In addition to the environmental risk, these wells also pose a serious financial risk to Colorado’s taxpayers. The oil and gas industry has actively shirked its responsibility to cover the cost of plugging and reclaiming its wells post production. The State has also failed to hold the industry accountable.
Every oil and gas operator is required post a “bond” with the state intended to cover costs for cleaning up the production site but the State’s bonding requirements are grossly inadequate – they allow operators to post a single $100,000 blanket bond for all their operations in the entire state! Many operators choose just to walk away, rather than spend the money to properly clean up a production site. These wells that have been left behind by their operators are called orphaned wells, and are left to the state to clean up.
Take Action
There are two ways to take action:
Take action with Safe and Healthy Communities and urge the Colorado Oil and Gas Conservation Commissioners (COGCC) to require oil & gas operators to pay their full cleanup costs.
2. The COGCC is adopting new rules to address these issues, and there is a hearing coming up on November 9 with an opportunity to provide public comment. Public comments should address:
The need for bonds that actually cover all the costs of plugging and cleaning up every well in the state.
Stop the practice of “blanket bonds.” Blanket bonds are a public subsidy for clean-up costs and perpetuate the future orphaned well problem
The current financial assurances rules perpetuate the scam the industry has been running, artificially keeping wells “economical” by letting operators discount the true cleanup costs, letting public pick up the bill instead.
The COGCC needs to add a per-well fee on operations in the state to generate revenue to clean up orphaned wells.
Below are some resources to help you with your comments:
Inadequate bonding regulations mean that it is cheaper for operators to walk away without cleaning up their wells. They can either spend millions on clean up, or let the state keep the $100,000 bond and call it quits. It’s an easy choice for some operators. It is time for Colorado to update its bonding requirements so Coloradans are no longer on the hook for the tens of thousands of wells producing little if any oil or gas, yet are pumping hazardous chemicals and pollution into our air, land and water.
Colorado Well Statistics
Total number of unplugged wells statewide: ~50,000
Wells producing less that 15 barrels of oil/day (or gas equivalent): ~35,000
The production level of these wells is often not profitable and because they are low-producing they are also exempt from many rules. They are also exempt from the state’s collection of severance taxes.
Wells producing less than 1 barrel of oil/day (or gas equivalent): 17,200
The production level of these well is uneconomical, they don’t yield enough profit to cover even basic maintenance costs.
Wells producing zero oil or gas in 2020: 9,500
These wells are considered inactive. Some are shut in or temporarily abandoned, meaning the operator has turned them off. Some remain “on” but are not producing any oil or gas.
Number of companies that own nothing but “uneconomic/non-productive” wells: 122
Total number of wells owned by these companies: 2,950
These wells are called “zombie” wells, because they are essentially dead, owned by dead companies, with no hope of being plugged and no one conducting maintenance or safety.
When an oil and gas operator wants to drill a new well, they are required to post a bond with the Colorado Oil and Gas Conservation Commission (COGCC). This money is set aside in case the operator is unable to fulfill their legal obligation to plug the well and pay for the reclamation of the land on which it was drilled. Unfortunately, the amounts currently required to be posted in a bond are too low, which has resulted in many wells going unplugged because their operator is no longer in business and the COGCC does not have enough money to plug and reclaim them.
The financial assurance rulemaking before the COGCC is designed to fix this problem. With strong new bonding rules, we can ensure that both new wells and wells transferred from one operator to another will be plugged and reclaimed after it no longer produces enough minerals to be profitable. But in order to do that, the COGCC needs to hear from concerned Colorado residents like you. This comment guide will give you the tools you need to make impactful comments that will help the commissioners create rules that protect our health and environment.
Tips for crafting strong public comments:
Be mindful of the amount of time that your comment will take. The COGCC allows members of the public three minutes to make their comments. When you’re planning on what to say, keep this limit in mind. If you decide to write out your comment, try for around 250 – 300 words (or about two-thirds of a page on most word processors).
Speak from your own experience whenever possible. Though the talking points in this document are helpful and important messages for the commissioners to hear, truly impactful comments come from authentic lived experiences. If you or someone you know has been impacted by oil and gas, this is a great opportunity to share your story. Even if the issue wasn’t necessarily caused by an orphaned well, you can tie your experience into a broader ask for industry accountability, and bring it back to the subject at hand.
Have a clear ask of the commission. When the COGCC commissioners are listening to your comments, the question that will be in the back of their minds is, “what does this person want me to do?”. Make sure that your comment concludes by telling them. While broad messages supportive of robust financial assurance requirements are useful, your comment will have the most impact by requesting specific policy outcomes, like those which can be found in the talking points section of this document below.
Be prepared to speak when called on. As this rulemaking is taking place during the COVID-19 pandemic, the hearings are being conducted virtually via Zoom. Before the session begins, be sure that you have the link to the meeting and that your technology is working properly. The COGCC will first call on elected officials to provide comments, and then begin calling on the general public. Sometimes the commission will publish a list of speakers and the order that they will be called upon, which may be visible on screen.
Be respectful when making your comments. Remember that the COGCC commissioners are also people with feelings. When speaking truth to power, it can be tempting to lean into our emotions and express anger. When this happens, it is important to attack the problem and not the commissioners themselves, even if we don’t agree with something they’ve said. Personal attacks are unhelpful at best, and counterproductive at worst. Keep your tone civil, and thank them for their time after making your comment.
Talking points that you can include in your comment:
The use of “blanket bonds” (a single bond that covers multiple wells) has resulted in bonds for some wells being less than $1,000 per well, despite state estimates of the plugging and reclamation cost of a single well averaging about $92,000.
Bonds should be required for every individual new and transferred well, and should be set at the full price of plugging and reclaiming the well.
Because the terrain on which wells are drilled varies, some are more expensive to clean up than others. A matrix of cost driving factors should be used to determine the full cost of plugging and reclamation for each well.
State bonding rules should also apply on federally owned land. These bonds should be set at the difference between the bond posted with the Bureau of Land Management and the full price of plugging and reclaiming the well.
Financial assurances should be required on the basis of rules, and not the discretion of the COGCC director. No exemptions to full cost bonding should be granted to any operator; if they don’t have enough money to clean up their mess when they’re done, they don’t have enough money to do business in Colorado.
The definition of an “inactive well” is important for determining when it needs to be plugged and abandoned so that operators are required to clean it up. This definition should be any well that falls short on time producing (less than 90 consecutive days per year), or production volume (less than 2 barrels of oil or equivalent per day).
In 2020, 13,576 wells did not produce 90 days or more, and over 10,000 had produced one day or less. Of the remaining 37,000 wells that produced 90 days or more, 3,682 had less than 1 barrel of oil or equivalent per day for the days they produced.
If operators are allowed to list wells as “out of service” and avoid posting financial assurances or conducting mechanical integrity tests on them, they must be plugged and reclaimed in a timely manner, and operators with fewer such wells should be required to plug a larger percentage of them in a relatively shorter period of time.
All new and transferred wells must have adequate environmental and hazard insurance.
Dirt road leading to petroleum battery with “Out of Service” spray-painted on one tank. Mountain range can be seen behind the tanks, courtesy of Earthworks
