The agencies responsible for regulating Colorado’s oil and gas industry are underperforming when it comes to reporting and enforcement and they also failed to collect payments amounting to hundreds of thousands of dollars in lost revenue, according to a state audit.

The Office of the State Auditor reviewed 2023 data on oil and gas production reports, conservation levels, emissions, severance taxes, and related penalties across three agencies – the Department of Natural Resource’s Energy and Carbon Management Commission (ECMC), the Colorado Department of Public Health and Environment (CDPHE), and the Department of Revenue – to determine whether agencies are collaborating and providing transparent reporting.

The audit showed there were 260 oil and gas operators in Colorado in 2023.

While the carbon commission collected about 674,000 production reports from those operators, about 8,700 reports were never submitted, the audit said, adding the body also failed to issue penalties to 134 operators that did not submit required reports.

“When ECMC does not collect all oil and gas production reports, or consistently take enforcement action against operators that fail to submit them, the State cannot ensure operators are following applicable laws and rules, and may not know if a well is producing or needs to be tested for leaks,” OSA said.

The commission also failed to collect nearly 250 conservation levy payments from 70 operators for oil and gas they sold, and it did not take enforcement action against those who failed to pay their levies. According to the auditors’ estimate, this resulted nearly $200,000 in lost revenue from oil sales alone.

Auditors were unable to estimate the amount for gas sales.

The agency also found discrepancies between the Department of Revenue’s severance tax data and ECMC’s production data due to the agencies collecting information from different entities.

Over half of all sampled oil and gas operators did not submit any emissions data to the health agency in 2023, despite filing the same data with ECMC.

An additional seven operators submitted incomplete data to the health department. However, none of the operators was penalized for failing to submit proper emissions data. According to the state auditor, insufficient data from the state health agency means the state cannot accurately determine if it’s meeting its greenhouse gas reduction goals.

“The State has an incomplete picture of oil and gas production, emissions, and severance taxes,” said Audit Manager Derek Johnson. “To address this, agencies would need to change reporting requirements for the oil and gas industry, and improve agency processes for collecting the data.”

The report made 12 recommendations for agencies to improve oil and gas reporting, data collection, and enforcement, including requiring agencies to collect all required emissions data and production reports, and for the health department to revise its rules related to sharing data with ECMC.

ECMC released a statement following the audit, saying that its director “accepted the audit’s findings and committed to implementing improved best practices.”

According to the commission, the audit found the agency has a 98% compliance rate for the submission of production reports and a 95% accuracy rate for reporting in 2023.

“The audit identified areas of improvement regarding the administrative collection of data from a technology standpoint and the consistency by which ECMC enforces and collects conservation levies,” the agency said. “These findings affirm strategic initiatives to improve data quality, data reporting, and stakeholder usability that have already been underway at ECMC, notably the COGIS Modernization project that moves ECMC’s data from an antiquated (1999) system to a cloud-hosted solution.”