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 TEXAS TEA OF COLORADO LLC, ADAMS COUNTY, COLORADO |
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CAUSE NO. 1V
DOCKET NO. 1406-OV-43
ORDER NO. 1V-485 |
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. Texas Tea of Colorado LLC, dba Texas Tea LLC (“Texas Tea”) (Operator No. 87195) is the operator of the Rocky Mountain II #1 Well (API # 05-001-08699) (“Well”) located in Adams County, Colorado.
2. Based on a review of COGCC’s records, and following two inspections of the Well, conducted September 18, 2012 (Document #665400482) and February 26, 2014 (Document #665400735), COGCC Staff learned that Texas Tea was in violation of multiple COGCC Rules of Practice and Procedure, 2 CCR 404-1 (“Rule” or “Rules”).
3. On February 27, 2014, COGCC Staff issued a Notice of Alleged Violation (“NOAV”) (No. 200397470) to Texas Tea citing violations of the following Rules, among others:
Rule 210.b (Signs and Markers)
Rule 309 (Operator’s Monthly Production Report)
Rule 319.b.3 (Abandonment)
Rule 324A.a (Pollution)
Rule 326.b.1 (Mechanical Integrity Testing)
Rule 603.f (Statewide Location Requirements for Oil and Gas Facilities, Drilling, and Well Servicing Operations)
Rule 912.a (Venting or Flaring Natural Gas)
4. Following factual investigation and legal review of the violations alleged in the NOAV, Enforcement Staff now asserts Texas Tea has committed the following violations:
One, 10-day violation of Rule 210.b (Signs and Markers) for the failure to install required signs and markers.
One, 10-day violation of Rule 309 (Operator’s Monthly Production Report) for the failure to file Form 7s as required.
One, 10-day violation of Rule 319.b.3 (Abandonment) for the failure to plug and abandon the Well within six months of the Well ceasing production or becoming incapable of production.
One, 10-day violation of Rule 324A.a (Pollution) for the failure to take precautions at the Well to prevent significant adverse environmental impacts to air, water, soil, or biological resources to the extent necessary to protect public health, safety and welfare, including the environment and wildlife resources.
One, 10-day violation of Rule 326.b.1 (Mechanical Integrity Testing) for the failure to perform a mechanical integrity test (“MIT”) on the well within thirty days of the Well becoming incapable of production.
One, 10-day violation of Rule 603.f (Statewide Location Requirements for Oil and Gas Facilities, Drilling, and Well Servicing Operations) for the failure to keep the Well location free of the following: equipment, vehicles, and supplies not necessary for use on that lease; weeds; rubbish, and other waste material.
One, 10-day violation of Rule 912.a (Venting or Flaring Natural Gas) for the failure to stop unnecessary or excessive venting or flaring of natural gas produced from the Well.
5. Pursuant to Rule 523 and the Commission’s Enforcement and Penalty Policy, Enforcement Staff calculated a penalty of $70,000 for these violations.
6. On November 15, 2012, the Commission entered Order No. 1V-397, which ordered Texas Tea to bring into compliance the Van Scoyk #1 well (API # 05-001-08516), Pace #2 well (API# 05-123-08720), Adams County #1 well (API# 05-001-08204), and the Krogh #2 well (API# 05-001-08503).
7. On May 6, 2013, the Commission entered Order No. 1V-410, which revoked Texas Tea’s Form 10 Certificate of Clearance until Texas Tea complied with Order No. 1V-397 to the Satisfaction of the Director.
8. Texas Tea asserts that it has expended approximately $200,000 bringing the Rocky Mountain II well, and other wells, into compliance with COGCC rules and regulations including, but not limited to, a completed Mechanical Integrity Test (“MIT”) on the Van Scoyk #1 well, soil removal at the Rocky Mountain II, Van Scoyk #1, and Pace #2 well-sites, new signage at the Rocky Mountain II, Pace #2, and Van Scoyk #1 well sites, and weed control at the Rocky Mountain II and Van Scoyk #1 well sites. Texas Tea asserts that the only remaining work to be performed on the Rocky Mountain II is an MIT, container labeling, and minor soil clean up.
9. Texas Tea asserts that the imposition of the $70,000 penalty will prevent it from performing the remaining work necessary to bring all of its wells into compliance with COGCC rules and regulations.
10. Texas Tea asserts that certain of its oil and gas leases are in danger of expiring unless Texas Tea’s Form 10 is reinstated.
11. To avoid placing the burden and cost on the State of Colorado to plug and abandon numerous wells and remediate well sites, Texas Tea and Commission Staff agree that suspension of the $70,000 penalty and the limited and sequential reinstatement of Texas Tea’s Form 10, Certificate of Clearance, is warranted. Reinstatement of the Form 10 will allow Texas Tea to return certain wells to production and use the revenue generated, subject to Commission Staff oversight, to pay for work necessary to bring Texas Tea’s wells and properties identified in the below paragraph IV into compliance within six (6) months after the Commission mails the Order approving this AOC. Thereafter, Texas Tea will endeavor to sell its properties to a third-party within one (1) year or as soon thereafter as is reasonably practical. Texas Tea agrees that revenues, to which it is entitled, generated through production or from the selling of assets will be used to ensure compliance with COGCC rules and regulations and to pay down prior penalties imposed under Order Nos. 1V-397 and 1V-410.
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 Texas Tea agrees to settle the NOAV on the following terms and conditions:
II. Texas Tea and Commission Staff agree that suspension of the $70,000 penalty and the limited and sequential reinstatement of Texas Tea’s Form 10, Certificate of Clearance, is warranted. Reinstatement of the Form 10 will allow Texas Tea to return certain wells to production and use the revenue generated, subject to Commission Staff oversight, to pay for work necessary to bring Texas Tea’s wells and properties identified in the below paragraph IV into compliance within six (6) months after the Commission mails the Order approving this AOC. Thereafter, Texas Tea will endeavor to sell its properties to a third-party within one (1) year or as soon thereafter as is reasonably practical. Texas Tea agrees that revenues, to which it is entitled, generated through production or from the selling of assets will be used to ensure compliance with COGCC rules and regulations and to pay down prior penalties imposed under Order Nos. 1V-397 and 1V-410.
III. The Commission will reinstate Texas Tea’s Form 10, Certificate of Clearance for the limited purpose of generating revenue that will be used exclusively to return Texas Tea’s wells and properties to compliance with COGCC rules and regulations and to pay down prior penalties imposed under Order Nos. 1V-397 and 1V-410.
IV. Texas Tea will bring the following wells into compliance with COGCC rules and regulations within six (6) months after the Commission mails the Order approving this AOC.:
a. Rocky Mountain II #1 (API# 05-001-08699)
b. Pace #2 (API# 05-123-08720)
c. Van Scoyk #1 (API# 05-001-08516)
d. Adams County #1 (API# 05-001-08204)
e. Krogh #2 (API # 05-001-08503)
Collectively the “Wells.”
V. To bring the Wells into compliance, Texas Tea will perform the following work in order of priority:
a. Perform a successful Mechanical Integrity Test on the following wells:
i. Rocky Mountain II, within 60 days from the entry of this Order;
ii. Krogh #2, within 60 days following the successful completion of the MIT on the Rocky Mountain II;
b. Plug and abandon or perform a successful MIT on the Adams County #1;
c. Complete soil removal at the Rocky Mountain II well site;
d. Re-equip the Van Scoyk #1 well with new wellhead equipment, tank battery, and construct a new secondary containment berm or apply for continued temporary abandoned status pursuant to COGCC Rule 319.b.;
e. Install new signs at wellheads or tank batteries as needed at all well sites;
f. Weed control at all well sites.
VI. Compliance dates specified in this Order may be extended only for good cause, as determined at the Director’s sole discretion. A request for extension must be made, in writing, at least 35 days prior to the pertinent compliance deadline or as soon as possible if 35 days prior notice is not feasible. Failure to receive an extension prior to the compliance deadline or the failure to meet a compliance deadline may constitute a new violation subject to additional penalties.
VII. Upon reinstatement of the Form 10, Texas Tea will be given the authority to return the Biow-Moore well (API# 05-001-08775) to production to generate income to fund the work outlined in paragraph IV above. Commission Staff will grant Texas Tea the authority to return additional wells to production, on a case by case basis, to fund continued compliance work in the following order: (1) Pace #2; (2) Rocky Mountain II; (3) Van Scoyk #1; and (4) Krogh #2. Wells will only be returned to production where Commission Staff is satisfied that production will not result in the potential for an adverse impact to public health, safety, and welfare, including the environment and wildlife resources.
VIII. Texas Tea agrees to provide monthly progress updates to Commission Staff which will include, but not be limited to, a statement of work completed, work planned, an accounting of oil and/or gas sales, an accounting of revenues earned through asset sales, an accounting of expenditures for which the oil and/or gas sales are used, and any additional information relevant to bringing the Wells into compliance. Texas Tea agrees to work closely with its attorneys in compiling these progress reports and agrees that failure to provide complete monthly progress updates to Commission Staff will result in a breach of this Order.
IX. Following resolution of the issues associated with the Wells, Texas Tea will, with input from Commission Staff, undertake a systematic review of all wells and locations operated by Texas Tea and work to resolve identified compliance issues in a timely manner. All identified compliance matters must be resolved within two (2) years.
RECOMMENDED this day of , 2014.
OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO
By
Jeremy I. Ferrin, Enforcement Officer
AGREED TO AND ACCEPTED this ______day of , 2014.
TEXAS TEA OF COLORADO LLC, DBA TEXAS TEA LLC
By
Signature of Authorized Company Representative
Print Signatory Name
Title
ORDER
HAVING CONSIDERED the Agreement between the Director and Texas Tea and to resolve the NOAV, the COMMISSION ORDERS:
1. Texas Tea is found in violation of Rules 210.b, 309, 319.b.3, 324A.a, 326.b.1, 603.f and 912.a, as described above.
2. Texas Tea is assessed a total penalty of $70,000 for the rule violations described above.
3. The $70,000 penalty is suspended so long as Texas Tea complies with the following terms and conditions within six (6) months after the Commission mails the Order approving this AOC.
4. Texas Tea’s Form 10 Certificate of Clearance is hereby reinstated, effective as of the date of this Order, as described above.
5. Texas Tea shall perform the following work in order of priority:
a. Perform a successful Mechanical Integrity Test on the following wells:
i. Rocky Mountain II, within 60 days from entry of this Order;
ii. Krogh #2, within 60 days from the successful completion of the MIT on the Rocky Mountain II;
b. Plug and Abandon or perform a successful MIT on the Adams County #1;
c. Complete soil removal at the Rocky Mountain II well site;
d. Re-equip the Van Scoyk #1 well with new wellhead equipment, tank battery, and construct a new secondary containment berm or apply for continued temporary abandoned status pursuant to COGCC Rule 319.b.;
e. Install new signs at any wellhead or tank battery as needed at all well sites;
f. Weed control at all well sites.
6. Compliance dates specified in this Order may be extended only for good cause, as determined at the Director’s sole discretion. A request for extension must be made, in writing, at least 35 days prior to the pertinent compliance deadline or as soon as possible if 35 days prior notice is not feasible. Failure to receive an extension prior to the compliance deadline or the failure to meet a compliance deadline may constitute a new violation subject to additional penalties.
7. Upon reinstatement of the Form 10, Texas Tea will be given the authority to return the Biow-Moore well (API# 05-001-08775) to production to generate income to fund the work outlined in paragraph IV above. Commission Staff will grant Texas Tea the authority to return additional wells to production, on a case by case basis, to fund continued compliance work in the following order: (1) Pace #2; (2) Rocky Mountain II; (3) Van Scoyk #1; and (4) Krogh #2. Wells will only be returned to production where Commission Staff is satisfied that production will not result in the potential for an adverse impact to public health, safety, and welfare, including the environment and wildlife resources.
8. Texas Tea will provide monthly progress updates to Commission Staff which will include, but not be limited to, a statement of work completed, work planned, an accounting of oil and/or gas sales, an accounting of revenues earned through asset sales, an accounting of expenditures for which the oil and/or gas sales are used, and any additional information relevant to bringing the Wells into compliance. Texas Tea agrees to work closely with its attorneys in compiling these progress reports and agrees that failure to provide complete monthly progress updates to Commission Staff will result in a breach of this Order.
9. 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.
10. The Commission expressly reserves its right after notice and hearing, to alter, amend, or repeal any and/or all of the above orders.
11. At the September 15, 2014, hearing on this matter, this Order was verbally amended to include Paragraph II above. Texas Tea agreed to the amendment at the hearing.
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OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By
Robert J. Frick, Secretary