KP Kauffman, which operates 1,200 low-producing oil and gas wells on the Front Range, was fined $1.6 million by state regulators Monday for a string of violations from improperly storing waste to failing to report and address spills.
It is one of the largest fines the Colorado Oil and Gas Conservation Commission has ever imposed and the biggest for a small, independent operator.
The largest penalty was levied in 2020 against Occidental Petroleum Corp., the largest operator in the state, which was fined $18.25 million for a 2017 house explosion in Frederick that killed two people. Noble Energy, the second biggest Colorado driller, was fined $1.6 million in 2018 for failing to conduct safety tests on wells.
The COGCC staff sought $3.7 million in fines against family-owned KP Kauffman, also known as KPK, for multiple rule violations at eight sites. The complaint covered 70 pages.
The staff also contended that these infractions were part of a larger pattern of bad behavior that could lead the commission to ban Denver-based KPK from operating in Colorado.
“This case is straightforward. KPK has shown itself to be an operator that is unreliable, incapable and impactful,” Caitlin Stafford, an assistant state attorney general, said in her opening statement at the hearing, which began Aug. 10.
The question of whether there is a pattern of violations and behavior will be the subject of commission hearings starting Sept. 20. The commission will also hear testimony and consider the company’s ability to pay the fine.
At the outset of the hearings over the fines, KPK’s outside counsel, John Jacus, an attorney at Davis, Graham and Stubbs, called the staff’s proposed fines “grossly exaggerated” and asked the commission to set penalties that were “right-size and equitable.”
Jacus described KPK as “a proud family-owned oil and gas producer,” although he conceded “KPK is not perfect.”
Through several days of hearings, the five-member commission reviewed five of the violation notices assessing the severity of violations, the duration and whether there were mitigating circumstances.
Many of the fines were scaled back, but commissioners sometimes voiced concerns about KPK’s actions. “This is not the way business should be conducted in the state of Colorado,” Commission Chairman Jeff Robbins said at one point.
Commissioner Bill Gonzalez called actions outlined in one violation “a series of poor operations all around.”
For two violation notices, Robbins recused himself after KPK raised a potential conflict of interest since the notices were filed when he was COGCC director.
Another violation notice was withdrawn because the actions were beyond a statute of limitations.
In all, the commission levied fines for 28 violations. The largest was a $388,000 fine for improperly carting away tainted soil from a well site and spreading it on a field behind a KPK office in Weld County.
“I am disappointed the fines weren’t higher, but I am not surprised,” said Andrew Forkes-Gudmundson, deputy director of the League of Oil and Gas Impacted Coloradans, a nonprofit community group. “The commissioners were really grappling with the burden of proof.”
Jacus, in an email, said, “The K.P. Kauffman Company appreciates the commissioners’ hard work through two phases of hearing evidence and testimony in these consolidated proceedings.”
“Because a third phase remains where additional penalty adjustments will be considered it is inappropriate to comment on tentative adjustments made by the commissioners to proposed penalties at this time,” Jacus said.
In his opening remarks at the hearing, Jacus said KPK can not pay “anywhere near” what the commission staff was seeking and that heavy fines could put the company out of business.
In January, KPK reached a $3.5 million settlement with federal and state air quality regulators over emissions violations from its tanks that included $2.5 million in equipment upgrades and a $1 million civil penalty.
In April, the COGCC ordered KPK to close 87 wells and clean up 29 sites for violations ranging from fouling farm fields to covering the road in front of a high school with oily waste.