BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
|
IN THE MATTER OF A REQUEST TO BE REIMBURSED FROM THE CONSERVATION AND ENVIRONMENTAL RESPONSE FUND FOR ALLEGED DAMAGES DUE TO OIL AND GAS OPERATIONS IN HUERFANO COUNTY, COLORADO |
) CAUSE NO. 1 ) ) |
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission on March 25, 2010 at 9:00 a.m. at The Chancery Building, 1120 Lincoln Street, Suite 801, Denver, Colorado, after giving Notice of Hearing as required by law, for an order authorizing the expenditure of monies from the Conservation and Environmental Response Fund (“CERF”) for damages to a dairy operation located downstream from oil and gas operations.
FINDINGS
The Commission finds as follows:
1. Corsentino Dairy Farm, Inc. (“Corsentino”) as applicant herein, is an interested party in the subject matter of the above-referenced hearing.
2. Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.
3. The Commission has jurisdiction over the subject matter embraced in said Notice, and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order pursuant to the Oil and Gas Conservation Act.
4. On January 29, 2010, Corsentino, by its attorney, filed with the Commission an application for an order to grant funds from the CERF to Corsentino to mitigate the losses it incurred to the value of its property and operations as a result of the coalbed methane operations conducted by Petroglyph Energy, Inc. (“Petroglyph”).
Corsentino is located in portions of the following sections of land:
Township 27 South, Range 65 West, 6th P.M.
Section 31
Township 27 South, Range 66 West, 6th P.M.
Sections 35 and 36
Township 28 South, Range 66 West, 6th P.M.
Sections 1 and 2
Petroglyph’s coalbed methane production operations have ceased temporarily and are located on portions of the following sections of land:
Township 28 South, Range 67 West, 6th P.M.
Sections 22, 35, and 36
Township 29 South, Range 66 West, 6th P.M.
Sections 5 through 8
Township 29 South, Range 67 West, 6th P.M.
Sections 2 through 5, 8 through 10, 12, and 13
Petroglyph is alleged to have discharged produced water from 1999-2007 into the Cucharas River pursuant to a point source water discharge permit (No. CO-0048020) issued by the Water Quality Control Division of the Colorado Department of Public Health and Environment (“CDPHE”) causing damage to Corsentino’s lands due to the high sodium content and high Sodium Adsorption Ratio of the discharged water.
Corsentino’s application requested reimbursement of an unspecified amount of money from the CERF for alleged damages to its dairy operation (reduced milk production, herd loss, and crop loss) as a result of Petroglyph’s discharge of produced water from its oil and gas operations upstream of Corsentino’s irrigation system.
5. On March 23, 2010, Petroglyph filed a Rule 510 Statement in the matter, explaining that it did not seek party-status because no relief was being requested of Petroglyph by Corsentino, but Petroglyph wanted to respond to certain issues raised by the application and to address certain allegations.
According to Petroglyph’s analysis, the CERF represents the consolidation of what were formerly separate Commission accounts. With respect to the Environmental Response Fund (“ERF”) portion of the accounts, the provisions of C.R.S. § 34-60-124(4) govern its expenditures and provide that the ERF may be expended to:
a. Investigate, prevent, monitor, or mitigate conditions that threaten to cause, or that actually cause, a significant adverse environmental impact on any air, water, soil, or biological resource;
b. Gather background or baseline data on any air, water, soil, or biological resource that the [C]ommission determines may be so impacted by the conduct of oil and gas operations; and
Petroglyph contended that this list does not include payment of compensation to private parties for alleged consequential damages caused by the conduct of oil and gas operations.
Petroglyph further contended that the portion of the statute that gives authority to expend funds to “mitigate conditions that…cause a significant adverse environmental impact on any…soil…resource” is not applicable because Petroglyph is voluntarily conducting mitigation and remediation activities on Corsentino’s lands; and, Corsentino is not seeking funds from the ERF for mitigation activities, rather, it seeks funds for compensation of damages.
6. Testimony and exhibits in support of the application indicated Petroglyph, as part of its oil and gas operations, discharged produced water into the Cucharas River under a permit (Permit No. CO-0048020) issued by the CDPHE from 1999 to July 2007, when Petroglyph voluntarily ceased production operations because of an increase in methane detected in nearby water wells.
7. Testimony and exhibits in support of the application indicated that CDPHE amended the discharge permit on December 28, 2009, effective February 1, 2010, to recognize the threat to agricultural use of the discharge of untreated produced water that has a high Sodium Adsorption Ratio and high concentrations of sodium and required treatment of the produced water prior to discharge.
8. Testimony and exhibits in support of the application also showed photographs of the alleged crop damage Corsentino suffered from 2002 through 2008.
9. Corsentino acknowledged that Petroglyph has stepped forward and is remediating the soils to return the corn crop to its predischarge rate.
10. Corsentino, by its attorney, argued that the CERF is one solution to the problem that occurred at its dairy operation as a result of oil and gas operations. He further argued that the 2007 Colorado General Assembly charged the Commission with protecting human health and safety of the citizens of Colorado, not just the surface owners where wells and oil and gas operations are located, and that the spirit of the changes to the Oil and Gas Conservation Act in 2007 was a basis to authorize expenditures from the CERF to address Corsentino’s situation.
11. Corsentino did not request a specific amount in damages; rather it requested that the Commission authorize the Director to expend money from the CERF based on the following four factors:
a. The amount of funds in the CERF and the projected demand for those funds,
b. The projected refunding obligations of the CERF in accordance with C.R.S. § 34-60-124,
c. Corsentino’s losses and continuing losses, and
d. Costs saved by Petroglyph by not treating its produced water from 1999 to July 2007.
12. The Commission heard COGCC Staff’s interpretation of the provision within the statute that authorizes expenditures from the CERF to “mitigate conditions that cause…a significant adverse environmental impact on…soil or biological resource.” 34-60-124(4)(a), C.R.S. (2009). The COGCC Staff have always interpreted this provision of the statute to authorize expenditure by COGCC Staff for activities they oversee to mitigate environmental damage due to oil and gas operations, not to pay money damages to a person impacted by oil and gas operations.
13. Further testimony indicated that, historically, one request has been made informally to COGCC Staff to reimburse a contractor for monies spent in excess of a bid to plug and abandon a well. In that case, a commercial developer took over an improperly plugged and abandoned well in order to proceed timely with its project. Its contractor bid the project on a turnkey basis, i.e., a single amount for the entire project, which turned out to be too low. When the developer’s contractor discovered that the well had not been properly plugged and abandoned, the contractor had to spend its own money to complete the project. Afterward, the contractor informally asked if it could be reimbursed for the excess from the CERF, and the COGCC Staff denied the request.
14. On another occasion, COGCC Staff investigated whether funds from the CERF could be used to compensate someone who was injured by an explosion that blew up his home. The explosion was the result of gas migrating from an improperly plugged well drilled prior to the existence of the Commission. Staff also wanted to buy property. Based on the analysis by the COGCC Staff and the Commission’s assistant attorney general, the conclusion was that the COGCC Staff could not use CERF money for that situation.
15. This is a matter of first impression. The Commission has not addressed the issue of whether funds from the CERF can be expended in the manner requested by Corsentino. The Assistant Attorney General provided advice about the discretion available to the Commission under C.R.S. § 34-60-124 and provided examples of other statutes enacted by the state legislature that allow compensation for damages. Additionally, he explained that there is no “responsible party” in this matter because there are not any allegations that the operator violated any rule, statute, or permit provision.
16. Some Commissioners expressed concern about the gap in legislation, the unfairness of the situation, the complexity of issues related to damage to a dairy herd, and the frustration with not having the authority to grant the relief requested; however, the majority voted to deny the application based on the legal analysis of the statute.
NOW, THEREFORE, IT IS ORDERED, that the application of Corsentino Dairy Farm, Inc. for an order to grant funds from the Conservation and Environmental Response Fund to Corsentino Dairy Farm, Inc. to mitigate the losses it incurred to the value of its property and operations as a result of the discharge of produced water from oil and gas operations upstream of its dairy operation is hereby denied.
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.
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.
ENTERED this day of April, 2010, as of March 25, 2010.
OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO
By
Carol Harmon, Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
April 24, 2010