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Going with the Flow: Colorado Audit Program Ups the Ante on Flowline Compliance

June 18, 2015

The Colorado Oil and Gas Conservation Commission (Commission) recently published an updated Rules 1101 and 1102: Flowline Guidance (Guidance)1 confirming the agency's intent to begin random audits of operators' flowline integrity records in 2016 to determine compliance with applicable Commission flowline regulations for the 2015 calendar-year. These audits will continue indefinitely thereafter. The Commission's focused oversight of flowlines will impact oil and gas operators via potential increased enforcement and penalties for any non-compliance with the Commission's rules governing flowlines.

The Guidance also details an alternative method for complying with flowline integrity testing requirements and provides recommended best practices for flowline installation and integrity testing. Flowlines are broadly defined in the Commission's 100-Series Rules as “those segments of pipe from the wellhead downstream through the production facilities ending at: in the case of gas lines, the gas metering equipment; or in the case of oil lines the oil loading point or LACT unit; or in the case of water lines, the water loading point, the point of discharge to a pit, the injection wellhead, or the permitted surface water discharge point.”

The Guidance responds to the Commission's February 1, 2014 report titled Risk-Based Inspections: Strategies to Address Environmental Risk Associated with Oil and Gas Operations (Risk-Based Inspections Report) which identified equipment failures, including pipeline failures, as a significant source of spills. The Risk-Based Inspections Report presents an evaluation of 1,638 spill reports and Commission staff interviews and concludes that spills are more likely to occur from equipment (process piping, pipelines, tanks, and valves) failures during the production phase of oil and gas development.