Troubled oil and gas operator K.P. Kauffman once again eluded a cleanup deadline as it won a judge’s stay of a state order to remediate 78 sites and pay a $2 million fine by Aug. 1 or face a shutdown.
The order by the state Energy and Carbon Management Commission, formerly the Colorado Oil and Gas Conservation Commission, said that if the fine wasn’t paid and the cleanup wasn’t completed the company would lose its right to do business in Colorado
In the February order, the commission also directed the Denver-based company, which operates about 1,200 mostly low-producing wells, to suspend sales of oil and gas.
The ECMC action came after more than a year of wrangling over a negotiated remediation plan between the state and the company, also known as KPK.
The company, the target of repeated enforcement actions, sued in March to block the commission order, alleging that the commission order deprived the company of due process and was arbitrary and capricious.
The company said that without a stay of the commission order it risked going out of business before it had its day in court.
Denver District Court Judge Andrew Luxen agreed with KPK’s argument and stayed the ECMC order until the company’s lawsuit can be heard.
“KPK believes the court’s grant of a stay is consistent with the law and facts,” the company said in a statement. “The stay enables the company to continue operating.”
The ECMC declined to comment on the ruling.
Luxen noted that state regulators haven’t enforced the order to suspend sales. In 2023, KPK has sold nearly 65,000 barrels of oil and 330,000 cubic feet of gas, according to state records.
“With the revenue earned while operating as a result of the stay, KPK will maintain its oil and gas production system in Colorado safely and will continue to fund required reporting and ongoing remediation projects at locations subject to COGCC regulatory oversight,” the company said.
In November 2021, the oil and gas commission and KPK agreed on a plan to clean up a spate of spills and releases from wells, tanks and flowlines. That plan was prompted by an enforcement action involving 20 violations at seven sites and followed an April 2021 order to shut 87 wells and clean up 27 sites.
As part of the agreement a $2 million fine was reduced to $795,000 if the sites were cleaned up. KPK said that it could not afford to pay more than $795,000.
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Cleanup work lagged, however, and there were repeated conflicts between KPK and commission staff overseeing the remediation work.
At the February hearing where the ECMC issued its order Commissioner Brett Ackerman said KPK appeared to be “dragging their feet and being adversarial along the way.”
The commission voted to reimpose the full $2 million fine.
Every oil and gas operator in the state is required to file a financial assurance plan to show the resources it will use to plug and remediate its well sites, to guarantee that its wells will not be orphaned leaving the state to do the work.
The commission staff has rejected KPK’s proposed $1.1 million financial assurance plan saying that $13 million is required. The issue is tentatively slated for a full hearing before the ECMC in August.