BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

IN THE MATTER OF ALLEGED VIOLATIONS OF THE RULES AND REGULATIONS OF THE COLORADO OIL AND GAS CONSERVATION COMMISSION BY PIONEER NATURAL RESOURCES USA, INC., LAS ANIMAS COUNTY, COLORADO

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CAUSE NO. 1V

 

ORDER NO. 1V-360

 

 

ADMINISTRATIVE ORDER BY CONSENT

 

(Pursuant to Rule 522.b.(3) of the Rules and Regulations of the

Colorado Oil and Gas Conservation Commission, 2 CCR 404-1)

 

FINDINGS

 

1.     On June 11, 2004, a domestic water well was constructed for Ms. Gopa KA-Ross (“Ms. Ross”) under Colorado Division of Water Resources Permit No. 256909.  The well hereinafter referred to as the "Ross water well" is located in the NE¼ SE¼ of Section 35, Township 32 South, Range 68 West, 6th P.M.  The well is 140 feet deep and is located in a meadow down gradient from a barn and corral.  During drilling of the well, water was encountered at 26 feet and at 118 feet.  The casing of the well is perforated at intervals of 20 to 40 feet and 100 to 140 feet. Between the time of drilling and pump installation, the reported static level of the water was between 24 and 36 feet.  The well was grouted from 22 feet below the surface to the surface.  A pump was set in the well at 130 feet.  

 

2.     On May 4, 2005, Glibota Environmental Inc. (“Glibota”) on behalf of Ms. Ross collected one water sample from the Ross water well.  The sample was submitted to STL Laboratories Inc. for analysis.  The results of this sample showed the quality of the water from the Ross water well, for the parameters tested, met the standards for ground water promulgated by the Colorado Water Quality Control Commission (“WQCC”), Regulation 41, The Basic Standards of Ground Water Rule 41, 5 CCR 1002-41 (“WQCC Regulation 41”) and listed in Table 1, Domestic Water Supply - Human Health Standards (“WQCC Table 1”), Table 2, Domestic Water Supply - Drinking Water Standards (“WQCC Table 2”), and the narrative standards in WQCC Regulation 41.

 

3.     On June 30, 2006, the Colorado Oil and Gas Conservation Commission (“COGCC” or “Commission”) approved an Application for Permit-to-Drill the Molokai #13-36TR Well.  The permit required Pioneer Natural Resources USA Inc. (“Pioneer”) to drill a borehole to 1,050 feet, install surface casing, and cement that casing back to surface before drilling the well to a total depth of 2,250 feet.  The Molokai #13-36 TR Well (API #05-071-08837) is located in the NW¼ SW¼ of Section 36, Township 32 South, Range 68 West, 6th P.M. and is located approximately 1,300 feet east-northeast of the Ross water well.

 

4.     On July 18, 2006, a contractor hired by Pioneer began drilling the borehole for the surface casing of the Molokai #13-36 TR Well.  At approximately 6:45 p.m., while drilling the borehole for the surface casing with air and drill foam, a mechanical problem occurred with the main air compressor used at the Molokai #13-36 TR Well site. The air compressor shut down due to the mechanical problem and the drill bit became stuck in the uncased hole at 355 feet below surface elevation.  Using a back-up compressor, the drilling contractor pressurized the drill pipe to 600 pounds per square inch in an attempt to break the drill bit free.  This was not successful.    At 7:00 p.m., the pressure was bled off the drill pipe and the operation shut down to wait on tools. 

 

5.     On Wednesday July 19, 2006, the COGCC Staff received a complaint from Ms. Marilyn Dolores, the adjacent property owner, stating that her water well had been impacted by activities at the Molokai #13-36 TR Well site, which became the subject of a different Administrative Order by Consent (“AOC”), referred to by Order No. 1V-345. 

 

6.     Ms. Ross submitted numerous complaints dating from July 20, 2006 for various issues which involved water quality.  On July 20, 2006, COGCC Staff visited the site of the Ross water well and collected water samples from the well.  A local Pioneer representative in charge of its Raton Basin operations also visited the site and talked to COGCC Staff.  Pioneer suspended all operations on the Molokai #13-36 TR Well, per COGCC instructions to suspend operations.    

 

7.     On Thursday morning, July 20, 2006, Pioneer had also contacted its hydrologic consultant, Norwest Applied Hydrology (“Applied”), and Applied’s local environmental supervisor was directed to collect water samples from the Ross water well.  A water sample was collected from the Ross water well by Applied and was sent to STL Laboratories in Denver - the same company used for the 2005 sample referred to in Finding No. 2. 

 

8.     Also on the morning of July 20, 2006, Pioneer took a call from Ms. Ross in which she complained about dead fish, sonic blasting, and interruption of sweat lodge rituals.  Pioneer offered to pay for Ms. Ross’ to have a hotel room in town while Pioneer was sorting out the situation with the Molokai Well site and ordered Pioneer employees to investigate the water quality allegations.

 

9.     Between July 20, 2006 and October 25, 2006, a total of 18 samples were collected from the Ross water well by Applied on behalf of Pioneer; two additional water samples were collected by Glibota. All of the data from these samples were shared by Pioneer with COGCC Staff, Ms. Ross and Glibota, her consultant.  In October 2006, Pioneer offered to pay for Glibota to sample the Ross water well and provide the laboratory results to Ms. Ross; however, the sampling program was halted when, in a letter dated October 25, 2006, Pioneer received notice from Jesse Manzanares, Attorney, that he had been retained by Ms. Ross to represent her in a claim for damages to her property associated with drilling of the Molokai #13-36 TR Well.  

 

10.   On July 21, 2006 Ms. Ross filed her sixth complaint with the COGCC related to her water well.

 

11.   On July 21, 2006, Pioneer plugged and abandoned the borehole for the surface casing of the initial Molokai #13-36 TR Well, as required by COGCC Staff.

 

12.   On July 31, 2006, COGCC Staff issued Notice of Alleged Violation (“NOAV”) #1393100 to Pioneer citing violations of the following COGCC rules:   

 

a.   Rule 324A.a., which requires an operator to take precautions to prevent significant adverse environmental impacts to water to the extent necessary to protect human health, safety and welfare by using cost effective and technically feasible measures to protect environmental quality and to prevent the unauthorized discharge of oil, gas, chemical substances, or exploration and production waste; and

 

b.   Rule 324A.b., which prohibits an operator from performing any act or practice in the conduct of oil and gas operations that constitutes a violation of water quality standards or classifications established by the WQCC for waters of the state.

 

The NOAV required Pioneer to develop a Site Investigation Remediation Plan (“Plan”), to address water quality impacts, to develop metrics to be used to monitor and measure effectiveness of the Plan, and to develop secondary goals and objectives if initial objectives could not be reached.  The NOAV also required Pioneer to complete and submit an investigative report (“Report”) on the cause of the upset drilling conditions and identification of standard operating practices that could be implemented to reduce potential for additional upsets.

 

13.   On August 4, 2006, Pioneer met one of the corrective action deadlines by submitting the Plan.  The Plan included a description of tasks to investigate, monitor and mitigate the impact to the Ross water well.  The Plan also described the on-going investigation being conducted by Pioneer and its consultant and the associated environmental (soil, water, gas) testing program.

 

14.   On August 16, 2006, Pioneer submitted the Report.  The Report stated that some deviations from standard oil field drilling procedures were found during their investigation of the incident. In this case, the contract drillers continued drilling operations after a compressor failure and continued to drill while working on the equipment.  The standard practice should be to pull drilling pipe back to a safe zone which would typically be inside casing or out of the borehole if casing has not been set.

 

15.   Pioneer offered to replace the Ross water well by drilling a new water well and placing the water filtration-treatment of her choice on the new well.  Pioneer asked Ms. Ross to select the water well contractor, and Pioneer arranged for that company to drill the new well.  Pioneer paid for such contractor to drill a replacement well at a location approved by Ms. Ross.  The well was drilled to approximately 400 feet deep and was dry.  

 

16.   On October 18, 2006, Applied submitted a summary of water quality data for water wells near the Molokai #13-36 TR Well to COGCC Staff.  The report summarized all water quality data available to Pioneer, COGCC, Ms. Ross, and Glibota, as of September 2006.  Taking the sample collected in 2005 as indicative of background, and allowing for typical natural variation, COGCC Staff asserts that the report noted that samples taken over time following the incident appeared to show a return to baseline condition.  For example, the report noted that while an elevated level of iron and dissolved manganese was noted in samples taken following the incident, over time the concentration of these constituents decreased and appeared to return to pre-incident concentrations.

 

17.   Two samples were taken from the Ross water well on October 25, 2006 - one by Glibota and one by Applied.  Pioneer paid for collection and analysis of both samples.  In both samples, all constituents were within the ground water quality standards of the WQCC.  Allowing for some natural variation, COGCC Staff asserts that both samples were close to the levels found in the pre-incident sample (2005 sample).

 

18.   Pioneer and Ross have entered into an agreement settling any and all outstanding disputes between them regarding the alleged incident with neither party admitting any fault or liability.

 

19.   Pioneer has performed all requirements of the Plan for the NOAV in a timely manner.  Water quality data for samples collected on August 14, 2006 by Applied, on behalf of Pioneer, indicate that the water quality was within the WQCC Regulation 41 ground water standards.  Methane levels had declined to less than 1.1 mg/l. 

 

20.   COGCC Staff alleges that the drilling of the borehole for the surface casing of the initial Molokai #13-36 TR Well resulted in impacts to the water quality of the Ross water well that were first documented in samples collected on July 20 and July 23, 2006.

 

21.   Rule 523. specifies a base fine of One Thousand dollars ($1,000) for each day of violation of Rules 324A.a. and 324A.b.  Rule 523.a.(3) specifies that “the maximum penalty for any single violation shall not exceed Ten Thousand dollars ($10,000) regardless of the number of days of such violation,” unless the violation results in significant waste of oil and gas resources, damage to correlative rights, or a significant adverse impact on public health, safety or welfare or the environment.

                               

22.   COGCC Staff alleges that Pioneer violated Rule 324A.a. because it failed to take precautions to prevent significant adverse environmental impacts to water resources to the extent necessary to protect public health, safety and welfare.  COGCC Staff believes that, despite drilling with air, Pioneer and its contractor did not exercise due care in the protection of water-bearing formations while drilling the surface casing borehole. Pioneer failed to take precautions to prevent significant adverse impacts to water resources from July 18, 2006 to July 21, 2006 for three days of violation of Rule 324A.a. at the Molokai #13-36 TR Well.  Pioneer spudded the Molokai #13-36 TR Well on July 18, 2006 and had mechanical problems the same day.  Pioneer plugged and abandoned the Molokai #13-36 TR Well on July 21, 2006.  A base fine of Three Thousand dollars ($3,000) has been calculated for the violation of Rule 324A.a. 

 

23.   COGCC Staff alleges that Pioneer violated Rule 324A.b. because it performed an act or practice that affected a water well in such a way that the water within the water well temporarily exceeded WQCC water quality standards.  Between July 20, 2006 and August 14, 2006, State of Colorado Water Quality Standards were exceeded in the Ross water well in a total of six samples taken on five days in violation of Rule 324A.b.  These exceedances were not continuous, and, in between the samples that showed some exceedance, there were samples that showed no exceedance.  No exceedances were found in samples taken after August 14, 2007. Laboratory pH is not used as pH can change in the course of transport to the lab; for this reason only the pH noted in the field at the time of sampling is used.  A base fine of Ten Thousand dollars ($10,000) has been calculated for the violation of Rule 324A.b.              

 

24.   In accordance with Rule 523.d., the total fine can be reduced if there are mitigating factors.  The mitigating factors in this matter are as follows: (1) Pioneer demonstrated prompt response to the violations; (2) Pioneer cooperated with the COGCC with respect to the violations; (3) there was no economic benefit associated with the violations and Pioneer incurred significant cost in correcting the violations and in drilling a new water well for Ms. Ross; (4) the water met WQCC standards after August 14, 2007; (5) in general the exceedances noted were only slightly above (< 0.01 mg/L) the WQCC standards and in some cases may have been due to natural variability.   The total base fine of Thirteen Thousand dollars ($13,000) should be reduced because of the mitigating factors, resulting in a recommended adjusted fine of Ten Thousand  dollars ($10,000).

       

25.   COGCC Staff specifically reserve the right to proceed as to alleged violations of Rules 324A.a. and 324A.b., if this matter is not resolved by this AOC.  Nothing within this AOC should be construed as the COGCC Staff waiving their right to prosecute any violation set forth in this AOC to the fullest extent, in the event that this AOC is not executed by the parties and approved by the Commission, including, without limitation, the evidence which alters the days of violation set forth in this AOC.

26.   Payment of the fine pursuant to this AOC does not relieve the operator from its obligations to complete abatement or corrective actions set forth in the NOAVs, as may be amended or modified by Staff.

 

27.   Pioneer should execute this AOC no later than fourteen (14) days after the date it is executed by Staff for recommendation to the Commission for expedited approval.  Fines may increase if this matter is not recommended for expedited approval.    

 

28.   Pioneer, or its successors or assigns, should be required to remain responsible for complying with this AOC, in the event of any subsequent sale of property.

 

29.   Pioneer does not agree with the COGCC’s allegations and does not admit that (a) the drilling of the borehole for the surface casing of the initial Molokai #13-36 TR Well resulted in impacts to the water quality of the Ross water well, (b) it failed to take precautions to prevent significant adverse environmental impacts to water resources to the extent necessary to protect public health, safety and welfare or (c) it performed an act or practice that affected a water well in such a way that the water within the water well temporarily exceeded WQCC water quality standards.  However, the parties have agreed upon the adjusted fine amount set forth in Finding No. 24 in order to resolve this matter without the necessity of an extended contested hearing. 

                       

ORDER

 

NOW, THEREFORE IT IS ORDERED, that Pioneer Natural Resources USA, Inc. is hereby found in violation of Rules 324A.a. and 324A.b., for its oil and gas operations at the Molokai #13-36 TR Well, located in the NW¼ SW¼ of Section 36, Township 32 South, Range 68 West, 6th P.M., for those acts alleged in this AOC. 

 

IT IS FURTHER ORDERED, that Pioneer Natural Resources USA, Inc. is hereby assessed a total adjusted fine of Ten Thousand dollars ($10,000) for the violations described above, which shall be payable within thirty (30) days of the date this order is entered by the Commission.

 

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.

 

                        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 ______ day of ______, 2010.

 

 

COLORADO OIL AND GAS CONSERVATION COMMISSION

 

 

By: ___________________________________

                                                                                    Rob Willis, Enforcement Officer

 

 

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

 

 

AGREED TO AND ACCEPTED THIS _________DAY OF ________, 2010.

 

PIONEER NATURAL RESOURCES USA, INC.

 

 

                                    By __________________________________________

                                                Signature of Authorized Company Representative

 

                                    ____________________________________________                                   

                                               Print Signatory Name

                      

                                    ____________________________________________

                                                Title


 

 

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This cause came on for hearing before the Commission on the ______ day of _______________, 20 ___, in __________________________________________, Colorado, for the approval of this Administrative Order by Consent.

ENTERED this __________  day of _____________, 20 ___, as of _________ day
of _________________, 20 ___. 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                        OF THE STATE OF COLORADO

 

 

                        By____________________________________

                                                                                    Robert A. Willis, Acting Secretary

 

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

 

_______________, 20 ___