BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF ALLEGED VIOLATIONS OF THE RULES ) CAUSE NO.1
AND REGULATIONS OF THE COLORADO OIL AND GAS )
CONSERVATION COMMISSION BY ALLEN OIL & GAS LLC, ) ORDER
NO. 1V-170
TOW CREEK FIELD, ROUTT COUNTY, COLORADO ) AMENDED
This cause came on for hearing before the Colorado Oil and Gas Conservation Commission on March 25, 1999 at 8:30 a.m. in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing as required by law, on why Allen Oil and Gas LLC is in continuing violation of Rule 319.b., 326., 603.g., 902., 904., 905., 906., 909.b.(2) & (5) and 910. and why the Commission should not invoke the provisions of §34-60-121 C.R.S., as amended, to assess penalties for violations of the Rules and Regulations of the Commission.
FINDINGS
The Commission finds as follows:
1. Allan Oil and Gas LLC 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 of the subject matter embraced in said Notice, and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.
4. On August 22, 1996 Colorado Oil and Gas Conservation Commission ("COGCC") staff inspected the Bradley #2 Well located in the NE¼ NW¼ of Section 18, Township 6 North, Range 86 West, 6th P.M. and found the flowline had been disconnected and the well had not produced for over two (2) years. On August 27, 1996 COGCC staff issued a Notice of Alleged Violation ("NOAV") to the operator B.G. Cannon Oil Company requiring that the well be returned to production, pass a mechanical integrity test (“MIT”) or be plugged and abandoned by August 1, 1997. The lease was sold to Allen Oil & Gas LLC ("Allen") in June 1997 prior to the abatement deadline. Allen requested and was granted an extension of the abatement deadline until July 1, 1998. On June 11, 1998 Allen indicated it would not meet the deadline and requested an additional extension until October 1, 1998. On July 20, 1998 the COGCC Director, State Representative Jack Taylor, landowners Kenny and Wayne Morton, Claude Allen and the COGCC Northwest Area Engineer met in the Tow Creek Field to discuss landowner complaints, the many outstanding rules violations and to inspect the lease. Additional violations were noted at other locations. Based on the comments of the meeting, COGCC staff drafted a Benchmark Schedule to give the operator another opportunity to comply with COGCC rules without causing undue economic hardship. On August 20, 1998 COGCC staff sent a NOAV to Allen for the Bradley #2 Well as an enforcement instrument of the Benchmark Schedule. The NOAV cited Rule 326.b., shut-in wells shall pass a MIT within two (2) years of the initial shut-in date, and/or Rule 319.b., wells incapable of production shall be plugged and abandoned within six (6) months. The NOAV required that the well either be returned to production, pass a MIT, or be plugged and abandoned. The NOAV required abatement no later than October 1, 1998. On September 30, 1998 Allen requested and was granted an extension of the abatement deadline until November 1, 1998. To date, a MIT has not been performed, the well has not been plugged or returned to production and is in continuing violation of Rule Nos. 326.b. and/or 319.b.
5. On July 20, 1998 the COGCC Director, State Representative Jack Taylor, landowners Kenny and Wayne Morton, Claude Allen and the COGCC Northwest Area Engineer inspected the Bradley #3 Well located in the NE¼ NW¼ of Section 18, Township 6 North, Range 86 West, 6th P.M., and found the well to be temporarily abandoned, having not produced for over two (2) years. On August 20, 1998 COGCC staff sent a NOAV to Allen for the Bradley #3 Well as an enforcement instrument of the above-referenced Benchmark Schedule. The NOAV cited Rule 326.b., shut-in wells shall pass a MIT within two (2) years of the initial shut-in date, and/or Rule 319.b., wells incapable of production shall be plugged and abandoned within six (6) months. The NOAV required that the well be either returned to production, pass a MIT, or be plugged and abandoned. The NOAV required abatement no later than October 1, 1998. On September 30, 1998 Allen requested and was granted an extension of the abatement deadline until November 1, 1998. To date, a MIT has not been performed; the well has not been plugged or returned to production and is in continuing violation of Rules 326.b. and/or 319.b.
6. On August 22, 1996 COGCC staff inspected the Bradley #4 Well located in the NE¼ NW¼ of Section 18, Township 6 North, Range 86 West, 6th P.M. and found an unlined production pit in use for water disposal located in the Yampa River floodplain, a sensitive area. Published information shows that water produced from the Niobrara Formation in the Tow Creek Field has a salinity of 25,000 parts per million total dissolved solids. The pit also contained oil stained soil and some free oil. On August 27, 1996 COGCC staff issued a NOAV to the operator B.G. Cannon Oil Company citing what was then Rule 907., prohibiting release of saline produced water into the waters of the state. The NOAV required that the pit be closed by August 1, 1997. The lease was sold to Allen in June 1997 prior to the abatement deadline. Allen requested and was granted an extension of the abatement deadline until September 1, 1997. Staff contacted Allen on October 14, 1997 regarding a surface owner complaint from Mr. Kenny Morton and to follow up on the pit closure. Claude Allen indicated that the pit had been closed by the deadline. On July 20, 1998 the COGCC Director, State Representative Jack Taylor, landowners Kenny and Wayne Morton, Claude Allen and the COGCC Northwest Area Engineer inspected the location and found the pit to still be in use with free oil on the surface. On August 20, 1998 COGCC staff sent a NOAV to Allen for the Bradley #4 Well as an enforcement instrument of the above-referenced Benchmark Schedule. The NOAV cited Rule 904., production pits in sensitive areas shall be lined, and Rule 905., pits shall be closed in accordance with an approved Site Investigation and Remediation Workplan, Form 27. The NOAV required that the operator discontinue dumping produced water into the pit, file a pit closure plan in accordance with Rule 905. and close and reclaim the pit. The NOAV required abatement no later than October 1, 1998. On September 30, 1998 Allen requested and was granted an extension of the abatement deadline until November 1, 1998. To date, the pit has not been closed and is in continuing violation of Rule Nos. 904. and 905. In addition, use of the pit is a continuing violation of Rule 902. and has caused a significant adverse environmental impact.
7. On July 20, 1998 the COGCC Director, State Representative Jack Taylor, landowners Kenny and Wayne Morton, Claude Allen and the COGCC Northwest Area Engineer inspected the Bradley #5 Well located in the NE¼ NW¼ of Section 18, Township 6 North, Range 86 West, 6th P.M. and found the well to be temporarily abandoned, having not produced for over two (2) years. On August 20, 1998 COGCC staff sent a NOAV to Allen for the Bradley #5 Well as an enforcement instrument of the above-referenced Benchmark Schedule. The NOAV cited Rule 326.b., shut-in wells shall pass a MIT within two (2) years of the initial shut-in date, and/or Rule 319.b., wells incapable of production shall be plugged and abandoned within six (6) months. The NOAV required that the well be either returned to production, pass a MIT, or be plugged and abandoned. The NOAV required abatement no later than October 1, 1998. On September 30, 1998 Allen requested and was granted an extension of the abatement deadline until November 1, 1998. To date, a MIT has not been performed, the well has not been plugged or returned to production and is in continuing violation of Rules 326.b. and/or 319.b.
8. On July 20, 1998 the COGCC Director, State Representative Jack Taylor, landowners Kenny and Wayne Morton, Claude Allen and the COGCC Northwest Area Engineer inspected the State #1 Well located in the SE¼ NW¼ of Section 18, Township 6 North, Range 86 West, 6th P.M., and found the well to be temporarily abandoned, having not produced for over two (2) years. Surplus tanks, equipment and debris were present along with oily contaminated soil. Adjacent to the site were three (3) water disposal pits. The two (2) upper pits were lined and the lower pit was not lined. The liner was torn on the middle pit. The two (2) lower pits had been allowed to overflow. The overflow and subsurface leachate had resulted in salt staining the hillside and road adjacent to and below the site. The leachate was flowing directly into the Yampa River. On August 20, 1998 COGCC staff sent three (3) NOAVs to Allen for the State #1 Well as enforcement instruments of the above-referenced Benchmark Schedule.
The first NOAV cited Rule 326.b., shut-in wells shall pass a MIT within two (2) years of the initial shut-in date, and/or Rule 319.b., wells incapable of production shall be plugged and abandoned within six (6) months. The NOAV required that the well either be returned to production, pass a MIT and be converted to a disposal well, or be plugged and abandoned. The operator agreed to convert the well to disposal as a means of complying with the third NOAV. The first NOAV required abatement no later than October 1, 1998. On September 30, 1998 Allen requested and was granted an extension of the abatement deadline until November 1, 1998. The well failed a MIT on October 5, 1998 and was not repaired. To date, the well has not been repaired and converted to disposal or plugged and is in continuing violation of Rule Nos. 326.b and/or 319.b.
The second NOAV cited Rule 603.g., the location shall be kept free of unnecessary equipment and debris and Rule 906.a. and e., spills shall be reported, controlled and remediated. Tanks, surplus equipment, junk and debris were required to be removed and the contaminated soil was required to be removed or remediated. The NOAV required abatement no later than October 1, 1998. On September 30, 1998 Allen requested and was granted an extension of the abatement deadline until November 1, 1998. Some of the debris was removed prior to the deadline. The tanks and contaminated soil are still present and in continuing violation of Rule Nos. 603.g. and 906.a. and e.
The third NOAV cited Rule 906., spills and releases must be reported, investigated and remediated, Rule 909.b.(2) and (5), requires sampling, analysis and remediation and Rule 910., soil and ground water concentrations shall not be exceeded. The operator was required to cease pit disposal (percolation) of the produced water. The NOAV required abatement no later than December 1, 1998. Disposed water into the pits is leaching into the Yampa River. The operation is in continuing violation of Rules 906., 909.b.(2) and (5) and 910. In addition, the operation is also in continuing violation of Rule 902.
9. On July 20, 1998 the COGCC Director, State Representative Jack Taylor, landowners Kenny and Wayne Morton, Claude Allen and the COGCC Northwest Area Engineer inspected the State #2 Well located in the NE¼ NW¼ of Section 18, Township 6 North, Range 86 West, 6th P.M., and found the well to be temporarily abandoned, having not produced for over two (2) years. On August 20, 1998 COGCC staff sent a NOAV to Allen for the State #2 Well as an enforcement instrument of the above-referenced Benchmark Schedule. The NOAV cited Rule 326.b., shut-in wells shall pass a MIT within two (2) years of the initial shut-in date, and/or Rule 319.b., wells incapable of production shall be plugged and abandoned within six (6) months. The NOAV required that the well be either returned to production, pass a MIT, or be plugged and abandoned. The NOAV required abatement no later than October 1, 1998. On September 30, 1998 Allen requested and was granted an extension of the abatement deadline until November 1, 1998. To date, a MIT has not been performed, the well has not been plugged or returned to production and is in continuing violation of Rules 326.b. and/or 319.b.
10. On July 20, 1998 the COGCC Director, State Representative Jack Taylor, landowners Kenny and Wayne Morton, Claude Allen and the COGCC Northwest Area Engineer inspected the State #5 Well located in the NE¼ NW¼ of Section 18, Township 6 North, Range 86 West, 6th P.M., and found the well to be temporarily abandoned, having not produced for over two (2) years. On August 20, 1998 COGCC staff sent a NOAV to Allen for the State #5 Well as an enforcement instrument of the above-referenced Benchmark Schedule. The NOAV cited Rule 326.b., shut-in wells shall pass a MIT within two (2) years of the initial shut-in date, and/or Rule 319.b., wells incapable of production shall be plugged and abandoned within six (6) months. The NOAV required that the well be either returned to production, pass a MIT, or be plugged and abandoned. The NOAV required abatement no later than October 1, 1998. On September 30, 1998 Allen requested and was granted an extension of the abatement deadline until November 1, 1998. To date, a MIT has not been performed, the well has not been plugged or returned to production and is in continuing violation of Rules 326.b. and/or 319.b.
11. After testimony and evidence were presented by COGCC staff at the January 14, 1999 hearing the Commission issued Order No. 1C-2, in which Allen voluntarily agreed to cease and desist operations on the Bradley #4 and the State # 3 Wells no later than midnight on January 16, 1999 for a period of sixty (60) days or until an earlier hearing date on Mr. Allen’s request. The Commission continued the Order Finding Violation and the Responsible Party Determination portions of the original application to the February or March 1999 hearing, upon advisement by Mr. Allen to the Commission no later than January 31, 1999. The Commission ordered that Allen cease and desist any further violations of the Act, Rules and Regulation, and Orders of the Commission.
12. COGCC staff has estimated plugging and reclamation costs in the Tow Creek Field at approximately One Hundred Thirteen Thousand Two Hundred Seventy Five Dollars ($113,275). Allen, as operator, has stated it has no alternative funds available to pay for plugging operations or further compliance. Accordingly, the salvage value of the equipment in question may be needed to augment the Thirty Thousand Dollar ($30,000) plugging bond, to the extent funds for plugging operations are obtained from the Environmental Response Fund. §34-60-124 (4) and (7), C.R.S. Outstanding NOAVs exist on five (5) other wells operated by Allen in the Buck Peak Field which are not addressed in this proceeding, the status of which may be affected by the outcome of this matter. Staff has estimated the plugging and reclamation cost at Buck Peak to be an additional One Hundred Six Thousand Eight Hundred Fifty Dollars ($106,850).
13. In accordance with Rule 523.d., the following are aggravating factors to be used in determining the fine amount; 523.d.(1), the violations had a significant negative impact, or threat of significant negative impact on the environment or on public health, safety, or welfare; 523.d.(6), the violations involved recalcitrance or recidivism upon the part of the violator; and 523.d.(8), the violation resulted in economic benefit to the violator.
14. A monetary penalty of Twelve Thousand Dollars ($12,000.00) should be assessed against Allen for continuing violation of Rule 326.b., for failure to pass a MIT for the following six (6) wells: the Bradley #2, Bradley #3, Bradley #5, State #1, State #2 and the State #5; for continuing violation of Rule 904., production pits in sensitive areas shall be lined and Rule 905., pits shall be closed in accordance with an approved Site Investigation and Remediation Workplan, Form 27 for the Bradley #4 Well; for continuing violation of Rule 603.g., the location shall be kept free of unnecessary equipment and debris, and Rule 906., failure to mitigate spills, Rule 909.b.(2) and (5), failure to discontinue percolation disposal and Rule 910., soil and ground water pollutant concentrations shall not be exceeded for the State #1 Well. In accordance with Rule 523.a., the base fine for each of these violations is One Thousand Dollars ($1,000.00) per day with a total of twelve (12) violations for a total fine of Twelve Thousand Dollars ($12,000.00).
15. In accordance with §34-60-121(6), C.R.S., the Commission considers Allen's failure to bring the wells and lease into compliance after numerous extensions of time and staff's attempts to work with Allen as evidence of a pattern or violation of Commission rules and orders.
ORDER
NOW, THEREFORE IT IS ORDERED, that Allen Oil & Gas LLC shall be found in continuing violation of Rule 326.b., failure to pass a mechanical integrity test for the following six (6) wells: the Bradley #2, Bradley #3, Bradley #5, State #1, State #2 and the State #5; Rule Nos. 904. and 905. for the Bradley #4 Well and Rule Nos. 603.g., 906., 909.b.(2) and (5), and Rule No. 910. for the State #1 Well.
IT IS FURTHER ORDERED, that Allen Oil & Gas LLC shall be assessed a total fine of Twelve Thousand Dollars ($12,000.00) for the violations, payable within thirty (30) days from the date the Order is issued.
IT IS FURTHER ORDERED, that Allen Oil & Gas LLC shall plug and abandon the Bradley #1, Bradley #2, Bradley #3, Bradley #4, Bradley #5, State #1, State #2, State #3 and the State #5 Wells no later than July 1, 1999.
IT IS FURTHER ORDERED, that Cease and Desist Order No. 1C-2 entered by the Commission on January 21, 1999 as of January 14, 1999, shall remain in effect until said order has been fully complied with by Allen Oil & Gas LLC.
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 15th day of April, 1999, as of March 25, 1999.
AMENDED this day of April, 1999.
OIL AND GAS CONSERVATION COMMISSION
By
Dated at Suite 801
1120 Lincoln Street
Denver, CO 80203