Code of Colorado Regulations
400 - Department of Natural Resources
404 - Oil and Gas Conservation Commission
2 CCR 404-1 - PRACTICE AND PROCEDURE
Section 702 - FINANCIAL ASSURANCE FOR PLUGGING, ABANDONMENT, AND RECLAMATION
Universal Citation: 2 CO Code Regs 404-1 ยง 702
Current through Register Vol. 47, No. 17, September 10, 2024
a. Applicability. All references to Wells in this Rule 702 include Wells subject to an approved but not yet expired Form 2, Application for Permit to Drill that have not yet been Spud. This Rule 702 applies to every Well and its associated Oil and Gas Location and Oil and Gas Facility, in Colorado, unless the Operator demonstrates that it has already provided or will provide Financial Assurance for the same Well, Oil and Gas Location, or Oil and Gas Facility to the federal government at the time it files a Form 2, Application for Permit to Drill, an Oil and Gas Development Plan, or a Financial Assurance Plan pursuant to this Rule 702. This exception will continue until no later than 90 days after the effective date of any final rule adopted by the U.S. Bureau of Land Management to update the federal bonding requirements found in 43 C.F.R. § 3104, and in no case later than October 15, 2023. Following the expiration of this exception, all Operators with Wells subject to federal bonding requirements will file a revised Financial Assurance Plan pursuant to Rule 702.b.(2) and, based upon the Financial Assurance Option, the Commission or Director will determine whether the financial assurance required by the federal government is substantially equivalent to the Commission's 700 Series and, if not, what additional Financial Assurance is required so long as the additional Financial Assurance does not duplicate financial assurance imposed by the federal government.
b. Form 3, Financial Assurance Plan. Operators of 1 or more Wells will file Financial Assurance Plans as required by this Rule 702.b. Each Financial Assurance Plan will demonstrate how the Operator is financially capable of fulfilling its obligations under the Act and the Commission's Rules.
(1)
Initial Financial Assurance Plan
Submissions.
A.
Existing
Operators' Deadlines for Initial Financial Assurance Plan Submission.
All Operators of 1 or more Wells with an active Form 1, Registration for Oil
and Gas Operations as of April 30, 2022 will submit an initial Financial
Assurance Plan according to the following deadlines:
i. Operators with 50 or more Wells: July 1,
2022.
ii. Operators with greater
than 10 but fewer than 50 Wells: October 1, 2022.
iii. Operators with 10 or fewer Wells:
December 31, 2022.
B.
New Operators. An Operator of 1 or more Wells that files a new
Form 1 after April 30, 2022 will submit an initial Financial Assurance Plan
concurrently with its Form 1.
C.
Review of Initial Financial Assurance Plan.
i.
Director's Review of Initial
Financial Assurance Plan. If an Operator's initial Financial Assurance
Plan meets the criteria in Rules 702.d.(1) or (2), or the Operator's initial
Financial Assurance Plan provides Single Well Financial Assurance for all Wells
and does not request a modification of the presumptive annual contribution
pursuant to Rules 702.d.(3) or (4), the Plan will be subject to review by the
Director. If the Director denies the initial Financial Assurance Plan, the
Operator may file an application for a Financial Assurance hearing pursuant to
Rule 503.g.(11). Only CDPHE, CPW, or a Relevant Local Government with
jurisdiction over Wells subject to the Operator's Financial Assurance Plan may
file a petition pursuant to Rule 507 to participate formally as a party in the
Financial Assurance hearing.
ii.
Commission's Review of Initial Financial Assurance Plan. For any
submitted initial Financial Assurance Plan that does not qualify for Director
review pursuant to Rule 702.b.(1).C.i, the Operator will file an application
for a Financial Assurance hearing pursuant to Rule 503.g.(11) concurrently with
filing its Financial Assurance Plan. Only CDPHE, CPW, or a Relevant Local
Government with jurisdiction over Wells subject to the Operator's Financial
Assurance Plan may file a petition pursuant to Rule 507 to participate formally
as a party in the Financial Assurance hearing.
(2)
Revised Financial Assurance
Plans. An Operator will file a revised Financial Assurance Plan if the
Operator believes that a change to its approved Financial Assurance Plan is
warranted due to a change in circumstance. Only CDPHE, CPW, or a Relevant Local
Government with jurisdiction over Wells subject to the Operator's Financial
Assurance Plan may file a petition pursuant to Rule 507 to participate formally
as a party in the Financial Assurance hearing.
A. If an Operator's revised Financial
Assurance Plan meets the criteria in Rules 702.d.(1) or (2), or the Operator's
revised Financial Assurance Plan provides Single Well Financial Assurance for
all Wells and does not request a modification of the presumptive annual
contribution pursuant to Rules 702.d.(3) or (4), the Plan will be subject to
review by the Director. If the Director denies the revised Financial Assurance
Plan, the Operator may file an application for a Financial Assurance hearing
pursuant to Rule 503.g.(11).
B. For
any submitted revised Financial Assurance Plan that does not qualify for
Director review pursuant to Rule 702.b.(2).A, the Operator will file an
application for a Financial Assurance hearing pursuant to Rule 503.g.(11)
concurrently with filing its revised Financial Assurance Plan.
(3)
Director's Annual
Review. The Director may require an Operator to file a revised Financial
Assurance Plan and file an application for a Financial Assurance hearing
pursuant to Rule 503.g.(11) based on the Director's annual review pursuant to
Rule 707.b.
c. Financial Assurance Plan Options. Operators will file a Financial Assurance Plan in accordance with the listed Options. For purposes of any Option that includes a production threshold, the Operator will use the barrels of oil equivalent ("BOE") or thousand cubic feet of gas equivalent ("MCFE") threshold depending on the aggregate gas-to-oil ratio ("GOR") of the production from all of its Wells over the previous 12 months. The BOE thresholds apply to Operators with an aggregate GOR equal to or less than 15,000 standard cubic feet ("SCF")/barrels of oil ("BBL"); the MCFE thresholds apply to Operators with an aggregate GOR of greater than 15,000 SCF/BBL. Aggregate GOR is calculated by dividing the Operator's total gas production (in thousand cubic feet ("MCF")) over the previous 12 months by the Operator's total oil production (in BBL) over the previous 12 months and multiplying by 1,000. Operators will use the conversion factor of 5.8 to convert MCF to BBL and vice versa. For purposes of calculating the average daily per-Well production, the Operator will not include Class II UIC Wells that are not Inactive Wells, Wells used for the purpose of monitoring or observing an oil or gas reservoir, and Stratigraphic Wells.
(1)
Option
1. An Operator may file a Financial Assurance Plan that meets the
criteria of Rule 702.d.(1) if:
A. The
Operator's average daily per-Well production exceeds 60 BOE over the previous
12 months; or
B. The Operator's
average daily per-Well production exceeds 90 MCFE over the previous 12
months.
(2)
Option
2. An Operator may file a Financial Assurance Plan that meets the
criteria of Rule 702.d.(2) if:
A. The
Operator's average daily per-Well production exceeds 15 BOE and is less than or
equal to 60 BOE over the previous 12 months; or
B. The Operator's average daily per-Well
production exceeds 22 MCFE and is less than or equal to 90 MCFE over the
previous 12 months.
(3)
Option 3. An Operator may file a Financial Assurance Plan that
meets the criteria of Rule 702.d.(3) if:
A.
The Operator's average daily per-Well production exceeds 2 BOE and is less than
or equal to 15 BOE over the previous 12 months; or
B. The Operator's average daily per-Well
production exceeds 6 MCFE and is less than or equal to 22 MCFE over the
previous 12 months.
(4)
Option 4. If an Operator does not meet the criteria in Rules
702.c.(1), (2), (3), or (6), or reports zero production from its oil or gas
Wells during the previous 12 months, the Operator will file a Financial
Assurance Plan that meets the criteria of Rule 702.d.(4).
(5)
Option 5. An Operator may
file a Financial Assurance Plan based on individual circumstances that
demonstrate the Operator is financially capable of fulfilling all of the
obligations imposed by the Act and the Commission's Rules. An Operator may only
submit a Financial Assurance Plan that meets the criteria of Rule 702.d.(5) due
to circumstances that make it unnecessary or unreasonable for the Operator to
submit the Financial Assurance amounts specified in Rules 702.d.(1)-(4), or for
other exceptional circumstances.
(6)
Option 6. An Option 6
Financial Assurance Plan is subject to regular review every 3 years pursuant to
Rule 707.b.(1). An Operator may file a Financial Assurance Plan that meets the
criteria of Rule 702.d.(6) if:
A. The
Operator's average daily per-Well production exceeds 40 BOE or 60 MCFE over the
previous 12 months, and the Operator is a public company subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended,
15 U.S.C. §
78a, et seq.; or
B. The Operator's average daily per-Well
production exceeds 60 BOE or 90 MCFE over the previous 12 months, and the
Operator is a private company.
(7)
Consolidation of Related
Operators. Where a registered Operator owns, holds, or controls 50% or
more of one or more other registered Operators, that parent company Operator
and its subsidiary Operators may be consolidated, at their discretion, for
purposes of determining Financial Plan Option eligibility and applicable amount
of required Rule 702 Series Financial Assurance, provided the parent Operator
guarantees all Rule 702 Series Financial Assurance obligations for itself and
the consolidated subsidiary entities. Consolidation under this Rule will
include all of a parent Operator's subsidiary Operators.
d. Contents of Financial Assurance Plans. Financial Assurance Plans will meet the informational criteria listed below.
(1)
Option 1 Plans.
A.
Information Requirements. An
Operator that meets the criteria of Rule 702.c.(1) will file a Financial
Assurance Plan that includes the following information to demonstrate it
satisfies the criteria for Option 1:
i.
Production Data. The total MCF and BBLs reported during the
previous 12 months and the Operator's calculated GOR.
ii.
Well Status and Designation
Data. A summary table accounting for all Wells, including the number of
Wells that falls within each operational status and designation, as of the date
the Financial Assurance Plan is submitted.
iii.
Well Plugging Data. The
number of Wells Plugged and Abandoned by the Operator during each of the
previous three years.
iv.
Inactive Well List. A list of all the Operator's Inactive Wells
that includes the name, number, API number, status, reason for no or low
production, and planned date for return to production or plug each
Well.
v.
Asset Retirement
Planning. A demonstration of how the Operator is planning for the
retirement of its Oil and Gas Operations based on the projected life of the
field, age of the infrastructure, Out of Service, Inactive, and Low Producing
Wells, and related information. For each Inactive Well, the Operator will
identify the reason for no or low production and the planned date to return to
production or plug the Well.
B.
Financial Assurance Amount.
The amount of Financial Assurance the Operator will provide to the Commission
as soon as practicable but no later than 90 days from the Commission's approval
of the Financial Assurance Plan, which will be:
i.
Blanket Financial Assurance Amount
(excludes Out of Service Wells).
aa.
$12,000 per Well if the Operator operates less than or equal to 50
Wells;
bb. $10,000 per Well if the
Operator operates more than 50 Wells and less than or equal to 150
Wells;
cc. $5,000 per Well if the
Operator operates more than 150 Wells and less than or equal to 1,500
Wells;
dd. $3,000 per Well if the
Operator operates more than 1,500 Wells and less than or equal to 4,000 Wells;
or
ee. $1,500 per Well if the
Operator operates more than 4,000 Wells.
ii.
Low Producing, Inactive, or Out of
Service Well Financial Assurance.
aa.
Low Producing Wells. The Operator's blanket bond will cover Low Producing Wells
up to 10% of the Operator's total number of Wells (excluding Out of Service
Wells). The Operator will provide Single Well Financial Assurance for any Low
Producing Well that exceeds the 10% threshold.
bb. Inactive and Out of Service Wells. The
amount of Financial Assurance required by the Director pursuant to Rules 434.c
& d.
cc. Transferred Low
Producing Wells. Single Well Financial Assurance for any Low Producing Well
that exceeds the threshold set forth in Rule 702.d.(1).B.ii.aa and was subject
to a transfer of operatorship approved by the Director pursuant to Rule
218.g.
iii.
Other
Financial Assurance. The amount of Financial Assurance required for:
aa. Other Oil and Gas Facilities pursuant to
Rule 703;
bb. Surface Owner
protection pursuant to Rule 704; and
cc. Remediation pursuant to Rule 703.b.
C.
Type
of Financial Assurance. The type of Financial Assurance the Operator
proposes to provide, pursuant to Rule 701.
D.
Certification of Financial
Capability. An Operator will provide a Certification of Financial
Capability signed by the Operator's corporate officer to ensure it is
financially capable of meeting all of the obligations imposed by the Act and
Commission's Rules.
(2)
Option 2 Plans.
A.
Information Requirements. An Operator that meets the criteria of
Rule 702.c.(2) will file a Financial Assurance Plan that includes the following
information to demonstrate it satisfies the criteria for Option 2:
i.
Production Data. The total
MCF and BBLs reported during the previous 12 months and the Operator's
calculated GOR.
ii.
Well
Status and Designation Data. A summary table accounting for all Wells,
including the number of Wells that falls within each operational status and
designation, as of the date the Financial Assurance Plan is submitted.
iii.
Well Plugging
Data. The number of Wells Plugged and Abandoned by the Operator during
each of the previous three years.
iv.
Inactive Well List. A list
of all the Operator's Inactive Wells that includes the name, number, API
number, status, reason for no or low production, and planned date for return to
production or plug each Well.
v.
Asset Retirement Planning. A demonstration of how the Operator is
planning for the retirement of its Oil and Gas Operations based on the
projected life of the field, age of the infrastructure, Out of Service,
Inactive, and Low Producing Wells, and related information. For each Inactive
Well, the Operator will identify the reason for no or low production and the
planned date to return to production or plug the Well.
B.
Financial Assurance Amount.
The total amount of Financial Assurance the Operator will provide to the
Commission as soon as practicable but no later than 90 days from the
Commission's approval of the Financial Assurance Plan, which will be:
i.
Blanket Financial Assurance Amount
(excludes Out of Service Wells).
aa.
$18,000 per Well if the Operator operates less than or equal to 50
Wells;
bb. $15,000 per Well if the
Operator operates more than 50 Wells and less than or equal to 150
Wells;
cc. $12,000 per Well if the
Operator operates more than 150 Wells and less than or equal to 1,500
Wells;
dd. $10,000 per Well if the
Operator operates more than 1500 Wells and less than or equal to 4,000 Wells;
or
ee. $8,000 per Well if the
Operator operates more than 4,000 Wells.
ii.
Low Producing, Inactive, or Out of
Service Well Financial Assurance.
aa.
Low Producing Wells. The Operator's blanket bond will cover Low
Producing Wells up to 5% of the Operator's total number of Wells (excluding Out
of Service Wells). The Operator will provide Single Well Financial Assurance
for any Low Producing Well that exceeds the 5% threshold.
bb.
Inactive and Out of Service
Wells. The amount of Financial Assurance required by the Director
pursuant to Rules 434.c & d.
cc.
Transferred Low Producing
Wells. Single Well Financial Assurance for any Low Producing Well that
exceeds the threshold set forth in Rule 702.d.(2).B.ii.aa and was subject to a
transfer of operatorship approved by the Director pursuant to Rule
218.g.
iii.
Other
Financial Assurance. The amount of Financial Assurance required for:
aa. Other Oil and Gas Facilities pursuant to
Rule 703;
bb. Surface Owner
protection pursuant to Rule 704; and
cc. Remediation pursuant to Rule 703.b.
C.
Type
of Financial Assurance. The type of Financial Assurance the Operator
proposes to provide, pursuant to Rule 701.
D.
Certification of Financial
Capability. An Operator will provide a Certification of Financial
Capability signed by the Operator's corporate officer to ensure it is
financially capable of meeting all of the obligations imposed by the Act and
Commission's Rules.
(3)
Option 3 Plans.
A.
Information Requirements. An Operator requesting Commission
approval pursuant to Rule 702.c.(3) will file a Financial Assurance Plan that
includes the following information to demonstrate it satisfies the criteria for
Option 3:
i.
Production Data. The
total MCF and BBLs reported during the previous 12 months and the Operator's
calculated GOR.
ii.
Well
Status and Designation Data. A summary table accounting for all Wells,
including the number of Wells that falls within each operational status and
designation, as of the date the Financial Assurance Plan is submitted.
iii.
Well Plugging
Data. The number of Wells Plugged and Abandoned by the Operator during
each of the previous three years.
iv.
Inactive Well List. A list
of all the Operator's Inactive Wells that includes the name, number, API
number, status, reason for no or low production, and planned date for return to
production or plug each Well.
v.
Asset Retirement Planning. A demonstration of how the Operator is
planning for the retirement of its Oil and Gas Operations based on the
projected life of the field, age of the infrastructure, Out of Service,
Inactive, and Low Producing Wells, and related information. For each Inactive
Well, the Operator will identify the reason for no or low production and the
planned date to return to production or plug the Well.
B.
Financial Assurance Amount.
The total amount of Financial Assurance the Operator will provide to the
Commission over time, which will be:
i.
Wells. Single Well Financial Assurance for every Well, unless the
Commission approves an alternative amount for a transferred Low Producing Well
pursuant to Rule 218.g, or the Director approves an alternative amount pursuant
to Rule 434.d.
ii.
Other
Financial Assurance.The amount of Financial Assurance required for:
aa. Other Oil and Gas Facilities pursuant to
Rule 703;
bb. Surface Owner
protection pursuant to Rule 704; and
cc. Remediation pursuant to Rule
703.b.
C.
Time to Submit Contributed Financial Assurance. The contribution
amount of the Operator's Contributed Financial Assurance will increase each
year as established pursuant to the Operator's Financial Assurance Plan.
i. The presumptive annual contribution will
be 5% of the total amount of Financial Assurance required pursuant to Rule
702.d.(3).B until the Operator's Contributed Financial Assurance meets or
exceeds its Financial Assurance amount. The Commission may adjust this timeline
based upon considerations of the field life for the Operator's Oil and Gas
Operations.
ii.
Credit for
Completion of Plugging and Abandonment and Reclamation. The Single Well
Financial Assurance amount for any Well for which the Director has approved a
Form 6, Subsequent Report of Abandonment will apply towards an Operator's
Contributed Financial Assurance amount. If the Operator is claiming credit, the
Operator will submit the amount of credit and supporting information on a Form
3A. An Operator may not claim credit for the Plugging and Abandonment and
Reclamation of an Out of Service Well on its Plugging List pursuant to Rule
434.d.
iii.
Release of
Financial Assurance. Once the Operator's Contributed Financial Assurance
meets or exceeds its Financial Assurance amount, the Operator may submit a Form
3A requesting release of the Single Well Financial Assurance for any Well the
Operator has fully Plugged and Abandoned and Reclaimed pursuant to Rule
706.a.(4).
D.
Type
of Financial Assurance. The type of Financial Assurance the Operator
proposes to provide, pursuant to Rule 701.
E.
Certification of Financial
Capability. An Operator will provide a Certification of Financial
Capability signed by the Operator's corporate officer to ensure it is
financially capable of meeting all of the obligations imposed by the Act and
Commission's Rules.
(4)
Option 4 Plans.
A.
Information Requirements. An Operator requesting Commission
approval pursuant to Rule 702.c.(4) will file a Financial Assurance Plan that
includes the following information:
i.
Production Data. The total MCF and BBLs reported during the
previous 12 months and the Operator's calculated GOR.
ii.
Well Status and Designation
Data. A summary table accounting for all Wells, including the number of
Wells that falls within each operational status and designation, as of the date
the Financial Assurance Plan is submitted.
iii.
Well Plugging Data. The
number of Wells Plugged and Abandoned by the Operator during each of the
previous three years.
iv.
Inactive Well List. A list of all the Operator's Inactive Wells
that includes the name, number, API number, status, reason for no or low
production, and planned date for return to production or plug each
Well.
v.
Asset Retirement
Planning. A demonstration of how the Operator is planning for the
retirement of its Oil and Gas Operations based on the projected life of the
field, age of the infrastructure, Out of Service, Inactive, and Low Producing
Wells, and related information. For each Inactive Well, the Operator will
identify the reason for no or low production and the planned date to return to
production or plug the Well.
B.
Financial Assurance Amount.
The total amount of Financial Assurance the Operator will provide to the
Commission, over time, which will be:
i.
Wells. Single Well Financial Assurance for every Well, unless the
Commission approves an alternative amount for a transferred Low Producing Well
pursuant to Rule 218.g, or the Director approves an alternative amount pursuant
to Rule 434.d.
ii.
Other
Financial Assurance. The amount of Financial Assurance required for:
aa. Other Oil and Gas Facilities pursuant to
Rule 703;
bb. Surface Owner
protection pursuant to Rule 704; and
cc. Remediation pursuant to Rule
703.b.
C.
Time to Submit Total Financial Assurance. The contribution amount
of an Operator's Financial Assurance will increase each year as established
pursuant to the Financial Assurance Plan.
i.
The presumptive amount will be 10% of the total amount of Financial Assurance
required pursuant to Rule 702.d.(4).B. The Commission may adjust this timeline
considering the field life for the Operator's Oil and Gas Operations.
ii.
Credit for Completion of
Plugging and Abandonment and Reclamation. The Single Well Financial
Assurance amount for any Well for which the Director has approved a Form 6,
Subsequent Report of Abandonment will apply towards an Operator's Contributed
Financial Assurance amount. If the Operator is claiming credit, the Operator
will submit the amount of credit and supporting information on a Form 3A. An
Operator may not claim credit for the Plugging and Abandonment and Reclamation
of an Out of Service Well on its Plugging List pursuant to Rule 434.d.
iii.
Release of Financial
Assurance. Once the Operator's Contributed Financial Assurance meets or
exceeds its Financial Assurance amount, the Operator may submit a Form 3A
requesting release of the Single Well Financial Assurance for any Well the
Operator has fully Plugged and Abandoned and Reclaimed pursuant to Rule
706.a.(4).
D.
Type
of Financial Assurance. The type of Financial Assurance the Operator
proposes to provide, pursuant to Rule 701.
E.
Certification of Financial
Capability. An Operator will provide a Certification of Financial
Capability signed by the Operator's corporate officer to ensure it is
financially capable of meeting all of the obligations imposed by the Act and
Commission's Rules.
(5)
Option 5 Plans.
A.
Information Requirements. An Operator requesting Commission
approval pursuant to Rule 702.c.(5) will file a Financial Assurance Plan that
includes the following information to demonstrate it satisfies the criteria for
Option 5:
i.
Production Data. The
total MCF and BBLs reported during the previous 12 months and the Operator's
calculated GOR.
ii.
Well
Status and Designation Data. A summary table accounting for all Wells,
including the number of Wells that falls within each operational status and
designation, as of the date the Financial Assurance Plan is submitted.
iii.
Well Plugging
Data. The number of Wells Plugged and Abandoned by the Operator during
each of the previous three years.
iv.
Inactive Well List. A list
of all the Operator's Inactive Wells that includes the name, number, API
number, status, reason for no or low production, and planned date for return to
production or plug each Well.
v.
Asset Retirement Planning. A demonstration of how the Operator is
planning for the retirement of its Oil and Gas Operations based on the
projected life of the field, age of the infrastructure, Out of Service,
Inactive, and Low Producing Wells, and related information. For each Inactive
Well, the Operator will identify the reason for no or low production and the
planned date to return to production or plug the Well.
vi.
Consideration of Low Producing
Wells. A calculation of the Financial Assurance that would be required
for the Operator's Low Producing Wells if the Operator pursued a Financial
Assurance Plan based on its average daily per-Well production consistent with
the applicable Option from Rules 702.c.(1)-(4).
B.
Financial Assurance Amount.
The amount of Financial Assurance the Operator will provide to the Commission
as soon as practicable but no later than within 90 days of the Commission's
approval of the Financial Assurance Plan and the Operator's justification for
not pursuing a Financial Assurance Plan based on the criteria in Rules
702.c.(1)-(4). The plan will specify the amount of Financial Assurance for:
i.
Wells. The amount of
Financial Assurance based on Well status and designation, and under what
circumstances the Director will collect Single Well Financial Assurance for
future Low Producing Wells.
ii.
Out of Service Wells. The amount of Financial Assurance required
by the Director pursuant to Rule 434.d.
iii.
Transferred Low Producing
Wells. Single Well Financial Assurance for any Low Producing Well as set
forth in Rule 702.d.(5).B.i that was subject to a transfer of operatorship
approved by the Director pursuant to Rule 218.g.
iv.
Other Financial Assurance.
The amount of Financial Assurance required for:
aa. Other Oil and Gas Facilities pursuant to
Rule 703;
bb. Surface Owner
protection pursuant to Rule 704; and
cc. Remediation pursuant to Rule
703.b.
C.
Type of Financial Assurance. The type of Financial Assurance the
Operator proposes to provide, pursuant to Rule 701.
D.
Certification of Financial
Capability and Unmodified Opinion. An Operator will provide a
Certification of Financial Capability to ensure it is financially capable of
meeting all of the obligations imposed by the Act and Commission's Rules. The
Certification will be signed by the Operator's corporate officer and will
include its current net worth, as demonstrated through financial statements
accompanied by an unmodified opinion issued by an independent auditor.
(6)
Option 6
Plans.
A.
Information
Requirements. An Operator that meets the criteria of Rule 702.c.(6) will
file a Financial Assurance Plan that includes the following information to
demonstrate it satisfies the criteria for Option 6:
i.
Production Data. The total
MCF and BBLs reported during the previous 12 months and the Operator's
calculated GOR.
ii.
Well
Status and Designation Data.A summary table accounting for all Wells,
including the number of Wells that falls within each operational status and
designation, as of the date the Financial Assurance Plan is submitted.
iii.
Well Plugging
Data. The number of Wells Plugged and Abandoned by the Operator during
each of the previous three years.
iv.
Inactive Well List. A list
of all the Operator's Inactive Wells that includes the name, number, API
number, status, reason for no or low production, and planned date for return to
production or plug each Well.
v.
Asset Retirement Planning. A demonstration of how the Operator is
planning for the retirement of its Oil and Gas Operations based on the
projected life of the field, age of the infrastructure, Out of Service,
Inactive, and Low Producing Wells, and related information. For each Inactive
Well, the Operator will identify the reason for no or low production and the
planned date to return to production or plug the Well.
B.
Financial Assurance Amount.
The total amount of Financial Assurance the Operator will provide to the
Commission as soon as practicable but no later than 90 days from the
Commission's approval of the Financial Assurance Plan, which will be:
i.
Comprehensive Financial Assurance
Amount (excluding Out of Service Wells). Financial Assurance for every
Well, in a total amount equal to $40,000,000.
ii.
Low Producing, Inactive, or Out of
Service Well Financial Assurance.
aa.
Low Producing Wells. The Operator's comprehensive Financial
Assurance amount will cover Low Producing Wells up to 25% of the Operator's
total number of Wells (excluding Out of Service Wells). The Operator will
provide Single Well Financial Assurance for any Low Producing Well that exceeds
the 25% threshold.
bb.
Inactive and Out of Service Wells. The amount of Financial
Assurance required by the Director pursuant to Rules 434.c & d.
cc.
Transferred Low Producing
Wells. Single Well Financial Assurance for any Well that exceeds the
threshold set forth in Rule 702.d.(6).B.ii.aa and was subject to a transfer of
operatorship approved by the Director pursuant to Rule 218.g.
iii.
Other Financial
Assurance. The amount of Financial Assurance required for:
aa. Other Oil and Gas Facilities pursuant to
Rule 703;
bb. Surface Owner
protection pursuant to Rule 704; and
cc. Remediation pursuant to Rule
703.b.
C.
Type of Financial Assurance. The type of Financial Assurance the
Operator proposes to provide, pursuant to Rule 701.
D.
Certification of Financial
Capability. An Operator will provide a Certification of Financial
Capability signed by the Operator's corporate officer to ensure it is
financially capable of meeting all of the obligations imposed by the Act and
Commission's Rules.
e. Procedure for Review of Financial Assurance Plans.
(1)
Director's
Review. Pursuant to Rules 702.b.(1).C.i & 702.b.(2).A, the Director
will review an Operator's Financial Assurance Plan and may approve or deny such
plan.
A.
Approval. The Director
may approve a Financial Assurance Plan, subject to reasonable and necessary
conditions of approval, if, in the Director's judgment, the plan meets all
applicable requirements this Rule 702 and demonstrates that the Operator will
provide adequate Financial Assurance to comply with all of the obligations
under the Act and the Commission's Rules.
B.
Denial. The Director may deny
a Financial Assurance Plan if, in the Director's judgment, the plan does not
comply with this Rule 702 or does not demonstrate that the Operator will
provide adequate Financial Assurance to comply with all of the obligations
under the Act and the Commission's Rules.
C.
Additional Information. If
the Director determines that a Financial Assurance Plan is incomplete or
deficient, or that more information is necessary to determine whether to
approve or deny the Financial Assurance Plan, the Operator will provide the
additional information that the Director requests. The Director will not fully
consider the Financial Assurance Plan until the Operator provides the requested
information.
D.
Notice of
Decision. Upon making a Decision on the Operator's Financial Assurance
Plan, the Director will post the written basis for the Director's Decision on
the Commission's website, and notify the Operator electronically in a manner
determined by the Director.
(2)
Commission's Review.
Pursuant to Rules 702.b.(1).C.ii & 702.b.(2).B, the Director will review an
Operator's Financial Assurance Plan and recommend whether the Commission should
accept or deny such plan.
A.
Director
Recommendation.
i.
Recommended
Acceptance. The Director may recommend that the Commission accept a
Financial Assurance Plan if it complies with the informational requirements of
Rule 702.d and, in the Director's judgment, the Operator has demonstrated that
it will provide adequate Financial Assurance to comply with all of its
obligations under the Act and the Commission's Rules.
ii.
Recommended Denial. The
Director may recommend that the Commission deny a Financial Assurance Plan if
it does not comply with all the informational requirements of Rule 702.d, or,
in the Director's judgment, the Operator has not demonstrated that it will
provide adequate Financial Assurance to comply with all of its obligations
under the Act and the Commission's Rules.
iii.
Additional Information. If
the Director determines that a Financial Assurance Plan is incomplete, or that
more information is necessary to determine whether to recommend that the
Commission approve or deny the Financial Assurance Plan, the Operator will
provide the additional information that the Director requests. The Director
will not issue a recommendation, and the Commission will not consider the
Financial Assurance Plan, until the Operator provides the requested
information.
B.
Timing of Commission's Review. Pursuant to Rules 702.b.(1).C.ii
& 702.b.(2).B, and after the Director issues a recommendation pursuant to
Rule 702.e.(2).A, the Commission will consider the Financial Assurance Plan in
a hearing pursuant to Rule 510.
C.
Commission Approval. The Commission may approve a Financial
Assurance Plan, subject to reasonable and necessary conditions of approval, if
it determines that the plan meets all applicable requirements of this Rule 702
and demonstrates that the Operator will provide adequate Financial Assurance to
comply with all of its obligations under the Act and the Commission's
Rules.
D.
Commission
Denial. The Commission may deny a Financial Assurance Plan if it
determines that the plan does not comply with this Rule 702 or does not
demonstrate that the Operator will provide adequate Financial Assurance to
comply with all of its obligations under the Act and the Commission's
Rules.
E.
Additional
Information. The Commission, Administrative Law Judge, or Hearing
Officer may require an Operator to submit additional information or evidence in
support of its Financial Assurance Plan, pursuant to Rule 505.f.
F.
Commission's Order. The
Commission will issue an order memorializing its ruling on the Financial
Assurance Plan following the Hearing. The order may include, at the
Commission's discretion, one or more of the following requirements:
i.
Deadlines. Specific dates by
which the Operator will reach full compliance with its Financial Assurance
Plan, or Plug and Abandon certain Wells;
ii.
Progress Reports. A periodic
report to the Commission or Director on the Operator's progress towards meeting
certain required actions;
iii.
Plan Renewal. Re-submission of a Financial Assurance Plan at a
future date to afford the Commission an opportunity to review any changes in
the Operator's financial status; or
iv.
Financial Assurance Amount.
The amount of Financial Assurance an Operator must provide, which may differ
from the amount specified in Rules 702, 703, or 704.
f. Transition Period. The Director or Commission will consider any Financial Assurance in place as of April 29, 2022 as being applied towards the Operator's ongoing Financial Assurance obligations after April 30, 2022, unless the Commission issues an order specifying otherwise.
Disclaimer: These regulations may not be the most recent version. Colorado may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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