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 OXY USA WTP LP,
GARFIELD COUNTY, COLORADO |
)
)
)
) |
CAUSE NO. 1V
ORDER NO. 1V-365
|
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
April 26, 2005, the Director (“Director”) of the Colorado Oil and Gas
Conservation Commission (the “Commission” or the “COGCC”) approved an
Application for Permit-to-Drill for the Cascade Creek #697-15-54 Well (the
“Well,” and with the associated well pad, the “Well Pad”) (API No.
05-045-10687), located in the SW¼ SE¼ of Section 15, Township 6 South, Range 97
West, 6th P.M., submitted by OXY USA WTP LP (“OXY”). OXY spud the
Well on May 23, 2005 and completed it on June 13, 2005. OXY used an unlined
reserve pit (the “Reserve Pit”) during the drilling and completion of the Well.
On August 22, 2005, OXY began producing the Well.
2.
On
August 11, 2008, following the discovery of benzene contamination in an unnamed
spring in McKay Gulch east of the Well, COGCC Staff issued Notice of Alleged
Violation #200193504 (“NOAV”) to OXY for operations at the Well Pad.
The NOAV stated
that “Unauthorized discharge of E&P waste has occurred in the vicinity of a
cabin owned by Mr. Ned Prather. That discharge has impacted waters of the
state, specifically an unnamed spring located 2,300 feet to the east of the
above-referenced well.” The NOAV identified operations on the well pad as the
issue, and provided the date of the alleged violation as July 17, 2008.
3.
Between August 11, 2008 and January 28, 2011, COGCC Staff and OXY engaged in
thorough investigations of the alleged contamination of the unnamed spring,
which involved OXY’s placement of monitoring wells, including Monitoring Well 40
(“MW-40”), in McKay Gulch. The parties also shared information, and held a
number of investigation meetings and had numerous other communications during
this time.
4.
On
January 28, 2011, COGCC Staff issued a proposed Order Finding Violation (“First
Proposed OFV”) in the above-captioned case and notified OXY of the same. The
First Proposed OFV alleged that OXY’s operations on the Well Pad, specifically
with regard to placement of produced water in the Reserve Pit, had resulted in a
release of produced water that impacted the area in McKay Gulch sampled by
MW-40. In particular, the First Proposed OFV cited a November 9, 2009 water
sample taken from MW-40 that indicated chloride detected at a concentration of
820 mg/L, sodium detected at a concentration of 280 mg/L, TDS detected at a
concentration of 2,000 mg/L, and specific conductance measured at 3,100
µmhos/cm. Benzene was not detected.
5.
The
First Proposed OFV identified seven COGCC Rules that OXY allegedly violated for
which Staff recommended OXY be penalized.
6.
OXY
disputed the findings and conclusions proposed by COGCC Staff in the First
Proposed OFV, specifically denying that any release had occurred from the Well
Pad. As a result, a hearing was set in the matter for April 5, 2011, along with
discovery deadlines, a dispositive motion deadline, and a prehearing conference
to occur in the weeks leading up to the hearing date.
7.
OXY
filed a motion to dismiss the above-captioned matter on March 18, 2011. Staff
responded to that motion on March 28, 2011, and included in its response a
revised proposed Order Finding Violation (the “Second Proposed OFV”), which
superseded the First Proposed OFV, and alleged that OXY had violated five rules,
Rules 324.A.a., 324.A.b., 902.a., 906.b.(3), and 907.a.(2), and recommended
penalties based on violations of Rules 324.A.b. and 902.a. OXY replied on April
1, 2011.
A hearing
on the
motion was
held before the
Commission on
April
4, 2011,
and
the motion was denied.
8.
On
April 5, 2011, the above-captioned matter was presented to the Commission for an
evidentiary hearing in which seven witnesses appeared. Evidence was presented
over the course of approximately ten hours. At the close of the evidence, the
Commission stated that it would receive proposed findings of fact and orders
from the parties and hear closing arguments at its next regularly scheduled
hearing on May 16, 2011, and that it would rule on the above-captioned matter
after hearing those arguments.
9.
On
April 14 and 19, 2011, the Director met with OXY management, and the parties
agreed to the following settlement of the above-captioned matter.
ORDER
NOW, THEREFORE,
IT IS ORDERED that OXY USA WTP LP and the Director, having come to an agreement,
cognizant of the complexities of the above-captioned matter, confident that this
agreement satisfies both the Director and OXY, and wishing to avoid further
uncertainties and costs associated with continued litigation of the
above-captioned matter, enter into this Administrative Order on Consent (“AOC”).
IT IS FURTHER
ORDERED that OXY USA WTP LP shall pay Ninety
Thousand dollars ($90,000) in settlement of the NOAV and in response to the
First and Second Proposed OFVs, which shall be payable within thirty (30)
days of the date this AOC is approved by the Commission.
IT IS FURTHER
ORDERED that OXY USA WTP LP shall further pay Sixty Thousand dollars ($60,000)
to fund a public project in Garfield County, Colorado in accordance with Rule
523.e. OXY shall choose a project from a list of staff-approved projects within
sixty (60) days of the date this AOC is approved by the Commission.
A. The
execution of this project, including but not limited to the management,
planning, contracting, and inspection shall be the responsibility of OXY and its
contractors. COGCC staff reserves the right to request status reports or any
other documentation related to the project at any time.
B. OXY
shall not deduct the expenses associated with the implementation of the
above-described public project for any tax purpose or otherwise obtain any
favorable tax treatment of such payment or project. OXY hereby certifies that,
as of the date of this AOC, it is not under any existing legal obligation to
perform or develop, nor will it receive any credit for, any public project that
it may propose to the Director, except as provided in this AOC.
C. The
public project must be completed to the satisfaction of the Commission by
December 31, 2012. OXY shall submit a Public Project Completion Report to the
Division by that date, describing the project and the associated benefits,
itemizing and documenting the costs, and certifying that the project was
completed in compliance with this order and Rule 523.e.
D. In the
event that OXY fails to comply with any of the terms or provisions of this AOC
relating to the performance of the public project, OXY shall pay the amount
assigned for the public project, less any amounts expended for the public
project, as a fine to the Commission.
E. In the
event that OXY makes any public statement, oral or written, about the public
project, OXY shall include the following language in such public statement:
“This project was undertaken as part of settlement of an enforcement action
taken by the Colorado Oil and Gas Conservation Commission.”
IT IS FURTHER ORDERED that OXY is fully released from
any and all claims for violations of COGCC rules, the Colorado Oil and Gas
Conservation Act, or any other rule, law, order, or directive set out or that
could have been set out in the NOAV, the First Proposed OFV, the Second Proposed
OFV, or any other instrument now or in the future existing, and any fine,
remedial order, sanction or other potential liability, including but not limited
to those contemplated by the above-captioned matter presented to the Commission
during the hearing on April 5, 2011, arising from any unauthorized activity or
activities on or related to the Well Pad (including the reserve pit, the lined
pond, the well itself, and any and all other equipment or infrastructure on the
Well Pad), whether related to permitting and construction of the Well Pad or
operations on the Well Pad (including but not limited to fluid disposition,
handling, and transportation) that occurred any time before and including the
date this AOC is approved by the Commission. This AOC does not grant any
release of liability for any violations, regardless of when they occurred, that
are not cited in this AOC.
IT IS FURTHER
ORDERED that nothing in this AOC shall constitute or be construed as an
admission by OXY that any discharge occurred from the Well Pad or that it
committed any violations of any rules of the COGCC or other applicable law.
IT IS FURTHER
ORDERED that, unless otherwise specified, any report, notice or other
communication required under the AOC shall be submitted digitally to:
For OXY: Greg Hardin
Greg_Hardin@oxy.com
IT IS FURTHER ORDERED that OXY shall execute this AOC no
later than fourteen (14) days after the date it is executed by the Staff for
recommendation of expedited approval by the Commission.
The parties agree to the terms and conditions of this AOC and acknowledge that
this AOC constitutes an order issued pursuant to 2 CCR 404-1, Rule 523.a. The
Parties acknowledge that this AOC constitutes a full and final resolution of the
matters addressed herein, and further agree not to challenge the terms and
conditions of this AOC whether by way of direct judicial review or collateral
challenge. This AOC is binding upon the Parties and their corporate
subsidiaries or parents, their officers, directors, agents, attorneys,
employees, contractors, successors in interest, affiliates and assigns. The
undersigned warrant that they are authorized to bind legally their respective
principals to this AOC. This AOC shall be effective upon the date signed by the
last party. This AOC may be executed in multiple counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
AOC.
IT IS FURTHER ORDERED that the provisions contained within this AOC shall become
effective forthwith.
RECOMMENDED this day of____________, 2011.
OIL AND GAS CONSERVATION COMMISSION OF THE
STATE OF COLORADO
By: ___________________________________________
Robert A. Willis, Enforcement Officer
Dated at Suite 801
1120 Lincoln St.
Denver, Colorado 80203
AGREED TO AND ACCEPTED this _________day
of_______________, 2011.
OXY USA WTP LP
By: ___________________________________________
Signature of Authorized OXY Representative
___________________________________________
Print Signatory Name
___________________________________________
Title of Signatory
============================================================================
This cause came on for hearing before the Commission on
the ______ day of _______________, 2011, in
__________________________________________, Colorado,
for
the approval of this Administrative Order
by Consent.
ENTERED this
__________ day of _____________, 20 ___, as of _________ day
of
_________________, 2011.
OIL AND
GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert A. Willis, Acting
Secretary
Dated at Suite
801
1120 Lincoln
Street
Denver, Colorado
80203