Oil and gas bills aim to plug orphan wells, add more chemical transparency

Colorado officials delay discussion on oil and gas rules
Posted at 6:22 PM, May 06, 2022
and last updated 2022-05-06 20:38:19-04

DENVER — Colorado lawmakers are once again considering legislation to change oil and gas operations in the state with a series of bills. Here’s a look at what the bills will do:

Orphaned oil and gas well enterprise

Senate Bill 22-198 is a bipartisan effort to reduce the number of orphaned oil and gas wells in the state.

A well becomes orphaned when the owner goes out of business or the operator cannot be located. It then, in essence, becomes a ward of the state and the state's responsibility to plug.

“They cost about $100,000 per well to plug. It goes up or down a little bit depending on the type of whether it's vertical or horizontal,” said Sen. Ray Scott, R-Mesa, one of the bill’s co-sponsors.

The bill calls for the creation of a fee-based enterprise that operators would pay into as part of their operating expenses.

“Nobody ever wants a repeat of what happened at Firestone, which was kind of unrelated to an orphan well, but it had some connection to that. So, I think everybody wants to be on the same on the same page, and I believe Senate Bill 198 will help us do that,” said Scott.

Scott insists that Colorado does not have as many orphaned wells as other areas and says operators have expressed that they want to be part of the solution.

Operators would be charged a fee of $125 per well for smaller operations and $225 per well for larger operations. The fund would then be used to plug, reclaim and remediate orphaned wells in the state.

The Colorado Oil and Gas Conservation Commission estimates that the state has 625 orphaned wells, which will cost more than $47 million to plug.

Bill sponsors do not expect the enterprise to generate more than $100 million in its first five years of existence, so it will not require approval from voters before going into effect.

Normally, Republicans are not fans of fee-based enterprises. They have accused Democrats numerous times in the past of using these types of enterprises to get around the Taxpayer Bill of Rights.

Scott admits he, too, is not a fan of these enterprises, but sees this as the only avenue to get the wells taken care of since the money from these structures must be spent on a specific purpose and cannot end up in the general fund to be used at the discretion of the legislature.

The bill already passed the Senate and is awaiting one more vote in the House before heading to the governor’s desk.

Meanwhile, the federal government has pledged tens of millions of dollars to Colorado to help plug some of these abandoned wells in coming years.

Oversight of oil and gas chemicals

A second, more controversial bill calls for oil and gas manufacturers and disclosers to report information to the state about the chemicals that are used in oil and gas production in Colorado.

Colorado already requires the reporting of chemical information for products used in hydraulic fracturing operations that are then put into a third-party database. However, the bill’s sponsors say companies are finding too many ways around reporting.

“What we found is those disclosures are inadequate," said Rep. Meg Froelich, D-Arapahoe. "They're sort of a combination of sloppy or missing materials. And then the big one was a huge use of the term trade secrets."

House Bill 22-1348 reports that part of the problem is operators and suppliers of the products often do not have knowledge of the chemical information, thus the data is vastly underreported. This bill takes the onus away from operators. Instead, it would require manufacturers to disclose the chemical lists by July 31, 2023.

“We felt that the public had a right to know what chemicals are used in oil and gas operations,” Froelich said.

The disclosures must include the name of the chemical, the estimated amount used and the intended purpose of the chemical, among other things. The bill would also require manufacturers to commit to not use PFAS, also known as forever chemicals.

The Colorado Oil and Gas Conservation Commission (COGCC) would then be required to crease a website that is searchable by the public and includes a list of the chemicals and the amount used. Disclosures would also be made to anyone located within 2,640 feet of a well or within 15 stream miles of a surface public water system.

If the manufacturer believes that the information is a trade secret, it will have to fill out a claim form explaining who the information is known by, the measures they’ve taken to protect the information, the value of it and the amount spent developing it.

However, the bill is facing opposition from the industry, as well as Weld County, the Northern Colorado Legislative Alliance, the Denver Metro Chamber of Commerce and the Adams County Regional Economic Partnership, among others.

Opponents point out that 99 percent of the ingredients used in oil and gas extraction are water and sand.

“The less than 1% is mostly comprised of ingredients you'd find on your kitchen sink, and products such as Windex and Tilex, or food products like ice cream,” said Dan Haley, president and CEO of the Colorado Oil and Gas Association during committee testimony.

Haley considers the legislation to be a solution in search of a problem and described the bill as unnecessary and overburdensome. He also worries about what this will mean for an important industry in the state.

“This will set Colorado on a slippery slope as it relates to intellectual property," Haley said. "It says that a state agency will decide if a private company's intellectual property should be disclosed to the public."

Julie Murphy, director of the COGCC, also expressed concerns with the bill during the committee testimony. She told lawmakers that the bill would present significant operational challenges that may undermine some of the commission's overarching goals.

Murphy also pointed out that the bill will cause redundancies with data reporting since much of the chemical information is already available on the FracFocus website.

Froelich, though, insists that the bill would not hamper industry or the commission’s mission.

“We had no interest in ruining anyone's business or getting into the trade secrets disclosure business,” she said. “We recognize that this is incredibly important business in Colorado.”

The bill has already passed the House and is awaiting a vote from the Senate Appropriations Committee.