Colorado’s orphan well list set to swell By EPN Staff The Colorado Energy and Carbon Management Commission may soon revoke Highlands Ranch-based KT Resources’ right to do business in the state after multiple notices about the oil and gas operator’s activities. If that happens, the company’s 107 unproductive oil and gas wells in Rio Blanco County will end up on the list of orphaned wells the state plans to plug and reclaim. Since taking over the wells in 2022, the company has received 24 violation notices that it failed to remediate. Regulators said it also hadn’t delivered a $77,500 financial assurance payment to the state. Why it matters The scenario illustrates the complexities and risks of oil and gas well management, and how plugging unattended, or orphaned, wells and remediating sites can be passed to the state and taxpayers. In some cases, orphan wells were discontinued because the Colorado Energy & Carbon Management Commission (ECMC) revoked the operators’ permit or because the operator was financially unable or unwilling to maintain or plug the well and fulfill its obligations for abandonment. The commission estimated the average cost of plugging and environmental remediation at about $93,000, with the higher range extending to $291,000. The Orphaned Well Program has a list of 960 orphaned wells which the ECMC plans to plug prioritized by how much risk the well head poses to humans, livestock, wildlife, and air quality. ECMC has assumed responsibility for more than 1,800 cleanup sites. The bigger picture Financial assurance rules adopted by Colorado in 2022 have been described by the commission as the strongest in the nation. Since 1990, the Colorado legislature has appropriated funds to plug historic wells for which there is no responsible party. The state also received a $25 million grant from the federal government to address orphan wells. The Orphan Well Mitigation Enterprise fee has raised $18 million. The ECMC told The Colorado Sun that the state has 1,827 bonds from drilling operators totaling $399 million and the agency has approved financial assurance plans that bring the amount to $641 million. In 2019, the legislature passed Senate Bill 19-181, which requires operators to post more assurance money and to pay a $115 fee per well to the orphan program. Large scale operators can cover their liability with blanket bonds. Small operators have to pay into a fund over 10 to 20 years to cover their liability. But if the company closes before then, the state assumes the liability. Additional context KT Resources acquired the 107 wells in 2022 from another troubled operator. All but seven are on federal land. The company posted $317,000 in bonds and, under the new assurance regulations, had to pay $77,500 for those on state land. It has failed to do so. If the ECMC terminates KT Resources’ permission to work in the state due to violations and failure to pay assurance money, the state will assume responsibility for the seven orphaned wells. The ECMC also has an agreement with the federal government to cap the wells that are on federal land.
