Deal may help plug problem 1983 well

State regulators have agreed to forgive $166,000 in unpaid fines if an energy company plugs a problem Mesa County oil and gas well and pays a smaller penalty.

The Colorado Oil and Gas Conservation Commission approved the agreement negotiated with Petro Mex Resources, a New Mexico company that owns eight wells in Garfield and Mesa counties.

The agency wants Petro Mex to permanently plug a well in the Coal Gulch area east of Colorado Highway 139. The well, drilled in 1983, lacks surface casing, which is intended to protect freshwater formations from contamination. The company has failed to demonstrate that cement is properly in place so oil and gas can’t move along the wellbore into other formations where they can cause contamination, the oil and gas commission says. Under testing, the well failed to hold pressure above 75 pounds per square inch, with water returning to the surface outside the casing.

The state has agreed to forgo collecting $166,000 in other penalties related to well violations if the company meets the new agreement’s terms. It is imposing a new penalty of $50,000, but suspending $30,000 of that amount if Petro Mex takes steps including permanently plugging the well by June 30 and paying the remaining $20,000 fine by July 30.

Peter Gowen, enforcement supervisor for the oil and gas commission, said the agency decided not to pursue the other unpaid fines after Petro Mex submitted documentation showing an inability to pay.

“I think it’s fair to say that they’re a marginal operation,” he said.

He said five of the wells are producing, but probably not generating enough money to cover their expenses.

The agency’s focus is on trying to get the problem well addressed by a company with limited resources.

If Petro Mex doesn’t comply, the oil and gas commission director is authorized to terminate the company’s right to operate in the state.

The agency could then declare the company’s wells to be orphan wells, and coordinate with the Bureau of Land Management to plug them and reclaim surface locations, using any federal funds available to do so.

Petro Mex doesn’t appear to have state bonding for the facilities, which Gowen said may mean they involve wells incorporating federal minerals and lands, and bonding at the federal level.

Petro Mex’s compliance issues date back to 2014, when the company failed to do required testing on two shut-in wells.

The state commission ordered it to test or plug them and pay a $23,000 fine.

Later that year the commission fined it $169,000 for failing to comply with that order, suspending $86,000 of that should it comply in a timely manner. It paid the original $23,000, and $23,000 in subsequent payments on the amount it still owed for the second fine. It later plugged one of the wells and tested the other, but it failed to continue making payments on the fine, leading the agency to also call for the collection of the suspended $86,000 amount.

In 2015 it also was fined $20,000 for violations including failing to meet well-site equipment, weed and waste/trash requirements. The company hasn’t paid that fine.


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