Global Accessibility Awareness Day, which falls on May 18, was created to promote digital access for people with disabilities. While great strides have been made under the Americans with Disabilities Act (“ADA”) to ensure physical spaces are accessible, website accessibility has not kept pace. In fact, as of 2023, only 3.7%^[1]
of the internet is fully accessible to people with disabilities. This data indicates that the vast majority of business owners with an online presence do not know that their websites are inaccessible—and, importantly, that their inaccessible websites are driving away customers and potentially violating the law.^[2]

Taking the time to learn about how your company’s website can become digitally accessible not only promotes inclusion for people with disabilities, but also can help your company both increase its profitability and avoid costly litigation. In this article, you will be equipped with the knowledge and resources to ensure that your website is accessible and understand why having an accessible website is so critical. We will cover (1) examples of accessibility barriers on websites; (2) the legal landscape surrounding website accessibility; and (3) ways to ensure that your company’s website is accessible.

A. Website Accessibility and Barriers for Folks with Disabilities

Twenty-six percent of Americans have some form of a disability, including 6.1% of U.S. adults who are deaf or have serious difficulty hearing, and 4.8% of U.S. adults who have a vision disability with blindness or serious difficulty seeing even when wearing glasses.^[3]
In fact, most people reading this article will develop a disability at some point in their life. According to the Joint Center for Housing Studies of Harvard University, “41 percent of older adults aged 65-79 have at least one self-care, household activity, or mobility disability” and for people “80 and over, this share rises to nearly 71 percent.” [4]

Despite the large population of individuals with disabilities, the internet largely remains an inaccessible space. According to the Institute for Disability Research, Policy, and Practice at Utah State University, over 96.3% of websites fail under the prevailing accessibility protocols.[5]

As explained by the World Wide Web Consortium in this video and by the Department of Justice’s ADA website, folks with vision, hearing, and fine motor impairments are most often impacted by website accessibility issues. Common barriers to accessibility on websites include the following design issues:

1. Poor color contrast. People with limited vision or color blindness cannot read the text if there is not enough contrast between the text and background (for example, light gray text on a light-colored background).
2. Lack of text alternatives (“alt text”) on images. People who are blind will not be able to understand the content and purpose of pictures, illustrations, and charts when no text alternative is provided. While screen reading technology can read the other content on the website out loud, the screen reader cannot read images. Text alternatives convey the purpose of an image. For example, alt text that might accompany a picture of a South Carolina beach might say: “Alt Text: Tall grass on a sand dune with the beach and ocean surf in the background on a sunny day.”
3. No captions on videos. People with hearing disabilities may not be able to understand information communicated in a video if the video does not have captions.
4. Inaccessible online forms. People with disabilities may not be able to fill out, understand, and accurately submit forms without things like:
   1. Labels that screen readers can convey to their users (such as text that reads “credit card number” where that number should be entered);
   2. Clear instructions on filling out the forms; and
   3. Error indicators (such as alerts telling the user a form field is missing or incorrect).
5. Mouse-only navigation (lack of keyboard navigation). People with disabilities who cannot use a mouse or trackpad will not be able to access web content if they cannot navigate a website using a keyboard.^[6]

By ensuring that your website does not create these accessibility issues, you can simultaneously support the disabled community and increase your company’s profitability. Websites that are more accessible have better search engine optimization and improved user experience for all individuals who visit your website. Further, failure to make a website accessible can result in lost revenue and customer dissatisfaction.

According to a 2018 article from W3’s Education and Outreach Working Group, “[i]n the US, the annual discretionary spending of people with disabilities is over $200 billion. The global estimate of the disability market is nearly $7 trillion.” When pairing these numbers with the results of a 2019 survey in the United Kingdom revealing that nearly three-quarters of disabled online consumers (69%) will simply click away from websites that they find difficult to use due to the effect of their disability, the monetary impact to inaccessible e-commerce businesses is staggering. That study further revealed that 83% of participants with access needs limit their shopping to sites that they know are accessible, and 86% have chosen to pay more for a product from an accessible website rather than buy the same product for less from a website that was harder to use.

Companies that have inaccessible websites are not only leaving large sums of money on the table – they are also increasing their vulnerability to a costly lawsuit.

B. Legal Requirements for Website Accessibility

In recent years, federal and state laws have required website accessibility for certain businesses and other entities. Therefore, a company’s failure to make its website accessible can result in damages, attorneys’ fees, and injunctive relief that requires the company to make its website accessible.

Title III of the ADA requires that “places of public accommodation”—public-facing businesses that fall within at least one of 12 categories—provide “equal access” to their goods, services, and facilities to individuals with disabilities. While websites are not mentioned anywhere in Title III or its regulations, the Department of Justice, which oversees and enforces the ADA, takes the position that “the ADA’s requirements apply to all the goods, services, privileges, or activities offered by public accommodations, including those offered on the web.”^[7]

Several federal courts have confirmed that certain businesses operating online must ensure that their websites are accessible to individuals with disabilities in order to comply with Title III of the ADA. See, e.g., Robles v. Domino’s Pizza, LLC, 913 F.3d 898 (9th Cir. 2019) (ruling in favor of blind plaintiff where plaintiff could not order pizza because Domino’s failed to design its website to enable screen-reading software to read the website and its order form). Similarly, in recent years, several states, including Colorado, have passed laws to develop and maintain statewide website accessibility standards. For instance, in 2021, Colorado passed a bill requiring state and local governments as well as government agencies to bring their websites into compliance with established accessibility standards to avoid civil penalties. See Colorado HB21-1110 (making it a state civil rights violation for a government entities to exclude people with disabilities from receiving services or benefits because of lack of accessibility on their websites). The influx of laws being passed in this space and the increase in litigation over website accessibility make it clear that companies need to pay attention to web accessibility and the hazards (ethical, financial, and legal) of failing to make their websites accessible.

C. Ensuring Website Accessibility

So, what can your company do to ensure that its website is accessible? Here are some steps you can take to promote compliance with the ADA and the Web Content Accessibility Guidelines 2.1 (“WCAG 2.1”) (the leading web-accessibility standard that several states, including Colorado, have designated as the standard that must be met for regulated entities).

1. Conduct a website accessibility audit. A website accessibility audit can identify accessibility issues and provide a roadmap for compliance. This can be done as a self-audit
   or conducted by a consultant such as Userway. The cost can vary depending on the size and complexity of the website. To quickly check your company’s compliance, you can type your company website URL into this search bar.
2. Use accessible design and development practices. Going forward, when designing and developing your company’s website, you should consult accessible design and development practices as laid out in WCAG 2.1. These include using alternative text for images and videos, ensuring that content is keyboard-accessible, and providing captions and transcripts for audio and video content.
3. Solicit user feedback. In addition to providing accessibility features on your website to make it easier for individuals with disabilities to navigate and use the site, consider soliciting feedback from users to understand where and how your website is not meeting their needs. Users should be able to easily submit accessibility complaints – if your users can’t submit feedback easily via a single attempt, they won’t keep trying.^[8] Check out Google’s accessibility feedback form as an example of how you might format yours.
4. Add an Accessibility Statement to your website. An accessibility statement describes your company’s policy, goals, and accomplishments related to web accessibility. The statement also includes instructions on how to use specific accessibility technology that is available on the website and how to contact the organization if a disabled visitor runs into problems.^[9] As an example of a quality accessibility statement, visit Patagonia’s website and navigate to the bottom of the homepage.

Improving the accessibility of your website not only supports people with disabilities, but can also help you avoid legal exposure and increase profits. By consulting the WCAG 2.1 and ADA guidelines and soliciting feedback from website users, you can work to ensure that your company’s website is accessible to all individuals, regardless of ability.

Should you have a question about the contents of this article please contact Sarah Barr or a Davis Graham Partner.

^[1] https://webaim.org/projects/million/

^[2] https://www.forbes.com/sites/forbestechcouncil/2022/10/11/whats-next-for-digital-accessibility/?sh=1aa7aedd4bbd

^[3] https://www.cdc.gov/ncbddd/disabilityandhealth/infographic-disability-impacts-all.html

[4]www.jchs.harvard.edu/sites/default/files/harvard_jchs_housing_growing_population_2016_chapter_3.pdf

[5] https://webaim.org/projects/million/

^[6] https://www.ada.gov/resources/web-guidance/

^[7] https://www.ada.gov/resources/web-guidance/

^[8] https://www.boia.org/blog/getting-feedback-from-users-to-improve-accessibility

^[9] https://www.boia.org/blog/why-websites-need-an-accessibility-statement

The Federal Register, published on April 3, 2023, includes a proposed rule by the Bureau of Land Management (BLM) to change BLM’s management of public lands significantly by prioritizing conservation and ecosystem resiliency. If finalized, this proposed rule would impact all public land users, including those engaged in conventional and renewable energy development, mining operations, and grazing. BLM is accepting public comment on the proposed rule until June 20, 2023, or until 15 days after the last public meeting, which BLM has yet to announce.

The proposed rule would have two regulatory effects: revise BLM’s existing regulation related to Areas of Critical Environmental Concern (ACECs) at 43 C.F.R. § 1610.7-2 and establish new regulations at 43 C.F.R. Part 6100 titled “Ecosystem Resilience.”

Revisions to BLM’s ACEC Regulation

The Federal Land Policy and Management Act (FLPMA) defines ACECs and directs BLM to give priority to their designation and protection during the land use planning process. The proposed rule would revise BLM’s ACEC regulation at 43 C.F.R. § 1610.7-2 to provide more detail on the process for identifying and designating ACECs. Most notably, the proposed rule would:

• Modify the definitions of “relevance” and “importance” and define the term “special management attention;”
• Require BLM, when revising land use plans, to include an alternative that analyzes all proposed ACECs;
• Establish criteria that limit when BLM can remove an ACEC designation through the land use planning process; and
• Allow BLM, when areas are nominated for designation as ACECs outside of a land use planning process, to manage these areas to protect relevant and important values until BLM completes a planning process.

Ecosystem Resilience Regulations

The proposed rule would establish new regulations at 43 C.F.R. Part 6100 that apply to all BLM programs. The proposed rule is notable in multiple respects because it would:

• Define a host of terms, most notably “unnecessary or undue degradation;”
• Require BLM to manage for conservation;
• Allow BLM to issue conservation leases;
• Require that BLM manage for ecosystem resilience;
• Formalize a framework for compensatory mitigation; and
• Establish fundamentals of land health.

Definitions (§ 6101.4)

The proposed rule would define a host of terms for application across all of BLM’s programs. Many of these terms currently are either undefined or defined only with respect to certain BLM programs. Most notably, the proposed rule would define “unnecessary or undue degradation” as “harm to land resources or values that are not needed to accomplish use goals or is excessive or disproportionate.” The proposed rule would also define “conservation,” “mitigation,” and “protection,” among other terms.

Management for Conservation (§§ 6101.5, 6102.1 to 6102.3-2)

The proposed rule would require BLM to manage for conservation use and bases this direction on FLPMA’s mandate that BLM manages the public lands in accordance with principles of multiple use and sustained yield. The proposed rule notably would:

• Define “conservation” as “maintaining resilient, functioning ecosystems by protecting or restoring natural habitats and ecological functions;”
• Require BLM to consider conservation as a use on par with other uses of the public lands;
• Require BLM, when revising resource management plans (RMPs), to identify and protect “intact landscapes,” which the proposed rule defines as “an unfragmented ecosystem that is free of local conditions that could permanently or significantly disrupt, impair, or degrade the landscape’s structure or ecosystem resilience, and that is large enough to maintain native biological diversity, including viable populations of wide-ranging species;” and
• Prioritize and plan for landscape restoration.

Conservation Leases (§§ 6102.4 to 6102.4-2)

The proposed rule would allow BLM to issue conservation leases. Particularly, the proposed rule would:

• Allow BLM to issue conservation leases over public lands, which would authorize either restoration of public lands or mitigation of impacts; and
• Establish the process to obtain, terms of, and bonds for conservation leases.

Formalized Compensatory Mitigation (§ 6102.5-1)

The proposed rule would attempt to provide a process for BLM to utilize compensatory mitigation to offset impacts from land uses. Particularly, the proposed rule would:

• Direct BLM to require mitigation “to address adverse impacts to important, scarce, or sensitive resources;”
• Allow BLM to use third-party mitigation fund holders to collect, manage, and expend mitigation funds collected by permittees; and
• Establish criteria for approved third-party mitigation fund holders, including state or local government agencies.

Management for Ecosystem Resilience (§ 6102.5)

The proposed rule would require BLM to manage for resilient ecosystems, which the proposed rule defines as “ecosystems that have the capacity to maintain and regain their fundamental structure, processes, and function when altered by environmental stressors such as drought, wildfire, nonnative invasive species, insects, and other disturbances.” The proposed rule notably would require BLM to:

• Avoid authorizing uses of the public lands that would permanently impact ecosystem resilience;
• Identify priority watersheds, landscapes, and ecosystems that require protection and restoration efforts; and
• Develop strategies, including mitigation strategies, to protect resilient ecosystems.

Fundamentals of Land Health (Subpart 6103)

The proposed rule would impose on BLM a requirement to manage lands in accordance with the fundamentals of land health. Particularly, the proposed rule would:

• Require that standards or guidelines developed or revised in RMPs be consistent with specified fundamentals of land health that call for maintenance of or improvements to watersheds, ecological processes, water quality, and species’ habitats;
• Require BLM to apply existing land health standards and guidelines, including those previously established as part of BLM’s grazing program; and
• Require BLM to review and revise land health standards and guidelines as part of its land use planning process and review them at least every five years.

Issues to Consider

The proposed rule raises multiple questions, including:

• Can BLM protect intact landscapes while continuing to authorize principal or major uses as defined by FLPMA? What is the relationship between the protection of an intact landscape and the designation of an ACEC? When must BLM make withdrawals under FLPMA to protect intact landscapes?
• When and how will BLM utilize compensatory mitigation? Although the proposed rule appears to allow BLM to utilize compensatory mitigation to offset impacts from land uses, the proposed rule does not provide guidance on when BLM may utilize it or whether BLM may require it.
• How do the priority watersheds, landscapes, and ecosystems that BLM identifies for protection and restoration efforts relate to ACEC designations? Are these areas distinct from ACECs?
• How does the proposed rule’s direction that BLM avoid authorizing uses of the public lands that permanently impact ecosystem resilience harmonize with FLPMA’s requirement that BLM manages the public lands for multiple uses?
• Which provisions of the proposed rule can BLM implement immediately, and which provisions first require BLM to revise its RMPs? What time and resources will be required for RMP revisions?
• Would the proposed rule require BLM to revisit land use planning efforts that required significant time and negotiation with stakeholders, such as BLM’s greater sage-grouse land use plan amendments, the California Desert Conservation Area Plan, and the Western Solar Plan?
• Will the rule, and particularly its provision establishing conservation as a use of the public lands, if finalized, survive the inevitable legal challenge?

Users of the public lands should closely evaluate this rule and consider its impacts on existing and future land use authorizations. Please contact Katie Schroder with questions about this proposed rule.

Silicon Valley Bank (“SVB”) was placed into receivership with the Federal Deposit Insurance Corporation (“FDIC”) on Friday, March 10 [link]. Federal regulators spent the weekend addressing concerns about the ramifications of SVB’s failure for SVB depositors and the economy more broadly.

On Sunday, March 12, the Department of the Treasury, the Federal Reserve, and the FDIC issued a joint statement [link] announcing the closing of Signature Bank and confirming that all deposits at both SVB and Signature Bank would be fully protected. All deposits at SVB are available to depositors as of today, Monday, March 13.

The Federal Reserve established the Bank Term Funding Program (the “BTFP”), intended to provide a backstop for banks holding government bonds, allowing those bonds to be swapped for cash for up to a year. The BTFP is intended to help other banks meet the deposit requests of their customers to avoid the liquidity problems that led to SVB’s closure [link].

Circumstances are rapidly developing for businesses having deposits and credit lines at SVB, Signature Bank, and other financial institutions. Our attorneys are actively helping clients navigate this situation and monitoring developments. Please contact Davis Graham attorneys Adam L. Hirsch, Chris Richardson, or Kyler Burgi if we can assist in any way.

On December 6, 2022, the Environmental Protection Agency (“EPA”) published a supplemental proposal to reduce methane and volatile organic chemicals (“VOCs”) emissions from the oil and gas sector. 87 Fed. Reg. 74,702 (Dec. 6, 2022) (the “2022 Proposed Rule”). This proposed rule strengthens and expands on EPA’s November 2021 proposed revisions to the New Source Performance Standards (“NSPS”) program, established under Section 111 of the Clean Air Act (“CAA”). If adopted, the 2022 Proposed Rule will have significant impacts on the oil and gas sector, including—among other things— requiring owners and operators to conduct a root cause analysis and take corrective actions for large methane emission events known as “super-emitter events”; requiring ongoing fugitive monitoring at all well sites until the site has been closed; and restricting flaring to instances where the owner or operator has demonstrated a sales line is not available and alternative beneficial uses are technically feasible.

As with EPA’s November 2021 proposal, the 2022 Proposed Rule sets forth three actions under the CAA that would apply to new and existing oil and gas sources. The below chart outlines the three categories of proposed rules, the sources to which they apply, and their applicable date:

NSPS Program	Affected Source	Applicable Date
Subpart OOOO (“Quad O”) and Subpart OOOOa (“Quad Oa”)	For Quad O, new, modified, or reconstructed sources after August 23, 2011, and on or before September 18, 2015. For Quad Oa, new, modified, or reconstructed sources after September 18, 2015, and on or before November 15, 2021.	Currently in effect
Subpart OOOOb (“Quad Ob”)	New, modified, or reconstructed sources after November 15, 2021.	For many sources, 60 days after publication of the final rule. 2022 Proposed Rule, Subpart OOOOb (Section 60.5370b).
Subpart OOOOc (“Quad Oc”)	Existing sources, which includes (with one exception) sources that “commenced construction, reconstruction, or modification before November 15, 2021.” 87 Fed. Reg. at 74,716.	At the latest, 4.5 years after publication of the final rule. See 2022 Proposed Rule, Subpart OOOOc (Section 60.5360c).

Unlike the proposed revisions to Quad Ob regulations, the emission standards set forth under Quad Oc require each state to create plans to regulate methane from existing oil and gas sources. Specifically, the Proposed Rule requires states to submit plans for EPA’s review within 18 months after EPA publishes the final Quad Oc regulation in the Federal Register. In addition, states must then establish a compliance deadline for existing sources within 36 months after the plan is due. The November 2022 Proposed Rule contemplates that these state plans would be finalized (at the latest) within 4.5 years after the publication of the final rule. EPA proposes that an existing source’s compliance with a state or federal plan implementing Quad Oc would constitute compliance with Quad O and Quad Oa because the presumptive standards for Quad Oc result in the same or greater emissions reductions.

The remainder of this alert focuses on some of the 2022 Proposed Rule’s major revisions to the Quad Ob and Quad Oc regulations proposed in November 2021. The below requirements would apply to both new and existing sources under the revised Quad Ob and Quad Oc regulations:

• Super-Emitters: The 2022 Proposed Rule creates a “super-emitter response program” to prevent or detect and mitigate super-emitter emissions event (defined as quantified emissions of 100 kg/hour or greater of methane). The proposed rule will allow an EPA-approved third-party or regulatory authority to identify these super-emitter events and notify owners and operators when they detect an event. Upon notification, the owner or operator must conduct a root cause analysis and take corrective actions to mitigate the emissions.
• Fugitive Emissions: EPA’s proposal expands the requirements of the November 2021 proposal by requiring regular leak inspections at all well sites, regardless of their estimated emissions. The 2022 Proposed Rule expands the types of equipment to which the fugitive emissions monitoring requirements apply. For instance, a single wellhead-only site and small well sites must undergo quarterly audio, visual, and olfactory (“AVO”) inspections. Well-head only sites with two or more wellheads must conduct quarterly AVO inspections and semi-annual optical gas imaging (“OGI”) monitoring. Sites with major production and processing equipment and centralized production facilities must conduct bimonthly AVO inspections and quarterly OGI monitoring. Compressor stations must conduct monthly AVO inspections and quarterly OGI monitoring.
• Well Closures: EPA’s proposal requires owners and operators to continue fugitive emissions monitoring until all wells have been closed, including plugging the wells and submitting well closure reports. Owners or operators will also be required to conduct final surveys of the well sites using OGI once the sites are closed to ensure emissions have ceased.
• Pneumatic Pumps and Controllers: EPA’s proposal requires the use of “zero-emission” pneumatic controllers and pumps at new and existing sources. Based on comments received in response to the November 2021 proposal, EPA seeks to expand the proposed standard for pneumatic pumps. The 2022 Proposed Rule prohibits the use of natural gas to power pneumatic pumps at an affected facility. At sites without electricity, the proposed rule allows owners or operators to use natural gas-driven pneumatic pumps only if they demonstrate that it is not technically feasible to use pneumatic pumps not driven by natural gas. For pneumatic controllers, EPA’s proposal expands the definition of a “pneumatic controller affected facility” to include the “collection of natural gas-driven pneumatic controllers at a site.”
• Flaring Requirements: The 2022 Proposed Rule strengthens flaring regulations, prohibiting any flaring of associated gas from oil wells unless the operator can show that a sales line is not available and other beneficial uses are not technically feasible. In addition, the proposed rule adds compliance requirements to ensure that flares meet all requirements for “good flare performance,” including continuous monitoring to confirm the pilot flame is always burning.

• Centrifugal Compressors: EPA’s proposal sets new flow rate requirements, except for those compressors located at well sites. These were previously not regulated under NSPS.

The below requirement would also apply to existing sources under the revised Quad Oc regulations:

• Well Liquids Unloading: The 2022 Proposed Rule no longer considers liquids unloading to be a modification. EPA’s proposal instead creates a presumptive standard of zero methane and VOCs emissions for liquids unloading at existing wells. If performing liquids unloading with zero methane and VOC emissions is not feasible, owners and operators will be required to employ best management practices to minimize venting of emissions.

EPA expects to issue finalize the 2022 Proposed Rule in 2023. Comments are due on February 13, 2023.

On November 30, 2022, the U.S. Bureau of Land Management (“BLM”) proposed new rules that would regulate the venting, flaring, and leaks of natural gas during oil and gas production activities on federal and Indian oil and gas leases (“Proposed Rule”). BLM is accepting public comments on the Proposed Rule through January 30, 2023.

Currently, BLM regulates venting and flaring of natural gas produced from federal and Indian leases through Notice to Lessees (“NTL”) 4A. In 2016, BLM finalized a rule that regulated venting, flaring, and leaks of natural gas during oil and gas production activities on federal and Indian oil and gas leases (the “2016 Rule”). In 2018, BLM attempted to administratively replace its 2016 Rule with another rule (the “2018 Rule”). Federal courts, however, vacated both rules in 2020, thus restoring NTL 4A as the governing source of authority over vented and flared gas from federal and Indian leases.

Earlier this year, Congress enacted a statutory provision affecting when royalty is due on vented and flared gas. In section 50263 of the Inflation Reduction Act of 2022, Public Law No. 117-169, Congress mandated that, for all federal leases issued after August 16, 2022, royalty is due on all produced gas, except (a) gas vented or flared for not longer than 48 hours in an emergency situation that poses a danger to human health, safety, or the environment; (b) gas used or consumed within a lease, unit, or communitized area for the benefit of the lease, unit, or communitized area; and (c) gas that is unavoidably lost.

The Proposed Rule attempts to rectify the legal infirmities in the 2016 and 2018 Rules and incorporate the legislative change. Most notably:

• Like its predecessors, the Proposed Rule defines whether gas is “avoidably lost” and thus royalty bearing, or “unavoidably lost” and thus royalty-free.
• The Proposed Rule would allow BLM to evaluate potential flaring when approving applications for permits to drill (“APDs”). It would allow BLM to attach conditions of approval to APDs to require reasonable measures to prevent waste of natural gas. The Proposed Rule would also require operators to submit waste minimization plans with APDs and would allow BLM to defer or deny APDs to avoid unreasonable and undue waste.
• The Proposed Rule contains provisions specifically addressing two comment reasons for flaring: emergencies and limited pipeline capacity.
  • The Proposed Rule narrowly defines “emergency situations” and allows only 48 hours of royalty-free flaring in emergency situations
  • The Proposed Rule would allow for royalty-free flaring of up to 1,050 Mcf of oil-gas per month, per lease, unit, or communitized area (“CA”) because of pipeline capacity constraints, midstream processing failures, or similar events.
  • The Proposed Rule would allow BLM to require operators to curtail or shut-in production when significant flaring occurs because of pipeline capacity constraints, midstream processing failures, or similar events.
• The Proposed Rule contains similar operational limitations and equipment requirements as the 2016 Rule, including limitations on flaring during well completions and initial production tests; equipment requirements for pneumatic controllers and storage vessels; and leak detection and repair (“LDAR”) requirements.
  • The Proposed Rule would reduce the volumes of royalty-free flaring that may occur during well completions and initial production tests from the volumes of royalty-free flaring authorized by NTL 4A.
• Citing safety concerns, the Proposed Rule would prohibit venting except in specified circumstances.
• The Proposed Rule would allow states and Tribes to apply for variances from specific provisions.

These proposals are described in more detail below.

Notably, the Proposed Rule is narrower in scope than the 2016 Rule. Whereas the 2016 Rule applied to all oil and gas wells within a unit or communitized area with federal or Indian leases, the Proposed Rule’s provisions relating to safety, pneumatic equipment, storage tanks, and LDAR at sections 3179.6, 3179.201, 3179.203, and 3179.301 – .303 only apply to operations “on a [f]ederal or Indian lease.” The Proposed Rule does not define “on a [f]ederal or Indian lease,” thus raising a question of whether the final rule would apply to surface facilities physically within the boundary of a lease or to wells that penetrate federal or Indian leases, regardless of the location of surface facilities. The remaining provisions of the Proposed Rule apply to all operations producing federal and Indian oil and gas because they have the potential to impact royalty revenues more significantly.

Avoidably & Unavoidably Lost Gas

Section 3179.4(c) of the Proposed Rule defines gas as “avoidably lost” if it is not “unavoidably lost.” Section 3179.4(a) and (b) then sets forth a variety of circumstances when gas is unavoidably lost. First, section 3179.4(a) and (b) defines gas as “unavoidably lost” when the operator “has not been negligent, . . . has taken prudent and reasonable steps to avoid waste, . . . and has complied fully with applicable laws, lease terms, regulations, provisions of a previously approved operating plan, and other written orders of the BLM.”

Second, section 3179.4(b) defines gas as unavoidably lost when it is lost from the following operations or sources, which are subject to operational limitations or constraints set forth in other provisions of the Proposed Rule:

• Well drilling, unless BLM determines gas was lost due to operator negligence as provided in section 3179.101;
• Well completion and related operations, subject to the limitations in section 3179.102;
• Initial production tests, subject to the limitations in section 3179.104;
• Emergency situations, subject to the limitations in section 3179.105;
• Normal operating losses from a natural-gas-activated pneumatic controller or pump, subject to requirements in section 3179.201;
• Normal operating losses from a storage vessel or other low-pressure production vessel that is in compliance with sections 3179.203 and 3174.5(b);
• Well venting in the course of downhole well maintenance and/or liquids unloading performed in compliance with section 3179.204;
• Leaks, when the operator has complied with LDAR requirements in sections 3179.301 and .302; and
• Pipeline capacity constraints, midstream processing facilities, or other similar events, subject to limitations in section 3179.8.

Additionally, section 3179.4(b) defines gas as unavoidably lost when it is lost from the following operations or sources, which are not subject other limitations or constraints set forth in other provisions of the Proposed Rule:

• Exploratory coalbed methane well dewatering;
• Facility and pipeline maintenance, such as when an operator must blow-down and depressurize equipment to perform maintenance or repairs;
• Flaring of gas from which at least 50 percent of natural gas liquids have been removed and captured for market; and
• Flaring of gas from a well not connected to a gas pipeline if BLM authorized the flaring in its approval of the APD.

Evaluation of Flaring at the APD Stage

Conditions of Approval to APDs

• The Proposed Rule would allow BLM to attach conditions of approvals to APDs specifying “reasonable measures” to prevent waste. § 3179.12(b).
• After approval of an APD, BLM may order an operator to implement additional “reasonable measures” to prevent waste. § 3179.12(c).
• The Proposed Rule describes “reasonable measures” to prevent waste as reflecting “factors including but not limited to relevant advances in technology and changes in industry practice.” § 3179.12(d).

Waste Minimization Plans

• The Proposed Rule would require operators to include with all APDs a waste minimization plan that demonstrates how the operator plans to capture gas upon the start of production or as soon thereafter after reasonably possible. § 3162.3-1(j).
• For oil wells, if BLM determines that drilling the could cause “unreasonable and undue waste,” BLM may approve an APD with conditions for gas capture or royalty payment. Alternatively, BLM may defer approving the APD to prevent waste.
  • BLM may deny the permit after deferring for two years if the potential for “unreasonable and undue waste” is not addressed. § 3162.3-1(k).
  • The Proposed Rule would define “unreasonable and undue waste” as “a frequent or ongoing loss of gas that could be avoided without causing an ultimately greater loss of equivalent total energy that would occur if the loss of gas were to continue unabated.” § 3179.3.
  • BLM explained that it views the concept of “unreasonable and undue waste” as informing BLM decision-making with respect to complicated waste prevention measures, such as delaying or denying a permit to drill or ordering a well to be shut-in due to excessive flaring. By contrast, BLM views the “avoidable/unavoidable loss” designation primarily as a means to determine when royalties must be paid on lost gas.

Common Flaring Events – Emergencies & Pipeline Capacity

Emergencies

• The Proposed Rule would allow 48 hours of royalty-free flaring or venting in “emergency situations.” § 3179.105(a).
• The Proposed Rule defines an “emergency situation” as “a temporary, infrequent, and unavoidable situation in which the loss of gas is necessary to avoid a danger to human healthy safety, or the environment.” § 3179.105(a).
• The Proposed Rule affirmatively states the following situations are not emergencies:
  • Recurring failures of the same piece of equipment;
  • The operator’s failure to install appropriate equipment of a sufficient capacity to accommodate production conditions;
  • Failure to limit production when the production rate exceeds the capacity of the related equipment, pipeline, or gas plant, or exceeds sales contract volumes of oil or gas;
  • Scheduled maintenance; or
  • Operator negligence.

Pipeline Capacity & Midstream Processing Failures

• The Proposed Rule allows for royalty-free flaring of up to 1,050 Mcf of oil-well gas per month, per lease, unit, or CA because of pipeline capacity constraints, midstream processing failures, or other similar events that prevent produced gas from being transported through the connected pipeline. § 3179.8(a).
• The Proposed Rule would allow BLM to order an operator to curtail or shut in production where “substantial volumes” of oil-well gas is flared. § 3179.8(b).
  • The Proposed Rule expressly states that BLM will not order curtailment or a shut-in of production unless the operator has reported flaring of more than 4,000 Mcf per month for three consecutive months and the flaring is ongoing. § 3179.8(b).
• The Proposed Rules would allow BLM to order curtailment or a shut-in of production, resulting in adverse effects to production of non-federal or non-Indian oil and gas, only if the applicable unit or communitization agreement allows BLM to regulate the rate of production.

Flaring and Venting During Drilling and Production

• Well drilling – §3179.101.
  • BLM may determine that operator negligence caused the loss of well control and thus loss of gas. In that circumstance, lost gas is availably lost and royalty bearing.
• Well completion and related operations – § 3179.102.
  • For new completions that are hydraulically fractured, the Proposed Rule allows 10,000 Mcf of gas to be flared royalty-free during well completion, post-completion, and fluid recovery operations.
  • For recompletions of wells connected to a gas pipeline, the Proposed Rule allows 5,000 Mcf of gas to be flared royalty-free during well completion, post-completion, and fluid recovery operations.
• Initial production testing – § 3179.103.
  • The Proposed Rule allows royalty-free flaring during initial production tests for 30 days or until the operator flares 20,000 Mcf, whichever occurs first.
    • The 20,000 Mcf includes volumes flared during well completions and related operations under § 3179.102.
  • BLM may extend the 30-day period up to an additional 60 days because of well or equipment problems or because of a need for further testing.
  • BLM may increase the 20,000 Mcf limit by up to an additional 30,000 Mcf for exploratory oil wells in remote locations where additional information is needed in advance of development of pipeline infrastructure.
• Subsequent well tests – § 3179.104.
  • The Proposed Rule would allow royalty-free flaring for 24 hours for subsequent well tests unless BLM approves a longer period.

Equipment and Well Maintenance Requirements

• Pneumatic controllers and pumps – § 3179.201.
  • One year after the final rule takes effect, natural gas-activated pneumatic controllers and pneumatic diaphragm pumps with a bleed rate that exceeds 6 standard cubic feet (scf) per hour may not be used on leases, unit participating areas (“PAs”), or CAs that are producing at least 120 Mcf or 20 barrels of oil per month.
• Tanks – § 3179.203.
  • One year after the final rule takes effect, all oil storage vessels must be equipped with a vapor-recovery system or other mechanism to avoid the intentional loss of natural gas, unless the operator determines that a vapor-recovery system or other mechanism is technically or economically infeasible.
    • When a storage vessel is not equipped with a vapor-recovery system or other mechanism, the operator must submit a sundry notice to BLM with an annual compositional analysis production from the storage vessel. The compositional analysis must meet requirements identified in § 3179.203(c).
  • Operators must flare, rather than vent, of gas released from an oil storage vessel when practical and safe.
  • Operators may commingle vapors from multiple storage vessels to a single flare without BLM’s prior approval.
  • BLM will impose an immediate assessments of $1,000 for a thief hatch left open and unattended.
• Downhole well maintenance and liquids unloading – § 3179.204.
  • Gas vented or flared during well maintenance and well purging is royalty-free for a period not to exceed 24 hours per event.
    • “Well purging” means blowing accumulated liquids out of a wellbore by reservoir gas pressure, whether manually or by an automatic control system, where gas is vented to the atmosphere. It does not apply to wells equipped with a plunger lift system.
  • Gas vented or flared from a plunger lift system and/or an automated well control system is royalty free.
  • Operators must minimize gas losses during well maintenance and well purging.
    • For wells equipped with a plunger lift system and/or an automated well control system, minimizing gas less includes optimizing the operation of the system to minimize gas losses, to the extent possible.
    • For liquids unloading by manual well purging, the person conducting the well purging must remain on-site throughout the event.

Leak Detection and Repair (LDAR) Requirements

• LDAR programs – § 3179.301.
  • Operators must maintain LDAR programs.
  • LDAR inspections must occur annually.
    • For leases in effect when the final rule takes effect and on which operations have commenced, the operator must conduct an initial inspection within one year of the effective date of the final rule.
    • For other leases, the operator must conduct an initial inspection within one year of commence of operations.
  • Operators must submit a sundry notice to BLM describing their LDAR programs.
    • For leases in effect when the final rule takes effect, the operator must submit the sundry notice within six months of the effective date of the rule.
    • For new leases, the operator must submit the sundry notice within six month of a lease’s issuance.
    • BLM will review the LDAR program and notify the operator if BLM deems the program to be inadequate.
• Leak repair – § 3179.302.
  • Leaks must be repaired as soon as practicable and within 30 calendar days after discovery, unless the repair is technically infeasible (including unavailability of parts), would require a pipeline blowdown, a compressor shutdown, or a well shut-in, or would be unsafe to conduct during operation of the unit.
  • If the repair is delayed over 30 days, the operator must submit a sundry notice notifying BLM of the cause. BLM will not approve delays of over two years.
  • The operator must verify the effectiveness of a repair within 30 days of completing the repair.
• Leak detection inspection recordkeeping and reporting – § 3179.303.
  • By March 31 of each year, operators must submit an annual summary report to BLM on the previous year’s inspection activities.
  • Operators must retain records related to leak inspection and repair as specified in the rule.

Venting Prohibition

Citing safety concerns, section 3179.6 of the Proposed Rule would require operators to flare, rather than vent, gas that is not captured, except:

• When flaring is technically infeasible, such as when volumes are too small to flare;
• Under emergency conditions, when the loss of gas is uncontrollable or venting is necessary for safety;
• When gas is vented through a natural-gas-activated pneumatic controller or pump, a storage vessel, downhole well maintenance or liquids unloading activities, or a leak;
• When venting is necessary to allow non-routine facility and pipeline maintenance; and
• When release of gas is necessary and flaring is prohibited by federal, state, local, or tribal law or regulation, or the term of a permit.

Measurement Requirements

• The Proposed Rule would impose specific measurement requirements on high-pressure flares flaring 1,050 Mcf or more per month. § 3179.9(b). The Proposed Rule would allow estimation of volumes flared from other flares. § 3179.9(c).
• The Proposed Rule would allow gas produced from multiple leases, unit PAs, or communitized areas to be combined at a single flare using an allocation method approved by BLM. § 3179.9(d).
• The Proposed Rule specifies that measurement points for flared volumes are not facility measurement points. § 3179.9(e).

Variance Procedures

• Section 3179.401 would allow States and Tribes may apply for variances from any provision of the BLM’s final rule. BLM has discretion to approve such a request if BLM finds that State, local, or Tribal regulations or rules would perform at least equally well as the provision of BLM’s rule from which the variance is sought to a) reduce waste of oil and gas; b) reduce environmental impacts from venting and/or flaring of gas; c) assure appropriate royalty payments to the United States or beneficial Indian owners; and d) ensure the safe and responsible production and oil and gas.

Today, the United States Bureau of Land Management (BLM) published a notice of intent to prepare a programmatic environmental impact statement (PEIS) to modify and update its 2012 Western Solar Plan (“2012 Plan”) and make necessary resource management plan (RMP) amendments. The notice initiated a 60-day scoping period during which BLM will accept public comment on the PEIS and potential RMP amendments.

The 2012 Plan established where and how utility-scale solar energy development could occur on BLM-managed lands in Arizona, California, Colorado, Nevada, New Mexico, and Utah. Specifically, the 2012 Plan amended RMPs in these states to exclude some lands from solar development, identify lands where solar development would be prioritized (solar energy zones or “SEZs”), and establish a process for development outside of SEZs (in “variance areas”).

The PEIS will evaluate potential modifications to improve and expand the 2012 Plan. In the notice of intent, BLM explained that the 2012 Plan facilitated solar development applications in areas of flat land and direct sunlight and in areas without high-value resources. Solar developers, however, have expressed interest in development in areas allocated as exclusion areas based on exclusion criteria for slope or solar insolation values. Accordingly, BLM now seeks to update the 2012 Plan.

BLM particularly has identified these objectives of the planning process:

• To focus the BLM’s utility-scale solar energy planning on resource management on BLM-administered lands rather than specifying technology-based criteria for solar development on public lands;
• To expand the solar program to additional states;
• To increase opportunities for renewable energy development in priority and variance areas; and
• To develop appropriate criteria to exclude high-value resource areas from renewable energy development.

The PEIS also may consider land use allocation modifications related to other renewable energy development types, such as wind energy.

In its notice, BLM explained that it would consider alternatives in the PEIS that would modify these aspects of the 2012 Plan:

• Study area. BLM will consider at least one alternative that would expand BLM’s solar program to portions of additional states, which may include Idaho, Montana, Oregon, Washington, and Wyoming. BLM will also consider whether to include in the PEIS study area lands covered by the Desert Renewable Energy Conservation Plan in California and the Restoration Design Energy Project in Arizona.
• Exclusion criteria. BLM will consider whether to eliminate two exclusion categories and modify the remaining exclusion categories established in the 2012 Plan. Particularly, BLM will consider eliminating exclusion criteria 1 (excluding development in locations with slopes greater than five percent) and 2 (excluding development where insolation values are below 6.5 kWh/m²/day).
• Land use allocations. BLM will consider at least one alternative that would adjust existing SEZs, variance areas, and exclusion areas. BLM would consider establishing new SEZs, variance areas, and exclusion areas, including in states not covered by the 2012 Plan.
• Variance process. BLM will consider modifications to the variance process to focus review and improve efficiency. These potential modifications follow recent BLM’s release of an Instruction Memorandum
  aimed at enhancing consistency and workflow efficiency in the variance process. Notably, BLM will consider whether to incorporate variance procedures in means other than the PEIS, such as regulation or policy. BLM will also consider whether the purpose of the variance process is being met through other mechanisms, such as site-specific environmental review and BLM’s review of right-of-way applications, and therefore whether to continue the variance process.
• Definition of utility-scale. BLM may revise the definition of “utility-scale” set forth in the 2012 Plan, which is any project capable of generating 20 or more megawatts (MW) of electricity that is delivered into the electricity transmission grid.
• Promoting development in SEZs. BLM will consider incentives to promote development in SEZs.

BLM will hold two virtual and 12 in-person public meetings as part of the scoping process. BLM has requested that the public submit comments by February 6, 2023, via its eplanning site.

Please contact Katie Schroder with questions about the PEIS or how to effectively participate in the scoping process.

The U.S. Fish and Wildlife Service (USFWS) has released a final rule listing distinct population segments of the lesser prairie-chicken as threatened and endangered under the Endangered Species Act (ESA) (“Listing Rule”) based, in part, on threats from conventional and renewable energy development. The Listing Rule will become effective on or about January 25, 2023, which is 60 days after the Listing Rule is published in the Federal Register.

The USFWS listed the lesser prairie-chicken as endangered in New Mexico and west Texas. The USFWS listed the lesser prairie-chicken as threatened in the remainder of its range.

More precisely, the lesser prairie-chicken exists in the Texas Panhandle, eastern New Mexico, western Oklahoma, western Kansas, and southeastern Colorado. In these areas, lesser prairie-chicken populations exist in four distinct ecoregions: (1) a Shinnery Oak Ecoregion in New Mexico and Texas; (2) a Mixed-Grass Ecoregion of Oklahoma, Kansas, and Texas; (3) a Short Grass/Conservation Reserve Program (CRP) Ecoregion in Kansas and Colorado; and (4) a Sand Sagebrush Ecoregion in Colorado, Oklahoma, and Kansas.

In the Listing Rule, the USFWS applied its Distinct Population Segment policy, 61 Fed. Reg. 4722 (Feb. 7, 1996), and found that the lesser prairie-chicken population in the Shinnery Oak Ecoregion qualifies as a DPS (“Southern DPS”) and that the population in the three northern ecoregions qualifies as a separate DPS (“Northern DPS”). The USWFS then listed the Southern DPS as endangered and the Northern DPS as threatened.

Notably, the USFWS did not designate, and has not proposed to designate, critical habitat. The USFWS found that critical habitat presently is not determinable because the USFWS lacks information sufficient to perform the required analysis of the impacts of a critical habitat designation.

For energy developers and most other land users, no difference exists between the endangered listing of the Southern DPS and threatened listing of the Northern DPS. The USFWS’s listing of the Southern DPS as endangered and the Northern DPS as threatened carry the same the restrictions – most notably, the prohibition on take and incidental take of the lesser prairie-chicken. Although the USFWS has proposed to exempt a handful of activities in the Northern DPS from the prohibition on incidental take pursuant to section 4(d) of the ESA, these activities mainly relate to agricultural practices and prescribed fire.

Because incidental take of LPC resulting from conventional and renewable energy development will be prohibited once the Listing Rule takes effect, an energy developer must obtain a permit under section 10 of the ESA to engage in activities that incidentally take an LPC. Several permits are available to conventional and renewable energy developers:

• The USFWS has developed conservation plans, known as Candidate Conservation Agreements with Assurances (CCAAs), that authorize incidental take from oil and gas activities by operators who enrolled in the plans prior to the listing of the lesser prairie-chicken.
• The USFWS has finalized a habitat conservation plan (HCP) and issued a section 10 permit for oil and gas upstream and midstream activities. The section 10 permit associated with this HCP authorizes incidental take of lesser prairie-chicken by parties who execute a certificate of inclusion with the permit holder and commit to conservation measures as provided in the HCP. The HCP and related materials are available here. Unlike the oil and gas CCAAs, parties may enroll in the HCP after the USFWS’s listing decision takes effect.
• The USFWS has finalized an HCP and issued a section 10 permit for wind and solar energy, power lines, and communication towers. Like the oil and gas section 10 permit and HCP, the section 10 permit associated with this HCP authorizes incidental take of lesser prairie-chicken by parties who execute a certificate of inclusion with the permit holder and commit to conservation measures as provided in the HCP. The HCP and related materials are available here. Parties may enroll in the HCP after the USFWS’s listing decision takes effect.

Energy developers operating in a lesser prairie-chicken ecoregion should evaluate the risk that their activities will result in incidental take of lesser prairie-chicken and evaluate whether to enroll in an HCP.

Additionally, energy developers that will require a new federal permit or right-of-way should anticipate a longer permitting process, particularly in New Mexico where the United States holds a considerable amount of surface and mineral estate. Before a federal agency such as the Bureau of Land Management (BLM) may approve a permit or grant a right-of-way that may affect the lesser prairie-chicken, it must consult with the USFWS under section 7 of the ESA. The duration and complexity of this consultation depends on the potential impacts to the lesser prairie-chicken resulting from the federal approval or grant. Notably, delays may be reduced for land users enrolled in the Candidate Conservation Agreement (CCA) between the USFWS and BLM in New Mexico because the agencies have already engaged in some consultation under section 7 of the ESA over activities covered by the CCA.

If you have questions about the impact of the listing of the lesser prairie-chicken on your permits or operations, please contact Katie Schroder.

Global cryptocurrency exchange FTX Trading, Alameda Research, and 132 of their affiliates filed voluntary Chapter 11 bankruptcy petitions on November 11, 2022. According to the petitions, the debtors have more than 100,000 creditors. The cases have been assigned to Judge John T. Dorsey in the U.S. Bankruptcy Court for the District of Delaware.

FTX’s Chapter 11 filing has destabilized the crypto industry. Our attorneys are prepared to help clients navigate this landmark bankruptcy and are monitoring advancements in the case. Please contact Davis Graham attorneys Adam L. Hirsch, Chris Richardson, Kyler Burgi, or Peter H. Schwartz if we can assist in any way.

On September 15, 2022, U.S. Deputy Attorney General (DAG) Lisa O. Monaco issued a memorandum
and delivered prepared remarks announcing important policy updates in the Department of Justice’s (DOJ) efforts to fight corporate crime. The new policies build off of a preceding memorandum issued in October 2021 and signal a continued re-orientation towards holding culpable individuals responsible for corporate crime while encouraging companies to self-report, cooperate with investigators, and build strong compliance structures and culture. With the right mix of incentives and deterrence, DAG Monaco explained, shareholders will no longer be forced to bear the consequences of misconduct.

Key Takeaways:

• Individual Accountability: DAG Monaco emphasized that going after individuals who commit and profit from corporate crime was DOJ’s “top priority.” To that end, time is of the essence. Observing that individual prosecutions are too often slowed by a company’s reluctance to cooperate with prosecutors or spend the time and money to remediate misconduct, DOJ’s new policies incentivize companies to produce “hot” documents or evidence sooner during a company’s investigation process. Such timely disclosures will be rewarded with greater cooperation credit, while undue or intentional delay will result in the reduction or denial of such credit. In addition, DOJ will require its prosecutors to complete investigations and seek any criminal charges against individuals prior to or at the same time as entering a resolution against a corporation. According to DAG Monaco, both prosecutors and corporate counsel should feel like they are “on the clock.”
• History of Misconduct: Consistent with her October 2021 remarks, DAG Monaco explained that DOJ’s new policies required that prosecutors take a holistic look at a company’s misconduct history in determining an appropriate remedy or punishment. For repeat offenders—especially when involving the same personnel—DOJ will heavily scrutinize successive non-prosecution or deferred prosecution agreements and will not shy away from bringing charges or requiring guilty pleas. For others, the DOJ recognizes that not all misconduct is created equal and will accord less weight to criminal misconduct older than 10 years and civil or regulatory resolutions older than 5 years in determining appropriate punishment.

• Voluntary Self-Disclosure: DOJ has long encouraged voluntary self-disclosure of corporate misconduct. Emphasizing the importance such disclosure plays in creating a healthy compliance culture and timely resolutions, DAG Monaco explained that every DOJ component engaged in corporate enforcement will implement a program to encourage and reward voluntary disclosures. As an incentive, DOJ will not seek a guilty plea from the company when a company has voluntarily self-disclosed, cooperated, and remediated its conduct, absent aggravating factors. Nor will DOJ require an independent compliance monitor if the company has an implemented an effective compliance program.

• Independent Compliance Monitors: DAG Monaco explained that DOJ’s policies provide new guidance to prosecutors on how to identify the need for a monitor, how to select a monitor, and how to oversee the monitor’s work to increase the likelihood of success. In addition, the selection process for monitors will be transparent and consistent, and the selection of monitors will be tailored to the misconduct and corresponding compliance deficiencies. Prosecutors will ensure that all monitors stay on task and on budget.

• Corporate Culture: DAG Monaco also made clear that DOJ will pay close attention to company compliance programs that effectively reduce financial incentives for corporate wrongdoing, such as by clawing-back or escrowing an individual wrongdoer’s compensation. DOJ will require companies to show how they are linking compensation to compliance. Prosecutors are now directed to not only consider what the company’s policies say, but whether the company is following those policies in practice. New guidance on how to reward companies that implement compensation-based compliance programs is expected by the end of the year.

Implications:

According to DAG Monaco, the math is simple: root out misconduct and save time, money, and your reputation; otherwise, be prepared to face harsh consequences. DOJ’s new corporate criminal policies signal a renewed and strengthened focus on punishing corporate wrongdoing. To prepare for these changes, companies should:

• Invest in effective compliance programs that dedicate appropriate resources to early identification of misconduct, discovery and disclosure of documents or evidence of individual culpability, and remediation of misconduct. As the new DOJ policies make clear, leniency flows to those that voluntarily self-disclose
• Strengthen their corporate compliance culture by reviewing and, if necessary, updating compensation policies and incorporating forthcoming guidance on how to implement compensation-based compliance programs.

• Seek to hold individual wrongdoers accountable and, where appropriate, ensure early and robust cooperation with investigators.

• Review the prior misconduct of the company and of any entities acquired through mergers or acquisitions to better gauge how such history may affect a prosecutor’s evaluation of any punishment for future misconduct.

• Consult with experienced counsel early and often if facing allegations of corporate wrongdoing or an investigation or enforcement actions by the government.

  Please contact a Davis Graham partner if we can assist you in any way.

The Colorado legislature recently enacted a law, patterned on the federal False Claims Act, that creates new liability risks for businesses receiving or using state funds. The Colorado False Claims Act (the “CFCA”) was passed by the General Assembly in early June, signed into law by Governor Polis on June 7, 2022, and takes effect in September 2022. Like its federal counterpart, the CFCA holds individuals and businesses liable for committing, conspiring to commit, or aiding and abetting the commission of what the law characterizes as “false claims.” Such claims include false claims for payment from state funds, false records relating to claims for state payments, and withholding and misuse of state funds. The CFCA authorizes hefty civil penalties to protect public funding from misuse and misappropriation: between $11,800 and $23,600 per violation plus three times the amount of the damages sustained by the state as a result of the false claim.

In addition to authorizing civil penalties for false claims on state funds, the CFCA also empowers, protects, and rewards whistleblowers who sound the alarm on fraud against the state. This is typically seen in the case of employees blowing the whistle on their employers. The CFCA allows such employees and any other public citizens to file qui tam lawsuits on behalf of the state against those who make false claims for state funds. In the event of a successful qui tam suit, whistleblowers stand to recover up to 30% of any funds recouped by the government, “based on the extent the [whistleblower] contributed to the investigation and prosecution of the false claim.” The CFCA also protects whistleblowers from any form of retaliation, including – in the case of whistleblowing against an employer – discrimination, demotion, or termination because of the whistleblower’s “efforts in furtherance of investigating, prosecuting, or stopping false claims.” Additionally, the CFCA authorizes the Colorado Attorney General and local prosecutors to investigate false claims, seek penalties, and intervene in qui tam cases brought by whistleblowers.

Although the impact of the CFCA will not be known until after it takes effect in September, it has the potential to significantly incentivize individuals to blow the whistle on employers who receive or use state funds for any kind of statements or conduct that could be characterized as false or misleading. Under the federal False Claims Act, after which the CFCA is modeled, whistleblowers have been awarded over $8 billion and assisted the federal government in recovering over $70 billion since 1986, including over $5.6 billion in 2021 based on false claims relating to, among other things, federal health care funds (Medicaid, Medicare, etc.), unlawful kickbacks by businesses, unnecessary medical services, government procurement fraud, and COVID-related fraud.

As a result of the protection on whistleblowers and the financial incentive to blow the whistle, the CFCA may result in businesses facing more enforcement suits – whether meritorious or not. With implementation of the CFCA imminent, our attorneys are ready to help companies navigate this new law and its potential impact on their business, including by ensuring appropriate compliance mechanisms are in place to help prevent false claims from occurring.