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-344
SAMOTLOR PETROLEUM INVESTMENTS, LLC )
CHEYENNE 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. The Golden Hammer Lowe “H” #2 Well (API # 05-017-06905) is located in the SE¼ NW¼ of Section 18, Township 16 South, Range 44 West, 6th P.M. and is operated by Samotlor Petroleum Investments, LLC (“Samotlor”). Magnum Oil drilled the well in 1988 but was not able to complete it as a producer because of lost equipment in the hole. In 1995 Samotlor obtained the well from Cavanaugh & Cavanaugh Inc. and converted it to a water disposal well, which was approved by the Colorado Oil and Gas Conservation Commission (“COGCC” or “Commission”) on June 19, 1996. The well was used for water disposal between approximately October 1995 and July 1999. Since that time, it has been incapable of being used for injection. The well passed its most recent mechanical integrity test (“MIT”) which was performed on November 25, 2002.
2. On July 26, 2007, the COGCC staff issued Notice of Alleged Violation #200115641 (“first NOAV”) to Samotlor, citing violations of the following Rules:
a. Rule 210.b.(1), which requires the operator to install a permanent sign at the wellhead within 60 days of completion of the well;
b. Rule 319.b.(1), which requires the operator to obtain approval of the Director to shut-in or temporarily abandon a well for up to six months, to leave the hole in such a manner as to prevent migration of oil, gas, water or other substance from the formation or horizon in which it originally occurred, to close the well with a swedge and valve or packer or other approved method, to keep the well sign in place, to request from the Director an extension of the original six-month time period and explain why the extension is needed, and to submit a Sundry Notice (Form 4) or other approved form annually, setting forth the status of the well and plans for future operation;
c. Rule 326.d., which requires the operator to conduct an MIT within two years of the initial shut-in date and every five years thereafter; and
d. Rule 603.j., which requires the operator to keep all locations free of weeds.
3. Corrective actions under the first NOAV required the operator to close in the well immediately, and, by September 26, 2007, to control weeds, MIT the well, install a well sign, and submit proper documentation to continue shut-in status or plug and abandon the well. To date, Samotlor has failed to perform any of the corrective actions required by the first NOAV.
4. The COGCC staff sent the first NOAV to Mr. Jesse Ferrer, a principal investor of Samotlor, at Samotlor’s last known address in July, August, and October 2007. It appears that the copy of the first NOAV sent in October 2007 was received by Samotlor, but there has been no further communication by the company to the COGCC staff until June 2009, after Mr. Ferrer received notice of a proposed Order Finding Violation hearing on the Golden Hammer Lowe “H” #2 Well.
5. On December 7, 2007, the COGCC staff issued Notice of Alleged Violation #200123131 (“second NOAV”) to Samotlor, citing violations of the following Rules:
a. Rule 319.b.(1), which requires the operator to obtain approval of the Director to shut-in or temporarily abandon a well for up to six months, to leave the hole in such a manner as to prevent migration of oil, gas, water or other substance from the formation or horizon in which it originally occurred, to close the well with a swedge and valve or packer or other approved method, to keep the well sign in place, to request from the Director an extension of the original six-month time period and explain why the extension is needed, and to submit a Sundry Notice (Form 4) or other approved form annually, setting forth the status of the well and plans for future operation;
b. Rule 319.b.(4), which requires the operator to perform an MIT on an injection well that is shut-in or temporarily abandoned within two years after the shut-in date in order to retain its status as shut-in or temporarily abandoned;
c. Rule 325.e., which requires the proposed disposal well to pass an MIT test prior to approval of the application for using the well for underground disposal of water; and
d. Rule 326.a., which requires MITs on dedicated injection wells every five years after the date of the initial MIT.
6. Corrective actions under the second NOAV required the operator to MIT or plug and abandon the well by December 28, 2007. To date, Samotlor has failed to perform any of the corrective actions required by the second NOAV.
7. The COGCC staff sent the second NOAV to Mr. Jesse Ferrer, at Samotlor’s last known address in December 2007. It appears that the second NOAV was received by Samotlor, but there has been no further communication by the company to the COGCC staff until June 2009, after Mr. Ferrer received notice of a proposed Order Finding Violation hearing on the Golden Hammer Lowe “H” #2 Well.
8. Repeated attempts by COGCC staff to contact Samotlor have failed in obtaining Samotlor’s compliance with the NOAVs.
9. Samotlor should be found in violation of the following Rules:
a. Rule 319.b.(1), for failure to obtain Director’s approval to continue shut-in status of the well for longer than six months;
b. Rule 319.b.(4), for failure to perform an MIT on the injection well within two years after the shut-in date; and
c. Rule 326.a.(4), for failure to perform an MIT on the injection well every five years after the date of the initial MIT.
10. Rule 523. specifies a base fine of $1,000 for each violation of Rule 319. and Rule 326.
11. A total monetary penalty of $6,000 should be assessed against Samotlor in accordance with Rule 523.a for violations of Rules 319.b.(1), 319.b.(4), and 326.a.(4).
12. Pursuant to Order No. 1V-248, the COGCC assessed Samotlor $18,000 in fines for violations at four other wells owned or operated by Samotlor and required Samotlor to bring the wells into compliance within 90 days. If the wells were not brought into compliance the COGCC staff was to foreclose Samotlor’s statewide blanket plugging bond ($30,000) to plug and abandon the wells.
13. Samotlor did not pay the $18,000 fine. Samotlor’s contractor, working with the insurance company that provided Samotlor’s financial assurance, plugged the four wells. COGCC staff did not foreclose the $30,000 bond.
14. The Commission should require Samotlor to conduct an MIT in accordance with COGCC Rules including, without limitation, giving not less than 10 days’ prior written notice of the MIT to COGCC staff, on the Golden Hammer Lowe “H” #2 Well within 45 days of the date this Administrative Order by Consent is approved by the Commission. If Samotlor does not conduct an MIT in accordance with COGCC Rules (including, without limitation, giving not less than 10 days’ prior written notice of the MIT to COGCC staff) by the 45-day deadline, or if Samotlor conducts a timely MIT in accordance with COGCC Rules, but the Golden Hammer Lowe “H” #2 Well fails the MIT, the Commission should authorize the COGCC staff to foreclose Samotlor’s $30,000 plugging bond, supplemented as may be necessary by funds from the Oil and Gas Conservation and Environmental Response Fund, to plug and abandon the Golden Hammer Lowe “H” #2 Well and reclaim the well site and associated facilities.
15. If Samotlor conducts a timely MIT in accordance with COGCC Rules, and the Golden Hammer Lowe “H” #2 Well passes the MIT, the Commission should allow Samotlor 90 days to pay total fines of $24,000 ($18,000 outstanding, and $6,000 imposed by this Administrative Order by Consent).
16. If Samotlor fails to pay total fines of $24,000 within 90 days of the date the Golden Hammer Lowe “H” #2 Well passes the MIT, the Commission should authorize the COGCC staff to foreclose Samotlor’s $30,000 plugging bond, supplemented as may be necessary by funds from the Oil and Gas Conservation and Environmental Response Fund, to plug and abandon the Golden Hammer Lowe “H” #2 Well and reclaim the well site and associated facilities.
17. The Commission should find that a knowing and willful pattern of violations exists because Samotlor has failed to perform the abatement and corrective actions required by the NOAVs, has failed to contact the COGCC with respect to the NOAVs, and has failed to pay the $18,000 fine ordered by Order No. 1V-248. Until the fines assessed by this Administrative Order by Consent and Order No. 1V-248 are paid in full, the Director should not approve any Application for Permit-to-Drill, any Certificate of Clearance and/or Change of Operator, Form 10, or other permit for conducting oil and gas operations for Samotlor or any entity of which Mr. Jesse Ferrer is a principal, majority owner, operational or general manager, or which Mr. Ferrer otherwise controls.
ORDER
NOW, THEREFORE IT IS ORDERED, that the Colorado Oil and Gas Conservation Commission (“Commission” or “COGCC”) hereby finds Samotlor Petroleum Investments, LLC in violation of the following Rules at the Golden Hammer Lowe “H” #2 Well (API # 05-017-06905) located in the SE¼ NW¼ of Section 18, Township 16 South, Range 44 West, 6th P.M.:
a. Rule 319.b.(1), for failure to obtain Director’s approval to continue shut–in status of the well longer than six months;
b. Rule 319.b.(4), for failure to perform a Mechanical Integrity Test (“MIT”) on the injection well within two years after the shut-in date; and
c. Rule 326.a.(4), for failure to perform an MIT on the injection well every five years after the date of the initial MIT.
IT IS FURTHER ORDERED, that Samotlor Petroleum Investments, LLC shall be assessed a total fine of Six thousand dollars ($6,000) for the violations of the above Rules.
IT IS FURTHER ORDERED, that Samotlor Petroleum Investments, LLC shall conduct an MIT in accordance with COGCC Rules including, without limitation, giving not less than 10 days’ prior written notice of the MIT to COGCC staff, on the Golden Hammer Lowe “H” #2 Well within 45 days of the date this Administrative Order by Consent is approved by the Commission.
IT IS FURTHER ORDERED that if Samotlor Petroleum Investments, LLC does not conduct an MIT on the Golden Hammer Lowe “H” #2 Well in accordance with COGCC Rules (including, without limitation, giving not less than 10 days’ prior written notice of the MIT to COGCC staff) within 45 days of the date this Administrative Order by Consent is approved by the Commission or if Samotlor Investments, LLC conducts a timely MIT in accordance with COGCC Rules, but the Golden Hammer Lowe “H” #2 Well fails the MIT, the Commission hereby authorizes the COGCC staff to foreclose Samotlor Petroleum Investments, LLC’s $30,000 plugging bond, supplemented as may be necessary by funds from the Oil and Gas Conservation and Environmental Response Fund, and plug and abandon the Golden Hammer Lowe “H” #2 Well and reclaim the well site and associated facilities.
IT IS FURTHER ORDERED, that if Samotlor Petroleum Investments, LLC conducts a timely MIT in accordance with COGCC Rules, and the Golden Hammer Lowe “H” #2 Well passes the MIT, Samotlor Petroleum Investments, LLC shall, within 90 days of the date of the successful MIT, pay the COGCC total fines of $24,000 ($18,000 assessed by Order No. 1V-248 and $6,000 imposed by this Administrative Order by Consent).
IT IS FURTHER ORDERED, that if Samotlor Petroleum Investments, LLC fails to pay total fines of $24,000 within 90 days of the date the Golden Hammer Lowe “H” #2 Well passes the MIT, the Commission should authorize the COGCC staff to foreclose Samotlor’s $30,000 plugging bond, supplemented as may be necessary by funds from the Oil and Gas Conservation and Environmental Response Fund, to plug and abandon the Golden Hammer Lowe “H” #2 Well and reclaim the well site and associated facilities.
IT IS FURTHER ORDERED, that a knowing and willful pattern of violations exists because Samotlor Petroleum Investments LLC has failed to perform the abatement and corrective actions required by Notice of Alleged Violation #200115641 and Notice of Alleged Violation #200123131 (“NOAVs”), has failed to contact the COGCC staff with respect to the NOAVs and has failed to pay the $18,000 fine ordered by Order No. 1V-248.
IT IS FURTHER ORDERED, that until Samotlor Petroleum Investments, LLC pays total fines of $24,000 assessed by this Administrative Order by Consent and Order No. 1V-248, the Director shall not approve any Application for Permit-to-Drill, any Certificate of Clearance and/or Change of Operator, Form 10, or other permit for conducting oil and gas operations for Samotlor Petroleum Investments, LLC or any entity of which Mr. Jesse Ferrer is a principal, majority owner, operational or general manager, or which Mr. Ferrer otherwise controls.
IT IS FURTHER ORDERED, that Samotlor Petroleum Investments, LLC or its successors or assigns, shall remain responsible for complying with this Administrative Order by Consent notwithstanding any subsequent sale of the Golden Hammer Lowe #2 Well or property.
IT IS FURTHER ORDERED, that 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 the provisions contained in the above order shall be effective forthwith.
IT IS FURTHER ORDERED, that the Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any/or all of the above orders.
RECOMMENDED this day of July, 2009.
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
July 7, 2009
AGREED AND ACCEPTED THIS _____ day of ____________, 2009.
SAMOTLOR PETROLEUM INVESTMENTS, LLC
By _____________________________________________
Signature of Authorized Company Representative
_______________________________________________
Print Signatory Name
_______________________________________________
Title
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This cause came on for hearing before the Commission at 9:00 a.m. on July 14, 2009, in Devereux Room, Hotel Colorado, 526 Pine Street, Glenwood Springs, Colorado, for the approval of this Administrative Order by Consent.
ENTERED this________day of July, 2009, as of July 14, 2009
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert A. Willis, Acting Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
July 30, 2009