The Colorado Oil and Gas Conservation Commission on Thursday fined a company more than $200,000 in connection with failing to test a Rio Blanco County oil and gas well in a timely fashion and fix it after it was determined to have problems.
But commission staff don't expect the company to be able to pay the fine or repair or plug the well, and the agency is expecting to end up declaring Stehle Oil Co.'s six wells in the state to be orphaned. That would leave the state on the hook along with the Bureau of Land Management for foreclosing on bonds, plugging the wells and reclaiming surface facilities.
It's a situation that for one oil and gas commissioner, John Messner — also a Gunnison County commissioner — highlights the problem the state faces when it comes to orphaned wells and the failure of current state bonding and financial assurance requirements to come close to covering the cost of dealing with such wells.
"I do think this is an egregious violation that clearly shows some of the flaws and problematic situations that we face here at the COGCC, particularly around bonding and financial assurances for instances just like this," Messner told fellow commissioners Thursday. "While this is an unfortunate situation my guess is that the state will be reimbursed very little for the significant expense that it will be to address these as orphan wells."
The COGCC will be considering the financial assurance issue during one of the numerous rulemaking proceedings it has begun undertaking to implement various requirements of the Senate Bill 181 oil and gas measure that became law earlier this year. The state has hundreds of orphaned wells needing plugging, along with associated sites requiring reclamation, and the costs for doing so typically far exceed the bonding or financial assurance the COGCC requires and can claim under its current rules.
The $202,650 fine the commission approved Thursday involved a well that had been shut in at least since August 2014. Stehle failed to test it for mechanical integrity within two years of its shut-in as required by the state's rules. Such a test can determine whether a well may be prone to leak.
After receiving a warning letter from the COGCC in March 2018, Stehle tested the well in July 2018 and it failed the test. But it has yet to repair or plug the well as state rules require.
Steven Mah, a COGCC enforcement officer, told the commission that Stehle indicated it was trying to raise funds, but the agency doesn't believe the company has the ability to come into compliance with the state rules and pay the fine. He said the company isn't registered with the Secretary of State and consists essentially of one man in his 70s. The company is owned by Cary Stehle and based in Craig, according to an order finding violation that the COGCC approved Thursday and previously was agreed to by Stehle, who didn't dispute the order's factual findings.
Mah said just one of the six wells is producing, and his understanding is that none of them has much value. COGCC records show Stehle's wells as being in Rio Blanco and Moffat counties.
Mah said four wells are on federal lands and involve federal minerals. COGCC staff have been in contact with the BLM, which also has well bonding requirements. The state would ask the BLM to handle plugging of the federal wells if they end up being deemed orphaned.
Said Messner, "I think moving forward this is the type of situation that we want to be paying attention to as we look at bonding and financial assurances."