REPORT OF THE COMMISSION

This cause came on for hearing before the Colorado Oil and Gas Conservation Commission on September 23, 2002 at 10:00 a.m. in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado on why D J Production Services, Inc. is in violation of Rules 324A.a., 907.a., and 910.a. for the Sargent Farms "B" tank battery, and why the Commission should invoke the provisions of 34-60-122, C.R.S., as amended, providing for penalties for violations of t he Rules and Regulations of the Commission.

FINDINGS

1. On October 26, 2001, Colorado Oil and Gas Conservation Commission ("COGCC") staff received a complaint from the landowner of the Sargent Farms "B" tank battery operated by D J Production Inc. ("D J Production") located in the SE1/4 NE1/4 of Section 25, Township 2 North, Range 63 West, 6th P.M. The complaint involved royalty issues and a "mess" inside the berms at the subject tank battery where the operator was allegedly draining produced water into t he berm in order to sell the oil.

2. On October 26, 2001, COGCC environmental staff conducted a field inspection of the subject facility in response to the landowner complaint. Oil saturated soils and oily water were observed within the bermed area surrounding the stock tanks. Additionally, salt staining was also observed on soils within the berm.

3. On November 2, 2001, COGCC environmental staff issued a Notice of Alleged Violation ("NOAV") to D J Production for the presence of oil saturated soils and oily water within the berms. The NOAV cited violation of Rule 324A.a., failure to prevent significant adverse environmental impacts to air, water, soil, or biological resources and failure to prevent the unauthorized discharge or disposal of oil, gas, or Exploration & Production ("E&P") waste, Rule 907.a., failure to ensure that E&P waste is properly stored, handled, transported, treated, recycled, or disposed to prevent threatened or actual significant adverse environmental impacts to air, water, soil or biological resources, and Rule 910.a., exceeding the COGCC Allowable Concentrations for Organics in Soil for non-sensitive areas. The NOAV specified an abatement date of November 30, 2001 to submit a Site Investigation and Remediation Workplan, F orm 27, for the cleanup of the oily soils.

4. Per return receipt, D J Production accepted the NOAV on November 20, 2001.

5. A Form 27 or other correspondence from D J Production was not received by the abatement date of November 30, 2001.

6. On February 15, 2002, COGCC environmental staff conducted a field inspection of the Sargent Farms "B" tank battery. Oily soil and oily water was observed within the bermed area. A representative sample was collected from the impacted soil and submitted for analyses. Laboratory results indicated a Total Recoverable Petroleum Hydrocarbon ("TRPH") concentration at 120,000 mg/kg. This significantly exceeds the COGCC Allowable Concentrations for Orga nics in Soils for non-sensitive areas at 10,000 mg/kg.

7. In COGCC correspondence dated March 19, 2002, D J Production was sent a copy of the laboratory analyses and was required to submit a Form 27 by April 15, 2002.

8. A Form 27 or other correspondence from D J Production was not received by the extended abatement date of April 15, 2002.

Rule 523. specifies a base fine of One Thousand dollars ($1,000) for each violation of Rule 324A.a., 907.a., and 910.a.

10. At the time of the hearing, COGCC staff presented testimony and exhibits in support of the recommended order. No one from D J Production attended the hearing.

11. After deliberation, the Commission finds that D J Production is in violation of the above referenced rules and that a significant adverse environmental impact has occurred at this site.

12. A monetary penalty of One Thousand dollars ($1,000) for violation of Rules 324A.a., 907.a., and 910.a. should be assessed against D J Production for these violations in accordance with Rule 523.a. Because the rule violations are similar and duplicative, a fine of One Thousand dollars ($1,000) is recommended.

13. D J Production should submit a Site Investigation and Remediation Workplan, Form 27 for COGCC approval. The Form 27 should include a treatment method in accordance with Rule 907.e.(1). The Form 27 should also include soil and/or groundwater sampling to confirm the removal of impacted soils. Soil and/or groundwater samples should be submitted to a laboratory for analyses.

14. If D J Production does not remediate and reclaim the Sargent Farms "B" tank battery by November 1, 2002, the Commission should authorize the COGCC staff to claim D J Production's Thirty Thousand dollar ($30,000) blanket bond to remediate and reclaim the well.

15. The Commission finds that D J Production has demonstrated a pattern of violation through lack of compliance with Order No. 1-97 and with the numerous Orders Finding Violation issued at the September 23, 2002 hearing.

ORDER

NOW, THEREFORE IT IS ORDERED, that D J Production Services, Inc. shall be found in violation of Rules 324A.a., 907.a., and 910.a., for failure to prevent significant adverse environmental impacts to air, water, soil, or biological resources and failure to prevent the unauthorized discharge or disposal of oil, gas, or E&P waste; Rule 907.a., for failure to ensure that E&P waste is properly stored, handled, transported, treated, recycled or disposed t o prevent threatened or actual significant adverse environmental impacts to air, water, soil or biological resources; and Rule 910.a., for exceeding the COGCC Allowable Concentrations for Organics in Soil for non-sensitive areas at the Sargent Farms tank battery located in the SE1/4 NE1/4 of Section 25, Township 2 North, Range 63 West, 6th P.M.

IT IS FURTHER ORDERED, that D J Production Services, Inc. shall be assessed a total fine of One Thousand dollars ($1,000) for the above-described rule violations, payable within thirty (30) days of the date the order is entered by the Commission.

IT IS FURTHER ORDERED, that D J Production Services, Inc. shall submit a Site Investigation and Remediation Workplan, Form 27 for COGCC approval within fifteen (15) days of the date the order is entered. The Form 27 shall include a treatment method in accordance with Rule 907.e.(1). The Form 27 shall also include soil and/or groundwater sampling to confirm the removal of impacted soils. Soil and/or groundwater samples shall be submitted to a laborator y for analyses.

IT IS FURTHER ORDERED, that if D J Production Services, Inc. does not perform the work described above by November 1, 2002 and notify COGCC staff that the work has been performed, the COGCC staff shall be authorized to make a claim on D J Production Services, Inc.'s bond to remediate and reclaim the Sargent Farms tank battery.

IT IS FURTHER ORDERED, that the Assistant Attorney General is hereby directed to do whatever is reasonably necessary to obtain and execute a judgment decree against the personal property of D J Production Services, Inc. located on or associated with the well site.

IT IS FURTHER ORDERED, that the Certificate of Clearance, Form 10, which authorizes transportation of oil and gas for this well, is hereby revoked.

IT IS FURTHER ORDERED, that no Applications for Permits-to-Drill and no Change of Operator, Form 10, shall be issued to or approved for D J Production Services, Inc., Jay Pape, or any other company of which Mr. Pape is a principal until such time as compliance with all Orders Finding Violation against D J Production Services, Inc. is secured.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.

IT IS FURTHER ORDERED, that the Commission expressly reserves its right after notice and hearing, to alter, amend, or repeal any and/or all of the above orders.

ENTERED this day of October 2002, as of September 23, 2002.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary Dated at Suite 801 1120 Lincoln St. Denver, Colorado 80203 October 7, 2002

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(1V-240)

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