Legislation that would have phased out new oil and gas drilling in Colorado and could have put former owners on the hook for cleaning up depleted wells was defeated late Thursday night after a nine-hour hearing.
The legislation, Senate Bill 24-159, prompted TV ads and a rally at the state Capitol by opponents saying the measure would shut down Colorado’s oil and gas industry and eliminate thousands of jobs and millions of dollars in revenue for the state, schools and local governments.
About 200 people signed up to testify before the Senate Agriculture and Natural Resources Committee on the bill. Proponents called for moving away from fossil fuels for public health and environmental reasons. Two Democratic committee members joined the Republicans to reject the bill 5-2.
The bill’s defeat comes as conflicts over oil and gas drilling are rearing up again. Industry-related groups and supporters, and environmental and community activists have filed dueling ballot proposals on oil and gas issues.
The counter moves are happening against a backdrop of federal, state and local efforts to increase the use of renewable energy and cut greenhouse-gas emissions to address climate change.
The bill’s supporters also pointed to air pollution problems. Oil and gas production and tailpipe emissions contribute to ozone pollution along the Front Range, which is in violation of federal air-quality standards.
The bill is “a much-needed, huge coalition-driven policy” that demonstrates the commitment to meeting the state’s climate goals, said Democratic Sen. Sonya Jaquez Lewis of Lafayette, a prime sponsor of the bill.
“The oil and gas industry is important to Colorado, but in order to meet our clean energy goals, we cannot keep drilling forever, Jaquez Lewis said.
Republican lawmakers grilled the bill’s sponsors on the fiscal impact on state and local governments if the industry were forced to scale back. Sen. Barbara Kirkmeyer, a Brighton Republican, said school districts would lose tens of millions of dollars in revenue annually without property taxes and fees paid by the industry.
Democratic Sen. Janice Marchman of Loveland also voiced concerns about the fallout for school districts. She and fellow Democrat Sen. Dylan Roberts, the committee chairman, admonished the bill’s sponsors for not working more closely with the various parties and trying different approaches.
Solving problems for Colorado requires care, not “hatchets or blunt instruments,” Roberts said.
The Colorado Energy and Carbon Management Commission, which regulates oil and gas, opposed the legislation.
“The oil and gas industry in Colorado operates under some of the most stringent regulations in the world,” Dan Haley, president and CEO of the Colorado Oil and Gas Association, said in a statement.
The bill sent a chilling message to businesses across the state that some legislators “would consider putting you out of business, even if you supply a product they use every single day,” Haley said.
The bill would have capped the number of new oil and gas permits starting in 2028 and halted them altogether by the end of 2029.
Another provision would have targeted the former owners of depleted oil and gas wells if the current owners couldn’t pay to clean them up, creating what’s called “orphan wells.” A state program funded in part by fees on the industry takes care of the wells.
The program has a backlog of 648 wells, with at least 358 in line to be added. Another 1,411 orphaned sites, some without wells, need to be cleaned up and restored.
Other states have laws that go after previous owners if there’s no one else to pay, said Kevin Priola, a Democrat from Henderson and a prime sponsor of the legislation. He noted that the Bureau of Land Management will require a well’s former owners to pay to restore an orphan site on federal land.
Priola contended that larger companies have sold older wells to smaller companies to avoid the cleanup expenses, leaving taxpayers on the hook if the new owners can’t afford to do the work. A lawsuit recently filed in Colorado accuses two companies of fraud in what it claims is a common practices in the industry to offload defunct and uneconomic wells to smaller operators.
Opponents of making former owners liable said such a law would be unconstitutional because it would be retroactive. Attorneys in favor of the proposal disagreed, saying that state court cases have upheld the practice.
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“This is probably one of the more important discussions that is going to happen in this legislative session involving oil and gas,” attorney Matt Sura said of the orphan wells proposal. “It deserves its own hearing.”
Sura, who represents communities and landowners in oil and gas matters, said Colorado needs to be able to tap former owners of defunct wells. “Otherwise, taxpayers are going to spend hundreds of millions of dollars cleaning up the mess left by the oil and gas industry.”
The Colorado Energy and Carbon Management Commission has a plan to deal with orphan wells, said Julie Murphy, the agency’s director. The ECMC approved rules in 2022 to strengthen the financial assurances that companies must provide, including bonds. Companies buying wells must show they can afford to clean up the sites.
Fees on the industry generate nearly $10 million a year for the orphan well fund, Murphy said. The state has received $25 million in federal money for the program and anticipates receiving another $124 million over 12 years.
The state estimates it costs nearly $93,000 to properly close a well.
Kate Merlin, an attorney with WildEarth Guardians, helped write the bill’s section on orphan wells. She believes the volume of older, low-producing wells not covered by the new rules will be overwhelming if they become orphans.
“We don’t have the resources to take care of this, nor should we have to,” Merlin said.