On February 1, 2022 the federal government announced the first infusion of tens of millions of dollars that will be sent to Colorado to clean up orphaned oil and gas wells. Our U.S. Senators John Hickenlooper and Michael Bennett (D-CO) celebrated the incoming funds. Not only is it a chance to clean up dangerous wells, but the act of plugging wells will provide jobs and reduce our climate-changing methane emissions. (It’s interesting that they only call natural gas by its true name — methane — when no one is making money from the gas well anymore.)
I agree that these wells need to be plugged as soon as possible for the same reasons as our senators. But there are two big problems with the solution. First, it is a taxpayer bailout of the oil and gas (methane) industry to clean up their mess. One could argue that the industry is already overly subsidized by Colorado taxpayers. We have one of the lowest severance tax rates in the nation, which means that it is cheaper for oil and gas companies to operate in Colorado than most other places in the country. (Colorado has a 1.5% in effect severance tax rate compared to 4.9% in Wyoming, 9% in Montana, and 8.8% in North Dakota.) Besides the incredibly generous tax rate we give industry, we also give them more tax breaks including the ad valorem tax credit and the stripper well tax exemption. After decades of generosity, I’m frustrated that each Colorado taxpayer hasn’t gotten a thank you note yet from the oil and methane industry. I bet they’re in the mail.
The second problem with the federal taxpayer bailout is the Colorado Oil and Gas Conservation Commission (COGCC), which is the state regulatory agency that will be in charge of handling the millions of dollars and plugging the wells. In 2020, the state audited them and found that between 2016-2018 the COGCC had lost $300,000,000 in Colorado taxpayer money. They did this by not collecting over 50,000 production reports. Not only did the state lose that money and were unable to recuperate it, but Colorado taxpayers also had to pay the oil and gas industry $14.3 million in 2017 in property tax refunds. Sit with that one for a minute.
It does not make sense to hand over a giant federal taxpayer oil and gas bailout to a regulatory body that routinely costs the taxpayers of Colorado money by returning our money to industry.
The COGCC has created its own mess with orphan wells by allowing companies to transfer low-producing wells to companies without the assets to close them. The industry has made money by deferring liabilities, and the COGCC has let them do it.
Right now, the Colorado Oil and Gas Conservation Commission (COGCC) is undergoing a rulemaking to make the oil and gas industry pay to clean up their own mess, so taxpayers don’t have to. The COGCC has this chance to redeem themselves! But, friends, I am sad to report it is not looking good. Many parties to the rulemaking (the ones who are not part of the industry) are fighting for full-cost financial assurances for each individual well. This would protect taxpayers in the future and prohibit more costly bailouts. On the other hand, the industry thinks that a complicated multi-tiered system would be best, which includes one tier of blanket bonding that significantly underbonds the wells and another tier that allows oil and gas operators to go to the COGCC and choose any dollar amount they decide makes sense for them for financial assurances. This tier is being referred to in the hearings as (I am not making this up) “choose your own adventure.” COGCC appears to be siding with industry, because what this nimble regulatory body needs is more complicated systems to keep track of.
Do not despair! There are other avenues to justice. First, the COGCC is appointed by the governor and serves at his pleasure. Their failures are also his. Governor Jared Polis (D-CO) could direct them to do better for Colorado taxpayers. For example, the Governor of California directed his regulatory body to deny fracking permits because of climate change. As a result, California hasn’t approved a drilling permit since last February. However, given that as of last month 4,605 permits (form 2s) have been approved since Polis’s election and not one has been denied, I think maybe our governor is more of a champion of the oil and gas industry than of Colorado taxpayers.
Our hope now lies with our State Legislature. They could use their oversight to reign in the COGCC and tell them to do better in following what the lawmakers had in mind when they passed SB19-181: to protect public health, stop adding to the cumulative impacts, and ensure financial and environmental protection from wells that are done producing. Let’s hope that they decide to take a road that protects Colorado taxpayers. Otherwise, the millions of dollars of taxpayer bailout paid to the oil and gas industry, like so much fracking fluid-contaminated fresh water, might as well be pumped down a well.
Kate Christensen is the Oil and Gas Campaign Director for 350 Colorado, an environmental advocacy non-profit looking to stop fossil fuel extraction in Colorado.