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A K.P. Kauffman Company tank battery is pictured at the corner of Weld County roads 39 and 40 on May 14, 2022. (Andy Colwell, Special to The Colorado Sun)

K.P. Kauffman, a violation-plagued oil and gas operator, was ordered by state regulators Wednesday to promptly pay $1.9 million in fines and clean up 78 production sites or lose its right to do business in Colorado.

The company’s ability to sell oil and gas were also suspended and it was ordered to stop production activity at its well sites. It will have 30 days to pay the fine and six months to complete its cleanup. The cleanup clock starts ticking when the official order is issued in about two weeks.

Failure to pay the fine or do the cleanup will result in the company, known as KPK, losing its license to operate in Colorado, according to the ruling by the Colorado Oil and Gas Conservation Commission.

“KPK will consider all options resulting from COGCC’s decision, including the possibility of appealing it to Denver District Court, where we are confident we could enjoin such action by the commission,” the company said in a statement.

The action by the commission came after more than a year of wrangling over an agreement Denver-based KPK struck with the state in November 2021 to clean up spills and releases from wells, tanks and flowlines.

But the work has lagged, with only three of 58 designated sites cleaned and combative relations between the company and commission staff. KPK, Commissioner Brett Ackerman said, looked to be “dragging their feet and being adversarial along the way.”

The agreement was sparked by a large enforcement action involving 20 violations at seven sites and followed an April 2021 order to shut 87 wells and clean up 27 sites.

Violations at various sites included improperly storing waste and failing to report and clean up spills.

The global agreement eventually encompassed 78 sites, according to the COGCC. As part of the agreement, the commission trimmed a $2.02 million fine to $795,000, provided the sites were cleaned up.

KPK in testimony said it could not afford to pay more than $795,000 in fines.

As part of Wednesday’s decision the commission also abolished the comprehensive cleanup agreement.

In June, staff told the commission that KPK was not making progress and asked for sanctions against the company. 

At the time, KPK CEO Kevin Kauffman said in testimony that levying any fines would impair cleanup work and that efforts were being made to improve communications with the COGCC.

The company was given another six months and its performance was the subject of three days of hearings that ended Wednesday. The commission staff said there was little progress to be seen.

In some cases forms had to be sent back as many as seven times for errors or inaccuracies. In one case the same solid waste manifests were attached to forms for two different sites.

Sagging fencing, incomplete sampling and halting or inappropriate work was found at some sites, according to staff presentations.

John Jacus, KPK’s attorney, said that the company was in “substantial compliance” having hired an independent contractor and filed the cleanup plans required under the agreement, as well as having already spent $7.2 million on remediation.

Kevin Tautkus, who is overseeing the project for MarCom LLC, KPK’s contractor, said that when he took over the project in July “form submissions were substantially delinquent” but said the filings have improved.

KPK said that they were sometimes delayed by slow turnaround by commission staff.

Levi Kirk, another MarCom consultant, said that while only three sites have been closed, nine are close to completion and by the end of the year 23 sites could be completed.

“KPK has gotten tremendously better,” Kirk said. “It has been a work in progress.”

But Nikki Graber, the commission’s environmental supervisor for the Denver-Julesburg Basin, said, “I don’t see progress that would lead to closure on many of these sites.”

The commission was not convinced.

“There is a saying: Fool me once, shame on you. Fool me twice, shame on me,” Commissioner John Messner said. “This is a commissioner who will not be fooled twice.”

Commissioner Karin McGowan said KPK’s litany of excuses seemed “similar to a non-performing middle schooler.”

Still, KPK warned that the commission’s action “is loaded with unintended consequences.”

The decision to block the company’s ability to sell oil and gas will make it impossible to fund its operations and cleanup work.

“Rather than protecting public health and the environment, as required by COGCC’s mission, today’s decision puts them at risk,” the company said.

The company made the same argument during the hearing and Commissioner Ackerman asked Greg Deranleau, the COGCC environmental manager, whether taking action against KPK would have environmental impacts.

“With the conduct of its operations, KPK has caused significant environmental impacts,” Deranleau said. “I believe their ongoing operations continue to do so. I am not convinced that them ceasing operations makes that situation worse.”

Deranleau said there was the risk that KPK would cease operations and their wells and sites would end up in the state-operated orphan well program.

“But if we, for lack of a better term, stop the bleeding and start the work of cleaning up then I think the long-term outlook is better,” he said.

Andrew Forkes-Gudmundson, a senior manager with the environmental group Earthworks, echoed Deranleau. “If this means taxpayers are going to clean up KPK’s mess then that is unfortunate, but the company can’t be allowed to continue to pollute.”

Special to The Colorado Sun
Twitter: @bymarkjaffe