BEFORE THE OIL AND GAS CONSERVAT

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 WEST HAWK ENERGY (USA) LLC, RIO BLANCO COUNTY, COLORADO

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CAUSE NO. 1V

ORDER NO. 1V-378

ORDER FINDING VIOLATION

This cause came on for hearing before the Commission on August 8, 2011, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order finding violation hearing against West Hawk Energy (USA) LLC at certain wells (the “Figure Four Ranch” wells) located in Rio Blanco County.

FINDINGS

Figure Four Ranch #499-12-48 Well

1. On December 18, 2006, West Hawk spud the Figure Four Ranch #499-12-48 Well (API No. 05-103-10930), which is located in the SE¼ SW¼ of Section 12, Township 4 South, Range 99 West, 6^th P.M.

2. On September 9, 2009, COGCC Staff issued Notice of Alleged Violation (“NOAV”) #200224751 to West Hawk for its operations at the Figure Four Ranch #499-12-48 Well. The NOAV cited violations for various rules, including Rules 319.b.(1), 319.b.(2), 319.b.(3), 603.j., 1002.f.(2), 1003.b., and 1003.e.(2).

The NOAV required West Hawk to submit a compliance checklist, per Rule 206., and a weed management plan, to the Director by January 18, 2010, and remove all unused equipment by January 18, 2010. Further, the Figure Four Ranch #499-12-48 Well was to be produced, plugged and abandoned, or have an MIT by April 1, 2010, and the operator was to initiate interim reclamation by January 26, 2010.

3. On September 18, 2009, COGCC Staff issued NOAV #200220841 to West Hawk for its operations at Figure Four Ranch #499-12-48 Well. The NOAV cited violations for various rules, including Rules 706. and 707.

4. The NOAV required West Hawk to provide financial assurance to the Director as provided in Rules 706. and 707. in the amount of $20,000 for the Well by November 16, 2009. Financial assurance shall be in the form of cash bonds or insurance bonds. This was required to be completed by December 12, 2009.

5. The COGCC Staff requests West Hawk be found in violation of Rules 319.b.(1), 319.b.(2), 319.b.(3), 603.j., 706., 707., 1002.f.(2), 1003.b., and 1003.e.(2) for its operation of Figure Four Ranch #499-12-48 Well.

Figure Four Ranch #499-12-67 Well

6. On May 20, 2007, West Hawk spud the Figure Four Ranch #499-12-67 Well (API No. 05-103-10970), which is located at SW¼ SE¼ of Section 12, Township 4 South, Range 99 West, 6^th P.M.

7. On February 13, 2009, COGCC Staff issued NOAV #200203784 to West Hawk for its operations at the Figure Four Ranch #499-12-67 Well. The NOAV cited violations for various rules, including Rules 308A. and 319.b.(3).

The NOAV required West Hawk to file a Form 5 with appropriate attachments reflecting current status of drilling and casing of the well. File a Form 5A as appropriate if an interval has been completed. File a Form 10 if the well is producing. These forms were required to be filed by March 31, 2009.

8. On September 18, 2009, COGCC Staff issued NOAV #200222993 to West Hawk for its operations at the Figure Four Ranch #499-12-67 Well. The NOAV cited violations for various rules, including Rules 319.b.(1), 319.b.(2), 603.j., 902.d., 1002.a.(3), 1003.a., 1003.b., 1003.d.(2), and 1203.a.(13).

The NOAV required West Hawk to remove unnecessary equipment and debris and install appropriate fencing to protect livestock and wildlife by December 16, 2009. Also, close pit per COGCC Rule 1003 by February 22, 2010. Further, the Figure Four Ranch #499-12-67 Well was to be produced, plugged and abandoned, or have an MIT by February 22, 2010, and the operator was to initiate interim reclamation by December 16, 2009.

9. On September 18, 2009, COGCC Staff issued NOAV #200220841 to West Hawk for its operations at the Figure Four Ranch #499-12-67 Well. The NOAV cited violations for various rules, including Rules 706. and 707.

The NOAV required West Hawk to provide financial assurance to the Director as provided in Rules 706. and 707. in the amount of $20,000 for the Well by November 16, 2009. Financial assurance shall be in the form of cash bonds or insurance bonds. This was required to be completed by December 12, 2009.

10. The COGCC Staff requests West Hawk be found in violation of Rules 308A., 319.b.(1), 319.b.(2), 319.b.(3), 603.j., 706., 707., 902.d., 1002.a.(3), 1003.a., 1003.b., 1003.d.(2), and 1203.a.(13) for its operation of Figure Four Ranch #499-12-67 Well.

Figure Four Ranch #499-12-74 Well

11. On September 16, 2008, West Hawk spud the Figure Four Ranch #499-12-74 Well (API No. 05-103-11055), which is located at SE¼ NE¼ of Section 12, Township 4 South, Range 99 West, 6^th P.M.

12. On February 13, 2009, COGCC Staff issued NOAV #200203780 to West Hawk for its operations at the Figure Four Ranch #499-12-74 Well. The NOAV cited violations for various rules, including Rules 308A. and 319.b.(3).

13. On September 18, 2009, COGCC Staff issued NOAV #200220662 to West Hawk for its operations at the Figure Four Ranch #499-12-74 Well. The NOAV cited violations for various rules, including Rules 319.b.(1), 319.b.(2), 319.b.(3), 902.a., 902.b., 902.c., 902.d., 1002.a.(3), 1003.b., and 1003.d.(2).

The NOAV required West Hawk to close pit by December 3, 2009. Further, the Figure Four Ranch #499-12-74 Well was to be produced, plugged and abandoned, or have an MIT by March 8, 2010, and the operator was to initiate interim reclamation by December 3, 2009 or final reclamation by December 16, 2009.

14. On September 18, 2009, COGCC Staff issued NOAV #200220841 West Hawk for its operations at the Figure Four Ranch #499-12-74 Well. The NOAV cited violations for various rules, including Rules 706. and 707.

15. The COGCC Staff requests West Hawk be found in violation of Rules 308A, 319.b.(1), 319.b.(2), 319.b.(3), 706., 707., 902.a., 902.b., 902.c., 902.d., 1002.a.(3), 1003.b., and 1003.d.(2) for its operation of Figure Four Ranch #499-12-74 Well.

Figure Four Ranch #499-13-22 Well

16. On April 6, 2007 West Hawk spud the Figure Four Ranch #499-13-22 Well (API No. 05-103-10969), which is located at NW¼ NW¼ of Section 13, Township 4 South, Range 99 West, 6^th P.M.

17. On February 13, 2009, COGCC Staff issued NOAV #200203803 to West Hawk for its operations at the Figure Four Ranch #499-13-22 Well. The NOAV cited violations for various rules, including Rules 308A. and 319.b.(3).

18. On September 9, 2009, COGCC Staff issued NOAV #200224703 to West Hawk for its operations at the Figure Four Ranch #499-13-22 Well. The NOAV cited violations for various rules, including Rules 319.b.(1), 319.b.(2), 319.b.(3), 603.j., 1002.a.(3), 1002.f.(2), 1003.b., and 1003.e.(2).

The NOAV required West Hawk to submit a compliance checklist, per Rule 206., to the Director by January 18, 2010; remove chemical storage containers by January 11, 2010; remediate impacted soils in tank berm area by January 25, 2010; install appropriate fencing to protect livestock and wildlife by January 11,2010; and to initiate interim reclamation by January 26, 2010.

19. On September 18, 2009, COGCC Staff issued NOAV #200220841 West Hawk for its operations at the Figure Four Ranch #499-13-22 Well. The NOAV cited violations for various rules, including Rules 706. and 707.

20. The COGCC Staff requests West Hawk be found in violation of Rules 308A., 319.b.(1), 319.b.(2), 319.b.(3), 603.j., 706., 707., 1002.a.(3), 1002.f.(2), 1003.b., and 1003.e.(2). for its operation of Figure Four Ranch #499-13-22 Well.

Figure Four Ranch #499-14-22 Well

21. On September 26, 2008, West Hawk spud the Figure Four Ranch #499-14-22 Well (API No. 05-103-11386), which is located at NW¼ NW¼ of Section 14, Township 4 South, Range 99 West, 6^th P.M.

22. On February 13, 2009 COGCC Staff issued NOAV #200203792 to West Hawk for its operations at the Figure Four Ranch #499-14-22 Well. The NOAV cited violations for various rules, including Rules 308A. and 319.b.(3).

23. On September 9, 2009, COGCC Staff issued NOAV #200223636 West Hawk for its operations at the Figure Four Ranch #499-14-22 Well. The NOAV cited violations for various rules, including Rules 319.b.(1), 319.b.(2), 902.a., 902.c., 902.d., 1002.a.(3), 1003.b., 1003.d.(2), and 1203.a.(13).

The NOAV required West Hawk to remove unnecessary equipment and debris and install appropriate fencing to protect livestock and wildlife by January 11, 2010. Also, close pit per COGCC 905 series rules and submit a Form 27 for review and approval of pit closure by December 24, 2009. Further, the Figure Four Ranch #499-14-22 Well was to be produced, plugged and abandoned, or have an MIT by March 8, 2010, and the operator was to initiate interim reclamation by January 11, 2010.

24. On September 18, 2009, COGCC Staff issued NOAV #200220841 West Hawk for its operations at the Figure Four Ranch #499-14-22 Well. The NOAV cited violations for various rules, including Rules 706. and 707.

25. The COGCC Staff requests West Hawk be found in violation of Rules 308A., 319.b.(1), 319.b.(2), 319.b.(3), 706., 707., 902.a., 902.c., 902.d., 1002.a.(3), 1003.b., 1003.d.(2), and 1203.a.(13) for its operation of Figure Four Ranch #499-14-22 Well.

Figure Four Ranch #499-14-27 Well

26. On September 4, 2008, West Hawk spud the Figure Four Ranch #499-14-27 Well (API No. 05-103-11077), which is located at SW¼ SW¼ of Section 14, Township 4 South, Range 99 West, 6^th P.M.

27. On September 9, 2009, COGCC Staff issued NOAV #200223648 West Hawk for its operations at the Figure Four Ranch #499-14-27 Well. The NOAV cited violations for various rules, including Rules 319.b.(1), 319.b.(2), 902A., 1002.a.(3), 1003.b., 1003.d.(2), and 1203.a.(13).

The NOAV required West Hawk to remove debris, install appropriate fencing to protect livestock and wildlife, and close the pit by January 11, 2010. Further, the Figure Four Ranch #499-14-27 Well was to be produced, plugged and abandoned, or have an MIT by March 8, 2010, and the operator was to initiate interim reclamation by January 11, 2010.

28. On September 18, 2009, COGCC Staff issued NOAV #200220841 West Hawk for its operations at the Figure Four Ranch #499-14-27 Well. The NOAV cited violations for various rules, including Rules 706. and 707.

29. The COGCC Staff requests West Hawk be found in violation of Rules 319.b.(1), 319.b.(2), 706., 707., 902A., 1002.a.(3), 1003.b., 1003.d.(2), and 1203.a.(13) for its operation of Figure Four Ranch #499-14-27 Well.

Figure Four Ranch #499-14-67 Well

30. On August 15, 2008, West Hawk spud the Figure Four Ranch #499-14-67 Well (API No. 05-103-10968), which is located at SW¼ SE¼ of Section 14, Township 4 South, Range 99 West, 6^th P.M.

31. On February 13, 2009, COGCC Staff issued NOAV #200203810 to West Hawk for its operations at the Figure Four Ranch #499-14-67 Well. The NOAV cited violations for various rules, including Rules 308A. and 319.b.(3).

32. On September 18, 2009, COGCC Staff issued NOAV #200220867 West Hawk for its operations at the Figure Four Ranch #499-14-67 Well. The NOAV cited violations for various rules, including Rules 319.b.(1), 319.b.(2), 319.b.(3), 902.a., 902.c., 902.d., 1002.a.(3), 1003.b., and 1003.d.(2).

The NOAV required West Hawk to close pit by December 3, 2009. Further, the Figure Four Ranch #499-14-67 Well was to be produced, plugged and abandoned, or have an MIT by March 8, 2010, and the operator was to initiate interim reclamation by December 3, 2009 or final reclamation by December 16, 2009.

33. On September 18, 2009, COGCC Staff issued NOAV #200220841 West Hawk for its operations at the Figure Four Ranch #499-14-67 Well. The NOAV cited violations for various rules, including Rules 706. and 707.

34. The COGCC Staff requests West Hawk be found in violation of Rules 308A., 319.b.(1), 319.b.(2), 319.b.(3), 706., 707., 902.a., 902.c., 902.d., 1002.a.(3), 1003.b., and 1003.d.(2) for its operation of Figure Four Ranch #499-14-67 Well.

Figure Four Ranch #499-14-83 Well

35. West Hawk spud the Figure Four Ranch #499-14-83 Well (API No. 05-103-10959), which is located at the SE¼ NE¼ of Section 14, Township 4 South, Range 99 West, 6^th P.M.

36. On February 13, 2009, COGCC Staff issued NOAV #200203824 to West Hawk for its operations at the Figure Four Ranch #499-14-83 Well. The NOAV cited violations for various rules, including Rules 308A. and 319.b.(3).

37. On September 9, 2009, COGCC Staff issued NOAV #200223732 West Hawk for its operations at the Figure Four Ranch #499-14-83 Well. The NOAV cited violations for various rules, including Rules 319.b.(1), 319.b.(2), 319.b.(3), 324A.a., 603.j., 907A., 1003.a., 1003.b., and 1003.e.(2).

The NOAV required West Hawk to submit compliance checklist, per Rule 206., to the Director by December 28, 2009; remove chemical storage containers, unused materials and waste materials by December 30, 2009, and to remove debris, unused equipment, including vehicles by January 6,2009. Further, the Figure Four Ranch #499-14-83 Well was to be produced, plugged and abandoned, or have an MIT by March 22, 2010, and the operator was to initiate interim reclamation by January 11, 2010.

38. On September 18, 2009, COGCC Staff issued NOAV #200220841 West Hawk for its operations at the Figure Four Ranch #499-14-83 Well. The NOAV cited violations for various rules, including Rules 706. and 707.

39. The COGCC Staff requests West Hawk be found in violation of Rules 308A., 319.b.(1), 319.b.(2), 319.b.(3), 324A.a., 603.j., 706., 707., 907A., 1003.a., 1003.b., and 1003.e.(2) for its operation of Figure Four Ranch #499-14-83 Well.

40. Rule 523. specifies a base fine of Five Hundred dollars ($500) for each day of violation of Rules 302., and a base fine of One Thousand dollars ($1,000) for each day of violation of Rules 319.b. and 326.b. 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.

41. West Hawk should be found in violation of the following rules attributable to the following wells as compiled below:

Well Name/Number	API Number	NOAV Number	Rule Violations
Figure Four Ranch #499-12-48	05-103-10930	200224571	319.b.(1), 319.b.(2), 319.b.(3), 603.j., 1002.f.(2), 1003.b., and 1003.e.(2).
		200220841	706. and 707.
		200203784	308A. and 319.b.(3)
Figure Four Ranch #499-12-67	05-103-10970	200222993	319.b.(1), 319.b.(2), 603.j., 902.d, 1002.a.(3), 1003.a., 1003.b., 1003.d.(2), and 1203.a.(13)
		200203780	308A. and 319.b.(3)
Figure Four Ranch #499-12-74	05-103-11055	200220662	319.b.(1), 319.b.(2), 319.b.(3), 902.a, 902.b, 902.c, 902.d, 1002.a.(3), 1003.b., and 1003.d.(2)
		200220841	706. and 707.
		200203803	308A. and 319.b.(3)
Figure Four Ranch #499-13-22	05-103-10969	200224703	319.b.(1), 319.b.(2), 319.b.(3), 603.j., 1002.a(3), 1002.f.(2), 1003.b., and 1003.e.(2)
		200220841	706. and 707.
		200203792	308A. and 319.b.(3)
Figure Four Ranch #499-14-22	05-103-11386	200223636	319.b.(1), 319.b.(2), 902.a, 902.c, 902.d, 1002.a.(3), 1003.b., 1003.d.(2), and 1203.a.(13)
		200220841	706. and 707.
Figure Four Ranch #499-14-27	05-103-11077	200223648	319.b.(1), 319.b.(2), 902A, 1002.a.(3), 1003.b., 1003.d.(2), and 1203.a.(13)
		200220841	706. and 707.
		200203810	308A. and 319.b.(3)
Figure Four Ranch #499-14-67	05-103-10968	200220867	319.b.(1), 319.b.(2), 319.b.(3), 902.a, 902.c, 902.d, 1002.a.(3), 1003.b., and 1003.d.(2)
		200220841	706. and 707.
		200203824	308A. and 319.b.(3)
Figure Four Ranch #499-14-83	05-103-10959	200223732	319.b.(1), 319.b.(2), 319.b.(3), 324A.a, 603.j., 907A, 1003.a, 1003.b., and 1003.e.(2)
		200220841	706. and 707.

42. Base fines attributable to the Rule violations at the Figure Four Ranch wells are set forth below, based on the maximum penalty per rule violation:

Figure Four Ranch Well No.	Base Fine
#499-12-48	$90,000
#499-12-67	$110,000
#499-12-74	$140,000
#499-13-22	$120,000
#499-14-22	$130,000
#499-14-27	$90,000
#499-14-67	$130,000
#499-14-83	$130,000
*Total Base Fines*	*$940,000*

43. Acting pursuant to the request of Staff and Puckett Land Company (“Puckett Land”), the Commission should authorize Puckett Land, a mineral interest owner for the lands in which the wells have been drilled and completed, to submit Change of Operator forms for each well, which will allow Puckett Land to plug and abandon the Figure Four Ranch wells and reclaim the well sites in accordance with the rules. The Commission specifically finds that the Figure Four Ranch wells should be plugged and the well sites reclaimed in accordance with the rules.

44. Payment of the fine pursuant to this Order should not relieve West Hawk from its obligations to complete corrective actions set forth in the NOAV, as may be amended or modified by COGCC Staff.

45. West Hawk, or its successors or assigns, should be required to remain responsible for complying with this Order, in the event of any subsequent sale of property.

ORDER

NOW, THEREFORE, IT IS ORDERED, that West Hawk be found in violation of those Rules, and for those wells, specified in Finding No. 41 above, for those acts alleged in this Order.

IT IS FURTHER ORDERED, that West Hawk shall be assessed a total fine of Nine Hundred Forty Thousand dollars ($940,000) for the Rule violations set forth above, which shall be payable within thirty (30) days of the date the order is approved by the Commission.

IT IS FURTHER ORDERED, that Puckett Land, a mineral interest owner for the lands in which the wells have been drilled and completed, is hereby authorized to submit Change of Operator forms for each well, which will allow Puckett Land to plug and abandon the Figure Four Ranch wells and reclaim the well sites in accordance with the rules, and Puckett Land is hereby authorized to plug and abandon the Figure Four Ranch wells and reclaim the associated well sites.

IT IS FURTHER ORDERED, that this Order does not relieve West Hawk from undertaking and completing abatement or corrective actions that may be required by the Notice of Alleged Violation described above, or any amendments or modifications thereto specified by the COGCC Staff.

IT IS FURTHER ORDERED, that the operator shall execute this Administrative Order by Consent no later than fourteen (14) days after the date it is executed by the COGCC Staff for recommendation of expedited approval by the Commission.

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.

SO ORDERED this day of____________, 2011.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

Robert A. Willis, Acting Secretary

Dated at Suite 801

1120 Lincoln St.

Denver, Colorado 80203