2022 Colorado Code
Title 34 - Mineral Resources
Article 60 - Oil and Gas Conservation
§ 34-60-106. Additional Powers of Commission - Rules - Definition

1. The commission also shall require:
   1. Identification of ownership of oil and gas wells, producing leases, tanks, plants, and structures;
   2. The making and filing with the commission of copies of well logs, directional surveys, and reports on well location, drilling, and production; except that logs of exploratory or wildcat wells marked "confidential" shall be kept confidential for six months after the filing thereof, unless the operator gives written permission to release such logs at an earlier date;
   3. The drilling, casing, operation, and plugging of seismic holes or exploratory wells in such manner as to prevent the escape of oil or gas from one stratum into another, the intrusion of water into oil or gas stratum, the pollution of fresh water supplies by oil, gas, salt water, or brackish water; and measures to prevent blowouts, explosions, cave-ins, seepage, and fires;
   4. (Deleted by amendment, L. 94, p. 1980 , § 6, effective June 2, 1994.)
   5. That every person who produces, sells, purchases, acquires, stores, transports, refines, or processes oil or gas in this state shall keep and maintain within this state, for a period of five years, complete and accurate records of the quantities thereof, which records, or certified copies thereof, shall be available for examination by the commission, or its agents, at all reasonable times within said period and that every such person shall file with the commission such reasonable reports as it may prescribe with respect to such oil or gas or the products thereof;
   6. 1. That no operations for the drilling of a well for oil and gas shall be commenced without first:
         1. Applying for a permit to drill, which must include proof either that: The operator has filed an application with the local government with jurisdiction to approve the siting of the proposed oil and gas location and the local government's disposition of the application; or the local government with jurisdiction does not regulate the siting of oil and gas locations; and
         2. Obtaining a permit from the commission, under rules prescribed by the commission; and

      2. Paying to the commission a filing and service fee to be established by the commission for the purpose of paying the expense of administering this article 60 as provided in section 34-60-122 , which fee may be transferable or refundable, at the option of the commission, if the permit is not used.
      3. Repealed.

   7. That the production from wells be separated into gaseous and liquid hydrocarbons and that each be accurately measured by such means and standards as prescribed by the commission;
   8. The operation of wells with efficient gas-oil and water-oil ratios, the establishment of these ratios, and the limitation of the production from wells with inefficient ratios;
   9. Certificates of clearance in connection with the transportation and delivery of oil and gas or any product; and
   10. Metering or other measuring of oil, gas, or product in pipelines, gathering systems, loading racks, refineries, or other places.

2. The commission may regulate:
   1. The drilling, producing, and plugging of wells and all other operations for the production of oil or gas;
   2. The stimulating and chemical treatment of wells; and
   3. The spacing and number of wells allowed in a drilling unit.
   4. Repealed.

   1. (2.5) (a) In exercising the authority granted by this article 60, the commission shall regulate oil and gas operations in a reasonable manner to protect and minimize adverse impacts to public health, safety, and welfare, the environment, and wildlife resources and shall protect against adverse environmental impacts on any air, water, soil, or biological resource resulting from oil and gas operations.
   2. The nonproduction of oil and gas resulting from a conditional approval or denial authorized by this subsection (2.5) does not constitute waste.

3. The commission also has the authority to:
   1. Limit the production of oil or gas, or both, from any pool or field for the prevention of waste, and to limit and to allocate the production from such pool or field among or between tracts of land having separate ownerships therein, on a fair and equitable basis so that each such tract will be permitted to produce no more than its just and equitable share from the pool and so as to prevent, insofar as is practicable, reasonably avoidable drainage from each such tract which is not equalized by counter-drainage; and
   2. Classify wells as oil or gas wells for purposes material to the interpretation or enforcement of this article.

   (3.5) The commission shall require the furnishing of reasonable security with the commission by lessees of land for the drilling of oil and gas wells, in instances in which the owner of the surface of lands so leased was not a party to such lease, to protect such owner from unreasonable crop losses or land damage from the use of the premises by said lessee. The commission shall require the furnishing of reasonable security with the commission, to restore the condition of the land as nearly as is possible to its condition at the beginning of the lease and in accordance with the owner of the surface of lands so leased.

4. The grant of any specific power or authority to the commission shall not be construed in this article to be in derogation of any of the general powers and authority granted under this article.
5. The commission shall also have power to make determinations, execute waivers and agreements, grant consent to delegations, and take other actions required or authorized for state agencies by those laws and regulations of the United States which affect the price and allocation of natural gas and crude oil, including the federal "Natural Gas Policy Act of 1978", 15 U.S.C. sec. 3301 et seq., including the power to give written notice of administratively final determinations.
6. The commission has the authority, as it deems necessary and convenient, to conduct any hearings or to make any determinations it is otherwise empowered to conduct or make by means of an appointed administrative law judge or hearing officer, but recommended findings, determinations, or orders of any administrative law judge or hearing officer become final in accordance with section 34-60-108 (9). Upon appointment by the commission, a member of the commission may act as a hearing officer.
7. 1. The commission may establish, charge, and collect docket fees for the filing of applications, petitions, protests, responses, and other pleadings. All fees shall be deposited in the oil and gas conservation and environmental response fund established by section 34-60-122 and are subject to appropriations by the general assembly for the purposes of this article 60.
   2. The commission shall by rule establish the fees for the filing of applications in amounts sufficient to recover the commission's reasonably foreseeable direct and indirect costs in conducting the analysis, including the annual review of financial assurance pursuant to subsection (13) of this section, necessary to assure that permitted operations will be conducted in compliance with all applicable requirements of this article 60.

8. The commission shall prescribe special rules and regulations governing the exercise of functions delegated to or specified for it under the federal "Natural Gas Policy Act of 1978", 15 U.S.C. sec. 3301 et seq., or such other laws or regulations of the United States which affect the price and allocation of natural gas and crude oil in accordance with the provisions of this article.
9. 1. Notwithstanding section 34-60-120 or any other provision of law, the commission, as to class II injection wells classified in 40 CFR 144.6, may perform all acts for the purpose of protecting underground sources of drinking water in accordance with state programs authorized by 42 U.S.C. sec. 300f et seq., and regulations under those sections, as amended.
   2. The commission shall:
      1. Conduct a study to evaluate what resources are needed to ensure the safe and effective regulation of the sequestration of greenhouse gases, as that term is defined in section 25-7-140 (6), and to identify and assess the applicable resources that the commission or other state agencies have; and
      2. Report its findings to the governor and the general assembly by December 1, 2021.

10. The commission shall promulgate rules and regulations to protect the health, safety, and welfare of any person at an oil or gas well; except that the commission shall not adopt such rules and regulations with regard to parties or requirements regulated under the federal "Occupational Safety and Health Act of 1970".
11. 1. By July 16, 2008, the commission shall:

       (I) (A) Promulgate rules to establish a timely and efficient procedure for the review of applications for a permit to drill and applications for an order establishing or amending a drilling and spacing unit.

       (B) Repealed.

       (II) Promulgate rules, in consultation with the department of public health and environment, to protect the health, safety, and welfare of the general public in the conduct of oil and gas operations. The rules shall provide a timely and efficient procedure in which the department has an opportunity to provide comments during the commission's decision-making process. This rule-making shall be coordinated with the rule-making required in section 34-60-128 (3)(d) so that the timely and efficient procedure established pursuant to this subsection (11) is applicable to the department and to the division of parks and wildlife.

    2. 1. The general assembly shall review the rules promulgated pursuant to paragraph (a) of this subsection (11) acting by bill pursuant to section 24-4-103, C.R.S., and reserves the right to alter or repeal such rules.
       2. By January 1, 2008, the commission shall promulgate rules to ensure the accuracy of oil and gas production reporting by establishing standards for wellhead oil and gas measurement and reporting. At a minimum, the rules shall address engineering standards, heating value, specific gravity, pressure, temperature, meter certification and calibration, and methodology for sales reconciliation to wellhead meters. The rules shall be consistent with standards established by the American society for testing and materials, the American petroleum institute, the gas processors association, or other applicable standards-setting organizations, and shall not affect contractual rights or obligations.

    3. The commission shall adopt rules that:
       1. Adopt an alternative location analysis process and specify criteria used to identify oil and gas locations and facilities proposed to be located near populated areas that will be subject to the alternative location analysis process; and
       2. In consultation with the department of public health and environment, evaluate and address the potential cumulative impacts of oil and gas development.

12. The commission, in consultation with the state agricultural commission and the commissioner of agriculture, shall promulgate rules to ensure proper reclamation of the land and soil affected by oil and gas operations and to ensure the protection of the topsoil of said land during such operations.
13. The commission shall require every operator to provide assurance that it is financially capable of fulfilling every obligation imposed by this article 60 as specified in rules adopted on or after April 16, 2019. The rule-making must consider: Increasing financial assurance for inactive wells and for wells transferred to a new owner; requiring a financial assurance account, which must remain tied to the well in the event of a transfer of ownership, to be fully funded in the initial years of operation for each new well to cover future costs to plug, reclaim, and remediate the well; and creating a pooled fund to address orphaned wells for which no owner, operator, or responsible party is capable of covering the costs of plugging, reclamation, and remediation. For purposes of this subsection (13), references to "operator" include an operator of an underground natural gas storage cavern and an applicant for a certificate of closure under subsection (17) of this section. In complying with this requirement, an operator may submit for commission approval, without limitation, one or more of the following:
    1. A guarantee of performance where the operator can demonstrate to the commission's satisfaction that it has sufficient net worth to guarantee performance of every obligation imposed by this article 60. The commission shall annually review the guarantee and demonstration of net worth.
    2. A certificate of general liability insurance in a form acceptable to the commission that names the state as an additional insured and covers occurrences during the policy period of a nature relevant to an obligation imposed by this article 60;
    3. A bond or other surety instrument;
    4. A letter of credit, certificate of deposit, or other financial instrument;
    5. An escrow account or sinking fund dedicated to the performance of every obligation imposed by this article 60;
    6. A lien or other security interest in real or personal property of the operator. The lien or security interest must be in a form and priority acceptable to the commission in its sole discretion. The commission shall annually review the lien or security.

14. Before an operator commences operations for the drilling of any oil or gas well, such operator shall evidence its intention to conduct such operations by giving the surface owner written notice describing the expected date of commencement, the location of the well, and any associated roads and production facilities. Unless excepted by the commission due to exigent circumstances or waived by the surface owner, such notice of drilling shall be mailed or delivered to the surface owner not less than thirty days prior to the date of estimated commencement of operations with heavy equipment. The notice of drilling shall also be provided to the local government in whose jurisdiction the well is located if such local government has registered with the commission for receipt thereof.
15. The commission may, as it deems appropriate, assign its inspection and monitoring function, but not its enforcement authority, through intergovernmental agreement or by private contract; except that an assignment must not allow for the imposition of any new tax or fee by the assignee in order to conduct the assigned inspection and monitoring and must not provide for compensation contingent on the number or nature of alleged violations referred to the commission by the assignee.

    (15.5) The commission shall use a risk-based strategy for inspecting oil and gas locations that targets the operational phases that are most likely to experience spills, excess emissions, and other types of violations and that prioritizes more in-depth inspections. The commission shall:

    1. Repealed.
    2. Implement the systematic risk-based strategy by July 1, 2014. The commission may use a pilot project to test the risk-based strategy.

16. The commission has the authority to establish, charge, and collect fees for services it provides, including but not limited to the sale of computer disks and tapes.
17. 1. The commission has exclusive authority to regulate the public health, safety, and welfare aspects, including protection of the environment, of the termination of operations and permanent closure, referred to in this subsection (17) collectively as "closure", of an underground natural gas storage cavern.
    2. No underground natural gas storage cavern may be closed unless the operator has secured a certificate of closure from the commission. The commission shall issue a certificate of closure if the applicant demonstrates that its closure plan protects public health, safety, and welfare, including protection of the environment.
    3. Before submitting its application, an applicant for a certificate of closure must, to the extent such owners are reasonably identifiable from public records, notify all owners of property, both surface and subsurface, occupied by and immediately adjacent to the underground natural gas storage cavern of the applicant's intent to submit a closure plan. "Immediately adjacent to" means contiguous to the boundaries of the underground natural gas storage cavern. The notice shall advise the owners of a location where a full copy of the closure plan may be inspected, that written comments may be submitted to the commission, and that they may participate in the public hearing required by this subsection (17). The applicant shall notify the owners of the date, time, and place of the public hearing. Contemporaneously with notifying the owners, the applicant shall send a copy of the notice to registered homeowners' associations that have submitted a written request for such notice prior to the filing of the application with the commission and the board of county commissioners in the county where the underground natural gas storage cavern is located.
    4. The commission shall provide the public with notice and an opportunity to comment on an application filed under this subsection (17) for a certificate of closure pursuant to the procedures set forth in section 34-60-108 (7). The applicant shall attend the public hearing and shall be available at other reasonable times as the director may request to respond to comments and questions.
    5. The director may consult with other state agencies possessing expertise in matters related to closure of underground natural gas storage caverns in the areas of the jurisdiction of such agencies, including, but not limited to, safety, environmental protection, public health, water resources, and geology. Agencies consulted under this subsection (17) may include, but are not limited to, the public utilities commission, the division of reclamation, mining, and safety, the Colorado geological survey, the division of water resources, and the department of public health and environment. Any agency consulted shall provide advice and assistance with respect to matters within its expertise.
    6. The commission may attach conditions to its certificate of closure, including requiring reasonable recovery of residual natural gas, if the commission determines that such conditions are technically feasible and necessary to ensure compliance with the requirements of this subsection (17), taking into consideration cost-effectiveness. If the closure application requires the abandonment of wells and reclamation of well sites associated with the underground natural gas storage cavern, the commission shall attach conditions to its certificate of closure requiring that such well abandonment and reclamation occur in a manner consistent with applicable commission rules.
    7. The commission may, subject to the limitations contained in paragraph (f) of this subsection (17), attach conditions to its certificate of closure requiring:
       1. Reasonable post-closure monitoring and site security at a closed underground natural gas storage cavern; and
       2. That the applicant for the certificate of closure will perform post-closure corrective actions consistent with this subsection (17), including, but not limited to, the limitations contained in paragraph (f) of this subsection (17) if any such post-closure monitoring establishes that the closure does not protect public health, safety, or welfare, including protection of the environment.

    8. The commission shall require that the applicant for a certificate of closure provide reasonable assurance that it is financially capable of fulfilling any obligation imposed under this subsection (17) including, but not limited to, post-closure corrective action required by paragraph (g) of this subsection (17), in accordance with subsection (13) of this section.
    9. The applicant for a certificate of closure under this subsection (17) shall reimburse the commission's reasonable and necessary costs of reviewing and acting on the application. Such reimbursement shall include:
       1. Reimbursement to the commission, its staff, and any agencies consulted under this subsection (17) for the reasonable cost of the time required to review the application, at a rate commensurate with the hourly compensation of the staff employee performing the actual work, but not to exceed the hourly compensation of the highest paid commission staff employee, based on the employee's annual salary divided by two thousand eighty hours; and
       2. Reimbursement of the reasonable cost to the commission of hiring one or more private consultants to review the application and provide advice to the commission as a result of such review, if the applicant consents in writing to the scope and expected range of costs of the activities to be undertaken by each such private consultant. If the commission and applicant cannot agree on the scope or expected range of costs and if the commission determines a private consultant is necessary in the review of the application, then the commission may hire a private consultant at its own expense.

18. The commission shall promulgate rules to ensure proper wellbore integrity of all oil and gas production wells. In promulgating the rules, the commission shall consider incorporating recommendations from the State Oil and Gas Regulatory Exchange and shall include provisions to:
    1. Address the permitting, construction, operation, and closure of production wells;
    2. Require that wells are constructed using current practices and standards that protect water zones and prevent blowouts;
    3. Enhance safety and environmental protections during operations such as drilling and hydraulic fracturing;
    4. Require regular integrity assessments for all oil and gas production wells, such as surface pressure monitoring during production; and
    5. Address the use of nondestructive testing of weld joints.

19. The commission shall review and amend its flowline and inactive, temporarily abandoned, and shut-in well rules to the extent necessary to ensure that the rules protect and minimize adverse impacts to public health, safety, and welfare and the environment, including by:
    1. Allowing public disclosure of flowline information and evaluating and determining when a deactivated flowline must be inspected before being reactivated; and
    2. Evaluating and determining when inactive, temporarily abandoned, and shut-in wells must be inspected before being put into production or used for injection.

20. The commission shall adopt rules to require certification for workers in the following fields:
    1. Compliance officers with regard to the federal "Occupational Safety and Health Act of 1970", 29 U.S.C. sec. 651 et seq., including specifically working in confined spaces;
    2. Compliance officers with regard to codes published by the American Petroleum Institute and American Society of Mechanical Engineers or their successor organizations;
    3. The handling of hazardous materials;
    4. Welders working on oil and gas process lines, including:
       1. Knowledge of the flowline rules promulgated pursuant to subsection (19) of this section;
       2. A minimum of seven thousand hours of documented on-the-job training, which requirement can be met by an employee working under the supervision of a person with the requisite seven thousand hours of training; and
       3. Passage of the International Code Council Exam F31, national standard journeyman mechanical, or an analogous successor exam, for any person working on pressurized process lines in upstream and midstream operations.

Source: L. 51: p. 660, § 11. CSA: C. 118, § 68(11). CRS 53: § 100-6-15. L. 55: p. 654, § 8. C.R.S. 1963: § 100-6-15. L. 64: p. 509, § 1. L. 73: p. 1071, § 1. L. 77: (3.5) added, p. 1565, § 1, effective July 1. L. 79: (5) to (8) added, p. 1320, § 2, February 16. L. 81: (9) added, p. 1339, § 4, effective July 1; (9) amended, p. 2034, § 53, effective July 14. L. 85: (10) and (11) added, p. 1129, § 1, effective July 1. L. 86: (12) added, p. 1073, § 1, effective April 3. L. 91: (1)(f) and (9) amended, p. 1415, § 3, effective April 19. L. 94: (1)(d), (2)(d), (11), and (12) amended and (13), (14), (15), and (16) added, p. 1980, § 6, effective June 2. L. 96: (15) amended, p. 346, § 1, effective April 17. L. 2001: IP(13), (13)(a), (13)(b), and (13)(e) amended and (17) added, pp. 1303, 1304, §§ 2, 3, effective June 5; (14) amended, p. 491, § 6, effective July 1. L. 2005: (7) amended, p. 733, § 3, effective July 1. L. 2006: (17)(e) amended, p. 218, § 16, effective August 7. L. 2007: (2)(d) and (11) amended, pp. 1358, 1359, §§ 4, 6, effective May 29; (11) amended, p. 1344, § 1, effective May 29. L. 2008: IP(11)(a), (11)(a)(II), and (11)(b)(I) amended, p. 1033, § 1, effective May 21; (11)(a)(II) amended, p. 1912, § 122, effective August 5. L. 2013: (15.5) added, (SB 13-202), ch. 274, p. 1437, § 2, effective May 24. L. 2019: IP(1), (1)(f), IP(2), (2)(b), (2)(c), (6), (7), (13), and (15) amended, (2)(d) repealed, and (2.5), (11)(c), (18), (19), and (20) added, (SB 19-181), ch. 120, p. 513, § 12, effective April 16. L. 2021: (9) amended, (SB 21-264), ch. 328, p. 2107, § 3, effective June 24.

1. Amendments to subsection (11)(a)(II) by House Bill 08-1379 and House Bill 08-1412 were harmonized.
2. Subsection (11)(a)(I)(B) provided for the repeal of subsection (11)(a)(I)(B), effective July 1, 2010. (See L. 2007, p. 1359 .)
3. Subsection (15.5)(a)(II) provided for the repeal of subsection (15.5)(a), effective September 1, 2014. (See L. 2013, p. 1437 .)
4. Subsection (1)(f)(III)(B) provided for the repeal of subsection (1)(f)(III), effective January 15, 2021. On January 15, 2021, the revisor of statutes received the notice referred to in subsection (1)(f)(III) related to the repeal. For more information about the repeal and notice, see SB 19-181. ( L. 2019, p. 513 .)
5. Section 5 of chapter 328 (SB 21-264), Session Laws of Colorado 2021, provides that the act changing this section applies to conduct occurring on or after June 24, 2021.

Cross references: (1) For the legislative declaration contained in the 1994 act amending subsections (1)(d), (2)(d), (11), and (12) and enacting subsections (13), (14), (15), and (16), see section 1 of chapter 317, Session Laws of Colorado 1994. For the legislative declaration contained in the 2007 act amending subsections (2)(d) and (11), see section 1 of chapter 320, Session Laws of Colorado 2007. For the legislative declaration in the 2013 act adding subsection (15.5), see section 1 of chapter 274, Session Laws of Colorado 2013.

(2) For the federal "Occupational Safety and Health Act of 1970", see 29 U.S.C. § 651 et seq.