KP Kauffman may lose rights to Colorado oil and gas business

KP Kauffman, an oil and gas operator plagued by violations, was ordered Wednesday by state regulators to immediately pay a $1.9 million fine and clean up 78 production sites, or lose its right to do business in Colorado.

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

Failure to pay the fine or clean up would result in the company, known as KPK, losing its license to operate in Colorado, according to the Colorado Oil and Gas Conservation Board’s ruling.

“KPK will consider all options arising from the COGCC’s decision, including the possibility of appeal to Denver District Court, where we believe we can bar the Commission from taking such action,” the company said in a statement.

The commission’s action comes after more than a year of wrangling for Denver-based KPK to reach an agreement with the state in November 2021 to clean up spills and discharges from wells, storage tanks and pipelines.

But work is lagging, with only three of the 58 designated locations cleared, and tensions between the company and commission officers. The KPK, Commissioner Brett Ackerman said, looked “scrambling and hostile along the way”.

The agreement was sparked by a massive enforcement action involving 20 violations at seven sites, followed by orders in April 2021 to shut down 87 wells and clean up 27 sites.

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

The global agreement ultimately covered 78 sites, according to COGCC. As part of the agreement, the commission reduced the $2.02 million fine to $795,000, provided the site is cleaned up.

KPK said in its affidavit that it could not afford to pay a fine of more than $795,000.

The committee also scrapped the sweeping cleanup agreement as part of Wednesday’s decision.

In June, staff told the committee that KPK had not made progress and called for sanctions against the company.

At the time, KPK CEO Kevin Kaufman said in testimony that any fines levied would affect cleanup efforts and that efforts were underway to improve communication with the COGCC.

The company still has six months to go, and its performance is the subject of three days of hearings that end Wednesday. Commission staff say little progress has been made.

In some cases, forms had to be sent back as many as seven times due to errors or inaccuracies. In one case, the same solid waste inventory was attached to forms at two different locations.

According to staff, sagging fencing, incomplete sampling and stopped or inappropriate work were found at some locations.

KPK’s attorney, John Jacus, said the company was “generally compliant,” having hired independent contractors and submitted a cleanup plan required by the agreement, and had spent $7.2 million on remediation.

Kevin Tautkus, who oversaw the project for KPK contractor MarCom LLC, said there were “significant delays in form submissions” when he took over the project in July, but said applications had improved.

The KPK said they were sometimes delayed by the slow turnover of committee staff.

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

“KPK has gotten really good,” Kirk said. “It’s a work in progress.”

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

The committee was not convinced.

“There’s a saying: Fool me once and you’ll be ashamed. Fool me twice and you’ll be ashamed,” said Commissioner John Messner. “This is the committee member who won’t be fooled twice.”

Commissioner Karin McGowan said KPK’s litany of excuses appeared to be “similar to an underperforming secondary school student”.

However, the KPK warned that the commission’s actions were “fraught with unintended consequences”.

The decision to prevent the company from selling oil and gas would prevent it from funding its operations and cleanup efforts.

“Instead of protecting public health and the environment as COGCC’s mission calls for, today’s decision puts them at risk,” the company said.

The company made the same argument at the hearing, with Commissioner Ackerman asking Greg Deranleau, COGCC environmental manager, whether taking action against KPK would have an environmental impact.

“By conducting business, KPK has had a significant impact on the environment,” Deranleau said. “I believe their ongoing operations will continue to do so. I don’t believe they will make it worse by ceasing operations.”

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

“But if we stop the bleeding and start cleaning up because there’s no better deadline, then I think the long-term outlook is better,” he said.

Andrew Forkes-Gudmundson, senior manager at environmental group Earthworks, echoes Deranleau’s sentiments. “It’s unfortunate if it means taxpayers have to clean up KPK’s mess, but companies can’t keep polluting the environment.”

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