Oxy agrees to major fines for contamination of springs

Oxy USA has agreed to pay fines totaling nearly $650,000 for pit leaks that caused oil and gas contamination of spring waters northwest of Parachute.

The company signed a settlement agreement with the state under which it will pay $390,000 for an incident in the Cascade Canyon area and $257,400 for one at Rock Springs.

The fines are proposed in an agreement reached with the staff of the Colorado Oil and Gas Conservation Commission, but the commission will hold a hearing on the matters this week.

If approved, the $390,000 fine would be among the largest, if not the largest, ever imposed by the commission.

In 2004, EnCana Oil & Gas (USA) was fined what was then a record $371,200 for a gas seep into West Divide Creek south of Silt.

In 2008, Colorado Interstate Gas Co. reportedly was fined $374,000 for a gas leak that caused problems in the Fort Morgan area.

State oil and gas regulators could not be reached for comment Friday on whether any higher fines have been imposed since then.

Regulators say in investigative documents that Oxy operated pits without necessary permits in both incidents. In the Cascade Canyon case, leaks occurred in an unlined pit. Had Oxy sought a permit, the state would have required it to line the pit because of the potential for groundwater impacts in the area, regulators say.

Tests of one spring in that case reportedly found levels of benzene, a carcinogen, that were 300 times above groundwater standards. The spring’s levels of toluene were 15 times above standards in place at the time, and the state since has made its toluene standards stricter.

The contamination also affected up to a half-mile of a tributary to Cascade Canyon.

At Rock Springs, Oxy operated a pit for nearly 10 years without a permit that was needed because it was in a sensitive area. The pit was lined, but the liner was discovered to have been torn. One of the springs was found to have benzene levels 12 times the allowable amount. Also, an oily sheen was found on water in a tributary of Crystal Creek.

The two incidents of contamination were discovered in 2008.

State regulators accused Oxy of several rule violations in each incident. State rules allow for fines of $1,000 for each day a violation occurred. But they cap the fines for each violation at $10,000 regardless of the number of days involved, barring a showing of circumstances such as significant environmental impact.

The state determined such an impact occurred in the case of some violations, although not for the 10-year failure to have a pit permit.

Under the settlement agreement, Oxy admits no liability and denies there was significant environmental impact.

Regulators scaled back their proposed fine amounts 22 percent because of Oxy’s cooperation in the investigation and work in reducing the levels of contamination. Oxy has spent $2.4 million to date on remediation efforts. It spent another $8 million to better protect ground and surface water in the area of the violations by reducing its number of pits and using more storage tanks.

“When we have an incident, we conduct a thorough investigation to determine the cause or causes,” Oxy spokesman Eric Moses said. “At that point we take appropriate measures to prevent similar incidents from occurring in the future.”

The company regrets that the incidents occurred, he said, adding, “Oxy … is committed to safeguarding the environment and protecting the safety and health of our employees and neighboring communities.”

Moses said Oxy responded in a timely manner to the incidents, and neither one affected drinking water or fish and other wildlife.

Both occurred near areas designated by the Colorado Division of Wildlife as sensitive habitat for the greater sage grouse. The U.S. Fish and Wildlife Service recently decided Endangered Species Act protection is warranted for the bird, but it is precluded by the need to address higher-priority species first.


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