BEFORE THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO IN THE MATTER OF ALLEGED VIOLATIONS OF THE

IN THE MATTER OF ALLEGED VIOLATIONS OF THE         CAUSE NO. 1V
RULES AND REGULATIONS OF THE COLORADO OIL
AND GAS CONSERVATION COMMISSION BY                    ORDER NO. 1V-214
McELVAIN OIL & GAS PROPERTIES, INC.
WASHINGTON COUNTY, COLORADO

ADMINISTRATIVE ORDER BY CONSENT

FINDINGS

1. On January 4, 2001, Colorado Oil and Gas Conservation Commission (“COGCC”) staff conducted an inspection of the Anderson #1 tank battery operated by McElvain Oil & Gas Properties, Inc. (“McElvain”) located in the NE¼ SW¼ of Section 20, Township 3 South, Range 52 West, 6th P.M. Produced water was being intentionally discharged from an unlined earthen pit into adjacent surface waters.

2. On January 8, 2001, COGCC staff conducted another inspection of the subject site to collect water samples for laboratory analyses. The rate of discharge was estimated at approximately 256 barrels per day (10,752 gallons per day). Samples were collected at the discharge point and from a downstream location. No upstream water was observed and therefore not sampled. Laboratory results of the discharge water indicated non-detectable benzene, toluene, ethylbenzene and xylene (“BTEX”) concentrations and a Total Dissolved Solids (“TDS”) concentration at 2,720 mg/l. Laboratory results of the downstream surface water indicated non-detectable BTEX concentrations and a TDS concentration at 2,740 mg/l.

3. On January 9, 2001, COGCC staff informed McElvain by telephone to cease discharge activities immediately.

4. On January 17, 2001, COGCC staff issued a Notice of Alleged Violation (“NOAV”) to McElvain for the unauthorized and intentional discharge of produced water into an unnamed surface drainage. The NOAV cited violation of: Rule 324A.a., failure to prevent the unauthorized discharge of Exploration and Production (“E&P”) waste; Rule 324A.b., performing an act or practice which shall constitute a violation of water quality standards or classifications established by the Water Quality Control Commission (“WQCC”) for waters of the state; Rule 902.a., failure to operate a pit in order to protect the waters of the state from significant adverse environmental impacts from E&P waste; Rule 907.a.(1), failure to ensure that E&P waste is properly stored, handled, transported, treated, recycled or disposed to prevent threatened or actual significant adverse environmental impacts to water, soil or biological resources or to the extent necessary to ensure compliance with the allowable concentrations and levels in Table 910-1, with consideration to WQCC ground water standards and classifications; and Rule 907.a.(2), failure to conduct E&P waste management activities to protect the waters of the state from significant adverse environmental impacts from E&P waste; and Rule 907.c.(2), disposal of produced water by an unacceptable method. The NOAV specified an abatement date of January 31, 2001 to submit an explanation for the discharge activity and when the discharge commenced. Additionally, a Form 27 – Site Investigation and Remediation Workplan was required for soil sampling at the discharge area.

5. Per return receipt, the NOAV was accepted by McElvain on January 18, 2001.

6. As of January 25, 2001, discharges into the adjacent surface waters had ceased. COGCC staff met onsite with McElvain representatives to conduct an inspection of the facility, to discuss produced water disposal options, and to discuss soil sampling requirements. COGCC staff also granted an extension for submittal of any soil sample results.

7. On January 31, 2001, the required explanation for the unauthorized discharge was received by the COGCC. The discharge was commenced on January 3, 2001 and ceased on January 9, 2001.

8. On March 22, 2001, the laboratory results for the required soil sampling were received by the COGCC. Potential contaminant concentrations were below the COGCC Allowable Concentrations and Levels as per Table 910-1.

9. A monetary penalty of Six Thousand dollars ($6,000.00) for violation of Rules 324A.a., 324A.b., 902.a., 907.a.(1), 907.a.(2), and 907.c.(2) should be assessed against McElvain for these violations in accordance with Rule 523.a. Aggravating factors in this matter are that the violations were intentional and that the violator did not self-report the incident.

ORDER

NOW, THEREFORE IT IS ORDERED, that McElvain shall be found in violation of Rules 324A.a., 324A.b., 902.a., 907.a.(1), 907.a.(2), and 907.c.(2), for failure to ensure that E&P waste is properly stored, handled, transported, treated, recycled or disposed and for the unauthorized and intentional discharge of produced water into adjacent surface waters at the Anderson #1 tank battery located in the NE¼ SW¼ of Section 20, Township 3 South, Range 52 West, 6th P.M.

IT IS FURTHER ORDERED, that McElvain shall be assessed a total fine of Six Thousand dollars ($6,000.00) for violation of Rules 324A.a., 324A.b., 902.a., 907.a.(1), 907.a.(2), and 907.c.(2), for failure to ensure that E&P waste is properly stored, handled, transported, treated, recycled or disposed and for the unauthorized and intentional discharge of produced water into adjacent surface waters, payable within thirty (30) days of the date the order is approved by the Commission.

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.

RECOMMENDED this 25th day of April 2001, as of April 25, 2001.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dated at Suite 801 Morris Bell, Hearing Officer 1120 Lincoln Street Denver, Colorado 80203 April 25, 2001.

(1V#214)