SENATE BILL 22-198
BY SENATOR(S) Fenberg and Scott, Bridges, Buckner, Ginal, Hansen,
Jaquez Lewis, Lee, Pettersen, Priola, Story, Winter, Zenzinger;
also REPRESENTATIVE(S) Weissman and Will, Amabile, Bernett, Bird,
Boesenecker, Froelich, Gonzales-Gutierrez, Hooton, Jodeh, Kipp, Lindsay,
McCormick, McLachlan, Ricks, Titone.
C
ONCERNING MEASURES TO ADDRESS ORPHANED WELLS IN COLORADO, AND,
IN CONNECTION THEREWITH , CREATING THE ORPHANED WELLS
MITIGATION ENTERPRISE
.
Be it enacted by the General Assembly of the State of Colorado:
SECTION 1. Legislative declaration. (1) The general assembly
finds that:
(a) Orphaned wells present significant potential for adverse impacts
to public health, safety, and welfare, as well as to the environment and to
wildlife resources; and
(b) It is necessary, appropriate, and in the best interests of oil and
gas well operators for the state to ensure that orphaned wells and associated
facilities are plugged, reclaimed, and remediated in a timely manner.
NOTE: This bill has been prepared for the signatures of the appropriate legislative
officers and the Governor. To determine whether the Governor has signed the bill
or taken other action on it, please consult the legislative status sheet, the legislative
history, or the Session Laws.
________
Capital letters or bold & italic numbers indicate new material added to existing law; dashes
through words or numbers indicate deletions from existing law and such material is not part of
the act. (2) The general assembly also finds that:
(a) Current law authorizes the Colorado oil and gas conservation
commission (commission) to require operators to provide and demonstrate
certain financial assurances in order to plug, reclaim, and remediate
orphaned wells; and
(b) The existing statutory and rule-based mechanisms provided for
such financial assurances may not provide sufficient funding to plug,
reclaim, and remediate orphaned wells in all circumstances.
(3) Now, therefore, the general assembly declares that:
(a) It is in the public interest to create an enterprise within the
department of natural resources that is solely committed to the plugging,
reclaiming, and remediating of orphaned wells;
(b) The activities of the orphaned wells mitigation enterprise
(enterprise) shall be funded by revenue generated from mitigation fees
imposed upon, and paid by, operators of oil and gas wells in Colorado;
(c) It is appropriate that operators should pay such mitigation fees,
as operators are the direct beneficiaries of the service provided by the
enterprise, which is the plugging, reclaiming, and remediating of orphaned
wells;
(d) Operators benefit from the plugging, reclaiming, and
remediating services provided by the enterprise pursuant to this act because
such services allow operators to operate oil and gas wells in Colorado
despite the risk that some wells will be orphaned;
(e) Operators also benefit from the service provided by the
enterprise because without such service, it may be necessary to require
operators to submit significantly higher amounts of financial assurance to
the commission to ensure that the public does not become responsible for
paying the costs of plugging, reclaiming, and remediating orphaned wells;
(f) Consistent with the determination of the Colorado supreme court
in Nicholl v. E-470 Public Highway Authority, 896 P.2d 859 (Colo. 1995),
PAGE 2-SENATE BILL 22-198 that the power to impose taxes is inconsistent with enterprise status under
section 20 of article X of the state constitution, and in accordance with the
determination of the Colorado supreme court in Colorado Union of
Taxpayers Foundation v. City of Aspen, 2018 CO 36, the general assembly
concludes that the mitigation fees are fees, and the enterprise operates as a
business, because:
(I) By providing financing for plugging, reclaiming, and remediating
services as authorized by this section, this enterprise provides a benefit to
operators when orphaned wells are plugged, reclaimed, and remediated;
(II) The mitigation fee is imposed for the specific purpose of
allowing the enterprise to finance plugging, reclaiming, and remediating
services, which allow operators to operate oil and gas wells in Colorado
despite the risk of wells being orphaned;
(III) The mitigation fee is imposed for the specific purpose of
allowing the enterprise to finance plugging, reclaiming, and remediating
services, which reduces the total amount of financial assurance that
operators must provide in order to operate in Colorado; and
(IV) The mitigation fee is collected in amounts that are reasonably
calculated based on the impacts caused by fee payers and the benefits
enjoyed by fee payers; and
(g) So long as the enterprise qualifies as an enterprise for purposes
of section 20 of article X of the state constitution, the revenue from the
mitigation fees collected by the enterprise is not state fiscal year spending,
as defined in section 24-77-102 (17), Colorado Revised Statutes, or state
revenues, as defined in section 24-77-103.6 (6)(c), Colorado Revised
Statutes, and does not count against either the state fiscal year spending
limit imposed by section 20 of article X of the state constitution or the
excess state revenues cap, as defined in section 24-77-103.6 (6)(b)(I)(G),
Colorado Revised Statutes.
SECTION 2. In Colorado Revised Statutes, add 34-60-133 as
follows:
34-60-133. Orphaned wells mitigation enterprise - creation -
powers and duties - enterprise board created - mitigation fees - cash
PAGE 3-SENATE BILL 22-198 fund created - rules - definitions - repeal. (1) Enterprise created.
(a) T
HE ORPHANED WELLS MITIGATION ENTERPRISE IS CREATED IN THE
DEPARTMENT FOR THE PURPOSE OF
:
(I) I
MPOSING AND COLLECTING MITIGATION FEES ;
(II) F
UNDING THE PLUGGING, RECLAIMING, AND REMEDIATING OF
ORPHANED WELLS IN THE STATE
;
(III) E
NSURING THAT THE COSTS ASSOCIATED WITH PLUGGING ,
RECLAIMING, AND REMEDIATING ORP HANED WELLS ARE BORNE BY
OPERATORS IN THE FORM OF MITIGATION FEES
; AND
(IV) DETERMINING THE AMOUNT OF MITIGATION FEES .
(b) T
HE ENTERPRISE BOARD , IN CONSULTATION WITH THE
COMMISSION
, SHALL ADMINISTER THE ENTERPRISE IN ACCORDANCE WITH
THIS SECTION
.
(c) (I) T
HE ENTERPRISE CONSTITUTES AN ENTERPRISE FOR PURPOSES
OF SECTION
20 OF ARTICLE X OF THE STATE CONSTITUTION SO LONG AS IT
RETAINS THE AUTHORITY TO ISSUE REVENUE BONDS AND RECEIVES LESS
THAN TEN PERCENT OF ITS TOTAL REVENUES IN GRANTS
, AS DEFINED IN
SECTION
24-77-102 (7), FROM ALL COLORADO STATE AND LOCAL
GOVERNMENTS COMBINED
. SO LONG AS IT CONSTITUTES AN ENTERPRISE, THE
ENTERPRISE IS NOT A DISTRICT FOR PURPOSES OF SECTION
20 OF ARTICLE X
OF THE STATE CONSTITUTION.
(II) T
HE ENTERPRISE IS AUTHORIZED TO ISSUE REVENUE BONDS FOR
THE EXPENSES OF THE ENTERPRISE
, SECURED BY REVENUE OF THE
ENTERPRISE
.
(2) Powers and duties. I
N ADDITION TO ANY OTHER POWERS AND
DUTIES SPECIFIED IN THIS SECTION
, THE ENTERPRISE BOARD HAS THE
FOLLOWING GENERAL POWERS AND DUTIES ON BEHALF OF THE ENTERPRISE
:
(a) T
O ADOPT PROCEDURES FOR CONDUCTING ITS AFFAIRS ;
(b) T
O ACQUIRE, HOLD TITLE TO, AND DISPOSE OF REAL AND
PERSONAL PROPERTY
;
PAGE 4-SENATE BILL 22-198 (c) IN CONSULTATION WITH THE DIRECTOR OF THE COMMISSION OR
THE DIRECTOR
'S DESIGNEE, TO EMPLOY AND SUPERVISE INDIVIDUALS ,
PROFESSIONAL CONSULTANTS , AND CONTRACTORS AS ARE NECESSARY IN ITS
JUDGMENT TO CARRY OUT ITS BUSINESS PURPOSES
;
(d) T
O CONTRACT WITH ANY PUBLIC OR PRIVATE ENTITY , INCLUDING
STATE AGENCIES
, CONSULTANTS, AND THE ATTORNEY GENERAL 'S OFFICE,
FOR PROFESSIONAL AND TECHNICAL ASSISTANCE , OFFICE SPACE AND
ADMINISTRATIVE SERVICES
, ADVICE, AND OTHER SERVICES RELATED TO THE
CONDUCT OF THE AFFAIRS OF THE ENTERPRISE
;
(e) T
O SEEK, ACCEPT, AND EXPEND GIFTS, GRANTS, DONATIONS, OR
OTHER PAYMENTS FROM PRIVATE OR PUBLIC SOURCES FOR THE PURPOSES OF
THIS SECTION
, SO LONG AS THE TOTAL AMOUNT OF ALL GRANTS FROM
COLORADO STATE AND LOCAL GOVERNMENTS RECEIVED IN ANY STATE
FISCAL YEAR IS LESS THAN TEN PERCENT OF THE ENTERPRISE
'S TOTAL
ANNUAL REVENUE FOR THE STATE FISCAL YEAR
. THE ENTERPRISE SHALL
TRANSMIT ANY MONEY RECEIVED THROUGH GIFTS
, GRANTS, DONATIONS, OR
OTHER PAYMENTS TO THE STATE TREASURER
, WHO SHALL CREDIT THE
MONEY TO THE FUND
.
(f) T
O HAVE AND EXERCISE ALL RIGHTS AND POWERS NECESSARY OR
INCIDENTAL TO OR IMPLIED FROM THE SPECIFIC POWERS AND DUTIES
GRANTED BY THIS SECTION
.
(3) Enterprise board created - membership - repeal. (a) T
HE
ORPHANED WELLS MITIGATION ENTERPRISE BOARD IS CREATED TO
ADMINISTER THE ENTERPRISE
. THE ENTERPRISE BOARD INCLUDES THE
FOLLOWING FIVE MEMBERS
:
(I) T
HE CHAIR OF THE COMMISSION;
(II) T
HE DIRECTOR OF THE COMMISSION OR THE DIRECTOR 'S
DESIGNEE
;
(III) A
N INDIVIDUAL WITH SUBSTANTIAL EXPERIENCE IN THE OIL AND
GAS INDUSTRY
, TO BE APPOINTED BY THE GOVERNOR AND CONFIRMED BY
THE SENATE
;
(IV) A
LOCAL GOVERNMENT OFFICIAL , PREFERABLY FROM A
PAGE 5-SENATE BILL 22-198 JURISDICTION THAT HAS OIL AND GAS DEVELOPMENT AND ORPHANED WELLS ,
TO BE APPOINTED BY THE GOVERNOR AND CONFIRMED BY THE SENATE ; AND
(V) AN INDIVIDUAL WITH FORMAL TRAINING OR SUBSTANTIAL
EXPERIENCE IN LAND RECLAMATION PROJECTS
, TO BE APPOINTED BY THE
GOVERNOR AND CONFIRMED BY THE SENATE
.
(b) (I) T
HE GOVERNOR SHALL APPOINT THE INITIAL MEMBERS OF THE
ENTERPRISE BOARD PURSUANT TO SUBSECTIONS
(3)(a)(III), (3)(a)(IV), AND
(3)(a)(V) OF THIS SECTION ON OR BEFORE SEPTEMBER 1, 2022.
(II) T
HIS SUBSECTION (3)(b) IS REPEALED, EFFECTIVE JULY 1, 2023.
(c) T
HE MEMBERS OF THE ENTERPRISE BOARD DESCRIBED IN
SUBSECTIONS
(3)(a)(III), (3)(a)(IV), AND (3)(a)(V) OF THIS SECTION SHALL
EACH SERVE TERMS OF THREE YEARS
; EXCEPT THAT THE INITIAL TERM OF
THE MEMBER APPOINTED PURSUANT TO SUBSECTION
(3)(a)(III) OF THIS
SECTION IS ONE YEAR
, AND THE INITIAL TERM OF THE MEMBER APPOINTED
PURSUANT TO SUBSECTION
(3)(a)(IV) OF THIS SECTION IS TWO YEARS. IN THE
EVENT OF A VACANCY
, THE GOVERNOR MAY APPOINT AN INDIVIDUAL TO
COMPLETE THE TERM OF THE MEMBER WHOSE SEAT HAS BECOME VACANT
.
(d) A
N INDIVIDUAL MAY BE APPOINTED AS A MEMBER OF THE
ENTERPRISE BOARD PURSUANT TO SUBSECTION
(3)(a)(III), (3)(a)(IV), OR
(3)(a)(V) OF THIS SECTION AN UNLIMITED NUMBER OF TIMES .
(e) E
NTERPRISE BOARD MEMBERS SERVING PURSUANT TO
SUBSECTIONS
(3)(a)(III), (3)(a)(IV), AND (3)(a)(V) OF THIS SECTION MAY
RECEIVE COMPENSATION FROM THE DEPARTMENT ON A PER DIEM BASIS FOR
REASONABLE EXPENSES ACTUALLY INCURRED IN THE PERFORMANCE OF
DUTIES REQUIRED OF ENTERPRISE BOARD MEMBERS UNDER THIS SECTION
.
(f) T
HE GOVERNOR SHALL SELECT A MEMBER OF THE ENTERPRISE
BOARD TO SERVE AS CHAIR OF THE ENTERPRISE BOARD
.
(4) Enterprise board - duties. I
N ADDITION TO ADMINISTERING THE
ENTERPRISE
, AT LEAST ANNUALLY, THE ENTERPRISE BOARD SHALL:
(a) C
ONSIDER WHETHER THE AMOUNTS OF THE MITIGATION FEES
SHOULD BE INCREASED OR REDUCED
, BASED ON CURRENT CIRCUMSTANCES
PAGE 6-SENATE BILL 22-198 AND REASONABLY ANTICIPATED FUTURE EXPENDITURES FROM THE FUND ;
(b) I
F THE ENTERPRISE BOARD DETERMINES THAT AN INCREASE OR
REDUCTION OF THE MITIGATION FEE AMOUNTS IS WARRANTED
, ADJUST THE
MITIGATION FEE AMOUNTS
; EXCEPT THAT THE ENTERPRISE BOARD SHALL
NOT SET THE FEE AMOUNTS IN AN AMOUNT THAT RESULTS IN A VIOLATION OF
SUBSECTION
(6)(b) OF THIS SECTION; AND
(c) ADVISE THE COMMISSION OF THE OUTCOME OF THE ENTERPRISE
BOARD
'S DELIBERATIONS PURSUANT TO THIS SUBSECTION (4).
(5) Mitigation fees. (a) O
N 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 OF AN OPERATOR THAT HAS BEEN SPUD BUT IS
NOT YET PLUGGED AND ABANDONED
, IN ACCORDANCE WITH RULES OF THE
COMMISSION
. MITIGATION FEES DUE BY AUGUST 1, 2022, SHALL BE PAID IN
THE FOLLOWING AMOUNTS
:
(I) F
OR OPERATORS WITH PRODUCTION THAT IS EQUAL TO OR LESS
THAN A THRESHOLD TO BE DETERMINED BY RULES OF THE COMMISSION
, ONE
HUNDRED TWENTY
-FIVE DOLLARS FOR EACH WELL; AND
(II) FOR OPERATORS WITH PRODUCTION THAT EXCEEDS A THRESHOLD
TO BE DETERMINED BY RULES OF THE COMMISSION
, TWO HUNDRED
TWENTY
-FIVE DOLLARS FOR EACH WELL.
(b) M
ITIGATION FEES PAID AFTER AUGUST 1, 2022, SHALL BE PAID IN
THE AMOUNTS DESCRIBED IN SUBSECTION
(5)(a) OF THIS SECTION, AS SUCH
AMOUNTS MAY BE ADJUSTED BY THE ENTERPRISE BOARD PURSUANT TO
SUBSECTION
(4) OF THIS SECTION.
(c) T
HE ENTERPRISE SHALL TRANSFER ALL MONEY COLLECTED AS
MITIGATION FEES PURSUANT TO THIS SUBSECTION
(5) TO THE STATE
TREASURER
, WHO SHALL CREDIT THE MONEY TO THE FUND .
(6) Cash fund. (a) T
HE ORPHANED WELLS MITIGATION ENTERPRISE
CASH FUND IS CREATED IN THE STATE TREASURY
. THE FUND CONSISTS OF:
(I) M
ONEY RECEIVED AS MITIGATION FEES;
PAGE 7-SENATE BILL 22-198 (II) ANY MONEY RECEIVED FROM THE ISSUANCE OF REVENUE BONDS ,
AS DESCRIBED IN SUBSECTION (1)(c)(II) OF THIS SECTION;
(III) A
NY GIFTS, GRANTS, OR DONATIONS RECEIVED PURSUANT TO
SUBSECTION
(2)(e) OF THIS SECTION; AND
(IV) ANY OTHER MONEY THAT THE GENERAL ASSEMBLY MAY
APPROPRIATE OR TRANSFER TO THE FUND
.
(b) T
HE TOTAL AMOUNT OF MONEY CREDITED TO THE FUND AS
MITIGATION FEES MAY NOT EXCEED ONE HUNDRED MILLION DOLLARS IN THE
FIRST FIVE FISCAL YEARS OF THE ENTERPRISE
, BEGINNING WITH THE 2022-23
STATE FISCAL YEAR.
(c) T
HE STATE TREASURER SHALL CREDIT ALL INTEREST AND INCOME
DERIVED FROM THE DEPOSIT AND INVESTMENT OF MONEY IN THE F UND TO
THE FUND
. ANY UNEXPENDED AND UNENCUMBERED MONEY REMAINING IN
THE FUND AT THE END OF A FISCAL YEAR REMAINS IN THE FUND AND SHALL
NOT BE CREDITED OR TRANSFERRED TO THE GENERAL FUND
.
(d) M
ONEY CREDITED TO THE FUND IS CONTINUOUSLY APPROPRIATED
TO THE FUND FOR USE BY THE ENTERPRISE AND SHALL BE EXPENDED TO
:
(I) P
ROVIDE PLUGGING, RECLAIMING, AND REMEDIATING SERVICES
AT THE REQUEST OF THE DIRECTOR OF THE COMMISSION
;
(II) P
AY THE ENTERPRISE'S REASONABLE AND NECESSARY OPERATING
EXPENSES
; AND
(III) OTHERWISE EXERCISE THE ENTERPRISE'S POWERS AND PERFORM
ITS DUTIES AS AUTHORIZED BY THIS SECTION
.
(7) Rules. T
HE COMMISSION SHALL PROMULGATE RULES FOR THE
IMPLEMENTATION OF SUBSECTION
(5)(a) OF THIS SECTION AND AS MAY BE
OTHERWISE NECESSARY TO IMPLEMENT THIS SECTION
.
(8) Definitions. A
S USED IN THIS SECTION, UNLESS THE CONTEXT
OTHERWISE REQUIRES
:
(a) "D
EPARTMENT" MEANS THE DEPARTMENT OF NATURAL
PAGE 8-SENATE BILL 22-198 RESOURCES.
(b) "E
NTERPRISE" MEANS THE ORPHANED WELLS MITIGATION
ENTERPRISE CREATED IN SUBSECTION
(1) OF THIS SECTION.
(c) "E
NTERPRISE BOARD" MEANS THE ORPHANED WELLS MITIGATION
ENTERPRISE BOARD CREATED IN SUBSECTION
(3) OF THIS SECTION.
(d) "F
UND" MEANS THE ORPHANED WELLS MITIGATION ENTERPRISE
CASH FUND CREATED IN SUBSECTION
(6) OF THIS SECTION.
(e) "M
ITIGATION FEE" MEANS A MITIGATION FEE AUTHORIZED AND
IMPOSED PURSUANT TO SUBSECTION
(5) OF THIS SECTION.
(f) "O
RPHANED WELL" MEANS AN OIL AND GAS WELL, LOCATION, OR
FACILITY IN THE STATE FOR WHICH NO OWNER OR OPERATOR CAN BE FOUND
OR THE OWNER OR OPERATOR IS UNWILLING OR UNABLE TO PAY THE COSTS
OF PLUGGING
, RECLAIMING, AND REMEDIATING.
SECTION 3. Effective date. This act takes effect July 1, 2022.
SECTION 4. Safety clause. The general assembly hereby finds,
PAGE 9-SENATE BILL 22-198 determines, and declares that this act is necessary for the immediate
preservation of the public peace, health, or safety.
____________________________ ____________________________
Steve Fenberg Alec Garnett
PRESIDENT OF SPEAKER OF THE HOUSE
THE SENATE OF REPRESENTATIVES
____________________________ ____________________________
Cindi L. Markwell Robin Jones
SECRETARY OF CHIEF CLERK OF THE HOUSE
THE SENATE OF REPRESENTATIVES
APPROVED________________________________________
(Date and Time)
_________________________________________
Jared S. Polis
GOVERNOR OF THE STATE OF COLORADO
PAGE 10-SENATE BILL 22-198