DENVER – State natural-gas and oil officials Monday considered a proposal that would increase fines related to industry operational violations.
The rulemaking by the Colorado Oil and Gas Conservation Commission comes after state legislation earlier this year required a reassessment of fines and penalties.
The bill required the commission to eliminate the prior $10,000 penalty cap for a violation and increase the daily penalty amount from $1,000 to $15,000 for each violation. The measure also required the commission to assess a penalty for each day that the violation occurred.
But the measure stopped short of requiring mandatory minimum penalties, a contentious aspect that could not make its way through the Legislature.
The goal of the rulemaking is simply to deter violations and encourage prompt compliance.
The COGCC is expected to finalize the proposed rules Tuesday.
Part of the debate is over enforcement guidance and a penalty policy that aims to provide certainty over enforcement and assessment procedures.
Conservation groups called on the oil and gas commission to strengthen the proposed rules. They worry that the proposal would require fines only for “significant impacts,” without clarifying mandatory fines for public health, safety or environmental threats related to gas and oil production.
“The state should not wait until public health has been damaged before assessing fines – a violation of any COGCC rule that represents a threat to public health or safety should receive a mandatory fine,” said Catherine Collentine, with the Sierra Club. “If the state is going to continue to allow oil and gas development in residential areas, they need to hold the industry, and their own agency, to a higher standard.”
The push for increased fines intensified as practices such as hydraulic fracturing made its way to more populated communities along the Front Range. The increased activity spurred ballot proposals that would have offered greater local control, including the ability to ban fracking.
Bruce Baizel, a Durango-based energy program director for Earthworks, said the lack of mandatory fines in the oil and gas commission’s proposal could lead to ballot efforts in the future.
“This proposal is an open invitation to more ballot initiatives,” Baizel said. “Even though hundreds of thousands of Coloradans put their name on the line supporting increased local control of a largely self-policed oil and gas industry, these rules fail to significantly improve the loose state oversight that caused their concern in the first place.”
But Matt Lepore, director of the COGCC, said his commission is committed to assessing strong and appropriate fines.
He pointed to a 25 percent increase in enforcement orders over last year. In 2013, the commission assessed $1.1 million in penalties, while this year it collected $1.4 million.
As a comparison, Lepore pointed to the median penalty in 1993, which was less than $8,000 per violation; last year the average was $17,000, highlighting that penalties have doubled over the last 20 years.
“I subscribe 100 percent to the notion that a penalty should fit the nature of the violation,” Lepore said. “We have tried to create in these rules flexibility and discretion to allow us to do that.
“There’s no meaningful disagreement about the need for the penalty caps to be removed and the amount of daily penalties to be increased,” Lepore said. “We are in a regime where we have been directed to hold operators to the highest standards in the nation.”