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
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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
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.
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 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”).
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