Abandoned oil and gas wells prevent rural towns from diversifying their economies away from extraction to other sustainable economic drivers such as outdoor recreation. Many communities in Colorado were founded for the purpose of resource extraction. From mining and lumber towns in the mountains to oil and gas cities on the plains. These communities are now faced with an important choice: diversify their economies or risk extinction when the extraction industry moves on. Unfortunately, it’s not just that jobs disappear, but sometimes oil and gas operators abandon oil and gas wells that prevent any further use of the land without extensive clean-up—a process that takes time and is funded at taxpayer expense. Communities often face even more challenges, because abandoned and orphaned oil and gas wells threaten public health, clean air, lands, waters, wildlife, and the outdoor recreation brand of many communities looking to diversify their economies. The good news is recently Colorado regulators issued new rules that ensure that new oil and gas wells are properly bonded thus reducing the number or orphaned wells.
A historically underfunded financial assurance program in Colorado has created a shortfall in bonds which has led to over 800 orphaned wells statewide needing to be plugged and cleaned up. The Colorado Legislature passed Senate Bill 181 in 2019, refocusing the mission of Colorado’s oil and gas regulators to prioritize public health and safety, as well as the integrity of regional public land for other purposes. On March 1st, the five-member Colorado Oil and Gas Conservation Commission (COGCC) unanimously voted to adopt new rules on financial assurance (bonding). These new requirements are structured as a spectrum of financial assurance with large, low-risk operators providing blanket bonds as low as $1,500 and requiring smaller, high-risk operators to provide $110,000 per “single well” or more. Additionally, over the next ten years the federal government is expected to provide $10 million to $15 million per year to reclaim abandoned and orphaned wells.
Colorado is creating a model system for managing oil and gas development on public land and subsequently supporting communities across the state who are desperately trying to transition away from a single, unsustainable economic driver. These new financial assurance rules not only protect public health, safety, and welfare, but they also build trust and equity into the relationships communities have with oil and gas developers. The boom and bust nature of oil and gas will not change, but when the time comes to transition to more sustainable sources of jobs and revenue, such as outdoor recreation, the infrastructure will be in place to facilitate that transition quickly and safely.