BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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. IV-249
ROCKY MOUNTAIN OPERATING COMPANY, )
MESA COUNTY, COLORADO )
REPORT OF THE COMMISSION
This cause came on for hearing before the Colorado Oil and Gas Conservation Commission on December 1, 2003 at 10:00 a.m. in Suite 801, the Chancery Building, 1120 Lincoln Street, Denver, Colorado after giving notice of hearing as required by law on why Rocky Mountain Operating Company is in violation of Rule 1004.a. for one (1) well and in violation of Rule 326.b. or Rule 326.d. for thirty-nine (39) wells, and why the Commission should invoke the provisions of §34-60-122, C.R.S., as amended, providing for penalties for violations of the Rules and Regulations of the Commission.
FINDINGS
1. On January 7, 2002 the Colorado Oil and Gas Conservation Commission (“COGCC”) issued Order No. 1V-219 finding Rocky Mountain Operating Company (“RMOC”) in violation of Rule 326.b. requiring the Nichols No. 1-23 Well located in the SW¼ NE¼ of Section 23, Township 10 South, Range 97 West, 6th P.M. to be either repaired or plugged and abandoned by April 17, 2002. The well was plugged on April 29, 2002 and final reclamation should have been completed no later than April 29, 2003. COGCC staff met with RMOC representatives on location on two (2) occasions in May 2002 to discuss reclamation requirements. COGCC staff received several complaints from the landowner concerning lack of reclamation on the well site. COGCC staff called RMOC representatives several times to encourage them to reclaim the location. COGCC staff inspected the location on October 16, 2003 and verified that no reclamation had occurred. RMOC is in continuing violation of Order No. 1V-219 and Rule 1004.a.
2. On May 13, 2002 COGCC staff received a complaint from a neighboring landowner that the Trahern No. 1-20 Well located in the NE¼ SE¼ of Section 20, Township 10 South, Range 96 West, 6th P.M. had been idle for many years and the site was in poor condition. A review of the records indicated the well had not produced since January 1998. On May 28, 2002 COGCC staff inspected the well and found the well was not producing and the site had not been maintained. On May 31, 2002 COGCC staff issued a Notice of Alleged Violation (“NOAV”) to RMOC for failure to comply with Rule 326.b. which states that all shut-in wells shall pass a mechanical integrity test (“MIT”) to be performed on each shut-in well within two (2) years of the initial shut-in date. The abatement deadline was August 19, 2002. On July 31, 2002 and August 9 & 12, 2002 COGCC staff called RMOC and discussed the approaching deadline and a possible compliance plan because other RMOC wells were also in violation of Rule 326.b. RMOC requested extended deadlines to comply with Rule 326.b. and claimed the extension was justifiable due to their willingness and preference to repair the casing leaks while the rig was on location. On August 16, 2002 RMOC submitted a proposed compliance plan with a new abatement deadline of September 19, 2002. The plan also included a schedule for compliance on eleven (11) other wells. The plan was approved in writing by COGCC staff on August 20, 2002 reiterating the agreed upon terms. On September 13, 2002 RMOC requested and received an extension on the abatement deadline until October 19, 2002. On October 23, 2002, after failing to follow the plan, RMOC requested a change to the compliance plan that would eliminate the abatement deadlines altogether. COGCC staff responded immediately that compliance could not be open ended and offered in lieu of the proposed plan, to revert to the NOAV requiring a MIT to be performed with an extension of the deadline for this well and other wells to November 22, 2002, and to comply with Rule 326.d. if the MIT failed. The well failed a MIT on November 7, 2002 and COGCC staff notified RMOC that the well must be either repaired or plugged by May 6, 2003. On March 24, 2003 COGCC staff agreed to a new compliance plan for RMOC which moved the abatement deadline for this well up to April 30, 2003. On April 22, 2003 RMOC requested and received approval for the abatement deadline to be extended until May 31, 2003. To date, no repair or plugging work has been done on this well and it is in continuing violation of Rule 326.b. and d.
3. In early June 2002 COGCC staff contacted RMOC to discuss compliance with Rule 326.b. for eleven (11) wells in the Plateau Field. RMOC indicated they did not have the resources to bring the wells into compliance immediately. COGCC staff asked RMOC to submit a compliance plan addressing the eleven (11) wells by July 1, 2002. No plan was submitted. On August 9, 2002 COGCC staff issued Notices of Alleged Violation (“NOAVs”) to RMOC for the below-listed eleven (11) wells for failure to comply with Rule 326.b. which states that all shut-in wells shall pass a MIT and a MIT shall be performed on each shut-in well within two (2) years of the initial shut-in date.
WELL LOCATION ABATEMENT DEADLINE
Reed 20-3 SW¼ SW¼, 20, 10S, 95W, 6th PM October 25, 2002
Nichols 1-29 NW¼ SW¼, 29, 10S, 95W, 6th PM October 18, 2002
Nichols 1-31 NW¼ SE¼, 31, 10S, 95W, 6th PM October 18, 2002
Nichols 1-32 SW¼ NW¼, 32, 10S, 95W, 6th PM October 18, 2002
Nichols B-1 SW¼ SW¼, 13, 10S, 96W, 6th PM October 18, 2002
Fetters 1-18 SW¼ SE¼, 18, 10S, 96W, 6th PM October 25, 2002
Fetters 3-19 SE¼ SE¼, 19, 10S, 96W, 6th PM October 18, 2002
Curl 20-4 SW¼ NE¼, 20, 10S, 96W, 6th PM October 25, 2002
Shepard 3-20 SW¼ SW¼, 20, 10S, 96W, 6th PM October 18, 2002
Nichols 2-26 SW¼ NE¼, 26, 10S, 97W, 6th PM October 25, 2002
Swetland 1-5 SW¼ NE¼, 5, 11S, 95W, 6th PM October 25, 2002
4. On August 16, 2002 RMOC submitted a proposed compliance plan with a MIT schedule starting September 19, 2002 and deferring other MITs through January 2003. The plan was approved in writing by COGCC staff on August 20, 2002 reiterating the agreed upon terms. On September 13, 2002 RMOC requested and received an extension on the abatement deadline until October 19, 2002. On October 23, 2002, after failing to follow the plan, RMOC requested a change to the compliance plan that would eliminate the abatement deadlines altogether. COGCC staff responded immediately that compliance could not be open ended and offered in lieu of the proposed plan, to revert to the NOAVs requiring MITs to be performed with an extension of the deadline for the eleven (11) wells described above in Finding No. 3 to November 22, 2002, and to comply with Rule 326.d. if the MITs failed. RMOC attempted to perform MITs on six (6) of the wells between October 13, 2002 and November 2, 2002 and was unsuccessful in each case. No MITs were attempted on the remaining five (5) wells. COGCC staff notified RMOC that each well that failed a MIT must be either repaired or plugged and abandoned within six (6) months, and that COGCC staff would issue an Administrative Order by Consent (“AOC”) for the remaining untested wells. On March 4, 2003 COGCC staff received a complaint from the landowner on one of the untested wells, the Swetland 1-5 Well. On March 7, 2003, COGCC staff offered an AOC to RMOC to address the wells on which no MITs were attempted. RMOC requested a meeting to discuss the matter, and on March 24, 2003, a meeting was held to discuss the AOC and a new compliance plan. COGCC staff withdrew the AOC and agreed to a new compliance plan which required RMOC to resume testing and begin repairs in a timely manner. The plan required RMOC to first begin work on the two (2) wells the COGCC staff had received complaints and address the others according to the schedule. Work on the first two (2) wells was to be completed by April 30, 2003. On April 22, 2003 RMOC requested and was granted an extension to complete work on the first two (2) wells until May 31, 2003. To date, no further work has been attempted on any of the eleven (11) wells. Five (5) of these wells are in continuing violation of Rule 326.b. and six (6) of these wells are in continuing violation of Rule 326.b. and d.
5. RMOC is operator of twenty (20) fee wells and seven (7) federal wells for a total of twenty seven (27) wells listed below and not previously addressed in this order. These wells are shut-in and have not been tested for mechanical integrity within two (2) years of their shut-in date. NOAVs have not been issued on these wells yet as they are in recent violation of Rule 326.b. NOAVs will be issued in the near future and the operator will be given six (6) months to comply with Rule 326.b. subject to financial assurance considerations described herein.
FEE WELLS
WELL LOCATION MIT DUE DATE
Tupper 13-13 SW¼ SW¼, 13, 10S, 95W, 6th PM November 1, 2003
Lyons 14-1 NE¼ NE¼, 14, 10S, 95W, 6th PM November 1, 2003
Lyons 14-2 SW¼ NW¼, 14, 10S, 95W, 6th PM November 1, 2003
Kathlyn
Young 4-15 NW¼ SE¼, 15, 10S, 95W, 6th PM November
1, 2003
Kathlyn Young 1-15 NW¼ SW¼, 15, 10S, 95W, 6th PM November
1, 2003
Carpenter 15-1 SW¼ NE¼, 15, 10S, 95W, 6th PM November
1, 2003
Big Creek L&C SW¼ NE¼, 16, 10S, 95W, 6th
PM November 1, 2003
Livingston 11-2 NE¼ SE¼, 11, 10S, 96W, 6th PM March
1, 2002
Pallaoro 14-2 SE¼ SW¼, 14, 10S, 96W, 6th PM November 1, 2003
Pallaoro 15-2 NE¼ SW¼, 15, 10S, 96W, 6th PM March 1, 2003
Pallaoro 15-1 SE¼ SE¼, 15, 10S, 96W, 6th PM September 1, 2002
Currier 14-16 SE¼ SW¼, 16, 10S, 96W, 6th PM November 1, 2003
Harvey 5-19 NE¼ SW¼, 19, 10S, 96W, 6th PM June 1, 2003
Fetters 1-19 SE¼ NW¼, 19, 10S, 96W, 6th PM March 1, 2002
Ute 1-20 SE¼ NW¼, 20, 10S, 96W, 6th PM January 1, 2002
Law 28-2 NE¼ NW¼, 28, 10S, 96W, 6th PM November 1, 2003
Blair 1 SW¼ NE¼, 1, 10S, 97W, 6th PM November 1, 2003
Wolverton 1-13 NW¼ SE¼, 13, 10S, 97W, 6th PM November 1, 2003
Nichols 1-15 NW¼ SE¼, 15, 10S, 97W, 6th PM July 1, 2001
Barnard 1 NW¼ SE¼, 14, 10S, 96W, 6th PM November 1, 2003
FEDERAL WELLS
WELL LOCATION MIT DUE DATE
Colorado Water 15-2 NW¼ NW¼, 15, 10S, 95W, 6th PM November 1, 2003
Federal 6-2 NE¼ SW¼, 6, 10S, 96W, 6th PM January 16, 1983
U.S. Moran 28-1 SW¼ NE¼, 28, 10S, 96W, 6th PM October 30, 1963
Federal 1-3 SW¼ SW¼, 1, 10S, 97W, 6th PM November 1, 2003
USA 2-12 SE¼ SE¼, 12, 10S, 97W, 6th PM August 16, 1984
USA 1-27 SW¼ NE¼, 27, 10S, 97W, 6th PM July 20, 1984
Federal Shire Gl 35-1 NE¼ NE¼, 35, 9S, 97W, 6th PM December 1, 2003
6. RMOC should be found in violation of Order No. 1V-219 and Rule 1004.a., for failure to reclaim the Nichols 1-23 well site located in the SW¼ NE¼ of Section 23, Township 10 South, Range 97 West, 6th P.M.
7. RMOC should be found in violation of Rules 326.b. and d. for the below-listed seven (7) wells which failed to pass MIT’s in October 2002 and November 2002 and have not been repaired or plugged and abandoned within six (6) months of failure.
WELL LOCATION REPAIR/P&A DUE DATE
Reed 20-3 SW¼ SW¼, 20, 10S, 95W, 6th PM April 25, 2003
Nichols 1-29 NW¼ SW¼, 29, 10S, 95W, 6th PM April 22, 2003
Nichols 1-31 NW¼ SE¼, 31, 10S, 95W, 6th PM April 16, 2003
Nichols 1-32 SW¼ NW¼, 32, 10S, 95W, 6th PM April 19, 2003
Nichols B-1 SW¼ SW¼, 13, 10S, 96W, 6th PM April 30, 2003
Curl 20-4 SW¼ NE¼, 20, 10S, 96W, 6th PM May 1, 2003
Trahern 1-20 NE¼ SE¼, 20, 10S, 96W. 6th PM May 6, 2003
8. RMOC should be found in violation of Rule 326.b. for the below-listed five (5) wells which have not had a MIT within two (2) years of shut-in or within five (5) years of the last MIT. NOAVs have been issued but not abated and the wells are in continuing violation of Rule 326.b.
WELL LOCATION NOAV ABATEMENT DUE
Fetters 1-18 SW¼ SE¼, 18, 10S, 96W, 6th PM October 25, 2002
Fetters 3-19 SE¼ SE¼, 19, 10S, 96W, 6th PM October 18, 2002
Shepard 3-20 SW¼ SW¼, 20, 10S, 96W, 6th PM October 18, 2002
Nichols 2-26 SW¼ NE¼, 26, 10S, 97W, 6th PM October 25, 2002
Swetland 1-5 SW¼ NE¼, 5, 11S, 95W, 6th PM October 25, 2002
9. A monetary penalty of two thousand dollars ($2,000) per well should be assessed to RMOC for each of the seven (7) wells in violation of Rules 326.b. and d., each of the five (5) wells in violation of Rule 326.b., and for the Nichols 1-23 Well for violation of Rule 1004.a. (13 wells total), for a total fine of Twenty Six Thousand dollars ($26,000).
10. Rule 523.c. specifies a base fine of One Thousand dollars ($1,000) per violation of Rule 326. and Rule1004. Aggravating factors used to recommend increasing the base fine were: 1) the violation was intentional; 2) the violation had a threat of significant negative impact on the environment; 3) the violation involved recidivism; and 4) the violation resulted in economic benefit to the violator.
11. Due to the failure of seven (7) wells to pass a MIT, and the lack of MITs being performed on five (5) other wells, the violations of Rules 326.b. and d. described above in Finding Nos. 7 and 8 constitute a threat to cause a significant adverse environmental impact.
12. RMOC should be given ninety (90) days to achieve full compliance for the thirteen (13) wells described in Finding Nos. 1, 2, and 3.
13. If RMOC does not achieve full compliance within ninety (90) days for the thirteen (13) wells described in Finding Nos. 1, 2, and 3, COGCC staff should be authorized to make a claim upon the Thirty Thousand dollars ($30,000) Cashier’s Check posted as financial assurance and be
authorized to use the Environmental Response Fund to proceed with the plugging, abandonment and reclamation of each of the above-listed thirteen (13) wells in violation of COGCC rules. COGCC staff should be authorized to confiscate and sell for salvage any equipment in accordance with §34-60-124(6)(c), C.R.S. COGCC staff estimates the cost to plug, abandon and reclaim these wells will be approximately Three Hundred and Five Thousand dollars ($305,000).
14. RMOC is the operator of nine (9) producing wells with combined production of approximately four thousand (4,000) MCF per month. This represents an average daily production of fifteen (15) MCFD per well. Revenue associated with this production and the potential of other existing shut-in wells is not sufficient to bring all of the wells in violation into compliance. RMOC should be given ninety (90) days from the date the order is entered to post financial assurance in the total amount of One Hundred Thousand dollars ($100,000) with the COGCC in order to remain the operator of the nine (9) wells capable of production and of the twenty (20) shut-in fee wells described above in Finding No. 5.
15. Failure to post the Seventy Thousand dollars ($70,000) of additional financial assurance within ninety (90) days of the date the order is entered should result in the immediate suspension of the Certificate of Clearance and/or Change of Operator, Form 10, for each of the nine (9) producing wells, resulting in the shutting-in of these producing wells.
16. In the event that a Change of Operator, Form 10, is submitted for any well in this Order, all deadlines and obligations contained herein should be binding upon the new operator.
17. Pursuant to Rule 510., Max Goodwin, trustee for Swetland Well, made a statement regarding his concerns about the integrity of the casing in the Swetland Well. He stated his belief that RMOC is under capitalized and will not be able to raise money to meet its obligations. Mr. Goodwin would like the Swetland Well plugged and abandoned.
18. At the time of the hearing, after consultation with RMOC, COGCC staff proposed a revised recommended order for the Commission’s consideration.
19. After testimony was presented by the COGCC staff in support of the recommended order, RMOC concurred with the proposed revisions.
20. Upon deliberation, the Commission determined that the revised recommended order should be adopted with the following provisions: the Nichols Wells should be reclaimed by January 1, 2004, the Swetland and Trahern Wells should be repaired or plugged and abandoned by February 1, 2004, monthly status reports should be submitted to COGCC staff on January 1, 2004, February 1, 2004 and March 1, 2004, and that the January 1st report should contain a plan describing which wells will be tested, repaired, or plugged and abandoned and the estimated cost along with bradenhead tests and well pressures, and all water zones should be isolated with cement plugs for any wells that are plugged and abandoned.
ORDER
NOW, THEREFORE IT IS ORDERED, that Rocky Mountain Operating Company shall be found in violation of Order No. 1V-219 and Rule 1004.a. for the Nichols 1-23 Well located in the SW¼ NE¼ of Section 23, Township 10 South, Range 97 West, 6th P.M. for failure to reclaim the well within one (1) year of the plugging date.
IT IS FURTHER ORDERED, that Rocky Mountain Operating Company shall be found in violation of Rules 326.b. and d. for failure to either repair and pass a MIT or plug and abandon the below-listed seven (7) wells within six (6) months of their failure to pass a mechanical integrity test, and that these violations hereby constitute a threat to cause a significant adverse environmental impact:
WELL LOCATION MIT FAILURE DATE
Reed 20-3 SW¼ SW¼, 20, 10S, 95W, 6th PM October 25, 2002
Nichols 1-29 NW¼
SW¼, 29, 10S, 95W, 6th PM October 22, 2002
Nichols 1-31 NW¼
SE¼, 31, 10S, 95W, 6th PM October 15, 2002
Nichols 1-32 SW¼ NW¼, 32, 10S, 95W, 6th PM October 19, 2002
Nichols B-1 SW¼ SW¼, 13, 10S, 96W, 6th PM October 30, 2002
Curl 20-4 SW¼ NE¼, 20, 10S, 96W, 6th PM November 1, 2002
Trahern 1-20 NE¼ SE¼, 20, 10S, 96W, 6th P.M. November 7, 2002
IT IS FURTHER ORDERED, that Rocky Mountain Operating Company shall be found in violation of Rule 326.b. for the below-listed five (5) wells for failure to perform mechanical integrity tests within two (2) years of shut-in dates or within five (5) years of a previous mechanical integrity test, and these violations hereby constitute a threat to cause a significant adverse environmental impact:
WELL LOCATION NOAV ABATEMENT DUE
Fetters 1-18 SW¼ SE¼, 18, 10S, 96W, 6th PM October 25, 2002
Fetters 3-19 SE¼ SE¼, 19, 10S, 96W, 6th PM October 18, 2002
Shepard 3-20 SW¼ SW¼, 20, 10S, 96W, 6th PM October 18, 2002
Nichols 2-26 SW¼ NE¼, 26, 10S, 97W, 6th PM October 25, 2002
Swetland 1-5 SW¼ NE¼, 5, 11S, 95W, 6th PM October 25, 2002
IT IS FURTHER ORDERED, that Rocky Mountain Operating Company shall be assessed a fine of Two Thousand dollars ($2,000) for each of the above-described violations of Rules 1004.a., 326.b. and 326.d., for a total of thirteen (13) violations and a total fine of Twenty-six Thousand dollars ($26,000), payable within ninety (90) days of the date the order is entered by the Commission.
IT IS FURTHER ORDERED, that if Rocky Mountain Operating Company does not achieve full compliance within ninety (90) days for the thirteen (13) wells described in Finding Nos. 1, 2, and 3, COGCC staff is hereby authorized to commence a claim on the Thirty Thousand dollar ($30,000) Cashier’s Check posted as financial assurance by Rocky Mountain Operating Company to plug, abandon and reclaim the wells. COGCC staff is hereby authorized to expend money from the Environmental Response Fund to plug, abandon and reclaim the wells, and to confiscate and sell for salvage any equipment to offset plugging, abandonment and reclamation costs.
IT IS FURTHER ORDERED, that Rocky Mountain Operating Company shall post financial assurance with the COGCC in the total amount of One Hundred Thousand dollars ($100,000) within ninety (90) days of the date the order is entered in order to continue as the operator of the twenty (20) shut-in fee wells and the nine (9) producing wells identified in Finding Nos. 5 and 14.
IT IS FURTHER ORDERED, that if Rocky Mountain Operating Company does not achieve full compliance within ninety (90) days for the thirteen (13) wells described in Finding Nos. 1, 2, and 3, the Certificate of Clearance and/or Change of Operator, Form 10, shall be suspended for the nine (9) producing wells and these wells shall be shut-in.
IT IS FURTHER ORDERED, that the Nichols Wells shall be reclaimed by January 1, 2004.
IT IS FURTHER ORDERED, that the Swetland and Trahern Wells shall be repaired or plugged and abandoned by February 1, 2004.
IT IS FURTHER ORDERED, that monthly status reports shall be submitted to COGCC staff on January 1, 2004, February 1, 2004 and March 1, 2004, and that the January 1st report shall contain a plan describing which wells will be tested, repaired, or plugged and abandoned and the estimated cost, along with bradenhead tests and well pressures.
IT IS FURTHER ORDERED, that all water zones shall be isolated with cement plugs for any wells that are plugged and abandoned.
IT IS FURTHER ORDERED, that in the event that a Change of Operator, Form 10, is submitted for any well in this Order, all deadlines and obligations contained herein shall be binding upon the new operator.
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.
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 thirty (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.
ENTERED this day of December, 2003, as of December 1, 2003.
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
December 12, 2003