Leaking well, company draw state’s notice

A state inspector last March determined Maralex Resources was in violation of a requirement for mechanical integrity testing for an oil and gas well where a leak was discovered Dec. 14 southwest of De Beque.

In addition, the Colorado Oil and Gas Conservation Commission in October fined Maralex $50,000 after finding the company had failed to comply with the same requirement in the case of nine other wells in Mesa and Garfield counties.

Also, the Bureau of Land Management says it has required the company to repair about 20 wells with small gas leaks over recent years in western Colorado.

Maralex’s history of problems concerns Commissioner Rich Alward of Grand Junction, who does oil and gas reclamation consulting work. He says Maralex’s problems go even further and he sees them firsthand.

“They’ve got a number of well pads with failed reclamation and that are poorly maintained, they have old equipment lying on their well pads, and that (observation) is from my actual being on the ground, seeing the weed cover, lack of reclamation, lack of revegetation,” he said.

He said that most of the time when he’s working on another project in the field, “I can identify a Maralex (well) pad from a mile away.”

Gas and fluids were discovered leaking around the problem Maralex well on federal land on Jaw Ridge about seven miles southwest of De Beque. It was drilled in 1981 and was shut shortly thereafter but remained capable of production. Authorities are investigating whether the recent hydraulic fracturing of a horizontal Black Hills Exploration & Production well that passed an estimated 400 feet within the Maralex well underground may have triggered the leak.

Some fluids initially ran off the pad, but the BLM says no surface waters appear to have been impacted. The well was opened and flow is being diverted to a containment pit, and work has been ongoing to permanently plug the well based on a BLM order. So far, two, 200-foot plugs have been installed that have isolated the Dakota sandstone target production zone of the well. A plug in the above-lying Mancos shale formation, which the Black Hills well was targeting a part of, probably will be installed today.

The well has leaked thousands of gallons.

The BLM saw no structural problems with the well during a routine inspection in July.

The commission requires companies to test wells for mechanical integrity within two years of their initially being shut in, and every five years thereafter. Such tests are designed to ensure the soundness of the well casing and the cement sealing around it.

Commission records indicate the Maralex well was shut in in 1983.

“It should have been tested in 1985 and every five years since then,” Alward said.

The regulators’ records indicate the well was drilled by the Golden-based Adolph Coors Co. That company was associated with the family behind Coors beer.

Disputes over access

In 1992, the well was taken over by GASCO, Inc., which was a subsidiary of KN Energy. In 1995, its operation transferred to KN Production Co., and Ignacio-based Maralex acquired it later that year.

Oil and gas commission records show Maralex owns more than 220 wells in Mesa, Garfield, Rio Blanco and La Plata counties.

The company hasn’t been available for comment. However, in a 2012 letter to a commission official, discussing its work plan for inactive wells in the Piceance Basin, it said it is operating most of its Piceance wells in the red due to low natural gas prices.

“This does not lend itself to an environment by which we have positive economics to complete well work,” the company wrote.

It also cited difficulties getting to many of its wells due to access disputes with two ranch owners.

In 2009, Garfield County and the BLM dealt with problems at a Maralex site in the Soldier Canyon area off Douglas Pass, including poor fencing that let deer and a bear get into a fluid-filled pit. The company reportedly at first cited a lack of money to address the problems, but at least some problems eventually were fixed.

Following discovery of the December leak, commission inspectors have found other problems at the Jaw Ridge well site ranging from a small hole in a tank, to a lack of an emergency contact number on signage, to the need to remove unnecessary equipment.

In this summer’s inspection, the BLM found some deficiencies such as weeds on site.

Plug or produce

According to a statement from the BLM, provided by spokesman David Boyd, Maralex operates 110 oil and gas wells involving federal lands or minerals in western Colorado.

“Of these, 24 are producing and 86 are shut-in. Forty of the shut-in wells have been shut-in for more than 20 years. The majority of their wells were obtained in the last 15 years from other operators,” the statement said.

“BLM has been working with Maralex and COGCC to resolve the issues related to these older shut-in wells. BLM met with Maralex on September 10, 2013 with the goal of developing a strategy for addressing their shut-in wells. We want them to develop a strategy to either plug the wells or put them into production over the next five years. Maralex has started this process and is planning to plug three wells in the De Beque area this month.”

The BLM said it can’t inspect each Maralex well each year, but typically does so every two years.

“We have documented some issues with their wells and well pads during these inspections,” the agency said, and it has written up what it calls instances of non-compliance.

“Problems we’ve documented and required them to address include ensuring containment berms and containment pits are adequate, keeping their equipment painted to avoid rust, and labeling tanks and other structures adequately. In recent years we have discovered about 20 wells that had small gas leaks, which we required them to repair.

“Surface condition of the pads, including reclamation, is one of the issues we are also concerned about. When a company plugs a well, it would be required to complete final reclamation.”

The BLM doesn’t require mechanical integrity tests over certain intervals of time.

“We typically require them on a shut-in well before an operator takes action such as plugging it or putting it into production. If an inspection of a shut-in well suggests there could be a problem, we could require one be done,” the agency said in its statement.



COMMENTS

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Clearly reclamation bonding is set far too low.  That the ‘current economics’ prevents Maralex from fulfilling its legal obligations to the people and State of Colorado, and the US government and the American taxpayer, is of no consequence.  They need to pay or corporate officers should go to jail.  If bonding levels are not raised to prevent future taxpayer liability, then the feds and COGCC need to make violations truly punitive: pay to reclaim or face time in jail.

This story points to a problem with how we lease public lands and how we manage them once they have been leased. There is no requirement that the owner of a well be financially secure enough to deal with problems that may develop, and the current bonding requirement is inadequate to protect the taxpayer. Interesting that there was Coors money invested in the original well. They made money while it was producing, then sold it to another company to get out from under the responsibility of reclaiming the site. How can the big, responsible oil and gas companies condone this kind of behavior? It gives them a bad name.

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