Colorado Oil and Gas Conservation Commission Bond

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Colorado Oil and Gas Conservation Commission Bond – Form 3 – Gas Facilities – Rule 711
Colorado Oil and Gas Conservation Commission Bond – Form 3 – Inactive Wells – Rule 706
Colorado Oil and Gas Conservation Commission Bond – Form 3 – Plugging – Rule 706
Colorado Oil and Gas Conservation Commission Bond – Form 3 – Produced Water Transfer System – Rule 711
Colorado Oil and Gas Conservation Commission Bond – Form 3 – Surface – Rule 703 Bond

Introduction

The Colorado Oil and Gas Conservation Commission (COGCC)—now operating as the Colorado Energy and Carbon Management Commission (ECMC)—is the state agency responsible for regulating oil and gas development in Colorado. Its mission is to protect public health, safety, the environment, and wildlife resources while overseeing all aspects of drilling, production, reclamation, and plugging of wells. The Commission enforces compliance through rules, permitting, inspections, and financial assurance requirements such as Form 3 surety bonds.

Explanation: Colorado Oil and Gas Conservation Commission Bond

Here is a clear explanation of the key bond types required by the Colorado Energy and Carbon Management Commission (ECMC) (formerly the Colorado Oil and Gas Conservation Commission, or COGCC) as referenced in Rules 703, 706, and 711—all of which are documented in Form 3: Financial Assurance filings.

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What is Form 3?

Form 3 – Oil and Gas Operator Financial Assurance is the official ECMC filing used to:

Submit or update financial assurance documentation
Indicate bonding coverage per applicable rules (703, 706, 711)
Include blanket or well-specific bonding
Required for new operators, transfers, or changes in financial status

Colorado Oil and Gas Conservation Commission – Form 3 Bond Types

Rule 703 Bond – Surface Use/Access (Surface Bond)

- Purpose: Ensures the operator will comply with surface land use agreements, including restoring surface conditions after drilling or operations.
- Required For: Operators drilling on land not owned by them or without a comprehensive surface use agreement.

Rule 706 Bond – Plugging & Inactive Well Financial Assurance (IWFA)

- Plugging Bond
  - Purpose: Guarantees the operator will properly plug and abandon a well in compliance with ECMC rules.
  - Required For: All wells, especially prior to transfer, or if plugging responsibilities are triggered.
- Inactive Wells Bond (IWFA)
  - Purpose: Ensures operators set aside funds for wells that are inactive for extended periods and not yet plugged.
  - Applies When: Operators maintain inactive status for certain wells beyond allowed timeframes.

Rule 711 Bond – Gas Facilities & Produced Water Transfer Systems

- Gas Facility Bond
  - Purpose: Provides financial assurance for midstream natural gas facilities such as processing plants or compressor stations.
  - Required For: Operators who own or operate facilities used in gathering, compressing, or processing gas.
- Produced Water Transfer System (PWTS) Bond
  - Purpose: Covers produced water pipelines and transfer infrastructure, ensuring proper operation, maintenance, and closure.
  - Required For: Operators transporting produced water beyond lease boundaries or across public/private land.

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Process of Getting the Colorado Oil and Gas Conservation Commission Bond

Step 1: Identify Required Bond Types

Determine which ECMC bonding rules apply to your operations:

- Rule 703 – Surface Bond (for access to non-owned land)
- Rule 706 – Plugging Bond and Inactive Wells Bond
- Rule 711 – Gas Facilities and Produced Water Transfer System (PWTS) Bonds

Step 2: Calculate Bond Amounts

- Use ECMC guidance to determine required coverage amounts.

Step 3: Secure the Bond

- Contact a Colorado-authorized surety company to obtain Surety Bond.

Step 4: Complete ECMC Form 3 – Financial Assurance Form

- Download and fill out Form 3 from the ECMC site.

Step 5: Submit Form 3 and Bond to ECMC

- Submit via ECMC eForms portal, or
- Email/mail to the ECMC Financial Assurance Team (as listed on Form 3)

Conclusion

The Colorado Oil and Gas Conservation Commission (COGCC) Bond is a vital financial assurance tool that ensures oil and gas operators comply with state regulations for well operation, plugging, reclamation, and environmental protection. Required under ECMC rules and documented through Form 3, these bonds safeguard public resources and hold operators accountable for responsible energy development across Colorado.

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Frequently Asked Questions (FAQs)

Can one bond cover multiple sites or wells?

Yes. Operators may use blanket bonds to cover multiple wells or facilities, subject to ECMC approval and minimum financial thresholds.

What happens if an operator fails to maintain a valid bond?

Failure to maintain proper bonding may result in permit suspension, enforcement actions, or the state using the bond funds to complete plugging or reclamation.

How often must the bond be renewed or reviewed?

Bonds must be kept current throughout the life of operations. ECMC may require annual updates or adjustments if the operator’s activities or well inventory changes.

Can bond coverage be transferred when selling or assigning a well?

No. Bonds are not transferable. The new operator must submit a new Form 3 and provide their own financial assurance as a condition of ECMC approval for the transfer.

Can the ECMC call a bond if the operator files for bankruptcy?

Yes. In the event of operator insolvency or bankruptcy, ECMC may call the bond to secure funds for plugging, abandonment, or environmental remediation.

What if the bond amount exceeds actual reclamation costs?

Any unused bond funds remain with the surety or financial institution unless called upon by ECMC. Operators are not reimbursed unless the bond is specifically a cash deposit and the site is closed in good standing.

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