BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

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

Well Descriptions

1.         Benchmark Energy LLC (“Benchmark”) (Operator No. 10380) operates the wells identified in Table 1 (“Wells”) in Logan County.

Table 1.

Alleged Violation Citations

2.         COGCC Staff reviewed records for these sites and discovered alleged Rule violations.  The dates of citation, Notice of Alleged Violation (“NOAV”) numbers, and alleged Rule violations cited are identified in Table 2.

Table 2.

Cited Rules Summary

3.         Violations cited in Table 2 are explained as follows:

a.            Rule 309 (Form 7 Report) requires operators to submit a Form 7- Operator’s Monthly Report of Operations (“Production Report”) within 45 days after the month in which production occurs.  The Rule further requires Production Reports from the spud date to one month after plugging and abandonment.

b.         Rule 319.b. (Temporarily Abandonment) requires operators to file a Sundry Notice requesting Continued Temporarily Abandoned status for wells Temporarily Abandoned longer than six months.  The Rule further requires that wells which have ceased production or are incapable of production or injection be abandoned within six months thereafter unless the time is extended by the Director upon application by the owner.  Wells incapable of production due to lack of production facilities, downhole plugs, or other mechanical problems are considered to be Temporarily Abandoned.

c.         Rule 326.b.(1) (Mechanical Integrity Testing - Shut-in Wells) requires idle wells pass a mechanical integrity test (MIT) within two years of being Shut-In or within 30 days of being Temporarily Abandoned.  Subsequent MITs are required at five year intervals from the date of an initial MIT.  Idle wells include wells where gas and/or oil are produced but there are no associated sales as well as wells with no produced volumes at all.

d.         Rule 326.d (Mechanical Integrity) requires all wells to maintain mechanical integrity.  Those wells that lack mechanical integrity shall be repaired or plugged and abandoned within six months of failing an MIT, and the well shall be reclaimed in accordance with Rule 1004.a.

Calculation of Fines

4.         Rule 523 (Procedure for Assessing Fines) specifies a base fine of $1,000 for each day of violation of Rules 309, 319, and 326.  Rule 523.a.(3) specifies that the maximum penalty for any single violation shall not exceed $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. Staff does not allege any of these three factors in this case.

5.         Rule 523.d. specifies that a fine may be decreased by application of mitigating factors.  Applicable mitigating factors include:

a.         Rule 523.d.(2), the violator demonstrated prompt, effective and prudent response to the violation, including assistance to any impacted parties.

b.         Rule 523.d.(3), the violator cooperated with the Commission, or other agencies with respect to the violation.

c.         Rule 523.d.(6), the cost of correcting the violation reduced or eliminated any economic benefit to the violator.

6.         Benchmark has since performed all necessary MIT’s and has filed the required Form 7’s (Operator’s Monthly Report of Operations). All three of the mitigating factors identified in the previous paragraph apply in this case.

7.         Benchmark and Staff agree to resolve the NOAV’s described above with the imposition of a fine of $15,000, payable within 30 days of the time this AOC is approved by the Commission.

8.         Benchmark agrees to the findings of this AOC only for the purpose of expeditiously resolving the matter without a contested hearing.  Pursuant to Rule 522.b.(3), entering into this AOC by Benchmark shall not be construed as an admission of the alleged violations. Benchmark fully reserves its right to contest the same in any future action or proceeding other than a proceeding to enforce this AOC.

ORDER

NOW, THEREFORE, IT IS ORDERED, that:

1.         Benchmark Energy LLC shall be found in violation of Rule 326, for failure to properly and timely conduct mechanical integrity tests of the below-listed wells:

2.         Benchmark Energy LLC shall be assessed a total fine of $15,000 for the Rule violations set forth above.  The fine shall be paid not later than 30 days after this Order is approved by the Commission.

3.         The Commission considers this order to be final agency action for purposes of judicial review 30 days after the date this order is mailed by the Commission.

4.         An application for reconsideration by the Commission of this order is not required prior to the filing for judicial review.

5.         The provisions contained in the above order shall become effective immediately.

6.         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  8^th   day of March, 2013.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                             OF THE STATE OF COLORADO

                                                                        By                                                                       

                                                                                    Peter J. Gowen, Enforcement Officer

AGREED TO AND ACCEPTED this _________day of  March, 2013.

BENCHMARK ENERGY LLC

By:      ___________________________________________

            Signature of Authorized Benchmark Energy LLC Representative

            ___________________________________________

            Print Signatory Name

            ___________________________________________

            This Administrative Order by Consent was heard and approved by the Commission on the  6^th  day of May, 2013.

ENTERED this _____ day of May 2013, as of the  6^th  day of May, 2013.    

                                                                        OIL AND GAS CONSERVATION COMMISSION

                        OF THE STATE OF COLORAD

                        By____________________________________

                                                                                    Robert J. Frick, Secretary