SECTION 211: A NEW TOOL FOR LANDOWNERS AND DEVELOPERS DEALING WITH PROBLEMATIC OIL AND GAS WELLS

Northern Colorado has been home to an abundance of oil and gas development and drilling over the last century and remains a hotbed for drilling in the state. In the last ten years, state and local laws that govern setbacks – how far lots, homes, buildings, and other improvements need to be from oil and gas wells – have become larger, creating a unique challenge for planners, engineers, and developers trying to complete projects. Our experience in this area representing of landowners, developers, oil and gas operators, and mineral owners in all matters related to the Colorado oil and gas industry, has made us experts on the complexities of Colorado natural resource law. We have helped numerous clients pursue their goals by negotiating with oil and gas companies on their behalf.

This blog will serve as a primer to outline some of the more challenging complexities.

An active wellsite generally has a much larger setback requirement than a well that is plugged and abandoned, with the surrounding area remediated. All oil and gas operators are required to plug wells and remediate the area once the well is no longer producing. However, some oil and gas operators have been reluctant (or some might say opportunistic) in timely completing production and remediating the areas around wells that are well-past their high-producing years. Low producing wells, in which production has slowed to a relative trickle, are increasingly common in northern Colorado, with no clear timeline on when operators will finally remediate the surrounding land to allow residential and other development.

Some oil and gas companies have required a landowner or developer to pay as much as $150,000 – $300,000 per well to accelerate the process, despite one such operator recently reporting to the Colorado Energy and Carbon Management Commission (ECMC) that the actual cost to do such work was just $42,181.

Recently, some municipalities, notably Dacono and Frederick, have started to fight back, bringing actions to force operators to plug and abandon shut-in and low-producing wells under a regulatory process commonly known as Section 211 (Section 2 CCR 404-1-211: “Plugging and Abandonment of Wells and Closure of Oil and Gas Facilities and Locations”).

Section 211 sets forth guidelines and standards for the proper plugging and abandonment of oil and gas wells, as well as the closure of associated facilities and locations. Its primary objective is to ensure the safe and environmentally responsible decommissioning of such infrastructure to mitigate potential risks to public health, safety, and the environment, and also allows for the plugging and abandonment of wells that are no longer “used or useful” which includes many of the shut-in and low-producing wells plaguing development.

By allowing developers and landowners to bring an action to the ECMC for a hearing and by allowing the ECMC to order the plugging and abandonment of wells that are no longer producing adequately, development now has an alternative to either waiting out oil and gas operators or paying exorbitant costs to have wellsites remediated. Moreover, well-maintained and environmentally compliant sites command higher market values and attract buyers and tenants who prioritize safety and sustainability. By adhering to Section 211, landowners and developers ensure that their properties meet regulatory standards, thereby enhancing their appeal and long-term financial returns.

The potentially lower cost of obtaining an order under Section 211 and accelerating the remediation process has given new life to residential and commercial developments that had been put on indefinite hold by oil and gas operators unwilling to act and has provided some home to landowners and developers dealing with problematic wellsites that have precluded the economic development of our communities.