Gas board: Raise fines for leaks by tenfold

The Colorado Oil and Gas Conservation Commission has recommended a tenfold increase — to $10,000 — in its maximum daily fine for rule violations, and elimination of the current $10,000 maximum total fine.

The increases, which require legislative action, are proposed in an internal review of its fines and enforcement structure that was ordered by Gov. John Hickenlooper. That order came after a bill that would have hiked the maximum fine to $15,000 a day failed to clear the Legislature last year.

Doug Flanders, director of policy and external affairs for the Colorado Oil & Gas Association, said his group is generally fine with the idea of a penalty increase, and is expecting a bill to be introduced during this year’s legislative section.

“Nobody likes to raise fines on themselves but we also recognize that there hasn’t been a major change within the fine structure and levels in decades,” he said.

The current $1,000 maximum daily penalty and $10,000 total maximum penalty are set in law. The $10,000 limit can be exceeded if violations significantly impact health, safety or welfare.

“A higher initial penalty will help prevent violations from first occurring; eliminating the cap will decrease the incentive to allow violations to continue,” the gas commission’s review says.

It says maximum fines for environmental violations under the Colorado Department of Public Health and Environment are “considerably greater” than the commission’s top daily penalty. Numerous federal environmental laws all include $25,000 daily limits that have been adjusted for inflation and now are $37,500, it said.

It said New Mexico has a $1,000 maximum daily penalty for oil and gas violations, but Wyoming and Utah have fines of $5,000 a day, or up to $10,000 a day for willful violations.

The Hickenlooper administration and the gas association last year supported a bill allowing daily fines of up to $15,000 a day, but objected to a House-approved version that also included a mandatory minimum fine because it took away the commission’s flexibility in addressing individual situations. Flanders said health department rules don’t include mandatory minimums and the gas association would like to see consistency between its rules and the commission’s rules.

State Rep. Mike Foote, D-Lafayette, and state Sen. Matt Jones, D-Louisville, carried last year’s legislation. Flanders is expecting them to introduce bills this year as well, and said the gas association has been in discussions with them.

“We couldn’t get it resolved last year so hopefully we can resolve it this year,” he said.

The commission also is seeking legislative authority to cease issuing new permits to a violator and suspend its ability to sell its oil and gas while serious violations remain uncorrected, and to also take the latter measure as long as a pattern of violations continues.

The review also resulted in recommended rules changes the commission can adopt itself without legislative involvement. These cover areas such as establishing criteria to determine the degree of actual or threatened health or environmental impact from a violation, and specifying aggravating and mitigating factors to help ensure penalties are appropriate.

The review states that it was undertaken “to foster the public’s trust that oil and gas operations in Colorado are conducted in a manner that protects public health, welfare, and the environment to the highest degree. This review underscores Colorado’s commitment to ‘hold the oil and gas industry to the highest operating standards in the nation.’”

The review said that since 2010 the commission has imposed penalties in 11 cases that involved significant environmental impacts.

“Each of these cases involved adverse impacts to ground water, surface water, or both,” it said.

The maximum penalty, $423,300, was imposed against Williams for a pit leak that led to a man drinking contaminated spring water northwest of Parachute. The average penalty in the 11 cases was $173,350, and the lowest was $10,000.

Through Oct. 28 of last year, the commission had imposed $1.16 million in penalties for 2013, with a maximum fine of $220,000 and a median fine of $13,500.

It issued 167 notices of alleged violations during the first 11 months of the year.


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