By Heidi Leathwood

The final draft of the Colorado Oil and Gas Conservation Commission’s Financial Assurances rules was approved by the Commissioners on March 1, after a year-long process and many drafts. 350 Colorado, along with other environmental groups, helped to move the dial toward greater public protection, even though we didn’t get everything we pushed for.

Things 350 Colorado pushed for that are now included in rules:

• COGCC kept the annual well registration fee introduced in the very first proposed draft, despite big industry pushback. This fee will build up the orphan well fund by $10M annually.
• Operators are now required to have better insurance for remediation.
• They got rid of the ill-considered and last minute “amnesty” rule proposal, which would have enabled Operators to give up operating in Colorado and give all their wells to the state without having to pay for plugging.
• The rules acknowledge the risk of low and zero producing wells.
• The rules acknowledge the need to look closely at transfers.

What we don’t like about the new rules:

• They don’t acknowledge climate damages or take the social cost of carbon into consideration in any calculations.

• They could have required Single Well bonds for each and every new well and they didn’t.

• The system they adopted (with 6 different “Options” for various “categories” of operator) is far too complicated: a Single Well financial assurance for each and every well is what we asked for. This would have been easier to oversee, and protected Coloradans better.

 The new rules aren’t as protective as we would like. We won’t know their results for sure until they begin to take effect, but they are definitely better than the old rules of 2009.

 They might incentivize earlier plugging through the Out of Service well-plugging list, and through higher financial assurances in general. It will likely not be as profitable for companies to just keep a bunch of inactive or low-producing wells on their list. It remains to be seen, but that is the idea.

 Here are some examples of the improvements:

• Better remediation insurance – Old: $1M. New: $5M per occurrence and the COGCC is named on the insurance certificate. 
• Much higher blanket bonds – Old: $100,000 for statewide unlimited wells. New: $40M for biggest operator statewide unlimited wells. Old per-well low: under $20 per well; New per-well low: $1500

• More wells will have “single well financial assurance.”

• Wells that are low producing are a flag for higher bonds.
• Enforcement is better.
  • COGCC can shut-in wells if Operators don’t comply with transfer requirements.
  • COGCC can terminate an Operator’s permission to operate in Colorado if they don’t properly plug, reclaim and remediate wells.

• Requirements at transfer are better and COGCC can go after seller if COGCC does not approve the transfer.      

• The Financial Assurance plan is required to be reviewed by COGCC every year.

There are two aspects of the new rules that are worse than the old rules: their complexity, and their inexactness. There is too much room for individualization of plans, and too much evaluation that is done on a case-by-case basis. How will the COGCC be able to evaluate and oversee so many different plans? Do they have enough staff? Will they be able to correctly guess which operators are financially risky? Will they use their discretion to give a pass to Operators who will then turn out to go bankrupt and leave their wells to be cleaned up by the State? Will they tie up so much time in financial assurances hearings that they don’t have time to protect our health? Only time will tell.