Two southern Weld County communities are trying a novel strategy to force oil and gas operator K.P. Kauffman to plug old wells that they say are a potential threat to safety and an obstacle to development.
The town of Frederick and its Carbon Valley neighbor, Dacono, are using a revised section of the Colorado Energy and Carbon Management Commission’s rules to petition for the commission to order the company, known as KPK, to plug and abandon 45 wells.
The communities have identified the wells as no longer being “used or useful” and say they pose a threat to public health, safety and welfare and want the ECMC to order them be plugged and abandoned.
This had been a power reserved for the ECMC, but in 2022, when the commission adopted new financial assurance rules, it broadened this section of the rules to allow relevant local governments to petition for closures.
This is the first time a local government has tried to exercise this power. ECMC hearings on the petition are set to begin Wednesday.
It is not, however, the first time Frederick has tried to get KPK wells plugged. In 2023, the two communities tried to use the commission’s new financial assurance rules to get 95 wells plugged. The wells, they said, hampered development. They were unsuccessful.
Denver-based KPK is facing a $1.9 million fine for violations, having run up 148 violation notices since 2020, according to state records — and has been legally sparring with the ECMC for the past three years.
KPK in its prehearing statement contended that the rule, Section 211, was being misapplied and that an order to plug the wells would “strip KPK of its valuable assets and mineral leaseholds without just compensation.”
The company also said that the oil and gas consultants the municipalities employed had underestimated the value of the oil and gas in the wells and overestimated well costs.
In documents obtained through discovery, KPK contended that the municipalities coordinated with developers to identify wells holding up development to include in the application.
“Making way for surface development is not a proper purpose of Rule 211, and the application should be denied on this basis alone,” the oil and gas operator said.
“The subject wells, and the underlying leaseholds, have significant value, and do not pose the threats to (public health, safety, welfare and the environment) alleged,” KPK said. “The subject wells should not be plugged and abandoned by the commission, and certainly without just compensation.”
An aged sign marking the Cosslett A lease battery No. 1, a few hundred feet east of the Legacy Park neighborhood and across a field from the Sharpe Farms neighborhood in Dacono. (Dana Coffield, The Colorado Sun)There are 95 KPK wells in Frederick that produce little or no oil or gas and there are 59 KPK wells in Dacono, but the municipalities targeted 26 wells in Frederick and 19 in Dacono that are closest to homes, schools and parks.
In a filing Frederick said “the threat the 26 subject wells and locations pose are due to the numerous spills that have occurred within Frederick but also their proximity to homes.”
There have been 45 reported KPK spills in Frederick since 2018, including four in a two-week period in January, according to an ECMC filing.
Twenty of the wells are located within 500 feet of homes, in one case 76 homes are within 500 feet of a well.
The main battleground at the hearing, which will run over several days, will be an assessment of each well.
For example Dacono’s oil and gas consultant evaluated KPK’s Cosslett A 4 well, just southeast of the rapidly developing intersection of Interstate 25 and Colorado 52, which has not produced oil or gas in three years, and found it had an operating loss for that period and therefore was no longer “used and useful.”
When a well is no longer used and useful, under state rules it should be plugged and abandoned.
KPK, however, disputed the Dacono findings saying that by its assessment the well still has $143,400 of total proven value and that it hasn’t produced because it is under a closure order from the ECMC.
Other oil and gas operators in the communities, including Occidental Petroleum, Civitas and PDC Energy (now part of Chevron), have plugged dozens of wells, Frederick and Dacono said in a filing. KPK has plugged a few wells, but only when paid to do so.
“KPK should have plugged and abandoned its old wells years ago,” the municipalities said. “The reason KPK has not done so is because KPK demands $250,000 or more to plug and abandon a well to profit from its plugging liability obligations at the expense of landowners or the public.”
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