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Drilling company may face record fine for gas leak

Dennis WebbGlenwood Springs correspondent

A proposed $371,000 fine against EnCana Oil and Gas for violations that caused a gas seep on West Divide Creek near Silt would be the state’s highest penalty ever for a single energy-drilling incident.The fine might have been even higher, however, if Garfield County had had its way.EnCana agreed to admit to the violations, and to pay the fine, after discussion with staff members of the Colorado Oil and Gas Conservation Commission. At a hearing at the Ramada Inn in Glenwood Springs Monday, the commission found the company had committed the violations.The hearing will continue today, as the commission determines whether the $371,000 penalty is appropriate and what remedial actions should occur.Brian Macke, acting director of the Colorado Oil and Gas Commission, said he is happy with the size of the fine EnCana has offered to pay, and called it “very sizable.”EnCana faces a maximum fine of $464,000 for violations connected with the seep, which resulted from problems with a well drilled south of Silt. However, under the proposed resolution, it would receive a 10 percent fine waiver for its prompt response to the seep and another 10 percent off for cooperating with regulators since then.The maximum fine amount is determined based on the number of violations and how many days they occurred. A pre-hearing agreement between COGCC staff and EnCana set the maximum number of days for any violation at 55 – from Feb. 9, when the company first began experiencing problems on the well believed to have caused the seep, to April 5, when it conducted remediation work at the well aimed at ending further gas seepage.However, Garfield County Attorney Don DeFord questioned during Monday’s hearing why the violation period didn’t extend until now, due to continuing contamination of water by the gas, or at least until July 9, when monitoring wells found high levels of cancer-causing benzene related to the gas.Carolyn Lamb, an attorney with the Western Colorado Congress citizens group, shared DeFord’s concern. But Erika Enger, an attorney for EnCana, said the COGCC’s rules give it discretion in determining the length of time of a violation.”If we’re going to count into the future we may never end this hearing,” she said.COGCC’s staff is recommending that, in lieu of EnCana paying a fine that would go into the state’s general coffers, it spend an equal amount on a local public project.If the commission agrees, it may suspend collection of the fine until its Sept. 20 meeting, to give the parties a chance to propose an appropriate project.Drilling moratorium may continueCOGCC’s staff also recommended that a moratorium on drilling and well completion operations within a two-mile radius of the seep remain in effect for the time being. Regulators first want to evaluate EnCana’s compliance with remediation requirements required in connection with the seep.They also want to judge the effectiveness of new drilling rules imposed on all operators drilling wells in the Mesaverde geological formation or deeper in Garfield County’s Mamm Creek Field, in hopes of preventing another gas seep.Garfield County Commissioner John Martin said he would hope to see EnCana’s fine go toward cleanup of contamination from the seep, as well as water and air quality monitoring in drilling areas.Martin also cautioned that much of the proposed fine might not be spent locally. He said state costs related to the seep investigation and enforcement of regulations will be recovered from the fine amount.Martin also is disappointed that EnCana, while admitting to violations, is not admitting any liability related to the gas seep.”If they take the responsibility, how is it that they don’t have the liability?” he asked.He speculated that the company fears leaving itself legally exposed in the case of any lawsuits filed in connection with the suit if it admits liability.EnCana continues to deny that evidence conclusively points to the well as being the cause of the gas seep in West Divide Creek. However, company spokesman Walt Lowry said there is a reasonable chance that it is the cause. EnCana did not contest the state’s allegation that its actions resulted in violation of state water quality standards through benzene contamination of surface water.DeFord expressed frustration that the county and Western Colorado Congress, which had been granted formal status as intervenors in the gas seep case, weren’t involved in discussions between EnCana and the COGCC staff that led to agreement on what violations EnCana would admit to and what level of fine it would offer to pay.He said the county wasn’t notified of the agreement until Thursday. That made it difficult for him to adequately analyze the specifics of the violations EnCana is admitting to and raise any concerns over the agreement.The seep was first discovered April 1, when gas bubbles were found on West Divide Creek. But state regulators testified Monday that EnCana experienced problems with the nearby well as early as February, yet failed to report them promptly to the state as required.The state has since determined that EnCana was unsuccessful in trying to seal the well with cement, allowing gas to escape into groundwater.Macke called EnCana’s violations “extremely serious,” due to the water contamination that occurred. Likewise, it was “very unusual” for the state to issue a notice of drilling rule changes to operators in the Mamm Creek field to prevent a recurrence of the seep, he said.DeFord questioned whether the COGCC is adequately staffed to monitor drilling and respond to problems in a timely fashion in the future. But Jaime Adkins, the COGCC’s area engineer in northwest Colorado, noted that hundreds of wells had been drilled in the Mamm Creek Field prior to the one that caused the seep, and without a similar incident occurring.”That would suggest to me that our inspection level has been fairly effective,” Adkins said. Macke said he is concerned about the number of other alleged violations the COGCC has issued EnCana for its Garfield County operations. But he also noted that EnCana is doing a lot of drilling in the area, and praised the company for its efforts to mitigate impacts through directional drilling, noise abatement measures, and piping rather than trucking water.’Cost of business’Peggy Utesch, who lives south of Silt and has been active in drilling issues through the Grand Valley Citizens Alliance, said she thinks it was good that EnCana may be fined based on maximum penalties. But she said the fine is still far too little, given the amount of money EnCana makes.”This fine is the cost of doing business. It’s meaningless to them,” she said.She said the COGCC needs to raise its fine structure to a point where it has more of a punitive effect.She said it was the citizens alliance that suggested that the state have EnCana spend the fine money on a local public project. She would like to see the money come back to residents affected by drilling in the Divide Creek area, or that they be given some say in how it is spent.EnCana’s Lowry said he believes the fine is appropriate, given its record-setting amount and the unusual nature of the gas seep, which he said apparently resulted from gas finding its way into an underground fault that outcropped a good distance away at West Divide Creek. He said the company has worked with the state to improve the cementing process to help prevent another seep.He said the company looks forward to today’s public comment section of the gas seep hearing.”We’ll be able to listen to their concerns and be able to address them,” Lowry said.


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