New rules that could require oil and gas operators in Colorado to post financial security for property damage, environmental cleanup, closure and reclamation of well sites will be the subject of comments before the Colorado Oil and Gas Conservation Commission this week.
The COGCC is slated to take public comments as part of its Financial Assurance rulemaking process over two days, Thursday and Friday.
Initial hearings take place virtually from 9 a.m. to 8 p.m. Thursday and 9:30 a.m. to noon on Friday. To sign up for comment, visit the COGCC website, COGCC.State.co.us.
Deliberations are expected to continue into February as the new rules are decided upon.
Financial assurance for oil and gas operators is part of the ongoing rulemaking that grew out of Colorado Senate Bill 19-181 that was signed into law by Gov. Jared Polis shortly after he took office in 2019.
It’s also one that Garfield County commissioners and representatives of other energy producing counties, as well as the industry lobby, are keeping a close eye on this year.
The provision calls for operators to provide upfront financial assurance, such as a bond, for wells on private property before they can drill and begin production. Operations on federal or tribal lands fall under separate regulations.
Different bonds are to be required for different types of activities, including damage to separately owned surface operations, such as crop losses, surface facilities, underground gathering and storage facilities, inactive wells, abandoned wells and reclamation of well sites.
Industry watchdogs say that having some degree of financial assurance banked will prevent taxpayers from having to foot the bill in the event of spills or other environmental hazards, or to clean up a site after a company has moved on.
During a Jan. 5 overview of the oil and gas rulemaking process to date and activity expected this year before the Garfield County commissioners, some smaller operators said those upfront costs can be onerous, even if the bonds are refundable if they comply with the various requirements.
That’s especially true for operators of the many low-producing natural gas wells in the region, they said.
Currently, there are about 15 producers actively operating in Garfield County, with more than 12,000 active wells and an average of around 100 new well permits per year, according to the latest COGCC statistics. Not all of those wells are on private land, however.
Garfield County and the numerous members of the Western and Rural Local Governments Coalition agree that there are several areas of concern with the proposed financial assurance rules, said Kirby Wynn, oil and gas liaison for Garfield County.
Like many of the rules and regulations that have already been put in place, some are more geared toward Front Range operators or specific to oil wells rather than natural gas, which is the primary resource extracted in Garfield County, he said.
Regarding financial assurity, “The annual well registration fee lacks a cap and as currently drafted could balloon to tens of millions of dollars and thus could divert critical funding operators could otherwise directly use for plugging and abandonment activities,” Wynn wrote in his report to the commissioners.
“Such a fund is also an easy target for raiding by the legislature to shore up unrelated state funding shortfalls,” he wrote.
Operators in the Piceance Basin region in northwest Colorado are also penalized, he said, because they don’t meet the same standard for being “financially sound” as the larger operators on the Front Range.
Other concerns to be put forth in comments by Garfield County and other Western and Rural Local Governments Coalition representatives have to do with federal well exemptions and estimated reclamation costs for single well sites.
Garfield County has not historically had issues with abandoned wells, Wynn said.
“There are changes to financial assurance that need to happen, and operators even agree on that,” Wynn said before the county commissioners. “It comes down to what is the appropriate level.”
*This story has been revised from the original version to remove an incorrect reference to the 2017 Firestone explosion.
Senior Reporter/Managing Editor John Stroud can be reached at 970-384-9160 or [email protected]