BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF ALLEGED VIOLATIONS OF THE ) CAUSE NO. 1V
RULES AND REGULATIONS OF THE COLORADO OIL )
AND GAS CONSERVATION COMMISSION BY ) ORDER NO. 1V-306
MARALEX RESOURCES, INC., )
LA PLATA COUNTY, COLORADO )
ADMINISTRATIVE ORDER BY CONSENT
FINDINGS
1. On February 16, 2005, Colorado Oil and Gas Conservation Commission (“COGCC”) staff approved the Application for Permit-to-Drill, Deepen or Operate, Form 2 submitted by Maralex Resources, Inc. (“Maralex”) for the Keegan Patrick 33-7-11 #2A Well (API #05-067-09016) located in the NW¼ SW¼ of Section 11, Township 33 North, Range 7 West, N.M.P.M.
2. On July 25, 2005, Maralex spudded the Keegan Patrick 33-7-11 #2A Well. Drill cuttings and fluids were placed in unlined drilling and reserve pits on the site.
3. On October 30, 2005, COGCC received a complaint from Mr. David Thomson (Complaint #200079439) alleging degraded water quality in his domestic water supply well (permit #151002) resulting from activities at the Keegan Patrick 33-7-11 #2A Well. The Thomson water well is located approximately 350 feet east of the Keegan Patrick 33-7-11 #2A Well. Information from the driller’s log for the water well indicates that groundwater was encountered at 12 feet below ground surface (bgs) during the installation of the Thomson water well and that the well is screened from 12 to 180 feet bgs.
4. On November 1, 2005, a contractor retained by Maralex visited the site and collected water samples from the Thomson water well, the Keegan Patrick 33-7-11 #2A reserve pit and the Keegan Patrick 33-7-11 #2A separator. Analytical results indicated that groundwater from the Thomson water well contained elevated levels of calcium (398 milligrams per liter [mg/L]), chloride (890 mg/L), total dissolved solids (2,320 mg/L) and electrical conductivity (3,120 micro Siemens per centimeter [uS/cm]) relative to expected quality of shallow groundwater in the area. The chloride concentration of 890 mg/L detected in the Thomson water well exceeded the Colorado Basic Groundwater Standard (Table 2) of 250 mg/L for drinking water.
5. On November 3, 2005, COGCC staff conducted a field inspection of the Keegan Patrick 33-7-11 #2A Well and the Thomson water well. Fluids were observed in the unlined reserve pit. An odor was noted in the vicinity of the reserve pit. An area of turned soil was noted adjacent to the well head. Groundwater from the Thomson water well was observed to have a tendency to foam when discharged to the ground surface. A COGCC subcontractor collected water samples from the Thomson water well for laboratory analysis for volatile organic compounds (VOCs) by EPA Method 524.2, for total petroleum hydrocarbons (TPH) in the diesel and oil ranges of organics by EPA Method 8015, and for nitrate and nitrite by EPA Method 353.3. In addition, a water sample was collected from the Keegan Patrick 33-7-11 #2A reserve pit for VOCs by EPA method 524.2. Analytical results indicate benzene concentrations in the reserve pit sample (7.4 ug/L) exceeded Colorado standards for groundwater; however, organic constituents were not detected in samples from the Thomson water well.
6. On November 5, 2005, Maralex initiated the process of removing liquids from the reserve pit.
7. On November 15, 2005, a COGCC subcontractor collected soil samples from the area of turned soil noted during the November 3, 2005 site inspection. Samples were analyzed for benzene, ethylbenzene, toluene and xylenes by EPA Method 8020, for TPH by EPA Method 8015, and for pH, conductivity and sodium adsorption ratio. Analytical results indicated no constituents exceeded soil standards as listed in the COGCC 900 Series Rules, Table 910-1.
8. On November 22, 2005, the Keegan Patrick 33-7-11 #2A reserve pit was backfilled and closed and reclamation was completed.
9. On December 28, 2005, groundwater samples were collected from the Thomson water well and from three nearby domestic wells, and Mr. Thomson and Mr. Larry Zufelt, a neighboring landowner, were interviewed. The analytical results of the Thomson water well were compared to the results of previous samples. The analytical results from nearby wells were used to determine the quality of the natural groundwater and were compared to the water from the Thomson well. Analytical results indicated that calcium and chloride concentrations in the Thomson well had declined to 226 mg/L and 520 mg/L, respectively, since November, 2005. However, the chloride concentration of 520 mg/L detected in the Thomson water well exceeded the Colorado Basic Groundwater Standard (Table 2) of 250 mg/L for drinking water. Concentrations of calcium in neighboring wells ranged from 20.8 mg/L to 56.2 mg/L while chloride ranged from <10 mg/L to a high of 15 mg/L.
10. To determine concentration trends, a third set of water samples were collected from the Thomson water well by a COGCC subcontractor on February 10, 2006. Analytical results indicate that concentrations of calcium and chloride in the Thomson well had declined to 29.7 mg/L and 140 mg/L. The chloride concentration of 140 mg/L detected in the Thomson water well did not exceed the Colorado Basic Groundwater Standard (Table 2) of 250 mg/L for drinking water, but it is still greater than the concentration of chloride in the unimpacted groundwater in this area. Results from the three sampling events are consistent with staff interpretation that a slug of fluids from the unlined Keegan Patrick 33-7-11 #2A reserve pit leaked into the shallow groundwater system and flowed downgradient, resulting in a transient degradation in the groundwater quality in the Thomson water well.
11. On March 13, 2006, a Notice of Alleged Violation (“NOAV”, #200085988) was issued to Maralex regarding the observed impacts to the Thomson water well. The NOAV cited Rule 324A.a., for failure to prevent significant adverse environmental impacts to air, water, soil, or biological resources and to prevent the unauthorized discharge or disposal of E&P waste; Rule 324A.b., for performing an act or practice which constitutes a violation of water quality standards or classifications; Rule 902.a., for failure to construct and operate a pit to protect waters of the state from significant adverse environmental impacts from E&P wastes; Rule 907.a.(1), for 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; and Rule 907.a.(2), for failure to conduct E&P waste management activities to protect waters of the state from significant adverse environmental impacts. Corrective action required by the NOAV included submission of a Spill Report, Form 19 regarding the release from the Keegan Patrick 33-7-11 #2A reserve pit and a Site Investigation and Remediation Workplan, Form 27 for the continued monitoring of the impacts to the Thomson water well and down gradient water wells to ensure that should impacted water from the release migrate further it is detected and mitigated. The deadline for submission of the Form 19 and Form 27 was established to be April 14, 2006.
12. On April 14, 2006, Maralex submitted the Form 19 (#01953000) and Form 27 (#3680) required by the NOAV.
13. On May 25, 2006, the Form 19 and Form 27 were approved by COGCC staff with conditions specifying required locations, frequency, and duration of groundwater monitoring.
14. Maralex acknowledges by its concurrence with this Administrative Order by Consent (AOC) that the fact that the contents of the reserve pit associated with the Keegan Patrick 33-7-11 #2A Well likely infiltrated into and impacted the shallow groundwater constitutes a violation of Rules 324A.a., 324A.b. and 902.a. from October 31, 2005 when Maralex was notified of the Thomson complaint until November 5, 2005 when fluid removal from the pit was initiated for a total six (6) days of violation.
15. Rule 523. specifies a base fine of One Thousand dollars ($1,000) for each day of violation of Rules 324A.a., 324A.b., and 902.a. for a total fine of Eighteen Thousand dollars ($18,000). In accordance with Rule 523.d. the total fine should be reduced by thirty percent (30%) because of mitigating factors resulting in a recommended fine of Twelve Thousand Six Hundred dollars ($12,600). The mitigating factors in determining this fine are as follows: (1) Maralex demonstrated prompt, effective response to the violations; (2) Maralex cooperated with the COGCC with respect to the violation; and (3) Maralex has a history of compliance with Commission rules, regulations and orders.
ORDER
NOW, THEREFORE, IT IS ORDERED, that Maralex Resources Inc. shall be found in violation of Rules 324.A.a., 324.A.b., and 902.a. for adverse environmental impacts from discharge of exploration and production waste from the reserve pit associated with the Keegan Patrick 33-7-11 #2A Well located in the NW½ SW¼ of Section 11, Township 33 North, Range 7 West, N.M. P.M.
IT IS FURTHER ORDERED, that Maralex Resources, Inc. shall be found in violation of Rules 324.A.a., 324.A.b., and 902.a. from October 31, 2005 when Maralex was informed of the Thomson complaint until November 5, 2005 when the process of fluid removal from the reserve pit was initiated for a total of six (6) days of violation.
IT IS FURTHER ORDERED, that Maralex Resources, Inc. shall be assessed a total fine of Twelve Thousand Six Hundred dollars ($12,600) for the three (3) violations described above, which shall be payable within thirty (30) days of the date this order is approved by the Commission.
IT IS FURTHER ORDERED, that Maralex Resources, Inc. shall continue to follow the Site Investigation and Remediation Workplan, Form 27 and subsequent conditions provided by COGCC staff in the May 25, 2006 approval letter, until the impact to the Thomson water well and surrounding area has been mitigated, including subsequent revisions and adjustments required by the COGCC staff.
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/or all of the above orders.
IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date this order is mailed by the Commission.
IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this order is not required prior to the filing for judicial review.
RECOMMENDED this day of August, 2006.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By:_______________________________________
Dorothy E. Baldwin, Environmental Manager
Dated at Suite 801
1120 Lincoln St.
Denver, Colorado 80203
June 1, 2006
AGREED TO AND ACCEPTED this _________day of August, 2006.
MARALEX RESOURCES INC.
By ____________________________________________
Title ___________________________________________
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This cause came on for hearing before the Commission at 9:00 a.m. on November 27, 2006, Suite 801, in The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for the approval of this Administrative Order by Consent.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Patricia C. Beaver, Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203