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 KP   KAUFMANN COMPANY, INC., WELD COUNTY, COLORADO

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CAUSE NO. 1V DOCKET NO. 201100261, et al. TYPE: ENFORCEMENT ORDER NO. 1V-863

 

ORDER FINDING NO SUBSTANTIAL COMPLIANCE

 

The Commission heard this matter on January 25-26, 31, and February 1, 2023, at the office of the Colorado Oil and Gas Conservation Commission (“COGCC” or “Commission”), 1120 Lincoln Street, Suite 801, Denver, Colorado, upon order of the Commission for a hearing on KP Kauffman Company, Inc.’s compliance with the November 5, 2021 Compliance Plan Agreement.

 

PARTIES AND JURISDICTION

 

1.               The parties to this matter are COGCC Staff (“Staff”) and operator KP Kauffman Company, Inc. (“KPK”) (Operator No. 46290) (collectively the “Parties”). KPK is the operator of record of the oil and gas locations and remediation sites identified in the November 5, 2021 Compliance Plan Agreement (“CPA”).  Collectively, the oil and gas locations and remediation sites identified in the CPA are referred to herein as “CPA Sites.”

 

2.               Both Staff and KPK are interested parties in the subject matter of the above-referenced hearing.

 

3.               Due notice of time, place, and purpose of hearing has been given in all respects as required by law.

 

4.               The Commission has jurisdiction over the subject matter embraced in said matter and the parties interested therein and has authority to promulgate the hereinafter prescribed order pursuant to the Oil and Gas Conservation Act (“Act”).

 

PROCEDURAL HISTORY

 

ORDER FINDING VIOLATION AND COMPLIANCE PLAN AGREEMENT[1]

 

5.               On August 10-13, 16, 18, 20, and 23, and September 16, and 20-21, October 7, and November 5, 2021, the Commission held hearings (“Enforcement Hearings”) on applications pursuant to C.R.S. § 34-60-121, by the COGCC Staff (“Staff”) for orders finding violations on seven Notices of Alleged Violations (“NOAV”) issued to KPK for wells and locations in Weld County, Colorado.

 

6.               At issue in the Enforcement Hearings were the following seven NOAVs:

 

a.            Charter Schneider Tank Battery, NOAV No. 402363430 (“Charter Schneider”). COGCC Staff alleged KPK violated Rules 210.b., 603.f., 605.c., 901.c., 1002.f., and 1105.b.

 

b.            Grant Tank Battery, NOAV No. 402206828 (“Grant Tank Battery”). COGCC Staff alleged KPK violated Rules 905.b. and 906.b.

 

c.            Jillson #5 Flowline, NOAV No. 402571143 (“Jillson”). COGCC Staff alleged KPK violated Rules 906.b. and 906.c.(2).

 

d.            Nessu #1 Flowline, NOAV No. 402550681 (“Nessu #1”). COGCC Staff alleged KPK violated Rules 901.c. and 907.a.

 

e.            Nessu Consolidated Flowline, NOAV No. 402548397 (“Nessu Consolidated”). COGCC Staff alleged KPK violated Rules 901.c. and 906.b.

 

f.             Soil Spreadfield, NOAV No. 402494406 (“Soil Spreadfield”). COGCC Staff alleged KPK violated Rules 324A.a., 907.a., 907.e., and 908.

 

g.            UPRR 43 PAN AM G Consolidation #2, NOAV No. 402523412 (“UPRR”). COGCC Staff alleged KPK violated Rules 324A.a., 906.a., 907.a., 1102.i.(2)., and 1102.j.(1).

 

7.               The Commission heard the merits of the KPK NOAVs on August 10–13, 16, 18, 20, and 23.  At hearing, the Commission made the following findings:

 

a.            At the Charter Schneider location, KPK violated Rules 210.b., 603.f., 605.c., 901.c., and 1002.f.  The Commission assessed a total penalty of $523,300.00 for the five violations. 

 

b.            At the Grant Tank Battery location, KPK violated Rules 905.b. and 906.b.  The Commission assessed a total penalty of $158,900 for the two violations.

 

c.            At the Jillson location, KPK violated Rule 906.b.  The Commission assessed a penalty of $47,800.00 for the violation.

 

d.            At the Nessu #1 location, KPK violated Rules 901.c. and 907.a.  The Commission assessed a penalty of $186,725.00 for the two violations.

 

 

e.            At the Nessu Consolidated location, KPK violated Rule 901.c. the Commission assessed a penalty of $85,250.00 for the violation. 

 

f.             At the Soil Spreadfield location, KPK violated Rules 324A.a., 907.a., 907.e., and 908.  The Commission assessed a penalty of $685,750.00 for the four violations.

 

g.            At the UPRR location, KPK violated Rules 906.a., 907.a., 1102.i.(2)., and 1102.j.(1).  The Commission also found KPK in violation of Rule 324A.a., and consolidated that violation with the violations of Rules 906.a., 907.a., 1102.i.(2)., and 1102.j.(1).  The Commission assessed a total penalty of $149,750.00 for the five violations.

 

8.               On September 20 and 21, the Commission held a hearing on the issue of whether KPK committed a Pattern of Violations pursuant to Rule 525.d. The Commission found KPK committed a Pattern of Violations, and applied this finding as an aggravating factor to increase the assessed penalties, as follows:

 

a.            The violation of Rule 901.c. in Nessu #1, warranted a 10% penalty increase resulting in a final penalty of $116,710.00.

 

b.            The violation of Rule 901.c. in Nessu Consolidated, warranted a 20% penalty increase resulting in a final penalty of $102,300.00.

 

c.            The violation of Rule 907.a. in UPRR, warranted a 20% penalty increase resulting in a final penalty of $107,700.00.

 

d.            The violation of Rule 324A.a. in Soil Spreadfield, warranted a 20% penalty increase resulting in a final penalty of $466,140.00.

 

e.            The violation of Rule 907.a. in Soil Spreadfield, warranted a 20% penalty increase resulting in a final penalty of $175,380.00.

 

f.             The violation of Rule 906.b. in Grant Tank Battery, warranted a 10% penalty increase resulting in a final penalty of $50,490.00.

 

g.            The two separate violations of Rule 901.c. in Charter Schneider warranted a 10% penalty increase resulting in final penalties of $92,125.00 and $22,000.00.

 

9.               The Commission assessed a total penalty of $2,014,530.00 (the “Penalty Amount”).

 

10.            Prior to and during the September 20–21, 2021 hearing, the Commission found that KPK has an inability to pay the full Penalty Amount. 

 

11.            At the September 21 hearing, the Commission authorized Chairman Jeff Robbins (“Chair”) to sit as a hearing officer and enter into discussions with KPK and COGCC Staff to attempt to facilitate agreement on the terms of a plan governing:

 

a.            KPK’s return to compliance with the Rules;

 

b.            Payment of a portion of the Penalty Amount not suspended by the Commission to comport with KPK’s ability to pay provided KPK remains in material compliance with the plan;

 

c.            The corrective actions necessary to attain compliance with respect to the violations found by the Commission at the KPK OFV NOAV locations; and

 

d.            The Commission’s findings that KPK committed a pattern of violations.

 

12.            Chair Robbins held conferences with the Parties on September 24, 27 and 29, and October 5, 22, 26, and 29, and November 1, 2021.

 

13.         At the November 5, 2021, hearing, the Chair presented the Compliance Plan Agreement (“CPA”) to the Commission.  KPK and COGCC Staff agreed to all provisions of the Plan as presented to the Commission.  The Commission considered whether any additional terms and conditions were necessary to attain compliance with the violations cited in the KPK NOAVs or with the finding of a pattern of violations.  The Commission concluded the actions and activities set forth in the CPA were necessary to achieve the closure of remediation projects at the NOAV sites where violations were found by the Commission and were reasonably necessary to promote KPK’s return to compliance with the Rules following the Commission’s finding that KPK committed a pattern of violations.

 

14.         During the November 5, 2021 hearing the Commission discussed the importance of the development of the Flowline Integrity Evaluation and the implementation of the Flowline Integrity Plan as outlined in the CPA. The Commission requested, and the Parties agreed, that a hearing would be convened to present to the Commission the Evaluation Plan and the Integrity Plan.

 

15.         On November 5, 2021, as memorialized in Order No. 1V-772, the Commission unanimously (5-0) found KPK LIABLE for the rule violations identified above.

 

16.         On a vote of 5 to 0, the Commission assessed a total penalty of

$2,014,530 to KPK.         

 

17.            On a vote of 4 to 0, the Commission approved the CPA, attached to and incorporated into Order No. 1V-772 as Exhibit 1.[2]  

 

18.            In Section III.6. the CPA states that: “The Commission concluded the actions and activities set forth below are necessary to achieve the closure of remediation projects at the NOAV sites where violations were found by the Commission and are reasonably necessary to promote KPK’s return to compliance with the Rules following the Commission’s finding that KPK committed a pattern of violations.”

 

19.            The requirements of the CPA are primarily set forth in Section IV of the CPA.

 

20.            Section IV.5.b. provides that if “KPK fails to substantially comply with the requirements of Section IV of the [CPA]” the Commission may “terminate the [CPA], impose any outstanding remaining portions of the Penalty Amount, suspend any or all of KPK’s Certificates of Clearance, or refuse to issue KPK new Oil and Gas Development plans.” 

 

JUNE 2022 HEARING

 

21.            On June 22-23, and 27, 2022, the Commission held a hearing pursuant to Section IV.5.b. on the question of whether KPK was in substantial compliance with the CPA.

 

22.            Following argument and presentations from the Parties, the Commission deliberated and made certain findings and conclusions.  The Commission’s decision at the June 2022 hearing is memorialized in Corrected Order No. 1V-859.

 

23.            The Commission discussed the standard of “substantial compliance” provided in Section IV.5.b. of the CPA.  The Commission concluded that the “substantial compliance” standard required KPK to prove that it had not committed failed to comply with the CPA as a whole, and that “substantial compliance” did not require strict compliance or technical compliance with all minor requirements.

 

24.             The Commission found that KPK was not in substantial compliance with the following paragraphs of Section IV of the CPA:

 

a.            Paragraph 4, the UPRR (Remediation #16131), and the requirements thereunder;

 

b.            Paragraph 5, the Soil Spreadfield (Remediation # 15951) and the requirements thereunder;

 

c.            Paragraph 7, the Grant Tank Battery (Remediation #12158) and the requirements thereunder;

 

d.            Paragraph 8, the Global Remediation Implementation Plan (“GRIP”);

 

e.            Paragraph 10, the Comprehensive Waste Management Plan; and the

 

f.             Paragraph 11, the Spill/Release Reporting and Training Plan.

 

25.            The Commission imposed the penalty provisions under each of the above- referenced Sections upon KPK.  However, the Commission decided against requiring the immediate payment of those penalties, and instead decided to suspend the penalties so long as KPK complied with the following:

 

a.            KPK provided a quarterly update by October 1, 2022, wherein KPK shall demonstrate substantial compliance with all requirements of the CPA that should have been complied with as of June 27, 2022;

 

b.            KPK provided a quarterly update by January 20, 2023, wherein KPK shall demonstrate compliance with the entirety of the CPA;

 

c.            Weekly meetings with the Chair, KPK, and Staff, during which Staff shall identify the projects which deserve the highest priority from KPK.  In the event of a dispute between KPK and Staff regarding the priority projects, the Chair would oversee and decide the outcome.

 

d.            The Commission directing KPK as to priorities for remediation shall not mean that KPK may exclude other issues that may arise, which may be critical to or present the potential of significant adverse impacts to public health, safety, welfare, the environment and wildlife resources. KPK must continue to ensure the protection of public health, safety, welfare, the environment and wildlife resources in all of its operations.

 

e.            The Commission also desired to have KPK focus funds on the utilization of additional resources, because the testimony that KPK has “done its best” is not sufficient. Staff should provide input to KPK regarding what additional resources would be the most effective.

 

f.             The Commission directs KPK and Staff to utilize the Chair for the purposes of dispute resolution.

 

PROCESS BEFORE JANUARY 2023 HEARING

 

26.            On August 25, 2022, KPK requested the Commission Hearings Manager to schedule KPK’s next quarterly update to the Commission for October 19, 2022, due to various scheduling conflicts.  Staff did not object.  The Hearings Manager granted KPK’s request.

 

27.            On October 19, 2022, KPK provided the Commission with a quarterly update of its progress in complying with the CPA. Staff provided a responsive presentation.  Following the Parties’ presentations, the Commission reiterated its intent to convene a hearing on or before January 20, 2023, on the question of whether KPK was in substantial compliance with the CPA.

 

28.            On October 31, 2022, Staff, KPK, and MarCom met with the Chair to discuss whether the weekly remediation project prioritization and progress meetings would continue to occur.  Following extensive discussion on the utility of continued meetings, the Commission Chair determined that the weekly meetings would not continue.  KPK and MarCom LLC[3] agreed to contact Staff on an as-needed basis to discuss technical and other site-specific issues.  

 

29.            On November 3, 2022, KPK filed an unopposed motion to reschedule and delay the January 20, 2023 hearing by five days to January 25, 2023.

 

30.            Also on November 3, 2022, the Commission Hearing Officer assigned to this matter held a status conference between the Parties.  The Parties discussed the parameters of the upcoming January 2023 hearing, as well as KPK’s motion to reschedule.  The Hearing Officer indicated that KPK’s motion to reschedule was likely to be granted.  

 

31.            On December 14, 2022, KPK filed a Motion to Amend the Order Finding Violation 1V-772 to (1) make certain typographical and substantive corrections raised previously and (2) add a paragraph to the end of Order No. 1V-772 with language permitting KPK to fund a contractor to assist Staff in the review and approval of KPK’s spill/release and remedial work submittals to COGCC.  Staff filed its response on December 29, 2022.   Staff responded that it opposed KPK’s request to amend the order to permit KPK to fund a contractor, but took no position on KPK’s request to amend the Order No. 1V-772 to make typographical and substantive corrections.  

 

32.            On December 15, 2022, the Hearing Officer held a status conference between the Parties.  The Parties discussed recent requests from KPK, including a request to receive Staff’s demonstrative PowerPoint a week prior to the hearing date.  The Hearing Officer indicated he would grant KPK’s request, and Staff requested an opportunity to file a motion to reconsider, which was granted.  The Parties also discussed KPK’s Motion to Amend the Order Finding Violation 1V-772.  Staff requested, and was granted, 14 days to respond to KPK’s motion.

 

33.            On December 19, 2022, Staff filed a Motion to Reverse the Hearing Officer’s Ruling regarding the filing of demonstrative aids.  KPK filed its response on December 22, 2022.

 

34.            On December 27, 2022, KPK filed a Motion for Partial Summary Judgment, requesting that the Hearing Officer hold as a matter of law that that KPK may demonstrate substantial compliance with Section IV of the CPA by showing compliance with identified requirements in the CPA (“MSJ”).  Staff filed its response in opposition on January 3, 2023, arguing that the Commission determined the meaning of “substantial compliance” at the June 2022 hearing, and the Hearing Officer did not have the authority to reverse or change the Commission’s determination.

 

35.            On January 3, 2023, the Hearing Officer issued an Order Denying Staff’s Motion to Reverse and the Third Amended Case Management Order (“CMO”), setting the matter for hearing before the Commission on January 25, 2023.  A revised Third Amended CMO was issued on January 5, 2023 to adjust certain deadlines and make other edits agreed to by the Parties.

 

36.            On January 11, 2023, KPK filed a Notice to Partially Withdraw its Motion to Amend with respect to its request to fund a contractor.

 

37.            On January 18, 2023, KPK filed a motion to stay the January 25 hearing for six months, and to hold the January 25 hearing in person (“Motion to Stay”).  KPK argued that a stay was necessary to provide KPK with time to sell its Spindle Field assets to another operator to inject CO₂ for enhanced oil recovery and geologic sequestration.  KPK also argued that holding the hearing as scheduled on January 25 “unnecessarily risks damaging Colorado’s ability to more rapidly utilize this unique Spindle Field resource for CCUS development to meet its climate action goals.”  Motion to Stay, p. 3.   To support its request for an in-person hearing, KPK argued that: “[t]his hearing is potentially very consequential for KPK, and the opportunity to cross-examine witnesses and have the Commissioners evaluate their demeanor and veracity is better achieved in person.”  Motion to Stay, p. 5.   Staff opposed KPK’s request for a stay and took no position on KPK’s request for an in-person hearing.

 

38.            On January 19, the Hearing Officer issued an order denying KPK’s MSJ, deciding that the Commission previously determined the meaning of “substantial compliance,” and the Hearing Officer was without authority to reverse or alter the Commission’s determination.

 

39.            On January 20, 2023, the Commission considered KPK’s Motion to Stay.  The Commission unanimously (5-0) denied KPK’s request for a stay.

 

40.            Rule 510.l. provides that the Commission may “for good cause cancel, stay or continue any hearing to another date.”  It is within the Commission’s discretion to stay a hearing.  The January 25 hearing had been scheduled since the Commission’s June 2022 hearing, or approximately seven months.  KPK did not argue in its Motion to Stay that it did not have sufficient time to prepare for hearing, or that unforeseen circumstances required KPK to request a stay.  KPK’s Motion to Stay indicated that it had anticipated the transfer of its assets for several months prior to requesting the stay.  Motion to Stay, p. 3.  A potential transfer of assets does not constitute good cause to continue the January 25 hearing.  None of the potential outcomes of the January 25 hearing would prevent KPK from transferring assets, and KPK had sufficient time to prepare for hearing. 

 

41.            Regarding its request for an in-person hearing, KPK argued only that an in-person hearing was required because the outcome of the hearing was potentially consequential for KPK, and that the opportunity to cross-examine witnesses and have Commissioners evaluate their demeanor and veracity is better achieved in person.  Motion to Stay, p. 5.  KPK did not provide any legal citation to support its argument.

 

42.            On a vote of 3-2, the Commission denied KPK’s request for an in-person hearing.

 

43.            The APA requires that every party to a proceeding must have the right to present their case by oral and documentary evidence, to submit rebuttal evidence, and conduct cross-examination.  C.R.S. § 24-4-105(7).  A virtual hearing would provide both Parties with all of these rights.  The Commission has been conducting fully virtual hearings since the beginning of the COVID-19 pandemic in 2020, and is very well practiced at holding virtual hearings so that every party could fully present its case.  Prior to KPK’s request, no party to a Commission hearing had claimed that a virtual hearing negatively impacted their due process rights.  Further, the Commission has never had an issue determining the demeanor or veracity of witnesses in a virtual setting.  In fact, the virtual setting provides greater opportunity for a more efficient hearing by allowing witnesses to appear from any geographic location and allowing for presentation of evidence electronically.  There are no due process concerns with holding hearings virtually.

 

44.            On January 23, 2023, KPK filed a request with the Hearing Officer to file a Motion in Limine.  KPK filed its Motion in Limine as Exhibit A to its request.  KPK’s Motion in Limine argued that Staff may use its demonstrative exhibit only during opening, closing, and witness examination.  KPK attached Staff’s demonstrative exhibit as an exhibit to its Motion in Limine.  Staff responded on January 24, 2023, arguing that the Hearing Officer had already ruled that demonstrative exhibits were not exhibits, and that but for KPK’s attaching Staff’s demonstrative exhibit to its Motion in Limine, Staff’s demonstrative exhibit would not be in the record.

 

45.            On January 24, 2023, the Hearing Officer issued an order granting KPK’s request to make typographical and substantive changes to Order No. 1V-772, but denying KPK’s request to amend Order No. 1V-772 to fund a contractor as moot.

 

JANUARY 2023 HEARING

 

46.            On January 25-26, 31, and February 1, 2023, the Commission held the hearing on the issue of KPK’s substantial compliance with Section IV of the CPA. The Commission heard argument, received testimony and exhibits, and asked questions of the Parties on January 25-26, and 31, and returned on February 1 to deliberate and issue a final decision.

 

47.            The Commission began the hearing on January 25 by considering whether any Commissioner had any conflicts.  No Commissioner identified any conflicts with hearing the matter, and no Party or member of the public raised a conflict.

 

48.            The Commission began the substantive portion of the hearing by addressing three matters raised in the prehearing process.  First, the Chair stated that demonstrative exhibits could not serve as independent exhibits, but noted that KPK had filed Staff’s demonstrative exhibit into the record with its Motion in Limine.  Second, the Chair stated that the Commission had previously determined the “substantial compliance” standard, and would not revisit that issue at the January 25 hearing.  Third, the Chair stated he would not revisit any of his rulings at the June 2022 hearing regarding the admission or exclusion of exhibits or other evidence.  The other Commissioners agreed with the Chair’s statements.

 

49.            The Commission then requested that the Parties raise any procedural matters still pending.  KPK took issue with the standard of “substantial compliance” as stated by the Chair, and raised concerns regarding the time allotment for case presentations.  Both Parties raised questions of admission of exhibits, as KPK had objected to a number of Staff exhibits. 

 

50.            The Chair clarified that the Commission interpreted “substantial compliance” to mean compliance with the essential requirements and purpose of Section IV, including not only KPK’s timely submittal of forms and plans required by Section IV, but also successful implementation of those forms and plans.  No Commissioner, and neither party, raised an objection to the Chair’s clarification.

 

51.            The Chair stated that he would rule upon evidentiary objections as they arose in the course of the hearing.  The Chair also stated that the Commission would not grant additional time at the beginning of the hearing, but would accept and consider requests for additional time as they arose in the hearing – as has been the Commission’s practice in past hearings.  

 

52.            The Commission heard case presentations, rebuttal, and argument from KPK and Staff on January 25, 26, and 31.  The Commission asked questions of the witnesses and counsel for the Parties.  The Commission also provided additional time to KPK.  No party objected to the time allotted by the Commission by the conclusion of the hearing.

 

53.            Near the conclusion of the case presentations, the Commission took up Staff’s request to admit all of Staff’s exhibits listed in their Prehearing Statement for the January 25 hearing.  The Commission recessed while the Parties conferred on KPK’s objections to Staff’s exhibits, as listed in KPK’s January 17, 2023 Objections to Staff’s Exhibit List.  KPK stated that it had withdrawn its objections to all of Staff’s exhibits showing post-CPA activity, but maintained its objection to pre-CPA exhibits on relevance grounds.  KPK also stated that it maintained its objection to certain Staff exhibits in that those exhibits could only be used as evidence of site descriptions or conditions, and not evidence of unadjudicated violations of COGCC Rules. 

 

54.            The Commission Chair admitted all exhibits listed in Staff’s Prehearing Statement, except for Exhibit 1046, for which the Chair sustained KPK’s objection and excluded Exhibit 1046.  Staff Exhibits 1101, 1102, 1144, 1145, 1154, 1167, 1168, 1196, 1197, 1307, and 1308 were admitted for the limited purpose of demonstrating site descriptions or conditions.  Exhibits 1022, 1023, 1086, 1087, 1090-96, 1104, 1105, 1108, 1109, 1115-18, 1120, 1136, 1141, 1142, 1162, 1163, 1166, 1169-71, 1181, 1182, 1187, 1188, 1190, 1191, 1221, 1222, 1230-33, 1241, 1242, 1247, 1248, 1253-55, 1261, 1262, 1266, 1267, 1284-89, 1312-19, and 1324-26 were admitted over KPK’s objection. All other exhibits listed by Staff in its Prehearing Statement were admitted with either no objection, or withdrawn objections, from KPK.

 

55.            Rule 517 provides that the Colorado Rules of Evidence applicable before a trial court without a jury apply to Commission matters, though those rules may be relaxed to promote justice.  Rule 517.b.(2) also provides the Commission may accept evidence not admissible under the Rules of Evidence, “if the evidence possessed probative value commonly accepted by reasonable and prudent persons in the conduct of their affairs.” 

 

56.            The exhibits admitted by the Commission over KPK’s objection are relevant to show the condition of sites listed in the CPA prior to the CPA so that the Commission may better determine KPK’s progress in remediating conditions on those locations.  These exhibits therefore have probative value.  Further, the exhibits either appear in the Commission’s database, or are photographs that have sufficient detail to be commonly accepted by reasonable and prudent persons.  These exhibits meet the relaxed standard set by Rule 517 and were properly admitted.

 

57.            On February 1, 2023, the Commission deliberated, made findings of fact and conclusions of law, and orally issued its decision.  Findings of fact and conclusions of law made by the Commission in the course of the hearing are memorialized below.  After deliberation the Commission unanimously (5-0) approved the order memorialized below.

 

COMMISSION FINDINGS OF FACT AND CONCLUSIONS OF LAW

 

Standard of Review – and Intent and Purpose of the CPA

 

58.            Section IV.5.b. provides that if “KPK fails to substantially comply with the requirements of Section IV of the [CPA]” the Commission may “terminate the [CPA], impose any outstanding remaining portions of the Penalty Amount, suspend any or all of KPK’s Certificates of Clearance, or refuse to issue KPK new Oil and Gas Development plans.” 

 

59.            Under Section VII.5.b., the sole question for the Commission to determine at the January 25 hearing was whether KPK has substantially complied with Section IV of the CPA.

 

60.            Also under Section VII.5., it is KPK’s burden to show compliance with the CPA.

 

61.            “Substantial compliance” means compliance with the essential requirements and purpose of Section IV, including not only KPK’s timely submittal of forms and plans required by Section IV, but also successful implementation of those forms and plans. 

 

62.            The essential purpose of the entire CPA, including Section IV, is stated in Section III.6.: “The Commission concluded the actions and activities set forth below are necessary to achieve the closure of remediation projects at the NOAV sites where violations were found by the Commission and are reasonably necessary to promote KPK’s return to compliance with the Rules following the Commission’s finding that KPK committed a pattern of violations.”

 

63.            The Commission’s intent in approving the CPA, and providing KPK with the benefits of suspended penalties and an opportunity to address compliance issues without additional enforcement, was to address the systematic deficiencies in KPK’s practices and operations and pattern of violations that led to violations of rules and threatened public health, safety, and welfare, the environment, and wildlife resources, as determined by the Commission in 2021.

 

KPK’s Failure to Substantially Comply with the Essential Purpose of the CPA

 

64.            After concluding KPK violated COGCC Rules at seven different locations, assessing penalties totaling over $2 million, and determining KPK committed a pattern of violations, the Commission approved the CPA to provide KPK with a path to compliance.  KPK benefited substantially from the CPA through suspension of well over half of the total penalty, a five-year payment schedule for the unsuspended portions of the penalty, and the support and efforts of Staff to aid KPK in developing and implementing plans to come into compliance.  Through the CPA, the Commission provided KPK with the ability to continue operating in Colorado. 

 

65.            Since approval of the CPA, evidence submitted to the Commission demonstrated that KPK failed to comply with the essential purpose of the CPA.  Based on the plain language of the CPA, as well as testimony and written pleadings, the essential purpose of the CPA was for KPK to complete remediation at CPA Sites, come into compliance with COGCC Rules, and correct a culture of non-compliance that resulted in the Commission’s finding that KPK committed a pattern of violations. 

 

66.            The CPA was not intended to create a “check-the-box” process that would allow KPK to continue to operate simply timely submitting plans or forms.  KPK demonstrated that it submitted initial drafts of plans required by Section IV timely, but timely submittal at most demonstrates only partial technical compliance with Section IV.  Multiple rounds of review and comment, and in one case intervention by the Chair, was required before Staff approved plans submitted by KPK.  While some discussion between KPK and Staff was anticipated in the CPA, evidence submitted at the June 2022 and January 2023 hearings demonstrated that in many cases KPK took significant time responding to Staff’s comments on plans, objecting to Staff’s required changes, and failing to include Staff’s comments even after KPK and Staff agreed to changes to initial plans.  This demonstrated KPK’s failure to create a culture of compliance or agreement to work within the CPA and COGCC Rules.

 

67.            Further, and more importantly, KPK failed to implement the submitted plans or make meaningful progress on remediation.  To be substantially compliant with the essential elements and purposes of the requirements of Section IV and the CPA as a whole, KPK must demonstrate that it successfully implemented plans, and made significant progress on site remediation.  Timely submission of initial plans is not sufficient.  The evidence shows KPK did not meet this burden.  While KPK alleged that it has improved its processes and work to remediate CPA Sites since June 2022, improvement alone is also not sufficient to show substantial compliance.  KPK argued that it has abated threats to public health and the environment, but that statement can only apply to nine of more than fifty CPA Sites.  Many CPA Sites still require monitoring and investigation to confirm remediation. 

 

68.            Overall, the evidence at hearing demonstrated KPK did not make progress toward remediation at most CPA Sites, which is inexcusable.  Excavation remains open at many CPA Sites, and KPK has not even started excavation at many CPA.  Forms or other documents submitted by KPK to Staff, photographs, and inspections conducted by Staff show additional excavation is needed, contaminated soil and/or groundwater remains, and oil or gas is visible in non-excavated sites.  Many of the CPA Sites are near homes, schools, or other sensitive receptors.  Sites such as the Grant Tank Battery, the Nessu Consolidated, the Yoxall Farms, and the James S. Haley have been open for years even though the evidence shows remediation should have been achieved much sooner.  By leaving reclamation projects open for years, KPK has allowed wetlands to form in excavations, allowed significant weeds to grow on CPA Sites, allowed visible oil or gas to remain on surface water or soil for months.  For many CPA Sites, KPK has not submitted sufficient information even after Staff returned multiple forms to draft and offered to waive conditions of approval (“COAs”)[4].

 

69.            KPK failed to demonstrate true progress toward reclamation in part because, as evidence submitted by Staff shows, the extent of contamination and remediation required cannot be determined.  Evidence shows KPK has not completed investigation at many CPA Sites.

 

70.            COGCC Staff testified that the length of time required for remediation, or the amount of work left to perform, was still unknown due to the lack of work performed by KPK.  As KPK agreed in the CPA, KPK has the burden to prove substantial compliance.  The lack of knowledge about the true amount of work to be done at various CPA Sites prevented KPK from proving that it has made significant progress toward remediation.   

 

71.            While KPK submitted evidence that it had removed 46,000 tons of impacted soil, backfilled nearly 6,800 tons, and spent significant sums of money to perform remediation, that evidence shows that KPK merely did some work.  Moreover, the large disparity between the amount of soil removed and the amount of necessary backfilling only highlights that significant work remains - which leaves open excavation pits that pose a threat to public safety.  Additionally, at the Grant Tank Battery site, Staff testified KPK performed backfilling even though remediation was not complete.

 

72.            Evidence at hearing also demonstrated that KPK is incapable of protecting public safety or the environment while conducting remediation work, which shows KPK’s failure to change its culture of non-compliance.  KPK claimed in written pleadings and at hearing that it had improved site conditions by using best management practices and regular inspections to ensure adequate fencing and storage of impacted soils. The evidence presented during the hearing does not support this assertion. Although KPK testified that it had improved fencing and had crews that regularly inspect and repair sites, testimony and photographs show that these problems persist.  Staff testified that in visits to CPA sites mere days before the January 25 hearing began, Staff found that many CPA Sites still had inadequate fencing (e.g., sagging, not fully covering excavation, etc.), a condition Staff repeatedly noted in inspections or other communication with KPK.  Although KPK claimed that it, its affiliates, or Primary Contractor conducted daily inspections, testimony and evidence showed many issues were not resolved.  Additionally, KPK’s testimony that fencing merely keeps the honest honest is not acceptable, and demonstrates KPK does not take compliance seriously.  Best management practices (“BMPs”) exist for a reason, including public safety and protection of the environment.  The testimony of Staff and exhibits presented by Staff illustrated that BMPs (to the extent adopted by KPK) are not being properly implemented.

 

73.            Staff’s testimony regarding the current conditions at CPA Sites was particularly credible, not only because Staff described the pictures submitted by Staff and the work done on sites to date, but also because Staff conducted site visits to CPA Sites two days before the January 25 hearing which confirmed that descriptions provided by Staff in exhibits were accurate.  KPK’s rebuttal testimony disagreeing with Staff’s descriptions was not credible, in part because KPK did not provide documents or photos to contradict Staff testimony. 

 

74.            Evidence showed KPK is largely incapable of submitting complete or accurate forms, or complying with COAs and BMPs, which prevented Staff from accurately determining the status of site remediation and required Staff to repeatedly communicate with KPK to obtain additional required information or correct information.  Rather than make efforts to improve its process and resolve identified issues, KPK argued that its lack of progress was because of Staff delay in approving forms.  But testimony confirmed that the issues identified that led to forms being returned to draft were the result of a lack of required information or inaccurate information, not administrative issues with Staff review.

 

75.            KPK’s demonstrative presented during rebuttal highlights KPK’s problems with submitted forms. Specifically, even though other operators have had more incidents reported in the second half of 2022, more of KPK spills or releases remain open when compared to other operators, particularly after 90 days.  Staff testimony and KPK’s own presentation shows that other operators do not suffer from these issues to close spills and releases.  KPK’s response to recent spills show that KPK is not making progress with its overall culture of compliance.  Testimony does not indicate that Staff is to blame for KPK’s failure to timely comply. Instead, testimony and evidence show that Staff has been significantly more lenient with KPK than with other operators.

 

76.            Overall, the evidence presented by KPK and Staff at hearing demonstrates that rather than a culture of compliance, KPK has a historic, persistent, and consistent lack of compliance.  At most, KPK tried to comply just enough to keep the CPA in place, rather than actually progress locations toward remediation and comply with COGCC Rules.  KPK showed more interest in arguing with Staff about the legal requirements of the CPA, pushing back on Staff’s required COAs, and placing blame for its lack of progress on anyone but itself. 

 

77.            The Commission’s overarching statutory mandate is to protect public health, safety, and welfare, the environment, and wildlife resources from potential adverse impacts of oil and gas operations.  See C.R.S. § 34-60-106(2.5).  Rather than demonstrate substantial compliance with the CPA, the evidence demonstrates that KPK did not operate to meet this standard even under the significant benefits provided by the CPA and with the constant aid of Staff.  The CPA has not been effective as a result of KPK’s continuous refusal to take its obligations seriously.  The Commission cannot allow KPK to continue to operate under the CPA, and has no choice but to impose the most serious consequences on KPK.

 

KPK’s Failure to Substantially Comply with the Essential Requirements of Section IV

 

78.            The CPA requires that KPK prove it substantially complied with all requirements of Section IV.  Section VII.5.b.  Therefore, KPK’s failure to substantially comply with even one paragraph of Section IV would allow the Commission to impose the additional consequences listed in Section VII.5.  However, the Commission found that KPK failed to prove substantial compliance with multiple requirements within nine separate paragraphs of Section IV. 

 

Section IV.2. – Contractors Performing Work Under the Plan

 

79.         Section IV.2. provides: “All work set forth in [the CPA] will be performed under the direction and supervision of a qualified environmental/engineering firm (the “Primary Contractor”) acting in the capacity of a project manager with expertise in site investigation and remediation associated with oil and gas sites in Colorado.”

 

80.         Section IV.2.c. provides that in the first year of the CPA, “the Primary Contractor will oversee and perform all technical environmental site characterization and remediation work."  Section IV.2.g. provides that KPK “may subcontract or use KPK personnel to perform non-technical work such as excavation and transportation of E&P waste for appropriate disposal so long as such non-technical work is supervised by the Primary Contractor.” Section IV.2.h. provides, “[t]he unavailability of KPK personnel or equipment is not a valid justification to delay or postpone non-technical components of the work required.”

 

81.         KPK failed to prove that it substantially complied with Section IV.2.’s requirement that the Primary Contractor perform all technical work and supervise all non-technical work.  Testimony and exhibits submitted at the June 2022 hearing and the January 2023 hearing demonstrated that KPK was using an affiliate, Kauffman Well Service, Inc. (“KWS”) to perform all non-technical work, and that KWS was performing some technical work, such as making remedial excavation decisions, without supervision.  Testimony and exhibits submitted at the January 2023 hearing demonstrated these issues persisted after the June 2022 hearing.  KPK did not demonstrate that the Primary Contractor was performing all technical work or that KWS personnel had the technical training to correctly perform technical work.  The Primary Contractor also was not directly supervising non-technical work performed by KPK or its affiliates.  Instead, the Primary Contractor was only checking on or delineating non-technical work.  The non-technical work to be done at CPA locations required near-constant technical guidance to determine how far the excavation should be taken laterally or vertically, based on visual and olfactory observations and soil screening performed by qualified environmental personnel.  KPK’s insistence on using KWS exclusively to perform non-technical work caused delays or actual or threatened impacts to public health, safety, and welfare, the environment, and wildlife resources were caused by

 

82.         Section IV.2. provides: “KPK will submit its contract with the Primary Contractor, including the scope of work, to the Commission Chair within 30 days of the [date COGCC Staff approves of the Primary Contractor in writing].” On November 29, 2021, Staff approved MarCom LLC to serve as KPK’s Primary Contractor under the CPA.  While KPK provided the Chair with the scope of work materials on December 21, 2021, within 30 days after Staff approved MarCom as Primary Contractor, KPK failed to provide the Chair with its unredacted contract with MarCom until June 14, 2022, nearly six months late.  Ex. 1002.  KPK therefore failed to substantially comply with this CPA requirement.

 

Section IV, Para. 4 – UPRR 43 PAN AM G Consolidation #2 – Rem. #16131

 

83.         Section IV.4.a. requires KPK, by no later than 14 days following the Contractor Approval Date (November 29, 2021), submit a detailed, standalone implementation schedule to COGCC via a Supplemental Form 27, Site Investigation and Remediation Workplan.

 

84.         Section IV.4.a. also requires that the Supplemental Form 27 contain a description of how remedial excavation will be completed, site diagrams, soil boring logs and construction diagrams, KPK’s submittal of quarterly updates as required by Rule 913.e., and propose an “appropriate remediation plan to address any groundwater impacts based on the results of groundwater characterization.”

 

85.         Section IV.4.b. provides “COGCC Staff and the Commission Chair may approve or require appropriate revisions to the implementation schedule, in whole or in part.  If COGCC Staff and Commission Chair require revisions, KPK will submit a revised implementation schedule within 14 days after receipt of COGCC’s notification of the required revisions.  Upon approval of the implementation schedule, KPK will commence implementation of the tasks in accordance with the schedule included therein.”

 

86.         KPK failed to prove that it substantially complied with Sections IV.4.a. and b.

 

87.         First, KPK failed to submit the detailed, standalone implementation schedule required by Section IV.4.a.  KPK submitted a Supplemental Form 27 to Staff on December 13, 2021, but that submittal did not contain a detailed, standalone implementation schedule.  The December 31, 2021 submittal did not contain, for example, planned dates and durations of activities proposed on site. 

 

88.         On January 19, 2022, COGCC Staff notified KPK of the deficiencies in the December 13 submittal.  Staff explained to KPK that the December 13 submittal did not meet Rules 901.a., 915.e.(2), and Table 915-1, did not address COGCC Staff’s previous requirements for the UPRR site, and did not contain a detailed, standalone implementation schedule.  

 

89.         On February 21, 2022, outside the 14-day response required by the CPA, KPK resubmitted a Supplemental Form 27 to Staff. On March 3, 2022, Staff applied additional requirements (COAs) to KPK’s February 21 Supplemental Form 27 submittal.  Staff notified KPK through these COAs that the February 21 submittal did not contain a detailed, standalone implementation schedule, including planned dates and durations of activities proposed on site.

 

90.         On May 12, 2022, KPK submitted a Supplemental Form 27 and attached updated analytical results.  On May 13, 2022, COGCC Staff informed KPK that the May 12 submittal did not contain a detailed, standalone implementation schedule, including planned dates and durations of activities proposed on site.  The analytical data KPK submitted on May 12 also showed that soils on location contained contaminates in excess of the allowable limits listed in Table 915-1.

 

91.         As of the June 2022 hearing, KPK had not submitted a Supplemental Form 27 for this remediation project that contained a detailed, standalone implementation schedule, including planned dates and durations of activities proposed on site.

 

92.         As of the January 2023 hearing, KPK still had not submitted a Supplemental Form 27 for this remediation project that contained a detailed, standalone implementation schedule, including an appropriate remediation plan to address groundwater impacts, updated planned dates and durations of activities proposed on site, complete site diagrams.  Since the June 2022 hearing, KPK submitted two Supplemental Form 27s for the UPRR remediation.  COGCC Staff rejected one of those submittals for reasons including, but not limited to missing analytical data, maps, and waste manifests; duplicative attachments; and conflicting data and information. 

 

93.         As it did before the June 2022 hearing, KPK submitted forms and information shortly before the January 2023 hearing.  Last-minute submittals before hearing are not sufficient to demonstrate compliance because such submittals do not allow for complete review by Staff and do not contribute to actual progress toward compliance. 

 

94.         Further, evidence submitted by Staff, and confirmed by KPK testimony demonstrated that KPK submitted missing, duplicative, or incomplete waste management information. 

 

95.         Second, KPK has failed to demonstrate any significant progress toward remediation of the UPRR location, therefore failing to substantially comply with Section IV.4.b.’s requirement to implement tasks in accordance with COGCC Rules and the CPA. 

 

96.         KPK’s failure to properly remediate the UPRR site presents threatened or actual impacts to public health, safety, and welfare, the environment, and wildlife resources.  The excavation on location is immediately adjacent to a county road and is approximately 200 feet from a private residence.  The location is also within Aquatic Native Species Conservation High Priority Habitat.  Conditions on the location have remained uncorrected for 858 days - since discovery on September 19, 2020.  Impacts to soil remain and KPK has not determined the extent of the impacts.  KPK has not defined the impacts to groundwater.  Between June 2022 and January 2023, the excavation at the UPRR site has remained open.

 

97.         Finally, KPK missed deadlines to remediate the UPRR site.  Section IV.8. requires that KPK submit a Global Remediation Implementation Plan (“GRIP”).  The GRIP, which is discussed in more detail below, requires that KPK plan to remediate all CPA Sites, including the UPRR.  KPK missed anticipated completion dates KPK proposed in the GRIP for the UPRR site, including to complete reclamation by August 31, 2022. 

 

98.         Testimony at the June 2022 and January 2023 hearings, and stipulated facts submitted by the Parties support the Commission’s findings and conclusions contained herein.  Additionally, documents submitted by Staff, including but not limited to Exhibits 101-116, 509, 1009, and 1010-21 support the Commission’s findings and conclusions.  The Commission notes that it would have reached the same findings and conclusions even if it had not considered the exhibits to which KPK objected. 

 

Section IV, Para. 5 – Soil Spreadfield – Rem. #15951

 

99.         Section IV.5.a. requires KPK submit for the Soil Spreadfield site, by no later than January 8, 2022, a Supplemental Form 27.  That Supplemental Form 27 must have included additional background determination information for soil contaminants of concern, along with an additional remediation plan and implementation schedule, subject to Staff approval, or a detailed reclamation plan with a basis to leave elevated levels of inorganic constituents in place.  Finally, “KPK will implement such plan in accordance with the implementation schedule approved by COGCC Staff.”

 

100.      Section IV.5.b. requires that KPK, as part of the January 8, 2022 submission, “provide all requested information due in the next Supplemental Form 27 quarterly update, including an implementation schedule to complete any outstanding work identified within the quarterly update.”

 

101.      KPK failed to prove that it substantially complied with Section IV.5., because evidence at hearing demonstrated that KPK failed to submit complete background information for identified soil contaminates and failed to meet its own deadlines for completing reclamation work.  Further, KPK’s allegation that it was at an impasse with Staff regarding Staff’s responses to KPK’s submittals is inappropriate and moot.  KPK is required to comply with Staff’s COAs or requests for information required by the CPA, not argue with Staff.  KPK’s failure to meet Staff’s requirements further demonstrates KPK’s failure to improve its culture of non-compliance.

 

102.      On January 7, 2022, Staff received a Supplemental Form 27 from KPK. The submittal included a request for No Further Action.  A No Further Action determination by Staff means Staff concluded that an operator has completed remediation.

 

103.      On January 24, 2022, Staff applied COAs to KPK’s January 7 Supplemental Form 27 submittal.  The COAs noted that Staff could not approve the request for No Further Action due to several deficiencies.  KPK did not submit sufficient background sampling and analysis data to demonstrate that certain soil contaminants were consistent with naturally occurring background concentrations.  KPK also did not provide the required remediation plan and implementation schedule to address elevated soil contaminant levels at the location, and did not provide an alternative reclamation plan pursuant to Rule 915.b with a proposal to leave such contaminants in place.  Staff also noted that KPK did not provide all information requested by prior COAs, did not demonstrate that site soils comply with Table 915-1 standards, and instead requested closure of the project without providing the appropriate documentation or justification, as required by the Rules.

 

104.      On February 17, 2022, Staff met with KPK and the Primary Contractor to discuss Staff’s denial of KPK’s No Further Action request and next steps.

 

105.      As of the June 2022 hearing, KPK had not submitted any additional Supplemental Form 27s for the Soil Spreadfield.

 

106.      Since June 27, 2022, KPK submitted one Supplemental Form 27 (Doc. No. 403204944), which Staff rejected for reasons including failure to comply with COAs referenced in the CPA and missing background sampling data.

 

107.      As of the January 2023 hearing, KPK still had not submitted a detailed statistical analysis of contaminants of concern. In addition, background analysis provided by KPK were missing two original background samples.  The remediation remains open, as it has for 898 days since the date of discovery on August 10, 2020.  The extent of soil impacts remains undefined.  KPK missed anticipated completion dates KPK proposed in the GRIP, including to complete remediation by April 30, 2022.

 

108.      Testimony at the June 2022 and January 2023 hearings, and stipulated facts submitted by the Parties support the Commission’s findings and conclusions contained herein.  Additionally, documents submitted by Staff, including but not limited to Exhibits 201-207, 502, 1009, and 1022-27 support the Commission’s findings and conclusions.  The Commission notes that it would have reached the same findings and conclusions even if it had not considered the exhibits to which KPK objected.   

 

Section IV, Para. 6 – Nessu Consolidated – Rem. #15797

 

109.      Section IV.6. requires KPK, by no later than January 26, 2022, comply with all previously applied COAs for Supplemental Forms 27 for the Nessu Consolidated site. The previously applied COAs required KPK to analyze collected soil samples in accordance with the 900 Series Rules, including all contaminants of concern listed for soils in Table 915-1, conduct proposed sampling and analysis of soils in the excavation and related background soil sampling and analysis and report results to COGCC by January 26, 2022.  If further excavation of soils was necessary, excavation was required by February 26, 2022 with any follow-up sampling results reported by March 26, 2022.

 

110.      Section IV.6.b. required KPK provide all requested information due in the next Supplemental Form 27 quarterly update by January 26, 2022.

 

111.      Section IV.6.c. required that KPK, no later than 90 days following the effective date of the CPA, submit necessary forms and obtain Staff approval to complete remediation.

 

112.      Section IV.6.d. required that once remediation has been completed and KPK has received a no further action determination, KPK was to begin interim reclamation within 90 days.

 

113.      KPK failed to prove that it substantially complied with Section IV.6.  Evidence at hearing demonstrates KPK has yet to comply with COAs enumerated in Section IV.6.a.  KPK did not provide all excavation soil and background soil sampling and analysis to COGCC by January 26, 2022; did not perform all excavation activities by February 26, 2022; and did not conduct and report follow-up sampling and analysis by March 26, 2022.

 

114.      As of the January 2023 hearing, the excavation at the Nessu Consolidated site remains open, soil impacts remain and are undefined, and groundwater impacts are unknown.  In addition, there was no indication that KPK had performed any additional work at the Nessu Consolidated site since the June 2022 hearing.  Rather than focus its efforts on compliance, KPK created an adversarial environment by arguing with Staff regarding requirements and submittals.  KPK’s actions once again demonstrate its failure to change the culture of non-compliance at KPK.

 

115.      When compared to other sites included in the CPA, the remediation project at the Nessu Consolidated site should have been easy to reach No Further Action status.  Instead, the remediation project has remained open for 949 days - since the June 20, 2020 date of discovery.  In addition, KPK missed anticipated completion dates KPK proposed in the GRIP, including completing reclamation by May 31, 2022. 

 

116.      Testimony at the June 2022 and January 2023 hearings, and stipulated facts submitted by the Parties support the Commission’s findings and conclusions contained herein.  Additionally, documents submitted by Staff, including but not limited to Exhibits 301-323, 502, 1009, and 1028-43 support the Commission’s findings and conclusions.  The Commission notes that it would have reached the same findings and conclusions even if it had not considered the exhibits to which KPK objected.   

 

Section IV, Para. 7 – Grant Tank Battery – Rem. #12198

 

117.      Section IV.7. requires KPK comply with a project specific implementation schedule.

 

118.      Section IV.7.a. requires KPK submit to Staff a scale site map showing all previously installed soil borings; all monitoring wells including elevations of measuring points used when gauging depth to groundwater; locations, including depth, of soil samples collected; surveyed boundaries of current excavation limits; and GPS data to verify compliance with Rule 216.

 

119.      Section IV.7.b. requires KPK submit, via a Supplemental Form 27, detailed implementation and reporting schedules per Rule 913.d and 913.e., and abide by those schedules.  As part of these implementation and reporting schedules, KPK must determine the horizontal and vertical extent of contamination in excess of cleanup concentrations provided by the Rules.

 

120.      Section IV.7.c. requires that KPK receive approval of its project-specific implementation schedule and workplan for Grant Tank Battery.  If Staff required revisions, KPK would submit a revised plan and implementation schedule within 14 days after receipt of Staff’s notice of required revisions. Upon Staff approval of the workplan and implementation schedule, KPK would commence implementation of the approved plan with the schedule included therein.

 

121.      Section IV.7.d. requires that if, in the course of determining the horizontal and vertical extent of contamination, KPK obtained forensic analysis of the historic contamination at Grant Tank Battery, KPK would present such analysis to Staff for review and apply for a Rule 526 responsible party hearing within 30 days of receipt of the analysis.

 

122.      Section IV.7.e. requires KPK, upon complete delineation of groundwater impacts, to submit to Staff for approval a detailed plan to remediate groundwater impacts of historic contamination.

 

123.      Section IV.7.f. requires KPK to submit Staff Field Analysis information as required by Rule 915.e.(1).A, in accordance with the approved implementation and reporting schedules.  Field Analysis means field measurements and field tests, including items like field notes, screening logs, boring logs, monitoring well construction logs, pump tests, photographs, and soil vapor screening results.

 

124.      Section IV.7.g. requires KPK implement quarterly monitoring of groundwater and surface water quality. This requirement was included due to the location of an unnamed tributary to the St. Vrain River, approximately 150 feet from the excavation.

 

125.      Section IV.7.h. requires KPK comply with COAs applied to Supplemental Form 27, Doc. No. 402763207.

 

126.      KPK failed to prove it substantially complied with Section IV.7. Testimony and exhibits submitted at the June 2022 and January 2023 hearings demonstrate the following.

 

127.      At the June 2022 hearing, KPK failed to demonstrate that it had submitted Supplemental Form 27s or information showing it completed all previously applied COAs.  As of June 3, 2022, the vertical and lateral extent of impacts to soil threatening nearby sensitive receptors remained unknown.  As of June 3, 2022, the project and excavation remained open with virtually no onsite work to investigate, delineate, or remediate remaining impacts to soil and groundwater conducted by KPK since 2021.

 

128.      Since the June 2022 hearing, KPK submitted two Supplemental Forms 27 for this project. Staff applied 16 COAs to Doc. No. 403126424 (the first Form 27) and returned Doc. No. 403254814 (the second Form 27) to draft for reasons including, but not limited to, a missing standalone detailed implementation schedule, a missing detailed site reclamation plan, missing groundwater data, and missing information regarding points of compliance for soil and groundwater.

 

129.      As of the January 2023 hearing, KPK had not complied with all previously applied COAs for this remediation project, including the COAs required by Section IV.7.

 

130.      On November 21, 2022, KPK began backfilling without providing the required notification to COGCC Staff and with no detailed, standalone implementation schedule in place or established points of compliance for soil and groundwater.

 

131.      The contamination at the Grant Tank Battery site presents threatened or actual impacts to public health, safety, and welfare, the environment, and wildlife resources.  Soil impacts and groundwater impacts remain in place, and the extent of those impacts remains undefined.  KPK failed to comply with stormwater and waste management BMPs as well.  The Grant Tank Battery site is also one of the CPA Sites where evidence demonstrates that the Primary Contractor did not supervise non-technical work.

 

132.      The GRIP indicates that, at this location, “[KPK] is awaiting resolution of historical contamination.”  However, Section IV.8.f.ii. provides: "[d]iscovery of historic contamination and/or historic oil and gas equipment at remediation project locations will not be grounds to discontinue remediation activities."  KPK may not rely on its allegation that prior operators caused history contamination to avoid achieving progress at the Grant Tank Battery.

 

133.      Testimony at the June 2022 and January 2023 hearings, and stipulated facts submitted by the Parties support the Commission’s findings and conclusions contained herein.  Additionally, documents submitted by Staff, including but not limited to Exhibits 401-18, 502, 1009, 1044-45, and 1047-1082B support the Commission’s findings and conclusions.  The Commission notes that it would have reached the same findings and conclusions even if it had not considered the exhibits to which KPK objected.   

 

Section IV, Para. 8 – Global Remediation Implementation Plan for Ongoing and Unresolved Projects

 

134.      Section IV.8. requires KPK generate and submit a GRIP in an effort to focus its resources on improving compliance, and completing corrective actions and remediation work at ongoing and unresolved projects as of the Effective Date of the CPA. The purpose of the GRIP was to provide a roadmap for KPK to timely perform site characterization and remediation work at open spill/release and remediation project sites, and put itself back on the road to compliance with the COGCC Rules.

 

135.      Section IV.8. contains certain requirements that must be included in the GRIP, including prioritization of work on Attachment A projects, detail on planned staffing and resources necessary to implement the GRIP, detailed project implementation schedules for each project to finish additional site characterization and remediation, and requirements for appropriate recordkeeping and reporting.

 

136.      Section IV.8.c. contains the timeline for review and approval of the GRIP.  By no later than December 31, 2021, KPK was required to submit a draft GRIP to Staff for review and comment. By no later than January 14, 2022, Staff was required to return comments on the GRIP to KPK.  By no later than January 31, 2022, KPK was required to submit a final GRIP, incorporating all comments from Staff.  Beginning February 1, 2022, KPK was required to begin implementing the GRIP at each project identified in Attachment A to the CPA.

 

137.      Pursuant to Section IV.8.f and as part of the GRIP, KPK was required to submit all available due diligence for sites associated with each Attachment A project. Also, for locations where KPK had a reasonable belief that historic contamination existed, KPK was required to request a Responsible Party determination pursuant to Rule 526 within 100 days of the Effective Date.  Last, Section IV.8.f states that “[d]iscovery of historic contamination and/or historic oil and gas equipment at remediation project locations will not be grounds to discontinue remediation activities.”

 

138.      On December 31, 2021, KPK provided Staff with a draft GRIP for review and comment.  On January 12, 2022, Staff provided KPK and its Primary Contractor with comprehensive comments on the draft GRIP.  In addition to the specific comments provided in the draft GRIP, Staff also provided guidance to help KPK and its Primary Contractor finalize the GRIP.

 

139.      On January 31, 2022, KPK and the Primary Contractor provided Staff with a final GRIP.  On the same day, KPK provided Staff with all available due diligence for sites associated with Attachment A projects.

 

140.      The GRIP became effective on February 1, 2022. On the same date, KPK began implementing the GRIP at Attachment A projects.

 

141.      However, shortly following KPK’s submission of the revised GRIP, Staff determined that KPK did not incorporate all of Staff’s comments into the final GRIP, as required by Section IV.8.c.

 

142.      On February 8, 2022, Staff provided KPK with a two-page letter acknowledging receipt of the final GRIP and providing conditional approval. In its letter to KPK, Staff applied nine COAs to the GRIP to ensure Staff’s comments were incorporated and to clarify KPK’s existing obligations under COGCC Rules.

 

143.      Beginning February 8, 2022, the Parties engaged in a months-long dispute over whether Staff had properly applied COAs to the final GRIP.  On April 26, 2022, following the dispute being resolved by the Chair on April 6, 2022, KPK filed its final GRIP incorporating Staff’s COAs.

 

144.      The GRIP contains guidelines, established from the Rules and COGCC Guidance, that KPK must comply with as it worked to achieve environmental site characterization and remedial work milestones at each of the 74 projects listed on Attachment A (the “GRIP Sites”).  Importantly, the GRIP also includes a prioritized site list, site status summaries, project-specific schedules, soil and groundwater sampling guides, inspection forms for certain BMPs, and summaries of open spill/release projects on Attachment A.

 

145.      Section 3.5 of the GRIP states that “Best Management Practices (BMPs) will be implemented to prevent unauthorized persons access to site locations undergoing investigation and remedial activities; to minimize erosion, transport of sediment offsite, and degradation of stockpiled contaminated soils. In accordance with COGCC Rule 913.b.(5).B.i, operators will install fencing around open excavations to prevent unauthorized access when sites are unattended.”

 

146.      Section 3.5.1 of the GRIP provides that “[i]mpacted soils will be staged onsite within an area protected with a plastic liner and stormwater controls, or immediately disposed of at an appropriate disposal facility under proper waste manifest documentation.

 

147.      Section 3.7 of the GRIP discusses reclamation activities. Importantly, the GRIP provides that “[r]eclamation of sites will be performed following COGCC 1000 Series Reclamation Regulations to include: [m]inimizing land disturbance.” Reclamation begins in the remediation phase.

 

148.      Section 3.8 of the GRIP provides that “[i]nspections will be conducted by a qualified inspector with MarCom to ensure all site BMPs are in good working condition and require no maintenance, litter is removed, and weeds are controlled. Additionally, inspections will be conducted following high wind or heavy rain events.”

 

149.      Section 3.8 of the GRIP provides that “[t]opsoil will be protected by segregating and storing non-impacted topsoil in a protective manner, segregating impacted and non-impacted materials, not stockpiling impacted soil directly on top of existing vegetation unless it is an emergency situation and following BMPs to prevent erosion.”

 

150.      Evidence at hearing demonstrated KPK is not in substantial compliance with multiple Sections of the GRIP.

 

151.      Evidence at hearing demonstrated that if KPK or its Primary Contractor are conducting inspections, those inspections are either not identifying appropriate corrective measures, or KPK is not responding to perform the necessary corrective measures.

 

152.      Observed BMPs were not in good working condition, which resulted in collateral impacts due to sediment migration and potential impacts to stormwater at multiple GRIP Sites.

 

153.      Between the June 2022 and January 2023 hearings, KPK continued to improperly install and maintain fencing, and employ fencing not adequate for site conditions, at multiple GRIP Sites with open excavations.

 

154.      Between the June 2022 and January 2023 hearings, KPK continued to mismanage waste by stockpiling oily soil onsite with inadequate and unmaintained BMPs at multiple GRIP Sites.

 

155.      Between the June 2022 and January 2023 hearings, KPK consistently failed to minimize land disturbance at multiple GRIP locations, by, for example, driving across fields ready for cultivation and driving around vehicle tracking pads creating a larger land disturbance and causing sediment transportation.

 

156.      Between the June 2022 and January 2023 hearings, KPK consistently failed to maintain stormwater BMPs.   KPK did not prove that it or its Primary Contractor was conducting the inspections required by GRIP Section 3.8 and Rule 1002.f.(2).D., because if these inspections are being conducted, KPK is either not identifying or not performing necessary corrective measures, resulting in ongoing potential impacts off site and to surface water from sediment migration.

 

157.      Between the June 2022 and January 2023 hearings, KPK consistently failed to protect topsoil as provided for in the GRIP.

 

158.      KPK failed to show substantial compliance with the GRIP because evidence at hearing shows a significant lack of progress at GRIP sites.  This lack of progress demonstrated that KPK has no sense of urgency to remediate conditions that threaten or actually cause adverse impacts to public health, safety, and welfare, the environment, and wildlife resources.  Instead, KPK demonstrated a desire to time reclamation activities that would take advantage of the five-year duration of the CPA, rather than remediate GRIP Sites as quickly as possible. 

 

159.      At the June 2022 hearing, testimony and exhibits demonstrated that KPK was past due for quarterly reports on 29 GRIP Sites, required to be submitted via a Supplemental Form 27. At the January 2023 hearing, testimony and exhibits demonstrated KPK was past due on for quarterly reports on 23 GRIP Sites required to be submitted via a Supplemental Form 27.

 

160.      At the June 2022 hearing, testimony and exhibits demonstrated that KPK  missed its own deadlines for implementing site characterization and remediation work at 17 of the 18 projects listed on Attachment 3 to the GRIP. In total, KPK missed 70 project milestones while completing only 12 project milestone dates on schedule, with one (1) grant of extension. At the January 2023 hearing, testimony and exhibits demonstrated that KPK missed its own deadlines for implementing site characterization and remediation work at all of the 18 projects listed on Attachment 3 to the GRIP. In total, KPK missed 68 project milestones, while meeting only 13 project milestone dates (with one extension requested and granted).

 

161.      At the June 2022 hearing, testimony and exhibits demonstrated KPK achieved closure on only eight of the 16 spill/release projects on Attachment A.  Closure does not mean KPK remediated the impacts of the spills or releases, it only means that Staff administratively closed the spills or releases by converting the sites into remediation projects.  In other words, KPK was not cleaning up the sites where spills or releases occurred, the sites were only moving into a new phase of remediation.  At the January 2023 hearing, testimony and exhibits demonstrated Staff had converted 15 of the 16 spill/release projects on Attachment A into remediation projects.  None of the resultant remediation projects have achieved closure.

 

162.              Overall, KPK has made little overall progress at the projects listed on Attachment A.  KPK has achieved closure on only two of the 58 remediation projects on Attachment A.  Closure means sampling shows soils have low enough levels of contamination to meet the standards set in Table 915-1, and KPK completed excavation backfill and site restoration in preparation for reclamation.  As of the date of the January hearings, this number remains the same as at the June 2022 hearing.

 

163.              In direct conflict with the provisions of Sect. IV.8.f., KPK made minimal progress at the projects for which it has filed Responsible Party hearing applications. Of the five applications, each associated remediation remains open and evidence demonstrates that KPK has not made any minimal measurable onsite progress to achieve a No Further Action determination.

 

164.              Following the June 2022 hearing, KPK was to work with Staff to prioritize work at projects listed on Attachment A in a manner consistent with reducing the significant adverse impacts to public health, safety, and welfare, the environment, and wildlife resources.  KPK did not even attempt to meet this requirement until shortly before the January 2023 hearing, and even then, only upon prompting from Staff. 

 

165.      Testimony at the June 2022 and January 2023 hearings, and stipulated facts submitted by the Parties support the Commission’s findings and conclusions contained herein.  Additionally, documents submitted by Staff, including but not limited to Exhibits 501-99, and 1083-1331A support the Commission’s findings and conclusions.  The Commission notes that it would have reached the same findings and conclusions even if it had not considered the exhibits to which KPK objected.   

 

Section IV, Para. 9 – Flowline System Integrity Evaluation and Plan

 

166.              Section IV.9. sets forth the requirements for a detailed Flowline System Integrity Evaluation and Plan for KPK’s Spindle Field flowline system.

 

167.              Pursuant to Section IV.9.a., KPK was required to utilize a qualified third-party engineering firm to generate the results of a systematic evaluation of KPK’s entire Spindle Field flowline system (“Integrity Evaluation”) and submit them to Staff by April 1, 2022.  If Staff did not initially approve the Integrity Evaluation, KPK had 60 days to address comments from Staff and resubmit an amended Integrity Evaluation. The Integrity Evaluation was required to take into account the factors listed in Section IV.9.a.-e.

 

168.              Pursuant to Section IV.9.b., in addition to evaluating flowlines from wellheads to production equipment and consolidation flowlines, the Integrity Evaluation must also include an evaluation of all flowline segments including but not limited to dump lines and process piping at all production facilities that are defined as flowlines by the Rules, including wellhead lines, production piping (production lines, dump lines, manifold piping, and process piping), off-location flowlines, peripheral piping, and produced water flowlines.

 

169.              Pursuant to Section IV.9.d., the Integrity Evaluation forms the basis for the Flowline System Integrity Plan (“Integrity Plan”), due to Staff no later than July 1, 2022. The Integrity Plan must include a monitoring, maintenance, and repair program for the flowline system; assessment and recommendations for replacement of flowlines; a schedule for recommended updates, monitoring, or replacement of segments; a map identifying specific locations of flowlines that are not currently mapped accurately; an active flowline monitoring plan; a plan concerning collision avoidance and line crossings; identification of facts and circumstances more likely to contribute to potential failures, spills, releases, or a loss of integrity; and a plan addressing appropriate recordkeeping in accordance with Rule 1102.m.

 

170.              On April 1, 2022, KPK submitted its Integrity Evaluation to Staff.

 

171.              On May 31, 2022, KPK emailed the Commission Chair to request an extension to submit its Integrity Plan, due to extenuating circumstances including that Staff had not yet returned comments on the Integrity Plan.

 

172.              On June 2, 2022, Staff responded to KPK’s request for extension and indicated it did not oppose such request.  On the same day, Staff returned extensive comments to KPK on the Integrity Evaluation.  Staff’s comments noted that several of the elements required by Sections IV.9.a. and b. were not included in the Integrity Evaluation.

 

173.              On August 1, 2022, KPK submitted its amended Flowline System Integrity Evaluation and a response to Staff’s comments.

 

174.              On September 1, 2022, Staff returned comments to KPK on the amended Integrity Evaluation. Staff did not approve the amended Integrity Evaluation.

 

175.              On September 16 and 30, and October 6, 2022, Staff, KPK, and Campos EPC met to discuss the comments Staff applied to the amended Integrity Evaluation and the pending Integrity Plan. Staff conditionally approved the amended Flowline System Integrity Evaluation, subject to KPK and Campos incorporating certain modifications as discussed in previous meetings.

 

176.              On November 7, 2022, KPK submitted to Staff an Integrity Plan, pursuant to Section IV.9.d.

 

177.              On November 14, 2022, Staff provided KPK with comments to the Integrity Plan. Staff did not approve the Integrity Plan as submitted, giving KPK 60 days to submit an amended Plan. Staff’s comments included an assessment that the Plan as presented was incomplete, as it did not explain risk assessment, schedule for recommended upgrades, and potential adjusted frequencies for specific flowline segments, for example.

 

178.              On November 18 and December 7, 2022, Staff, KPK, and Campos EPC met to discuss the comments Staff applied to the Integrity Plan.

 

179.              KPK submitted an amended Integrity Plan to Staff on January 11, 2023.

 

180.              KPK failed to prove it substantially complied with Section IV.9.  While KPK submitted the Integrity Evaluation timely on April 1, 2022, that submittal lacked significant components required by Section IV.9. The entire purpose of the Integrity Evaluation was to form the basis of the Integrity Plan, which would help ensure KPK operated and monitored flowlines to protect public health and the environment – the essential requirement and purpose of the Section IV.9.   Further, KPK did not demonstrate at hearing that it was implementing or following the Integrity Plan it submitted to Staff.

 

181.      Testimony at the June 2022 and January 2023 hearings, and stipulated facts submitted by the Parties support the Commission’s findings and conclusions contained herein.  Additionally, documents submitted by Staff, including but not limited to Exhibits 123-30, and 1332-1335 support the Commission’s findings and conclusions.  The Commission notes that it would have reached the same findings and conclusions even if it had not considered the exhibits to which KPK objected.    

 

Section IV, Para. 10 – Comprehensive Waste Management Plan

 

182.              Section IV.10. sets forth the requirements for a detailed Comprehensive Waste Management Plan (“Waste Management Plan”). KPK was required to submit a Waste Management Plan by December 31, 2021 detailing how KPK would treat, characterize, manage, store, dispose, and transport all types of waste generated from its operations. The Waste Management Plan was required to address required record keeping in accordance with Rule 905.b, and employee training.

 

183.              Pursuant to Section IV.10.b., if the Waste Management Plan was not approved, KPK had 30 days to address comments from Staff and resubmit an amended Waste Management Plan.

 

184.              Pursuant to Section IV.10.b, the Waste Management Plan would not be deemed complete until approved by Staff and the Commission Chair.

 

185.              On December 29, 2021, KPK submitted a draft Waste Management Plan to Staff. In the accompanying cover letter, KPK explained that it had already begun training KPK employees on its draft Waste Management Plan, “[i]n order to satisfy the requirements” of the CPA.

 

186.              Following KPK’s submission of the draft Waste Management Plan, Staff communicated with the Primary Contractor and KPK to coordinate the timing for providing comments. Staff indicated it would hold comments on the Waste Management Plan so that KPK and the Primary Contractor could focus on addressing and incorporating comments to the draft GRIP into the final GRIP.

 

187.              On March 3, 2022, Staff returned extensive comments to KPK and the Primary Contractor on the Waste Management Plan.  Staff stated that it did not approve the Waste Management Plan because the Plan did not meet the requirements of the CPA, as it did not provide a comprehensive plan detailing how KPK will treat, characterize, manage, store, dispose, and transport all types of waste generated from its operations. Staff also determined that KPK’s Waste Management Plan also did not follow COGCC Guidance regarding organization and content.

 

188.              On April 1, 2022, KPK requested an extension to April 11, 2022 to submit its amended Waste Management Plan due to extenuating circumstances. Staff consented to KPK’s request, and the Chair approved the request.

 

189.              On April 11, 2022, KPK submitted an amended Waste Management Plan to Staff.

 

190.              On June 2, 2022, Staff emailed KPK and the Primary Contractor to acknowledge acceptance of the amended Waste Management Plan.  Staff did not approve KPK’s amended Waste Management Plan. Instead, Staff indicated it was accepting the amended Waste Management Plan and provided extensive comments. Staff did not request further revision.

 

191.              Staff deemed the amended Waste Management Plan inadequate for reasons including, but not limited to:

 

a.    Comments and requests Staff made regarding the draft Waste Management Plan were not addressed;

 

b.    Several inaccuracies (e.g., used oil and impacted stormwater must be profiled before being categorized as non-hazardous waste);

 

c.     The Universal Waste section did not address accumulation;

 

d.    The Waste Streams section listed a third profile for produced water/other fluids removed through hydrovac operations only, and dewatering via pump to frac tank or other containers was not addressed; and

 

e.    Several comments and requests that Staff applied to the draft Waste Management Plan were not included.

 

192.              Since the June 2022 Compliance Hearing, KPK revised its amended Waste Management Plan three times to properly incorporate Staff comments and achieve approval.

 

193.              Staff approved KPK’s amended Waste Management Plan, with comments, on December 13, 2022. During the preceding six months, Staff applied numerous comments to KPK’s various drafts, including requests for more specification on: individual wastes and waste streams, hazardous waste determination and waste profiling, record keeping (including proper waste manifest procedures), and the storage, treatment, handling, and disposal of waste based on waste type.

 

194.              KPK failed to prove that it substantially complied with Section IV.10.  The essential purpose of the Waste Management Plan was to ensure that KPK stored and treated waste in accordance with COGCC Rules a manner that protects public health, safety, and welfare, the environment, and wildlife resources.  Evidence at hearing demonstrated that KPK continued to manage waste in a manner inconsistent with the GRIP, the Rules, and KPK’s own Waste Management Plan by stockpiling oily soil onsite with inadequate and unmaintained BMPs.  

 

195.              Further, evidence demonstrated that KPK’s waste manifests remain missing or incomplete for multiple locations.  Without this information, KPK cannot demonstrate that it was complying with the Waste Management Plan.

 

196.       Testimony at the June 2022 and January 2023 hearings, and stipulated facts submitted by the Parties support the Commission’s findings and conclusions contained herein.  Additionally, documents submitted by Staff, including but not limited to Exhibits 501, 609, 1019, 1113, 1168, 1237, 1271, 1308, and 1356 support the Commission’s findings and conclusions.  The Commission notes that it would have reached the same findings and conclusions even if it had not considered the exhibits to which KPK objected.    

 

Section IV, Para. 11 – Spill/Release Reporting and Training Plan

 

197.              Section IV.11. sets forth the requirements for a detailed Spill/Release Reporting and Training Plan (“Spill Reporting Plan”) for all KPK field employees, and for office employees with COGCC and environmental health and safety reporting responsibilities. The Spill Reporting Plan was required to include documented training on all required reporting to COGCC, including notifications to surface owners, Local Government Designees, and reporting to other state and federal agencies that have reporting requirements applicable to KPK oil and gas operations. KPK was required to submit a Spill Reporting Plan by December 31, 2021.

 

198.              Pursuant to Section IV.11.b., if the Spill Reporting Plan was not approved, KPK had 30 days to address comments from Staff and resubmit an amended Spill Reporting Plan.

 

199.              Pursuant to Section IV. 11.b, the Spill Reporting Plan would not be deemed complete until approved by Staff and the Chair.

 

200.              On December 23, 2021, KPK and MarCom submitted a draft Spill Reporting Plan. In the accompanying cover letter, KPK explained that it had already begun training KPK employees on its draft Spill Reporting Plan, “[i]n order to satisfy the requirements” of the CPA.

 

201.              Following KPK’s submission of the draft Spill Reporting Plan, Staff communicated with the Primary Contractor and KPK to coordinate the timing for providing comments.  Staff indicated it would hold comments on the Spill Reporting Plan so that KPK and the Primary Contractor could focus on addressing and incorporating comments to the draft GRIP into the final GRIP.

 

202.              On March 3, 2022, Staff returned extensive comments to KPK and the Primary Contractor on the Spill Reporting Plan.  Staff stated that the Spill Reporting Plan was not approved because of substantial deficiencies.

 

203.              Since the Effective Date of the CPA and concurrent with providing extensive feedback on KPK’s Spill Reporting Plan, Staff has gone to great lengths to try to assist KPK with improving its spill reporting.

 

204.              On April 1, 2022, KPK requested an extension to April 11, 2022 to submit its amended Spill Reporting Plan due to extenuating circumstances. Staff consented to KPK’s request, and the Commission Chair approved the request.

 

205.              On April 11, 2022, KPK submitted an amended Spill Reporting Plan to Staff.

 

206.              Staff deemed the amended Spill Reporting Plan inadequate for reasons including, but not limited to:

 

a.    Notification requirements to existing agencies listed in the Training Plan were incomplete;

 

b.    Additional state and federal agencies which require notification and reporting were not listed in the Plan, as required by Section IV.11.a. of the CPA;

 

c.     Inaccurate reporting information (timing, circumstances that require reporting, descriptions of what information must be provided when reporting);

 

d.    TENORM section did not discuss when CDPHE should be notified, types of notifications (written/verbal) and respective timeframes, or relevant contact information; and

 

e.    The KPK Notification Matrix reiterated inaccurate reporting requirements.

 

207.              Between the Effective Date of the CPA, and the June 2022 hearing, KPK reported 22 spills/releases to Staff.  Of those 22 spills/releases, KPK reported 19 since KPK submitted its draft Spill Reporting Plan.  All but one (1) of the reported spills/releases involved some kind of reporting error (e.g., missed initial COGCC notification; missed 24- hour notification to Local Government; missed 3-day deadline to file an initial spill/release report via a Form 19; or incorrect or insufficient information about location, size, extent of spill/release).

 

208.              Since the June 2022 Compliance Hearing, KPK revised its amended Spill/Release Reporting and Training Plan to incorporate Staff comments and achieve approval.

 

209.              Staff approved KPK’s amended Spill Reporting Plan on October 13, 2022.

 

210.              Since the Effective Date of the CPA through the January 2023 hearing, KPK reported 48 spills/releases to Staff.  Of those 48 spills/releases, KPK reported 26 since June 9, 2022.  Of the 26 reported since June, all but five (5) of the reported spills/releases involved some kind of reporting error (e.g., missed initial COGCC notification; missed 24-hour notification to Local Government; missed 3-day deadline to file an initial spill/release report via a Form 19; or incorrect or insufficient information about location, size, extent of spill/release).  At hearing, KPK’s witnesses were not able to explain or state a reason for the errors, despite KPK’s claimed efforts to follow the Spill Reporting Plan and create a culture of compliance.

 

211.              While KPK submitted its initial Spill Reporting Plan timely, evidence at hearing demonstrated that KPK repeatedly and persistently failed to follow COGCC Rules and the Plan.  The essential purpose of the Spill Reporting Plan was to ensure that KPK reported spill or release correctly and timely.  KPK therefore failed to meet the essential purpose of Section IV.11. of the CPA.

 

212.      Testimony at the June 2022 and January 2023 hearings, and stipulated facts submitted by the Parties support the Commission’s findings and conclusions contained herein.  Additionally, documents submitted by Staff, including but not limited to Exhibits 607, 608, 1336-55, and 1357-59 support the Commission’s findings and conclusions.  The Commission notes that it would have reached the same findings and conclusions even if it had not considered the exhibits to which KPK objected.    Further, the Commission did not consider evidence of post-CPA spills as evidence of violations, but as evidence of KPK’s failure to comply with the essential purpose of Section IV.11. 

 

Section IV, Para. 12 – Monthly Compliance Reporting via COGIS

 

213.              Section IV.12. requires KPK and its Primary Contractor, beginning January 1, 2022, to provide a monthly status summary report for progress and milestones achieved at CPA Sites.  The CPA contains no requirement for Staff to provide feedback on those reports, as their purpose is to “serve as a means by which COGCC Staff and the Commission may monitor KPK’s progress in achieving the terms of the conditions of the Plan.”

 

214.              KPK has generally submitted monthly reports timely.  However, the monthly reports contain a variety of errors, including but not limited to a lack of current information on Form 27 quarterly reporting, mischaracterization of the status of certain projects, onsite observations that do not align with site photographs, and lack of information on inspections performed by KPK or its Primary Contractor.

 

215.              KPK failed to prove that it substantially complied with Section IV, para. 12 because, due to the incorrect or lack of information in the monthly reports, COGCC Staff and the Commission are unable to monitor KPK’s progress through the monthly reports.  The monthly reports thus fail in their essential purpose as stated in the CPA.

 

216.            Testimony at the June 2022 and January 2023 hearings, and stipulated facts submitted by the Parties support the Commission’s findings and conclusions contained herein.  Additionally, documents submitted by Staff, including but not limited to Exhibit 1003 support the Commission’s findings and conclusions.  The Commission notes that it would have reached the same findings and conclusions even if it had not considered the exhibits to which KPK objected.    

 

KPK’s Arguments Regarding Impacts of Imposing Additional Consequences

 

217.              KPK argued that imposing the additional consequences upon KPK, as provided for in Section VII.5., would have negative impacts on the Colorado economy, the oil and gas industry, and the use of the Spindle Field for carbon sequestration and storage.  The Commission rejected these arguments for the following reasons.

 

218.              First, even if KPK loses its license to operate in Colorado, it will retain ownership of its assets in the Spindle Field and, pending COGCC approval of any necessary requirements regarding the transfer, may transfer those assets to an operator who may use them for carbon sequestration and storage.  Further, the fact that KPK’s wells in the Spindle Field may possibly be used in a way that will have a positive impact on Colorado’s environment is not an adequate reason for the Commission to ignore the current negative impact that KPK’s operations have on public health, safety, and welfare, environment, and wildlife resources.

 

219.              Second, the warranted consequences in this case are a result of KPK’s actions, or inaction.  The Commission cannot ignore its statutory mandate to protect public health, safety, and welfare, the environment, and wildlife resources based upon KPK’s allegation that other operators will view the consequences imposed upon KPK as disincentive to conduct remedial work or avoid investing in Colorado.  The evidence presented at hearing demonstrates that KPK’s current practices present threatened and actual adverse impacts to public health, safety, and welfare, the environment, and wildlife resources.  Further, as shown by KPK’s demonstrative during rebuttal, other operators have spills, releases, or incidents, but those operators timely report and remediate.  This matter presents the rare case of an operator with wide-spread, systemic, repeated violations of COGCC Rules, that the same operator refuses to correct in a timely or successful manner.  It should not be a surprise to any person that the Commission will impose appropriate penalties or corrective actions on an operator who violates COGCC Rules. 

 

220.              While the Commission does not take the possible impact of this Order lightly, the Commission cannot ignore its statutory mandate to protect public health, safety, and welfare, the environment, and wildlife resources, or KPK’s failure to substantially comply with the CPA, because of the possible loss of  employment and tax revenue.  KPK operated in violation of COGCC Rules for a significant period of time before the CPA, and failed to live up to the promises it made in the CPA.  This Order is the natural result of that failure. 

 

221.              In addition to the findings of fact and conclusions of law memorialized in this Order, the Commission incorporates all Commissioner statements supporting this Order made during the course of the June 2022 and January 2023 hearings, including deliberations, as findings and conclusions.  The Commission also reviewed the entire record for both the June 2022 and January 2023 hearings, including all admitted testimony and exhibits, and finds substantial evidence in the record supports the Commission’s decision, even if testimony or an exhibit is not specifically identified herein.

ORDER

 

HAVING CONSIDERED the written pleadings and the argument and evidence presented by the Parties at hearing, the Commission hereby ORDERS:

 

1.            On a unanimous vote of 5-0, the Commission HEREBY FINDS KPK is not in substantial compliance with Paragraphs 2, and 4-12, of Section IV of the CPA.

2.            The CPA is terminated immediately.

3.            The penalties suspended pursuant to the CPA, and identified in Paragraphs 2, and 4-12 of Section IV of the CPA are unsuspended.

4.            The remainder of the initial penalty suspended pursuant to Paragraph 1 of Section IV of the CPA is unsuspended.

5.            KPK must pay a total penalty of $1,935,030, via certified funds, to the Commission on or before 30 days following the entry date of this Order.  If KPK fails to meet this deadline, the Commission will revoke KPK’s license to operate in Colorado.

4.            All of KPK’s Form 10, Certificates of Clearance are suspended immediately.  KPK must continue to operate locations in full compliance with all Commission Rules, permits, inspections, Administrative Orders by Consent, Orders Finding Violations, 901.a. Orders, the Act, and any other applicable orders or requirements.  Staff may continue to take all available enforcement actions to ensure KPK’s compliance.

5.            KPK must bring all of the Oil and Gas Locations, Wells, or other facilities it operates into full compliance with all Commission Rules, permits, inspections, Administrative Orders by Consent, Orders Finding Violations, 901.a. Orders, the Act, and any other applicable orders or requirements, by August 1, 2023.  If KPK fails to meet this deadline, the Commission will revoke KPK’s license to operate in Colorado. 

IT IS FURTHER ORDERED:

6.            The provisions contained in the above order shall become effective immediately.

 

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

 

8.            Under the State Administrative Procedure Act the Commission considers this Order to be final agency action for purposes of judicial review within 35 days after the date this Order is mailed by the Commission.

 

9.            An application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.

==================================================================

ENTERED this 15th day of February, 2023 as of the 1st day of February, 2023.

           

                                                            OIL AND GAS CONSERVATION COMMISSION

                                                            OF THE STATE OF COLORADO

 

 

                                                            By                                                                                          

                                                                                    Mimi C. Larsen, Secretary

 

 

CERTIFICATE OF MAILING

 

On the below described date, a true and accurate copy of Commission Order 1V-863 was uploaded into the Commission’s eFiling system and emailed to the following:

 

Staff:

Caitlin Stafford: Caitlin.Stafford@coag.gov

Benjamin Boudreaux: Benjamin.Boudreaux@coag.gov

Kelly Rosenberg: kelly.rosenberg@state.co.us

 

KPK:

John Jacus: John.Jacus@dgslaw.com

Lucas Satterlee: Lucas.Satterlee@dgslaw.com

Nicole Rushovich: Nicole.Rushovich@dgslaw.com