Before the Colorado Oil and Gas Conservation
Commission
In the Matter of Keith L. Rising, and ) Docket No.
Midwest Enterprises, Inc. )
)
) Request
for Release of Well Plugging
) Bond No. 15462
)
) Review
of Employee
) Decision
of May 30, 2002
_____________________________________________________________________
APPLICATION
_____________________________________________________________________
Relief Requested:
Release of Well Plugging Bond 15462 in the amount of $30,000.
Legal Basis: Neither Keith L. Rising nor Midwest Enterprises has any further liability for a well properly plugged
and abandoned more than 10 years
ago, and approved by the Commission at that time.
Factual Basis:
For several years, the
applicants operated a salt water disposal well in Kiowa County, Colorado, known
as the Fenton 2-31 well. The well was
plugged and abandoned in March of 1990. See
Attachment A. In July, 1991, an
inspector for the Commission conducted an inspection of the plugging and
abandonment and stated in writing that the plugging and abandonment passed
inspection and further noted that “restoration” was “complete.” See Attachment B. In June, 1992, the Commission released the
surety bond for this well. See
Attachment C. In 1995, the applicants
obtained a statewide bond for 6 wells in Logan County, Colorado. See Attachment D. The Commission recognized on November 27,
2001, that all reclamation is now complete for those 6 wells in Logan County
but also informed the applicants more that 10 years after the final inspection
of the Fenton 2-31 well in Kiowa County that there were “issues” with that well
which must be resolved. On May 30, 2002,
almost 10 years after the bond release for the Fenton 2-31 well, the Commission
informed the applicant that it would not release the statewide bond obtained
for the 6 Logan County wells but that the applicant must remediate the Fenton
2-31 wellsite even though that well site was properly remediated more than 10
years ago as recognized by the Commission at that time.
Statement of the Case
Midwest
Enterprises, Inc., requested full, complete, and final
release of well plugging bond number 15462, in the amount of $30,000, on June
26, 2001, and March 25, 2002. David
Dillon, a Commission employee, denied the latter request on May 30, 2002. The $30,000 bond, which is also a statewide
bond, was obtained in 1995 to cover 6 wells located in sections 27, 28, 29, and
33, T. 11 N., R. 52 W., 6th p.m., in Logan County, Colorado. The Commission’s letter of November 27, 2001,
to the applicant indicated that all of these wells have passed “final field
inspection.”
The
only remaining impediment to release of this bond is another well known as the
Fenton 2-31 well located in section 31, T. 20 S., R. 42 W., 6th
p.m., Kiowa County, Colorado. Commission
employees stated in the letter of May 30, 2002, to the applicant that this well
is also covered by the statewide bond referred to above and that there is still
a reclamation issue which needs to be resolved before the bond in question can
be released.
Midwest
Enterprises disagrees with that decision and believes that three Commission
documents will show otherwise. First,
the final inspection for the Fenton 2-31 well in Kiowa County took place on
July 17, 1991. See Attachment
B. As you can see, the Fenton 2-31
passed the inspection, which recommended bond release, and also noted:
“Restoration Complete.” Second, on June
26, 1992, the Commission informed the surety for the Fenton 2-31 well in Kiowa
County that it was releasing two surety bonds, one of which was for the Fenton
2-31 well. See Attachment C. This document was obtained from the
Commission’s file on the Fenton 2-31 well.
Third,
more than three years later, in July of 1995, Midwest Enterprises obtained the
statewide bond referred to above. In
obtaining that bond, Midwest Enterprises specifically stated in a July 7, 1995,
letter to the Commission that it obtained the statewide bond as a substitute
for six individual well bonds for wells in Logan County, specifically, the six
wells located in sections 27, 28, 29, and 33, T. 11 N., R. 52 W. See Attachment D. There is no hint in either the bond itself nor in the applicant’s letter that the new bond was to
reestablish liability for a well which more than 4 years before had passed
inspection and for which the bond had been released more than 3 years
before. Bonds are, after all, contracts
which can only be understood with respect to the intention of the parties.
Midwest
Enterprises believes that these documents clearly show that statewide bond
number 15462 has no applicability to the Fenton 2-31 well in Kiowa County. First, more than three years had passed from
the time that the original bond for the Fenton 2-31 well was released until the
statewide bond for six other wells was obtained. Given that long passage of time, It is very difficult to believe that Midwest Enterprises
could have intended that the 1995 statewide bond was in any way intended to be
a substitute for a bond fully, completely, and finally released in 1992. It’s even more unlikely that the Commission
would have allowed a three year hiatus in bonding in order that a new bond
could be substituted.
Second,
Midwest Enterprises specifically stated in a July 7, 1995, letter to the
Commission that it obtained the statewide bond in order to substitute for six
specific wells in Logan County, specifically, the six wells located in sections
27, 28, 29, and 33, T. 11 N., R. 52 W.
The fact that Midwest Enterprises specified these wells but did not mention
the Fenton 2-31 well in Kiowa County is a clear indication that Midwest
Enterprises never intended, understood, or believed that the new statewide bond
would be applied to the Fenton 2-31 well–a well for which there had been a
full, complete, and final bond release more than three years before. Because bonds are contracts and are construed
accordingly, it seems clear that the intent of the parties was simply to
substitute one bond for several others with no suggestion that the applicants
were submitting to new liability under new standards for old wells which had
been deemed by the Commission to have been properly plugged and abandoned.
Third,
the one year statute of limitations in Colorado Rev. Stat. § 34-60-115 clearly
prohibits any attempt by the Commission to hold Midwest Enterprises liable for
the Fenton 2-31 well in Kiowa County in any way either three (1995) or ten
(2002) years after the bond for that well was fully, completely, and finally
released, which terminated the period of liability. That provision states:
No
action or other proceeding based upon a violation of this article or any
rule, regulation, or order of the commission shall be commenced or maintained
unless it has been commenced within one year from the date of the violation.
While that provision is
susceptible to different interpretations, perhaps the most reasonable
interpretation would be that an operator may not be held liable for violations
of Commission regulations if more than one year has passed since final
inspection and bond release. Indeed, the
applicants know of no authority, in the absence of fraud or deceit, which would
allow the Commission to begin a new period of liability for a well whose period
of liability has previously been terminated more than a year before.
Moreover,
this provision becomes even clearer if we use another example. If we
assume that after the bond was released for the Fenton 2-31 well in
1992, the applicants simply left the State of Colorado, the Commission would
have been absolutely barred from suing the applicants after the summer of 1963
for remediation in any Colorado court by the 1-year limitations period in
Colorado Rev. Stat. § 34-60-115. The
fact that the applicants did not cease doing business in the State of Colorado
after 1992 should not make any difference.
Neither should the fact that the applicants submitted another bond for
different wells several years later. Any
such action is prohibited if it occurs more than one year after final
inspection and bond release.
The
arbitrary and capricious nature of the Commission employee’s decision is also
made clear by the fact that the applicants could have avoided this entire
dispute by maintaining individual bonds for the 6 wells in Logan county instead of having just one statewide bond. Had the applicants done so, it is very clear
that the Commission could not have taken any action against the applicants’
other individual bonds, because the other bonds are committed to specific
wells. The Commission would then have
had to proceed in a court of law and would have been prohibited from doing so
more than a year after bond release by Colorado Rev. Stat. § 34-60-115. This is a textbook example of the meaning of
arbitrary and capricious because there is no good reason why one should be able
to avoid perpetual liability by using individual well bonds instead of a
statewide bond.
Finally,
the Commission employee’s decision of May 30, 2002, means that any entity which
has a statewide bond will be liable forever for every oil
and gas well ever drilled in the State of Colorado. Moreover, it also means that it is always
appropriate for Commission employees to hold operators liable forever based on
the newest, latest, and forever changing reclamation standards. If, for example, it is appropriate to use
present standards to re-examine a 1991 final inspection and 1992 bond release
more than 10 years later, why is not appropriate to do so for a 1980, 1970, or
1930 final inspection. This requirement
for perpetual care is not in the statute nor in the
Commissions’s regulations. In fact, the
Colorado legislature’s requirement that such actions be taken within one
year is the most reasonable standard for a time limit on liability–not some
sort of perpetual care requirement.
In
light of the foregoing, Midwest Enterprises respectfully requests that the
Commission act expeditiously in fully, completely, and finally releasing its
statewide bond number 15462, as Midwest Enterprises has completely fulfilled
all applicable requirements of law. Bond
release is not only legally correct but is also good public policy as well.
Respectfully
submitted,
Lyle
K. Rising
Attorney
Registration No. 4268
for
Midwest Enterprises, Inc.
8280
Grizzly Way
Evergreen,
Colorado 80439
(303)
674-0701
Certificate of Service
I
certify that I served the foregoing application by first class mail, postage
prepaid, on this 9th day of July, 2002, on the following, who may have an
interest in this matter:
Donald
and Susanne Seufer
35737
Rd. JJ
Holly,
CO 81047
Goetz
Insurers
P.O.
Box 190
Fort Morgan, CO 80701-0190