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-330

PIONEER NATURAL RESOURCES USA, INC.,                      )    

LAS ANIMAS 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.  On March 4, 2006, a release of 350 barrels (“bbl”) of exploration and production (“E&P”) waste occurred at the Erin #21-15 Well site (“Erin #21-15,” API #05-071-08713) located in the NE¼ NW¼ of Section 15, Township 33 South, Range 67 West, 6^th P.M. operated by Pioneer Natural Resources USA, Inc. (“Pioneer”)   The release occurred when drill cuttings, completion fluids and produced water leaked from a pit built in fill material.  The pit had been constructed by February 28, 2006, the date the Erin #21-15 was spudded.    

                        2.  On March 6, 2006, Pioneer submitted a Spill/Release Report, Form 19, to the Colorado Oil and Gas Conservation Commission (“COGCC” or “Commission”) (#1393041) and notified the Colorado Department of Public Health and Environment (Spill Tracking Report #2006-181) of the discharge into waters of the state. 

                        3.  On March 8, 2006, the staff (“Staff”) of the COGCC provided a list of corrective actions to Pioneer including soil and water sampling, integrity review of an adjacent pit and submittal of water quality data for produced water in the pit.

                        4.  On March 27, 2006, Pioneer submitted water quality data from the Erin #21-15 pit and water quality data for samples collected from the Wet Canyon waterway up-gradient and down-gradient of the discharge point.

                        5.  On March 30, 2006, Staff inspected the Erin #21-15 Well site.  At the time of the inspection the Erin #21-15 pit had been backfilled, and the pit at the nearby Erin #21-15 TR Well (“Erin #21-15 TR,” API #05-071-08712) was being lined by a construction crew.

                        6.  On April 4, 2006 Pioneer sent an email to COGCC as written verification that the closure of the pit at the Erin 21-15 had been completed.

                        7.  On April 10, 2006, Staff, accompanied by Pioneer, conducted a follow-up inspection of the Erin #21-15 and observed the site of the March 4, 2006 spill of E&P waste   consisting of drill cuttings and produced water. 

                        8.  On April 26, 2006, Staff issued Notice of Alleged Violation (“NOAV”) #200087330 to Pioneer (COGCC Operator #10084) for violation of the following Rules:

                        9.  The NOAV required Pioneer to close the leaking pit, line the Erin #21-15 TR pit, collect soil samples on the creek bank, provide produced water chemistry data for the Erin #21-15 and the Erin #21-15 TR, and provide to the COGCC an explanation of how the problem with leaking pits will be prevented in the future.  The original abatement deadline was June 26, 2006. 

                        10.  On February 2, 2007, Pioneer submitted its final response to the NOAV and completed all corrective actions to Staff’s satisfaction.  Pioneer’s response included copies of all original laboratory reports, a letter explaining corrective actions taken and a summary of improved protocols for pit construction and spill reporting.  Pioneer had previously closed the Erin #21-15 pit (by April 4, 2006), lined the Erin #21-15 TR pit (approximately March 30, 2006), and provided water quality data for the Wet Canyon waterway (March 27, 2006).

                        11.  Pioneer should be found in violation of Rule 902.g., for constructing an unlined drilling pit on fill material, and Rule 907.a.(1), for failing to ensure that E&P waste is properly stored, handled or disposed to prevent threatened significant adverse environmental impacts to water, soil or biological resources.

                        12.  Rule 523. specifies a base fine of One Thousand dollars ($1,000) for each day of violation of Rule 902. and Rule 907. The Erin #21-15 pit was constructed sometime prior to February 28, 2006.  Pioneer discovered the spill on March 4, 2006.  On April 4, 2006 Pioneer reported that the closure of the pit at the Erin 21-15 had been completed.

                        13.  A monetary penalty of Eight Thousand dollars ($8,000) for violations of 902.g. (construction of a pit in fill material) and 907.a.(1) (failing to ensure that E&P waste is properly stored, handled or disposed to prevent threatened significant adverse environmental impacts to water, soil or biological resources) should be assessed against Pioneer in accordance with Rule 523.a.

                        14.  Pursuant to Article IX, of the “Memorandum of Agreement” between the Water Quality Control Division (“WQCD”) and COGCC, adopted February 15, 2000, Staff conferred with WQCD enforcement staff in determining the monetary penalty against Pioneer for violations of WQCC standards for surface waters.  WQCD indicated it agrees with the fine and the terms of this AOC and will not pursue any additional penalty.

                        15.  Pioneer should execute this Administrative Order by Consent no later than 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.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Pioneer Natural Resources USA, Inc. shall be found in violation of Rule 902.g. (construction of a pit in fill material) and 907.a.(1) (failing to ensure that E&P waste is properly stored, handled or disposed to prevent threatened significant adverse environmental impacts to water, soil or biological resources) at the Erin #21-15 Well site (API #05-071-08713) located in the NE¼ NW¼ of Section 15, Township 33 South, Range 67 West, 6^th P.M.

IT IS FURTHER ORDERED, that Pioneer Natural Resources USA, Inc. shall be assessed a total fine of Eight Thousand dollars ($8,000) for violation of Rule 902.g. and Rule 907.a.(1), which shall be payable within thirty (30) days of the date this order is approved by the Commission.

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

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This cause came on for hearing before the Commission at 8:00 a.m. on August 19, 2008, in Ballroom B of the Brown Palace Hotel, 321 Seventeenth Street, Denver, Colorado, for the approval of this Administrative Order by Consent.

                        ENTERED this________    day of August, 2008, as of August 19, 2008

                                                                        OIL AND GAS CONSERVATION COMMISSION

                        OF THE STATE OF COLORADO

                        By____________________________________

Patricia C. Beaver, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

August 27, 2008