OWP Reports | Colorado Energy & Carbon Management Commission

FY24 Annual Report Orphaned Well Program

Fiscal Year 2024 Annual Report
Orphaned Well Program
September 5, 2024

Purpose

The Colorado Energy & Carbon Management Commission (ECMC), a division within the Department of Natural Resources, prepared this report to document work performed by the ECMC’s Orphaned Well Program during the State’s Fiscal Year 2024 (or “FY24”), covering the period from July 1, 2023 through June 30, 2024. Commission Rule 205.c.(6) requires the following:

The progress on plugging, remediation, and Reclamation of Orphaned Wells and Sites as of the end of the previous Fiscal Year on June 30;
The total number of Orphaned Wells and Sites that are not plugged or closed;
Total funding received during the previous Fiscal Year; and
Total amount spent during the previous Fiscal Year.

This FY24 Annual Report summarizes the required progress and financial metrics:

The information contained in this report will also be presented to the Governor and General Assembly Committees of Reference with oversight authority over the ECMC.

Orphaned Well Program Background

For a variety of reasons, oil and gas operators may discontinue operation and maintenance of oil and gas facilities, effectively “orphaning” the facilities. For example, the ECMC may have revoked the operator’s right to operate through an enforcement action. Alternatively, an operator may have voluntarily stopped operating facilities due to its financial distress. Finally, in some instances, the ECMC is unable to identify the responsible party for “historic” oil and gas facilities. The Orphaned Well Program identifies, prioritizes, and addresses these oil and gas wells, locations, and production facilities statewide, which without intervention may impair a surface owner’s farming or ranching activity or other use of the property, harm wildlife, release air and greenhouse gas emissions, or present a safety hazard to the public.

Bond Claims

When the ECMC claims an operator’s bond, that money is reserved for the sole purpose of plugging and/or reclaiming the Orphaned Well or the Orphaned Site to which it pertains. Except for emergency work, and when available, bonds are obligated to fund work before any expenditures are authorized from the Orphaned Well Program appropriation.

State Appropriation

The legislature first authorized a budget appropriation to plug and abandon historic oil and gas wells with no available financial assurance in the 1990 Legislative Session. Each year through FY24, funding from the Orphaned Well Program appropriation line item in the General Assembly’s “Long Bill” has enabled the Commission to: plug wells; remove production equipment and debris; investigate and remediate soil and groundwater impacts; install safety equipment such as fences, signs, and locks or tags; and reclaim well pads, remote production sites, and access roads. Historically, the budget appropriation has been funded by a production levy and penalty revenues. The production levy is paid by operators on the sales value of oil and gas production. This budget appropriation expired on June 20, 2024 and will not continue into FY25.

Enterprise Fund

An Orphan Well Mitigation Enterprise cash fund was established in FY23, and the Orphan Well Mitigation Enterprise board holds an annual meeting each fall. The Orphan Well Mitigation Enterprise is funded by annual operator per-well fees, per Rule 205.c.(3)B, which states:

The Operator will pay the fee for every Well it operates as of December 31 of the previous calendar year. After a Well is Spud, the Operator will pay an annual fee for the Well until it is properly Plugged and Abandoned, subject to an approved Form 6, Well Abandonment Report – Subsequent Report of Abandonment.

Federal Grant

For FY24, most of the Orphaned Well Program’s work was funded by a federal grant. The U.S. Department of Interior (DOI) awarded ECMC a $25,000,000 “Initial Grant” in FY23 through the Bipartisan Infrastructure Law (Infrastructure Investment and Jobs Act). The DOI approved Colorado’s Initial Grant application on August 25, 2022 with an effective date of October 1, 2022. Initial Grant work continued through FY24.

Program Staff

ECMC’s personnel budget, an administrative cost allowance in the Initial Grant, and the Orphaned Well Mitigation Enterprise jointly funded OWP staff salaries, benefits, and administrative overhead for the program. Program staff averaged 13 full-time technical employees in FY24. The Initial Grant also funded support staff and indirect costs from the Colorado Department of Natural Resources for grant administration.

FY24 Project Expenditures

For contractual costs, bond expenditures increased from $274,772 in FY23 to $767,371 in FY24. Appropriation expenditures increased from $2,801,972 in FY23 to $3,848,632 in FY24. Orphan Well Mitigation Enterprise decreased from $379,541 in FY23 to $242,949 in FY24, and federal Initial Grant program expenditures increased from $6,743,925 in FY23 to $10,136,116 in FY24.

FY24 Program Metrics

Table 1

For orphaned sites with work performed in FY24, Table 1 summarizes tasks by work category, the county where the work was performed, the project and task name, the task status, and the site status. The site status complements the site list found in Table 4. Entries on Table 1 are grouped by site where more than one task was performed in FY24. “In Progress” tasks may have commenced in a prior fiscal year and may have work extending into future fiscal years. Small projects may contain one or more tasks for a single well, while large projects may consist of multiple tasks at many different orphaned sites throughout the state. The following work categories correspond to work types shown in the Project and Task Name data field:

PLUG represents well plugging and related activities, including wellsite access, environmental sampling at the wellhead, laboratory analysis, and methane monitoring
OFFL represents off-location flowline abandonment and related activities, including environmental sampling and analysis
DCOM represents equipment decommissioning activities, including on-location flowline abandonment and environmental sampling and analysis
ESAM represents environmental sampling and analysis that is not otherwise included with PLUG, OFFL, or DCOM work
EREM represents environmental remediation
RECL represents surface reclamation, stormwater controls, and weed management
OTHR represents other work not specified above

FY24 Work Progress - Rule 205.c.(6)A

During FY24, Orphaned Well Program staff, contractors, and four oil and gas operators performed field work at orphaned sites belonging to 60 separate projects, including 28 historic projects and 32 bond claims. Project work was subdivided into 339 discrete tasks related to plugging, equipment removal, environmental reclamation, or field inspections for site closure at 290 Orphaned Sites. Two tasks were related to field-wide or statewide work on multiple Orphaned Sites. Orphaned Well Program contractors and operators plugged a record high total of 132 orphaned wells in FY24.

Table 2

For bond claim projects that had FY24 expenditures, Table 2 summarizes historical bond claim financial information, including FY24 expenditures and available sureties remaining at the end of FY24.

Table 3

For active FY24 bond claim and historic Orphaned Well Program work, Table 3 summarizes project expenditures by funding source.

FY24 Program Funding and Spending - Rule 205.c.(6)C and D

Project expenditures reached an all time high of $14,995,068 in FY24:

$ 767,371 from Bond Claims,
$ 3,848,632 from the Orphaned Well Program appropriation,
$ 242,949 from the Orphan Well Mitigation Enterprise, and
$ 10,136,116 from the federal Initial Grant.

The costs for work performed by federal agencies on federal leases and work performed at Orphaned sites by operators are not included in the annual expenditure totals above.

For the total program effort in FY24, approximately 73 percent of the project spending was related to production equipment decommissioning (disconnection, removal, and disposal or salvage), plugging or other well work, and flowline abandonment; 10 percent was related to environmental sampling, laboratory analysis, and remediation; and 17 percent was related to surface reclamation.

Prioritized Site List

Table 4
Groups orphaned sites by Location ID into low, medium, and high priority categories based on multiple risk factors, including population density and urbanization; environmental factors; years in service; active and historic spills; stormwater issues; noxious weeds; wildlife, livestock, or vegetation impacts; surface equipment; bradenhead pressure; mechanical integrity test data; and any documented history of venting or leaking.

Site List and count of unplugged wells - Rule 205.c.(6)B

Table 4 is OWP’s Annual Site List, which includes a total of 1,747 orphaned sites with 941 orphaned wells that are not plugged and abandoned or otherwise closed per ECMC rules as of July 1, 2024.

Prior Year Annual Reports: