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Colorado Sets Tougher Penalties for Oil/Gas Violations

Colorado regulators opened the new year on Monday by approving rule and policy changes that they characterized as significantly increasing penalties for oil and natural gas operators violating state regulations.

Industry leaders supported the state law leading up to the changes, but continued to voice some concerns regarding eventual enforcement. The new rules are due to go into effect in early March.

In a split decision (5-3, one absent member), the nine-member Colorado Oil and Gas Conservation Commission (COGCC) said it made rule and policy changes to "further deter violations and encourage prompt compliance" by increasing maximum daily penalty amounts from $1,000 to $15,000 for each violation, along with eliminating a $10,000 overall penalty cap for each violation. The current $1,000/day penalty structure and $10,000 cap was implemented in 1955.

COGCC members also added clarifying language on the commission's ability to assess a penalty for each day that the evidence demonstrates a violation took place. A spokesperson for the Colorado Oil and Gas Association (COGA) told NGI that the commissioners essentially followed their staff's recommendations with minor modifications.

"COGA, and each industry representative that testified, made it clear that we supported the law [HB 1356] that passed and the COGCC's authority to implement its mandates," said Tisha Schuller, COGA CEO, adding that the industry has pointed out “concerns over the process of issuing Notices of Alleged Violations and the penalty schedule set forth in COGCC's proposed penalty matrix.” HB 1356 did not address this level of detail, Schuller said.

COGCC in mid-December delayed implementing larger fines, saying it would take up the issue again in early January (see Shale Daily,Dec. 17, 2014).In 2013, Gov. John Hickenlooper in an executive order directed the COGCC to review its enforcement program and penalty structure (see Daily GPI, May 10, 2013). The commission subsequently submitted its review more than a year ago, and last June the state legislature passed HB1356 to amend the Colorado Oil and Gas Conservation Act, strengthening COGCC’s penalty authority.

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