DENVER - Following a competitive application process, Colorado's Energy and Carbon Management Commission (ECMC) announces the recipients of a new grant program for the plugging and abandonment of marginal wells. Thirty operators are receiving reimbursement grants that will lead to the plugging of 142 wells. The grant is made possible by operator fees and federal funds.

These efforts are part of ECMC's Marginal Well Plugging Program aimed at reducing emissions of methane and other pollutants, which are harmful to public health, safety, and the environment. Plugging a well is the process of permanently sealing a well to prevent the release of hydrocarbons and other fluids into the environment. Marginal wells are low-producing oil and gas wells that are usually near their end of life and account for disproportionately high levels of methane emissions relative to production rates. Despite producing relatively small quantities of oil and gas, the cost of plugging these wells can be prohibitive to operators. Marginal wells are often operated at low production rates or left idle for years. They are also at higher risk of becoming orphan wells — wells that are wards of the state because the operator or owner is unknown or unable to effectively plug them.

"Plugging wells and preventing orphan wells is an important way to reduce pollution, improve Colorado's air quality, and make communities safer. Improving air quality helps keep Coloradans and our communities active and healthy, strengthening our high quality of life. Plugging these wells will directly help lower emissions and reduce risks," said Governor Jared Polis.

ECMC used two parallel funding sources to offer reimbursement assistance to operators for the plugging of marginal wells: federal funds from the Methane Emissions Reduction Program (MERP) and state funds paid by operator fees that are collected by the Orphan Well Mitigation Enterprise (OWME). No state of Colorado tax dollars are used.

MERP is funded by the US Inflation Reduction Act and established a partnership between the U.S. Environmental Protection Agency and the Department of Energy. In May 2024, Colorado became one of the 14 states eligible for MERP dollars and received $12.6 million for MCW reimbursement grants. The OWME is funded by collecting a flat annual fee of $115 per well from all oil and gas operators in Colorado. The fees fund the plugging of marginal wells, and generate approximately $5 million annually.

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ECMC facilitated a competitive application process. Any oil and gas operator in Colorado could apply for reimbursement funding. In total, 922 wells were eligible for state funding, and around 8,566 wells were eligible for federal funds. Thirty-three operators applied for funds, and ultimately 30 were awarded grants. Individual applications were ranked and scored by ECMC staff based on parameters such as methane emissions, proximity to disproportionately impacted communities or municipalities, and financial assurance plans.

"We are incredibly proud of the work being done by operators, ECMC staff, and federal agencies to address the negative impacts created by marginal wells," said Commission Chair Jeff Robbins. "By permanently plugging these wells we address an outsized culprit of methane emissions, which are a direct contributor to climate change and adverse to public health."

Field work for the plugging and abandonment of marginal wells will begin this summer. The cost to plug a well varies per location and well and is based on a number of factors. Operators will work with an approved service contractor to perform the work, beginning by capturing pre-plugging methane measurements. ECMC staff will track the status of plugging operations, documenting progress on the Marginal Well Plugging Program (MWPP) page of the ECMC website.

No dollars are allocated to the operator until the Operator satisfies its plugging and abandonment, remediation, and reclamation obligations and reporting requirements in accordance with ECMC's rules and the operator's reimbursement agreement. Each agreement, via the grant process, is estimated prior to the plugging operation. Based on the applications this year, the estimated maximum that could be reimbursed to the 30 operators is $13,970,000 for this grant cycle. ECMC will provide monthly reimbursement status updates online.

ECMC facilitated a competitive application process. Any oil and gas operator in Colorado could apply for reimbursement funding. In total, 922 wells were eligible for state funding, and around 8,566 wells were eligible for federal funds. Thirty-three operators applied for funds, and ultimately 30 were awarded grants. Individual applications were ranked and scored by ECMC staff based on parameters such as methane emissions, proximity to disproportionately impacted communities or municipalities, and financial assurance plans.

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About the Orphan Wells Mitigation Enterprise

The Orphan Wells Mitigation Enterprise is the State of Colorado's independent enterprise that oversees an industry-funded orphan and marginal well program with the highest level of environmental protections. The Enterprise uses fees from the oil and gas industry to plug and abandon orphaned and marginal wells and reclaim related sites. The Enterprise was established by SB22-198 and authority to assess the marginal well fee and plug marginal wells was added by SB24-229, sponsored by Senators Winter and Priola and Representatives Bacon and Willford. The Commission adopted rules implementing SB22-198 in the June 2022 Orphan Wells Mitigation Enterprise Fee Rulemaking.

About the Methane Emissions Reduction Program (MERP)

The Methane Emissions Reduction Program was established by The Inflation Reduction Act, which provided new authorities under Section 136 of the Clean Air Act to reduce methane emissions from the oil and gas sector. The program is a collaboration between the U.S. Department of Energy and Environmental Protection Agency to provide $1.36 billion in financial and technical assistance, including $350 million in formula grants to states to support industry efforts on non-Federal Lands and $850 million in competitive grants. On behalf of the state of Colorado, ECMC was awarded $12.6 million in the first round of MERP funding.

About the ECMC

The mission of the Colorado Energy & Carbon Management Commission (ECMC) is to regulate the development and production of the natural resources of oil and gas, deep geothermal resources, the capture and sequestration of carbon, and the underground storage of natural gas in a manner that protects public health, safety, welfare, the environment and wildlife resources. Visit the ECMC website for more information.

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