Second Regular Session
Seventy-third General Assembly
STATE OF COLORADO
INTRODUCED
LLS NO. 22-0801.01 Richard Sweetman x4333
SENATE BILL 22-198
Senate Committees House Committees
Finance
A BILL FOR AN ACT
C
ONCERNING MEASURES TO ADDRESS ORPHANED WELLS IN101
C
OLORADO, AND, IN CONNECTION THEREWITH , CREATING THE102
ORPHANED WELLS MITIGATION ENTERPRISE .103
Bill Summary
(Note: This summary applies to this bill as introduced and does
not reflect any amendments that may be subsequently adopted. If this bill
passes third reading in the house of introduction, a bill summary that
applies to the reengrossed version of this bill will be available at
http://leg.colorado.gov
.)
The bill creates the orphaned wells mitigation enterprise
(enterprise) in the department of natural resources for the purpose of:
! Plugging, reclaiming, and remediating orphaned wells
located in the state for which no owner or operator can be
found or for which the owner or operator is unwilling or
SENATE SPONSORSHIP
Fenberg and Scott,
HOUSE SPONSORSHIP
Weissman and Will,
Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
Capital letters or bold & italic numbers indicate new material to be added to existing statute.
Dashes through the words indicate deletions from existing statute. unable to pay the costs of plugging and abandoning the
well;
! Ensuring that the costs associated with the plugging,
reclaiming, and remediating of orphaned wells are borne by
operators in the form of mitigation fees;
! Determining the amounts of mitigation fees; and
! Imposing and collecting mitigation fees.
On or before August 1, 2022; on or before April 30, 2023; and on
or before April 30 each year thereafter, each operator shall pay a
mitigation fee to the enterprise for each well that has been spud but is not
yet plugged and abandoned, in accordance with rules promulgated by the
Colorado oil and gas conservation commission (commission), in the
following amounts:
! For operators with production that is equal to or less than
a threshold to be determined by rules of the commission,
$125 for each well; or
! For operators with production that exceeds a threshold to
be determined by rules of the commission, $225 for each
well.
Money collected as mitigation fees is credited to the orphaned
wells mitigation enterprise cash fund (fund), which is created in the bill.
The bill also creates the orphaned wells mitigation enterprise board
(enterprise board) and requires the enterprise board to administer the
enterprise and, at least annually, to:
! Consider whether the mitigation fee amounts should be
increased or reduced, based on current circumstances and
reasonably anticipated future expenditures from the fund;
! If the enterprise board determines that an increase or
reduction of the mitigation fee amounts is warranted, adjust
the mitigation fee amounts; and
! Advise the commission of the outcome of the enterprise
board's deliberations.
The commission may promulgate rules as necessary to implement
the enterprise.
Be it enacted by the General Assembly of the State of Colorado:1
SECTION 1. Legislative declaration. (1) The general assembly2
finds that:3
(a) Orphaned wells present significant potential for adverse4
impacts to public health, safety, and welfare, as well as to the5
SB22-198-2- environment and to wildlife resources; and1
(b) It is necessary, appropriate, and in the best interests of oil and2
gas well operators for the state to ensure that orphaned wells and3
associated facilities are plugged, reclaimed, and remediated in a timely4
manner.5
(2) The general assembly also finds that:6
(a) Current law authorizes the Colorado oil and gas conservation7
commission (commission) to require operators to provide and8
demonstrate certain financial assurances in order to plug, reclaim, and9
remediate orphaned wells; and10
(b) The existing statutory and rule-based mechanisms provided for11
such financial assurances may not provide sufficient funding to plug,12
reclaim, and remediate orphaned wells in all circumstances.13
(3) Now, therefore, the general assembly declares that:14
(a) It is in the public interest to create an enterprise within the15
department of natural resources that is solely committed to the plugging,16
reclaiming, and remediating of orphaned wells;17
(b) The activities of the orphaned wells mitigation enterprise18
(enterprise) shall be funded by revenue generated from mitigation fees19
imposed upon, and paid by, operators of oil and gas wells in Colorado;20
(c) It is appropriate that operators should pay such mitigation fees,21
as operators are the direct beneficiaries of the service provided by the22
enterprise, which is the plugging, reclaiming, and remediating of23
orphaned wells;24
(d) Operators benefit from the plugging, reclaiming, and25
remediating services provided by the enterprise pursuant to this act26
because such services allow operators to operate oil and gas wells in27
SB22-198
-3- Colorado despite the risk that some wells will be orphaned;1
(e) Operators also benefit from the service provided by the2
enterprise because without such service, it may be necessary to require3
operators to submit significantly higher amounts of financial assurance4
to the commission to ensure that the public does not become responsible5
for paying the costs of plugging, reclaiming, and remediating orphaned6
wells;7
(f) Consistent with the determination of the Colorado supreme8
court in Nicholl v. E-470 Public Highway Authority, 896 P.2d 859 (Colo.9
1995), that the power to impose taxes is inconsistent with enterprise status10
under section 20 of article X of the state constitution, and in accordance11
with the determination of the Colorado supreme court in Colorado Union12
of Taxpayers Foundation v. City of Aspen, 2018 CO 36, the general13
assembly concludes that the mitigation fees are fees, and the enterprise14
operates as a business, because:15
(I) By providing financing for plugging, reclaiming, and16
remediating services as authorized by this section, this enterprise provides17
a benefit to operators when orphaned wells are plugged, reclaimed, and18
remediated;19
(II) The mitigation fee is imposed for the specific purpose of20
allowing the enterprise to finance plugging, reclaiming, and remediating21
services, which allow operators to operate oil and gas wells in Colorado22
despite the risk of wells being orphaned;23
(III) The mitigation fee is imposed for the specific purpose of24
allowing the enterprise to finance plugging, reclaiming, and remediating25
services, which reduces the total amount of financial assurance that26
operators must provide in order to operate in Colorado; and27
SB22-198
-4- (IV) The mitigation fee is collected in amounts that are reasonably1
calculated based on the impacts caused by fee payers and the benefits2
enjoyed by fee payers; and3
(g) So long as the enterprise qualifies as an enterprise for purposes4
of section 20 of article X of the state constitution, the revenue from the5
mitigation fees collected by the enterprise is not state fiscal year6
spending, as defined in section 24-77-102 (17), Colorado Revised7
Statutes, or state revenues, as defined in section 24-77-103.6 (6)(c),8
Colorado Revised Statutes, and does not count against either the state9
fiscal year spending limit imposed by section 20 of article X of the state10
constitution or the excess state revenues cap, as defined in section11
24-77-103.6 (6)(b)(I)(G), Colorado Revised Statutes.12
SECTION 2. In Colorado Revised Statutes, add 34-60-132 as13
follows:14
34-60-132. Orphaned wells mitigation enterprise - creation -15
powers and duties - enterprise board created - mitigation fees - cash16
fund created - rules - definitions - repeal. (1) Enterprise created.17
(a) T
HE ORPHANED WELLS MITIGATION ENTERPRISE IS CREATED IN THE18
DEPARTMENT FOR THE PURPOSE OF :19
(I) I
MPOSING AND COLLECTING MITIGATION FEES ;20
(II) F
UNDING THE PLUGGING, RECLAIMING, AND REMEDIATING OF21
ORPHANED WELLS IN THE STATE;22
(III) E
NSURING THAT THE COSTS ASSOCIATED WITH PLUGGING ,23
RECLAIMING, AND REMEDIATING ORPHANED WELLS ARE BORNE BY24
OPERATORS IN THE FORM OF MITIGATION FEES ; AND25
(IV) D
ETERMINING THE AMOUNT OF MITIGATION FEES .26
(b) T
HE ENTERPRISE BOARD , IN CONSULTATION WITH THE27
SB22-198
-5- COMMISSION, SHALL ADMINISTER THE ENTERPRISE IN ACCORDANCE WITH1
THIS SECTION.2
(c) (I) T
HE ENTERPRISE CONSTITUTES AN ENTERPRISE FOR3
PURPOSES OF SECTION 20 OF ARTICLE X OF THE STATE CONSTITUTION SO4
LONG AS IT RETAINS THE AUTHORITY TO ISSUE REVENUE B ONDS AND5
RECEIVES LESS THAN TEN PERCENT OF ITS TOTAL REVENUES IN GRANTS , AS6
DEFINED IN SECTION 24-77-102 (7), FROM ALL COLORADO STATE AND7
LOCAL GOVERNMENTS COMBINED . SO LONG AS IT CONSTITUTES AN8
ENTERPRISE, THE ENTERPRISE IS NOT A DISTRICT FOR PURPOSES OF SECTION9
20
OF ARTICLE X OF THE STATE CONSTITUTION.10
(II) T
HE ENTERPRISE IS AUTHORIZED TO ISSUE REVENUE BONDS FOR11
THE EXPENSES OF THE ENTERPRISE , SECURED BY REVENUE OF THE12
ENTERPRISE.13
(2) Powers and duties. I
N ADDITION TO ANY OTHER POWERS AND14
DUTIES SPECIFIED IN THIS SECTION, THE ENTERPRISE BOARD HAS THE15
FOLLOWING GENERAL POWERS AND DUTIES ON BEHALF OF THE16
ENTERPRISE:17
(a) T
O ADOPT PROCEDURES FOR CONDUCTING ITS AFFAIRS ;18
(b) T
O ACQUIRE, HOLD TITLE TO, AND DISPOSE OF REAL AND19
PERSONAL PROPERTY;20
(c) I
N CONSULTATION WITH THE DIRECTOR OF THE COMMISSION OR21
THE DIRECTOR'S DESIGNEE, TO EMPLOY AND SUPERVISE INDIVIDUALS ,22
PROFESSIONAL CONSULTANTS , AND CONTRACTORS AS ARE NECESSARY IN23
ITS JUDGMENT TO CARRY OUT ITS BUSINESS PURPOSES ;24
(d) T
O CONTRACT WITH ANY PUBLIC OR PRIVATE ENTITY ,25
INCLUDING STATE AGENCIES , CONSULTANTS, AND THE ATTORNEY26
GENERAL'S OFFICE, FOR PROFESSIONAL AND TECHNICAL ASSISTANCE ,27
SB22-198
-6- OFFICE SPACE AND ADMINISTRATIVE SERVICES , ADVICE, AND OTHER1
SERVICES RELATED TO THE CONDUCT OF THE AFFAIRS OF THE ENTERPRISE ;2
(e) T
O SEEK, ACCEPT, AND EXPEND GIFTS, GRANTS, DONATIONS, OR3
OTHER PAYMENTS FROM PRIVATE OR PUBLIC SOURCES FOR THE PURPOSES4
OF THIS SECTION, SO LONG AS THE TOTAL AMOUNT OF ALL GRANTS FROM5
C
OLORADO STATE AND LOCAL GOVERNMENTS RECEIVED IN ANY STATE6
FISCAL YEAR IS LESS THAN TEN PERCENT OF THE ENTERPRISE 'S TOTAL7
ANNUAL REVENUE FOR THE STATE FISCAL YEAR . THE ENTERPRISE SHALL8
TRANSMIT ANY MONEY RECEIVED THROUGH GIFTS , GRANTS, DONATIONS,9
OR OTHER PAYMENTS TO THE STATE TREASURER , WHO SHALL CREDIT THE10
MONEY TO THE FUND.11
(f) T
O HAVE AND EXERCISE ALL RIGHTS AND POWERS NECESSARY12
OR INCIDENTAL TO OR IMPLIED FROM THE SPECIFIC POWERS AND DUTIES13
GRANTED BY THIS SECTION.14
(3) Enterprise board created - membership - repeal. (a) T
HE15
ORPHANED WELLS MITIGATION ENTERPRISE BOARD IS CREATED TO16
ADMINISTER THE ENTERPRISE. THE ENTERPRISE BOARD INCLUDES THE17
FOLLOWING FIVE MEMBERS:18
(I) T
HE CHAIR OF THE COMMISSION;19
(II) T
HE DIRECTOR OF THE COMMISSION OR THE DIRECTOR 'S20
DESIGNEE;21
(III) A
N INDIVIDUAL WITH SUBSTANTIAL EXPERIENCE IN THE OIL22
AND GAS INDUSTRY, TO BE APPOINTED BY THE GOVERNOR AND CONFIRMED23
BY THE SENATE;24
(IV) A
LOCAL GOVERNMENT OFFICIAL , PREFERABLY FROM A25
JURISDICTION THAT HAS OIL AND GAS DEVELOPMENT AND ORPHANED26
WELLS, TO BE APPOINTED BY THE GOVERNOR AND CONFIRMED BY THE27
SB22-198
-7- SENATE; AND1
(V) A
N INDIVIDUAL WITH FORMAL TRAINING OR SUBSTANTIAL2
EXPERIENCE IN LAND RECLAMATION PROJECTS , TO BE APPOINTED BY THE3
GOVERNOR AND CONFIRMED BY THE SENATE .4
(b) (I) T
HE GOVERNOR SHALL APPOINT THE INITIAL MEMBERS OF5
THE ENTERPRISE BOARD PURSUANT TO SUBSECTIONS (3)(a)(III), (3)(a)(IV),6
AND (3)(a)(V) OF THIS SECTION ON OR BEFORE SEPTEMBER 1, 2022.7
(II) T
HIS SUBSECTION (3)(b) IS REPEALED, EFFECTIVE JULY 1, 2023.8
(c) T
HE MEMBERS OF THE ENTERPRISE BOARD DESCRIBED IN9
SUBSECTIONS (3)(a)(III), (3)(a)(IV), AND (3)(a)(V) OF THIS SECTION SHALL10
EACH SERVE TERMS OF THREE YEARS ; EXCEPT THAT THE INITIAL TERM OF11
THE MEMBER APPOINTED PURSUANT TO SUBSECTION (3)(a)(III) OF THIS12
SECTION IS ONE YEAR, AND THE INITIAL TERM OF THE MEMBER APPOINTED13
PURSUANT TO SUBSECTION (3)(a)(IV) OF THIS SECTION IS TWO YEARS. IN14
THE EVENT OF A VACANCY, THE GOVERNOR MAY APPOINT AN INDIVIDUAL15
TO COMPLETE THE TERM OF THE MEMBER WHOSE SEAT HAS BECOME16
VACANT.17
(d) A
N INDIVIDUAL MAY BE APPOINTED AS A MEMBER OF THE18
ENTERPRISE BOARD PURSUANT TO SUBSECTION (3)(a)(III), (3)(a)(IV), OR19
(3)(a)(V)
OF THIS SECTION AN UNLIMITED NUMBER OF TIMES .20
(e) E
NTERPRISE BOARD MEMBERS SERVING PURSUANT TO21
SUBSECTIONS (3)(a)(III), (3)(a)(IV), AND (3)(a)(V) OF THIS SECTION MAY22
RECEIVE COMPENSATION FROM THE DEPARTMENT ON A PER DIEM BASIS23
FOR REASONABLE EXPENSES ACTUALLY INCURRED IN THE PERFORMANCE24
OF DUTIES REQUIRED OF ENTERPRISE BOARD MEMBERS UNDER THIS25
SECTION.26
(f) T
HE GOVERNOR SHALL SELECT A MEMBER OF THE ENTERPRISE27
SB22-198
-8- BOARD TO SERVE AS CHAIR OF THE ENTERPRISE BOARD .1
(4) Enterprise board - duties. I
N ADDITION TO ADMINISTERING2
THE ENTERPRISE, AT LEAST ANNUALLY, THE ENTERPRISE BOARD SHALL:3
(a) C
ONSIDER WHETHER THE AMOUNTS OF THE MITIGATION FEES4
SHOULD BE INCREASED OR REDUCED, BASED ON CURRENT CIRCUMSTANCES5
AND REASONABLY ANTICIPATED FUTURE EXPENDITURES FROM THE FUND ;6
(b) I
F THE ENTERPRISE BOARD DETERMINES THAT AN INCREASE OR7
REDUCTION OF THE MITIGATION FEE AMOUNTS IS WARRANTED , ADJUST THE8
MITIGATION FEE AMOUNTS; EXCEPT THAT THE ENTERPRISE BOARD SHALL9
NOT SET THE FEE AMOUNTS IN AN AMOUNT THAT RESULTS IN A VIOLATION10
OF SUBSECTION (6)(b) OF THIS SECTION; AND11
(c) A
DVISE THE COMMISSION OF THE OUTCOME OF THE ENTERPRISE12
BOARD'S DELIBERATIONS PURSUANT TO THIS SUBSECTION (4).13
(5) Mitigation fees. (a) O
N OR BEFORE AUGUST 1, 2022; ON OR14
BEFORE APRIL 30, 2023; AND ON OR BEFORE APRIL 30 EACH YEAR15
THEREAFTER, EACH OPERATOR SHALL PAY A MITIGATION FEE TO THE16
ENTERPRISE FOR EACH WELL OF AN OPERATOR THAT HAS BEEN SPUD BUT17
IS NOT YET PLUGGED AND ABANDONED , IN ACCORDANCE WITH RULES OF18
THE COMMISSION. MITIGATION FEES DUE BY AUGUST 1, 2022, SHALL BE19
PAID IN THE FOLLOWING AMOUNTS :20
(I) F
OR OPERATORS WITH PRODUCTION THAT IS EQUAL TO OR LESS21
THAN A THRESHOLD TO BE DETERMINED BY RULES OF THE COMMISSION ,22
ONE HUNDRED TWENTY -FIVE DOLLARS FOR EACH WELL; AND23
(II) F
OR OPERATORS WITH PRODUCTION THAT EXCEEDS A24
THRESHOLD TO BE DETERMINED BY RULES OF THE COMMISSION , TWO25
HUNDRED TWENTY-FIVE DOLLARS FOR EACH WELL.26
(b) M
ITIGATION FEES PAID AFTER AUGUST 1, 2022, SHALL BE PAID27
SB22-198
-9- IN THE AMOUNTS DESCRIBED IN SUBSECTION (5)(a) OF THIS SECTION, AS1
SUCH AMOUNTS MAY BE ADJUSTED BY THE ENTERPRISE BOARD PURSUANT2
TO SUBSECTION (4) OF THIS SECTION.3
(c) T
HE ENTERPRISE SHALL TRANSFER ALL MONEY COLLECTED AS4
MITIGATION FEES PURSUANT TO THIS SUBSECTION (5) TO THE STATE5
TREASURER, WHO SHALL CREDIT THE MONEY TO THE FUND .6
(6) Cash fund. (a) T
HE ORPHANED WELLS MITIGATION7
ENTERPRISE CASH FUND IS CREATED IN THE STATE TREASURY . THE FUND8
CONSISTS OF:9
(I) M
ONEY RECEIVED AS MITIGATION FEES;10
(II) A
NY MONEY RECEIVED FROM THE ISSUANCE OF REVENUE11
BONDS, AS DESCRIBED IN SUBSECTION (1)(c)(II) OF THIS SECTION;12
(III) A
NY GIFTS, GRANTS, OR DONATIONS RECEIVED PURSUANT TO13
SUBSECTION (2)(e) OF THIS SECTION; AND14
(IV) A
NY OTHER MONEY THAT THE GENERAL ASSEMBLY MAY15
APPROPRIATE OR TRANSFER TO THE FUND .16
(b) T
HE TOTAL AMOUNT OF MONEY CREDITED TO THE F UND AS17
MITIGATION FEES MAY NOT EXCEED ONE HUNDRED MILLION DOLLARS IN18
THE FIRST FIVE FISCAL YEARS OF THE ENTERPRISE, BEGINNING WITH THE19
2022-23
STATE FISCAL YEAR.20
(c) T
HE STATE TREASURER SHALL CREDIT ALL INTEREST AND21
INCOME DERIVED FROM THE DEPOSIT AND INVESTMENT OF MONEY IN THE22
FUND TO THE FUND. ANY UNEXPENDED AND UNENCUMBERED MONEY23
REMAINING IN THE FUND AT THE END OF A FISCAL YEAR REMAINS IN THE24
FUND AND SHALL NOT BE CREDITED OR TRANSFERRED TO THE GENERAL25
FUND.26
(d) M
ONEY CREDITED TO THE FUND IS CONTINUOUSLY27
SB22-198
-10- APPROPRIATED TO THE FUND FOR USE BY THE ENTERPRISE AND SHALL BE1
EXPENDED TO:2
(I) P
ROVIDE PLUGGING, RECLAIMING, AND REMEDIATING SERVICES3
AT THE REQUEST OF THE DIRECTOR OF THE COMMISSION ;4
(II) P
AY THE ENTERPRISE'S REASONABLE AND NECESSARY5
OPERATING EXPENSES; AND6
(III) O
THERWISE EXERCISE THE ENTERPRISE 'S POWERS AND7
PERFORM ITS DUTIES AS AUTHORIZED BY THIS SECTION .8
(7) Rules. T
HE COMMISSION SHALL PROMULGATE RULES FOR THE9
IMPLEMENTATION OF SUBSECTION (5)(a) OF THIS SECTION AND AS MAY BE10
OTHERWISE NECESSARY TO IMPLEMENT THIS SECTION .11
(8) Definitions. A
S USED IN THIS SECTION, UNLESS THE CONTEXT12
OTHERWISE REQUIRES:13
(a) "D
EPARTMENT" MEANS THE DEPARTMENT OF NATURAL14
RESOURCES.15
(b) "E
NTERPRISE" MEANS THE ORPHANED WELLS MITIGATION16
ENTERPRISE CREATED IN SUBSECTION (1) OF THIS SECTION.17
(c) "E
NTERPRISE BOARD" MEANS THE ORPHANED WELLS18
MITIGATION ENTERPRISE BOARD CREATED IN SUBSECTION (3) OF THIS19
SECTION.20
(d) "F
UND" MEANS THE ORPHANED WELLS MITIGATION ENTERPRISE21
CASH FUND CREATED IN SUBSECTION (6) OF THIS SECTION.22
(e) "M
ITIGATION FEE" MEANS A MITIGATION FEE AUTHORIZED AND23
IMPOSED PURSUANT TO SUBSECTION (5) OF THIS SECTION.24
(f) "O
RPHANED WELL" MEANS AN OIL AND GAS WELL, LOCATION,25
OR FACILITY IN THE STATE FOR WHICH NO OWNER OR OPERATOR CAN BE26
FOUND OR THE OWNER OR OPERATOR IS UNWILLING OR UNABLE TO PAY27
SB22-198
-11- THE COSTS OF PLUGGING, RECLAIMING, AND REMEDIATING.1
SECTION 3. Effective date. This act takes effect July 1, 2022.2
SECTION 4. Safety clause. The general assembly hereby finds,3
determines, and declares that this act is necessary for the immediate4
preservation of the public peace, health, or safety.5
SB22-198
-12-