An investigation by the Guardian and DeSmog has uncovered that Colorado regulators allowed major oil companies to sidestep over $1 billion in required financial guarantees for cleaning up thousands of old drill sites. The state's energy and carbon management commission (ECMC) waived collateral for more than 14,600 plugged wells where remediation and reclamation remain incomplete, undermining a key incentive for timely cleanup.
Broken Financial Oversight
Colorado law requires oil and gas operators to post financial collateral upfront for well cleanup, akin to a security deposit. However, the ECMC permitted Chevron, Occidental Petroleum (Oxy), and Civitas Resources to exclude thousands of plugged wells from bonding calculations, even though those sites still pose environmental risks. The three companies, collectively known as the Big Three, produce the vast majority of the state's oil and gas but also own over 14,600 dead wells with unfinished cleanup work.
According to the investigation, had the ECMC followed its own rules, it could have demanded up to $1.3 billion in bonds from these firms. Instead, it collected just $146 million, covering only about 7% of estimated cleanup costs. The regulator's actions effectively removed a critical financial incentive to tackle the most expensive part of decommissioning: remediation and reclamation.
Impact on Communities
Residents like Christiaan van Woudenberg, who live near drilling sites in Weld County, have suffered from noise, air pollution, and health issues. Van Woudenberg, a software developer, began mapping spills and contamination after drilling started near his home in 2014. His data revealed that chemical spills were common at old, defunct sites, often going undetected for years.
The Big Three are responsible for over 6,000 open spill sites that still need remediation, many overlapping with the unbonded plugged wells. The slow pace of cleanup means these sites remain unusable for housing, business, or recreation, hindering local development.
Regulatory Failures
The 2019 law SB-181 aimed to shift the ECMC's focus from fostering oil and gas development to regulating it in the public interest. However, the agency undermined this mandate by exempting plugged wells from bonding requirements. In 2022, ECMC staff instructed companies to remove plugged wells from their financial assurance calculations, contradicting the rule that all wells must be covered until cleanup is complete.
Additionally, the ECMC failed to complete mandatory annual reviews that could have adjusted bonding levels. Director Julie Murphy has not finalized a review for any company since the rules took effect. The agency also did not require bonds for remediation projects at spill sites, despite having the authority to do so.
Falsified Environmental Reports
Compounding the problem, contractors for the Big Three falsified environmental reports on pollution levels at hundreds of sites between 2021 and 2024. The ECMC discovered the fraud but did not impose fines or increase bonding requirements. Thousands of environmental filings have since been rejected by the agency for incomplete data or methodological issues.
Decades of Cleanup Ahead
At the current pace, it will take decades for Chevron, Oxy, and Civitas to clean up their backlog. The companies have only passed final environmental review on about 2,500 drilled well sites in the past 40 years. Experts warn that delaying cleanup only increases costs and risks to public health and the environment.
Phil Doe, a former policy specialist who helped draft SB-181, called the ECMC's actions a violation of the law. “The people that are in charge of performing the law and seeing that it's faithfully employed are breaking it,” he said. “To me, that's criminal.”
The ECMC defended its approach, stating it uses a risk-based system and that its financial assurance regime is one of the strongest in the nation. Chevron maintained it is following cleanup processes and timelines, while Oxy and Civitas did not respond to requests for comment.
