Current through Register Vol. 47, No. 17, September 10, 2024
a.
Preferred Types of Financial Assurance. To demonstrate its
capacity to perform all of its obligations under the Act and the Commission's
Rules, each Operator will provide the Commission with the following types of
Financial Assurance:
(1) A Cash Bond;
or
(2) A Surety Bond.
b.
Alternative Types of
Financial Assurance. An Operator may request a hearing pursuant to Rule
503.g.(11) to obtain the Commission's approval to provide a type of Financial
Assurance explicitly authorized by §
34-60-106(13)(a)
-(f), C.R.S.
(1)
Proving
Equivalency. If an Operator seeks the Commission's approval of a lien,
Letter of Credit, security interest, escrow account, sinking fund, Third-Party
Trust Fund, or other financial instrument that is not a Cash Bond or Surety
Bond, the Operator will prove that the proposed type of Financial Assurance is
equivalent to a Cash Bond or Surety Bond.
(2)
Self-Bonding Strongly
Disfavored. Unless the Operator is a Local Government, the Commission
will presumptively not accept a guarantee of performance based on an Operator's
demonstration of sufficient net worth unless the Operator proves, through a
personal guarantee of a corporate officer, on an annual basis:
A.
Audited Financial Statements.
Its current net worth, as demonstrated through financial statements accompanied
by an unmodified opinion issued by an independent auditor;
B.
Conservative Estimate of Net
Worth. That its net worth is greater than 20 times the estimated cost to
Plug and Abandon and Reclaim all Oil and Gas Operations in Colorado;
and
C.
Multi-Agency
Guarantees Prohibited. The Operator is not subject to a guarantee of
performance based on the same net worth as a form of Financial Assurance
provided to any other local, state, tribal, or federal government agency, or to
a foreign nation.
c.
Commission's Interest in Active
Financial Assurance.
(1)
Commission's Expenditure. All types of Financial Assurance may be
expended by the Commission if an Operator fails to perform its obligations
under the Act or the Commission's Rules, including its Plugging and
Abandonment, Reclamation, and Remediation obligations.
(2)
Operator's Contingent Reversionary
Interest. If an Operator fails to fulfill any of its obligations under
the Act and the Commission's Rules, the Operator will have no contract or
property interest in any type of Financial Assurance other than a contingent
reversionary interest in the surplus, if any, which arises:
A. After the Director determines that the
Operator has complied with all Plugging and Abandonment, Reclamation, and
Remediation obligations pursuant to Rule 706.a; or
B. After a Buying Operator has filed a
satisfactory replacement Financial Assurance pursuant to Rule 218.g.(4), and
the Director has approved the applicable Form 9, Transfer of Operatorship -
Subsequent.
d.
Riders Prohibited.
(1)
New Riders. The Commission
will not authorize any new bond riders after April 30, 2022, except:
A. In the instance of an Operator changing
its name without any associated transfer of assets pursuant to Rule 218;
or
B. As the result of changing the
amount of Financial Assurance provided without any associated transfer of
assets pursuant to Rule 218.
(2)
Existing Riders. Operators
whose Financial Assurance is partially or entirely provided through a rider on
another Operator's bond as of April 30, 2022 will submit a Financial Assurance
Plan for the review and approval or denial in accordance with Rule 702.b,
addressing the liability posed by the rider.
e.
Form 3A, Financial Assurance.
To provide Financial Assurance, update or change Financial Assurance or related
information pursuant to the 700 Series Rules, an Operator will file a Form 3A,
Financial Assurance, unless a Rule specifies a different form or notice
mechanism.
