Current through Register Vol. 47, No. 17, September 10, 2024
a.
General. If the Commission finds that an Operator has violated the
Act or a Commission Rule, order, or permit, the Commission may issue an order
imposing a penalty. Penalties will be calculated based on the Act and this Rule
525. The Commission's Enforcement Guidance and Penalty Policy also provides
non-binding guidance to the Commission and interested persons evaluating a
penalty for an alleged violation.
b.
Days of Violation. The
duration of a violation presumptively will be calculated in days as follows:
(1) A reporting or other minor violation not
involving actual or threatened significant adverse impacts begins on the day
that the report should have been made or other required action should have been
taken, and continues until the report is filed or the required action is
commenced to the Director's satisfaction.
(2) All other violations begin on the date
the violation was discovered or should have been discovered through the
exercise of reasonable care and continue until the appropriate corrective
action is commenced to the Director's satisfaction.
(3) With respect to violations that result in
actual or threatened adverse impacts to public health, safety, welfare, the
environment, and wildlife resources, commencing appropriate corrective action
includes, at a minimum:
A. Performing
immediate actions necessary to assess and evaluate the actual or threatened
adverse impacts; and
B. Performing
all other near-term actions necessary to stop, contain, or control actual or
threatened adverse impacts in order to protect and minimize adverse impacts to
public health, safety, welfare, the environment, and wildlife resources. Such
actions may include, without limitation, stopping or containing a Spill or
Release of E&P Waste; establishing Well control after a loss of control
event; removing E&P Waste resulting from surface Spills or Releases;
installing fencing or other security measures to limit access (including
wildlife access) to affected areas; providing alternative water supplies;
notifying affected landowners, Local Governments, and other persons or
businesses; and, in cases of actual adverse impacts, mobilizing all resources
necessary to fully and completely remediate the affected environment.
(4) A penalty will be assessed for
each day the evidence shows a violation continued.
(5) The number of days of violation does not
include any period necessary to allow the Operator to engage in good faith
negotiation with the Commission regarding an alleged violation if the Operator
demonstrates a prompt, effective, and prudent response to the
violation.
c.
Penalty Calculation. The base penalty for each violation will be
calculated based on the Commission's Penalty Schedule, which considers the
severity of the potential consequences of a violation of a specific rule
combined with an assessment of the degree of actual or threatened adverse
impacts to public health, safety, welfare, the environment, and wildlife
resources. Pursuant to §
34-60-121(1)(a),
C.R.S., the maximum daily penalty cannot exceed $15,000 per day per violation.
(1)
Penalty Schedule. The
Commission's Penalty Schedule is set forth in the following matrix. The matrix
establishes a daily penalty based on the classification of the Rule violation
(Class 1, 2, or 3) and the degree of actual or threatened adverse impact
resulting from the violation (minor, moderate, or major).
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Rule
Classification
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Class 1: Paperwork or other ministerial Rules, a
violation of which presents no direct risk or threat of harm to public health,
safety, welfare, the environment, and wildlife resources.
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Class 2: Rules related at least indirectly to
protecting and minimizing adverse impacts to public health, safety, welfare,
the environment, and wildlife resources, a violation of which presents a
possibility of distinct, identifiable actual or threatened adverse impacts to
those interests.
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Class 3: Rules directly related to protecting and
minimizing adverse impacts to public health, safety, welfare, the environment,
and wildlife resources, a violation of which presents a significant probability
of actual or threatened adverse impacts to those interests.
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Degree of threatened or actual impact
to public health, safety, welfare, the environment, or wildlife
resources
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Major:
Actual significant adverse impacts
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$5,000
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$10,000
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$15,000
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Moderate:
Threat of significant adverse impacts, or moderate
actual adverse impacts
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$1,500
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$5,000
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$10,000
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Minor:
No actual adverse impact and little or no threat of
adverse impacts
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$200
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$2,500
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$5,000
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(2)
Degree of Actual or Threatened Adverse Impact. The base penalty
for a violation may be increased based on the degree of actual or threatened
adverse impact to public health, safety, welfare, the environment, and wildlife
resources resulting from the violation. The Commission, Administrative Law
Judge, or Hearing Officer will determine the degree of actual or threatened
adverse impact to public health, safety, welfare, the environment, and wildlife
resources, based on the totality of circumstances in each case. The Commission,
Administrative Law Judge, or Hearing Officer will consider the following,
non-exclusive, list of factors in making its determination:
A. Whether and to what degree the environment
and wildlife resources were adversely affected or threatened by the violation.
This factor considers the existence, size, and proximity of potentially
impacted livestock, wildlife, soil, water, air, and all other natural or
environmental resources;
B. Whether
and to what degree Waters of the State were adversely affected or threatened by
the violation;
C. Whether and to
what degree drinking water was adversely affected or threatened by the
violation;
D. Whether and to what
degree public or private property was adversely affected or threatened by the
violation;
E. The quantity and
character of any E&P Waste or non-E&P Waste that was actually or
threatened to be Spilled or Released;
F. Whether any persons were harmed or whether
there was a threat to the health, safety, and welfare of any persons;
and
G. Any other facts relevant to
an objective assessment of the degree of adverse impact to public health,
safety, welfare, the environment, and wildlife resources.
(3)
Penalty Adjustments for Aggravating
and Mitigating Factors. The Commission, Administrative Law Judge, or
Hearing Officer may increase a penalty up to the statutory daily maximum amount
if it finds any of the aggravating factors listed in Rule 525.c.(3).A, exist.
The Commission, Administrative Law Judge, or Hearing Officer may decrease a
penalty if it finds that the violator cooperated with the Commission and other
agencies with respect to the violation and that any of the mitigating factors
listed in Rule 525.c.(3).B exist.
A.
Aggravating factors:
i. The violator acted
with gross negligence or knowing and willful misconduct.
ii. The violation resulted in significant
waste of oil and gas resources.
iii. The violation had a significant negative
impact on correlative rights of other parties.
iv. The violator was recalcitrant or
uncooperative with the Commission or other agencies in correcting or responding
to the violation.
v. The violator
falsified reports or records.
vi.
The violator benefited economically from the violation, in which case the
amount of such benefit will be taken into consideration.
vii. The violator has engaged in a pattern of
violations.
viii. The violation led
to death or serious injury.
B. Mitigating factors:
i. The violator self-reported the
violation.
ii. The violator
demonstrated prompt, effective and prudent response to the violation, including
assistance to any impacted parties.
iii. The cause of the violation was outside
of the violator's reasonable control and responsibility, or is customarily
considered to be force majeure.
iv. The violator made a good faith effort to
comply with applicable requirements prior to the Commission learning of the
violation.
v. The cost of
correcting the violation reduced or eliminated any economic benefit to the
violator, excluding circumstances in which increased costs stemmed from
non-compliance.
vi. The violator
has demonstrated a history of compliance with the Act and Commission's Rules,
orders, and permits.
(4)
Penalty Adjustments Based on
Duration of Violation. In its discretion, the Commission, Administrative
Law Judge, or Hearing Officer may decrease the daily penalty amounts for
violations of long duration to ensure the total penalty is appropriate to the
nature of the violation.
d.
Pattern of Violations, Gross
Negligence, or Knowing and Willful Misconduct.
(1) The Director will apply for an OFV
hearing when the Director determines an Operator has:
A. Engaged in a pattern of
violations;
B. Acted with gross
negligence or knowing and willful misconduct that resulted in an egregious
violation; or
C. Engaged in an
activity that resulted in death or serious injury.
(2) If the Commission, Administrative Law
Judge, or Hearing Officer finds after hearing that an Operator is responsible
for the conduct described in Rule 525.d.(1), the Commission, Administrative Law
Judge, or Hearing Officer may suspend an Operator's Certification of Clearance,
withhold new drilling or Oil and Gas Location permits, or both. Such suspension
will last until such time as the violator demonstrates to the satisfaction of
the Commission that the Operator has brought each violation into compliance and
that any penalty assessed, which is not subject to judicial review, has been
paid, at which time the Commission may vacate the order.
(3) The Commission, Administrative Law Judge,
or Hearing Officer will consider an Operator's history of violations of the Act
or Commission's Rules, orders, or permits, and any other factors relevant to
objectively determining whether an Operator has engaged in a pattern of
violations. For an Operator's history of violations, the Commission,
Administrative Law Judge, or Hearing Officer may only consider violations
confirmed by Commission order through an AOC or OFV.
e.
Voluntary Disclosure.
(1) The Director may consider a penalty
reduction for a violation of the Act or any Commission Rule, order, or permit
voluntarily disclosed by an Operator if:
A.
The disclosure is made promptly after the Operator discovers the
violation;
B. The Operator
discovered the violation independent of, and unrelated to a Commission
inspection or an NOAV;
C. The
Operator cooperates with the Director regarding investigation of the disclosed
violation; and
D. The Operator has
achieved or commits to achieve compliance within a reasonable time and pursues
compliance with due diligence.
(2) The Director may not consider a penalty
reduction if:
A. The disclosure is made for
fraudulent purposes;
B. The
disclosed violation is part of a pattern of violations; or
C. The disclosed violation was egregious and
the result of the Operator's gross negligence or knowing and willful
misconduct.
(3) If the
Director determines that any of the factors in Rule 525.e.(1) are not met or
that the factors in Rule 525.e.(2) are met, the Director may consider the fact
that the Operator self-reported the violation as a mitigating factor pursuant
to Rule 525.c.(3).B.(i).
f.
Public Projects. In its
discretion, the Commission, Administrative Law Judge, or Hearing Officer may
allow an Operator to satisfy a penalty in whole or in part by a public project
that the Operator is not otherwise legally required to undertake. The costs of
the public project may offset the penalty amount dollar for dollar, or by some
other ratio determined by the Commission. A public project will provide
tangible benefit to public health, safety, welfare, the environment, or
wildlife resources. The Commission favors public projects that benefit the
persons or communities most directly affected by a violation, or that provide
education or training to Local Government entities, first responders, the
public, or the regulated community related to the violation.
g.
Payment of Penalties. An
Operator will pay a penalty imposed by Commission order, by certified funds
unless otherwise agreed to, within 30 days of the effective date of the order,
unless the Commission grants a longer period or unless the Operator files for
judicial appeal, in which event payment of the penalty will be stayed pending
resolution of such appeal. An Operator's obligations to comply with the
provisions of a Commission order requiring compliance with the Act or
Commission's Rules, orders, or permits will not be stayed pending resolution of
an appeal, except by court order.
