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Colorado regulators out of patience with oil well cleanup

K.P. Kauffman Co. says it will be in better financial condition if it sells northeastern Colorado wells to a company proposing to use them for a carbon capture project
A K.P. Kauffman Company tank battery at the corner of Weld County Roads 39 and 40 on May 14, 2022. (Andy Colwell, Special to The Colorado Sun)

Colorado oil and gas regulators Friday rejected a bid by violation-plagued K.P. Kauffman Co. to delay for another six months an assessment of whether it is meeting a negotiated cleanup plan.

Last June, the Colorado Oil and Gas Conservation Commission staff pressed for penalties for failure to meet the cleanup plan, but the commission agreed to give the company, which operates about 1,200 low-producing wells, another six months.

However, in granting the extension Commission Chairman Jeff Robbins said it was time for the company to “comply from the top down or not, and if it is ‘or not,’ I am ready to throw the book at them.”

That six-month assessment is scheduled for Jan. 25, but KPK filed a request for another six months while it negotiates the sale of its Spindle Field assets, 68,000 acres of leases and hundreds of wells in northeastern Colorado, to a larger operator.

That larger – undisclosed – operator’s plan would be to pump carbon dioxide into the old field to enhance oil recovery and also serve as a carbon capture and sequestration project.

The sale would reduce KPK’s number of old wells, improve its financial positions and “would serve to more quickly and effectively address this commission’s concerns,” John Jacus, the company’s attorney, told the commissioners.

Proceeding with the enforcement review and possible penalties could hamper the sale of the oil field and the remediation project, Jacus said.

The motion was opposed by the COGCC staff, which through its attorney, Assistant Attorney General Caitlin Stafford, said that KPK is falling behind its negotiated 2021 plan to clean up 74 sites.

The agreement was the result of an enforcement action on 20 alleged violations at seven sites and came after 87 wells were ordered closed for violations earlier in 2021.

The company was fined $2 million, but allowed to pay $795,000 – all KPK said it could afford – provided it adhered to its cleanup plan.

Stafford told the commission that the company is not meeting its obligations.

“KPK is making little progress in addressing its multitude of core remediation projects subject to the compliance plan agreement,” she said. “Since June, and as we will likely discuss at the upcoming hearing, KPK has closed only one more remediation project … bringing their total to three out of 58 remediation projects.”

Jacus said that the company is prepared to show that it is making progress on the plan and has spent $7 million on remediation.

Robbins asked for more details on the potential sale, but Jacus said that negotiations were confidential and constrained by nondisclosure agreements.

The oil field sale and carbon project “could have a positive impact for the commission and the state of Colorado by helping to reduce greenhouse emissions, but based on the lack of information about the sale, transfer and future plans for the Spindle Field, much of this seems speculative,” Stafford said.

The commission unanimously rejected KPK’s request.

“How does a continuance ensure environmental protection for the remaining spills that are ongoing?” Robbins asked.

Commissioner Mike Cross questioned whether moving ahead with this week’s hearing and even levying sanctions for noncompliance would jeopardize the proposed oil field sale.

“It sounds to me as though this is kind of a roundabout way of saying we don’t want to have the hearing next week, because if we were to have any kind of sanctions levied against us, we would potentially have a sale price that would be lower,” Cross said. “And that is not our job to protect the sale price of any kind of assets.”

Continued and regular hearings and oversight of KPK’s cleanup plan were “imperative to the integrity of the compliance process,” Commissioner Brett Ackerman said.

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