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 FOUNDATION ENERGY MANAGEMENT, WELD COUNTY, COLORADO

)

CAUSE NO. 1V

DOCKET NO. 1410-OV-67

ORDER NO. 1V-491

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

I. Wells and Releases at Issue

1. Foundation Energy Management LLC (“Foundation”) (Operator No. 10112) is the operator of the following Wells in Weld County, identified in Table 1 below.

2. During inspections on May 8, 2014, COGCC Staff (“Staff”) observed evidence of five different releases at the three Wells.

Table 1: Wells and Releases at Issue

Well Name	API Number	NOAV No.	Releases
Sooner Unit 7-28	05-123-13138	200408958	Release #1
Sooner Unit 10-28	05-123-10637	200408959	Release #2, 6/30/2014 Release #3, 5/8/2014
Sooner Unit 2-28	05-123-13065	200408960	Release #4, North heater-treater Release #5, South heater-treater

II. Sooner Unit 7-28

A. Release #1

3. On May 7, 2014, Staff received a complaint from a surface owner stating that a flowline release had occurred in their pasture (Doc. No. 200404224).

4. On May 8, 2014, Staff inspected the pasture and observed that the area above the flowline from Sooner Unit 7-28 to the tank battery had been disturbed and hydrocarbon staining was present on the soil. (Tracking No. 400633384, “Release #1”). The release exceeded one barrel and was outside secondary containment.

5. The Inspection Report (Doc. No. 667400387) required Foundation to investigate the release and submit a Form 19, Spill/Release Report, and Form 27, Site Investigation and Remediation Workplan, by May 12, 2014.

6. On May 29, 2014, after receiving no response from Foundation to the inspection report, Staff sent Foundation an email reiterating that they needed to perform the corrective actions set forth in the inspection.

7. On June 20, 2014, Staff called Foundation to inquire about the release and Foundation acknowledged that a release had occurred on the Sooner Unit 7-28 flowline.

8. On June 26, 2014, Foundation submitted a Form 19 (Doc. No. 400633384) documenting a release of more than one barrel outside of secondary containment and a Form 27 (Doc. No. 2614840) proposing an investigation and remediation plan.

9. On July 14, 2014, Staff issued Notice of Alleged Violation (“NOAV”) No. 200408958 to Foundation for violations of Rule 906.b. (Spill/Release Reporting) and Rule 906.c. (Spill/Release Remediation) of the COGCC Rules of Practice and Procedure, 2 CCR 404-1 (“Rule” or “Rules”) for Release #1 at the Sooner Unit 7-28 Well.

B. Flowline Testing

10. NOAV No. 200408958 required Foundation to submit copies of annual flowline testing for the past three calendar years as required by Rule 1101.e. by August 14, 2014.

11. Foundation did not provide copies of annual flowline testing for the Sooner Unit 10-28 Well by August 14, 2014 or thereafter.

12. On September 25, 2014, COGCC staff issued NOAV No. 200412868 for violations of Rule 1101.e. at the Sooner Unit 7-28 Well.

III. Sooner Unit 10-28

A. Release #2 (2013)

13. On May 7, 2014, Staff received a complaint (Doc. No. 200404223) regarding an area affected by a 2013 release that was not properly reseeded and was lacking erosion controls on the flowline for the Sooner Unit 10-28 Well.

14. On May 8, 2014, Staff inspected the well and the 2013 release area and observed that no seed bed or erosion control was present. (Tracking No. 2145522, “Release #2”). However, the release had been properly reported in 2013.

15. The Inspection Report (Doc. No. 667400383) required Foundation to submit a Form 27, reseed the area of the release, and provide erosion controls on the bare soil of the hillside by May 23, 2014.

16. On July 14, 2014, Staff issued NOAV No. 200408959 to Foundation for violations of Rule 906.c. (Spill/Release Remediation) for Release #2 at the Sooner Unit 10-28 Well.

17. On August 30, 2014, Foundation submitted a Form 27 (Doc. No. 2614823) with the results of an initial investigation and remediation plan for Release #2.

B. Release #3 (2014)

18. On June 20, 2014, Foundation reported that a recent release had occurred on the flowline for the Sooner Unit 10-28 Well. (Tracking No. 400636673, “Release #3”). The release exceeded one barrel and was outside secondary containment.

19. On June 25, 2014, Foundation confirmed by telephone that this was a release from the Sooner Unit 10-28 salt water disposal line. Staff requested a Form 27 to document an investigation and remediation workplan for this release.

20. On June 30, 2014, Foundation submitted a Form 19 (Doc. No. 400636673) for Release #3 documenting a spill/release of more than one barrel outside of secondary containment.

21. On July 14, 2014, Staff issued NOAV No. 200408959 to Foundation for violations of Rule 906.b. (Spill/Release Reporting) and Rule 906.c. (Spill/Release Remediation) for Release #3 at the Sooner Unit 10-28 Well.

22. On July 18, 2014, Foundation submitted a Form 27 (Doc. No. 2614867) for Release #3.

C. Flowline Testing

23. NOAV No. 200408959 required Foundation to submit copies of annual flowline testing for the past three calendar years as required by Rule 1101.e. by August 14, 2014.

24. Foundation did not provide copies of annual flowline testing for the Sooner Unit 10-28 Well by August 14, 2014 or thereafter.

25. On September 25, 2014, Staff issued NOAV No. 200412872 for violations of Rule 1101.e. at the Sooner Unit 10-28 Well.

IV. Sooner Unit 2-28

A. Release #4 (North heater-treater building)

26. On May 8, 2014, Staff inspected the Sooner Unit 2-28 Well and discovered multiple small spills or a recent large release inside the north heater treater building. (Tracking No. 400636790, “Release #4”). The release exceeded one barrel and was outside secondary containment.

27. The Inspection Report (Doc. No. 667400390) required Foundation to submit a Form 19 to document the release and a Form 27 proposing a remediation plan by May 10, 2014.

28. On June 30, 2014, Foundation submitted a Form 19 for Release #4 (Doc. No. 400636790).

29. On July 7, 2014, Foundation submitted a Form 27 for Release #4 (Doc. No. 261844).

30. On July 14, 2014, Staff issued NOAV No. 200408960 to Foundation for violations of Rule 906.b. (Spill/Release Reporting) and Rule 906.c. (Spill/Release Remediation) for Release #4 at the Sooner Unit 2-28 Well.

B. Release #5 (South heater-treater building)

31. During the May 8, 2014, inspection of the Sooner Unit 2-28 Well, Staff discovered an ongoing produced water release from a leaking fitting in the south heater treater building. (Tracking No. 400636815, “Release #5”). The release had spread outside of the treater building. The release exceeded one barrel and was outside secondary containment.

32. The Inspection Report (Doc. No. 667400390) required Foundation to immediately repair the leak and investigate the extent of the release for impacts to surface soil and subsurface by May 10, 2014.

33. On June 30, 2014, Foundation submitted a Form 19 for Release #5 (Doc. No. 400636815).

34. On July 7, 2014, Foundation submitted a Form 27 for Release #5 (Doc. No. 261843).

35. On July 14, 2014, Staff issued NOAV No. 200408960 to Foundation for violations of Rule 906.b. (Spill/Release Reporting) and Rule 906.c. (Spill/Release Remediation) for Release #5 at the Sooner Unit 2-28 Well.

ENFORCEMENT PROCEEDING

36. Following a factual investigation and legal review of the violations alleged in the NOAVs referenced above, Staff now asserts Foundation has committed the following violations at the three Wells, summarize below and in Table 2:

Table 2: Violations

Well Name	NOAV Nos.	Rule 906.b.	Rule 906.c.	Rule 1101.e.
Sooner Unit 7-28	200408958, 200412868	X	X	X
Sooner Unit 10-28	200408959, 200412872	X	2X	X
Sooner Unit 2-28	200408960	2X	2X
TOTAL VIOLATIONS		4	5	2

a. Four violations of Rule 906.b. (Spill/Release Reporting) for the failure to report four spills/releases (Releases #1, #3, #4, and #5) at the three Wells.

b. Five violations of Rule 906.c. (Spill/Release Remediation) for the failure to investigate and remediate five releases (Releases #1 - #5) at the three Wells.

c. Two violations of Rule 1101.e. (Pressure Testing for Flowlines) for the failure to provide flowline testing records for the Sooner Unit 7-28 Well and Sooner Unit 10-28 Well for the past three years upon request from COGCC staff.

37. Foundation has submitted a plan for implementing a flowline testing program in compliance with Rule 1101.e., completed Remediation Project #8522 at the Sooner Unit 7-28, and completed Reclamation Project #8550 and #8551 at the Sooner Unit 10-28.

38. Pursuant to Rule 523 and the Commission’s Enforcement and Penalty Policy, Hearings Staff calculated a penalty of $110,000 for these violations. Staff does not recommend any adjustments based on aggravating or mitigating factors.

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 Foundation agrees to settle the NOAV on the following terms and conditions:

Foundation will be assessed a penalty of $110,000.

a. Foundation will pay $86,000 of this penalty within 30 days after the approved AOC is mailed by the Commission.

b. The remaining $24,000 of the penalty will be suspended pending timely compliance with the corrective actions required by this AOC. If Foundation complies, the suspended portion of the penalty will be vacated. If Foundation does not comply, the suspended penalty will be due upon demand by the Director without further action by the Commission.

II. Required Corrective Actions:

a. Foundation will complete Remediation Projects #8523 and #8524 at the Sooner Unit 2-28 by June 30, 2015. Foundation will remediate the contaminated soil in and around the heater-treater facilities with hand tools and dispose of as much contaminated soil as this approach will allow. Manifest tickets will be submitted for all dirt hauled to an approved waste management facility. If clean soil can be reached, Foundation will collect base and wall samples, per Table 910-1 requirements to close out the remediation project. If soil is still contaminated after digging to 3 feet with hand tools, Foundation will collaborate with Commission staff for guidance on how to complete and close the remediation project.

b. Foundation will continue to monitor the progress of reclamation of the areas affected by the spills associated with the Sooner Unit 7-28 (Remediation Project #8522), and the Sooner Unit 10-28 (Remediation Projects #8518 and #8550). Foundation will perform maintenance of stormwater controls and implement weed control measures at each spill location to maintain compliance with Rules 1002 and 1003.

III. Payment of the penalty pursuant to this AOC does not relieve the operator from its obligations to complete corrective actions set forth in the NOAVs, as may be amended or modified by Staff.

RECOMMENDED this 5^th day of January 2015.

ON BEHALF OF THE STAFF OF THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

_____________

Britta Beckstead, Assistant Attorney General

AGREED TO AND ACCEPTED this ____day of December, 2014.

FOUNDATION ENERGY MANAGEMENT LLC

Signature of Authorized Company Representative

Print Signatory Name

Title

ORDER

HAVING CONSIDERED the Agreement between the Director and Foundation to resolve the NOAV, the COMMISSION ORDERS:

1. Foundation is found in violation Rules 906.b., 906.c., and 1101.e. for the reasons described above.

Foundation will be assessed a penalty of $110,000.

a. Foundation will pay $86,000 of this penalty within 30 days after the approved AOC is mailed by the Commission. Failure to pay this penalty by the deadline may result in a separate violation with additional daily penalties.

The remaining $24,000 of the penalty will be suspended pending timely compliance with the corrective actions required by this AOC. If Foundation complies, the suspended portion of the penalty will be vacated. If Foundation does not comply, the suspended penalty will be due upon demand by the Director without further action by the Commission.

3. Required Corrective Actions:

4. This Order does not relieve Foundation from undertaking and completing additional abatement or corrective actions as required by Staff, including additional corrective actions as may be warranted to completely remediate the issues identified in the AOC but not otherwise described herein.

5. 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. 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 daily penalties.

6. Entry of this Order constitutes final agency action for purposes of judicial review 30 days after the date this order is mailed by the Commission.

7. The provisions contained in the above order are effective on the date this matter is heard and approved by the Commission.

8. 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 February, 2015 as of the 26^TH day of January, 2015.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

Jill Dorancy, Acting Secretary

ENTERED this _____ day of February, 2015 as of the 26TH day of January, 2015.

ENTERED this _____ day of February, 2015 as of the 26^TH day of January, 2015.