BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF ALLEGED VIOLATIONS OF THE ) CAUSE NO. 1
RULES AND REGULATIONS OF THE COLORADO OIL )
AND GAS CONSERVATION COMMISSION BY THE ) ORDER NO. 1-125
CITY OF TRINIDAD, GUSTAVSON ASSOCIATES, INC., )
HALLIBURTON SERVICES, AND PIONEER NATURAL )
RESOURCES USA, INC., LAS ANIMAS COUNTY, COLORADO )
REPORT OF THE COMMISSION
This cause came on for hearing before the Colorado Oil and Gas Conservation Commission (“COGCC” or “Commission”) on February 25, 2008, at 9:00 a.m. in Suite 801, 1120 Lincoln Street, Denver, Colorado, after giving notice of hearing as required by law to determine the party(ies) responsible for the escape of natural gas from the Trinidad MGP #1 Well and to determine proper mitigation liability in accordance with §34-60-124(7) and (8), C.R.S. (2007) and Rule 524.
FINDINGS
The Commission finds as follows:
1. The City of Trinidad, Gustavson Associates, Inc., Halliburton Services, and Pioneer Natural Resources USA, Inc. are interested parties in the subject matter of the above-referenced matter.
2. Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.
3. The Commission has jurisdiction over the subject matter embraced in said Notice and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.
4. On April 17, 2007, a house (“the Bouvier house”) that was being built for Stephen and Audrey Bouvier in Las Animas County by Cornerstone Construction, exploded, injuring three workers and destroying the Bouvier house. A preliminary investigation by the Stonewall District Fire Chief indicated that the source of the explosion appeared to be methane because coal beds crop out nearby, and there was not a gas hook up or other source of explosive materials onsite.
5. On April 18, 2007, the staff of the COGCC (“COGCC Staff”) became aware of the incident when Peter Gintautas, southeastern Environmental Protection Specialist, noticed an article describing the incident in a Trinidad newspaper. Mr. Gintautas notified personnel in the Denver office and initiated contact with local emergency response personnel and the initial investigators.
6. COGCC Staff reviewed COGCC records and determined that the following three wells (collectively, the “Wells,” or individually, a “Well,”) which were plugged and abandoned in the 1980s, are located near the explosion site and are all located in the NW¼ NW¼ of Section 32, Township 33 South, Range 66 West, 6th P.M.
a. Trinidad MGP #1 Well, API #05-071-6045 (“Trinidad MGP #1 Well”);
b. Trinidad MGP #2 Well, API #05-071-6070 (“Trinidad MGP #2 Well”); and
c. Trinidad MGP #3 Well, API #05-071-6048 (“Trinidad MGP #3 Well”).
The Trinidad MGP #1 Well appeared to be located adjacent to or possibly underneath the Bouvier house.
7. COGCC Staff immediately retained an environmental contractor, LT Environmental, Inc. (“LTE”) to conduct an emergency investigation of the site. LTE arrived on site the afternoon of April 18, 2007 and proceeded to conduct a soil gas survey around the explosion site, mostly around the periphery of the remains of the Bouvier house. (Soil gas surveys could not be conducted inside the footprint of the house initially because of safety reasons.)
8. On April 19, 2007, this initial soil gas work was completed. LTE conducted additional soil gas surveys on May 24, 2007, the day after the Trinidad MGP #1 Well was uncovered, and a follow-up survey on August 29, 2007. Results of the surveys indicated that methane was detected in close proximity to the Bouvier house (less than 100 feet away). Methane concentrations recorded from soil gas probes around the structure ranged from 2,000 parts per million (“ppm”) to 880,000 ppm (88%). During the April 2007 survey methane was also detected in the soil at a concentration of 5,000 ppm immediately outside the steel casing of the water well located approximately 55 feet west of the Bouvier house. The horizontal extent of the seepage at the ground surface was limited to an area of approximately 27,000 square feet.
9. While responding to this emergency situation, COGCC Staff and its environmental contractors developed a multi-phased plan to determine the source of the methane that caused the explosion and to ensure that public health, safety, and welfare and the environment were protected during the investigation and through mitigation of the methane seepage. To date, mitigation of the methane seepage is incomplete.
10. On April 27, 2007, based on a COGCC Staff request, the Commission approved the expenditure of Seventy Four Thousand Nine Hundred Fifty dollars ($74,950.00) from the One Million Five Hundred Thousand dollars ($1,500,000) Emergency Response line item of the Oil and Gas Conservation and Environmental Response Fund for the investigation of the cause of the explosion and lingering impacts associated with methane seepage in the area.
11. In late June, 2007, LTE submitted its final report to the Commission on LTE’s investigation into the cause of the explosion, which included the following findings:
a. The presence of methane gas seeping at the Bouvier house was confirmed following the initial emergency response investigation activities. The source of the gas appears to be the Trinidad MGP #1 Well. On April 23, 2007, LTE collected a sample and submitted it to Isotech Laboratories, Inc. for analysis. The gas composition was over 90% methane based on the air-free composition calculation.
b. The horizontal extent of the seepage was defined and is primarily centered around the plugged and abandoned Trinidad MGP #1 Well. The horizontal extent of seepage during the initial survey (April 18, 2007) was approximately 27,000 square feet and during the follow-up survey (May 24, 2007) was approximately 25,000 square feet. In general, the extent and magnitude of seepage during the follow-up survey is consistent with the initial survey.
c. On May 23, 2007, during excavations conducted to look for the source of the methane gas seep, the Trinidad MGP #1 Well was uncovered and was located below the southeastern corner of the crawl space of the Bouvier house. Methane was observed to be leaking out of the well casing during field activities. Soil gas surveys were conducted within the footprint of the Bouvier house, and soil gas concentrations were close to 100% in the area of the crawl space.
d. The isotopic analysis of the methane indicates that the gas may be comprised of a mixture of both thermogenic and biogenic methane. The isotopic composition is dissimilar to the methane gas produced from and present in water from a nearby active coal bed methane production well (Melbourne 21-32TR, API #05-071-07510, located in the NE¼ NW¼ of Section 32, Township 33 South, Range 66 West, 6th P.M., operated by Pioneer Natural Resources USA, Inc.)
e. Methane gas has not been detected within or around the residence (“SE residence”) located approximately 400 feet southeast of the explosion site. However, a methane detection system was installed in the SE residence as an added safety precaution.
f. Methane seeps have not been detected in the vicinity of the Trinidad MGP #2 Well or the Trinidad MGP #3 Well.
g. Analysis of a water sample from the water well at the Bouvier house did not detect the presence of dissolved methane above the laboratory method detection limit. Dissolved methane was detected in the SE residence water well, but at a low concentration (0.00107 milligrams per liter).
h. Geologic reconnaissance and well drilling information suggest that the Bouvier house is not underlain by a shallow coal seam within approximately 40 feet of the ground surface.
i. The soil surrounding the well casing of the Trinidad MGP #1 Well was excavated on the north side of the casing to a depth of 14 feet below ground surface. No coal was observed in the excavation.
12. According to COGCC’s online database, Gustavson Associates, Inc. was originally listed as the operator of the Wells.
a. The Well files, in general, and the file for the Trinidad MGP #1 Well, in particular, contain documents that variously indicate either the City of Trinidad or Gustavson Associates, Inc. or both as the “operator.”
b. The documents in the well file for the Trinidad MGP #1 Well and those in the operator file for Gustavson Associates, Inc. do not definitively establish that either Gustavson Associates, Inc. or the City of Trinidad was the operator of the well.
c. Based on their files, COGCC Staff concluded that Gustavson Associates, Inc. was a contractor, and the City of Trinidad owned the Wells.
13. On June 6, 2007, the COGCC Staff issued Notice of Alleged Violation (“NOAV”) #200112532 to the City of Trinidad, citing violation of Rule 319.a., which requires all wells to be plugged in such a manner that confines gas to the reservoir in which it originally occurred and permanently prevent migration of gas from the formation in which it originally occurred. (Rule 331.a. or 332.a. were the equivalent Rules during the early 1980s and had the same requirements to plug in a manner that confines substances to the original reservoir and permanently prevent migration of substances from the original formation in which they occurred.
14. The NOAV required the City of Trinidad, as operator, to take all necessary precautions to secure the well site from public access and to minimize any danger to the public from leaking gas with an abatement deadline of seven days from the receipt of the NOAV.
15. The NOAV also required the City of Trinidad, as operator, to re-enter and properly plug and abandon the Trinidad MGP #1 Well as soon as practicable (no later than August 1, 2007), to submit a Form 6, “Well Abandonment Report” for COGCC Staff review and approval prior to commencing plugging operations, and to post a plugging bond prior to commencing plugging operations.
16. The Bouviers’ insurance company, Fire Insurance Exchange, initially fenced the explosion site to secure it from public access and posted warning signs. The City of Trinidad has cooperated with COGCC requirements to maintain fencing and warning signs. COGCC Staff inspections at the present time indicate the site is relatively safe based on the results of LTE’s soil gas survey and the maintenance of fencing and warning signs.
17. The City of Trinidad and Gustavson Associates, Inc. have consistently denied that they were the “operator” of the Trinidad MGP #1 Well.
18. Interested parties have indicated they want an opportunity to test the Trinidad MGP #1 Well before it is plugged, in anticipation of potential litigation.
19. No entity has agreed to re-enter and re-plug the Trinidad MGP #1 Well, and the NOAV remains unresolved.
20. The Trinidad MGP #1 Well is a safety hazard and needs to be re-entered and re-plugged as soon as possible.
21. According to testimony from the COGCC Staff and the City of Trinidad at the hearing:
a. The Wells were drilled in the early 1980s as part of a program to test coalbeds as a source of natural gas.
b. The Wells were funded by a $4 million grant from the U.S. Department of Energy to the American Public Gas Association (“APGA,” an association of public utilities) for the development of unconventional gas resources (the “project”).
c. Gustavson Associates, Inc. was retained by APGA to manage field work on the project.
d. The City of Trinidad was one of the APGA members chosen for the project.
e. The City of Trinidad obtained an oil and gas lease from MGP Enterprises in anticipation of the Wells being drilled for its benefit.
f. The City of Trinidad owned its own gathering system, and gas from the project would have been used to supply local customers had the project been successful.
g. Payment for drilling, completion, production, and reclamation at the Wells was done by APGA through Gustavson Associates, Inc.
h. After the Wells were completed, the City of Trinidad measured and monitored dewatering of the Wells.
i. The City of Trinidad did not participate in decisions affecting the Wells, including the decision to plug and abandon the Wells, which, according to the City of Trinidad’s testimony, was made by APGA.
j. The Wells did not produce natural gas in economic quantities.
22. After hearing all the evidence presented by the COGCC Staff and the City of Trinidad (the only party identified by the COGCC Staff to be the owner/operator of the Trinidad MGP #1 Well), the Commission could not determine the responsible party pursuant to §34-60-124(7) and (8), C.R.S. (2007) and Rule 524. in this unusual matter involving a federally funded project conducted by an association of public utilities.
23. Since the Commission cannot identify the responsible party, the Commission should authorize the COGCC Staff to utilize money from the Oil and Gas Conservation and Environmental Response Fund to retain suitable contractors to perform the necessary re-entering and re-plugging operations.
24. The Commission should further order that any entity requesting tests or investigations of the wellbore prior to plugging operations shall pay for such tests or investigations and provide the data and results to COGCC Staff upon request.
25. The Commission should further order that the COGCC Staff is under no obligation to comply with requests for tests or investigations if the tests or investigations unduly delay the plugging operations or threaten public health, safety, or welfare, or the environment.
ORDER
NOW, THEREFORE, IT IS ORDERED, that the Colorado Oil and Gas Conservation Commission (“Commission”) hereby finds that there was insufficient evidence to determine that the City of Trinidad was the responsible party under §34-60-124(7) and (8), C.R.S. (2007) and Rule 524. for natural gas leaking from the Trinidad MGP #1 Well, API #05-071-6045, located in the NW¼ NW¼ of Section 32, Township 33 South, Range 66 West, 6th P.M.
IT IS FURTHER ORDERED, that this matter is unusual because it involves a federally funded project conducted by an association of public utilities for the benefit of members chosen by the association.
IT IS FURTHER ORDERED, that since the Commission is unable to determine the responsible party in this matter, the Commission authorizes the COGCC Staff to utilize money from the Oil and Gas Conservation and Environmental Response Fund to retain suitable contractors to perform the necessary re-entering and re-plugging operations.
IT IS FURTHER ORDERED, that if the COGCC Staff utilizes money from the Oil and Gas Conservation and Environmental Response Fund to carry out the necessary mitigation of the Trinidad MGP #1 Well, API #05-071-6045, any entity requesting tests or investigations of the wellbore prior to plugging operations shall pay for such tests or investigations, and provide the data and results to COGCC staff upon request; and, further, the COGCC Staff shall be under no obligation to comply with such requests if, according to COGCC Staff’s determination, the requests unduly delay the plugging operations or would threaten public health, safety, or welfare, or the environment.
IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this order to be final agency action for purposes of judicial review within 30 days after the date this order is mailed by the Commission.
IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this order is not required prior to the filing for judicial review.
IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.
IT IS FURTHER ORDERED, that the Commission expressly reserves its right after notice and hearing, to alter, amend, or repeal any and/or all of the above orders.
ENTERED this ______ day of March, 2008, as of February 26, 2008.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Patricia C. Beaver, Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
March 26, 2008