demonstrate that it met a 2% usage target for calendar year 2026; for each year thereafter, the operator would demonstrate its average compliance equaled or exceeded the 4% usage target across all wells for the entire four-year compliance period to date. In the event an operator does not meet the minimum usage requirement in any Annual Certification, it must file with the Commission a compliance plan that outlines further steps the operator intends to take in order to achieve the minimum usage target by the end of the compliance period. Form 47 – Quarterly Water Use Reports. The content required in Form 47, which operators must submit on a quarterly basis, is driven directly by statutory amendments from H.B. 23-1242. In these filings, an operator must provide a detailed report of its water usage, for each Oil and Gas Location ( i.e. , for each well pad), including but not limited to: (i) the sources and volume of fresh water used by the operator at the location; (ii) the sources, types, and volumes of all Recycled Produced Water and Alternatives used by the operator at the location; (iii) the methods and amounts of Produced Water and Recycled Produced Water Alternatives disposed of by the operator at the location; and (iv) the total volume of all water used at the location in each month of the preceding quarter. 2 C.C.R. 404-1-431.e.(1); see also C.R.S. § 34- 60-134(3). Each Form 47 must also contain similar volumetric data reported on a basin-wide basis, and if applicable, must contain information regarding the creation and/or transfer of Credits earned by the operator during the quarter, and during the applicable four-year compliance period. See 2 C.C.R. 404-1-431.e.(2). Other Reporting Changes. The Rules also impose several other changes to the ECMC’s reporting requirements, including Form 7’s report of monthly downhole water usage and disposal or treatment practices for each well. Each operator must also report total fluids and water types used in drilling operations and well stimulation on each Form 5 (Drilling Completion Report) and Form 5A (Completed Interval Report) that the operator files. See 2 C.C.R. 404-1-431.a., -431.b.
Produced Water Credit System Incentives Continued Improvement
One major highlight of the Rules is the potential to earn tradeable Credits for exceeding the minimum standards in a compliance period. In that event, an operator can claim Credits for the total volume of Recycled Produced Water and/or Alternatives used in excess of what was necessary to meet the minimum threshold for that compliance period. See 2 C.C.R. 404-1-905.c.(6)(C). The creation of a Credit must be identified on the new Form 47, or on an operator’s Annual Certification. See id at 905.c.(6) (C)(i). All water volumes reported under the Rules must be expressed in Barrels; with respect to the credit system, one Credit earned or used is equal to one barrel of water used in excess of or toward satisfaction of the applicable percentage standard for the compliance period. See 2 C.C.R. 404-1- 905.c(6)(C). These Credits may be traded to third party operators in the marketplace, encouraging continued commitment to recycling and reuse by operators that are well above the compliance minimum; provided, however, Credits may be traded and applied only within the same geologic basin and may be held only by approved “Operators” in the state (there being no avenue for ‘credit-trading’ entities to enter the market). See id at 905.c.(6)(C)(ii) . Any transfer of Credits must be reported to the Commission within ten (10) days of the transfer by filing the new Form 48. See id. The Credit system is intended to bring flexibility to compliance and incentivize continued improvement of recycling practices beyond meeting minimum targets. It does, however, carry certain notable limitations. For example, Credits are subject to expiration – when an operator seeks to utilize Credits that it created, or acquired by trade, to meet its compliance targets, it must apply those Credits within the same four-year compliance period as they were created, or within the first two years of the ensuing period. See id at 905.c.(6)(C)(i).
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N at i onal A ssociation of D i v i s i on O rder A nalys t s
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