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 BONANZA CREEK ENERGY OPERATING COMPANY LLC, JACKSON COUNTY, COLORADO

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CAUSE NO. 1V

 

ORDER NO. 1V-450

DOCKET NO. 1403-OV-16

 

 

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.            Bonanza Creek Energy Operating Company, LLC (“Bonanza”) (Operator No. 8960) is the operator of the Wells identified in Table 1 (“Wells”) and located in Jackson County, Colorado.

                                                            Table 1

 

Well Name

API

NOAV

MCCALLUM UNIT 44

05-057-06019

200378031

MCCALLUM UNIT 59

05-057-06040

200378034

MCCALLUM UNIT 79

05-057-06114

200378035

MCCALLUM UNIT 98

05-057-06161

200378036

MCCALLUM UNIT 105

05-057-06192

200378051

MCCALLUM UNIT 124

05-057-06343

200378063

MCCALLUM UNIT 185

05-057-06447

200378068

FEDERAL 6-27

05-057-06305

200378037

FEDERAL 7-27

05-057-06306

200378032

FEDERAL 10-27

05-057-06325

200378033

MCCALLUM 134

05-057-06399

200378065

MCCALLUM 165

05-057-06426

200378066

PRONGHORN 41-16

05-123-22768

200378070

 

            2.         Based on Commission records, the McCallum Unit 44, McCallum Unit 98, McCallum Unit 105, McCallum Unit 124,  McCallum Unit 185, Federal 7-27, and Federal 10-27 Wells are Shut-in. Mechanical integrity tests (“MIT’s”) were not performed on these wells within two years of their original shut-in date as required by Rule 326.

 

            3.         Based on Commission records, the McCallum Unit 79 Well is Shut-in and has not produced since October 2005. A MIT has never been performed on this Well. 

 

            4.         Based on Commission records, the McCallum Unit 59, McCallum 134, McCallum 165, and Federal 6-27 Wells are plugged and abandoned. Form 6, Well Abandonment Reports, were not filed within 30 days of the Wells’ abandonment.

 

            5.         Based on Commission records, the McCallum Unit 105, McCallum Unit 185, and Federal 7-27 Wells are either Temporarily Abandoned or Shut-in, but neither a Form 4, Sundry Notice, nor a Form 5A, Completed Interval Report, were filed with the Commission to reflect these changes in the Wells’ status.

 

            6.         On April 10, 2013, Commission Staff issued thirteen Notices of Alleged Violation (“NOAV’s”), identified below in Table 2, to Bonanza asserting violations of the following COGCC Rules of Practice and Procedure, 2 CCR 404-1 (“Rule” or “Rules”):

 

                        a.         Rule 308B.  (Form 5A Completed Interval Report);

                        b.         Rule 311.  (Form 6 Well Abandonment Report); and

                        d.         Rule 326.  (Mechanical Integrity Testing).

 

Table 2

 

Well Name

NOAV #

Rule 308B

Rule 311

Rule 326.b.1

 

MCCALLUM UNIT 44

200378031

X

MCCALLUM UNIT 59

200378034

X

 

MCCALLUM UNIT 79

200378035

X

MCCALLUM UNIT 98

200378036

X

MCCALLUM UNIT 105

200378051

X

X

MCCALLUM UNIT 124

200378063

X

MCCALLUM UNIT 185

200378068

X

X

FEDERAL 7-27

200378032

X

X

FEDERAL 6-27

200378037

X

 

FEDERAL 10-27

200378033

X

MCCALLUM 134

200378065

X

 

MCCALLUM 165

200378066

X

 

PRONGHORN 41-16

200378070

X

X

 

TOTAL

4

4

9

 

            7.         On January 31, 2014, Commission staff issued the Notice of Hearing (“Notice”) in this matter.  NOAV No. 200378034 (McCallum Unit 59) and NOAV No. 200378070 (Pronghorn 41-16) were omitted from the Notice. All other Table 1 Wells were listed in the Notice.

 

            8.         Bonanza  responded to the Notice with information that MIT’s had been performed on the following Wells at times indicated below, but Bonanza had failed to submit the required Form 21’s (Mechanical Integrity Test) within the 30 day period specified by Rule 316B:

 

 

Well Name

NOAV #

Date of MIT

MCCALLUM UNIT 44

200378031

December 2012 (passed)

MCCALLUM UNIT 98

200378036

December 2012 (passed)

MCCALLUM UNIT 105

200378051

December 2012 (indeterminate)

MCCALLUM UNIT 124

200378063

December 2012 (passed)

MCCALLUM UNIT 185

200378068

December 2012 (passed)

FEDERAL 7-27

200378032

December 2012 (passed)

FEDERAL 10-27

200378033

December 2012 (passed)

 

Bonanza also provided information that it commenced plugging and abandoning the Pronghorn 41-16 Well in December 2013 in lieu of conducting an MIT.

 

            9.         Based on the MIT and other information provided by Bonanza, the parties agreed to convert the alleged Rule 326 violations for the Wells indentified in paragraph 8 to single-day violations of Rule 316B for all Wells except the Pronghorn 41-16 for which the Rule 326 violation will be converted to a single-day violation of Rule 311.

 

10.       On February 28, 2014, Bonanza submitted Form 6 Well Abandonment Reports for all Wells identified in paragraph 4, Form 5A Completed Interval Reports for all Wells identified in paragraph 5, and Form 21 MITs for all Wells identified in Paragraph 8 except the Pronghorn 41-16.

           

11.       Bonanza has requested that NOAV No. 200378034 (McCallum Unit 59) and NOAV No. 200378070 (Pronghorn 41-16) be included in this action, waiving any objection to the Notice.

 

            12.       Following a factual investigation and legal review of the violations alleged in the NOAV’s, as well as the additional MIT and other information provided by Bonanza, the Hearings Staff now asserts Bonanza has committed the following violations identified in Table 3 below:

Table 3

 

Well Name

NOAV #

Rule 308B

Rule 311

Rule 316.B.

Rule 326.b.1

 

MCCALLUM UNIT 44

200378031

X

 

MCCALLUM UNIT 59

200378034

X

 

MCCALLUM UNIT 79

200378035

X

MCCALLUM UNIT 98

200378036

X

 

MCCALLUM UNIT 105

200378051

X

X

 

MCCALLUM UNIT 124

200378063

X

 

MCCALLUM UNIT 185

200378068

X

X

 

FEDERAL 7-27

200378032

X

X

 

FEDERAL 6-27

200378037

X

 

FEDERAL 10-27

200378033

X

 

MCCALLUM 134

200378065

X

 

MCCALLUM 165

200378066

X

 

PRONGHORN 41-16

200378070

X

X

 

 

TOTAL

4

5

7

1

 

a.            Four single-day violations of Rule 308B, because Bonanza failed to file a Form 5A, Completed Interval Report within 30 days for four Wells as identified in Table 3.

 

b.            Five single-day violations of Rule 311, because Bonanza failed to file a Form 6, Well Abandonment Report within 30 days for four Wells as identified in Table 3 and to account for the Pronghorn 41-16 Well.

 

c.            One 10-day violation of Rule 326.b.1, because Bonanza failed to conduct the required MIT within two years of the McCallum Unit 79 Well becoming Shut-in or Temporarily Abandoned or within five years of the last MIT.

 

d.            Seven single-day violations of Rule 316.B., because Bonanza failed to file a Form 21, MIT within 30 days after performing the MITs on seven Wells as identified in Table 3.

           

            13.       Pursuant to Rule 523 and the Commission’s Enforcement and Penalty Policy, Hearings staff calculated a penalty of $26,000 for these violations.  The following mitigating factors have been considered in calculating this penalty:

 

a.         the violator cooperated with the Commission;

 

b.         the violator made a good faith effort to comply with applicable requirements prior to the Commission learning of a violation (as to the MITs);

 

c.         the cost of correcting the violation reduced or eliminated any economic benefit to the violator;

 

d.         the violator has demonstrated a history of compliance with Commission rules, regulations and orders.

 

No aggrevating factors are applicable to the violations.  The violations did not result in any adverse impact to public health, safety, or welfare, including the environment or wildlife resources. 

 

AGREEMENT

 

NOW, THEREFORE, based on the Findings and pursuant to Rule 522.b.(3) and the Commission’s Enforcement and Penalty Policy, the Director proposes and Bonanza agrees to settle the NOAV’s identified in paragraph 1 on the following terms and conditions:

 

              I.                Bonanza will be assessed a penalty of $26,000.

 

            II.                Bonanza will pay $26,000 within 30 days after the approved AOC is mailed by the Commission. 

 

           III.                Bonanza will perform a MIT on the McCallum Unit 79 Well and submit the required Form 21 for the Well by July 1, 2014.

 

          IV.                Bonanza agrees to the Findings of this AOC only for the purpose of expeditiously resolving the matter without a contested hearing.  Bonanza reserves the right to contest the Findings in any proceeding before any agency, court, or other tribunal, except for a proceeding to enforce the terms of this AOC.  The Findings and any action undertaken by Bonanza pursuant to this AOC shall not constitute evidence of fault by Bonanza with respect to any third-party claim against Bonanza. 

 

RECOMMENDED this  3rd  day of March, 2014.

 

 

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By                                                                       

Peter J. Gowen, Enforcement Officer 

 

AGREED TO AND ACCEPTED this ______day of March, 2014.                    

            BONANZA CREEK ENERGY OPERATING COMPANY LLC

                             

 

            By                                                                                           

                        Signature of Authorized Company Representative

                       

                                                                                                                                               

Print Signatory Name

                      

                                                                                                                                                            Title

 

ORDER

HAVING CONSIDERED the Agreement between the Director and Bonanza to resolve the NOAV’s, the COMMISSION ORDERS:

 

1.         Bonanza is found in violation of Rule 308B, Rule 311, 316.B., and Rule 326.b.1, as described above.

 

2.         Bonanza will be assessed a total penalty of $26,000 for the violations described above.

 

3.         Bonanza will pay $26,000 within 30 days after the Commission mails this Order.

 

4.         Bonanza will perform a MIT on the McCallum Unit 79 Well and submit the required Form 21 for the Well by July 1, 2014.

 

5.         Bonanza, or its successors or assigns, will remain responsible for complying with this AOC, in the event of any subsequent conveyance of the Wells.

 

6.         Entry of this Order constitutes final agency action for purposes of judicial review as of the date this order is mailed by the Commission. For all other purposes, this Order is effective as of the date of approval by the Commission.

 

7.         The Commission expressly reserves its right after notice and hearing, to alter, amend, or repeal any and/or all of the above orders. 

 

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ENTERED this ______ day of _______, 2014, as of the 17th  day of March, 2014.

 

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

 

 

By______________________________________

                                                Robert J. Frick, Secretary