State set to levy record fine in benzene-guzzling natural gas case

A dubious record will likely be set when the Colorado Oil and Gas Conservation Commission (COGCC) meets over the next two days in Adams County: the highest fine ever levied against an oil and gas company for a spill in the state of Colorado.

Oil and gas drilling near the Roan Plateau. (Photo/
Williams, the largest producer of natural gas on the state’s Western Slope, has agreed in principle to pay $423,300 in the 2008 spring-water contamination case of Ned Prather, an outfitter who chugged benzene-laced water from his drinking well on his 1,800-acre property northwest of Parachute.

After a lengthy and expensive investigation, the COGCC – the state agency that permits and regulates natural gas drilling in Colorado – concluded nearby Williams drilling activity was responsible for the contamination. Prather and his family have filed two lawsuits against Williams Production RMT Co. and Nonsuch Natural Gas Inc. seeking a jury trial and damages.

Williams officials dispute the state’s findings but reportedly want to settle to avoid incurring further legal costs.

“While Williams does not agree with the findings of the COGCC, we have mutually agreed with the COGCC to settle this and move on. With the area’s difficult geologic conditions and additional time and expense required to prove a source, Williams has agreed to pay the fine in lieu of paying legal expenses to fight the allegation,” the company said in a prepared statement last week.

If the state agrees to the terms of the settlement at its Adams County meeting, Williams would top an April fine of $390,000 against Oxy USA for pit-leak contamination in the Cascade Canyon area of Garfield County. Oxy also was hit with a $257,400 fine for a separate spill in the Rock Springs area.

The Prather Springs case has been particularly vexing for the state because it involved several operators in a volatile geological area and because there was a direct and immediate impact to human health when Prather guzzled benzene. The case was cited as a priority for COGCC director David Neslin and his staff in an interview with the Colorado Independent in May.

Neslin said at that time there an unacceptable backlog of enforcement actions for various spills, some of them dating back several years. Enforcement was a priority for the state agency moving forward, he said at the time.

In a more recent interview, Neslin said state staffing is catching up to drilling.

COGCC Director David Neslin
“Certainly staffing has lagged behind industry activity over the past five years,” Neslin said. “We’ve added additional permitting staff to catch up. We’ve also added inspection staff. I think it’s probably accurate to say our compliance staff has lagged behind as the number of active wells has increased during this period.”

Neslin said inspection staff has increased from eight to 14 between 2008 and 2010 and environmental staff has increased from five to nine between 2006 and 2010.

“We believe that the additional staff that was added was necessary and will benefit the state and all of our citizens in helping to ensure that energy is produced in a manner that protects public health, safety and welfare,” Neslin added.

Onshore drilling spills have also been highlighted in the congressional debate over regulatory reforms needed in the wake of the record offshore Deepwater Horizon spill by BP in the Gulf of Mexico. The Colorado Independent, reviewing the COGCC website, found 141 instances of self-reported produced water spills related to natural gas drilling by BP America in La Plata County (Colo.) alone.

Neslin said enforcement remains a top priority for his agency, but admits some of the cases, involving multiple operators drilling deep underground, require an almost CSI-like investigative approach that can be costly and time-consuming.

The operators themselves are statutorily responsible for cleanup costs if a culprit can be determined, but that often takes considerable time. The politically charged amended oil and gas drilling regulations pushed through by Gov. Bill Ritter and approved by the State Legislature in 2009 did increase bonding amounts from $5,000 to $10,000 per well for shallow wells drilled above 3,000 feet and $20,000 for wells drilled deeper than that.

But those bonds are only claimed by the state if the well is abandoned. The Williams fine would likely go into the Oil and Gas Conservation and Environmental Response Fund, which can be used for investigation or reclamation costs. In lieu of a fine, the state can require the operator to pay for an environmental study or some other program related to restoring the impacted resource, such as a water project.

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