The Denver oil and gas company K.P. Kauffman, long under pressure to fix what regulators said were multiple violations, including spills, has lost the ability to sell its product and could lose its license to operate if it doesn’t comply with all state rules in six months.
The decision by the Colorado Oil and Gas Conservation Commission on Wednesday follows the approval of a comprehensive cleanup plan in November 2021, multiple hearings and numerous meetings and discussions that the COGCC staff yielded few results.
Other complaints against KPK were leaking flowlines, which carry oil and gas from wells; contaminated soil dumped on a field the company owns with a pond and wetlands nearby; and failure to turn in timely and accurate reports.
In a hearing last week, staffers said only three of 58 projects had been completed. Company representatives said K.P. Kauffman, or KPK, has spent more than $7 million to resolve the problems.
However, the five-member commission agreed with the COGCC staff that KPK remained substantially out of compliance. The commission suspended all the company’s certificates of clearance, which means it can’t sell its oil or gas because it can’t move items off well sites.
If KPK doesn’t bring its operations into full compliance in six months, the commission said its license to operate in Colorado will be revoked. The company has 30 days after a written order is issued to pay a nearly $2 million penalty that was suspended.
The COGCC’s decision to end the compliance plan agreement, imposing the penalty and the loss of certificates of clearance will have profound negative consequences “for the people of Colorado, for K.P. Kauffman Co. Inc. (KPK) and for our more than 150 employees and their families,” the company said in a statement.
The company said it will explore all options, including a possible appeal to Denver District Court.
“I feel sick because for anyone who thinks this is an easy decision for us commissioners, it’s not. I understand the gravity of this and the relevance of the decision that we’re making,” Karin McGowan of the COGCC said.
However, McGowan said the situation has been years in the making, hundreds of days and “there doesn’t seem to be a lot of progress made.”
“Has KPK made some progress? Yes. Is it enough? Unfortunately no,” McGowan said.
The family-owned company has about 1,200 wells in the Denver-Julesburg basin of northeastern Colorado. The majority of the wells are low-producing.
In 2020, K.P. Kauffman agreed to pay $3.5 million in fines and improvements to settle allegations by state and federal regulators of air quality violations.
In a Jan. 20 hearing, John Jacus, an attorney representing KPK, asked the commission to postpone a decision for six months on whether the company was in compliance with its agreement. He said the company was talking to larger operators about a possible sale of a majority of its wells to be used in part to sequester carbon emissions.
The commission rejected the request.
The COGCC has revoked other companies’ licenses to operate, but this is the first time it has terminated a compliance plan agreement, spokeswoman Megan Castle said.
“I’m tremendously disappointed. I was the chief author of the idea around the compliance plan agreement. We spent a lot of time because we felt that there was an ability for KPK to prove itself up and it could return to compliance,” said Jeff Robbins, commission chairman.
Robbins said he realizes the company was only 14 months into the five-year agreement. “But we needed to see substantial compliance along the way.”
That didn’t happen, Robbins added.
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