A consumer products group is suing to block the keystone of Colorado’s recycling expansion effort, the “producer responsibility” fee on packaging, saying its launch violates both the U.S. Constitution and the state law that enabled it.
The Independent Lubricant Manufacturers Association, or ILMA, made up of packagers and sellers not part of the major oil companies, says Colorado’s $200-million-plus program starting this year unlawfully charges them fees without giving them any say in how the money is used.
A similar suit by trade groups in Oregon secured a temporary injunction against that state’s producer packaging fee, and the lubricant trade group hopes to either begin negotiations with Colorado officials to alter the program here, or get its own injunction.
Far from the frictionless fraction-of-a-penny fee that recycling advocates have described in Colorado, the lubricant trade group says, the multinational packagers dominating the private committees developing the plan are setting high fees that will have to be passed on to consumers.
Smaller, family-owned companies are shut out of the decisions, the trade group says, and will be hurt most by the system. Colorado’s producer responsibility concept, first passed by the legislature in 2022, uses the manufacturers’ self-administered packaging fees to fund a pool of money for grants to cities and nonprofits around Colorado to expand curbside and other easier recycling programs.
The lubricant trade group for the largest oil and chemical companies has been given power in Colorado to set the packaging fee for all the related companies, and it comes to 56 cents a gallon, or 14 cents on a quart of oil, ILMA’s general counsel, Jeffrey Leiter, said in an interview. That will hurt consumer sales and also damage the smaller companies that have to pay the fees ahead of time before they get the money back in sales.
A handful of states starting fee programs at different levels for companies doing business across the nation also violates constitutional provisions for protecting interstate commerce, the trade group alleges.
“Everybody agrees it’s worthwhile, but we need to find a better and more sustainable way to do this than the way they’ve structured this,” Leiter said. “There’s constitutional problems. There are transparency issues. Just a range of issues that have been brought out by not only ILMA’s lawsuit, but the one in Oregon. A number of states that are looking at this have said, wait a minute, let’s take time and do a better assessment of how this might work.”
The Colorado Department of Public Health and Environment, which must let the producers’ organization set the fees but which oversees the grant program, said it does not comment on ongoing litigation. The suit was filed in mid-March in Denver District Court.
Colorado officials picked the Circular Action Alliance to administer the fee program. The alliance is dominated by some of the largest consumer packaging names in the world, including Coca-Cola, McDonald’s, Molson Coors and Colgate-Palmolive.
The alliance’s budget for 2026 envisions fees raising $215 million to $267 million in the first year for distribution to reimburse existing and new community recycling programs applying for the money. By 2030, the annual budget from fees is expected to rise to between $300 million and $400 million.
The group is working to set the internal fees on packaging based on volume and actual recyclability. Companies will have incentives to shave new packaging to lower their overall fees, as well as use more recycled products in new packaging.
The lawsuit from the independent lubricant packagers says in part, that the health department “has compelled ILMA members to enter into a ‘take it or leave it’ contract to pay.” It argues the state is set to impose “exorbitant fees which have no connection to the actual costs of running a recycling program in Colorado as required by the act, and which violates the act’s requirement that no more than 5% of those fees be used to pay for administrative expenses.”
The suit also takes on bigger legal issues, saying the way the health department is carrying out the legislative act “also violated ILMA members’ fundamental right to due process of law under the U.S. and Colorado Constitutions.”
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