If proposition 89 lands on the ballot and passes a statewide vote in the general election on November 4, companies who want to establish operations in Colorado will face a variety of differing rules and a new level of  political risk when committing capital in the state.

In a post-89 world, environmental regulations may be imposed by local communities around the state, and if a town’s regulations are more stringent than those at the state level, the local rules will trump those of the state.

Language in the proposed amendment 89 reads as follows:

“To facilitate the conservation of Colorado’s environment, local governments have the power to enact laws, regulations, ordinances, and charter provisions that are more restrictive and protective of the environment than laws or regulations enacted or adopted by the state government. If any local law or regulation pursuant to this article conflicts with a state law or regulation, the more restrictive and protective law or regulation governs.”

Project developers who are looking at Colorado—real estate developers, oil and gas companies, wind and solar energy operators, electrical transmission projects, water projects, and manufacturing companies, for example—could face dozens of sets of environmental regulations with which to comply, rather than one ruling set.

“It makes no sense to have a patchwork of regulations across the state,” said David Brody, attorney at Hogan Lovells in Denver. Hogan Lovells is counsel for CRED, Coloradans for Responsible Energy Development, a pro-business group backed by Anadarko Petroleum (ticker: APC) and Noble Energy (ticker: NBL).  “Just about any industrial activity could be adversely affected by such an amendment,” Brody said.

No Further Challenges Allowed

A challenge to a local community’s ban on hydraulic fracturing was upheld last week when a Boulder County court said that Longmont’s charter amendment “clearly conflicted with the state’s regulations and its interest in the efficient development of oil and gas deposits. While the court appreciates the Longmont citizens’ sincerely held beliefs about risks to their health and safety, the court does not find this is sufficient to completely devalue the state’s interest,” Judge D.D. Mallard wrote.

But if proposition 89 becomes an amendment in November, “a company could no longer challenge a local rule as a violation of a state law,” Brody pointed out.

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