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 PETROX RESOURCES INC, ARCHULETA COUNTY, COLORADO

)

CAUSE NO. 1V

DOCKET NO. 160400009

TYPE: ENFORCEMENT

ORDER: 1V-585

ADMINISTRATIVE ORDER BY CONSENT

(Pursuant to Rule 522.e.(1) of the Rules and Regulations of the

Colorado Oil and Gas Conservation Commission, 2 CCR 404-1)

FINDINGS

1. Petrox Resources, Inc. (“Petrox”) (Operator No. 69805) is the operator of the Dakota 33-5 #21-3 Well (API No. 05-007-06316) (“Well”) located in Archuleta County.

2. The Well was placed on production on November 11, 2014 (Doc. No. 400756523). COGCC Staff required Petrox to close the drilling pit by May 11, 2015 pursuant to Rule 1003.d.(2) (See Doc. 674900281).

3. On May 8, 2015, Petrox and COGCC Staff took independent samples from the drilling pit (Doc. No. 674900522). COGCC’s sample results indicated exceedances of SAR, arsenic, EC, and barium. Petrox’s sample results indicated exceedances for SAR, EC, and arsenic.

4. On June 22, 2015, Petrox resampled the pit contents only for barium. The June 25, 2015 results indicated that barium met Table 910-1 concentrations (Doc. Nos. 2315055 and 2315056).

5. On July 23, 2015, Petrox closed the drilling pit (Doc. No. 400895044).

6. On November 10, 2015, COGCC Staff issued Notice of Alleged Violation (“NOAV”) No. 200437910 to Petrox for a violation of Rule 1003.d.(2) (Drilling Pit Closure) of the Rules and Regulations of the Colorado Oil and Gas Conservation Commission, 2 CCR 404-1 (“Rule” or “Rules”) for the failure to close the Well’s drilling pit within six months after drilling and completion activities concluded.

7. Pursuant to Rule 523 and the Commission’s Enforcement and Penalty Policy, Staff calculated a penalty of $10,000 for these violations. The penalty calculation is based on the following:

NOAV No.	Rule	Class	Impact	Daily Penalty	Start Date	End Date	Days	Total Penalty
200437910	1003.d.(2)	Class 2	Minor	$1,000	6/26/2015	7/23/2015	27	$13,400
Settlement Inducement								-25.4%
FINAL PENALTY								$10,000

a. Violations beginning after the effective date of HB 14-1356 (June 6, 2014) and revised Rules 522/523 (March 2, 2015);

b. Days of violation do not include days where there were uncertainties regarding the barium results – May 12, 2015 to June 25, 2015;

c. Reduced daily penalty to make the penalty appropriate to the nature of the violation and based on consideration of the totality of the circumstances;

d. Settlement inducement;

e. No aggravating or mitigating factors; and

f. No pattern of violation or gross negligence/knowing and willful misconduct.

AGREEMENT

NOW, THEREFORE, based on the Findings and pursuant to Rule 522.e.(1) and the Commission’s Enforcement and Penalty Policy, the Director proposes and Petrox agrees to settle the NOAV on the following terms and conditions:

I. Petrox is found in violation of Rule 1003.d.(2), as described above.

II. Petrox will be assessed a penalty of $10,000.

III. Petrox will pay $10,000 within 30 days after the approved Administrative Order by Consent (“AOC”) is mailed by the Commission.

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

V. Petrox agrees to the findings of this AOC only for the purpose of expeditiously resolving this matter without a contested hearing. Petrox reserves the right to contest these 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 Petrox pursuant to this AOC shall not constitute evidence of fault or liability by Petrox with respect to any third-party claim against Petrox. This AOC does not constitute an admission by Petrox of any alleged violation, factual allegation, or penalty determination or component.

RECOMMENDED this 7^th day of June, 2016.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

Britta Beckstead, Assistant Attorney General

AGREED TO AND ACCEPTED this 7^th day of June, 2016.

PETROX RESOURCES INC.

Signature of Authorized Company Representative

Print Signatory Name and Title

ORDER

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

1. Petrox is found in violation of Rule 1003.d.(2), as described above.

2. Petrox is assessed a penalty of $10,000.

3. Petrox will pay $10,000 within 30 days after this Order is mailed by the Commission.

4. 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 14 days prior to the pertinent compliance deadline or as soon as possible if 14 days prior notice is not feasible.

5. Failure to receive an extension prior to or meet a compliance deadline, including a penalty payment deadline, may constitute a new violation subject to additional penalties.

6. This Order is effective as of the date it is mailed by the Commission. It constitutes final agency action for purposes of judicial review.

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

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ENTERED this ___ day of July, 2016 as of the ___ day of July, 2016.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

Julie Murphy, Secretary

CERTIFICATE OF MAILING

On July ___, 2016, a true and accurate copy of Commission Order 1V-585 was mailed by first-class mail, return receipt requested to the following:

Petrox Resources, Inc.
Attn: Michael J. Clark

P.O. Box 2600

Meeker, CO 81641

Signature: __________________________________

Print Name: _________________________________