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

1.         Magpie Operating Inc. (“Magpie”), Operator Number 52530, operates inactive wells in Colorado as identified in Exhibit 1 of this AOC, all of which are in excess of 3000 feet total depth.

2.         Rule 707.a. states:

To the extent that an operator's inactive well count exceeds such operator's financial assurance amount divided by ten thousand dollars ($10,000) for inactive wells less than three thousand (3,000) feet in total measured depth or twenty thousand dollars ($20,000) for inactive wells greater than or equal to three thousand (3,000) feet in total measured depth, such additional wells shall be considered “excess inactive wells.” For each excess inactive well, an operator's required financial assurance amount under Rule 706 shall be increased by ten thousand dollars ($10,000) for inactive wells less than three thousand (3,000) feet in total measured depth or twenty thousand dollars ($20,000) for inactive wells greater than or equal to three thousand (3,000) feet in total measured depth….

3.         Magpie has a $100,000 statewide blanket financial assurance instrument pursuant to Rule 706.b.

4.         On January 14, 2011, COGCC Staff issued NOAV No. 1662877 (“NOAV”) to Magpie for insufficient excessive inactive well financial assurance pursuant to Rule 707. At the time of the NOAV, Magpie’s excessive inactive well financial assurance obligation was $320,000 less than required by Rule 707.

5.         The NOAV required the following abatement or corrective action to be taken by Magpie: provide the COGCC with a plugging excessive inactive well financial assurance in the amount of $420,000 in the form of: 1) cashier’s check payable to COGCC; 2) insurance bond; or 3) certificate of deposit as a public fund account.  This action was required to have been completed by February 14, 2011. This requirement has not been satisfied.

6.         As of the date of this AOC, Magpie has a deficiency of $160,000, in its financial assurance under Rule 707, with 13 inactive wells.

7.         Rule 523.c. specifies a base fine of $1,000 per day for violations of Rule 707.  It appears that the violation alleged occurred for a period of more than ten days, however, the violations did not result in significant waste of oil and gas resources, damage to correlative rights, or a significant adverse impact on public health, safety or welfare, including the environment or wildlife resources.  Accordingly, the maximum penalty for any single violation shall not exceed $10,000 regardless of the number of days of such violation. COGCC Staff has calculated a base fine of $10,000 for violation of Rule 707 as identified in the NOAV.

8.         Magpie and the Commission agree Magpie is in violation of Rule 707. Magpie and the Commission agree to resolve this violation by: a) imposition and payment of a fine in the amount of Ten Thousand dollars ($10,000); b) Magpie implementation of the compliance schedule described in this AOC; and 3) Magpie compliance with all other requirements of this Order.

9.         Magpie agrees to the findings of this AOC only for the purpose of expeditiously resolving the matter without a contested hearing.  Pursuant to Rule 423.c.(3), entering into this AOC by Magpie shall not be construed as an admission of the alleged violations. Magpie 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.         Magpie is found in violation of Rule 707 for failure to provide adequate financial assurance for its excessive inactive wells.

2.         Magpie is assessed a fine of $10,000 for the violation of Rule 707 as described above. This fine shall be paid no later than July 31, 2013.

3.         Magpie shall resolve the Rule 707 financial assurance deficit of $ 160,000 according to the following compliance schedule:

TABLE 1

4.         To the extent that Magpie’s Rule 707 bonding requirements change due to: 1) well production; 2) well plugging and abandonment;  or 3) additional wells reaching inactive status, Magpie shall make financial assurance payments such that the following percentages of the financial assurance deficit are maintained at the end of each month indicated below:

May 2013                   not less than 20% of Rule 707 financial assurance deficit

June 2013                 not less than 50% of Rule 707 financial assurance deficit

July 2013                  

and thereafter           not less than 100% of Rule 707 financial assurance deficit

5.         If Magpie is not in compliance with Rule 707 by July 31, 2013, the Director shall withhold all Magpie permit application approvals until such time that Magpie is in compliance with Rule 707.

6.         Variance from the Table 1 compliance dates may only be granted by the Director upon showing of good cause, and will not be granted except for extraordinary circumstances. Failure to satisfy Compliance Schedule requirements may be considered a separate violation of Section 34-60-121 C.R.S., and subject to further enforcement.

7.         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.

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

9.         This Order shall become effective immediately upon approval by the Commission.

10.       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  11^th  day of April, 2013.

                                                            OIL AND GAS CONSERVATION COMMISSION

                                                              OF THE STATE OF COLORADO

By                                                 

Peter J. Gowen, Enforcement Officer 

EXHIBIT 1

DOCKET NO. 1302-OV-03

ORDER NO. 1V-409

Magpie Operating Inc.

Inactive Well List

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The Commission heard this matter on                 , 2013, and approved this Administrative Order by Consent.

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

                                                            OIL AND GAS CONSERVATION COMMISSION

                                    OF THE STATE OF COLORADO

                                                            By____________________________________

                                    Robert J. Frick, Secretary