May 5, 2017
On May 2, 2017, the Colorado Oil and Gas Conservation Commission (“COGCC”) issued a Notice to Operators (“NTO”) regarding the inspection, identification, and abandonment of certain flowlines and pipelines. By its terms, the NTO goes beyond existing COGCC Rules to require operators to inspect and report on all flowlines and pipelines within 1,000 feet of a building unit and if a line is active to confirm its integrity. Operators also must ensure that all flowlines and pipelines are properly abandoned regardless of building unit proximity. Prompt action is required, with 30 and 60 day deadlines imposed. The COGCC issued the NTO at the direction of Governor John Hickenlooper who called for a statewide review of existing oil and gas operations in response to a home explosion that killed two persons and critically injured another.
The NTO creates a two-phase process to systematically inspect, inventory and abandon certain flowlines and pipelines. Operators must complete Phase 1 by May 30, 2017 and Phase 2 by June 30, 2017.
Phase 1 – Inspection and Inventory
Phase 1 of the NTO requires that operators inspect all existing flowlines and pipelines located within 1,000 feet of a building unit (residence or commercial facility). Flowlines, as used in the NTO, are broadly defined as “any conduit for gas, oil, condensate, or other liquid or gaseous hydrocarbons” that meet the regulatory definition of flowlines. The NTO notes that flowlines may be known by different names, such as a “well site flowline, return line, sales line, dump line, process piping, fuel gas supply line, and non-well site flowline.”
The operator must also provide the COGCC with inventory and location data for all such flowlines and pipelines, including the API and location ID numbers of any associated well or tank battery, the GPS location for each endpoint of any flowline, and its current status (active or scheduled for abandonment). Regardless of the distance to a building unit, operators are required to inspect and verify that any existing flowline or pipeline not in use is abandoned pursuant to Rule 1103 and that it is clearly marked and capped and all operating valves are removed until it is abandoned.
Phase 2 – Integrity Verification and Abandonment
Phase 2 of the NTO requires operators to verify and document that all flowlines within 1,000 feet of a building unit have integrity. The exemption from pressure testing requirements under Rule 1101.e.(2) for low pressure flowlines (less than 15 psig) does not apply and all flowlines must be tested regardless of operating pressure. An operator may satisfy this requirement if it has a documented integrity test completed after November 1, 2016. Phase 2 of the NTO also requires operators to complete the process of abandoning all flowlines or pipelines not actively operated, regardless of distance to a building unit. An operator must use signage, lock-out/tag-out procedures, and fencing to avoid unintentional reactivation when a flowline or pipeline is undergoing abandonment pursuant to Rules 604.c.(2)M. and 605.c.(3).
The NTO provides several acceptable methods of abandonment. The COGCC’s recommended practice for flowlines and pipelines within 1,000 feet of a building unit is removal of the entire line. Alternatively, an operator may fill the abandoned pipe with backfill material such as sand or controlled density fill (cement). These methods are in addition to Rule 1103, which requires the operator to disconnect the line from the wellhead, tanks and other sources, purge the line, and cut off and permanently seal the line below ground. Once complete the operator must notify the COGCC and local government of the abandonment.
If an operator desires to change the status of an inactive flowline or pipeline to active, it must do so prior to June 30, 2017. The operator must also provide the COGCC with the line’s associated well API number and tank battery location ID number, GPS location information, and regardless of the operating pressure perform a pressure test as otherwise required by Rule 1101.e.(1).
The Notice to Operators is available here.
The NTO raises several questions for operators, which will likely be addressed through further clarification. One question concerns its scope, as it variously refers to “Flowlines,” to “Flowlines and pipelines,” and to “Flowlines or pipelines.” The pipeline references suggest that the NTO encompasses more than flowlines, but the COGCC has indicated that the NTO is limited to flowlines as defined in the 100 Series Rules. A similar issue is whether the NTO applies to flowlines that don’t convey hydrocarbons. Although the NTO defines flowlines as lines that transport “liquid or gaseous hydrocarbons,” the COGCC has indicated that the NTO applies to all flowlines including those that transport water.
Another question involves differences between the NTO and existing COGCC regulations. For example, Rule 1101.e.(2), exempts low pressure flowlines from pressure testing requirements, but the NTO eliminates this exemption for the testing it requires. Similarly, the NTO requires that flowlines not in use be marked and abandoned, which exceed the current requirements under Rule 1103, and it authorizes abandonment using methods that are not mentioned in Rule 1103. These and other differences suggest that the COGCC may follow the NTO with rulemaking on this subject.
A third question contains the enforceability of the NTO. Although the NTO uses mandatory language, it is probably not legally enforceable because it appears to be a rule of general application and the COGCC did not comply with the Administrative Procedure Act in issuing it. Nevertheless, the oil and gas industry has already indicated that it will comply with the NTO due to the paramount importance of public safety as recognized by Governor Hickenlooper in his accompanying directive.
Directing a Response to the NTO
As with any administrative directive, the NTO requires action be taken by operators in a very short period of time. It effectively requires the conduct of company-specific investigations and evaluations of “flowlines and pipelines” in proximity to occupied buildings. As with most regulatory compliance investigations, some care and thought is warranted in structuring such an effort so as to protect the company’s interests and preserve the privileged and confidential character of various communications made and documents created or possibly produced in response. This is primarily accomplished by involving in-house and outside legal counsel to direct the investigation and help prepare the response(s), and carefully controlling the scope of personnel involved in the effort within the respondent company. To the extent outside consultants and contractors are involved in the effort, it may also affect how and on what terms they are engaged, including possibly being engaged by outside counsel. Finally, the proprietary nature of Land Department information that is called for in response to the NTO may be the subject of a claim of business confidentiality under the Colorado Open Records Act, to protect it from public disclosure by the COGCC. Operators may wish to claim such status for portions of their responses to the NTO.
If you or your company have any questions regarding the NTO, please contact Dave Neslin, John Jacus, Randy Dann, or Greg Nibert.