Energy And Carbon Management Regulation In Colorado

Effective July 1, 2023, the act changes the name of the oil and gas conservation commission to the energy and carbon management commission (commission) and expands the commission's regulatory authority to include the authority to regulate a broader scope of energy and carbon management areas beyond oil and gas. The act also changes the name of the oil and gas conservation and environmental response fund to the energy and carbon management cash fund (fund) and allows the fund to also be used by the commission for the purposes of administering the expanded regulatory areas.

Section 3 of the act requires the commission to create and maintain a website that serves as the state portal for information and data regarding the commission's regulatory activities.

Current law states that the property right to the natural heat of the earth (geothermal resource) that lacks sufficient fluid associated with the geothermal resource (geothermal fluid) to transport commercial amounts of energy to the surface is an incident of ownership of the overlying surface unless expressly severed. Section 7 states that, as to property rights acquired on or after July 1, 2023, the property right to a geothermal resource associated with nontributary groundwater (allocated geothermal resource) is also an incident of ownership of the overlying surface unless expressly severed.

Current law requires the operator of a well, prior to constructing the well to explore for or produce geothermal resources, to obtain a permit from the state engineer. Section 8 bifurcates regulation of different types of geothermal operations between the commission and the state engineer. Specifically, the commission is granted the exclusive authority to regulate operations (deep geothermal operations) for the exploration for or production of:

• An allocated geothermal resource; or
• A geothermal resource that is deeper than 2,500 feet below the surface.

The state engineer retains the exclusive authority to regulate operations that are not deep geothermal operations (shallow geothermal operations).

Prior to obtaining a permit from the commission to construct a well for deep geothermal operations, the applicant must provide evidence of any applicable siting application to the local government with jurisdiction over the deep geothermal operations, including the disposition of the application, unless the local government does not regulate the siting of such operations. Upon request by a local government, the commission is also required to provide technical support to the local government concerning implementation of the commission's rules regarding deep geothermal operations.

The commission and the state engineer may each adopt rules for the assessment of fees for the processing and granting of a permit to construct a well for deep geothermal operations or shallow geothermal operations, as applicable. Any fees collected by the commission will be deposited by the state treasurer into the fund.

Current law requires the operator of a well, prior to the production of geothermal fluid from the well, to obtain a permit from the state engineer. Section 9:

• Bifurcates the issuance of different types of use permits by the state engineer between permits for the use of geothermal resources that are not allocated resources and permits for the use of allocated geothermal resources (collectively, use permits); and
• Requires the state engineer to only issue a use permit for allocated geothermal resources after a determination that any associated geothermal fluid is nontributary groundwater (nontributary determination).

Section 9 also allows the state engineer to adopt rules for the administration of use permits and the issuance of nontributary determinations.

Current law allows the state engineer to adopt procedures that establish geothermal management districts for the management of geothermal operations within the district. Section 10 limits the scope of geothermal management districts to distributed geothermal resources. The state engineer is also required to notify the commission of any application for a geothermal management district that is anticipated to affect deep geothermal operations.

Section 11 allows the commission to adopt procedures by rule to establish geothermal resource units for allocated geothermal resources.

Section 13 grants the commission the exclusive authority to regulate any intrastate facility that stores natural gas in an underground facility not subject to regulation by the public utilities commission (UNGS facility). If the commission submits a certification to, or enters into an agreement with, the federal secretary of transportation pursuant to applicable federal law, any rules regulating UNGS facilities must be at least as stringent as the applicable federal requirements.

If a UNGS facility is proposed to be sited in an area that would affect a disproportionately impacted community, the commission must evaluate and address impacts from the UNGS facility. The commission may assess and collect fees from operators of UNGS facilities in an amount and frequency determined by the commission by rule. Any fees collected will be deposited into the fund. Before commencing construction of a new UNGS facility, the operator of the facility must provide evidence of any applicable siting application to a local government with jurisdiction over the UNGS facility, if applicable, and the disposition of the application.

The act directs the commission to conduct and report to the general assembly during the 2025 legislative session the findings of the following studies:

• A technical study of the state's geothermal resources (section 11);
• A study, in collaboration with the state engineer, that evaluates the state regulatory structure for geothermal resources and whether any changes to law or rules are necessary (section 11);
• A study concerning the regulation and permitting of underground hydrogen operations (section 19); and
• A study, in coordination with the public utilities commission, examining the siting and regulation of intrastate pipelines (section 19).

For the 2023-24 state fiscal year, section 43 appropriates $1,200,480 from the fund to the department of natural resources (department) to be used as follows:

• $1,108,857 for use by the commission for program costs;
• $7,031, which amount is reappropriated for use by the division of water resources in the department for water administration related to division operations; and
• $84,592, which amount is reappropriated to the department of law to provide legal services for the department.

APPROVED by Governor May 22, 2023

EFFECTIVE July 1, 2023
(Note: This summary applies to this bill as enacted.)