REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on July 29, 1996, at 8:30 a.m., in Rifle Town Hall, Council Chambers, Rifle, Colorado, after giving Notice of Hearing as required by law, on why Qualls Operating (Qualls) is not in violation of Rule No. 907.a., unreported and unremediated spill around the skimming vessel and within the tank battery berm, Rule No. 904.c.(1), requiring the use of a leak-proof, covered, skimming vessel, of the Oil and Gas Conservation Commission, and why it should not invoke the provisions of 34-60-121 C.R.S., as amended, providing for penalties for violations of the Rules and Regulations of the Commission.

FINDINGS

The Commission finds as follows:

1. Qualls Operating is an interested party in the subject matter of the above-referenced hearing.

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 March 24, 1994, COGCC staff inspected the Wailes lease located in the SE1/4 of Section 4, Township 2 South, Range 63 West, 6th P.M. The separator and treater were discharging fluid onto the ground, oil was on the production pit, oil was around the skimming vessel, and the soil on the location was oily. On March 28, 1994, staff contacted Qualls concerning the situation and was assured that the situation would be corrected immediately. On May 25, 1994, staff re-inspected the site and the same conditions existed.

5. On November 7, 1995, staff again inspected the site and found violations of Rule 907.a., unreported and unremediated spills at all three well heads, around the treaters, and within the tank battery berm.

6. On June 14, 1996, staff inspected the site again and found violations of Rule 907.a., oil and water spilled around the skimming vessel and within the tank battery berm, and Rules 902.a., e. and f., buried cement vault leaking water and oil, production pit with oil on surface, production pit screen collapsed. Seven dead birds were also found within two oil covered pits. On June 18, 1996, Notices of Alleged Violation (NOAV) were hand delivered and ac cepted by Qualls specifying the alleged rule violations and the work required to resolve the alleged infractions. Compliance was required by June 25, 1996. Concurrently, an Administrative Order by Consent (AOC) was delivered for violation of Rule 322A.a. with a recommended fine of Two Thousand Dollars ($2,000).

7. On June 27, 1996, staff re-inspected the site. Two (2) issues of non-compliance were unresolved. The NOAV pertaining to Rule 904.c.(1) which required the soil surrounding the buried concrete skimming vessel be excavated to determine if leakage was occurring had not been performed. The NOAV pertaining to Rule 907.a., requiring remediation of the oil saturated soil near the treater and inside the production tank berm was not accomplished (clean soil had been placed over the affected area). Although an attempt had been made by Qualls to remediate the soil, the work was not performed adequately.

8. On July 9, 1996, COGCC environmental staff went to the site and took four soil samples to determine the levels of hydrocarbons present. Samples were taken on three (3) sides of the skimming vessel and within the northeast corner of the production tank berm. Lab results indicated hydrocarbon levels in excess of 24,000 mg/kg on the north side of the skimming vessel and inside the northeast berm area. Acceptable levels in a non-sensitive area as desc ribed in Rule 907.d.(3)A.ii are not to exceed 10,000 mg/kg.

9. On July 18, 1996, staff met with representatives of Qualls on site. The buried skimming vessel was excavated to an approximate depth of six (6) feet. It appeared that the soil had not been previously excavated to a depth sufficient to determine vault integrity. It was also determined that the vault lacked integrity due to the lack of a seal surrounding the inlet pipe. Holes were also found in the pipe leading into the vault. Staff was present du ring the replacement of the pipe and was advised of the procedure to seal the opening surrounding the pipe inlet.

10. On July 19, 1996, an AOC was submitted to Qualls recommending that Qualls Operating not be found in violation of Rule 907.a., since an effort was made to remediate the oil saturated soil, but be found in violation of Rule No. 904.c(1), requiring the use of a leak-proof, covered, skimming vessel and that a fine of One Thousand Five Hundred Dollars ($1,500) be assessed.

11. On July 25, 1996, Qualls concurred in writing with the two (2) AOCs dated June 18, 1996 and July 19, 1996 respectively.

12. An order of the Commission should be entered finding Qualls Operating in violation of Rule 322A.a, precautions not taken to prevent adverse environmental impacts to air, water, soil, or biological resources to the extent necessary to protect the public health, safety and welfare by using cost effective and technically feasible measures to protect environmental quality and to prevent the unauthorized discharge or disposal of oil, gas, E&P waste, chem ical substances, trash, discarded equipment or other oil field waste, and Rule No. 904.c(10), use of a leak-proof, covered, skimming vessel. A fine of Two Thousand Dollars ($2,000) should be assessed for violation of Rule 322A.a. and a fine of One Thousand Five Hundred Dollars ($1,500) should be assessed for violation of Rule 904.c.(1), for a total fine of Three Thousand Five Hundred Dollars ($3,500).

O R D E R

NOW, THEREFORE, IT IS ORDERED, that Qualls Operating is in violation of Rule 322A.a, precautions not taken to prevent adverse environmental impacts to air, water, soil, or biological resources to the extent necessary to protect the public health, safety and welfare by using cost effective and technically feasible measures to protect environmental quality and to prevent the unauthorized discharge or disposal of oil, gas, E&P waste, chemical substances, tr ash, discarded equipment or other oil field waste.

IT IS FURTHER ORDERED, that Qualls Operating is in violation of Rule No. 904.c(1), requiring the use of a leak-proof, covered, skimming vessel.

IT IS FURTHER ORDERED, that Qualls shall be assessed a fine of Two Thousand Dollars ($2,000) for violation of Rule 322A.a. and a fine of One Thousand Five Hundred Dollars ($1,500) for violation of Rule 904.c.(1), for a total fine of Three Thousand Five Hundred Dollars ($3,500), payable within thirty (30) days of the date the order is entered.

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 August, 1996, as of July 29, 1996

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 25, 1997 ??

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