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 PROVIDE ENERGY, LLC,
JEFFERSON COUNTY, COLORADO |
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CAUSE NO.
1V
ORDER NO.
1V-364
|
ORDER FINDING VIOLATIONS
FINDINGS
1.
According to the Colorado Secretary of State,
Provide Energy, LLC (“Provide Energy”) (Operator No. 100900) is a foreign
limited liability company, located in Nevada. On February 25, 2008, Provide
Energy submitted a Form 1A, Designation of Agent, which lists Allen Stout and
Melvin Richards as Managers for Provide Energy.
2. On July
18, 2007, Provide Energy, the successor and current operator of the State 16-4
#1 Well (API No. 05-059-06024) (the “Well”), located in the NW¼ NW¼ of Section
16, Township 2 South, Range 70 West, 6th P.M., completed the Well in
the Niobrara Formation with a total depth of 9,439 feet. Provide Energy has
posted a $5,000 Individual Plugging Financial Assurance for the Well.
3. On May 4,
2009, Staff issued NOAV #1769054 for alleged violations of COGCC rules,
including:
a.
Rule 301., which requires operators to file with the Director a written notice
of intention to do work or to change plans previously approved;
b.
Rule 1002.d., which requires operators to design and construct a safe working
area for drilling activities while reasonably minimizing the total surface area
disturbed;
c.
Rule 1002.e.(1), which requires operators to reasonably minimize land
disturbances and facilitate future reclamation by locating, constructing, and
maintaining well sites, production facilities, gathering pipelines, and access
roads so as to reasonably control dust and minimize erosion, alteration of
natural features, removal of surface materials, and degradation due to
contamination;
d.
Rule 1003.b., which provides that all disturbed areas affected by drilling or
subsequent operations to be reclaimed as early and as nearly as practicable to
their original condition or their final land use as designated by the surface
owner and shall be maintained to control dust and minimize erosion to the extent
practicable. Interim reclamation shall occur no later than six (6) months on
non-crop land after such operations;
e.
Rule 1003.e.(2), which provides that when a well is completed for production,
all disturbed areas no longer needed will be restored and revegetated as soon as
practicable. Interim reclamation of all disturbed
areas no longer in use shall be considered complete when all ground surface
disturbing activities at the site have been completed, and all disturbed areas
have been either built on, compacted, covered, paved, or otherwise stabilized in
such a way as to minimize erosion to the extent practicable, or a uniform
vegetative cover has been established that reflects pre-disturbance or reference
area forbs, shrubs, and grasses with total percent plant cover of at least
eighty percent (80%) of pre-disturbance levels or reference areas, excluding
noxious weeds. Re-seeding alone is not sufficient; and
e. Rule
1003.f., which provides that during drilling, production, and reclamation
operations, all disturbed areas shall be kept as free of all undesirable plant
species designated to be noxious weeds as practicable. Weed control measures
shall be conducted in compliance with the Colorado Noxious Weed Act, C.R.S.
§35-5.5-115 and the current rules pertaining to the administration and
enforcement of the Colorado Noxious Weed Act.
The NOAV required
Provide Energy to perform the following abatement or corrective actions by June
15, 2009: minimize the Well pad, contour the surface of the unused portion of
the Well site, install BMPs, control weeds, plant desirable species, and notify
COGCC Staff prior to surface activities to facilitate oversight. Further,
Provide Energy was required to submit a detailed timeline outlining planned
surface reclamation by May 15, 2009.
4. On
December 28, 2009, Staff issued NOAV #1769739 for alleged violations of COGCC
rules, including:
a. Rule 205.a.,
which requires all operators to make and keep appropriate books and records
covering their operations in the State of Colorado, including natural gas meter
calibration reports, from which they may be able to make and substantiate the
reports required by the Commission or the Director;
b. Rule 206.,
which requires operators from time to time to file accurate and complete reports
containing such information and covering such geographic areas or periods as the
Commission or Director shall require;
c. Rule 309.,
which requires operators to file with the Commission, within forty-five (45)
days after the month in which production occurs, a report on Operator’s Monthly
Production Report, Form 7, containing all information required by said form; and
d. Rule 706.,
which requires an operator, prior to commencing the drilling of a well, to
provide financial assurance to the Commission to ensure the protection of the
soil, the proper plugging and abandonment of the well, and the reclamation of
the site in accordance with COGCC regulations.
The NOAV required
certain abatement or corrective actions to be taken by the operator by February
1, 2010. The actions required Provide Energy to submit missing and corrected
production reports, provide adequate financial surety, and provide meter
calibration records.
5. As of
November 30, 2010, Provide Energy has failed to meet financial assurance
requirements set forth under the Colorado Oil and Gas Conservation Commission
(“Commission” or “COGCC”) Rules, amended December 2008 and effective on
non-federal lands on April 1, 2009. The financial assurance required for the
Well is Twenty Thousand dollars ($20,000). On October 27, 2009, COGCC Staff
(the “Staff”) issued an advisement letter to Provide Energy which requested the
operator to comply with Rule 706., by posting an additional $15,000 Individual
Plugging Financial Assurance for the Well, and that its failure to do so would
result in the issuance of a Notice of Alleged Violation (“NOAV”). The letter
was sent in the United States Mail, first class postage prepaid, and the letter
was not returned. Follow-up phone calls have been made to Provide Energy
regarding financial assurance, without avail. Further, as of November 30, 2010,
Provide Energy is delinquent in submitting production records.
6. As of
November 30, 2010, the site for the Well has not been minimized and no
substantive interim reclamation has begun. The Application for Permit to Drill
(“APD”) for the Well required Provide Energy to restore the tallgrass prairie in
which the site is located, and this reclamation measure has not occurred.
Additionally, there have been no Best Management Practices (“BMPs”) postings
on-site for the Well to control significant precipitation run-on/run-off
potential from land West of the wellsite and potential discharge of stormwater
East off the wellsite. The wellsite also has significant infestation of noxious
weeds.
7. On
November 29, 2010 and January 13, 2011, this matter came before the Commission
for an Order Finding Violation hearing. Provide Energy failed to appear and
defend against the allegations made by the COGCC Staff.
8. Rule 523.
specifies a base fine of Five Hundred dollars ($500) for each day of violation
of Rules 205.a., 206., and 309.; and a base fine of One Thousand dollars
($1,000) for each day of violation of Rules 301., 706., 1002.d., 1002.e.(1),
1003.b., 1003.e., and 1003.f. 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.
9. Rule
525.b. provides that whenever the Commission or the Director has evidence that
an operator is responsible for a pattern of violation of any provision of the
Oil and Gas Conservation Act (§34-60-101, et seq.) (the “Act”), or of any
rule, permit or order of the Commission, the Director shall issue a notice to
the operator to appear for a hearing before the Commission. If the Commission
finds after such hearing, that a knowing and willful pattern of violation
exists, it may issue an order which shall prohibit the issuance of any new
permits to the operator.
10. Provide
Energy should be found in violation of Rules 205.a., 206., 301., 309., 706.,
1002.e.(1), 1003.b., 1003.e.(2), and 1003.f., for its oil and gas operations at
the Well and pay a fine as prescribed by Rule 523. Further, Provide Energy
should be ordered to complete abatement or corrective actions set forth in the
NOAVs, as may be amended or modified by Staff.
11. The
Commission should authorize the Staff to foreclose the existing $5,000 plugging
bond, supplemented as may be necessary by funds from the Oil and Gas
Conservation and Environmental Response Fund, to plug and abandon the Well and
reclaim the Well site and associated facilities.
12. The
Commission should find that a knowing and willful pattern of violation exists
because Provide Energy has violated a number of separate bonding, reporting, and
maintenance requirements under the Rules; failed, for more than one year, to
perform the abatement and corrective actions required by the NOAVs; and failed
to respond to repeated communications from the COGCC Staff during this
enforcement action. Until any fine assessed under this action is paid in full
and all required abatement and corrective actions are performed by Provide
Energy for the Well, the Director should not approve any application for
permit-to-drill, any Certificate of Clearance and/or Change of Operator, Form
10, or other permit for conducting oil and gas operations for Provide Energy or
any entity of which Allen Stout or Melvin Richards are principals, majority
owners, operational or general managers, or in which Mr. Stout or Mr. Richards
otherwise exercise control.
13. The
Commission should assess the following fines based on the associated rule
violations for Provide Energy’s operations at the Well:
Violation |
Base
Fine |
Rule
205.a. |
$10,000 |
Rule 206. |
$5,000 |
Rule 301. |
$10,000 |
Rule 309. |
$10,000 |
Rule 706. |
$10,000 |
Rule
1002.d. |
$10,000 |
Rule
1003.b. |
$10,000 |
Rule
1003.e.(2) |
$10,000 |
1003.f. |
$10,000 |
Total Fines |
$85,000 |
14. 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.
15. Provide
Energy, 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.
16. On January
13, 2011, this matter was considered by the Commission.
17. Due notice
of the time, place and purpose of the hearing has been given in all respects as
required by law.
18. The
Commission has jurisdiction over the subject matter embraced in said Notice, and
of the parties interested therein, and jurisdiction to promulgate the
hereinafter prescribed order pursuant to the Oil and Gas Conservation Act.
19. At hearing,
COGCC Staff made an offer of proof in support of the proposed Order Finding
Violation, summarizing the key factual findings described above, and proposing a
total fine of Eighty Five Thousand dollars ($85,000) payable within 30 days of
the entry of the order.
20. The
Commission should accept the recommendation of the COGCC Staff in this matter.
ORDER
NOW, THEREFORE,
IT IS ORDERED, that Provide Energy is in violation of Rules 205.a., 206., 301.,
309., 706., 1002.e.(1), 1003.b., 1003.e.(2), and 1003.f.,
for its oil and gas operations at
the State 16-4 #1 Well, located in the NW¼ NW¼ of Section 16, Township 2 South,
Range 70 West, 6th P.M., for those acts alleged in this Order.
IT IS FURTHER ORDERED, that
Provide Energy shall be assessed a total fine of Eighty Five Thousand dollars
($85,000) 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 a
knowing and willful pattern of violation exists because Provide Energy has
failed, for more than one year, to perform the abatement and corrective actions
required by the NOAVs. Until any fine assessed under this action is paid in
full and all required abatement and corrective actions are performed by Provide
Energy for the Well, the Director shall not approve any application for
permit-to-drill, any Certificate of Clearance and/or Change of Operator, Form
10, or other permit for conducting oil and gas operations for Provide Energy or
any entity of which Allen Stout or Melvin Richards are principals, majority
owners, operational or general managers, or in which Mr. Stout or Mr. Richards
otherwise exercise control.
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 COGCC Staff is authorized to claim $5,000 plugging/abandonment and
reclamation bond posted by Provide Energy to defray the expenses associated with
plugging, abandoning and reclaiming the Well and well site.
IT IS FURTHER ORDERED, that
the COGCC Staff shall plug and abandon the Well and perform any necessary
reclamation of the well site, and supplement those costs associated with the
plugging with funds from the Oil and Gas Conservation and Environmental Response
Fund as may be necessary.
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 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.
ENTERED this 10th day of February, 2011, as of January 13, 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
February 10, 2011