1V-594

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 ENCANA OIL & GAS (USA) INC., WELD COUNTY, COLORADO

)

CAUSE NO. 1V

DOCKET NO. 160600196

TYPE: ENFORCEMENT

ORDER NO. 1V-594

ADMINISTRATIVE ORDER BY CONSENT

(Pursuant to Rule 522.e.(1) of the Rules and Regulations of the

Colorado Oil and Gas Conservation Commission, 2 CCR 404-1)

FINDINGS

1. Encana Oil & Gas (USA) Inc. (“Encana”) (Operator No. 100185) is the operator of the Minch 3B-4H-L368 Well (API No. 05-123-39412) (“Well”) located in Weld County, Colorado.

2. Encana spud the Well on November 22, 2014; reached total depth on February 2, 2015; released the rig from the pad on February 19, 2015; finished completion of the Well on March 7, 2016; and reported first production on April 29, 2015. (Doc. Nos. 400838609 and 400839573).

3. Encana did not properly file the Well’s Form 5, Drilling and Completion Report within 60 days of the rig release from the pad on February 19, 2015. (Doc. No. 400838609)

4. Encana did not properly file the Well’s Form 5A, Completed Interval Report, within 30 days of the reported date of first production on April 29, 2015. (Doc. No. 400839573).

5. Encana did not properly file the Well’s Form 10, Certificate of Clearance, within 30 days of reported first production on April 29, 2015. (Doc. No. 400868453).

6. Encana did not properly submit the Well’s open-hole resistivity logs within 60 days of the rig release from the pad on February 19, 2015. (Doc. No. 400993836).

7. On February 23, 2016, COGCC Staff issued Notice of Alleged Violation No. 400992466 (“NOAV”) to Encana for violating Section 34-60-121(1), C.R.S., and the following COGCC Rules of Practice and Procedure, 2 CCR 404-1 (“Rule” or “Rules”):

a. Rule 308A (COGCC Form 5. Drilling Completion Report);

b. Rule 308B (COGCC Form 5A. Completed Interval Report);

c. Rule 312 (COGCC Form 10. Certificate of Clearance and/or Change of Operator); and

d. Rule 317.p. (General Drilling Rules, Requirement to Log Well).

8. On July 29, 2016, the majority of Encana’s Colorado assets were transferred to Crestone Peak Resources Holdings LLC (“Crestone”). The majority of Encana employees associated with Encana’s Colorado assets transferred to Crestone upon the sale of the assets.

9. “Subject Wells” are those 314 wells outside of the Piceance Basin for which Encana has Forms 5 and 5A in process. “Subject Forms” are the Forms 5, 5A, and 10 associated with the Subject Wells that are in process or were not properly submitted. Encana and Staff have entered into this Agreement for the purpose of the efficient review, correction, and approval of the Subject Forms.

PENALTY CALCULATION

10. Pursuant to Rule 523 and the Commission’s Enforcement and Penalty Policy, Hearings Staff calculated a penalty of $120,000 for these violations. The penalty calculation is based on the following:

Rule	Class, Impact	Base Penalty	Start Date	End Date	Days	Duration Matrix	Total Penalty
308A	Class 2, Minor	$2,500	4/20/2015 11/6/2015	5/14/2015 11/25/2015	43	N	$107,500
308B	Class 2, Minor	$2,500	7/27/2015 12/14/2015	8/10/2015 1/13/2016	44	Y	$38,500
312	Class 1, Minor	$200	5/29/2015	7/15/2015	47	Y	$2,855
317.p.	Class 2, Minor	$2,500	4/20/2015	4/21/2015	1	N	$2,500
TOTAL PENALTY							$151,355
Settlement Inducement (20.7% rounded)							$31,355
FINAL PENALTY							$120,000

a. Application of the Duration Matrix from the COGCC Enforcement Guidance and Penalty Policy to the violations of Rule 308B and Rule 312;

b. Consolidation of the violation of Section 34-60-121(1), C.R.S., with the violation of Rule 317.p.;

c. Days of violation for Rules 308A and 308B incorporate the time from Encana’s initial submission until Encana’s proper submission of the Forms 5 and 5A, but do not include the time for Staff’s review of the Forms;

d. Settlement inducement of 20.7% rounded;

e. No aggravating or mitigating factors; and

f. No pattern of violation, gross negligence, or knowing and willful misconduct.

AGREEMENT

NOW, THEREFORE, based on the Findings and pursuant to Rule 522.e.(1), the Director and Encana agree to request that the Commission approve the Order below to resolve the NOAV.

Encana agrees to this AOC only for the purpose of expeditiously resolving this matter without a contested hearing. Encana reserves the right to contest the findings of this AOC in any proceeding before any agency, court, or other tribunal, except for a proceeding to enforce the terms of this AOC. The findings and any action undertaken by Encana pursuant to this AOC shall not constitute evidence of fault or liability by Encana with respect to any third-party claim against Encana.

RECOMMENDED this ___ day of October, 2016.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By _____________________

Britta Beckstead, Asst. Attorney General

AGREED TO AND ACCEPTED this ___ day of October, 2016.

ENCANA OIL & GAS (USA) INC.

Signature of Authorized Company Representative

Print Signatory Name and Title

ORDER

HAVING CONSIDERED the Findings and the Agreement between the Director and Encana, the COMMISSION ORDERS:

1. Encana is found in violation of Rules 308A, 308B, 312, and 317.p., as described above.

2. Encana is assessed a penalty of $120,000 for these violations.

3. Encana will pay $65,000 of the penalty 30 days after this Order is mailed by the Commission.

4. The remaining $55,000 of the penalty is suspended subject to Paragraph 12.

5. A “Trial Period,” not to exceed 60 days, will begin on the date that this Order is approved. During this Trial Period, COGCC Staff will request Minimum Information or Required Information from Encana for Subject Wells on a pad-by-pad basis after reviewing the Subject Forms for two well pads. Within 30 days after the date that this Order is approved, Staff will submit the information requests for these two well pads on a spreadsheet sent electronically to Encana. Within 30 days after receiving these information requests, Encana will respond to them on a pad-by-pad basis via the spreadsheet created by COGCC Staff pursuant to the standards for these responses in Paragraph 11.d. After receiving Encana’s response, Staff will correct and approve the Subject Forms for each of the two well pads.

6. The “Corrective Action Period” is the time period commencing on the first day following the Trial Period and continuing until the date that Staff approves all of the Subject Forms. Unless otherwise agreed upon by COGCC Staff and Encana, the Corrective Action Period is one year from the end of the Trial Period for Staff’s review and an additional 30 days for Encana’s final response, unless extended as provided in Paragraph 12.c.

7. The “Quarterly Review Period” is the length of time equal to one quarter of the Corrective Action Period allotted for Staff’s review. The “Quarterly Review Target” is Staff’s review target and encompasses all Subject Forms for one quarter of the Subject Wells that remain after the Trial Period, plus any Subject Wells needed to complete a well pad for each Quarterly Review Period. The fourth Quarterly Review Period will include Subject Forms for all remaining Subject Wells.

8. Designated Party Representatives:

a. “Designated COGCC Staff Members” are a COGCC Permit-Completions Technician and a COGCC Engineer who will review and approve the Subject Forms, request information from Encana, and correct the Forms as necessary.

b. “Designated Encana Representative” is the Encana representative that will be available during the Trial Period and Corrective Action Period to respond to COGCC Staff requests for information regarding the Subject Forms.

c. The Designated Party Representatives may change during the Trial Period and Corrective Action Period. A Party changing a Designated Party Representative must inform the other Party of the change in writing.

9. “Required Information” is all of the information that is required on Forms 5, 5A, and 10 for all Subject Forms submitted on or after June 2, 2015.

10. “Minimum Information” is a limited set of information as described below for specific types of Subject Forms submitted before June 2, 2015.

a. Initial Form 5s for new wells:

i. Form Data: As-Drilled GPS data: Latitude, Longitude, Date of Measurement, PDOP Reading, GPS Operator name; Spud Date; List of all logs run; Casing & Cement Information in Casing, Liner and Cement table; and Formation Top(s) for the completed formation(s). Information for other formations will not be required.

ii. Attachments: (1) Surface Casing and Cemented Liner Cement Job Summary; and (2) Final Directional Survey (including side view and plan view).

iii. Logs: (1) PDF and LAS formats of all logs run per Log Submittal Policy version applicable when the Form 5 was submitted; and (2) Cement Bond Log for the intermediate casing.

b. Subsequent Form 5s for Casing Repairs and Remedial Cement:

i. Form Data: (1) List of all logs run; and (2) all Casing & Cement Information in Stage/Top Out/Remedial Cement table. The details for this work are not required.

ii. Attachment: Cement Job Summary.

iii. Logs: PDF of Cement Bond Log if run.

c. Form 5As for new wells and Form 5As for Recompletions or Restimulations:

i. Form Data: (1) Formation(s) and status; (2) Date of first production; (3) Tubing Data; (4) Perforations: top, bottom, # holes, hole size; (5) Treatment start and end dates; (6) Treatment Data; and (7) Test Information: test date, bbls oil, Mcf gas, Bbls water, test hours, test method, Casing PSI, Tubing PSI, Choke Size, Gas Disposition, Gas Type, BTU Gas, API Gravity Oil.

ii. Tubing Data Options: (1) All Data: tubing size, setting depth, setting date, packer depth; or (2) attach Wellbore Diagram that includes all data. If the Wellbore Diagram is attached to the Form 5A and contains the necessary tubing data, then the Staff will use the Diagram to correct any deficiencies in the Tubing Data.

iii. Treatment Data Options: (1) All Data: total fluids used, total gas used, type of gas, total acid used, recycled water used, fresh water used, total proppant used, max pressure during treatment, fluid density at initial fracture, minimum frac gradient, number of staged intervals, flowback volume recovered, disposition method for flowback, green completion information; or (2) Attach Vendor’s Job Summary and Limited Data: recycled water used, fresh water used, green completion information.

d. Form 5As for Formation Abandonment:

i. Form Data: (1) Reason for non-production; (2) Date Formation Abandoned, Squeezed; (3) Number of Sacks of Cement; (4) Bridge Plug Depth; (5) Number of sacks of cement on top of bridge plug.

ii. Attachments: (1) Cement Job Summary; and (2) Wireline ticket(s).

iii. For all of the Cement Job Summaries required by this Paragraph 10, Encana has the following options: (1) Cement Job Summary with qualitative and quantitative data; (2) Operations Summary is acceptable, but only if Cement Job Summary is not available; (3) invoice is acceptable, but only if no other cement data is available (name as Cement Job Summary).

e. Form 10s: Date of first production, dates of first oil and gas sales, and Transporter and Gatherer information.

11. The Subject Forms will be reviewed, corrected, and approved according to the following process:

a. The Designated COGCC Staff Members will review the Subject Forms on a pad-by-pad basis in an order determined by Staff. No Subject Forms will be returned to “Draft” status.

b. If the Designated COGCC Staff Members determine that Required Information or Minimum Information is necessary to approve any of the Subject Forms for a pad, they will request that the Designated Encana Representative provide such information. This request will be made on a single spreadsheet that includes the requests for all Subject Forms for that pad.

c. In determining whether Required Information or Minimum Information is necessary to approve a Subject Form, the Designated COGCC Staff Members will apply the COGCC Rules, written policies, and written guidance effective at the time the Subject Form originally came due, as limited by Paragraph 10.

d. No later than 30 days after the end of the Quarterly Review Period, the Designated Encana Representative will respond to an information request in good faith by employing all reasonable means to obtain the information. Encana will submit responses to the requested information to the Designated COGCC Staff Members via the spreadsheet sent by Staff containing the information requests and through electronic communication to the Designated Staff Members for any necessary attachments. The Designated Encana Representative will utilize all reasonable means to provide the requested information, including seeking such information from Crestone as necessary. If the requested information does not exist, or if it is not in the custody or control of Encana or its contractors, or if it cannot be obtained through the exercise of all reasonable means including seeking such information from Crestone as necessary, the Encana Designated Representative will notify COGCC Staff and explain in writing via the tracking spreadsheet the reasons why the information is not available. Staff will record on the spreadsheet the date that the Designated Encana Representative provides the information or notifies Staff that the information is not available through the exercise of all reasonable means.

e. If the requested information provided by the Designated Encana Representative is complete and accurate, the Designated COGCC Staff Members will complete and approve the Subject Form for which the information was requested. If the Designated Encana Representative reports that the information is not available pursuant to Paragraph 11.d., the Designated COGCC Staff Members will include a comment on the Subject Form describing the circumstances surrounding the missing information and approve the Subject Form.

f. Upon request by either party, Encana and COGCC Staff will meet to discuss the progress on the Subject Forms.

12. The Designated Party Representatives will have the following obligations during the Corrective Action Period:

a. During each Quarterly Review Period, Staff will review Subject Forms equal to the Quarterly Review Target and submit necessary information requests as set forth in Paragraphs 11.a, 11.b, and 11.c. If Staff fails to meet the Quarterly Review Target during any Quarterly Review Period, then $13,750 of the suspended penalty will be vacated. One quarter of the suspended penalty, being $13,750, will be vacated in this manner for each Quarterly Review Period during which the Staff fails to meet the Quarterly Review Target.

b. Encana will fully respond to Staff requests for information as set forth in Paragraph 11.d. If Encana fails to respond to any Staff request for information up to the amount of the Quarterly Review Target within 30 days after the end of the corresponding Quarterly Review Period, then Encana will pay $13,750 of the suspended penalty. One quarter of the suspended penalty, being $13,750, will become due in this manner each time that Encana fails to fully respond to any Staff request for information received during such Period for Subject Forms up to the amount of the Quarterly Review Target.

c. For any Quarterly Review Period in which both Staff and Encana have not fulfilled their respective obligations under Paragraphs 12.a. and 12.b., $13,750 of the suspended penalty will remain suspended until the end of the Corrective Action Period. If Staff completes its review of all Subject Forms and submits requests for information for all Subject Forms to Encana no later than 30 days prior to the end of the Corrective Action Period and Encana fails to fully respond to any request for information by the end of the Corrective Action Period, any portion of the suspended penalty that remains suspended under this subparagraph will become payable in accordance with Paragraph 12.d. Provided, that if Staff submits requests for information for more than 25% of the Subject Forms during the final Quarterly Review Period, then the Corrective Action Period for Encana to respond will be extended by 30 days, and if Staff submits requests for information for more than 50% of the Subject Forms during the final Quarterly Review Period, then the Corrective Action Period for Encana to respond will be extended by 60 days. If Staff fails to complete its review and submit requests for information for all Subject Forms to Encana no later than 30 days prior to the end of the Corrective Action Period, then any portion of the suspended penalty that remains suspended under this subparagraph will be vacated in accordance with Paragraph 12.e.

d. Any portion of the suspended penalty that is not payable under Paragraphs 12.b or 12.c will be vacated when the Corrective Action Period ends.

e. Any penalty vacated pursuant to Paragraph 12.a., 12.c, or 12.d will be vacated within 30 days of electronic notification from the Director, without further action from the Commission. Any penalty that becomes payable pursuant to Paragraph 12.b. or 12.c. will be due within 30 days of electronic notification from the Director, without further action from the Commission.

13. Regardless of the sale or transfer of the wells for which the Subject Forms were filed, Encana is responsible for the payment of the penalties and the performance of the corrective actions required by this Order.

14. The failure to timely pay any penalty under this Order is an independent violation that may result in additional penalties under Rule 522.f.

15. If any dispute arises under this Order, Encana shall have the right to a hearing before the Commission under Rule 503.b.(10).

16. This Order is effective as of the date it is mailed by the Commission. It constitutes final agency action for purposes of judicial review.

17. 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 October, 2016, as of the ___ day of October, 2016.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

Julie Murphy, Secretary

CERTIFICATE OF MAILING

On ___________________, 2016, a true and accurate copy of Order 1V-594 was mailed by first-class mail, return receipt requested to the following:

Encana Oil & Gas (USA) Inc.

Attn: Allison Woolston

370 17^th Street, Suite 1700

Denver, CO 80202-5632

Margaret Humecki