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 ENERGY SEARCH COMPANY, ADAMS AND WASHINGTON COUNTIES, COLORADO |
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CAUSE NO. 1V DOCKET NO. 151000481 TYPE: ENFORCEMENT ORDER NO. 1V-547
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ORDER FINDING VIOLATION
The Colorado Oil and Gas Conservation Commission (“Commission”) enters this Order Finding Violation (“OFV”) pursuant to the Rules and Regulations of the Colorado Oil and Gas Conservation Commission, 2 CCR 404-1(“Rule” or “Rules”), and states as follows:
1. Energy Search is the operator of record of the following eleven wells (“Wells”) in Adams and Washington Counties: Ginther 1 (API #05-001-06945), Ginther 1 (API #05-001-07287), Green 2 (API #05-001-08804), Kortum 3 (API #05-001-07085), Kortum 7 (API #05-001-06190), North Colorado Blvd 1 (API #05-001-07005), Resler 12-27 (API #05-121-10323), Sauvage 3 (API #05-001-08803), Tsuzuki 2 (API #05-001-06851), Tsuzuki 3 (API #05-001-06852), and Tsuzuki 5 (API #05-001-07229). (Exhibit 1; Exhibit 4 - Affidavit of Martha Ramos; Exhibit 4A).
2. The Wells are all greater than 3,000 ft. in depth and have all been shut-in, with no sales, since at least January 2014 and, therefore, are considered inactive by the COGCC. (Id.).
3. On May 13, 2015, COGCC Staff issued a warning letter to Energy Search (Document No. 2559107) notifying Energy Search that it had failed to comply with Rule 707.a (Inactive Wells). (Exhibit 1; Exhibit 4)
4. On June 25, 2015, COGCC Staff issued NOAV No. 2559186 to Energy Search for violations of Rule 707.a. (Id.).
5. On September 29, 2015, Jill Dorancy, Hearing Officer in this matter, held a prehearing conference and issued a Prehearing Order setting deadlines and establishing an order of case presentation. (Prehearing Order).
6. Pursuant to the Prehearing Order, Energy Search stipulated to certain facts relevant to this matter. (Exhibit 1).
7. Energy Search failed to object to Staff’s exhibits, file a prehearing statement, file a proposed order or participate at the hearing as otherwise required by the Prehearing Order.
Jurisdictional Findings
8. Due notice of the time, place and purpose of the hearing has been given in all respects, as required by law. (Exhibit 1 – Stipulated Facts; Exhibit 2 – Hearing Packet; Exhibit 3 – NOAV Packet).
9. The Commission has jurisdiction over the subject matter embraced in this Application, and of the interested parties, and jurisdiction to promulgate the following order pursuant to the Oil and Gas Conservation Act.
Liability, Corrective Action and Penalty Amount
10. Rule 707.a requires operators of “inactive wells” to post additional financial assurance in the amount of $10,000 for inactive wells less than 3,000 feet in total measured depth or $20,000 for inactive wells greater than or equal to 3,000 feet in total measured depth, less existing financial assurance. An “inactive well” is defined in the 100-Series to include “any shut-in well from which no production has been sold for a period of twelve (12) consecutive months; [or] any well which has been temporarily abandoned for a period of six (6) consecutive months.” (Exhibit 4; Exhibit 5 - Pertinent Rule Language).
11. COGCC records indicate that the 11 wells described above are inactive. (Exhibit 1; Exhibit 4; Exhibit 4-A).
12. COGCC records indicate that Energy Search has only posted $60,000 in financial assurance with the Commission pursuant to Rule 706. (Exhibit 1; Exhibit 4; Exhibit 4-B).
13. The Commission applied the following formula to Energy Search’s inventory of inactive wells in order to determine the amount of additional financial assurance required by Rule 707.a:
11 Inactive Wells > 3,000 Ft. x $20,000 = $220,000
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Existing Financial Assurance = $60,000
__________________________
Required Additional Financial Assurance = $160,000
(Exhibit 4).
14. To date, Energy Search has failed to provide $160,000 in additional financial assurance to the COGCC or otherwise comply with the NOAV. (Exhibit 1; Exhibit 4).
15. Based on the foregoing, the Commission finds that Energy Search has committed the following violation:
|
Rule Violation |
Penalty Act and Class/Impact |
Base Penalty |
Start Date |
Penalty End Date |
Duration Adjusted Violation |
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707.a. |
New Class 2/Minor |
$2,500 |
7/1/2014 |
10/26/2015 |
$63,090 |
16. Pursuant to Rule 523 and the Commission’s Enforcement and Penalty Policy (“EPP”), the Commission calculates a penalty of $1,205,000 for this violation. After applying the Violation Duration Matrix from the EPP, the Penalty amount decreases to $63,090. The penalty calculation is based on the following:
a. The Rule violation began prior to the effective date of HB 14-1356. The penalty for these violations have been calculated pursuant to the revised version of § 34-60-121, C.R.S., with reference to the revised Rules 522 and 523 for guidance. A penalty was not sought under the penalty structure in place prior to the effective date of HB 14-1356;
b. The violation was on-going as of June 6, 2014, the effective date of HB 14-1356, so July 1, 2014, the NOAV service date, was used as the penalty start date. For purposes of calculating a penalty end date the hearing date (October 26, 2015) was used. This results in a total of 482 days of violation;
c. No aggravating factors apply;
d. No mitigating factors apply;
e. No pattern of violation exists; and
f. No gross negligence or knowing and willful misconduct exists.
ORDER
NOW, THEREFORE, the COMMISSION ORDERS:
1. Energy Search violated Rule 707.a, for the reasons described above. This violation is ongoing until Energy Search complies with Rule 707.a.
2. Energy Search will post an additional $160,000 in financial assurance within 30 days after this Order is mailed by the Commission.
3. Energy Search is assessed a total penalty of $63,090 for this violation. Energy Search will pay $63,090 within 30 days after this Order is mailed by the Commission.
4. Entry of this Order constitutes final agency action for purposes of judicial review as of the date this Order is mailed by the Commission. Otherwise, it is effective upon approval.
5. The Commission expressly reserves its right after notice and hearing, to alter, amend, or repeal any and/or all of the above Order.
ENTERED this _____ day of _____________ 2015, as of the 26th day of October, 2015.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By
Julie Murphy, Secretary