When state oil and gas regulators recently were asked to approve a fine of more than $1.2 million in Moffat County for violations of rules, including leaked oil and other fluids that were never cleaned up, none of them questioned the appropriateness of the penalty.
But at least one member of the Colorado Oil and Gas Conservation Commission was prompted to wonder why, by comparison, a second company was being fined just $15,000 in connection with another case in which workers were hurt in an explosion.
“Can somebody help me here because I’m really having trouble making this make sense,” Commissioner Brenda Haun said in questioning the discrepancy during deliberations at the commission’s recent meeting.
The commissioners approved a staff recommendation to fine Santa Fe Natural Resources $1,237,860 for 12 violations at seven wells and facilities in Moffat County. The violations ranged from minor ones such as the lack of a required sign at a wellhead, accumulation of weeds and debris, failure to fully reclaim areas no longer needed for production, and not properly abandoning unused flowline equipment, to more serious ones including not testing wells for leaks, and not controlling and cleaning up leaked oil and other fluids found at some sites.
The violations date back several years, Santa Fe failed to respond as required to violation citations it received from the COGCC, and some of the fine amount reflects the ongoing significant threat posed by the continuing presence of the leaked fluids.
But the Santa Fe situation didn’t involve injuries, whereas the $15,000 fine the COGCC imposed against Mallard Exploration arose from an October 2018 explosion that injured three at a well pad in Weld County. Contract workers had been using a grinder to remove rusted bolts from previously used oil storage tanks that contained oil residue and vapors, leading to the blast.
“I remember this explosion and fire,” Haun, who lives in Weld County, told fellow commissioners. “I remember that one of the fellows involved was very seriously injured, and (left) with lifelong physical and emotional problems.”
She said there seems to be a disconnect between the COGCC’s recommendation for a $15,000 fine in that case, and more than $1 million in the other case.
“I’m wondering, when there’s so much personal damage, why the fine is only $15,000,” she said.
The fine was agreed to in a settlement negotiated between Mallard and Steven Kirschner, a COGCC enforcement officer. He told the commissioners that Mallard’s violation isn’t that employees were injured, but that it permitted an ignition source near a source of flammable liquids. The Occupational Safety and Health Administration also reached an agreement with Mallard under which Mallard paid a $4,000 fine in the case.
Kirschner said Haun’s question also “goes back to the architecture of our rules.” State law allows a maximum penalty of $15,000 for each day that a violation of COGCC rules continues, and in the Mallard case the violation only occurred over one day, he said. The Santa Fe fine reflects violations that have continued for years.
Pressed further by Commissioner Howard Boigon about the fine level, Kirschner said COGCC staff found no evidence of a workplace culture at Mallard where it was flouting rules, insufficiently educating contract employees or creating an unsafe environment for them. In fact, it had communicated to contractors the danger of using power tools near the tanks, the COGCC says.
Haun voted against the $15,000 fine amount, which other commissioners approved.
Responding to other concerns a fellow commissioner raised in connection with another fine that commissioners approved, Commissioner John Putnam, who also works in the state Department of Public Health and Environment, suggested that the new, paid commission scheduled to take over July 1 take on as one of its tasks reviewing the agency’s penalty practices.
If Santa Fe — which COGCC data shows as owning only eight wells in the state, all in Moffat County — doesn’t pay its fine in 35 days, the state would terminate its ability to operate in Colorado and foreclose on a $60,000 bond that COGCC could use for purposes including cleanup of leaked fluids. It also could declare the wells orphaned and take steps including selling equipment and other onsite assets to help cover costs of plugging wells and reclaiming sites.