BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

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 S&S Oil & Gas Operating for its operations at certain wells located in Baca County.

FINDINGS

General Operations

1.     On September 2, 2010, COGCC Staff issued NOAV #1661939 to S&S Oil & Gas Operating (“S&S”) (Operator #10114) for its general operations.  Said NOAV cited violations for COGCC Rules 706.b. and 707.

Said NOAV required S&S to provide the COGCC with an additional financial assurance of $30,000 for blanket plugging and $80,000 for excessive inactive wells by October 2, 2010.

2.     The COGCC Staff requests that S&S be found in violation of Rules 706.b. and 707.

TSRU #203

3.     On February 4, 1986, Cities Service Oil & Gas Corporation spud the TSRU #203 Well (API No. 05-009-06454), located in the SW¼ SE¼ of Section 2, Township 35 South, Range 46 West, 6^th P.M., and completed the well for production of the Lansing Formation.  The well was subsequently sold to Oxy USA Inc., then to Murfin Drilling Company, and finally to S&S, the well’s present operator.  

4.     On March 18, 2009, COGCC Staff issued a Notice of Alleged Violation (“NOAV”) #200205896 to S&S for its operation at the TSRU #203 Well.  Said NOAV cited violations for COGCC Rules 309. and 319.b.(3). 

Abatement or corrective actions found in the NOAV required S&S to file Form 7 production reports and a sundry notice as to future plans for the TSRU #203 Well by June 30, 2009.  

5.     On August 11, 2009, COGCC Staff issued NOAV #200216281 to S&S for an alleged violation Rules 319.b.(4), 326.b.(1), and 603.j. for its operation of the TSRU #203 Well.

Said NOAV required S&S to produce, perform a mechanical integrity test (“MIT”), or plug the well.  Said NOAV also required S&S to remove and control noxious weeds.  Abatement or corrective action was required to be completed by February 11, 2010. 

6.     The COGCC Staff requests that S&S be found in violation of Rules 309., 319.b.(3), 319.b.(4), 326.b.(1), and 603.j. for its operations at the TSRU #203 Well. 

Tanner SECU #401

7.     On January 21, 1986, Cities Service Oil & Gas Corporation spud the Tanner SECU #401 Well (API No. 05-009-06453), located in the SE¼ SE¼ of Section 2, Township 35 South, Range 46 West, 6^th P.M., and completed the well for production of the Lansing Formation. Subsequently, the well was sold to Oxy USA, Murfin Drilling Company, and finally to S&S, the well’s present operator.  The well has been listed as shut in since August 11, 2009.

8.     On March 18, 2009, COGCC Staff issued NOAV #200205886 to S&S for its operation at the Tanner SECU #401 Well for an alleged violation of COGCC Rules 309., 319.b.(3), and 326.b.(1).

Said NOAV required S&S to produce, perform a MIT, or plug the well by September 30, 2009.  Said NOAV required performance of a MIT to ensure the casing integrity if the well was to be produced under a packer.  Said NOAV also required S&S to file all required production reports and to file a sundry notice for approval if well was to remain shut in by September 30, 2009.

9.     The COGCC Staff requests that S&S be found in violation of Rules 309., 319.b.(3). and 326.b.(1) for its operations at the Tanner SECU #401 Well.

Tanner SECU #901

10.   On June 11, 1985, Cities Service Oil & Gas Corporation spud the Tanner SECU #901 Well (API No. 05-009-06439), located in the SW¼ NW¼ of Section 12, Township 35 South, Range 46 West, 6^th P.M., and completed the well for production in the Lansing Formation.  Subsequently, the well was sold to Oxy USA, Murfin Drilling Company, and finally to S&S, the present operator of the well.  The well has been listed as shut in since April 1, 2005.

11.   On March 18, 2009, COGCC Staff issued NOAV #200205822 to S&S for an alleged violation of Rules 309., 319.b.(3), and 326.b.(1) for its operation of the Tanner SECU #901 Well.

Said NOAV required S&S to: (1) produce, perform a MIT, or plug the well; and, (2) file all required production reports for the well.  Said NOAV noted that S&S is to perform a MIT to ensure casing integrity if the well is to be produced under a packer, or to file a sundry notice if the well is to remain shut in.  Abatement or corrective action was required to be completed by September 30, 2009.  

12.   The COGCC Staff requests that S&S be found in violation of Rules 309., 319.b.(3), and 326.b.(1) for its operations at the Tanner SECU #901 Well. 

TSRU #801

13.   On January 10, 1986, Cities Service Oil & Gas Corporation spud the TSRU #801 Well (API No. 05-009-06449), located in the SE¼ NE¼ of Section 11, Township 35 South, Range 46 West, 6^th P.M., and completed the well for production in the Lansing Formation.  Subsequently, the well was sold to Oxy USA, Murfin Drilling Company, and finally to S&S, the well’s present operator.  The well has been listed as shut in since July 11, 2007. 

14.   On March 18, 2009, COGCC Staff issued NOAV #200205816 to S&S for an alleged violation of COGCC Rules 309., 319.b.(3), and 326.b.(1) for its operation of the TSRU #801 Well.

Said NOAV required S&S to: (1) produce, perform a MIT, or plug the well; and, (2) file all required production reports for the well.  Said NOAV noted that S&S is to perform a MIT to ensure casing integrity if the well is to be produced under a packer, or to file a sundry notice if the well is to remain shut in.  Abatement or corrective action was required to be completed by September 30, 2009.  

15.   The COGCC Staff requests that S&S be found in violation of Rules 309., 319.b.(3), and 326.b.(1) for its operations at the TSRU #801 Well. 

Tanner SEC REC Unit #501

16.   On November 6, 1985, Cities Service Oil & Gas Corporation spud the Tanner SEC REC Unit #501 Well (API No. 05-009-06450), located in the NE¼ NE¼ of Section 11, Township 35 South, Range 46 West, 6^th P.M., and completed the well for production of the Lansing Formation.  Subsequently, the well was sold to Oxy USA, Murfin Drilling Company, and finally to S&S, the present operator of the well.  The well has been listed as shut in since December 18, 1985. 

17.   On March 18, 2009, COGCC Staff issued NOAV #200205807 to S&S for an alleged violation of Rules 210.b.(1), 309., 319.b.(3), 326.b.(1), 906.a., and 906.e.(1) for its operation of the Tanner SEC REC Unit #501 Well. 

Said NOAV required S&S to: (1) produce, perform a MIT, or plug the well; (2) file all required production reports for the well; (3) remove or remediate oily soil at water tanks; (4) raise all berms to provide adequate secondary containment; and, (5) update the sign to reflect the current operator of the well.  Said NOAV noted that S&S is to perform a MIT to ensure casing integrity if the well is to be produced under a packer, or to file a sundry notice if the well is to remain temporarily shut in.  Abatement or corrective action was required to be completed by September 30, 2009.  

18.   The COGCC Staff requests that S&S be found in violation of Rules 210.b.(1), 309., 319.b.(3), 326.b.(1), 906.a., and 906.e.(1) for its operations at the Tanner SEC REC Unit #501 Well. 

TSRU #206W

19.   On December 1, 1991, Oxy USA spud the TSRU #206W Well (API No. 05-009-06498), located in the SE¼ SW¼ of Section 2, Township 35 South, Range 46 West, 6^th P.M., and completed the well for production of the Lansing Formation.  Subsequently, the well was sold to Murfin Drilling Company, and then to S&S, the present operator of the well.  As of May 5, 1992, the well has been changed to injection.

20.   On March 18, 2009, COGCC Staff issued NOAV #200206129 to S&S for an alleged violation of Rules 309., 319.b.(3), and 405.b. for its operation of the TSRU #206W Well. 

Said NOAV required S&S to: (1) file all required Form 7 reports of injected fluid; (2) file sundry notice if well was to remain shut in, including the future plans for the well; and (3) file a discontinuance of injection for approval.  Abatement or corrective action was to be completed by June 30, 2009.

21.   The COGCC Staff requests that S&S be found in violation of Rules 309., 319.b.(3), and 405.b. for its operations at the TSRU #206W Well. 

TSRU #204W

22.   On September 1, 1987, Cities Service Oil & Gas Corporation spud the TSRU #204W Well (API No. 05-009-06464), located in the NW¼ SE¼ of Section 2, Township 35 South, Range 46 West, 6^th P.M., and completed the well for production in the Lansing Formation.  Subsequently, the well was sold to Oxy USA, Murfin Drilling Company, and finally to S&S, the present operator of the well.  As of May 5, 1992, the well has been changed to injection.

23.   On September 27, 2007, COGCC Staff issued NOAV #200094919 to S&S for an alleged violation of Rule 326.d. for its operation of the TSRU #204W Well.

Said NOAV required S&S to shut in, fix, and pass a MIT, or plug and abandon the well.  Abatement or corrective action was required to be completed by February 1, 2007.

24.   On March 18, 2009, COGCC Staff issued NOAV #200206128 to S&S for an alleged violation of Rules 309., 319.b.(3)., and 405.b. for its operation of the TSRU #204W Well. 

Said NOAV required S&S to file all required reports of injected fluid.  If the well was to remain shut in, the NOAV required S&S to file a sundry notice of the shut in, including future plans for the well, and a notice of discontinuance of injection for approval.  Abatement or corrective action was required to be completed by June 30, 2009. 

25.   The COGCC Staff requests that S&S be found in violation of Rules 309., 319.b.(3)., 326.d., and 405.b. for its operations at the TSRU #204W Well.

TSRU #1001W

26.   On August 7, 1985, Cities Service Oil & Gas Corporation spud the TSRU #1001W Well (API No. 05-009-06441), located in the NW¼ SW¼ of Section 12, Township 35 South, Range 46 West, 6^th P.M., and completed the well for production in the Lansing Formation.  Subsequently, the well was sold to Oxy USA, Murfin Drilling Company, and finally to S&S, the present operator of the well.  As of June 26, 2000, the well has been changed to injection. 

27.   On March 18, 2009, COGCC Staff issued NOAV #200206127 to S&S for an alleged violation of Rules 309., 319.b.(3), and 405.b. for its operation of the TSRU #1001W Well.

Said NOAV required S&S to file all required reports of injected fluid.  If the well was to remain shut in, the NOAV required S&S to file a sundry notice of the shut in, including future plans for the well, and a notice of discontinuance of injection for approval.  Abatement or corrective action was required to be completed by June 30, 2009. 

28.   The COGCC Staff requests that S&S be found in violation of Rules 309., 319.b.(3), and 405.b. for its operations at the TSRU #1001W Well.

TSRU #601W

29.   On October 8, 1985, Cities Service Oil & Gas Corporation spud the TSRU #601W Well (API No. 05-009-06445), located in the NW¼ NW¼ of Section 12, Township 35 South, Range 46 West, 6^th P.M., and completed the well for production in the Lansing Formation.  Subsequently, the well was sold to Oxy USA, Murfin Drilling Company, and finally to S&S, the well’s present operator.  The well has been listed as shut in since August 11, 2009.

30.   On March 18, 2009, COGCC Staff issued NOAV #200206126 to S&S for its operation of the TSRU #601W Well.  Said NOAV cited violations for COGCC Rules 309., 319.b.(3)., and 405.b. 

Said NOAV required S&S to file all required reports of injected fluid.  If the well was to remain shut in, the NOAV required S&S to file a sundry notice of the shut in, including future plans for the well, and a notice of discontinuance of injection for approval.  Abatement or corrective action was required to be completed by June 30, 2009. 

31.   The COGCC Staff requests that S&S be found in violation of Rules 309., 319.b.(3), and 405.b. for its operations at the TSRU #601W Well.

TSRU #701W

32.   On May 14, 1986, Cities Service Oil & Gas Corporation spud the TSRU #701W Well (API No. 05-009-06458), located in the SW¼ NE¼ of Section 11, Township 35 South, Range 46 West, 6^th P.M., and completed the well for production in the Lansing Formation.  Subsequently, the well was sold to Oxy USA, Murfin Drilling Company, and finally to S&S, the well’s present operator.  The well has been listed as shut in since January 5, 2001.

33.   On March 18, 2009, COGCC Staff issued NOAV #200206125 to S&S for its operation of the TSRU #701W Well.  Said NOAV cited violations for COGCC Rules 309., 319.b.(3), and 405.b.

Said NOAV required S&S to file all required Form 7 reports.  If the well was to remain shut in, the NOAV required S&S to file a sundry notice of the shut in, including future plans for the well, and a notice of discontinuance of injection for approval.  Abatement or corrective action was required to be completed by June 30, 2009. 

34.   The COGCC Staff requests that S&S be found in violation of Rules 309., 319.b.(3), and 405.b. for its operations at the TSRU #701W Well.

35.   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.

#     #     #

36.   Base fines attributable to the Rule violations at the wells operated by S&S are set forth below, based on the maximum penalty per rule violation:

37.   S&S has failed to attend today’s hearing to defend against the allegations contained in the Notice for Order Finding Violation Hearing and, as such, the total amount of base fines set forth in Finding No. 36, should be entered as penalties against S&S on those allegations contained herein.

38.   The Commission should authorize Staff to claim any bond posted by S&S, and authorize Staff to plug and abandon the Wells and reclaim the Well sites in accordance with the rules.

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

40.   S&S, 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 S&S is found in violation of those Rules, and for those wells, specified herein, for those acts alleged in this Order in Finding No. 36.

IT IS FURTHER ORDERED, that S&S shall be assessed a total fine of Three Hundred Eighty Thousand dollars ($380,000) 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 the any and all bonds posted by S&S associated with the wells and well sites it operates, referred to herein, shall be claimed and the funds used to plug and abandon the wells and reclaim the well sites.

IT IS FURTHER ORDERED, that this Order does not relieve the operator 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      8^th       day of___August__, 2011.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                                                                                                By                                                                            ____ 

                                                                                    Robert A. Willis, Acting Secretary

Dated at Suite 801

1120 Lincoln St.

Denver, Colorado 80203