A recent report from Greenwire points out weak state regulation of the oil and gas industry. In particular, the article looks at regulation in Colorado. According to the article, the Colorado regulators have ignored serious violations of the law. In one 2004 case, a company was not penalized even though it allowed an untrained rig crew to work on a well, leading to an explosion that knocked a house partially off its foundation.
Since that incident, Colorado has had a change in administration. But the problems there continue. In 2008, a county official witnessed a violation when a pit was buried on private land, and filed a complaint with the state. Although the state agency inspector took samples, results were never provided and there is no listing of the complaint in agency records. Testing conducted by the landowner found petroleum residues on the site and the landowner is now suing the company.
A 2011 Colorado article reports that Colorado state regulators are issuing violation notices, but the violations are extensive and the penalties are minimal. For example, the state has recently imposed: a $420,000 fine on Dolphin Energy Corporation for 42 violations; a $100,000 fine on Tatonka Oil and Gas Co. Inc. for 10 violations; a $380,000 fine on S&S Oil & Gas Operating for 34 violations; and a $940,000 fine against West Hawk Energy (USA) LLC for 90 rule violations. Violations include wells not properly plugged, chemical spills, and poorly constructed pits.
The fact that there are so many violations per company is alarming. Why were companies allowed to violate the law so many times before being caught and penalized? And the average fine per violation is very small for oil and gas companies that spend millions of dollars to drill one well--not enough to force companies to change their practices. There is promising news according to this article, however, which reports that Colorado regulators are blacklisting some companies from future operations in the state "until they pay their fines and clear things up with regulators." Shutting down operations and banning companies from a state is the only penalty that will force companies to clean up their act. It is a tool that should be used more often.