One operator with 3,200 missing production reports faced no enforcement. Another reported producing gas for four years but paid zero conservation levies. State auditors found the same failures they documented in 2020 and 2021 audits, despite agency promises of fixes.
Colorado’s Energy & Carbon Management Commission (ECMC) cannot determine which oil and gas wells are leaking, producing, or threatening public safety because the agency repeatedly fails to enforce basic reporting requirements. State auditors examining 2023 operations found the pattern in a November 2025 performance audit.
The audit—mandated by legislation after two previous audits found identical problems—documented 8,772 missing production reports from 134 operators that received no enforcement action. ECMC’s tracking system missed 4,436 of those reports. The agency accepted 32,391 errors in submitted reports without requiring corrections.
ECMC failed to collect at least $190,844 in conservation levies from operators who reported selling oil and gas but paid no fees. State law requires ECMC to regulate oil and gas development “in a manner that protects public health, safety, and welfare, including protection of the environment and wildlife resources.”
The agency must collect monthly production reports from all operators showing well status, geological formations, volumes produced and sold, and safety data. Reports are due 45 days after month-end. Operators who fail to submit reports face penalties up to $15,000 per violation per day.
The audit examined all 260 operators active in 2023. ECMC approved 674,000 production reports but auditors identified 8,772 missing reports from 134 operators. ECMC’s own tracking system missed 4,436 of those reports and incorrectly listed 37 received reports as missing.
Auditors found ECMC accepted 32,391 errors across 32,003 production reports—4.7 percent of all submissions—without requiring corrections. One operator submitted four reports showing end-of-month oil inventory 1,134 barrels lower than beginning-of-month inventory the following month. Another over-reported July 2023 production by 1,104 barrels of oil and 30,540 MCF of gas due to duplication errors ECMC’s validation system failed to catch.
ECMC accepted 22,824 production reports for wells already plugged and abandoned, some since 2014. One of those wells had been reported as plugged since September 2021 but an operator submitted a production report in April 2023 showing 76 barrels of oil produced and sold.
ECMC did not pursue conservation levies—quarterly fees based on oil and gas sales that fund agency operations—from 70 operators who reported selling 1.7 million barrels of oil and 310 million MCF of gas in 2023. Using federal price data, auditors estimated at least $190,844 in lost oil revenue alone. The amount lost from gas sales could not be calculated due to lack of pricing data, but the unreported volume represents 15 percent of all gas sold statewide in 2023.
One operator reported producing 6,600 MCF of gas from 2019 through 2023 but paid zero conservation levies across all four years. ECMC took no enforcement action.
State auditors first documented ECMC’s enforcement failures in a January 2020 audit that found 66 percent of operators hadn’t submitted required reports and 10 percent submitted incomplete reports between 2016 and 2018. ECMC imposed no penalties. The agency claimed in July 2020 it had fixed the problems.
A September 2021 audit found ECMC still couldn’t distinguish between operators who never submitted reports and those whose submissions contained errors. The distinction matters: operators who never file deserve stronger enforcement than operators trying to comply but making mistakes. In August 2022, ECMC said it had modified systems to make this distinction and staff were using the information “to take enforcement action against operators that had never submitted the required reports.”
The November 2025 audit found ECMC made the system changes but never trained staff to use them. “Current staff were never trained on how to use” the 2021 improvements “due to staff turnover,” according to ECMC’s response. Staff continued manually reviewing reports “and rely on their knowledge of operators to determine which production reports might truly be missing.”
ECMC blamed a 1999 database system but accepted all 12 new audit recommendations with implementation dates extending to December 2027—seven years after the first audit identified the problems.
State law requires ECMC to issue written notice when it has “reasonable cause to believe a violation” occurred and assess penalties up to $15,000 per violation per day. ECMC’s own enforcement policy sets production report fines at $200 per day per well, with violations beginning 46 days after month-end.
In 2023, ECMC assessed $6.3 million in penalties against 50 operators but only $200,000 related to production reporting failures. The agency issued 99 Notices of Alleged Violation that year but only two cited production reporting violations. Neither addressed the 134 operators with missing 2023 reports.
As of October 2025, ECMC has collected only $1.2 million of the $6.3 million assessed. ECMC told auditors it doesn’t typically issue violations solely for missing reports and uses staff discretion on whether to add reporting violations to enforcement actions for other problems. Auditors noted this discretion conflicts with statutory language requiring written notice for violations.
The Colorado Department of Public Health and Environment cannot determine if oil and gas operators submitted all required emissions data because the agency lacks a systematic process for identifying which operators should report. Without complete data, the state cannot verify it’s meeting greenhouse gas reduction goals established in state law.
Auditors examined 30 operators in detail. Fourteen filed no emissions data with CDPHE for 2023 despite reporting production of 26,000 barrels of oil and 24 million MCF of gas to ECMC. Another seven submitted incomplete emissions data covering only some facilities.
The gap stems from incompatible systems. Operators file production reports with ECMC by individual well. Owners or operators file facility-level emissions reports with CDPHE. A single facility may contain multiple wells or no wells. Ownership structures mean the entity reporting to ECMC often differs from the entity reporting to CDPHE.
CDPHE has assessed zero penalties for missing emissions reports as of April 2025. The agency told auditors it prioritizes education over enforcement while implementing reporting requirements adopted in 2021.
Colorado’s 50,000 oil and gas wells produced 167 million barrels of oil and 2.1 billion MCF of gas in 2023. Most production occurs in Weld, Garfield, Rio Blanco, and La Plata counties—all rural areas where oil and gas operations sit near homes, schools, and water sources.
When ECMC fails to collect production reports, rural communities cannot verify whether nearby wells undergo required safety testing. When operators skip conservation levy payments, the agency loses funding for environmental monitoring in drilling areas. When CDPHE lacks emissions data, counties with heavy production cannot track whether air quality is improving or worsening.
The production reporting system serves purposes beyond ECMC oversight. The agency uses reports to verify operators conduct required mechanical integrity tests checking for leaks. CDPHE uses production data to identify operators required to submit emissions data. The Department of Revenue uses reports to cross-check severance tax filings and select audit targets.
The cascade of missing data means DOR cannot verify whether operators accurately report production volumes for tax purposes. CDPHE cannot identify which facilities should submit emissions reports. ECMC cannot determine which wells need mechanical integrity testing.
The cascade of missing data means DOR cannot verify whether operators accurately report production volumes for tax purposes. CDPHE cannot identify which facilities should submit emissions reports. ECMC cannot determine which wells need mechanical integrity testing.
House Bill 22-1361, passed in 2022 after the second audit documented continued failures, mandated the current audit to “identify opportunities to improve interagency communication, leading to increased transparency and public confidence in the reporting process.” The legislation presumed interagency communication problems caused the failures.
The November 2025 audit revealed a different problem. ECMC made promised system changes after the 2021 audit but never trained staff to use them. The agency blamed a database from 1999 but set implementation dates for fixes that extend to December 2027. Three audits, three sets of promises, seven years between identification and planned correction.
The pattern suggests audit processes themselves may be insufficient when agencies face no consequences for ignoring findings. ECMC collected only $1.2 million of $6.3 million in assessed penalties, used discretion to avoid citing reporting violations despite statutory requirements, and told auditors limited resources prevent enforcement—while operators skipped 8,772 required reports and $190,844 in fees without penalty. The rural counties where production occurs bear the cost of a regulatory system that documents its own failures but lacks mechanisms to compel correction.
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