CO Fines TX Firm for Illegal Well

Wednesday, June 29, 2016 @ 09:06 AM gHale


Atom Petroleum is facing a $239,496 fine for illegally operating an oil and gas well in La Plata County, CO, after willfully neglecting a state order to shut it down.

On Tuesday, the Colorado Oil and Gas Conservation Commission – the state agency responsible for regulating the industry – issued the Texas-based company the penalty, as well as a laundry list of corrective actions for its well site on Fort Lewis Mesa. Originally, state officials deemed the well was a “severe” risk to public health and the environment.

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According to state documents, Atom Petroleum, along with Hoshi Energy, LLC, a Colorado operator out of Castle Rock, purchased 40 wells in bankruptcy court after the previous owner, Red Mesa Holdings, declared bankruptcy in March 2015.

Atom and Hoshi had to pay the state $360,000 in financial assurances, which would have allowed them to begin operations. However, a state inspection in January found the two companies started drilling without paying the fee.

At that time, the state determined Atom and Hoshi’s continued oil and gas activities posed a risk of “significant adverse environmental impacts to public health, safety and welfare, including environment and wildlife resources.”

On Feb. 11, the oil and gas commission issued the operators a Cease and Desist order, demanding all oil and gas activities to shut down immediately, and the operators clean up any leaks and implement any repairs to prevent future spills.

However, on March 1, a state inspector found that Atom’s Taylor 3 well, about a half-mile south of Fort Lewis Mesa Elementary School on Colorado Highway 140, was pumping, and the site was in disarray.

On March 8 and 11, the same state inspector returned to the site to find the Taylor 3 well still operating, and took video of the activity. Atom’s representative, Tom Stover, acknowledged he received the video via email on March 11, yet the Taylor 3 kept pumping until at least March 16, state documents show. The well has since shut down.

Stover did not return calls for comment. In a February interview, Stover said Taylor 3 was no longer in operation, and the company was exploring whether it would be profitable to make the well active again. On Feb. 22, a reporter from the local newspaper visited the site, which was actively producing, had undergone surface construction and contained an open oil pit.

In the state order, Atom contends that the “Cease & Desist order did not provide reasonable notice and therefore the violation should be dismissed,” and went on to question language in the document that made it unclear whether the state wanted the well shut down.

“The gravity of Atom’s failure to cease operation of the pumping unit was severe,” according to the state order, which cited the presence of crude oil and methane at the well head, among other “knowing and willful violations.”

As part of the order, Atom has 45 days to remove all trash from the location, submit a plan for remediating dead vegetation, install a liner at the crude oil tank and clean all oil-impacted soils.

Within 60 days, it must submit a Mechanical Integrity Test on Taylor 3 – which tests if the well can withstand pressure during operations – and improve the access road to the site.

If Atom fails to comply, the state may impose additional fines, revoke the company’s right to conduct oil and gas operations in Colorado and/or claim all its equipment, among other punishments.

According to the state order, Atom and Hoshi have not paid the $360,000 in financial assurances for the 40 wells purchased last fall.

Representatives for Hoshi were not immediately available for comment.