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 MONUMENT GLOBAL RESOURCES INC, MONTEZUMA COUNTY, COLORADO |
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CAUSE NO. 1V
DOCKET NO. 161000401
TYPE: ENFORCEMENT
ORDER NO. 1V-600 |
STIPULATED ORDER FINDING VIOLATION
The Colorado Oil and Gas Conservation Commission (“Commission”), having reviewed the administrative record and being fully advised on the premises, 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 finds and states as follows:
FINDINGS
The Staff of the Commission (“Staff”) and Monument Global Resources, Inc. (“Monument”) have agreed to this Stipulated OFV in the “Stipulation” section below. There are no disputed facts or issues.
I. The Commission entered two enforcement orders regarding Monument’s oil and gas operations in March and April 2016.
1. Monument (Operator No. 10430) is the operator of the Cache Unit 6 Well (API No. 05-083-05152), Cache Unit 8 Well (API No. 05-083-05147), and Cache Unit 9 Well (API No. 05-083-05148) (“Wells”) in Montezuma County, Colorado. These Wells are the subjects of Orders 1V-541 and 1V-577.
A. Order 1V-541 involved four oil spills, two of which impacted waters of the state.
2. In April 2013, Staff received a complaint regarding oil spills from flowline leaks at the Cache Unit 6 Well and Cache Unit 9 Well. At a follow-up inspection, Staff observed that one of the spills had traveled 600 feet downstream in McElmo Creek and the other spill had traveled a quarter mile downstream in a tributary of the creek. In June 2013, a third spill was discovered at the Cache Unit 9 Well.
3. The Form 27s, Site Investigation and Remediation Workplan, for the 2013 spills required Monument to submit supplemental reports to Staff, documenting the actions performed to remediate the sites, and continue remediation. In March 2015, Staff inspected the sites and observed oil-stained soils at two of the 2013 spill sites. Staff also discovered a fourth spill below an aboveground storage tank at the Cache Unit 9 Well, which had not been reported or cleaned up.
4. In May 2015, Staff issued a Warning Letter to Monument, requiring the supplemental reports and continued remediation. Monument did not take the actions required by the Warning Letter.
5. In September and October 2015, Monument submitted satisfactory supplemental reports and re-treated the area of the spills that required remediation. Two of the spills required additional treatment to come into compliance with Table 910-1.
6. On March 7, 2016, the Commission entered Order 1V-541, approving an Administrative Order by Consent (“AOC”) between Staff and Monument regarding the clean-up, reporting, and remediation of the four spills.
7. Order 1V-541 required Monument to sample for compliance with Table 910-1 at two Cache Unit 9 Well spill sites by May 15, 2016 and, if necessary based on the sample results, treat the impacted areas and resample.
8. Order 1V-541 also required Monument to pay $17,260 within 30 days after the Order was mailed by the Commission. Subsequent penalty payments of $5,373 were due before June 30, 2016 and September 30, 2016.
9. Order 1V-541 provided that if Monument failed to perform the corrective actions or pay the penalties required by the Order, the total penalty remaining, including the $54,925 suspended penalty, would be due upon notification from the Director.
B. Order 1V-577 involved casing integrity issues of an underground injection control well.
10. On August 20, 2014, the Cache Unit 8 Well, an underground injection control well, failed a Mechanical Integrity Test (“MIT”). Monument did not plug or repair and test the Well for mechanical integrity and Staff issued a Notice of Alleged Violation (“NOAV”).
11. On October 21, 2015, Monument and Staff executed an AOC that required Monument to plug and abandon the Cache Unit 8 Well by November 15, 2015.
12. In November 2015, a drilling rig was brought onto the Cache Unit 8 Well’s location, but Monument did not commence plugging until December 2015. From November 2015 to January 2016, Monument alleged weather conditions and contractor issues as reasons for the delay.
13. In February 2016, Staff observed that the Blowout Preventer (“BOP”) at the Cache Unit 8 Well was leaking and Monument notified Staff that the rig crew had left their equipment and had not returned to the Well. The leak from the BOP was stopped on or around March 1, 2016.
14. On April 18, 2016, the Commission entered Order 1V-577, approving a re-negotiated AOC between Staff and Monument regarding the mechanical integrity violations at the Cache Unit 8 Well.
15. Order 1V-577 required Monument to complete the plugging and abandonment of the Cache Unit 8 Well by July 1, 2016 and pay a penalty of $15,590 within 60 days of the mailing of the Order.
16. Order 1V-577 also stated that if Monument failed to pay the penalty or perform the corrective action, the $50,000 suspended penalty would become due and Staff would be authorized to immediately use funds from the Oil and Gas Conservation and Environmental Response Fund.
II. Monument failed to perform the corrective actions and pay the penalties required by Orders 1V-541 and 1V-577.
17. Monument did not re-sample the two spill sites by May 15, 2016, as required by Order 1V-541. (Doc. No. 674901139).
18. On June 7, 2016, Staff inspected the Cache Unit 9 Well and observed “no evidence of recent remediation efforts” and oil-stained soil “readily visible in the creek bed.” (Doc. No. 674901139).
19. On June 7, 2016, Staff also inspected the Cache Unit 8 Well and observed oily fluid present in the open-topped mud tank, dead rodents in the plugging pit, and that the wellhead was surrounded by impacted material. (Doc. No. 674901127).
20. On July 8, 2016, Staff inspected the Cache Unit 8 Well and observed that the well had not been plugged as required by Order 1V-577. Staff also observed mineral deposits on the bottom of the BOP’s housing, indicating that it was seeping fluid. (Doc. No. 685300887).
21. The corrective actions from the June 7, 2016 and July 8, 2016 inspection reports remained outstanding at an August 17, 2016 inspection of the Cache Unit 8 Well. (Doc. No. 674901235).
22. Monument has failed to pay the penalties required by Orders 1V-541 and 1V-577.
23. On July 8, 2016, the Director issued a demand for payment of the $150,950 in penalties imposed by the Orders. Monument did not respond to this demand for payment.
24. On August 31, 2016, COGCC Staff issued NOAV Nos. 401102188 & 401102202 to Monument for violations of Section 34-60-121, C.R.S., of the Oil and Gas Conservation Act (“Act”) and Rule 522.f. for the failure to comply with Orders 1V-541 and 1V-577.
PENALTY CALCULATION
25. Pursuant to Rule 523 and the Commission’s Enforcement and Penalty Policy, Hearings Staff calculated a penalty of $293,800 for these violations. The penalty calculation is based on the following:
|
Order No. |
NOAV No. |
Rule/Act Violated |
Class, Impact |
Daily Penalty |
Start Date |
End Date |
Days of Violation |
Total Penalty |
|
1V-541 |
401102188 |
Section 121 & 522.f. |
3, Moderate |
$5,000 |
5/16/16 |
10/24/16 |
161 |
$152,200 |
|
1V-577 |
401102202 |
Section 121 & 522.f. |
3, Moderate |
$5,000 |
7/2/16 |
10/24/16 |
114 |
$141,600 |
|
TOTAL PENALTY |
$293,800 |
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a. Application of the Duration Matrix from the COGCC Enforcement Guidance and Penalty Policy;
b. Consolidation of Monument’s violations for the failure to pay the penalty and perform the corrective action into a single violation of each Order;
c. Start date of the day after the corrective action was due, end date of the October 24-25, 2016 hearing for ongoing violations;
d. Reduced the daily penalty to make the penalty appropriate to the nature of the violation;
e. No aggravating or mitigating factors; and
f. No gross negligence, or knowing and willful misconduct.
STIPULATION
NOW, THEREFORE, based on the Findings above, the Director and Monument stipulate to this Order in its entirety and jointly request that the Commission enter this Order Finding Violation.
RECOMMENDED this 30th day of September, 2016.
OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO
By
Britta Beckstead, Asst. Attorney General
AGREED TO AND ACCEPTED this 30th day of September, 2016.
MONUMENT GLOBAL RESOURCES INC.
By
Signature of Authorized Company Representative
Print Signatory Name and Title
ORDER
HAVING CONSIDERED the Findings and the Agreement between the Director and Monument, the COMMISSION ORDERS:
1. Monument is found in violation of Orders 1V-541 and 1V-577, as described above.
2. Monument is found to have engaged in a pattern of violations pursuant to Section 34-60-121(7), C.R.S., and Rule 523.d.(3).
3. Monument is assessed a $293,800 penalty for these violations and is ordered to return to compliance with the Act, Commission rules, orders, and permits.
4. Monument will pay the $293,800 penalty, by certified check, within 30 days of the mailing of this Order.
5. The Director is authorized, but not required, to take any or all the following actions, if Monument fails to pay the penalty and/or return to compliance within 30 days of the mailing of the Order:
a. Declare Monument’s wells “Orphaned Wells”, as defined in the 100-Series Rules;
b. Suspend Monument’s Form 10s, Certificates of Clearance, for Monument’s wells, and withhold the issuance of any new drilling or oil and gas location permits, until Monument demonstrates to the satisfaction of the Director that the operator has brought all violations cited in the Order into compliance and that any penalty assessed has been paid;
c. Terminate Monument’s Operator Number (Operator No. 10430), rescind Monument’s Form 1 (Doc. No. 02558572), and revoke Monument’s right to conduct oil and gas operations in Colorado, until Monument demonstrates at a Commission hearing that Monument has brought all violations cited in the Order into compliance, any penalty assessed has been paid, and that re-instating Monument’s Form 1 will not threaten to or actually create significant adverse impacts to public welfare or the environment;
d. Foreclose Monument’s existing financial assurance (Surety ID 2015-0078 (Inst. No. 1340010205065) and Surety ID 2012-0078 (Inst. No. 1340010202538)) and claim both the principal and any accrued, but undisbursed, interest that may exist and use those funds to remediate conditions that threaten to cause, or that actually cause, significant environmental impacts at non-federal and non-tribal wells and locations formerly operated by Monument;
e. Require Mr. Kerry W. Smith, President of Monument, to notify the Commission if: (1) he or any entity of which he is a principal, majority owner, operational or general manager, or otherwise controls applies for a permit or submits a Form 10, Certificate of Clearance, for the Commission’s approval; or (2) he joins an existing entity and becomes the principal, majority owner, operational or general manager, or otherwise controls the existing entity. If Mr. Smith or such an entity applies for a permit or submits a Form 10, Certificate of Clearance, the Commission must hear the matter and determine whether to grant the application;
f. Use funds from the Oil and Gas Conservation and Environmental Response Fund to investigate, prevent, monitor, or mitigate conditions that threaten to cause, or that actually cause, significant adverse environmental impacts at non-federal and non-tribal wells and locations formerly operated by Monument;
g. Require Monument to repay any funds expended by the Commission from the Oil and Gas Conservation and Environmental Response Fund for any work undertaken by COGCC Staff;
h. Claim all equipment, saleable product, and appurtenances related to Monument’s oil and gas operations at its wells as property of the Commission, provided that any proceeds from the disposition of the assets will be credited to the Oil and Gas Conservation and Environmental Response Fund; and
i. To the extent permitted by applicable law and Commission resources, coordinate remediation efforts at Monument’s federal and tribal wells with the BLM, EPA, and tribes, using any federal or tribal funds available for this purpose.
6. At the Director’s request, Monument will assign equipment, saleable product, and appurtenances related to Monument’s oil and gas operations to the Commission or a third party to be determined by the Director.
7. In the event the Director determines, in the Director’s discretion and consistent with the Director’s independent determination of operational priorities, that there is a need to expend funds from the Oil and Gas Conservation and Environmental Response Fund to remediate conditions that threaten to cause, or that actually cause, significant environmental impacts at federal and/or tribal wells and locations formerly operated by Monument, the Director will return to the Commission for approval of such actions.
8. The following will not affect Monument’s obligations under this Order: (1) a change in ownership, corporate status, or partnership status; or (2) a conveyance of title or other interest relating to Monument’s oil and gas operations. Monument will give written notice of this Order to any purchaser, successor, or assignee prior to transferring ownership or title to its oil and gas operations. Monument will give written notice to the Director prior to any change in title, ownership, or status. If there are outstanding corrective actions at the time of a change in title or ownership, Monument’s successors or assigns will be responsible for completing those corrective actions at Monument’s former oil and gas locations.
9. Upon the Director’s notice of a claim pursuant to Paragraph 5.h., Monument will not remove, transfer, or dispose of any equipment, saleable product, or appurtenances related to its oil and gas operations, unless permission is granted by the Director.
10. This Order is effective as of the date it is mailed by the Commission. It constitutes final agency action for purposes of judicial review.
11. 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 October, 2016, as of the ___ day of October, 2016.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By
Julie Murphy, Secretary
CERTIFICATE OF MAILING
On _____________, 2016, a true and accurate copy of Order 1V-600 was mailed by first-class mail, return receipt requested to the following:
Monument Global Resources, Inc.
Attn: Kerry Smith
12160 N Abrams Rd. Ste 610
Dallas, TX 75243
Margaret Humecki