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 BLACK HILLS PLATEAU PRODUCTION LLC GARFIELD COUNTY, COLORADO |
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CAUSE NO. 1V DOCKET NO. 161200307 TYPE: ENFORCEMENT ORDER NO. 1V-623
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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. Black Hills Plateau Production, LLC (“Black Hills”) (Operator No. 10150) is the operator of the Homer Deep 9-11CH well (API No. 05-045-22489) (“Well”) in Garfield County, Colorado.
2. On December 8, 2014, Black Hills spud the Well. The rig was released from the pad where the Well is located on June 20, 2015 (Document #400923362). Black Hills was required to submit the Final Drilling Completion Report, Form 5, by August 21, 2015 (60 days after rig release for the pad). Black Hills submitted a Form 5 before the 60 day deadline on July 23, 2015 but it was incorrectly submitted as preliminary. Black Hills did not submit the final Form 5 until November 10, 2015 (Document #400923362), 81 days late, and it was still incomplete.
3. On September 8, 2015, the Well first produced hydrocarbons (Document #400924930) while the Well was on flowback. As a result of this production, Black Hills was required to submit the Completed Interval Report, Form 5A, for the Well by October 8, 2015. The Form 5A was not submitted until November 10, 2015 (Document #400924930), 33 days late.
4. Black Hills is required to submit Form 7s, Operator’s Monthly Report of Operations, within 45 days after the end of each month. Black Hills failed to submit monthly operation reports on wells which were not capable of production beginning the month of spud, December 2014, through August 2015. Black Hills submitted all delinquent reports on June 21, 2016 (Document #401075129).
5. On September 8, 2015, Black Hills first sold production from the Well (Document #400807866). Black Hills was required to submit a Certificate of Clearance, Form 10, by October 8, 2015 (within thirty (30) days after initial sale of oil or gas from the Well). Black Hills did not submit the Form 10 until June 27, 2016 (Document #400807866), 263 days late.
6. Black Hills was required to run an open hole resistivity log with gamma ray or other petrophysical log approved by the Director to adequately describe the stratigraphy of the entire well bore and adequately verify the setting depth of surface casing and aquifer coverage at the Well. Black Hills ran a qualifying log for another well on the same well pad, but failed to obtain advanced approval to use such log for the Well.
7. The Application for Permit to Drill for the Well (Document #400583648), approved production no closer than six hundred sixty (660) feet from the north line of Section 9, Township 8 South, Range 98 West. This north line of Section 9 is the unit boundary of the Homer Deep Exploratory Unit (COC 072921X) approved by the Bureau of Land Management (“BLM”). The Form 5 submitted by Black Hills (Document #400923362) reported a productive interval three hundred twenty seven (327) feet from the north line of Section 9.
8. On June 8, 2016, COGCC Staff issued NOAV No. 401047564 to Black Hills for violations of the following Rules of the COGCC Rules of Practice and Procedure, 2 C.C.R. 404-1 (“Rule” or “Rules”) and the Oil and Gas Conservation Act (“Act”):
a. Rule 308A.b.(1) (Drilling Completion Report) for the failure to timely submit a Form 5, Drilling Completion Report, for the Well;
b. Rule 308B (Completed Interval Report) for the failure to timely submit a Form 5A, Completed Interval Report, for the Well;
c. Rule 309.a. (Operator’s Monthly Operations Report) for the failure to timely submit Form 7, Operator’s Monthly Operations Reports, for the Well;
d. Rule 312.a. (Certificate of Clearance) for the failure to timely file a Form 10, Certificate of Clearance, for the Well;
e. Rule 317.p. (General Drilling Rules) for the failure to run a qualifying log on the Well; and
f. Rule 318.d.(3) (Location of Wells) for the failure to locate the Well at least 600 feet from a unit boundary.
9. The NOAV required the following corrective actions:
a. By July 8, 2016, submit a Form 4 Sundry Notice to detail internal procedures that will ensure that Form 5s, "Final" Drilling Completion Reports, will be submitted within 60 days of the rig release on the pad in a complete, accurate, and approvable manner. Black Hills completed this corrective action on June 28, 2016 by submitting a Form 4 with the required information (Document #401069407);
b. By July 8, 2016, submit a Form 4 Sundry Notice to detail internal procedures that will ensure that Form 5As, Completed Interval Reports, will be submitted within 30 days of first production a complete, accurate, and approvable manner. Black Hills completed this corrective action on June 28, 2016 by submitting a Form 4 with the required information (Document #401069407);
c. By July 8, 2016, submit the delinquent Form 7 Operations Reports for November 2014 through August 2015. Black Hills submitted all delinquent reports on June 21, 2016 (Document #401075129);
d. By July 8, 2016, submit a Form 10, Certificate of Clearance for the Well. Black Hills completed this corrective action by submitting the Form 10 on June 27, 2016 (Document #400807866);
e. By July 8, 2016, submit a Form 4 Sundry Notice to detail internal procedures that will ensure that open hole resistivity logs with gamma ray will be run as required by Rule 317.p. in future wells. Black Hills completed this corrective action on June 28, 2016 by submitting a Form 4 with the required information (Document #401069407); and
f. By July 8, 2016, submit a Form 4 Sundry Notice with a request for exception location and request a waiver from the BLM. Black Hills immediately began negotiations with the BLM to obtain a waiver, and on July 7, 2016 Black Hills notified Staff of our ongoing negotiations with BLM related to such waiver. On August 28, 2016, Black Hills submitted an exception location request after obtaining agreement from the BLM that the Well is not draining BLM minerals (Document #401099878). This satisfied the corrective action.
10. Pursuant to Rule 523 and the Commission’s Enforcement and Penalty Policy, Hearings staff calculated a penalty of $34,946. The penalty calculation is based on the following:
|
NOAV No. |
Rule |
Class, Impact |
Daily Penalty |
Start Date |
End Date |
Days |
Total Penalty |
|
401047564 |
308A.b. |
Class 2, Minor |
$1,000 |
8/21/2015 |
11/10/2015 |
81 |
$17,840 |
|
401047564 |
308B |
Class 2, Minor |
$1,000 |
10/8/2015 |
11/10/2016 |
33 |
$14,300 |
|
401047564 |
309.a. |
Class 1, Minor |
$200 |
6/13/2015 |
6/21/2016 |
374 |
$4,156 |
|
401047564 |
312.a. |
Class 1, Minor |
$200 |
10/8/2015 |
6/27/2016 |
263 |
$3,839 |
|
401047564 |
317.p. |
Class 2, Minor |
$2,500 |
6/18/2015 |
6/19/2015 |
1 |
$2,500 |
|
401047564 |
318.d. |
Class 1, Minor |
$200 |
9/8/2015 |
7/7/2016 |
303 |
$3,959 |
|
SETTLEMENT INDUCEMENT (-25%) |
-$11,648 |
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TOTAL PENALTY |
$34,946 |
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a. Application of the Duration Matrix of the COGCC Enforcement Guidance and Penalty Policy;
b. For the Rule 308A.b.(1)., 308B, and 312.a violations, start date of the due date for the form at issue and end date of the submission of the required form;
c. For the Rule 309 violation, start date of one year back from service of the NOAV and end date of the submission of all delinquent reports;
d. For the Rule 317.p. violation, start date of the date casing was set in the Well and end date of the following day as the violation is uncorrectable and this is the first instance of this violation for Black Hills;
e. For the Rule 318.d. violations, start date of date of first production and end date of commencement of corrective actions by beginning to negotiate with the BLM for a location exception;
f. Reduced daily penalty for the violations of Rules 308A.b.(1) and 308B to make the penalty appropriate to the nature of the violation;
g. No aggravating or mitigating factors; and
h. No pattern of violation, or gross negligence or knowing and willful misconduct.
11. Black Hills agrees to the findings of this AOC only for the purpose of expeditiously resolving this matter without a contested hearing. Black Hills 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 Black Hills pursuant to this AOC shall not constitute evidence of fault or liability by Black Hills with respect to any third-party claim against Black Hills. This AOC does not constitute an admission by Black Hills of any alleged violation, factual allegation, or penalty determination or component.
AGREEMENT
NOW, THEREFORE, based on the Findings and pursuant to Rule 522.e.(1) and the Commission’s Enforcement and Penalty Policy, the Director and Black Hills agree to request that the Commission enter the Order set forth below.
RECOMMENDED this 17 day of January, 2017.
OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO
By
Kyle W. Davenport, Asst. Attorney General
AGREED TO AND ACCEPTED this ____ day of January, 2017.
BLACK HILLS PLATEAU PRODUCTION
By
Signature of Authorized Company Representative
Print Signatory Name and Title
ORDER
HAVING CONSIDERED the Findings and the Agreement between the Director and Black Hills to resolve the NOAVs, the COMMISSION ORDERS:
1. Black Hills is found in violation of Rules 308A.b.(1), 308B, 309.a., 312.a., 317.p., 318.d.(3) as described above.
2. Black Hills will be assessed a penalty of $34,946 for these violations.
3. Black Hills will pay $34,946 within 30 days after this Order is mailed by the Commission.
4. 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.
5. This Order is effective as of the date it is mailed by the Commission. It constitutes final agency action for purposes of judicial review.
6. 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 January, 2017 as of the ___ day of January, 2017.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By
Julie Murphy, Secretary
CERTIFICATE OF MAILING
On February __, 2017, a true and accurate copy of Order 1V-623 was mailed by certified mail, return receipt requested, to the following address:
Black Hills Plateau Production LLC
Attn: John Benton
1515 Wynkoop Street, Suite 500
Denver, Colorado 80202
____________________________________
Margaret Humecki