(The Center Square) – Colorado’s oil and gas regulators voted Tuesday to overhaul the state’s financial assurance rules for the first time in more than two decades. 

Financial assurance rules require well owners to submit a bond or other financial guarantee that a well owner will help cover the costs of sealing wells that are no longer productive, a process commonly known as plug and abandonment, according to the National Conference of State Legislatures. 

The Centennial State's new rules are part of the the Colorado Oil and Gas Conservation Commission's (COGCC) goal to revise its mission from “fostering” to “regulating” oil and gas development as required by Senate Bill 19-181, which the Democratic-led General Assembly passed in 2019. COGCC has also increased its oversight of flowlines and wellbore activity as part of the mission change.  

Under the new rules, well owners are required to submit an operator-specific financial assurance plan to the COGCC. The rules also increase the financial assurance amounts by between 10 and 30 times, depending on the size of the drilling operation. 

COGCC’s decision also increases oversight of wells that are transferred between owners and creates an orphan well fund. The fund is expected to generate more than $10 million during its first year from new fees on operators. 

In a statement, COGCC Chairman Jeff Robbins described the new rules as "a model that is now the most robust in the country with by far the highest financial assurance requirements."

Some conservation groups in the state praised the new rules as a means of reversing the oil and gas industry’s “long-standing influence” on environmental policy. 

“For too long, the oil and gas industry dumped their responsibility for low-producing wells onto the people of Colorado, and our health, safety, and environment paid the price,” said Kelly Nordini, CEO of Conservation Colorado, a nonprofit environmental advocacy organization. “Taxpayers shouldn’t have to clean up big polluters’ messes.”

Oil and gas advocates said the new rules will ratchet up the cost of doing business in Colorado, a cost that is approaching more than $500 million in regulatory fees, according to state estimates. 

Colorado Oil and Gas Association President and CEO Dan Haley told The Center Square in a statement that he hopes the new rules provide “a path forward [for oil and gas companies] to operate here and to preserve our industry’s commitment to safely retiring wells across our state.” 

“As Coloradans and our global partners face the realities of higher energy prices due to supply shortages, Colorado’s oil and natural gas professionals stand ready to do our part to help lower those prices by adding some of the cleanest molecules in the world to supply the energy we all need,” Haley added.