Tell the COGCC to protect taxpayers from the unscrupulous Oil & Gas Industry! Testify at the COGCC “Financial Assurances” Rulemaking Hearing.
Times available are:
Thursday, January 20th 1:00 pm – 5:00 pm,
Thursday, January 20th 6:00 pm to 8:00 pm, and
Friday, January 21st 9:30 am to 12:00 pm
The following is a breakdown of some of the issues at stake in this Rulemaking, along with talking points you can customize for use in your testimony. The hearing will be on Zoom, so you can testify from the comfort of your home or office. Also attached is our ‘FA Team’ Response to the latest round of Draft Rules for more context. The points below do not include the fracking pollution, the climate change impacts, the damage to public health, and so on. You all know those issues better than most people in the state. So please feel free to discuss the Commission’s requirement to prioritize Public Health, Safety, Welfare, the Environment, and Wildlife Resources over private profits when you make your statement.
Starting Monday, January 20, the COGCC will begin the hearing to put in place increased Financial Assurances for O&G Operators. Sounds Great—what’s the problem? They’re not increasing our protection! Here’s how they’re not:
- The state has $185M on hand in bonding to plug and reclaim the sites of all the oil and gas wells in the state. But the average cost to perform plugging and cleanup is $93K each and there are more than 52,000 wells, which means we need $4.8 BILLION to meet just the average obligation. We have a mere $581,917 on hand.
- The current Orphaned Well Program (OWP) lists 799 sites with 410 wells on them. We put 5 operators with 200 wells out of business last year—nearly doubling our total count—for not doing the bare minimum required to do business in this state, and that of course left us with all their wells. That means our current obligations on average amount to over $50M in costs.
- The COGCC lists more than 10,000 shut-in (SI) or Temporarily Abandoned (TA) wells right now. How many of those will end up in the OWP?
- There are more than 25,000 low-producing (Stripper) wells in the state. How many of them will end up in the OWP?
- The average life of a horizontal well—before it becomes a stripper well—is 4 years. How many more wells will become Strippers (leading to Orphans) in the next 5 years?
- This means there are hundreds if not thousands more abandoned wells in our state that simply haven’t yet been added to the Orphaned Well Program.
- SB19-181 – the Regulate O&G Bill – requires Operators to meet EVERY financial obligation for its operations, and therefore discourages the use of Blanket Bonds (a single amount to cover all the Operator’s wells in the state) but the COGCC is retaining them at absurdly low rates!
- The bright spot is the Commission has created a mechanism for full-cost bonding of single wells based on actual plugging and reclamation (cleanup) costs. But here come the escape clauses:
- Regardless of the $93K average cost, they can provide one blanket bond of only
- $15,000 per Well for less than 50 Wells;
- $10,000 ea for more than 50 Wells;
- $5,000 ea for more than 150 Wells;
- $3,000 ea for more than 1500 Wells; or
- $1,500 per Well if the Operator operates more than 4000 Wells;
- THIS FORMULA RESULTS IN FEWER BOND AMOUNTS THAN WE HAVE NOW!
- And they only have to pay 10% of the amount per year which means we’re just supposed to pray nobody goes bankrupt in the next 10 years. How likely do you suppose that will be?
- There are 11 types of ‘used or useful’ wells that operators can employ to change well status so they can avoid plugging them and also avoid paying the higher bond rates required if they have a certain percentage of ‘inactive’ wells! And there are 3 more types of wells that are Out Of Service but still don’t have to be plugged, because maybe—just maybe—they’ll be useful again someday!
- AND for Inactive, or Transferred wells
- Inactive Wells. The Operator’s blanket bond will cover Inactive Wells up to 10% (excluding Out of Service Wells). The Operator must provide Single Well Financial Assurance for any Inactive Well exceeding the 10% threshold
- But of course, you can change the well status to one of 14 other types to avoid the 10% threshold
- Single Well Financial Assurance is based on the demonstrated plugging and cleanup costs, but that only happens if you don’t put them on a plugging list that can take years to complete
- You can transfer them to a new Operator, then the new guy has to provide Single Well Financial Assurance—unless he doesn’t want to—then he can ask for a hearing to determine a lower amount!
- Are you confused? That’s the point!
- Can Operators basically submit a plan for any amount of bond amount they want? YES!
- Every year we transfer around $4M from the General Fund to pay for the Orphaned Well Program. This Rulemaking asks Operators to put up $200/well/year to pay for the Fund, for an annual amount of $10M. Last year we spent about $4M and completed plugging and cleanup of a mere 8 projects for that price.
- It will take 480 years fund the Program to cover just the wells we have today—and we keep on drilling new ones!
- The Federal Government requires $25,000 in a blanket bond to cover all the wells on their land in our state, but O&G doesn’t want to pay the state any bond, citing ‘double bonding’. This is BS! We have 50 Federal Sites on our cleanup list right now, with zero in bonds to cover them, unless we go through a lengthy bureaucratic process to claim about $2,200/well.
- We have 318 ‘Active Operators’ who each must submit their own bonding plans every year, but the Commission only meets once a week. This means the Commission would need to hold 6 hearings/meeting every week in perpetuity. This is not possible!
- There is a ‘Single Well Financial Assurance’ requirement but it only kicks in when wells are transferred from one operator to another. We need EVERY well to be fully bonded to the cost of cleanup.
- We need every new permit for new wells to include a bond at full cleanup cost for every well on the pad. And we need every new well to be fully bonded.
- We need every Operator to plug and cleanup at least 1 well in their inventory for every new well they want to drill, preferably 2:1.
- We need every existing well to be fully bonded, not just the ones that are no longer producing.
- If an Operator can’t afford to bond their operations then they shouldn’t be allowed to continue business until they can afford it!
- No new permits for Operators who can’t pay full cost bonds.
- We need to demand that Operators plug and clean up every inactive well in their inventory, and bond for every active well too!
The O&G Industry is packing the hearings with employees who are given pre-written talking points, most of which have to do with scaring people with threats of bankruptcy, orphaned wells and job losses, and a promise that we can trust them to clean up their mess. We know better. We need YOU to counter their puppets with the facts and the truth.