Colorado's Oil Industry Dodges Billions in Cleanup Costs
When Christiaan van Woudenberg moved to Erie, Colorado, in 2007, he never imagined he would become an anti-fracking activist. He simply thought he was buying his dream home – a four-bedroom with a panoramic mountain view, 30 minutes north of downtown Denver.
Then, in 2014, the drilling started. Oil and gas rigs sprang up, some just 800ft (240m) from his bedroom window. The dream turned to nightmare: loud noises rumbled all night long, and the air stank like exhaust. Neighbors started getting headaches and nosebleeds, and Van Woudenberg developed new respiratory issues. He kept his windows shut and worried about his daughters going outside.
“So I got mad,” he said. “Like, ‘Oh, if they can do this to me in my fancy house as an upper-middle-class white guy, they can do it to anybody.’”
Van Woudenberg looked for ways to visualize the scale of the industry’s pollution. A software developer, he sorted through vast data published by the state energy and carbon management commission (ECMC), Colorado’s oil and gas regulator. What he discovered shocked him. Chemical spills were turning up daily in Weld county, where he lives – sometimes at new drilling projects, but more often at old, defunct sites where contamination had gone undetected for years.
He started charting locations where wells, storage tanks and underground flow lines had leaked toxic material into the environment, bringing his detailed maps to anti-fracking protests and community meetings. Without highly specialized skills, the toll was nearly impossible to see.
“We’re trying to show the oil and gas infrastructure burden on this state,” he told the Denver Post in 2018, a year when more than 11 spills a week were uncovered on average in Colorado. “There’s heaps and heaps of it. It is everywhere.”
An investigation by the Guardian and DeSmog examined thousands of state documents to create an unprecedented picture of that invisible public toll, as an ageing oil industry struggles to clean up – and pay for – its own decommissioning.
Major reforms gave the ECMC an opportunity to solve the problem in 2019. But rather than use those powers to hold the biggest companies accountable, the agency found new ways to let them off the hook.
Drilling sites in Weld county, Colorado
The damage stems in particular from Chevron, Oxy (Occidental Petroleum) and Civitas Resources, collectively the Big Three. Together, they produce the vast majority of Colorado’s oil and natural gas.
But as this investigation found, they also own more than 14,600 dead oil and gas sites, where production has ended but pollution or other impacts remain. These sites overlap heavily with their more than 6,000 open spills, locations where toxic chemicals may be contaminating soil and groundwater.
By law, the companies must remediate pollution and restore the land. But reports pulled from the Colorado Oil and Gas Information System database reveal that the Big Three have allowed many of these dirty and environmentally damaged sites to languish for years – or, in some cases, decades.
Since 2019, the ECMC has had broad power to ensure compliance. Had the agency simply followed its own protocols, it could have forced Chevron, Oxy and Civitas to hand over as much as $1.3bn in financial collateral – funds in the form of bonds the state could hold in trust to incentivize cleanup, or deploy itself if necessary.
Instead, the agency twisted its own rules, allowing all three companies to provide just a sliver of what they might have owed.
“It is unambiguous that these obligations are owed to the people of Colorado,” said Dwayne Purvis, a petroleum engineering consultant who has co-authored a report on Colorado’s looming fossil fuel liabilities. “I don’t see any reason that the work should not be done promptly, and I don’t see any reason that it shouldn’t be fully bonded.”
In 2024, the regulator said contractors for all three companies had falsified environmental paperwork at hundreds of sites including over pollution levels in water and soil – a situation the companies and the commission say they are investigating.
But even then, the ECMC still didn’t use its power to increase the Big Three’s financial assurance totals.
And the agency has continued to forfeit that crucial source of leverage at a time when it needs every tool at its disposal. If the current pace of cleanup continues, this investigation found, it will take Chevron, Oxy and Civitas decades to clean up their existing backlog of dead and dirty sites.
Meanwhile, rates of remediation and reclamation still lag far behind plugging – and as those final, costly steps drag out, the toll continues to rise.
Across the US, more than 2m oilwells will require plugging and cleanup in the coming years, an undertaking that could cost more than $150bn, according to an analysis of state data by ProPublica and Capital & Main. But rather than foot the bill, industry has routinely found ways to avoid financial assurance, “orphan” their dead wells and finally dump decommissioning expenses on the public – a tactic so widespread some experts call it “the playbook”.
In Colorado, where a Carbon Tracker report co-authored by Purvis estimates oil and gas decommissioning costs could exceed $8bn, experts and politicians said new regulations offered a fresh model for reining in the problem. Instead, this investigation found that regulators took actions that allowed companies to pile up cleanup costs while the public wasn’t looking – undermining a cornerstone of its celebrated rules.
In a statement, the ECMC acknowledged slow implementation of tightened rules but defended its performance as a regulator including its handling of financial assurances. It said there were “multiple layers” of financial protections for the public and that it used a “risk-based system” to determine the levels.
“ECMC stands behind the policy and practical considerations that underscore the development and implementation of its financial assurance protocol, which is one of the strongest financial assurance regulatory regimes in the nation,” John Brown, a commission spokesperson, told DeSmog and the Guardian, in an emailed statement. “We believe Colorado’s framework strikes an important balance between protecting communities today and reducing long-term environmental risk for the future.
“Our approach to financial assurance and site management is consistent with the options and processes established by regulators, which are designed to account for operational complexity and portfolio characteristics,” Allison Cook, a Chevron spokesperson, wrote by email. “Assertions that Chevron is out of compliance or avoiding its financial assurance responsibilities are false.”
Oxy and Civitas did not respond to multiple requests for comment on this investigation’s findings. (Civitas merged with SM Energy in January.)
A ‘model for the nation’
In 2019, the Colorado legislature passed SB-181, a sweeping law intended to forever change the ECMC’s relationship with industry. Until then, the commission’s stated purpose had always been to “foster” oil and gas development, according to its formal charter. But the new rules flipped that dynamic on its head: by law, the commission would instead “regulate” industry while acting to ensure that the environment, public health and the public purse would always be protected.
Phil Doe, a former US Bureau of Reclamation policy specialist, says he helped make suggestions to the bill’s language in sessions convened by lawmakers.
“The requirement is simple,” he said. “You’re supposed to eliminate the cost to the public wherever possible.”
Media outlets hailed a “major shift”. The state’s governor, Jared Polis, called SB-181 an opportunity to “uplift Colorado as a model for the nation”.
In 2020, the ECMC – then the “Colorado oil and gas conservation commission” – began the epic process of translating SB-181’s broad mandate into nitty-gritty ground rules. In hearings stretching late into the night, community members, environmental groups and industry representatives debated what oil and gas governance in the public interest should look like.
That included the state’s new approach to financial assurance, its process of requiring operators to provide upfront cleanup money – like a security deposit – in the form of bonds. According to state records, Colorado already held $132m in bonding before the law’s passage, but that only averaged out to about $3,000 per well – nowhere near enough to cover liabilities that could exceed $8bn.
Crucially, the new law mandated that the ECMC collect enough bonding to nullify the public’s risk.
It was an opportunity to solve a huge structural dilemma faced by the oil and gas industry. As old wells run dry, dwindling profits can no longer cover the expense of their own cleanup. Based on its own data, the ECMC found that $140,000 would cover the cost in most instances – a huge price tag for restoring an individual well. Unless companies are forced to set that money aside in advance, they have little incentive to do the work when that enormous bill comes due.
Until their boreholes are stopped up with enormous concrete plugs, old wells can continue to leak methane, a potent, combustible greenhouse gas. They can also continue to leach dangerous chemicals such as benzene, a component of crude oil with well-established links to blood cancers. Even after plugging, extensive remediation efforts are often needed before operators can begin reclamation, the final stage of land and habitat restoration.
But while plugging gets by far the most attention – thanks to acute climate impacts and dangerous accidents linked to unplugged wells – the work doesn’t stop there. On-site remediation and reclamation are actually the most expensive and demanding part of the job.
“The restoration activities can be two times your plugging cost depending on the impact,” said Curtis Shuck, a longtime oil and gas industry veteran who today works on orphan well cleanup through his non-profit, the Well Done Foundation. “It’s a whole other thing to remediate the site. If there’s contamination found, good grief.”
Historically, the biggest, most financially secure operators have found ways to offload these mounting liabilities at the last moment – reaping lucrative fossil profits for years, then dodging costs on the back end. Before SB-181, Colorado oil and gas companies now owned by Chevron, Oxy and Civitas all transferred dying wells to smaller operators. While the transfers were lawful, those wells ended up in the hands of companies that declared bankruptcy or otherwise threatened to saddle taxpayers with the expense.
SB-181 gave the ECMC an opportunity to make industry pay part of its bill upfront. Susan Speece, a biologist and former Penn State chancellor who moved to Broomfield, Colorado, in retirement – and whose home sits just feet from a Civitas well pad – was among those who advocated for strong financial protections during the rulemaking process.
“As a community surrounded by literally hundreds of wells … we are critically aware of the health risks we face,” she said in February 2022 testimony before the commission. “While the state currently has some bonded money from operators, there is significantly less than the estimated $8bn it would cost to clean up all wells.”
The ECMC’s initial draft rules attached a large bond to each and every well, which could have raised $3bn in cleanup funding for the state. But industry fought that approach intensely.
“In our view, there is no real crisis,” an attorney representing the American Petroleum Institute (API) told commissioners in one 2021 hearing. “Virtually all operators in Colorado are acting responsibly.” The API represents Chevron and its subsidiary Noble Energy, as well as Oxy, according to its current members page. Chevron also employed a lobbyist specifically focused on well cleanup rules in July 2020, just as it was working to buy Noble – an acquisition that would bring thousands of plugged wells with unfinished cleanup work on to its books.
The ECMC’s Brown said the agency routinely consults stakeholders, including corporations, who seek clarity on rule changes, though he said removing plugged wells from the financial assurance process “was not the result of special treatment provided to any individual operator or company”.
A Chevron spokesperson declined to say whether the company discussed bonding for its many plugged wells with the ECMC.
Ultimately, the ECMC settled for an approach based on overall production levels. Companies with healthy, high-producing wells can skate by with generous bonding terms, securing their wells for as little as $1,500 apiece. But as production falls across an operator’s portfolio, the amount of bonding owed quickly rises. A company can only have so many low-producing wells before serious penalties kick in, and wells over the allowable threshold, state rules dictate, are bonded for as much as $140,000 each – enough, on average, to cover the entire cost of cleanup.
In theory, this prevents the public from ever needing to foot the bill. And some advocates were satisfied. “Colorado has pretty much solved its orphan well problem, and kudos to them,” Adam Peltz, an Environmental Defense Fund researcher, told the Washington Post in 2022. “The rest of the country needs to do it now, too.”
A disappearing act
In the wake of the hearings, Colorado’s hundreds of oil and gas operators began tallying their new financial assurance bills. Then, in a virtual meeting with industry on 30 August 2022, ECMC staff proposed something unusual: if a well had been plugged already, companies could simply remove it from their calculations, even though cleanup requirements still hadn’t been met.
This seemed to directly contradict the ECMC’s final rules, which state that “all wells” – plugged or unplugged, without exception – must be covered by financial assurance until remediation and reclamation are complete.
In one fell swoop, the ECMC removed a critical incentive to tackle the dirtiest, most expensive part of the process. And that primarily benefited Chevron, Oxy and Civitas. Factoring those companies’ 14,611 dead wells into the process could have resulted in bonds totaling over $1.3bn, our analysis found.
Instead, the ECMC has collected just $146m in bonds to plug wells from the Big Three since SB-181’s 2022 enactment. That amount, which also covers the companies’ roughly 12,000 actively producing wells, only represents 7% of their total cleanup costs, according to our conservative estimate.
“No state requires operators to fully pre-fund every possible future cleanup cost all at once,” the ECMC’s Brown said by email, emphasizing the need to maintain flexibility for operators. But this investigation arrived at the $1.3bn figure simply by following the ECMC’s own bonding rules for the riskiest sites, an approach that still includes numerous discounts and exceptions for industry.
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