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 WELLINGTON OPERATING COMPANY, LARIMER COUNTY, COLORADO |
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CAUSE NO. 1V
DOCKET NO. 160400099
TYPE: ENFORCEMENT
ORDER NO. 1V-605 |
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
Inactive Wells
1. Wellington Operating Company (“Wellington”) (Operator No. 95233) operates the following inactive wells in Larimer County, Colorado:
· WF Muddy Unit 26-2 (API #05-069-06092);
· Wellington Muddy Unit 20-3 (API #05-069-05168);
· WT Muddy UT/Buckeye 9-9 (API #05-069-05189);
· Wellington Muddy Unit 13-2 (API #05-069-06008);
· WF Muddy UT/Buckeye 9-11 (API #05-069-06063);
· Wellington Muddy Unit 17-6 (API #05-069-06004);
· Wellington Muddy Unit 21-1A (API #05-069-06009);
· Wellington Muddy Sand 35-4 (API #05-069-06069);
· Wellington Muddy UT/Fleming 13-1 (API #05-069-60039);
· WF Muddy UT/N Poudre 40-1 (API #05-069-05290).
2. On February 4, 2015, Commission Staff issued a Notice of Alleged Violation (“NOAV”) (No. 2558861) to Wellington for the failure to provide the required financial assurance for ten inactive wells as described above. Wellington had a plugging bond of only $105,000 in violation of Rule 707.a (Inactive Wells). The NOAV required Wellington to either: 1) return 5 of the 10 wells to production; 2) plug the wells; or 3) provide additional financial assurance in the amount of $95,000 (for a total of $200,000).
3. On March 3, 2015, Wellington provided an additional $95,000 to the COGCC to financially assure all of the wells in violation and thus come into compliance with Rule 707.a. That same day, NOAV No. 2558861 was closed, requiring no further action.
Mechanical Integrity Testing
4. Wellington operates wells identified in Table 1 in Larimer County that have either been Temporarily Abandoned for more than 30 days or Shut-in for more than two years:
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Table 1 |
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Well Name |
API Number |
NOAV No. |
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WF Muddy Unit 26-2 |
05-069-06092 |
1352209 |
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Wellington Muddy Unit 13-2 |
05-069-06008 |
1352205 |
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WF Muddy UT/Buckeye 9-11 |
05-069-06063 |
200437282 |
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Wellington Muddy Sand 35-4 |
05-069-06069 |
1352208 |
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Wellington Muddy UT/Fleming 13-1 |
05-069-60039 |
1352206 |
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WF Muddy UT/N Poudre 40-1 |
05-069-05290 |
1352207 |
5. On September 23, 2015, Commission Staff issued NOAVs identified in Table 1 above to Wellington for violations related to its failure to perform successful mechanical integrity tests as required by Rule 326 (Mechanical Integrity Testing).
6. Soon after receipt of the NOAVs, Wellington brought the following wells into compliance: WF Muddy Unit 26-2; Wellington Muddy Sand 35-4; Wellington Muddy UT/Fleming 13-1; and WF Muddy UT/N Poudre 40-1.
7. Soon after receipt of the NOAVs, Wellington requested a variance for the mechanical integrity test requirements at the Wellington Muddy Unit 13-2 well and the WF Muddy UT/Buckeye 9-11 well.
Penalty Calculation
8. Pursuant to Rule 523 and the Commission’s Enforcement and Penalty Policy, Hearings staff calculated a penalty of $112,200 for the Rule 326 violations. The penalty calculation is based on the following:
|
Well |
Rule |
Class/ Impact |
Daily Penalty |
Start Date |
End Date |
Days |
Total Penalty |
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Muddy Unit Unit 13-2 NOAV 1352205 |
326.f |
Class 2 Minor |
$1,000 |
12/2/2007 |
10 day limit |
10 |
$10,000 |
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WF Muddy UT/Buckeye 9-11 NOAV 200437282 |
326.f |
Class 2 Minor |
$1,000 |
3/30/2012 |
10 day limit |
10 |
$10,000 |
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WF Muddy Unit 26-2 NOAV 1352209 |
326.f. |
Class 2 Minor |
$1,000 |
12/16/2014 |
10/16/2015 |
304 |
$23,080 |
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Muddy Sand 35-4 NOAV 1352208 |
326.f |
Class 2 Minor |
$1,000 |
12/16/2014 |
10/14/2015 |
302 |
$23,040 |
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Muddy UT/Fleming 13-1 NOAV 1352206 |
326.f |
Class 2 Minor |
$1,000 |
12/15/2014 |
10/14/2015 |
303 |
$23,060 |
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Muddy UP/N Poudre 40-1 NOAV 1352207 |
326.f |
Class 2 Minor |
$1,000 |
12/17/2014 |
10/14/2015 |
301 |
$23,020 |
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TOTAL PENALTY |
$112,200 |
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a. Two violations occurring before the effective date of HB 14-1356 (June 6, 2014) and thus limited $1,000 per day and not more than 10 days (because no significant adverse impact);
b. Four Violations beginning after the effective date of HB 14-1356 and revised Rules 522/523 (March 2, 2015);
i. Start date was the date the MIT was due;
ii. End date established when a successful MIT was performed;
iii. Class 2, Minor;
iv. Daily penalty starting at $1,000 per day (reduced by Ability to Pay);
v. Application of the COGCC Enforcement Guidance and Penalty Policy’s Duration Matrix;
c. No aggravating or mitigating factors; and
d. No pattern of violation, or gross negligence or knowing and willful misconduct.
9. Wellington has submitted financial information for purposes of being considered for its ability to pay under Section V, C of the Enforcement Guidance and Penalty Policy, dated April, 2015. Staff concluded that Wellington’s financial condition supports its request to have Wellington’s ability to pay a penalty considered in the calculation of its penalty. Inability to pay based on Wellington’s submission of: net revenue and income chart from January 2002 through 2015, 1099 for the working interest owner, daily production form September 2015 through March 2016, a revenue and expense summary for the period of January 2015 – March 2016, current bank statements and 2 years of tax returns for both the operating company and the working interest LLC.
AGREEMENT
NOW, THEREFORE, pursuant to Rule 522.e.(1) and in order to resolve the NOAVs without a contested hearing, the Director and Wellington agree to request that the Commission enter the Order set forth below.
RECOMMENDED this ___ day of ________, 2016.
OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO
By
Jeremy Ferrin, Enforcement Officer
AGREED TO AND ACCEPTED this ___day of ______, 2016.
WELLINGTON OPERATING COMPANY
By
Signature of Authorized Company Representative
Bradley Pomeroy
President
ORDER
HAVING CONSIDERED the Agreement between the Director and Wellington Operating Company to resolve the NOAVs, the COMMISSION ORDERS:
1. Wellington is found in violation of Rule 326 as described above.
2. Wellington is assessed a total penalty of $112,200, of which $102,200 is suspended pending successful completion of paragraph 3 below.
3. Wellington will plug and abandon the Muddy Unit Unit 13-2 Well and the WF Muddy UT/Buckeye 9-11 Well, which are no longer capable of production by December 31, 2016.
4. These wells will be plugged in accordance with the approved Form 6s, Document Nos. 401101152 and 401101637, as amended by Staff.
5. Wellington will pay a total of $10,000 by certified checks in four quarterly installments over the course of one year. The first payment of $2500 is due within 30 days after this Order is mailed by the Commission. The second payment of $2500 is due by May 18, 2017. The third payment of $2500 is by September 18, 2017. The final payment of $2500 is due by January 18, 2018.
6. If Wellington fails to plug and abandon the Wells as required by this AOC, the total penalty remaining, including any suspended portion ($102,200 less any payments already made), will be due, and received by the Commission, no later than 30 days after a written demand for payment by the Director is mailed to Wellington’s address of record on file with the COGCC pursuant to Rule 302.
7. If Wellington timely completes the Corrective Actions, the suspended portion of the penalty will be vacated.
8. 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. The 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 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 orders.
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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 IV-605 was mailed by certified mail, return receipt requested to the following address provided by Wellington:
Wellington Operating Company
Attn: Bradley Pomeroy
6065 S QUEBEC ST STE 200
CENTENNIAL , CO 80111
____________________________________
Margaret Humecki