Colorado Oil & Gas Conservation Commission Votes Unanimously to Adopt Orphan Well Mitigation Fee Enterprise Rules


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Commission adopts rules for first-ever Enterprise fund, using industry fees for orphan wells, to ensure environmental protections

Denver, CO (Jun. 30, 2022) - The Colorado Oil and Gas Conservation Commission (COGCC) announced today it has completed the rulemaking hearing for the Orphan Wells Mitigation Fee Enterprise Fund. Today's rulemaking was a follow up to the March 2022 Financial Assurance Rulemaking, which called for the creation and funding of an orphan well fund, and was established by S822-198. The Financial Assurance Rules were required by SB 19-181, to reflect the COGCC's new mission from "fostering" to "regulating" oil and gas in a manner that protects public health, safety, welfare, the environment and wildlife resources.

"Today's rulemaking is the necessary follow through to March's Financial Assurance Rulemaking to establish this first-ever enterprise fund for orphan wells that ensures the creation of an industry funded orphan well program with the highest level of environmental protections," said COGCC Chair Jeff Robbins. "This Enterprise is an example of COGCC's commitment to conducting open, inclusive and transparent rulemakings. We want to thank SB22-198's sponsors and supporters, as well as all our diverse stakeholders for reaching a consensus through collaboration on this important issue. This is truly a first-ever and unique solution to use fees from the oil and gas industry to address orphan wells. We are thankful for the legislature for giving us this tool that will help ensure orphan well protection of public health, safety, welfare, wildlife and the environment."

About the Orphan Wells Mitigation Fee Enterprise Fund:

  • The Commission established a fee paid by industry that is expected to generate initially $10M annually, and is responsive to address orphan wells in the state of Colorado.
  • The fee will be revisited annually, allowing the funding to increase or decrease depending on the needs and anticipated scale of future orphan well work.
  • This robust orphan well funding mechanism needed the legislature to create the Enterprise Fund.
  • This fund is in addition to the $10-15 million Colorado expects to receive and spend annually for the next ten years from the Federal Infrastructure Investment and Jobs Act.
  • In total, the federal funds and the orphan well funds will likely total $100 -$115 million over the next 5 years, which is unprecedented and will be totally paid for by industry and the federal government.

Orphan Wells Mitigation Fee Enterprise Timeline:

  • March 1, 2022: COGCC Commission Adopts Financial Assurance Rules
  • June 2, 2022: Gov. Polis signed legislation with bipartisan sponsors Sens. Fenberg & Scott, and Reps. Weissman & Will, SB22-198, to create an industry-funded Orphan Wells Mitigation Enterprise that will ensure that taxpayers aren't left with the bill when it comes to cleaning up abandoned oil and gas wells.
  •  June 3, 2022: COGCC Commission Orphan Wells Mitigation Fee Enterprise Rules
  • Aug. 1, 2022: Orphan Wells Mitigation Fee Enterprise Rules become effective

Prior to today's action, the Commission adopted these additional required SB 19-181 rulemakings:

500 Series Administrative Law Judge rules enacted, August 2019. Allowed COGCC to use Administrative Law Judges in Hearings. This process increases the efficiency of the COGCC Hearing Unit.

Flowline Rules (1100 Series) adopted in November 2019. Increases protections to the public by:

  1. Strengthen the state's oversight of flowlines and operators returning inactive wells to production or injection within Colorado.
  2. Create for the first time a map of the actual paths of all flowlines in the state of Colorado, while at the same time balancing transparency with the need for public safety.
  3. Ensure flowlines are abandoned in a manner that is least impactful, which balances the varying ways in which abandonment - in place or through removal - creates impacts or risks to public health, safety, welfare, the environment, or wildlife resources.

Wellbore Integrity Rulemaking adopted June 2020. Focuses on protecting Colorado's  groundwater from potential contamination from oil and gas activity throughout the lifecycle of oil and gas operations, from development to production to abandonment. Rules provide the nation's strongest protections for groundwater by the following:

  1. Health checks, using regular testing and maintenance, throughout the well's lifecycle.
  2. Isolate all fluids associated with the well from escaping to protect groundwater.
  3. Increase public access and transparency of precautionary measures to protect groundwater near homes and drinking water sources. Other key new protections include provide:
  • Strict protections and detailed subsurface geological reviews for any wells that are proposed to fracture within shallow groundwater formations where the risk of contamination is at its greatest.
  • Increased transparency so local governments, water-well owners and the public can readily learn about what precautions are being taken to protect groundwater near their homes and drinking water sources.

Mission Change Rulemaking adopted November 2020. Includes Alternative Location Analysis, Cumulative Impacts as well as Mission Change and the highlights include: Defining the new relationships between state and local government; Addressing cumulative impacts by developing a new program with the Colorado Department of Public Health and Environment; Establishing setbacks for location siting purposes, and a streamlined permitting process that incentivizes landscape level planning; A reorganization of the rules using updated language to ensure accessibility; Enacting a prohibition on routine flaring or venting; and, Increased protections for wildlife.

Financial Assurance Rulemaking adopted March 2022. Directed the Commission to broadly consider changes to financial assurances including that every operator provide assurance capable of fulfilling every financial obligation imposed by the Act. Significant changes and protections include: Requiring a first-ever individual operator-specific financial assurance plans; Increasing financial assurance for transferred and inactive wells; Requiring financial assurance accounts for new wells funded in the initial years of operations; Creating an orphan well fund; Applying Colorado's new rules to Federal wells for the first time; Broadening access for local governments regarding plugging of wells; and, Developing a first in the nation out-of-service plugging program.

The Commission will take up additional rulemakings at future hearings, including Worker Safety, and the enactment of Permit Fees. To learn more about participating, upcoming hearings and the rulemaking schedule, visit the ECMC website.