BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF ALLEGED VIOLATIONS OF THE ) CAUSE NO. 1V
RULES AND REGULATIONS OF THE COLORADO OIL )
AND GAS CONSERVATION COMMISSION BY ) ORDER NO. 1V-329
PETROLEUM DEVELOPMENT CORPORATION, )
YUMA COUNTY, COLORADO )
ADMINISTRATIVE ORDER BY CONSENT
(Pursuant to Rule 522.b.(3) of the Rules and Regulations of the
Colorado Oil and Gas Conservation Commission, 2 CCR 404-1)
FINDINGS
1. On October 31, 2001, the Colorado Oil and Gas Conservation Commission (“COGCC” or “Commission”) approved a Form 33, Injection Well Permit Application, for the Gardner (SWD) 12-26 Well (API #05-125-08247) located in the SW¼ NW¼ of Section 26, Township 1 North, Range 45 West, 6th P.M. The Form 33 authorized a maximum surface injection pressure of 582 pounds per square inch (“psi”).
2. On November 15, 2007, COGCC’s production group informed COGCC’s engineering group that Petroleum Development Corporation (“PDC”) had reported a surface injection pressure of 639 psi for September 2007. This pressure was significantly higher than PDC’s reported pressure of 487 psi for August 2007. The September 2007 surface injection pressure of 639 psi also exceeded the maximum authorized surface injection pressure of 582 psi, despite PDC’s efforts to keep the pressure below 582 psi by installing a pressure relief valve and a bypass valve in June 2007. In a letter from PDC to COGCC dated January 4, 2008, PDC explained that the bypass valve was sized incorrectly, which did not allow for sufficient flow to provide adequate pressure relief.
3. On November 19, 2007, COGCC staff was on location at the Gardner (SWD) 12-26 Well and witnessed a surface injection pressure of 685 psi. COGCC staff recommended that PDC discontinue injection, except for fluids taken on a vacuum, until the problem was resolved.
4. On November 19, 2007, COGCC staff issued a Notice of Alleged Violation (“NOAV”) for the Gardner (SWD) 12-26 Well, citing Rule 325.c.(7), failure to inject at pressures less than the maximum injection pressure, as set by the Director. The NOAV required that PDC submit a written report to summarize PDC’s actions which resulted in the alleged violation and PDC’s plan to correct the problem. The NOAV had an abatement or corrective action deadline of December 20, 2007, which was extended by COGCC staff to January 4, 2008.
5. PDC ceased injection into the Gardner (SWD) 12-26 Well on November 20, 2007. PDC re-perforated the well, treated the well, performed a step-rate injection test, and installed a new 600 psi Murphy kill switch in December 2007. Based on the results of the step-rate injection test, it appears that the formation fracture gradient was never exceeded. Therefore, no material escaped from the well as a result of exceeding the maximum injection pressure, and neither the wellbore nor the surrounding formations were ever placed in jeopardy. Regardless, PDC knowingly injected above the maximum authorized surface injection pressure of 582 psi in September 2007.
6. PDC submitted a written response to the NOAV on January 4, 2008, which documented work on the Gardner (SWD) 12-26 Well from June 2007 through December 2007. The written response also requested an increase of the maximum authorized surface injection pressure to 912 psi, based on the results of the step-rate injection test, which was approved by the COGCC staff on January 8, 2008.
7. With due consideration given to PDC’s response to the NOAV, PDC should be found in violation of Rule 325.c.(7), failure to inject at pressures less than the maximum injection pressure, as set by the Director.
8. Rule 523.c. specifies a base fine of One Thousand dollars ($1,000) per day for each violation of Rule 325. It appears that the violation occurred for a period of more than ten (10) days but did not result in significant waste of oil and gas resources, damage to correlative rights, or a significant adverse impact on public health, safety or welfare.
9. The parties agree to a fine of Six Thousand dollars ($6,000) due to the following mitigating factors:
a) PDC demonstrated prompt, effective and prudent response to the violation;
b) PDC cooperated with the COGCC with respect to the violation;
c) PDC made a good faith effort to comply with applicable requirements prior to the COGCC learning of the violation (PDC installed the pressure relief valve and bypass valve in June 2007); and
d) The cost of correcting the violation reduced or eliminated any economic benefit to PDC.
10. PDC agrees to the findings in this Administrative Order by Consent (“AOC”) only for the purpose of expeditiously resolving the matter without a contested hearing. Notwithstanding the above, PDC does not admit to any of the factual or legal determinations made by the Commission herein, and fully reserves its right to contest the same in any future action or proceeding other than a proceeding to enforce this AOC. Any action undertaken by PDC pursuant to this AOC shall not constitute evidence of any liability or fault by PDC with respect to matters set forth in this AOC.
ORDER
NOW, THEREFORE, IT IS ORDERED, that Petroleum Development Corporation shall be found in violation of Rule 325.c.(7), for failure to inject at pressures less than the maximum injection pressure, as set by the Director, for the Gardner (SWD) 12-26 Well (API #05-125-08247) located in the SW¼ NW¼ of Section 26, Township 1 North, Range 45 West, 6th P.M.
IT IS FURTHER ORDERED, that Petroleum Development Corporation shall be assessed a fine of Six Thousand dollars ($6,000.00) payable within thirty (30) days of the date the order is approved by the Commission for violations occurring on the Gardner (SWD) 12-26 Well.
IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date this order is mailed by the Commission.
IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this order is not required prior to the filing for judicial review.
IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.
IT IS FURTHER ORDERED, that the Commission expressly reserves its right after notice and hearing, to alter, amend, or repeal any and/or all of the above orders.
Recommended this day of April, 2008.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By ___________________________________
Carol Harmon
Enforcement Officer
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
April 3, 2008
AGREED TO AND ACCEPTED THIS _________DAY OF ___________, 2008.
PETROLEUM DEVELOPMENT CORPORATION
By ___________________________________________
Authorized Company Representative
____________________________________________
Print Full Name
______________________________________________
Title
============================================================================
This cause came on for hearing before the Commission at 9:00 a.m. on June 11, 2008, in the Colorado River Room, Two Rivers Convention Center, 159 Main Street, Grand Junction, Colorado, for the approval of this Administrative Order by Consent.
ENTERED this________ day of June, 2008, as of June 11, 2008
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Patricia C. Beaver, Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
June 30, 2008