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 JAVERNICK OIL, LLC, FREMONT COUNTY, COLORADO

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CAUSE NO. 1V

 

DOCKET NO. 160300003

 

TYPE:  ENFORCEMENT

 

ORDER NO. 1V-575

 

ADMINISTRATIVE ORDER BY CONSENT

(Pursuant to Rule 522.e.(1) of the Rules and Regulations of the

Colorado Oil and Gas Conservation Commission, 2 CCR 404-1)

           

FINDINGS

 

1.            Javernick Oil, LLC (“Javernick”) (Operator No. 44390) is the operator of record of the Chandler Creek 24-32 well (API No. 05-043-06196) (“Well”) located in Fremont County, Colorado.

2.            According to the records of the Colorado Oil and Gas Conservation Commission (“Commission” or “COGCC”), Javernick spud the Well on August 11, 2012 and drilled to the total depth of the “00” wellbore (“Original Wellbore”) on September 6, 2012.

3.            On October 12, 2012, Javernick submitted a Sundry Notice informing the Commission of its intent to drill the “01” sidetrack to the Well (“Sidetrack”). This Sundry references Staff’s verbal approval to drill the Sidetrack given on October 11, 2012. Javernick cited “drifting of the original wellbore” as the justification for an immediate sidetrack of the well.

4.            According to Commission records, Javernick released the rig from these operations on October 30, 2012.

5.            Javernick failed to submit a Form 5 (Drilling Completion Report) for the Original Wellbore within 60 days of releasing the rig.

6.            Javernick failed to submit a Form 5 (Drilling Completion Report) for the Sidetrack within 60 days of releasing the rig.

7.            Javernick failed to submit the requisite Form 7s (Operator’s Monthly Reports of Operations) from the time the Well was spud.

8.            On October 27, 2015, Commission Staff issued a Notice of Alleged Violation (“NOAV”) (No. 200437826) to Javernick citing a violation of the following COGCC Rule(s) of Practice and Procedure, 2 CCR 404-1 (“Rule” or “Rules”):

a.    Rule 308A (Form 5. Drilling Completion Report)

b.    Rule 309 (Form 7. Operator’s Monthly Report of Operations)

9.            On February 4, 2016, Javernick submitted a complete Form 5 for the Well (Doc. No. 400938369).

10.         On January 26, 2016, Javernick submitted the requisite Form 7s. Staff approved these Form 7s on February 17, 2016.

11.         As of February 17, 2016, Javernick is in compliance with all reporting requirements at the Well.

12.         Following factual investigation and legal review of the violations alleged in the NOAV, Hearing Staff now asserts Javernick has committed the following violations:

a.    One 10-day violation of Rule 308A for failing to timely submit the requisite Form 5 (Drilling Completion Report) for the Well; and

b.    One 451-day violation of Rule 309 for failing to submit the requisite Form 7s for the Well.

13.         Pursuant to Rule 523 and the Commission’s Enforcement and Penalty Policy, Hearings Staff calculated a penalty of $10,686 for this violation. The penalty calculation is based on the following:

a.    Rule 308A;

                                                  i.    Violation began prior to the June 6, 2014 effective date of H.B. 14-1356;

                                                ii.    Daily base penalty of $1,000 per day of violation;

                                               iii.    Statutory limit of not more than 10 days of violation because there was no significant waste of oil and gas resources, damage to correlative rights, or significant adverse impact on public health, safety or welfare, including the environment or wildlife resources;

b.    Rule 309;

                                                  i.     Current versions of § 34-60-121 C.R.S. and Rule 523;

                                                ii.     Application of the Duration Matrix from the COGCC Enforcement Guidance and Penalty Policy January 2015 (corrected 4/8/2015);

                                               iii.     Calculated days of violation limited by one-year statute of limitations (§34-60-115, C.R.S.);

                                               iv.     Class 1;

                                                v.     Minor impact;

                                               vi.     Daily base penalty of $200;

c.    No aggravating factors;

d.    No mitigating factors;

e.    No pattern of violation;

f.     No gross negligence or knowing and willful misconduct; and

g.    A settlement inducement discount of 25% of the total penalty amount.

14.         Javernick has provided to Staff sufficient evidence of its inability to pay the penalty as calculated above such that imposition of the total penalty would threaten its ability to continue oil and gas operations in Colorado. Given Javernick’s inability to pay the total penalty amount, it is appropriate to suspend a substantial portion of the penalty contingent upon Javernick’s timely completion of the mutually agreed upon Compliance Plan set forth below.

 

AGREEMENT

 

NOW, THEREFORE, based on the Findings and pursuant to Rule 522.e.(1).A. and the Commission’s Enforcement and Penalty Policy, the Director proposes and Javernick agrees to settle the NOAV on the following terms and conditions:

 

      I.        Javernick is found in violation of Rules 308A and 309.

    II.        Javernick will be assessed a total penalty of $10,686.

a.    Javernick will pay $4,000 in the following installments:

                                          i.    $1,000 due within 30 days after this approved AOC is mailed by the Commission;

                                        ii.    $1,000 due on September 1, 2016;

                                       iii.    $1,000 due on January 1, 2017; and

                                       iv.    $1,000 due on April 1, 2017.

b.    The remaining $6,686 will be suspended pending Javernick’s completion of those requirements set forth in the Compliance Plan set forth below.

   III.        In the event Javernick defaults under this agreement, the total penalty remaining, including any suspended portion ($10,686 less any payments already made), will be due, and received by the Commission, no later than 30 business days after a written demand for payment by the Director, which will be served pursuant to Rule 521 at Javernick’s address of record, on file with the COGCC pursuant to Rule 302.

 

RECOMMENDED this 21st day of March, 2016.

 

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

 

 

By                                                                              

     David A. Beckstrom, Enforcement Officer

 

AGREED TO AND ACCEPTED this         day of March, 2016.

 

                                                JAVERNICK OIL, LLC

 

 

 

By                                                                                          

Signature of Authorized Company Representative

                       

                                                                                         

Print Signatory Name

 

                                                                                         

Title

 

 

ORDER

 

HAVING CONSIDERED the Agreement between the Director and Javernick to resolve the NOAV, the COMMISSION ORDERS:

 

1.            Javernick is found in violation of Rules 308A and 309.

2.            Javernick is assessed a total penalty of $10,686.

a.    Javernick will pay $4,000 in the following installments:

                                          i.    $1,000 due within 30 days after this approved AOC is mailed by the Commission;

                                        ii.    $1,000 due on September 1, 2016;

                                       iii.    $1,000 due on January 1, 2017; and

                                       iv.    $1,000 due on April 1, 2017.

b.    The remaining $6,686 will be suspended pending Javernick’s completion of those requirements set forth in the following Compliance Plan:

Subject

Task

Deadline

Permitting / Engineering

Javernick will engage a third party contractor to conduct an audit of the files of its 33 “active” wells (see Appendix A) to determine the paperwork deficiencies related to Rules 308A and 308B.

9-1-2016

 

Javernick will correct all Rule 308A and 308B deficiencies in the well files of its 33 “active” wells. (See Appendix A)

 

Corrections will be completed on the following schedule:

-       At least ten (10) total well files included in Appendix A will be audited and corrected by May 1, 2016;

-       At least twenty (20) total well files included in Appendix A will be audited and corrected by July 1, 2016; and

-       All thirty-three (33) active well files included in Appendix A will be audited and corrected by September 1, 2016.

See Note

 

Javernick will submit to the COGCC a report on each of the above-stated dates informing Staff of the well files that have been audited and are ready for review by Staff.

5-1-2016

7-1-2016

9-1-2016

 

Javernick will remain in compliance with Rule 308A (Form 5, Drilling Completion Reports) for a period of one year after the completion of the audit and resulting corrections.

9-1-2017

 

Javernick will remain in compliance with Rule 308B (Form 5A, Completed Interval Report) for a period of one year after the completion of the audit and resulting corrections.

9-1-2017

Engineering

Javernick will remain in compliance with Rule 311 (Form 6, Well Abandonment Report) for a period of one year.

4-18-2017

 

Javernick will remain in compliance with Rule 319 (Abandonment) for a period of one year.

4-18-2017

 

Javernick will remain in compliance with Rule 326 (Mechanical Integrity Testing) for a period of one year.

4-18-2017

Production

Javernick will remain in compliance with Rule 309 (Operator’s Monthly Report of Operations) for a period of one year.

4-18-2017

 

3.            In the event Javernick defaults under this agreement, the total penalty remaining, including any suspended portion ($10,686 less any payments already made), will be due, and received by the Commission, no later than 30 business days after a written demand for payment by the Director, which will be served pursuant to Rule 521 at Javernick’s address of record, on file with the COGCC pursuant to Rule 302.

4.            Compliance dates specified in this Order may be extended only for good cause, as determined at the Director’s sole discretion.  A request for extension must be made, in writing, at least 35 days prior to the pertinent compliance deadline or as soon as possible if 35 days prior notice is not feasible. Failure to receive an extension prior to the compliance deadline or the failure to meet a compliance deadline may constitute a new violation subject to additional penalties.

5.            Entry of this Order constitutes final agency action for purposes of judicial review as of the date this order is mailed by the Commission.  For all other purposes, this Order is effective as of the date of approval by the Commission.

6.            The Commission expressly reserves its right after notice and hearing, to alter, amend, or repeal any and/or all of the above orders.

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ENTERED this          day of                        , 2016 as of the 18th day of April, 2016.

           

                                                            OIL AND GAS CONSERVATION COMMISSION

                                                            OF THE STATE OF COLORADO

 

 

                                                            By                                                                                          

                                                                                    Julie Murphy, Secretary