Colorado’s Oil And Gas Regulatory Agency Is Running Out Of Money

BROOMFIELD, CO -- From the Colorado Independent. By John Herrick

As the state grapples with the aftermath of last April’s fatal pipeline explosion in Firestone and a fervent demand by residents to better regulate the oil and gas industry, the agency in charge of enforcing those regulations has a problem: it may not even have the cash to make payroll come summer.

About a third of the $18.6 million budget for the Colorado Oil and Gas Conservation Commission, or COGCC, comes from one of the state’s most unpredictable sources of income: the severance tax. Oil and gas companies pay the tax on the total value of what they extract from the ground. When prices and production are up, the state reels in hundreds of millions of dollars. In other years, programs get by. But this year, the state faces a shortfall.

Since April, state economists have been adjusting their forecasts for how much severance tax money the state will collect. In May, projected revenue looked rosy. But in December, it plummeted. This is a reflection of both mediocre oil and gas prices and a 2016 Colorado Supreme Court decision that required the state to issue an estimated $120 million in refunds to oil and gas companies. The state expects to issue an estimated $72 million in remaining refunds over the next 16 months.

This budget dilemma is also the result of lawmakers using the fund to pay for new programs during good revenue years. And when revenues are down, like this year, the fund comes up short.
Now, state officials say the agency will not have enough money to pay staff, including its three flowline inspectors, if projections hold up. The state may also have to delay hiring two new flow line inspectors responsible for inspecting the entire Western Slope. Its workload includes mapping hundreds of thousands of flowlines and plugging hundreds of abandoned oil wells. The COGCC will have to operate on a shoestring budget, if, its budget director says, it’s able to operate at all.

READ MORE in the Colorado Independent

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Image: Oil and gas development in new housing subdivision on Collier’s Hill. Photo by Ted Wood/The Story Group.