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 EDDY OIL COMPANY, WELD COUNTY, COLORADO |
) ) ) ) |
CAUSE NO. 1V
ORDER NO. 1V-349 |
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 November 21, 1984, Eddy Oil Company (“Eddy Oil”) completed the Dupper #2 Well (API No. 05-123-11848) (the “Well”), which is located 660 feet FNL and 660 feet FWL in the NW¼ NW¼ of Section 26, Township 4 North, Range 65 West, 6th P.M. The Well was completed in the Codell Formation with 85/8-inch surface casing run from the ground surface to a depth of 337 feet below ground surface (“fbgs”), 4½-inch production casing run from ground surface to 7,175 fbgs, and with perforations from 7,063 fbgs to 7,073 fbgs. At the time the Well was drilled, the depth of surface casing was sufficiently deep to protect water wells in the area.
2. On August 1, 2009, Mr. Norman Anderson (“Complainant”) filed a complaint (Complaint #200217527) with the Colorado Oil and Gas Conservation Commission (“COGCC” or “Commission”) Staff alleging an impact to his domestic water well, in that, gas bubbles were present in his water. The Bohlender Well No. 2 domestic water well (“Anderson WW”) was completed on June 29, 2009, under the Colorado Division of Water Resources Permit No. 280098, Receipt No. 3637708B, and is located in the SW¼ SW¼ of Section 23, Township 4 North, Range 65 West, 6th P.M. The Anderson WW was drilled to 450 fbgs, a depth greater than the surface casing in the pre-existing Dupper #2 Well, and is completed in the Laramie-Fox Hills Aquifer with perforations from 220 to 450 fbgs The water well is located approximately 960 feet northwest of the Well. The Anderson WW was never placed into production status.
3. On August 11, 2009, a water sample was collected from the Anderson WW. The sample was analyzed for water quality parameters including inorganic and organic constituents by Evergreen Analytical, Inc. On August 26, 2009, test results from the water sample were received indicating no detectible presence of benzene, ethylbenzene or xylenes; however, toluene was detected at a concentration of 12 ug/L. Further, dissolved methane was also detected in the sample at a concentration of 17 mg/L, and results for chloride, conductivity and TDS were elevated, but not atypical of concentrations for water wells completed in the Laramie-Fox Hills Aquifer. A split sample collected on the same date and time was submitted to Isotech Laboratories, Inc. (“Isotech”) for analysis of gas composition and stable isotopes of methane. On September 21, 2009, test results from the split sample were received which indicated both gas composition and stable isotope values characteristic of thermogenic gas.
4. As a result of the Isotech test indicating a thermogenic gas impact to the Anderson WW, COGCC Staff requested that operators with wellbores within ½-mile of the Anderson WW perform bradenhead tests on those wells.
5. On October 1, 2009, COGCC Staff observed a bradenhead test on the Well. The initial tubing, production casing and surface casing pressures were 230, 470 and 240 psi, respectively. As the bradenhead valve was opened, gas began to flow from the bradenhead valve and the pressure in the surface and production casing decreased. COGCC Staff concluded that the bradenhead test indicates a hole in the production casing which provides a route for contamination of the Laramie-Fox Hills Aquifer in and around the Well by produced gas from the Codell Formation. COGCC Staff collected a gas sample from the bradenhead test on the Well and submitted the sample to Isotech for analysis of gas composition and stable isotopes.
6. On October 5, 2009, COGCC Staff issued a Notice of Alleged Violation (“NOAV”) (#1725322) to Eddy Oil for having a production casing leak at the Well flowing gas from the Codell Formation into the surface casing annular space. Said NOAV cited violations of the following rules:
a. Rule 317.d., which requires an operator to plan and maintain a casing program to prevent the migration of oil, gas or water from one horizon to another, that may result in the degradation of ground water; and
b. Rule 326.d., which required all wells to maintain mechanical integrity.
Said NOAV required Eddy Oil to submit a sundry notice, Form 4, within 7 days, to include a detailed work plan and wellbore diagram. Upon submission, said Form 4 is to be approved by the Director prior to initiating casing repair operations. Casing repairs are to be made within 30 days of Director approval.
7. On or about October 22, 2009, Eddy Oil began casing repair operations on the Well, without providing advance notice to COGCC Staff and without prior approval of the Director. This casing repair effort failed. On October 26, 2009, Eddy Oil contacted COGCC Staff for plugging orders on the Well, due the failed casing repairs. Consequently, COGCC Staff gave verbal plugging orders and completed a Form 6, Notice of Intent to Abandon, on the Dupper #2 Well. Eddy Oil then plugged the Well pursuant to the verbal plugging orders.
On November 2, 2009, Isotech provided an analytical report on the gas sample retrieved from the bradenhead test on the Well, which confirmed that the isotopic results were consistent with the analysis from the Anderson WW.
8. On November 5 and 6, 2009, acting on a verbal notice from Eddy Oil, COGCC Staff inspected the Well and found methane gas venting from the surface casing, and met onsite with Eddy Oil to discuss the possibly failed abandonment operations on said well. Subsequent operations by Eddy Oil confirmed that the methane gas was venting from the aquifer rather than a producing formation and additional down-hole plugging was not necessary.
9. On November 6, 2009, COGCC Staff made a follow-up request to Eddy Oil regarding submission of the Form 4 detailed above in Paragraph 6.
10. On November 17, 2009, COGCC Staff issued NOAV #200222149 to Eddy Oil for impacting the Anderson WW with gas from the Codell Formation from a production casing leak at the Well. The NOAV cited violations of the following COGCC rules:
a. Rule 324A.a., which requires operators to take precautions to prevent significant adverse environmental impacts to air, water, soil, or biological resources to the extent necessary to protect public health, safety and welfare and to prevent the unauthorized discharge of gas;
b. Rule 324A.b., which provides that no operator, in the conduct of any oil or gas operation shall perform any act or practice which shall constitute a violation of water quality standards or classifications established by the Colorado Department of Public Health and Environment (“CDPHE”), Water Quality Control Commission (“WQCC”) for waters of the state; and
c. Rule 906.a. which provides that spills/releases of exploration and production (“E&P”) waste, including produced fluids, shall be controlled and contained immediately upon discovery to protect the environment, public health, safety, and welfare, and wildlife resources. Impacts resulting from spills/releases shall be investigated and cleaned up as soon as practicable.
Said NOAV required Eddy Oil to submit a Form 27, Site Investigation and Remediation Workplan, to the COGCC by December 31, 2009, documenting the proposed alternate water supply for the Anderson residence and a plan for mitigation and monitoring of the release associated with the Well.
11. Eddy Oil failed to submit the Form 27 by December 31, 2009. On January 4, 2010, an email was sent to Eddy Oil requesting an update regarding the status of the Form 27.
12. Rule 906., regarding spills and releases, requires operators to submit a Form 19, Spill/Release Report, for releases of any size which impact or threaten to impact any waters of the state, residence or occupied structure, livestock, or public byway. Such releases are also required to be reported to the Director as soon as practicable, but not more than twenty-four hours after discovery. Eddy Oil failed to submit a Form 19 after formal notification of the release provided in the NOAV. Eddy Oil failed to submit a Form 19 after the failed plugging procedure discovered by COGCC Staff on November 5, 2009.
13. On December 16, 2009, COGCC Staff gave notice of establishment of a "bradenhead test area" covering that portion of the Wattenberg/DJ Basin in which the Well is located, for wells having a "short surface casing," being casing set at a depth above the Fox-Hills aquifer. Eddy Oil should perform bradenhead tests on all wells it operates, which have not been subject to bradenhead tests in the past twelve (12) months.
14. Based on the known scientific information, it is not possible to affix a date certain as to when Eddy Oil’s operations at the Well initially caused the contamination of the Laramie-Fox Hills Aquifer as detected in the Anderson WW on August 1, 2009. On October 1, 2009, due to the results of the bradenhead test at the Well, COGCC Staff concluded that a hole in the production casing provided a route for contamination of the Laramie-Fox Hills Aquifer by produced gas from the Codell Formation. On October 26, 2009, Eddy Oil contacted COGCC Staff and obtained verbal plugging orders for the Well. For the purpose of settling this matter under terms agreed to under this Administrative Order by Consent (“AOC”), the parties have agreed to use a period of 26 days of alleged violation (from October 1, 2009 through, and including, October 26, 2009).
15. Rule 523. specifies a base fine of One Thousand dollars ($1,000) for each day of violation of Rules 317.d., 324A.a., 324A.b., 326.d., and 906.a. Rule 523.a.(3) specifies that “the maximum penalty for any single violation shall not exceed Ten Thousand dollars ($10,000) regardless of the number of days of such violation,” unless the violation results in significant waste of oil and gas resources, damage to correlative rights, or a significant adverse impact on public health, safety or welfare or the environment.
16. Based on the above facts, COGCC Staff contend that a hole in the production casing in the Well resulted in a significant waste of oil and gas resources and a significant adverse impact on public health, safety or welfare or the environment as it pertains to Rule 324A.a. COGCC Staff further contend that Eddy Oil’s failure to maintain a casing program to prevent the migration of produced gas from Codell Formation in the Well to the Laramie-Fox Hills Aquifer resulted in the degradation and contamination of ground water.
17. Eddy Oil does not admit liability for any of the alleged Rule violations, and denies that such alleged violations caused a significant adverse impact to the environment. However, Eddy Oil agrees to pay the following fines as adjusted pursuant to Finding No. 27 and the COGCC Staff agrees to accept the following fines as adjusted pursuant to Finding No. 27. Both parties agree to do so in order to resolve this matter without the necessity of a contested hearing.
18. Eddy Oil violated Rule 317.d. because it failed to maintain competent production casing for the Well to prevent the migration of oil, gas or water from one horizon to another, which resulted in the degradation of ground water, constitutes a significant waste of oil and gas resources and a significant impact on public health, safety, or welfare. A base fine of Ten Thousand dollars ($10,000) has been calculated for the violation of Rule 317.d.
19. Eddy Oil violated Rule 324A.a. because it failed to take precautions to prevent significant adverse environmental impacts to water, to the extent necessary to protect public health, safety and welfare and to prevent the unauthorized discharge of gas from the Well by not maintaining competent production casing for the Well. A base fine of Twenty Six Thousand dollars ($26,000) has been calculated for the violation of Rule 324A.a.
20. Eddy Oil violated Rule 324A.b. because it failed to maintain competent production casing for the Well, in the conduct of its oil or gas operation, and by so doing, Eddy Oil performed an oil and gas related act or practice which caused contamination of ground water in violation of the water quality standards or classifications established by CDPHE-WQCC for waters of the state. A base fine of Ten Thousand dollars ($10,000) has been calculated for the violation of Rule 324A.b.
21. Eddy Oil violated Rule 326.d. because it failed to maintain competent production casing for the Well, and by so doing, Eddy Oil failed to maintain mechanical integrity of the Well. A base fine of Ten Thousand dollars ($10,000) has been calculated for the violation of Rule 326.d.
22. Eddy Oil violated Rule 906.a. because it failed to maintain competent production casing program for the Well, which caused the continual release of E&P waste, including produced fluids, that were not controlled and contained immediately upon discovery to protect the environment, public health, safety, and welfare. A base fine of Ten Thousand dollars ($10,000) has been calculated for the violation of Rule 906.a.
23. COGCC Staff specifically reserve the right to proceed as to alleged violations of Rules 317.d., 324A.a., 324A.b., 326.d., and 906.a., if this matter is not resolved by this AOC. Nothing within this AOC should be construed as the COGCC Staff waiving their right to prosecute any violation set forth in this AOC or presenting evidence which alters the days of violation set forth in this AOC, in the event that this AOC is not executed by the parties and approved by the Commission.
24. In summary, Eddy Oil should be found in violation of Rules 317.d., 324A.a., 324A.b., 326.d., and 906.a. as described herein, for failing to maintain competent production casing for the Well, which caused contamination of the Laramie-Fox Hills Aquifer by produced gas, and base fines levied as compiled in the table below:
|
Rule Violation |
Days of Violation |
Fine Amount/Violation |
|
317.d. |
10 |
$10,000 |
|
324A.a. |
26 |
$26,000 |
|
324A.b. |
10 |
$10,000 |
|
326.d. |
10 |
$10,000 |
|
906.a. |
10 |
$10,000 |
|
Total Maximum Allowable Fine |
$66,000 |
|
25. Because the base fine for these violations is set at $1000 per day of violation, the aggravating factors set forth in Rule 523.d. are not applicable by their terms.
26. The following mitigating factors were considered in reducing the maximum allowable fine amount by thirty percent (30%):
a. Ten percent (10%) for Rule 523.d.(3), because Eddy Oil has indicated full cooperation with the Commission by implementing a program for bradenhead testing on all of its wells;
b. Ten percent (10%) for Rule 523.d.(6), because Eddy Oil incurred expenses of approximately $42,000 to reimburse the affected owner of the Anderson WW for drilling and plugging that well and purchasing a chlorinator on a replacement water well; and
c. Ten percent (10%) under Rule 523.d.(7), because Eddy Oil has demonstrated a history of compliance with the Commission.
27. The parties agree to a fine of Forty Six Thousand, Two Hundred dollars ($46,200), which takes into consideration a 30% fine reduction for mitigating factors.
28. Payment of the fine pursuant to this AOC does not relieve the operator from its obligations to complete abatement or corrective actions set forth in the NOAV, as may be amended or modified by Staff.
29. The parties agree that the fine set forth in Finding No. 27, above, should be paid in installments according to the following schedule:
|
Payable On or Before . . . |
Amount Due |
|
August 15, 2010 |
$10,000 |
|
October 15, 2010 |
$10,000 |
|
December 15, 2010 |
$10,000 |
|
February 15, 2011 |
$10,000 |
|
April 15, 2011 |
$6,200 |
30. Eddy Oil should execute this AOC no later than fourteen (14) days after the date it is executed by Staff for recommendation to the Commission for expedited approval. Fines may increase if this matter is not recommended for expedited approval.
31. Eddy Oil, or its successors or assigns, should be required to remain responsible for complying with this AOC, in the event of any subsequent sale of the Anderson WW or its associated property.
32. Eddy Oil agrees to the findings and orders of this AOC only for the purpose of expeditiously resolving the matter without a contested hearing, and conditioned upon its approval by the Commission. Notwithstanding the above, Eddy Oil does not admit to any of the factual or legal determinations made by the Commission herein, and fully reserves its right to contest same in any future action or proceeding other than a proceeding to enforce this AOC. Any action undertaken by Eddy Oil pursuant to this AOC shall not constitute evidence of any liability or fault by Eddy Oil with respect to matters set forth in this AOC. Eddy Oil agrees to execute this AOC no later than fourteen (14) days after the date it is executed by the Staff for recommendation of expedited approval by the Commission.
ORDER
NOW, THEREFORE, IT IS ORDERED, that Eddy Oil Company shall be found in violation of the Rules set forth in Finding No. 24, above, for oil and gas operations at the Dupper #2 Well, located in the NW¼ NW¼ of Section 26, Township 4 North, Range 65 West, 6th P.M., for those acts alleged in this AOC.
IT IS FURTHER ORDERED, that Eddy Oil Company shall be assessed a total adjusted fine of Forty Six Thousand, Two Hundred dollars ($46,200) for the Rule violations set forth in Finding No. 24, above, which shall be payable according to the payment schedule set forth in Finding No. 29.
IT IS FURTHER ORDERED, that this AOC does not relieve the operator from undertaking and completing abatement or corrective actions that may be required by the Notices of Alleged Violation described in Finding Nos. 6 and 10, above, or any amendments or modifications thereto specified by Staff.
IT IS FURTHER ORDERED, that Eddy Oil Company shall perform bradenhead tests on all wells it presently operates, on which bradenhead tests have not been performed in the past twelve (12) months, in a manner which conforms to the requirements set forth below:
(1) The operator shall perform bradenhead tests on all such wells it presently operates within 30 days of the effective date of the AOC. Any such wells not presently equipped for bradenhead testing shall be so equipped by the operator within 30 days of the effective date, and bradenhead tests for those wells shall be performed within 60 days of the effective date. The operator shall provide a list of those wells not presently equipped for bradenhead testing to the Director within 30 days of the effective date of the AOC.
(2) The results of any bradenhead test performed shall be reported to the COGCC by filing a Form 17, Bradenhead Test Report, within 10 days of test completion, and shall include the date, time and pressure of each reading, the time to complete blowdown, and the type of fluid flowing from the bradenhead. Pressure readings shall comport with the “Bradenhead Pressure Guidance Levels” set forth in the Policy for Special Bradenhead Testing Area in Weld County, Colorado posted on the COGCC website.
(3) The COGCC shall be notified immediately if a well continues to flow gas after 30 minutes of bradenhead testing.
(4) The COGCC shall be notified immediately when a bradenhead test indicates communication between the production casing and the bradenhead annulus. For purposes of the bradenhead test, communication is indicated when the tubing or production casing pressure decreases during the test.
(5) The COGCC shall be notified immediately when the measured bradenhead pressure exceeds the posted “Bradenhead Pressure Guidance Levels.”
(6) If the bradenhead pressure measures zero, the operator must confirm that the point of measurement for the bradenhead pressure is truly in communication with the bradenhead annulus. This confirmation should be noted on the Form 17, Line 16, under the “Confirmed Open?” query.
IT IS FURTHER ORDERED, that Eddy Oil Company, or its successors or assigns, shall be required to remain responsible for complying with this order, in the event of any subsequent sale of the Anderson WW or its associated property.
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____________, 2010.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By ____________
Rob Willis, Enforcement Officer
Dated at Suite 801
1120 Lincoln St.
Denver, Colorado 80203
June 22, 2010
AGREED TO AND ACCEPTED this _________day of_______________, 2010.
EDDY OIL COMPANY
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 8, 2010, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for the approval of this Administrative Order by Consent.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Carol Harmon, Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203