DENVER – State natural-gas and oil regulators last week approved increased fines for violations related to operations.
The Colorado Oil and Gas Conservation Commission increased the maximum daily penalty from $1,000 to $15,000 for each violation. The commission also eliminated a $10,000 penalty cap for each violation.
Also, regulators will now be able to assess a penalty for each day that evidence demonstrates a violation occurred.
“This marks a considerable change in the way we do business,” said Matt Lepore, director of the oil and gas commission. “Toughening major penalties for violators is an important component of our ongoing efforts to strengthen our oversight, enforcement and compliance program.”
The rulemaking came about after the Legislature last year passed a bill requiring the oil and gas commission to tackle the violations issue. An original iteration of the measure would have required mandatory minimum penalties, but contention forced sponsors to pull that effort.
Observers had hoped that the commission would have finalized the rules last month. But lengthy hearings required commissioners to delay its decision until Jan. 5.
Overall, gas and oil producers did not fight the penalty increase.
Some in the industry were concerned about a penalty schedule proposed by the oil and gas commission. Producers worried that misapplication of the penalties would hurt the industry if applied without discretion.
Fines are broken into three classes and categories.
The classes are for administrative errors that don’t affect public health, indirect impacts to public health, and direct harm to public health.
Categories for fines include major incidents that have adverse impacts, moderate violations that have damaging effects and minor infractions that have no negative health impacts.
“We’re looking for clarity and certainty as to how the new rules would be enforced and applied, not for certainty on what the penalty should be,” said Tisha Schuller, president of the Colorado Oil and Gas Association. “Overall, we are all on the same page with the same goal, which is to promulgate rules that provide certainty, clarity and consistency to all stakeholders, not just industry.”
Conservation and environmental groups pushed for tougher rules, suggesting that the matrix offers too much discretion to the oil and gas commission, especially without mandatory minimum fines.
Community fears intensified as hydraulic fracturing made its way to the populated Front Range. The process – which uses sand, chemicals and water to extract resources – comes with myriad health and nuisance concerns.
Some local communities have gone as far as to ban fracking, though many of those cases are tied up in the courts. A task force is meeting to recommend possible legislation to address fears.
Bruce Baizel, a Durango-based energy program director for Earthworks, said the rulemaking by the commission is a step in the right direction.
“There’s a lot of discretion still for the director, so some of the proof will be in how he actually implements what the commission has done,” Baizel said. “But for them to mandate a fine, we think that’s a good thing.”
He said that the rules should be given a chance to have an impact before additional fines are considered.
“If it doesn’t really change the behavior, and we still see the major impacts that are resulting in violations, then I think we’ll look at it again,” Baizel said.