BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF ALLEGED VIOLATIONS OF THE RULES AND REGULATIONS OF THE COLORADO OIL AND GAS CONSERVATION COMMISSION BY REDWINE RESOURCES, INC., MONTROSE COUNTY, COLORADO |
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CAUSE NO. 1V
ORDER NO. 1V-470 DOCKET NO. 1406-OV-45
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ORDER FINDING VIOLATION
FINDINGS
1. Proper Notice of Hearing has been given as required by law to all interested parties, including the third-party provider of financial assurance, Lexon Insurance Company, under Rule 709. (Exhibit 1).
2. Notice of Hearing was published in the Denver Daily Journal and the Montrose Daily Press as required by law (Exhibits 2 and 3).
3. The Commission has jurisdiction over the subject matter embraced in the Notice, and of the parties interested therein, and jurisdiction to promulgate this Order pursuant to the Oil and Gas Conservation Act (“Act”).
4. Redwine Resources, Inc. (“Redwine”) (Operator No. 10107) is a registered operator in the State of Colorado and subject to the jurisdiction of the Commission (Exhibit 4).
5. Redwine is the owner and operator of record for the South Nucla Unit #1-32 Well (API # 05-085-06047) (“Well”), located in Montrose County, Colorado (Exhibit 5).
6. The COGCC holds a $30,000 financial insurance instrument against the Well with the COGCC (Exhibits 8 and 9).
7. Redwine spud the Well on March 7, 2008, and filed a Well Abandonment Report (Form 6) on April 23, 2009, indicating its Notice of Intent to Abandon. Staff approved the Form 6 on June 10, 2009 (Exhibits 5 and 11).
8. On June 4, 2010 Redwine filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Texas. That Court approved the sale of Redwine’s assets, free and clear of all liens, claims, encumbrances and interests to Longroad Capital Partners III, L.P. (“Longroad”) on September 17, 2010 (Exhibit 12).
9. In an Asset Purchase and Sale Agreement filed with the Bankruptcy Court, the Well is listed as part of “Excluded Assets” (Exhibits 13 and 14).
10. The Bankruptcy Court dismissed Redwine’s bankruptcy case on May 10, 2011 (Exhibit 15).
11. COGCC Staff issued a “Violation” Field Inspection Form on October 15, 2012 for the Well. Staff conducted the inspection to evaluate potential environmental and reclamation liability (Exhibit 17).
12. The 2012 Inspection Form with attached photographs, document an unreclaimed location with: 1) an abandoned and unplugged wellhead; 2) minor junk and trash on the well pad; 3) a large, lined, unclosed pit with netting hanging in the water; 4) breached berms; 5) an eroded access road; 6) cuttings and dried mud in the south side of the pit; 7) silt fences in disrepair; 8) drainage problems; and 9) large unvegetated areas (Exhibits 17 and 18A-G).
13. On October 7, 2013, Staff issued Notice of Alleged Violation (NOAV) No. 200388006 to Redwine. The NOAV was served according to the requirements of the Act, (§ 34-60-108(4), C.R.S.) and the Colorado Administrative Procedures Act (§ 24-4-105, C.R.S.) The NOAV was sent by certified mail to Redwine’s registered address with the Commission on October 7, 2013 and was signed for by David M. Paschall two days later (Exhibit 19).
14. Counsel for COGCC Staff spoke with Gary Redwine, the former principal of Redwine regarding the foreclosure of the $30,000 financial insurance instrument. Gary Redwine reported that Redwine had been liquidated, but provided no documentation.
15. COCGG Staff corresponded with Thane Stranathan, Natural Resource Specialist for the BLM’s Uncompahgre Field Office. Mr. Stranathan performed a site visit on June 2, 2014 and provided Staff with captioned photographs updating the 2012 photographs (Exhibits 20 and 21A-H).
16. On June 17, 2014, this matter came before the Commission for an Order Finding Violation hearing. No interested party appeared to defend against the allegations.
17. At hearing, COGCC Staff made an offer of proof in support of the proposed Order Finding Violation, summarizing the key factual findings described above, and proposing a total fine of $60,000, due within 30 days after this Order is mailed by the Commission.
18. Redwine has committed the following violations:
a. One ten-day violation of Rule 309, because Redwine failed to file a Form 7, Operator’s Monthly Production Report.
b. One ten-day violation of Rule 319, because Redwine maintained the Well in a temporarily-abandoned condition without obtaining COGCC approval.
c. One ten-day violation of Rule 326, because Redwine failed to conduct the required Mechanical Integrity Test within two years of the Well becoming Shut-In or Temporarily Abandoned.
d. One ten-day violation of Rule 902.d., for failing to properly install netting over pits.
e. One ten-day violation of Rule 1002 for failing to properly prepare and stabilize the site, and employ erosion controls to minimize erosion.
f. One ten-day violation of Rule 1003 for failing to reclaim all disturbed areas affected by drilling as nearly as practicable to their original condition, within six months.
19. The penalty for these violations is $60,000. No aggravating or mitigating factors apply.
20. As of the hearing date, Redwine has failed to respond, or otherwise comply with any of the corrective actions listed in NOAV.
21. COGCC Staff requested an Order Finding Violation against Redwine:
a. finding Redwine violated Rules 309, 319, 326, 902.d, 1002 and 1003;
b. assessing a $60,000 penalty for the violations;
c. requiring the penalty to be paid within 30 days of the mailing of the Order;
d. finding Redwine has failed to fulfill its statutory obligations under the Act,
e. ordering Redwine’s financial assurance be foreclosed under Rule 709;
f. authorizing Staff to proceed with plugging and abandonment of the Well and reclamation of the location;
g. authorizing Staff to utilize the Oil and Gas Conservation and Environmental Response Fund as necessary to complete the work if the proceeds of the Redwine financial assurance instrument is inadequate to do so; and
h. revoking Redwine’s Form 10, under Rule 709.
22. Enforcement Staff requested that Redwine, or its successors or assigns, be ordered to remain responsible for complying with this Order, including the penalties imposed, in the event Redwine is revived or recapitalized or there is a sale of the properties.
23. Enforcement Staff also requested that Redwine, or its successors or assigns, be ordered to repay any funds expended by the Commission from the Oil and Gas Conservation and Environmental Response Fund in plugging and abandoning the Wells in the event Redwine is revived, recapitalized, or otherwise has funds available for that purpose.
ORDER
NOW, THEREFORE, THE COMMISSION ORDERS:
1. Redwine is found in violation of Rules 309, 319, 326, 902.d, 1002, and 1003 as the operator of the South Nucla Unit #1-32 Well located in Montrose County, Colorado.
2. Redwine is assessed a total penalty of $60,000 for these violations.
3. Redwine is ordered to pay $60,000 within 30 days after this Order is mailed by the Commission.
4. COGCC Staff is authorized to foreclose the existing $30,000 financial assurance for the well and to plug and abandon the Well and reclaim the Well site and associated facilities. Staff is additionally authorized to use the Oil and Gas Conservation and Environmental Response Fund if the Redwine financial assurance is inadequate to complete the required work.
5. Redwine, or its successors or assigns, will remain responsible for complying with this Order, including the penalties imposed, in the event Redwine is revived or recapitalized or there is a sale of the properties.
6. Redwine, or its successors or assigns, shall repay any funds expended by the Commission from the Oil and Gas Conservation and Environmental Response Fund in plugging and abandoning the Wells if Redwine is revived, recapitalized, or otherwise has funds available for that purpose.
7. This Order does not relieve Redwine from undertaking and completing abatement or corrective actions that may be required by the NOAV described above, or any amendments or modifications thereto specified by the COGCC Staff.
8. 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.
9. 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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OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By
Robert J. Frick, Secretary