Statutes, codes, and regulations
Colorado Administrative Code
Department 400 - Department of Natural ResourcesDivision 404 - Oil and Gas Conservation Commission
Rule 2 CCR 404-1 - PRACTICE AND PROCEDURE
Section 2 CCR 404-1-706 - RELEASE OR CLAIM OF FINANCIAL ASSURANCE

2 Colo. Code Regs. § 404-1-706

Download
PDF
Current through Register Vol. 47, No. 20, October 25, 2024
Section 2 CCR 404-1-706 - RELEASE OR CLAIM OF FINANCIAL ASSURANCE
a.When Financial Assurance Reverts to Operators. The Director will release part or all of an Operator's Financial Assurance, including any accrued interest from a Cash Bond, if the Operator submits a Form 3A requesting release of the Financial Assurance, and any of the following conditions have been met:
(1)Full Compliance. The Director determines that an Operator has fully complied with all of its statutory and regulatory obligations for Plugging and Abandonment, Remediation, and Reclamation of all Oil and Gas Facilities subject to the Operator's control pursuant to the Commission's Rules;
(2)Transfer of Operatorship. The Director approves a Form 9 - Subsequent pursuant to Rule 218.g.(4) certifying that one or more Buying Operator(s) have filed sufficient replacement Financial Assurance for all Wells, Oil and Gas Locations, and Oil and Gas Facilities subject to the Operator's control;
(3)Other Facilities and Operations. The Operator meets the requirements for release of Financial Assurance held for a specific category of facility or operation identified in Rule 703 or for release of a Surface Owner protection bond pursuant to Rule 704.c; or
(4)Single Well Financial Assurance for Wells. The Operator fully Plugs and Abandons and Reclaims a Well that has an associated Single Well Financial Assurance.
(5)Abandonment of Permit without Construction. The Operator abandons a permit for a Well, Oil and Gas Location, or Oil and Gas Facility without disturbing the surface or otherwise constructing the applicable facility, and files a Form 4, Sundry Notice to formally request abandonment of the permit and a field inspection confirms no disturbance or construction occurred.
b.Procedure for Director to Access Financial Assurance. If an Operator fails to fulfill its statutory and regulatory obligations for Plugging and Abandonment, Remediation, and Reclamation, the Director will suspend the Operator's Form 1 and Form 10, Certificate of Clearance and will file an application for a Financial Assurance hearing pursuant to Rule 503.g.(11) to claim the Operator's Financial Assurance.
(1)Hearing Procedures. The Secretary will serve notice of the Director's hearing application on the Operator and, where applicable, any applicable third-party provider of the Financial Assurance pursuant to Rule 504.
A. The Operator, third-party provider of Financial Assurance, and any other Affected Person may petition to participate in the hearing pursuant to Rule 507.
B. If no petition is filed, the matter may be resolved as an uncontested matter on the Commission's consent agenda pursuant to Rules 508 & 519.
C. At hearing, the Commission has discretion to order appropriate relief, including but not limited to permanently revoking the Operator's license to conduct Oil and Gas Operations in Colorado.
(2)Director's Action to Claim Financial Assurance Pursuant to Commission Order. If the Commission approves the Director's application to claim the Operator's Financial Assurance, the Director will:
A. Transfer any Cash Bond to the Oil and Gas Conservation and Environmental Response Fund;
B. Call any Surety Bond or Letter of Credit held by a third party for the benefit of the Commission and deposit the called funds in the Oil and Gas Conservation and Environmental Response Fund;
C. Foreclose upon any liens or otherwise secured real or physical property held as a form of Financial Assurance and deposit the foreclosed funds in the Oil and Gas Conservation and Environmental Response Fund; and
D. Take any other actions necessary to liquidate and transfer any other assets held as Financial Assurance into the Oil and Gas Conservation and Environmental Response Fund.
c.Recalcitrant Bond Providers. If a third-party provider of Financial Assurance fails to comply with the terms of a financial instrument, or with a Commission order calling a Surety Bond, Letter of Credit, or other form of Financial Assurance, the Director may designate that third-party provider to be an unacceptable provider. The Director will maintain a list of all unacceptable Financial Assurance providers on the Commission's website.
(1)Reinstatement of Unacceptable Third-Party Providers. The Director will not accept any new Financial Assurance that an Operator seeks to provide through an unacceptable provider until the third-party provider applies for a hearing before the Commission pursuant to Rule 503.g.(11) and obtains an order of reinstatement from the Commission.
(2)Suits to Recover Financial Assurance. The Commission may file suit pursuant to § 34-60-109, C.R.S., to recover Financial Assurance based on a valid Commission order claiming the Financial Assurance pursuant to Rule 706.b.(2).
d.Refund of Claimed Financial Assurance. If any portion of an Operator's Financial Assurance that is claimed pursuant to Rule 706.b is not needed to cover the costs of Plugging and Abandonment, Reclamation, and Remediation of an Orphaned Site, the Director will refund the remainder of the Financial Assurance to the entity that provided the Financial Assurance. The Director may claim an overhead recovery fee of 10% of the funds as direct costs charged against any Financial Assurance that would otherwise be refunded to the entity that provided the Financial Assurance.
e.Procedure for Operator to Pursue Release of Financial Assurance. If the Director or the Commission fails to timely release all or part of an Operator's Financial Assurance after the Operator has satisfied its requirements pursuant to Rule 706.a, the Operator may file an application for a Financial Assurance hearing pursuant to Rule 503.g.(11).

2 CCR 404-1-706

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