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 MARALEX RESOURCES INC, MESA AND LA PLATA COUNTIES, COLORADO |
) ) ) ) ) |
CAUSE NO. 1V
DOCKET NO. 1410-OV-53 |
ORDER FINDING VIOLATION
The Colorado Oil and Gas Conservation Commission (“Commission”) enters this Order Finding Violation (“OFV”) pursuant to Rule 522.b. of the Rules and Regulations of the Colorado Oil and Gas Conservation Commission, 2 CCR 404-1 and states as follows:
The Commission, having reviewed the administrative record, hearing the arguments of counsel, and being fully advised on the premises, issues the following OFV. Parts I & II address the operator and wells at issue, as well as a chronology of the events. Part III sets forth the Commission’s findings and conclusions.
I. Operator and Wells at Issue
Maralex Resources, Inc. (“Maralex”) is licensed to conduct oil and gas operations in the state and operates of over 200 wells in Colorado, including the following four wells at issue: the Sulfur Gulch 9-98-10 2 Well (“Sulfur Gulch Well”), Katie Eileen 34-7-35 2A (“Katie Eileen 2A Well”), Katie Eileen 34-7-35 2 (“Katie Eileen 2 Well”), and Katie Eileen 3 34-7-35 3 (“Katie Eileen 3 Well”). (Stip. Facts 6-8).
The Sulfur Gulch Well is located in Mesa County and was added to this case without objection to improve administrative efficiency. (Stip. Fact 7). The Katie Eileen 2A, 2, and 3 Wells (“Katie Eileen Wells”) are located in La Plata County at two different locations (“Katie Eileen 2A Location” or “western location” and “Katie Eileen 2 & 3 Location” or “eastern location”). (Stip. Fact 11, Ex. 1).
A.M. (“Mickey”) O’Hare is both the president of Maralex and the surface owner of the lands where the Katie Eileen Wells are located. (Stip. Facts 9 & 10).
II. Chronology
On March 20, 2012, Commission staff issued Notice of Alleged Violation (“NOAV”) No. 200344211 for the failure to conduct a Mechanical Integrity Test on the Sulfur Gulch Well.
On March 20, 2014 at approximately 1:00 p.m., the Commission’s Southwest Field Inspection Supervisor, Steve Labowskie, requested access to the Katie Eileen Wells by calling Maralex’s Ignacio office. (Stip. Fact 20, Ex. 12). He was told by two Maralex employees that they could not provide access at that time. (Stip. Facts 20-22, Ex. 12).
On March 21, 2014, Mr. O’Hare threatened Mr. Labowskie over the phone and in writing. (Ex. 9 & 12). Mr. O’Hare stated in an email to Mr. Labowskie: “Should you suspect us of criminal activity, by all means get a search warrant and have the sheriff escort you onto our place before then … we will not shoot at him or anyone he is escorting.” (Ex. 9).
On March 25, 2014, the La Plata District Court issued the Commission an administrative search warrant to inspect the Katie Eileen Wells. (Ex. 13). Commission staff was not able to obtain access until after coordinating with the La Plata Sheriff’s Office to execute the warrant. (Ex. 10). Maralex’s actions delayed the Commission’s inspections by seven days.
On March 27, 2014, staff inspected the Katie Eileen Wells and observed violations of Commission rules regarding site up-keep, spills and releases, and stormwater management. (“March Inspections”, Ex. 14, March Inspection Report for the Katie Eileen 2 & 3 Location, Ex. 18, March Inspection Report for the Katie Eileen 2A Location). In addition, the Katie Eileen 2 and 3 Location had two pits – one unlined and another with a torn liner – that had not been properly closed. (Ex. 14).
On April 11, 2014, Commission staff conducted follow-up inspections and observed that the violations documented at the March inspections were ongoing at both Locations. (“April Inspections,” Ex. 15, April Inspection Report for the Katie Eileen 2 & 3 Location, Ex. 19, April Inspection Report for the Katie Eileen 2A Location). At the April 11 Inspection of the Katie Eileen 2 and Katie Eileen 3 Wells, staff took soil samples from both pits. All four samples showed levels of electrical conductivity (“EC”) and sodium adsorption ratio (“SAR”) that exceeded the allowable concentration levels in Commission Rule Table 910-1 (“Table 910-1”). (Ex. 16, April Sampling Inspection Report, Ex. 17, Summary of the Lab Results, Ex. 21, Full Lab Analysis).
On June 12, 2014, staff issued NOAV No. 400623453 for inspection violations at the Katie Eileen 2 & 3 Location. (Stip. Fact 38).
On June 12, 2014, staff issued NOAV No. 400625924 for inspection violations at the Katie Eileen 2A Location. (Stip. Fact 44).
On August 19, 2014, staff issued NOAV No. 200410618 for environmental violations regarding the two pits near the Katie Eileen 2 and Katie Eileen 3 Wells. (Stip. Fact 39).
On October 27-28, 2014, the Commission heard evidence, testimony, and arguments regarding these alleged violations at the Sulfur Gulch and Katie Eileen Wells in Durango, CO.
The parties stipulated to the admissibility of all exhibits and that Commission technical staff is qualified to offer opinion testimony. (Stip. Facts 3 & 4).
III. The Commission’s Findings Regarding the Alleged Violations
The Commission reviewed the alleged violations and associated penalties recommended by staff. The Commission’s final determinations compared to staff recommendations are set forth in Exhibit A attached to this Order.
The Commission finds and concludes that staff has proven by a preponderance of the evidence that Maralex violated the following Rules and Regulations of the Colorado Oil and Gas Conservation Commission, 2 CCR 404-1 (“Commission rules” or “Rule”) at the Sulfur Gulch Well and Katie Eileen Wells. The Commission accepted in part and rejected in part the penalties sought by staff.
A. Rule 326.b.(1) (Mechanical Integrity Test, Shut-in Wells) Violation at the Sulfur Gulch Well
Rule 326.b.(1) requires operators to perform Mechanical Integrity Tests on shut-in wells with two years of the shut-in date.
The Commission finds Maralex in violation of Rule 326.b.(1), because Maralex did not dispute this violation and the Mechanical Integrity Test (“MIT”) was overdue by almost nine years. The parties stipulated to the fact that Maralex violated Rule 326.b.(1) for 10 days at the Sulfur Gulch Well. (Stip. Fact 5).
Maralex did not present any persuasive evidence or testimony in mitigation of this penalty. Although Maralex argued that the completion of a successful MIT on September 19, 2014 should mitigate this violation, eventual compliance with this Rule does not mitigate the penalty. The Commission imposes a $10,000 penalty for this violation (10 days x $1,000 per day).
B. Rule 204 (Right to Inspect) Violations at the Katie Eileen 2 & 3 Location and Katie Eileen 2A Location
Rule 204 states that “the Director and the authorized deputies shall also have the right at all reasonable times to go upon and inspect any oil or gas properties, disposal facilities, or transporters facilities or wells for the purpose of making any investigation or tests to ascertain whether the provisions of the Act or these rules or any special field rules are being complied with and shall report any violation thereof to the Commission.”
The Commission finds Maralex in violation of Rule 204 at both Locations. Maralex did not provide access on March 20, 2014, and effectively denied staff access through threats to staff’s safety until March 27, 2014. In addition to the testimony summarized below, this finding is supported by Exhibits 6-13 and Stipulated Facts 20-28.
Property owners ordinarily have the right to exclude others from their property, but there are limitations on that right. In exchange for receiving the right to conduct oil and gas operations in the State of Colorado, operators must comply with the Commission rules, including Rule 204. Oil and gas operations, and potential impacts arising out of such operations, are not confined to property ownership boundaries. The Commission has a substantial interest in inspecting such operations to fulfill its statutory mandate.
The Commission heard testimony from Margaret Ash, the Commission’s Field Inspection Unit Manager, to the effect that the Commission has devised a risk-based inspection policy and the Commission routinely conducts unnoticed inspections. Ms. Ash further testified that the Commission’s inspection regime would be significantly undermined if it were not able to do surprise inspections. Ms. Ash expressed concern that, among other things, operators could attempt to correct some violations if operators were notified of all inspections in advance and if the Commission were required to obtain an administrative search warrant as it did in this case. Ms. Ash further testified that obtaining an administrative search warrant in this case was a time-consuming process, which required significant agency resources. In addition, Ms. Ash testified to her extensive experience with the Commission’s inspection program.
The Commission also considered the term “at all reasonable times” in Rule 204. This statement refers to requests for entry during reasonable business hours. A reasonable request for entry must be met with an equal amount of good faith on the part of the operator or a surface owner. In this case, Commission staff was threatened by Maralex’s president and such threats interfered with staff’s ability to do their job. (Ex. 9 & 12). Mr. Labowskie testified that he was “quite terrified for his safety.” Commissioner King determined that Mr. O’Hare’s statements were “objectively a threat.” Commissioner Spielman noted that it was clear that “staff felt that they did not have access to the property to fulfill their duties.” The Commission cannot condone such threats and intimidation, and concludes that these statements were meant to chill the frequency of Commission inspections at the properties at issue.
The Commission finds and concludes that Maralex’s violation of Rule 204 persisted for seven days. This finding is based in large part on Exhibit 9, Mr. O’Hare’s email to Mr. Labowskie. When read in the light most favorable to the author, Mr. O’Hare, this email implied that if Mr. Labowskie did not obtain a search warrant and inspect the property accompanied by the sheriff, he would be shot. This threat prevented the Commission from inspecting the properties at issue until it was able to obtain a search warrant and an escort of sheriff deputies, which was seven days later.
The Commission imposes a penalty of $14,000 for the violation of Rule 204 at both Locations (7 days x $1,000 per day x 2 Locations).
C. Rule 210.b. (Signs and Markers, Wells) Violation at the Katie Eileen 2 & 3 Location
Rule 210.b. requires operators to mark each and every well in a conspicuous place, from the time of initial drilling until final abandonment, with a sign containing specific information, including a phone number for local emergency services or 911 where available.
Mr. Labowskie testified that the well sign was partially obscured by equipment and concealed in a meter shed at the March Inspection. He also testified that one of the well signs did not have the contact information for the local emergency responders. Exhibit 14O, which is a photograph of the sign in the meter shed at the inspection, supports this testimony.
Maralex argued that because there is a Local Emergency Response Plan on file with La Plata County, the emergency contact information and proper installation of the sign is unnecessary. Ms. Ash testified to the importance of Rule 210.b. in allowing rapid response to emergencies in the field, where access to a plan in a distant office may be impossible or difficult.
Based on the evidence, the Commission finds Maralex in violation of Rule 210.b. at the Katie Eileen 2 & 3 Location. The well sign was not installed in a “conspicuous place” and was missing the local emergency contact information as required by the Rule.
Mr. Labowskie also testified that this violation was ongoing at the April Inspection, which is supported by Stipulated Fact 32 and the April Inspection Report, Exhibit 15. As a result, the Commission finds that this violation continued for at least 10 days and imposes a penalty of $5,000 for the violation of Rule 210.b. at the Katie Eileen 2 & 3 Location (10 days x $500 per day).
D. Rule 603.f. (Statewide equipment, weeds, waste and trash requirements) Violations at the Katie Eileen 2A Location and Katie Eileen 2 & 3 Location
Rule 603.f. states that “all locations, including wells and surface production facilities, shall be kept free of the following: equipment, vehicles, and supplies not necessary for use on that lease; weeds; rubbish, and other waste material.”
For both Locations, Maralex argued that Mr. O’Hare, as the surface owner, and the previous operator had agreed to the storage of the equipment at the site, and therefore Maralex did not violate Rule 603.f. Under Commission rules, the surface owner has the right to use oil and gas equipment obtained from the operator, but either the operator or the surface owner must obtain a variance under Rule 502.b.(1). Mr. O’Hare testified, and the parties stipulated, that neither Maralex, nor the previous operator, nor Mr. O’Hare sought this variance. (Stip. Fact 37).
In addition, Mr. Labowskie testified that much of the oil and gas equipment or debris on the Locations is not necessary for current operations. In addition to Mr. Labowskie’s testimony, the photographs of each Location demonstrate that this equipment is not necessary for production. (Ex. 14B, 14C, 14N, 18A-18F).
Because the penalties and remaining arguments of the parties differ for each Location, the two violations are addressed separately below.
1. Katie Eileen 2A Location
Maralex, by and through its attorney and Mr. O’Hare, argued that it should not be penalized for the equipment at the Location because such equipment was purchased by the surface owner, Mr. O’Hare, in an arms-length transaction. However, neither Maralex nor Mr. O’Hare provided any documents evidencing such a transaction. Moreover, Mr. O’Hare, as the surface owner, contradicted his own testimony by also testifying that Maralex, not he, owned the equipment at issue; and, that Maralex was using the Location as a storage yard with his permission. The Commission rejects Mr. O’Hare’s testimony as contradictory and unsupported.
In the alternative, Maralex argued that it should not be penalized because Mr. O’Hare had agreements with prior operators. The Commission also rejects Mr. O’Hare’s testimony regarding the prior agreements, because Maralex did not provide any evidence of these agreements.
This equipment is stored very close to Ute Creek, as demonstrated by Exhibit 4 and Mr. Labowskie’s testimony. Photographs from the March Inspection, Exhibits 18A-18F, show equipment with potential contaminants, which could enter the nearby surface water. In addition, the equipment is on the oil and gas location. Exhibit 18A shows the cut slope above the storage area. The 100-Series Rules define “Oil and Gas Location” as “a definable area where an operator has disturbed or intends to disturb the land surface in order to locate an oil and gas facility.” Mr. Labowskie testified that based on his experience in the oil and gas field, this cut slope was not naturally-occurring and was constructed by the operator.
The Commission finds Maralex in violation of Rule 603.f. at the Katie Eileen 2A Location. The equipment is unnecessary for use on the lease and is stored on the Location without Commission approval. In addition, there is a risk that contaminants will move from the equipment into nearby surface waters.
Mr. Labowskie also observed equipment and debris at the follow-up April Inspection, which is supported by Stipulated Fact 42 and the April Inspection Report, Exhibit 19. Maralex provided no evidence that it has implemented the corrective action for this violation since the April Inspection. As a result, the Commission concludes that the violation continued for at least 10 days and imposes a penalty of $10,000 for the violation of Rule 603.f. at the Katie Eileen 2A Location ($1,000 per day x 10 days).
2. Katie Eileen 2 & 3 Location
While Maralex argued that Mr. O’Hare, the surface owner, had purchased this equipment from the company, it did not provide any evidence to support that statement. Neither Maralex nor Mr. O’Hare could provide any documents evidencing such a transaction and the Commission rejects Mr. O’Hare’s testimony on the subject. In addition, the photographs in evidence – Exhibits 14N, 14B, and 14C – do not demonstrate that the purchased equipment was treated as such. The unnecessary equipment, which included a palate, old tire, cinder blocks, used pipe, and other debris, is scattered all over the Location.
The Commission finds Maralex in violation of Rule 603.f. at the Katie Eileen 2 & 3 Location, because the equipment is unnecessary and stored on the Location without Commission approval. However, the Commission finds that the gravity of the violation was less than at the Katie Eileen 2A Location due to the fact that this Location was not as close to surface water.
Maralex provided no evidence that it has implemented the corrective action for this violation since the April Inspection. The Commission concludes that the violation persisted for at least 10 days as supported by Stipulated Fact 32 and the April Inspection Report, Exhibit 15. The Commission imposes a penalty of $5,000 for a violation of Rule 603.f. at the Katie Eileen 2 & 3 Location ($500 per day x 10 days).
E. Rule 905 (Closure of Pits) Violations at the Katie Eileen 2 & 3 Location
Rule 905 requires operators to close pits in accordance with the 1000-Series Rules. Rule 1003.d. requires pits on non-crop land to be closed six months after drilling and completion operations conclude and in accordance with Table 910-1.
Mr. Hughes, Commission Environmental Protection Specialist, and Mr. Labowskie testified and Exhibit 3 shows that there are two pits at this Location – a “pit with a torn liner” and an “unlined pit.” Mr. Hughes testified that the Katie Eileen 2 Well was completed in 1996 and Katie Eileen 3 Well was completed in 2007, as well as that neither pit has been closed. The parties also stipulated to this fact. (Stip. Fact 36). Mr. Hughes also testified that all samples taken at both pits exceeded Table 910-1 standards for electrical conductivity and sodium adsorption ratio, which can kill existing vegetation and prevent future vegetative growth. Exhibit 17, the summary of the lab results, and Exhibit 21, the full lab analysis, support this testimony. Mr. Hughes was qualified to offer these opinions.
Maralex argued that Mr. O’Hare has been using these pits as stock ponds since the wells were drilled and completed and therefore Maralex should not have to comply with Rule 905. Mr. Hughes, Mr. Labowskie, and Mr. O’Hare all testified to the fact that neither Mr. O’Hare nor Maralex has applied for a variance from Rule 905 at this Location. (See also Stip. Fact 37). Because the proper analysis and procedures were not conducted, there is a risk of environmental impacts from run-off and seepage contaminating surface and ground water due to the proximity of both to the pits. Exhibit 3, an aerial photograph of the Location, and Exhibit 20, groundwater data for the area, demonstrate this proximity. As shown by the photographs of these pits in Exhibits 14B and 14M at the March Inspection and Exhibits 16A and 16B at the April Inspection, these pits were not properly managed.
Maralex also argued that it did not need to apply for a variance, because the pits were constructed prior to the 2008 rulemaking. However, the Rules have required drilling pit closure within six months of the completion of a well since 1996. Rule 1001.c., and its exclusion of the 900-Series Rules from the waiver provision, has also been in place since that time. These requirements have applied since both pits were constructed.
The Commission finds that Rule 502.b.(1) and Rule 1001.c. allow for surface owners to use pits for non-oil and gas related activities, but the important procedures set forth in those Rules must be followed. Commissioner Holton stated that “the surface owner has the right to use the pits for what they want to use them for, as long as it has been cleared by the Oil and Gas Commission…we never went through this process [for these pits].” The Commission also considered the fact that Rule 1001.c. requires compliance with the 900-Series Rules, regardless of an agreement with the surface owner.
Moreover, Rule 901.c. allows the Director to impose additional requirements for existing pits whenever he or she “has reasonable cause to believe that an operator, in the conduct of any oil or gas operation, is performing any act or practice which threatens to cause or causes a violation of Table 910-1 . . .” Mr. Labowskie and Mr. Hughes testified that they observed what appeared to be drill cuttings in the pit with the torn liner. Mr. Labowskie and Mr. Hughes also opined that they observed a flow pattern leading from the wellhead into the unlined pit, which is also shown in Exhibit 16C. Here, Commission staff suspected a violation of Table 910-1 at the inspections and confirmed this exceedance of Table 910-1 requirements through the soil sample analysis provided in Exhibits 17 and 21. The Commission finds that this is “reasonable cause” to believe that in an operator is performing an act – leaving the pits open – that has caused a violation of Table 910-1.
The Commission finds Maralex in violation of Rule 905 at the Katie Eileen 2 & 3 Location, because the pits were not properly closed and neither Maralex nor Mr. O’Hare has applied for a variance or waiver from Rule 905. The Commission also finds that there are two separate violations of Rule 905.
Both of these pits have remained open for several years and Maralex did not perform any corrective action regarding the pits between the two inspections of the Location. This is supported by Stipulated Fact 32, as well as the April Inspection Report, Exhibit 15. Furthermore, Exhibit 22, “Denial of Approval of Form 27 Submitted September 8, 2014,” demonstrates that the remediation and investigation work plans Maralex submitted to Commission staff are currently inadequate. Therefore, the Commission concludes that these two violations continued for at least 10 days. The Commission imposes a penalty of $20,000 for these two violations ($1,000 per day x 10 days x 2 Pits).
F. Rule 906 (Spills and Releases) Violations at the Katie Eileen 2A Location and Katie Eileen 2 & 3 Location
Rule 906.a. requires operators to “immediately upon discovery, control and contain all spills/releases of E&P waste or produced fluids to protect the environment, public health, safety, and welfare, and wildlife resources” and “investigate, clean up, and document impacts resulting from spills/releases as soon as practicable.”
Mr. Labowskie testified to his observations of numerous spills and releases at the Katie Eileen 2A Location and Katie Eileen 2 & 3 Location at the March Inspections. These observations are supported by Exhibits 14C-14G, which are photographs of the releases at Katie Eileen 2 & 3 Location taken at the March Inspection, and Exhibits 18H and 18I, which are photographs of the releases at the Katie Eileen 2A Location taken at the March Inspection. Mr. Labowskie also opined that evaporation rings and cracked soil likely indicate produced water based on his experience. Mr. Labowskie and Mr. Hughes also testified that there was a flow pattern from the wellhead flowing into the unlined pit. This testimony is supported by Exhibit 14E, a photograph taken at the March Inspection, and Exhibit 16C, a photograph taken during the sampling at the April Inspection.
Mr. O’Hare testified that there is “discolored soil” all over the Locations and that the stained soil had been cleaned up, but did not provide any documentation of this remediation or evidence that such discoloration is naturally-occurring. The Commission rejects these statements as not credible, because Mr. O’Hare admitted that he was not an expert.
The Commission also considered the fact that both Maralex and staff agreed that there were numerous spills and releases at the Locations. Commissioner Alward noted that Rule 906.a. is clear that all spills and releases, regardless of the quantity, “shall be cleaned up as soon as practicable and there is no requirement to demonstrate actual impacts to groundwater or wildlife.”
The Commission finds Maralex in violation of Rule 906 at both Locations. The photographs and testimony demonstrate that spills and releases occurred and were not properly remediated.
Although Maralex presented some testimony that the spills and releases had been cleaned up, they were not cleaned up at the time of the April Inspection. This is further supported by Stipulated Facts 32 & 42, as well as the Inspection Reports, Exhibits 15 and 19. Therefore, the Commission concludes that the violation persisted for at least 10 days. However, the Commission reduces the daily penalty for this violation, as more appropriate for the gravity of the violation, and imposes a total penalty of $10,000 for violations of Rule 906 at both Locations ($500 x 10 days x 2 Locations).
G. Rule 907.a.(1) (Exploration and Production Waste Management) Violation at the Katie Eileen 2 & 3 Location
Rule 907.a.(1) requires operators to ensure that exploration and production waste (“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 or to the extent necessary to ensure compliance with the concentration levels in Table 910-1…”
Mr. Labowskie and Mr. Hughes testified that they observed weathered drill cuttings in the pit with the torn liner, due to the contrast between the native soils and the cuttings. This contrast is also shown in Exhibit 14K, a photograph taken at the March Inspection. Mr. Hughes testified that the purpose of the soil sampling was only to determine whether E&P waste was present at the site. Mr. Hughes also testified that the two samples from the pit with the torn liner exceeded Table 910-1 standards for electrical conductivity, sodium adsorption ratio, and arsenic. This testimony is further supported by a summary of the lab results in Exhibit 17 and the complete lab analysis in Exhibit 21.
Proper E&P waste management is crucial to the Commission’s mandate of ensuring that development occurs in a manner that protects public health, welfare, and safety, including the environment and wildlife resources. §34-60-102(1)(a)(I), C.R.S. Maralex did not provide any evidence or testimony demonstrating that the E&P waste in the pit was properly treated or stored.
The Commission finds Maralex in violation of Rule 907.a.(1) at the Katie Eileen 2 & 3 Location, because drill cuttings were not properly treated or stored in the pit with the torn liner.
Mr. Labowskie testified that the E&P waste was still present in the pit at the April Inspection, which is supported by Stipulated Fact 32 and the April Inspection Report, Exhibit 15. Maralex provided no evidence that it has implemented the corrective action for this violation since that date. As a result, the Commission concludes that the violation persisted for at least 10 days and imposes a penalty of $10,000 for the violation of Rule 907.a.(1) at the Katie Eileen 2 & 3 Location ($1,000 x 10 days).
H. Rule 1002.f. (Stormwater Management) Violation at the Katie Eileen 2 & 3 Location
Rule 1002.f. requires operators implement and maintain Best Management Practices (“BMPs”) at oil and gas locations in order to control stormwater runoff in a manner that minimizes erosion, transport of sediment offsite, and site degradation.
Mr. Labowskie testified that the south side of the Location was not adequately protected from compaction and erosion. He pointed out signs of this erosion in Exhibits 14I and 14J, which are photographs taken at the March inspection. Mr. Labowskie also testified that this was erosion on the cut slope leading into the unlined pit, identifying these indicators on Exhibit 14N. Mr. O’Hare also testified that this erosion exists at the Location from stormwater runoff. The proximity of the Spring Creek Extension Ditch, as shown in Exhibit 3, increases the importance of preventing the transport of sediment and other materials off the site.
The Commission finds Maralex in violation of Rule 1002.f. at the Katie Eileen 2 & 3 Location, because signs of stormwater erosion demonstrate that Maralex did not implement and maintain BMPs at the Location.
Mr. Labowskie testified that this violation was not remedied at the April Inspection, which is supported by Stipulated Fact 32 and the April Inspection Report, Exhibit 15. Maralex provided no evidence that it has implemented the corrective action for this violation since that date. The Commission concludes that the violation persisted for at least 10 days and imposes a penalty of $10,000 for the violation of Rule 1002.f. at the Katie Eileen 2 & 3 Location ($1,000 x 10 days).
ORDER
NOW, THEREFORE, the COMMISSION ORDERS:
1. Maralex violated Rules 204, 210.b., 326.b.(1), 603.f., 905, 906, 907.a.(1), and 1002.f. for the reasons described above.
2. Maralex is assessed a total penalty of $94,000 for these violations. Maralex will pay $94,000 within 30 days after this Order is mailed by the Commission. Failure to pay this penalty by the deadline may result in an independent violation with additional daily penalties.
3. Maralex will complete the following corrective actions for the violations cited above:
a. Rule 204 (Right to Inspect): Maralex will provide a written plan to ensure COGCC staff has access at all reasonable times to all Maralex facilities within 35 days of the approval of this Order.
b. Rule 210.b. (Signs and Markers, Wells): Maralex will also file a Form 42, Notice of Notification, with COGCC staff within 35 days of the approval of this Order, documenting Maralex’s updating the wellhead signs with the information required in Rule 210.b. and properly install them at the wellhead.
c. Rule 603.f. (Statewide Equipment, Weeds, and Trash Requirements):
i. Maralex will remove unnecessary equipment from the Katie Eileen 2 & 3 Location within 35 days of the approval of this Order. Maralex will also file a Form 42, Notice of Notification, documenting this action with COGCC staff within 35 days of the approval of this Order.
ii. Maralex will remove unnecessary equipment from the Katie Eileen 2A Location within 90 days of the approval of this Order. Maralex will also file a Form 42, Notice of Notification, documenting this action with COGCC staff within 90 days of the approval of this Order.
d. Rule 905 (Pit Closure): Maralex will complete the corrective actions for both pits at the Katie Eileen 2 and 3 Wells:
i. Submit a Form 27 for each pit to COGCC staff by December 8, 2014, containing the information outlined in the “Denial of Approval of Form 27 Submitted September 8, 2014,” dated October 3, 2014 (Record, Ex. 22). Staff will provide an update on its initial review of the Form 27 at the Commission’s December 15-16, 2014 hearing. Any further review or changes will be provided at the January 26-27, 2015 hearing.
ii. Timely implement the long-term closure and remediation requirements and deadlines of the approved Form 27s for each pit.
e. Rule 906 (Spills and Releases): Maralex will file a Form 42, Notice of Notification, documenting that Maralex has cleaned up and remediated the stained soil and implemented measures to prevent further releases with COGCC staff within 35 days of the approval of this Order.
f. Rule 1002.f. (Stormwater Management): Submit a plan to Commission staff regarding implementation of stormwater BMPs to prevent erosion and site degradation at the Katie Eileen 2 & 3 Location within 60 days of the approval of this Order. This plan must be approved by Commission staff and implemented according to the dates specified in the approved plan.
4. Corrective action deadlines specified in this Order may be extended only for good cause, as determined at the Director’s sole discretion. A request for extension must be made, in writing, at least 14 days prior to the pertinent compliance deadline. Failure to receive an extension prior to the compliance deadline or to meet a compliance deadline may constitute a new violation subject to additional daily penalties.
5. Payment of the penalty and/or fulfillment of the corrective action deadlines pursuant to this Order does not relieve Maralex from its obligations to complete corrective actions set forth in the NOAV, as may be amended or modified by Commission staff.
6. Entry of this Order constitutes final agency action for purposes of judicial review as of the date this Order is mailed by the Commission. For all other purposes, this Order is effective as of the date of approval by the Commission.
7. The Commission expressly reserves its right after notice and hearing, to alter, amend, or repeal any and/or all of the above Order.
==================================================================
ENTERED this _____ day of November, 2014 as of the 28th day of October, 2014.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By
Robert J. Frick, Secretary
Exhibit A – Penalty and Violation Summary
|
CLAIM |
CLAIM DESCRIPTION |
COMMISSION RULE |
PENALTY SOUGHT BY STAFF |
PENALTY IMPOSED BY COMMISSION |
|
1. |
Failure to conduct MIT Sulfur Gulch Well |
326.b.(1) Mechanical Integrity Test |
$10,000 |
$10,000 |
|
2. |
Denial of access to western location Katie Eileen 2A Location |
204. General Functions of Director |
$7,000 |
$7,000 |
|
3. |
Denial of access to eastern location Katie Eileen 2 & 3 Location |
204. General Functions of Director |
$7,000 |
$7,000 |
|
4. |
No signage at eastern location Katie Eileen 2 & 3 Location |
210.b. Signs and Markers |
$5,000 |
$5,000 |
|
5. |
Equipment, weeds, waste, and trash at western location Katie Eileen 2A Location |
603.f. Statewide equipment, weeds, waste, and trash requirements |
$10,000 |
$10,000 |
|
6. |
Equipment, weeds, waste, and trash at eastern location Katie Eileen 2 & 3 Location |
603.f. Statewide equipment, weeds, waste, and trash requirements |
$10,000 |
$5,000 |
|
7. |
Failure to close unlined pit at eastern location Katie Eileen 2 & 3 Location |
905. Closure of Pits |
$10,000 |
$10,000 |
|
8. |
Failure to close pit with torn liner at eastern location Katie Eileen 2 & 3 Location |
905. Closure of Pits |
$10,000 |
$10,000 |
|
9. |
Spills and releases at western location Katie Eileen 2A Location |
906. Spills and Releases |
$10,000 |
$5,000 |
|
10. |
Spills and releases at eastern location Katie Eileen 2 & 3 Location |
906. Spills and Releases |
$10,000 |
$5,000 |
|
11. |
Improper handling of E&P Waste at eastern location Katie Eileen 2 & 3 Location |
907. Management of E&P Waste |
$10,000 |
$10,000 |
|
12. |
Improper stormwater management at eastern location Katie Eileen 2 & 3 Location |
1002.f. Stormwater management |
$10,000 |
$10,000 |
|
|
|
TOTAL PENALTY |
$109,000 |
$94,000 |