Consumer product groups are suing to block Colorado’s “producer responsibility” fees on packaging materials that are a key part of Colorado’s recycling expansion efforts, arguing that its introduction violates both the U.S. Constitution and the state law that made it possible.
The Independent Lubricant Manufacturers Association (ILMA), a group of packagers and distributors not affiliated with major oil companies, argues that the $200 million-plus program that Colorado launched this year illegally charges fees without giving them any say in how the funds are spent.
A similar lawsuit by an Oregon industry group secured a temporary injunction against that state’s producer packaging fees, and the lubricants industry group now hopes to begin negotiations with Colorado officials to change the program or obtain an injunction of its own.
Far from the frictionless fees Colorado recycling advocates say, the multinational packaging companies that control the private committee that develops the plan are setting high fees that must be passed on to consumers, lubricant industry groups say.
The industry group says small, family-owned businesses will be hit hardest by the system, as they are excluded from decision-making. Colorado’s Producer Responsibility concept, first passed by the Legislature in 2022, uses manufacturers’ self-managed packaging fees to fund a pool of grants to cities and nonprofits around Colorado to expand curbside recycling and other easier recycling programs.
In Colorado, the lubricant industry association of the largest oil and chemical companies is given the power to set packaging fees for all associated companies, which amount to 56 cents per gallon, or 14 cents per quart of oil, Jeffrey Reiter, ILMA’s general counsel, said in an interview. That would hurt sales for consumers and small businesses that must pay upfront before they can collect funds from sales.
Industry groups also argue that several states have instituted varying levels of fee programs for companies doing business across the country, violating constitutional provisions that protect interstate commerce.
“Everyone agrees there’s value, but we need to find a better, more sustainable way than the way they built this,” Reiter said. “There’s a constitutional issue. There’s a transparency issue. There’s a whole range of issues brought up by the Oregon case, not just the ILMA case. A lot of the states that are looking at this are saying, wait a minute, let’s take time to better assess how this is going to work.”
The Colorado Department of Public Health and Environment, which oversees the subsidy program and requires producer groups to set rates, said it would not comment on ongoing litigation. The lawsuit was filed in Denver District Court in mid-March.
Colorado officials selected Circular Action Alliance to administer the fee program. The partnership is comprised of many of the world’s largest consumer packaging companies, including Coca-Cola, McDonald’s, Molson Coors and Colgate-Palmolive.
The alliance’s 2026 budget envisions an increase of $215 million to $267 million in the first year for distribution fees to reimburse existing and new community recycling programs that apply. By 2030, the annual budget from fees is expected to increase from $300 million to $400 million.
The group is working to set internal rates for packaging materials based on volume and actual recyclability. Companies will have an incentive to reduce new packaging to lower their overall rates and use more recycled products in new packaging.
The lawsuit from an independent lubricant packager states in part that the health department “forced ILMA members to enter into ‘take it or leave it’ agreements with their payments.” The law alleges that the state intends to impose “exorbitant fees unrelated to the actual costs of operating Colorado’s statutorily mandated recycling program,” violating the law’s requirement that no more than 5% of fees be used to pay administrative costs.
The lawsuit also raises larger legal issues, saying the Department of Health’s legislative approach “also violates ILMA members’ fundamental right to due process under the U.S. Constitution and the Colorado Constitution.”
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