FREDERICK — The past, in the form of aging oil and gas wells, has become a barrier to the future for this town, 29 miles north of Denver, especially the wells owned by one operator, the K.P. Kauffman Co.
The town is part of the fast-growing Front Range suburbs, but far enough north that home prices are a little more reasonable. “It is a bit easier for families to start their lives and families here because it is a little less expensive,” Mayor Tracie Crites said.
Frederick has been growing at 6% to 8% a year, but the more than 300 wells that riddle the town are a constant obstacle, particularly to commercial, industrial and mixed-use developments that Crites said are vital to keeping local taxes reasonable.
“We are trying to bring in commercial and industrial growth and we find developers say they are stuck and they cannot develop on land they own because of oil and gas wells,” Crites said. “It has led to developers not considering the Town of Frederick.”
The biggest problem has been K.P. Kauffman, or KPK, which owns 107 wells in town — 95 that produce little or no oil or gas, according to state production records. Still, when a developer seeks to have KPK wells removed the company has demanded between $250,000 to $300,000 to uproot a single well.
Other parties own the land, but an oil company that has mineral rights beneath is entitled to access the property to put in wells, tanks and pipes.
Most of the wells in town are 50 or more years old and produce less than 2 barrels of oil and gas a day. These “low-producing” wells pose a greater financial risk, according to state regulators. Some KPK wells in town produce a fraction of a barrel a day.
The situation has been exacerbated by a string of KPK oil spills, including one in front of the town’s high school, as well as incidences of soil contamination and a volley of violation notices from state inspectors.
In an unprecedented move, Frederick is seeking to have the Energy and Carbon Management Commission, formerly the Colorado Oil and Gas Conservation Commission, to require KPK to plug and abandon the 95 low-producing wells as part of the new rule that companies show they have the financial resources to restore their sites.
KPK must begin showing it has means to manage plugging
The ECMC hearings on KPK’s financial assurance plan are slated to start Wednesday and while the focus of such reviews for other operators have been on the costs of plugging and the adequacy of financial assets, the appeals by Frederick and its neighbor Dacono, which has 59 KPK wells, to order plugging are unique.
“For years there were assumptions that things were being handled, and criteria, qualifications and inspection were being met,” Crites said. “But over those years there have been several K.P. Kauffman spills that were a challenge for our community.”
“Within the last year we have decided to no longer assume but to take a stronger seat at the table,” Crites said.
In its filings to the ECMC, KPK opposed the attempt by Frederick and Dacono to “usurp this proceeding in an effort to require the (plugging, abandonment) and reclamation of over 100 wells in those two jurisdictions.”
The company said it opposed introducing any facts or arguments on plugging by the two municipalities and maintained those claims should be heard separately “at a later date.” KPK declined to comment.
Late Tuesday afternoon KPK filed a motion with the commission to cancel the hearing and argued that Frederick and Dacono do not have standing in the case, even though they had been approved by an ECMC hearing officer. KPK did not raise the issue at an Aug. 9 session with the hearing officer to go over motions from the various parties.
KPK has been a chronic violator of state oil and gas rules. Under an accord with the commission it agreed to cleanup 78 sites, but has been lagging in that effort. It is facing a $1.9 million fine and has been threatened by state regulators with losing the right to do business in Colorado.
Frederick has been ground zero for some of KPK’s high-profile incidents. In March 2019, oil surfaced on the north side of Tipple Parkway, directly across from Frederick High School and 40 feet from the closest home. The town informed KPK about the leaking flow line.
The company repaired the line and put it back in service, but the line disrupted traffic through the next summer as oil wastes were flushed across the parkway when it rained, and fluids washed into storm sewers. The remediation of the KPK site that led to the spill, part of the cleanup agreement, is still not complete.
On Aug. 12, 2022, a homeowner found oil seeping out of the ground and contacted the fire department, which in turn called KPK. In its filing, the town said that of 17 spills, only two were reported by the company and many were found by Frederick landowners and the residents.
The well that was the source of the oil, was shut off, the area fenced in and KPK removed the contaminated soil and replaced the leaky flowline, completing the remediation.
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But as of May, 11 of 17 KPK remediation projects in town were still ongoing, and some like the Grant Tank Battery, where soil and groundwater may have been contaminated, have been open for years. The Grant Tank Battery is 800 feet from the Legacy Elementary School.
“The contamination at the Grant Tank Battery site presents threatened or actual impacts to public health, safety, and welfare, the environment, and wildlife resources,” a February 2023 oil and gas commission order stated. “Soil impacts and groundwater impacts remain in place, and the extent of those impacts remains undefined.”
The land upon which the Grant Tank Battery sits is owned by BCL Colorado LP, developer of Clearview Villages, 301 single-family homes on 103 acres. Most of the land is across the road from the elementary school, but the parcel also includes the tank battery on the north and two KPK pumpjacks to the south.
Efforts to negotiate with KPK to remove the tank battery and the pump jacks were unsuccessful, according to Louis Conrad, Clearview Villages’ developer. KPK wanted a fee to do the work. “They started very high, a million dollars to remove their installations and then worked their way down, the process takes time,” Conrad said. “I told them your number just doesn’t work.”
KPK executives were responsive and cordial, but they never got to a workable figure. In the end, rather than build homes on the land Conrad opted to dedicate the areas for greenspace.
Not all oil and gas operators are the same
Another operator, Crestone Peak Resources, part of Civitas Resources, also had oil and gas equipment on the Clearview Villages land, Conrad said. “My experience with Crestone was very different from KPK.”
“Crestone plugged their wells, removed oil and water tanks, removed flow lines, abandoned its locations with no fee to the developers,” he said.
Another 40-acre parcel on which a developer hopes to build a mixed-use complex to be called Miner’s Town Center, featuring stores and housing for older adults, has six well pumpjacks on it. The quote from KPK for removing them: $250,000 each.
“That’s $1.5 million before the developer does anything,” said Ryan Johnson, Frederick’s assistant town manager, said.
In its financial assurance plan to the ECMC, KPK estimated the cost of closing and remediating the 1,089 of the company’s 1,206 wells that fall under the plan at almost $43 million or about $39,500 a well.
When asked to remove its wells, Crites said KPK told the town it was “unable to provide the revenue” to plug and abandon wells. “Among our many oil and gas companies K.P. Kauffman and the town of Frederick haven’t always had the strongest relationship,” she said.
Meanwhile, Frederick has good relationships with other operators, such as Occidental Petroleum and Civitas Resources, which are systematically, albeit slowly, plugging their wells, Crites said.
“It is a balance for us,” Crites said, noting that the town’s oil and gas royalty fund helps finance a host of local programs and scholarships. The fund received $63,274 in royalty and investment revenue in 2020 and $49,500 in 2021, the town’s annual financial report.
And so life goes on, as Frederick gets ready for its annual Miners Day celebration on Sept. 6 — commemorating the town’s start as a 19th century coal mining outpost — with bands, a parade with floats and a 10-kilometer burro race (bring your own burro or rent one).
The KPK wells littering the town, however, are not a problem that can be fixed at town hall, Crites said.
Frederick is not only looking to the ECMC, but has written to Gov. Jared Polis seeking help, she said. “We are not able to combat the challenges of an organization like K.P. Kauffman brings to our community on our own.”