1V-604

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 SAN MARCO PETROLEUM INC, LA PLATA COUNTY, COLORADO

)

CAUSE NO. 1V

DOCKET NO. 161200481

TYPE: ENFORCEMENT

ORDER NO: 1V-604

ADMINISTRATIVE ORDER BY CONSENT

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

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

FINDINGS

1. San Marco Petroleum Inc. (“San Marco”) (Operator No. 74975) is the operator of West Alkali Gulch 1 Well (API No. 05-067-06491) (“Well”) in La Plata County, Colorado.

2. According to COGCC records, the Well has been producing intermittently since 1999.

3. San Marco received its first results of a gas analysis taken at the Well indicating the presence of hydrogen sulfide in 2014.

4. On May 19, 2016, San Marco received results from a gas analysis of the Well that reported 334 ppm of hydrogen sulfide in the gas stream (Doc. No. 02451419).

5. At a June 2, 2016 inspection of the Well, the location was marked with a designation that hydrogen sulfide gas was present (Doc. No. 685200154). At the time of the inspection, COGCC and the La Plata County Local Government Designee (“LGD”) did not have a gas analysis on file for this Well. COGCC Staff required San Marco to submit a gas analysis for the Well to COGCC and the LGD by June 24, 2016.

6. On June 24, 2016, COGCC received a Form 4, Sundry Notice, with the gas analysis from San Marco (Doc. No. 02451419).

7. On September 15, 2016, COGCC Staff issued NOAV No. 401108344 to San Marco for a violation of Rule 607 (Hydrogen Sulfide Gas) of the COGCC Rules of Practice and Procedure, 2 C.C.R. 404-1 (“Rule” or “Rules”) for the failure to submit a gas analysis for the Well to COGCC and the La Plata LGD after learning that the Well had hydrogen sulfide in the gas stream.

8. Pursuant to Rule 523 and the Commission’s Enforcement and Penalty Policy, Hearings staff calculated a penalty of $3,000. The penalty calculation is based on the following:

Rule	Class, Impact	Daily Penalty	Start Date	End Date	Days	Total Penalty
607	Class 1, Minor	$200	9/15/2015	6/24/2016	283	$3,899
Settlement Inducement (-22.85%)						-$899
FINAL PENALTY						$3,000

a. Application of the Duration Matrix of the COGCC Enforcement Guidance and Penalty Policy;

b. Class 1, Minor violation;

c. Rule 607 is classified as a Class 2 Rule, but Staff has reclassified Rule 607 as a Class 1 Rule for the purposes of this penalty calculation due to the unique circumstances of this case;

d. Start date of one-year prior to the issuance of the NOAV and end date of the submission of the gas analysis to COGCC and the LGD;

e. Settlement inducement;

f. No aggravating or mitigating factors; and

g. No pattern of violation, or gross negligence or knowing and willful misconduct.

AGREEMENT

NOW, THEREFORE, based on the Findings and pursuant to Rule 522.e.(1), the Director and San Marco agree to request that the Commission enter the Order set forth below.

RECOMMENDED this 21^st day of October, 2016.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By _____________________

Britta Beckstead, Asst. Attorney General

AGREED TO AND ACCEPTED this 21^st day of October, 2016.

SAN MARCO PETROLEUM INC

Signature of Authorized Company Representative

Print Signatory Name and Title

ORDER

HAVING CONSIDERED the Findings and the Agreement between the Director and San Marco to resolve the NOAV, the COMMISSION ORDERS:

1. San Marco is found in violation of Rules 607, as described above.

2. San Marco is assessed a penalty of $3,000 for these violations.

3. San Marco will pay $3,000, by certified check, within 30 days after this Order is mailed by the Commission.

4. Within 30 days of the mailing of this Order, San Marco will perform all of the following corrective actions:

San Marco will submit a Reporting Guidance Questionnaire, which will include a calculation of the Radius of Exposure, and an Operations Plan for the Well to COGCC. Both the Reporting Guidance Questionnaire and Operations Plan must meet the requirements for each of those documents as set forth in the COGCC Notice to Operators: Reporting Hydrogen Sulfide (H₂S) Clarifications for Implementation of COGCC Rule 607 and BLM Onshore Order No. 6 (“COGCC H₂S Policy”).

i. San Marco will submit the Operations Plan to COGCC and the La Plata County LGD. San Marco must notify COGCC, the LGD, and local emergency dispatch of San Marco’s intent to implement the Operations Plan prior to commencing drilling, workover, completion, or servicing operations on production or gathering equipment.

ii. San Marco will evaluate whether: (1) the 100 ppm Radius of Exposure is greater than 50 feet and includes any occupied residence, school, church, park, school bus stop, place of business, playground, or other areas where the public can reasonably be expected to frequent; or (2) the 100 ppm Radius of Exposure is equal to or greater than 3,000 feet where facilities or roads are principally maintained for public use.

b. San Marco will demonstrate that it is a member of the Utility Notification Center of Colorado pursuant to §9-1.5-101 et. seq., C.R.S., and Rule 1102.d. San Marco will submit a Form 4, Sundry Notice, with documentation demonstrating its membership to the COGCC.

5. Within 60 days of the mailing of this Order, San Marco will perform one of the following corrective actions:

a. If neither of the conditions in Paragraph 4.a.(ii) are met, San Marco will submit a Form 4, Sundry Notice, to COGCC. This Form 4 will be subject to COGCC conditions of approval and must include calculations and other supporting documentation demonstrating why a Public Protection Plan is not required.

b. If either one of the conditions in Paragraph 4.a.(ii) is met, San Marco will submit a Public Protection Plan as required by COGCC H₂S Policy.

i. This Public Protection Plan will be subject to COGCC Staff approval. It must be submitted to COGCC, the La Plata County LGD, and the local emergency dispatch office.

ii. The COGCC-approved Public Protection Plan for the Well must be available at the Well during drilling, workover, completion, and servicing operations, as well as at San Marco’s local field office.

6. Within 90 days of the mailing of this Order, San Marco will perform both of the following corrective actions:

a. Pressure test the flowline at the Well pursuant to a procedure approved by COGCC Engineering Staff; and

b. Submit a Workover Operations Plan to address any potential hydrogen sulfide exposure and mitigation concerns prior to performing any work or testing on the Well.

7. 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.

8. Failure to pay the penalty or perform the corrective action by the above deadlines is an independent violation that may be subject to additional penalties.

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

10. 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 December, 2016 as of the ___ day of December, 2016.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

Julie Murphy, Secretary

CERTIFICATE OF MAILING

On ____________________, 2016, a true and accurate copy of Order 1V-604 was mailed by certified mail, return receipt requested to the following address:

San Marco Petroleum, Inc.

Attn: John F. Sheridan

240 Milwaukee St., Suite 200

Denver, CO 80206-5006

____________________________________

Margaret Humecki