BEFORE THE
OIL AND GAS CONSERVATION COMMISSION
OF THE
STATE OF
IN THE MATTER OF CHANGES TO THE RULES ) CAUSE NO. 1R
AND REGULATIONS OF THE OIL AND GAS )
CONSERVATION COMMISSION OF THE STATE ) ORDER NO. 1R-104
OF
REPORT OF
THE COMMISSION
TO ALL INTERESTED PARTIES AND TO WHOM IT MAY CONCERN:
Pursuant to a hearing before the Oil and Gas Conservation Commission on August
28, 2007, in
310. COGCC
Form 8. MILL LEVY
On
or before March 1, June 1, September 1 and December 1 of each year, every
producer or purchaser, whichever disburses funds directly to each and every
person owning a working interest, a royalty interest, an overriding royalty
interest, a production payment and other similar interests from the sale of oil
or natural gas subject to the charge imposed by §34‑60‑122 (1) (a)
C.R.S., 1973, as amended, shall file a return with the Director showing by
operator, the volume of oil, gas or condensate produced or purchased during the
preceding calendar quarter, including the total consideration due or received
at the point of delivery. No filing
shall be required when the charge imposed is zero mill ($0.0000) per dollar
value.
The levy shall be an
amount fixed by order of the Commission.
The levy amount may, from time to time, be reduced or increased to meet
the expenses chargeable against the oil and gas conservation and environmental
response fund. The present charge
imposed, as of July 1, 2007, is seven tenths of a mill ($0.0007) per dollar
value.
Rule 310B.
was deleted as a result of the amendments to Rule 310.
DONE AND PERFORMED by the Oil
and Gas Conservation Commission of the State of
IN
THE NAME OF THE
OIL
AND GAS CONSERVATION COMMISSION
OF
THE STATE OF
By
Patricia
C. Beaver, Secretary
Dated at
August 29, 2007
Exhibit
A
STATEMENT
OF BASIS AND PURPOSE
This statement
sets forth the basis, specific authority, and purpose for the amendments to
Rule 310A. and Rule 310B. of the Rules and Regulations ("Rules" or,
individually, "Rule") of the Colorado Oil and Gas Conservation
Commission ("Commission"), 2 CCR 404-1. The amendments to the Rules
were heard and promulgated by the Commission on August 28, 2007. This statement is hereby incorporated by
reference in the amendments as adopted.
AUTHORITY
The Commission’s
authority is primarily set forth in the provisions of Title 34, Article 60 of
the Colorado Revised Statutes, as amended, specifically, the “Oil and Gas
Conservation Act,” §§ 34-60-101 through 126, C.R.S. (2006).
C.R.S. §§
34-60-122(1)(a) and (5) establish the oil and gas conservation and
environmental response fund (“Fund”).
C.R.S. §
34-60-122(1)(a) gives the Commission authority to impose a charge on the market
value at the well of all oil and natural gas produced, saved, and sold or
transported from the field where produced, not to exceed one and seven-tenths
mill ($0.00170) on the dollar.
C.R.S. §
34-60-122(1)(a) requires the Commission to fix the charge by order and gives
the Commission authority to reduce or increase the amount from time to time to
meet the expenses chargeable against the Fund.
C.R.S. §
34-60-124(10) requires that a portion of the Fund be spent to cover the cost of
administering the Oil and Gas Conservation Act, including staffing, overhead,
enforcement, and environmental response.
C.R.S. §
34-60-124(4)(a) authorizes the Commission to spend monies from the Fund to (i)
investigate, prevent, monitor, or mitigate conditions related to oil and gas
operations that threaten to cause, or that actually cause, a significant
adverse environmental impact on any air, water, soil, or biological resource,
(ii) gather background or baseline data on any air, water, soil, or biological
resource that the Commission determines may be impacted by the conduct of oil
and gas operations, and (iii) investigate alleged violations of any provision
of the Oil and Gas Conservation Act, any rule, or order of the Commission, or
any permit where the alleged violation threatens to cause or actually causes a
significant adverse environmental impact.
C.R.S. §
34-60-129 (enacted in 2007 by passage of HB 07-198) requires the Commission to
monitor and mitigate the seepage of coalbed methane from the Fruitland
Formation outcrop in
PURPOSE
Prior to 2005,
there were separate levies authorized by C.R.S. § 34-60-122, one for the oil
and gas conservation fund (Rule 310A.) and the other for the environmental
response fund (Rule 310B.). In 2005, the
Colorado General Assembly modified C.R.S. § 34-60-122 and combined the two
funds into the Fund, earmarking an account within the Fund as the environmental
response account. C.R.S. §§
34-60-122(1)(a) and (5).
The amendments
combine Rules 310A. and 310B. into a single Rule 310. to reflect the combined
Fund that was enacted by the 2005 legislative changes to C.R.S. § 34-60-122.
The amendments
increase the charge (levy) imposed by the Commission, pursuant to C.R.S. §
34-60-122(1)(a), from five-tenths mill ($0.0005) (set in 2004) to seven-tenths
mill ($0.0007) per dollar of market value at the well of all oil and natural
gas produced, saved, and sold or transported from the field where
produced. The amendments, as publicly
noticed, proposed to increase the levy to nine and one quarter-tenths mill
($0.000925); however, based on revised predictions of production levels and
product prices, the Commission staff recommended the lower levy (seven-tenths
mill ($0.0007)) that was promulgated by the Commission at the hearing.
The increased
levy is necessary to supplement the Commission’s administration and operation
budget, which has increased dramatically in the past three years because of
increased drilling activity in the state.
Staff requirements are 57% higher than three years ago, requiring
additional funds for salaries to attract qualified professionals. More than half of the recently hired staff is
in the field near areas of active drilling, requiring expenditures for, among
other things, additional equipment, computers, and vehicles.
The increased
levy is also necessary to maintain the Fund balance adequately to address
environmental response needs (not to exceed $4 million) as required by C.R.S. §
34-60-122(1)(b).
The increased
levy is also necessary to meet the estimated expense of the three-year project
required by C.R.S. § 34-60-129 ($2,003,400 for each of the first two years and
$445,200 for the third year).