2 Colo. Code Regs. § 404-1-525

Current through Register Vol. 47, No. 20, October 25, 2024

Section 2 CCR 404-1-525 - ASSESSING PENALTIES IN ENFORCEMENT MATTERS

a.General. If the Commission finds that an Operator has violated the Act or a Commission Rule, order, or permit, the Commission may issue an order imposing a penalty. Penalties will be calculated based on the Act and this Rule 525. The Commission's Enforcement Guidance and Penalty Policy also provides non-binding guidance to the Commission and interested persons evaluating a penalty for an alleged violation.

b.Days of Violation. The duration of a violation presumptively will be calculated in days as follows:

(1) A reporting or other minor violation not involving actual or threatened significant adverse impacts begins on the day that the report should have been made or other required action should have been taken, and continues until the report is filed or the required action is commenced to the Director's satisfaction.

(2) All other violations begin on the date the violation was discovered or should have been discovered through the exercise of reasonable care and continue until the appropriate corrective action is commenced to the Director's satisfaction.

(3) With respect to violations that result in actual or threatened adverse impacts to public health, safety, welfare, the environment, and wildlife resources, commencing appropriate corrective action includes, at a minimum:

A. Performing immediate actions necessary to assess and evaluate the actual or threatened adverse impacts; and

B. Performing all other near-term actions necessary to stop, contain, or control actual or threatened adverse impacts in order to protect and minimize adverse impacts to public health, safety, welfare, the environment, and wildlife resources. Such actions may include, without limitation, stopping or containing a Spill or Release of E&P Waste; establishing Well control after a loss of control event; removing E&P Waste resulting from surface Spills or Releases; installing fencing or other security measures to limit access (including wildlife access) to affected areas; providing alternative water supplies; notifying affected landowners, Local Governments, and other persons or businesses; and, in cases of actual adverse impacts, mobilizing all resources necessary to fully and completely remediate the affected environment.

(4) A penalty will be assessed for each day the evidence shows a violation continued.

(5) The number of days of violation does not include any period necessary to allow the Operator to engage in good faith negotiation with the Commission regarding an alleged violation if the Operator demonstrates a prompt, effective, and prudent response to the violation.

c.Penalty Calculation. The base penalty for each violation will be calculated based on the Commission's Penalty Schedule, which considers the severity of the potential consequences of a violation of a specific rule combined with an assessment of the degree of actual or threatened adverse impacts to public health, safety, welfare, the environment, and wildlife resources. Pursuant to § 34-60-121(1)(a), C.R.S., the maximum daily penalty cannot exceed $15,000 per day per violation.

(1)Penalty Schedule. The Commission's Penalty Schedule is set forth in the following matrix. The matrix establishes a daily penalty based on the classification of the Rule violation (Class 1, 2, or 3) and the degree of actual or threatened adverse impact resulting from the violation (minor, moderate, or major).

		Rule Classification
		Class 1: Paperwork or other ministerial Rules, a violation of which presents no direct risk or threat of harm to public health, safety, welfare, the environment, and wildlife resources.	Class 2: Rules related at least indirectly to protecting and minimizing adverse impacts to public health, safety, welfare, the environment, and wildlife resources, a violation of which presents a possibility of distinct, identifiable actual or threatened adverse impacts to those interests.	Class 3: Rules directly related to protecting and minimizing adverse impacts to public health, safety, welfare, the environment, and wildlife resources, a violation of which presents a significant probability of actual or threatened adverse impacts to those interests.
Degree of threatened or actual impact to public health, safety, welfare, the environment, or wildlife resources	Major: Actual significant adverse impacts	$5,000	$10,000	$15,000
	Moderate: Threat of significant adverse impacts, or moderate actual adverse impacts	$1,500	$5,000	$10,000
	Minor: No actual adverse impact and little or no threat of adverse impacts	$200	$2,500	$5,000

(2)Degree of Actual or Threatened Adverse Impact. The base penalty for a violation may be increased based on the degree of actual or threatened adverse impact to public health, safety, welfare, the environment, and wildlife resources resulting from the violation. The Commission, Administrative Law Judge, or Hearing Officer will determine the degree of actual or threatened adverse impact to public health, safety, welfare, the environment, and wildlife resources, based on the totality of circumstances in each case. The Commission, Administrative Law Judge, or Hearing Officer will consider the following, non-exclusive, list of factors in making its determination:

A. Whether and to what degree the environment and wildlife resources were adversely affected or threatened by the violation. This factor considers the existence, size, and proximity of potentially impacted livestock, wildlife, soil, water, air, and all other natural or environmental resources;

B. Whether and to what degree Waters of the State were adversely affected or threatened by the violation;

C. Whether and to what degree drinking water was adversely affected or threatened by the violation;

D. Whether and to what degree public or private property was adversely affected or threatened by the violation;

E. The quantity and character of any E&P Waste or non-E&P Waste that was actually or threatened to be Spilled or Released;

F. Whether any persons were harmed or whether there was a threat to the health, safety, and welfare of any persons; and

G. Any other facts relevant to an objective assessment of the degree of adverse impact to public health, safety, welfare, the environment, and wildlife resources.

(3)Penalty Adjustments for Aggravating and Mitigating Factors. The Commission, Administrative Law Judge, or Hearing Officer may increase a penalty up to the statutory daily maximum amount if it finds any of the aggravating factors listed in Rule 525.c.(3).A, exist. The Commission, Administrative Law Judge, or Hearing Officer may decrease a penalty if it finds that the violator cooperated with the Commission and other agencies with respect to the violation and that any of the mitigating factors listed in Rule 525.c.(3).B exist.

A. Aggravating factors:

i. The violator acted with gross negligence or knowing and willful misconduct.

ii. The violation resulted in significant waste of oil and gas resources.

iii. The violation had a significant negative impact on correlative rights of other parties.

iv. The violator was recalcitrant or uncooperative with the Commission or other agencies in correcting or responding to the violation.

v. The violator falsified reports or records.

vi. The violator benefited economically from the violation, in which case the amount of such benefit will be taken into consideration.

vii. The violator has engaged in a pattern of violations.

viii. The violation led to death or serious injury.

B. Mitigating factors:

i. The violator self-reported the violation.

ii. The violator demonstrated prompt, effective and prudent response to the violation, including assistance to any impacted parties.

iii. The cause of the violation was outside of the violator's reasonable control and responsibility, or is customarily considered to be force majeure.

iv. The violator made a good faith effort to comply with applicable requirements prior to the Commission learning of the violation.

v. The cost of correcting the violation reduced or eliminated any economic benefit to the violator, excluding circumstances in which increased costs stemmed from non-compliance.

vi. The violator has demonstrated a history of compliance with the Act and Commission's Rules, orders, and permits.

(4)Penalty Adjustments Based on Duration of Violation. In its discretion, the Commission, Administrative Law Judge, or Hearing Officer may decrease the daily penalty amounts for violations of long duration to ensure the total penalty is appropriate to the nature of the violation.

d.Pattern of Violations, Gross Negligence, or Knowing and Willful Misconduct.

(1) The Director will apply for an OFV hearing when the Director determines an Operator has:

A. Engaged in a pattern of violations;

B. Acted with gross negligence or knowing and willful misconduct that resulted in an egregious violation; or

C. Engaged in an activity that resulted in death or serious injury.

(2) If the Commission, Administrative Law Judge, or Hearing Officer finds after hearing that an Operator is responsible for the conduct described in Rule 525.d.(1), the Commission, Administrative Law Judge, or Hearing Officer may suspend an Operator's Certification of Clearance, withhold new drilling or Oil and Gas Location permits, or both. Such suspension will last until such time as the violator demonstrates to the satisfaction of the Commission that the Operator has brought each violation into compliance and that any penalty assessed, which is not subject to judicial review, has been paid, at which time the Commission may vacate the order.

(3) The Commission, Administrative Law Judge, or Hearing Officer will consider an Operator's history of violations of the Act or Commission's Rules, orders, or permits, and any other factors relevant to objectively determining whether an Operator has engaged in a pattern of violations. For an Operator's history of violations, the Commission, Administrative Law Judge, or Hearing Officer may only consider violations confirmed by Commission order through an AOC or OFV.

e.Voluntary Disclosure.

(1) The Director may consider a penalty reduction for a violation of the Act or any Commission Rule, order, or permit voluntarily disclosed by an Operator if:

A. The disclosure is made promptly after the Operator discovers the violation;

B. The Operator discovered the violation independent of, and unrelated to a Commission inspection or an NOAV;

C. The Operator cooperates with the Director regarding investigation of the disclosed violation; and

D. The Operator has achieved or commits to achieve compliance within a reasonable time and pursues compliance with due diligence.

(2) The Director may not consider a penalty reduction if:

A. The disclosure is made for fraudulent purposes;

B. The disclosed violation is part of a pattern of violations; or

C. The disclosed violation was egregious and the result of the Operator's gross negligence or knowing and willful misconduct.

(3) If the Director determines that any of the factors in Rule 525.e.(1) are not met or that the factors in Rule 525.e.(2) are met, the Director may consider the fact that the Operator self-reported the violation as a mitigating factor pursuant to Rule 525.c.(3).B.(i).

f.Public Projects. In its discretion, the Commission, Administrative Law Judge, or Hearing Officer may allow an Operator to satisfy a penalty in whole or in part by a public project that the Operator is not otherwise legally required to undertake. The costs of the public project may offset the penalty amount dollar for dollar, or by some other ratio determined by the Commission. A public project will provide tangible benefit to public health, safety, welfare, the environment, or wildlife resources. The Commission favors public projects that benefit the persons or communities most directly affected by a violation, or that provide education or training to Local Government entities, first responders, the public, or the regulated community related to the violation.

g.Payment of Penalties. An Operator will pay a penalty imposed by Commission order, by certified funds unless otherwise agreed to, within 30 days of the effective date of the order, unless the Commission grants a longer period or unless the Operator files for judicial appeal, in which event payment of the penalty will be stayed pending resolution of such appeal. An Operator's obligations to comply with the provisions of a Commission order requiring compliance with the Act or Commission's Rules, orders, or permits will not be stayed pending resolution of an appeal, except by court order.

2 CCR 404-1-525

37 CR 16, August 25, 2014, effective 9/30/2014

38 CR 01, January 10, 2015, effective 2/14/2015

38 CR 03, February 10, 2015, effective 3/2/2015

38 CR 07, April 10, 2015, effective 4/30/2015

38 CR 16, August 25, 2015, effective 9/14/2015

39 CR 04, February 25, 2016, effective 3/16/2016

41 CR 05, March 10, 2018, effective 4/1/2018

41 CR 06, March 25, 2018, effective 5/1/2018

41 CR 23, December 10, 2018, effective 12/30/2018

42 CR 02, January 25, 2019, effective 2/14/2019

42 CR 17, September 10, 2019, effective 9/30/2019

42 CR 24, December 25, 2019, effective 1/14/2020

43 CR 17, September 10, 2020, effective 9/30/2020

43 CR 13, July 10, 2020, effective 11/2/2020

43 CR 24, December 25, 2020, effective 1/15/2021

45 CR 07, April 10, 2022, effective 4/30/2022

45 CR 09, May 10, 2022, effective 5/30/2022

45 CR 13, July 10, 2022, effective 7/30/2022