BEFORE THE OIL AND GAS CONSERVATION COMMISSION

                                                               OF THE STATE OF COLORADO

 

IN THE MATTER OF ALLEGED VIOLATIONS OF THE RULES         )                    CAUSE NO. 1V

AND REGULATIONS OF THE COLORADO OIL AND GAS                )

CONSERVATION COMMISSION BY ENCANA OIL & GAS (USA)     )                    DOCKET NO. 0408-OV-27

INC., GARFIELD COUNTY, COLORADO                                            )

                                                                                                                                                                                    

                                                                        NOTICE OF HEARING

 

TO ALL INTERESTED PARTIES AND TO WHOM IT MAY CONCERN:

 

            On July 29, 2003, EnCana Oil & Gas (USA) Inc. (“EnCana”) was issued an Application for Permit-to-Drill (“APD”), Form 2, for the Schwartz 2-15B Well (the “Well”) located in the SW¼ SE¼ of Section 2, Township 7 South, Range 92 West, 6th P.M.  A Notice to All Operators Drilling Williams Fork Gas Wells in Garfield County (“Notice”) was attached to the APD and required EnCana to report all kicks and lost circulation incidents to Colorado Oil and Gas Conservation Commission (“COGCC”) staff.  The Well was drilled to total depth and production casing was cemented in the Well on February 9, 2004.  Significant lost circulation and/or kicks occurred during drilling at 1099’, 1543’ and 4328’ and significant lost circulation occurred while running production casing. No kicks or lost circulation incidents were reported to the COGCC staff.  This is a violation of the Notice attached to the APD.

 

The APD approved for the Well required the production casing to be cemented to surface.  In addition, Rule 317.i. states that “…cement shall be pumped behind the production casing two hundred (200) feet above the top of the shallowest known producing horizon.”  Open hole logs indicated the top of gas to be at approximately 4132’.  EnCana ran a cement bond log (“CBL”) and temperature survey log on February 16, 2004 after cementing the production casing and prior to beginning completion operations on the Well.  The CBL indicated the top of cement at approximately 4050', less than 200 feet above the top of the shallowest known producing horizon.  This is a violation of Rule 317.i. and the permit conditions requiring cement to surface. 

 

            Inadequate cementing of the Well resulted in a loss of well control.  A temperature survey log was run in conjunction with the CBL on February 16, 2004.  The logs were run seven (7) days after the Well was cemented and were run under shut-in conditions.  The temperature survey positively identified gas entry into the annular space between the production casing and the uncemented wellbore at approximately 4300' and gas migration behind the pipe into shallower formations.  Rule 327. states ”The operator shall take all reasonable precautions, in addition to fully complying with Rule 317., to prevent any oil, gas or water well from blowing uncontrolled and shall take immediate steps (emphasis added) and exercise due diligence to bring under control any such well,…”.  The gas migration demonstrated a lack of well control.  The Well was completed without immediate remedial cementing. Inadequate cementing allowed the Well to blowout underground, uncontrolled, at the estimated rate of 2.1 million cubic feet per day (“MMCFD”) for fifty-five (55) days with observed pressures on the bradenhead varying between 500 and 661 pounds per square inch gauge, (“psig”).  During this period approximately 115.5 million cubic feet (“MMCF”) of Williams Fork Formation gas was lost to shallower formations.  The loss of Williams Fork Formation gas to the shallower formations meets the definition of waste as defined in §34-60-103.(11) and (13)(a), C.R.S., and is prohibited under §34-60-107, C.R.S. 

 

            On April 1, 2004 COGCC staff received a complaint of gas bubbles in West Divide Creek where no gas bubbles had previously been observed.  COGCC staff inspected and confirmed the existence of the gas bubbles in West Divide Creek.  On April 2, 2004, as part of the investigation to determine the cause of the seep, COGCC staff obtained samples of the bradenhead gas from three (3) wells adjacent to the West Divide Creek seep (Schwartz 2-15B Well, Brown 11-2C Well, and Morgan 12-14B Well), one sample of Williams Fork produced gas (Twin Creek 1-15B Well), and one sample from West Divide Creek.  Isotopic and compositional analysis indicated the bradenhead gas from two (2) of the wells (Schwartz 2-15B Well and Brown 11-2C Well) and the produced gas (Twin Creek 1-15B Well) were very similar and from the Williams Fork Formation.  The isotopic values and composition of the gas seeping into West Divide Creek also were very similar to the produced gas indicating that gas seeping into the West Divide Creek was from the Williams Fork Formation.  After the gas from the seep in West Divide Creek was identified as Williams Fork Formation gas, EnCana promptly responded to the COGCC staff with a plan of action to address the environmental and safety concerns of nearby residents and the community.  In addition to implementing this plan, EnCana also voluntarily agreed to cease drilling and completion operations within a two (2) mile radius of the seep until new drilling and completion procedures can be developed to prevent any similar occurrence in the future.  Water samples were also taken by COGCC staff from West Divide Creek on April 2, 2004 to determine the extent of the contamination from the seep.  Analysis of water samples taken from the creek showed impact to the surface waters of the state by the presence of benzene at the concentration of 99.0 micrograms per liter (µg/l).  Analysis of a water sample from a spring near the seep on May 19, 2004 showed impact to the ground water by the presence of benzene at the concentration of 200 µg/l.  The Water Quality Control Commission (WQCC) has established surface water and ground water standards for benzene of 1.2 µg/l and 5 µg/l, respectively.

 

            The Schwartz 2-15B Well was remedially cemented on April 5, 2004. Within eight (8) days of the repair, the gas seep and benzene concentration in West Divide Creek had decreased.  The decrease in gas seepage corresponding to the remedial cementing of the Well indicates that the failure of the primary cementing of the Schwartz 2-15 Well was responsible for the gas seep and benzene in West Divide Creek.  Williams Fork Formation gas and benzene are still present in the seep area and are a threat to the waters of the state and to the environment, public health, safety and welfare, and have resulted in damage to private property. EnCana is the owner of and party responsible for all Williams Fork Formation gas wells underneath and adjacent to the West Divide Creek seep and as operator of the Schwartz 2-15B Well should be found to be the responsible party for the release and subsequent impacts to ground and surface water. 

 

COGCC staff hand-delivered a Notice of Alleged Violation (“NOAV”) to EnCana on April 23, 2004. The NOAV had an abatement deadline of May 8, 2004. The NOAV cited Rule 209., failure to prevent the contamination of fresh water by gas, Rule 301., failure to notify the Director when public health or safety is in jeopardy, Rule 317.i., failure to pump cement 200’ above the top of the shallowest producing horizon, Rule 324A., impacts to water quality and Rule 906.b.(3), failure to report a release to the Director.  The NOAV required EnCana to submit a Site Investigation and Remedial Workplan, Form 27 for COGCC staff approval, outlining monitoring and mitigation measures to be taken to ensure protection of public safety and to mitigate impacts to water resources, submit a letter detailing how the Well was drilled and completed, along with an explanation of what occurred that caused Williams Fork Formation gas, benzene, and other hydrocarbon compounds to seep into West Divide Creek and nearby ponds.

 

EnCana responded to the NOAV by letter dated May 7, 2004.  EnCana submitted an amended response on May 18, 2004 wherein EnCana claimed not to have violated any of the rules cited and only acknowledged its failure to notify the Director of the high bradenhead pressure within ten (10) days of discovery.  EnCana further stated that “Even though there is no definitive evidence that EnCana caused the charging of an existing seep, EnCana has spent, and continues to spend, a significant amount of money to perform the plan.”  The initial inadequate cementing of the production casing and the delay in remedial cementing for the Well from February 9, 2004 until April 5, 2004 resulted in a significant waste of gas, damage to correlative rights and caused a significant adverse impact on public health, safety and welfare.

 

EnCana should be found in violation of the Notice for failure to comply with the notification requirements. 

 

EnCana should be found in violation of Rule 317.i. for failure to pump cement 200 feet above the top of the shallowest known producing horizon and should be found in violation of the permit conditions.

 

EnCana should be found in violation of Rule 327. for loss of well control and allowing an underground blowout.  EnCana also should be found in violation of §34-60-107, C.R.S. because the loss of natural gas is a significant waste of gas resources which damages correlative rights.

 

EnCana should be found in violation of Rule 301. which states that “Immediate notice shall be given to the Director when public health or safety is in jeopardy. Notice shall also be given to the Director of any other significant downhole problem or mechanical failure within ten (10) days.”  EnCana did not notify the COGCC staff of the high bradenhead pressure or the lack of production casing cement coverage until March 30, 2004.

 

EnCana should be found in violation of Rule 209. which states that “Special precautions shall be taken in drilling and abandoning wells to guard against any loss of artesian water from the stratum in which it occurs, and the contamination of fresh water by objectionable water, oil, or gas.  Before any oil or gas well is completed as a producer, all oil, gas and water strata above and below the producing horizon shall be sealed or separated in order to prevent the intermingling of their contents.”

 

EnCana should be found in violation of Rule 324A. which states that “The operator shall take precautions to prevent significant adverse environmental impacts to air, water, soil, or biological resources to the extent necessary to protect public health, safety and welfare, by using cost-effective and technically feasible measures to protect environmental quality and to prevent the unauthorized discharge of oil, gas, E&P waste, chemical substances, trash, discarded equipment or other oil field waste.”  The rule also states that “No operator, in the conduct of any oil or gas operation shall perform any act or practice which shall constitute a violation of the water quality standards or classifications established by the WQCC for waters of the state,…”.

 

EnCana should be found in violation of Rule 906.b.(3) which states that “…releases of any size which impact or threaten to impact any waters of the state, residence or occupied structure, livestock or public byway, shall be verbally reported to the Director as soon as practicable after discovery.”

 

EnCana should be found in violation of Rule 209. from February 9, 2004 until April 5, 2004 for fifty-five (55) days of violation.  EnCana should be found in violation of Rule 301. from February 16, 2004 until March 30, 2004 for forty-three (43) days of violation.  EnCana should be found in violation of Rule 317.i. from February 9, 2004 until April 5, 2004 for fifty-five (55) days of violation.  EnCana should be found in violation of Rule 324A. from February 9, 2004 until April 5, 2004 for fifty-five (55) days of violation.  EnCana should be found in violation of Rule 327. from February 9, 2004 until April 5, 2004 for fifty-five (55) days of violation.  EnCana should be found in violation of Rule 906.b.(3) from February 16, 2004 until March 30, 2004 for forty-three (43) days of violation.  EnCana should be found in violation of the Notice to Operators for four (4) days between the dates of January 19, 2004 and February 9, 2004.  EnCana should be found in violation of the permit conditions from February 9, 2004 until April 5, 2004 for fifty-five (55) days of violation.  EnCana should be found in violation of §34-60-107, C.R.S. from February 9, 2004 until April 5, 2004 for fifty-five (55) days of violation.  EnCana should be assessed an appropriate fine for the above-described violations.

 

EnCana should proceed under the COGCC staff approved remediation and mitigation plan until Williams Fork Formation gas is significantly reduced, and associated benzene and other hydrocarbon compounds are below the standards established by the WQCC.  EnCana should proceed under the COGCC staff approved West Divide Creek procedures for drilling, cementing, completing and monitoring all wells in the affected area.

 

NOTICE IS HEREBY GIVEN, that the Oil and Gas Conservation Commission of the State of Colorado, pursuant to the above, has scheduled the above-entitled matter for hearing on:

Date:                           Monday, August 16, 2004

 

Time:                           10:00 a.m.

 

Place:                          Ramada Inn, Aspen and Birch Rooms

                                    124 W. 6th Street

                                    Glenwood Springs, CO 81601

            In accordance with the Americans with Disabilities Act, if any party requires special accommodations for this hearing as a result of a disability, please contact Audra Serlet at (303) 894-2100, extension 114, prior to the hearing and arrangements will be made.

 

Pursuant to said hearing in the above-entitled matter at the time and place aforesaid, or at any adjourned meeting, the Commission will enter such orders as it deems appropriate and necessary to protect public health, safety and welfare and to prevent the waste of oil and gas, either or both, in the operations of said field, and carry out the purposes of the statute.

 

In accordance with Rule 509., any interested party desiring to protest or to intervene should file with the Commission a written protest or a notice to intervene no later than July 14, 2004 briefly stating the basis of the protest or intervention.  Such interested party shall, at the same time, serve a copy of the protest or notice to intervene to the person filing the application.  An original and nine (9) copies shall be filed with the Commission.  Anyone who files a protest or intervention must be available to participate in a prehearing conference during the week of July 14, 2004. 

 

      IN THE NAME OF THE STATE OF COLORADO

 

                                                                  OIL AND GAS CONSERVATION COMMISSION

                               OF THE STATE OF COLORADO

 

 

                                   By_________________________________

Dated at Suite 801                                                             Patricia C. Beaver, Secretary

1120 Lincoln Street

Denver, Colorado, 80203

June 16, 2004