As the spring of 2021 draws near, our Alliance finally has the opportunity to catch its breath after an intense year of engaging with state regulators to reform rules concerning the production of oil and gas in a manner that is protective of public health, safety, welfare, the environment, and biological resources.

Such was the mandate set forth by the Colorado State Legislature in Senate Bill 19-181, which changed the mission of the Colorado Oil and Gas
Conservation Commission (COGCC). The result of this effort, which has been decades in the making, has been unmitigated success for our Alliance, including a new 2,000 foot setback requirement for new wells from homes and schools, ending the practice of venting and flaring in Colorado, compulsory analysis of alternative locations and cumulative impacts, and automatic standing to provide input on permitting decisions for residents living near proposed drilling locations.

Though it is important to recognize and celebrate these achievements, our work is far from over. It isn’t enough that oil and gas is extracted in a safer manner—if it is to occur, it must be done in such a way that ensures that taxpayers are fairly compensated for parting with the resource, and that they aren’t stuck with the bill for clean up once the operation is over. Under the Bureau of Land Management’s (BLM) current leasing rules, operators are paying a mere $1.50 per acre on over 10.4 million acres of federal land that, despite being leased for production, is presently sitting idle, and cannot be used for other beneficial uses such as conservation and recreation as long as the lease remains in effect. In Colorado, of the over 2.4 million acres of federal land that has been leased, just 1.8 million acres are considered to have moderate or high potential for production, and some 1.4 million acres is sitting idle in the hands of speculators and operators.
In the short time that he’s held office, President Biden has kicked off a sweeping reform of the way the federal government thinks about and engages with the production of oil and gas on federal lands, including a temporary pause on federal leasing. Predictably, the move has drawn the ire of the oil and gas industry and its allies, who contend that such action will result in job losses, increase America’s energy dependence of foreign powers, and create a vacuum in supply that will drive production to take place outside of the United States and its regulatory oversight.

Upon closer inspection, however, there is little cause for concern; operators throughout the nation have stockpiled millions of acres of leases, production on federal lands accounts for only 10% of the nation’s oil and gas supply, and the Biden administration’s decision to rejoin the Paris Agreement once again positions America to become a world leader on addressing the climate crisis — a role that it can only fulfill if our nation leads by example.

The decision to pause federal leasing also presents an opportunity to examine another financial problem posed: financial assurances. When an operator secures a permit to drill on federal lands, they are required to post a bond with the BLM. These bonds are held until production is completed, and the well is plugged. However, the bonds that operators are required to post are a fraction of the cost to properly plug a well and restore the land on which it was drilled. The problem, as the residents of W

Western Colorado know all too well, the oil and gas industry is inherently volatile; shocks to the energy market (such as what we experienced at the onset of COVID) have the potential to cause a waves of bankruptcies, leaving well orphaned and unplugged. If left unchecked, these wells will leak methane into the atmosphere, and the aging infrastructure could corrode, resulting in the pollution of groundwater and surrounding land.
The need to reform financial assurances for the oil and gas industry goes beyond the federal level. Here in Colorado, the COGCC is set to examine its own bonding rules in the Spring. Like the BLM, Colorado faces a staggering shortage of funds to plug and reclaim wells; despite the average well costing
approximately $82,500 to properly remediate, the state currently allows operators to post $100,000 to bond an unlimited number of wells—a policy that has resulted in the average cost to plug and abandon an orphaned well, remediate impacts, and reclaim the well site being 14 times greater than the amount of financial assurance held by the state. As our state and federal government grapple with these challenges, our Alliance will continue to push for stronger rules on both financial assurances and federal leasing, and demanding that any development occurs responsibly, and that taxpayers are fairly compensated for the privilege.