Transcript Slide 1

Notices of Violations
and
Consent Orders
in
West Virginia
June 21, 2011
Kenneth E. Tawney, Esquire
500 Lee Street East, Suite 1600, Charleston, WV 25301
Phone: 304-340-1189 • Fax: 304-340-1080
[email protected]
w w . j a c k s o n k e l l y . c o m • www.jacksonkelly.com
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Permitting Authority
• In order to commence any well work, a person or
company must first receive a permit from the
Office of Oil and Gas (OOG)
– W. Va. Code § 22-6-6
• In addition to issuing a permit for well work, the
OOG also issues a separate or consolidated
water permit which governs and controls the
discharge of pollutants into West Virginia waters
– W. Va. Code § 22-6-7
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Penalty Provisions
• The Department of Environmental Protection
has authority to issue citations for violations
concerning both drilling and water use
– W. Va. Code § 22-6-3; § 22-11-6
• An oil and gas inspector or agency director can
find a violation of any applicable provision of the
West Virginia Code, any rule, or any order
– W. Va. Code § 22-6-3
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Potential Water Violations
• Allowing sewage, industrial wastes, or other wastes, or
the effluent therefrom, produced by or emanating from
any point source, to flow into the water of the State
– W. Va. Code § 22-11-8
• Failing to comply with water quality standards and
effluent limitations
– W. Va. Code § 22-11-6
• Violating any provision of a prior Consent Order
– W. Va. Code § 22-6-3
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Possible Penalties For
Violations
• An inspector can shut down operations
until a violation is abated
• If an imminent danger exists, the inspector
can issue an order requiring the well
operator to cease further operations until
the imminent danger has been abated
– W. Va. Code § 22-6-3
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Possible Penalties For
Violations
• If the inspector finds that the violation doesn’t
present an imminent danger, he or she will
determine a reasonable time in which the
violation must be abated
– A “reasonable period of time” for a violation that
doesn’t present an imminent danger shall not exceed
seven days
• W. Va. Code § 22-6-3
– This period can be extended up to thirty days for good
cause
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Possible Penalties For
Violations
• Any person or corporation that willfully violates
any provision or rule is subject to a civil penalty
not to exceed $2,500 a day
– W. Va. Code § 22-6-34
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Possible Penalties For Water
Violations
• If any discharge or pollution constitutes a
clear, present, and imminent danger to the
health of the public or to the fitness of a
drinking supply, the director may issue an
order requiring that the discharge be
immediately stopped and abated
– W. Va. Code § 22-11-19
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Possible Penalties For Water
Violations
• There is a cap on fines at $25,000 per day for any
person or company that violates any provision of
any permit issued under or subject to this article
– W. Va. Code § 22-11-22
• A company’s owner or operator can be found guilty
of a criminal misdemeanor and sentenced up to six
months in county jail for polluting water if he does so
without a permit or refuses to comply with an issued
permit
– W. Va. Code § 22-11-24
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Possible Penalties for Abandoned
Well Violations
• Any person who fails to plug an abandoned
well within thirty days from the ordered date
can be fined $25,000
– W. Va. Code § 22-10-9
• This period can be extended up to one
hundred eighty days upon a showing of good
cause
– W. Va. Code § 22-10-9
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Prior Policy on Calculating Penalties
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Seriousness :
Negligence :
Good Faith:
History:
Economic Benefit:
Total:
________
+ ________
– ________
+ ________
+ ________
= ________
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Seriousness of Violation
• Based exclusively on the harm or potential harm to
human health or the environment
– Minor - $200-$1000
• No potential for harm/administrative violation
– Moderate - $1000-$2000
• Potential to harm human health or environment
– Major - $2000-$5000
• Has resulted in harm or is an imminent danger
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Negligence
• Reflects the amount of effort expended by the operator
to prevent the violation
– 0% Increase in Base Assessment
• Beyond the operator’s control, so there was no negligence
– 33% Increase in Base Assessment
• Oversight by operator, could have been avoided if more
conscientious
– 67% Increase in Base Assessment
• Obvious and no action was taken prior to the violation being written
– 100% Increase in Base Assessment
• Operator failed to adequately respond to instructions by inspector to
prevent the situation
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Good Faith
• Refers to the promptness by the operator to
abate the violation
• Reduces the penalty
– 50% Decrease in Base Assessment
• Operator was already taking remedial actions at the time the
violation was written
– 25% Decrease in Base Assessment
• Operator took prompt remedial action and abated the
violation within the initial or extended time period
– 0% Decrease in Base Assessment
• Operator failed to take remedial actions to abate violation
during abatement period
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History of Prior Violations
• All violations written against the operator
within the past 3 years are considered
– 1 – 5 Violations
– 6 – 10 Violations
– 11 – 15 Violations $800
– 16 – 20 Violations
– 21+ Violations
$200
$400
$1600
$3200
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Economic Benefit
• In addition to the above factors, a penalty includes an
amount that represents the economic benefit that the
operator received through noncompliance
• Includes delayed or avoided costs through:
– Failure to install, operate, or properly maintain required
treatment or control systems
– Failure to conduct required testing or monitoring
– Improper disposal
– Failure to obtain necessary permits
– Failure to establish or follow methods required by rules or
permits
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New Approach to
Assessing Penalties
• While this is the adopted assessment
policy published on DEP’s website, the
agency is currently assessing penalties for
water violations in a manner which assess
the higher penalties permitted for such
violations
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Contesting A Notice of Violation
Under Chapter 22, Article 6
• Only 15 days to apply to the director of OOG for
annulment or revision of a finding or order
– W. Va. Code § 22-6-4
• The director then makes a special inspection after which
an order is issued that includes findings and annuls,
revises, or affirms the order
– W. Va. Code § 22-6-4
• All final orders issued by the director are subject to
judicial review in circuit court
– W. Va. Code § 22-6-5
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Contesting A Notice of Violation For
A Water Violation
• If the director issues an emergency order, an operator must act
immediately to comply with the order, but can submit a notice for
appeal and receive a hearing within 10 days.
– W. Va. Code § 22-11-19
• An appeal must be filed with the Environmental Quality Board within
thirty days from the date that the order was issued.
– W. Va. Code § 22B-1-7
• Within five days of the appeal the board will then make and enter an
order continuing, revoking, or modifying the emergency order.
– W. Va. Code § 22-11-19
• All final orders issued by the director are subject to review by the
Environmental Quality Board
– W. Va. Code § 22-11-21
• The EQB’s decision may be appealed to a circuit court
– W. Va. Code § 22B-1-9
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Consent Orders
• At any point after receiving a citation for
either a drilling or water violation, an operator
may settle the matter through a Consent
Order
• The company and the DEP will come to an
agreement on what penalties the company
will pay and what corrective actions it will
take to prevent future violations
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Office of Oil and Gas
601 57th Street
Charleston, WV 25304
(304) 926-0450 fax (304) 926-0452
Earl Ray Tomblin, Governor
Randy C. Huffman, Cabinet Secretary
www.dep.wv.gov
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CONSENT ORDER
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TO:
[OPERATOR]
DATE:
February __, 2011
ORDER NO.: 2011-xxx
INTRODUCTION
This Consent Order (hereinafter “Order”) is issued by the Office of Oil and Gas (hereinafter “OOG”), by
and through its Chief, pursuant to the authority of W. Va. Code §§ 22-1-1 and 22-6-1 et seq. to [OPERATOR].
(hereinafter “**” or “Operator”), collectively the “Parties”.
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Consent Orders
Avoiding Future Liability
• In drafting the consent order, special precaution must be
taken to ensure that your company is protecting itself against
potential liability to third parties
• The Consent Order will contain sections as follows:
– “Introduction
– “Findings of Fact”
– “Conclusions of Law”
– “Order for Compliance”
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– If not carefully drafted, these Findings of Fact
could have the effect of admitting fault. This
fault could then be used against you by a third
party who is claiming damage
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Consent Orders
Avoiding Future Liability
• In West Virginia, the violation of a statute is
prima facie evidence of negligence
– Syl. Pt. 1, Anderson v. Moulder, 183 W. Va. 77, 79,
394 S.E.2d 61, 63 (1990).
• A prima facie case of negligence supports a jury
finding of negligence which was the proximate
cause of a plaintiff’s injuries without any other
evidence
– Morris v. City of Wheeling, 140 W. Va. 78, 82 S.E.2d
536 (1954)
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Consent Orders
Avoiding Future Liability
• “Any person injured by the violation of a statute
may recover from the offender such damages as
he may sustain by reason of such violation,
although a penalty or forfeiture for such violation
be thereby imposed, unless the same be
expressly mentioned to be in lieu of such
damages.”
– W. Va. Code § 55-7-9
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Consent Orders
Avoiding Future Liability
• The relevant contents of a settlement
agreement can be discovered in a future
third party case
– W. Va. Rules Evid. 408; Porter Hayden Co. v.
Bullinger, 350 Md. 452, 469, 713 A.2d 962,
970 (1998)
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• Thus, an admission that your company
violated a statute could allow a third party
to use that settlement agreement as proof
of your negligence
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Findings of Fact
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FINDINGS OF FACT
In support of this Order, the Chief hereby finds the following:
OOG, an office within the West Virginia Department of Environmental Protection, is the agency with the duty and
authority to execute and enforce W. Va. Code § 22-6-1 et seq., and the rules and regulations promulgated
thereunder.
Operator is a “person” as defined by W. Va. Code § 22-6-1(n), with an official address registered with OOG as **.
Operator is the “owner” as defined by W. Va. Code § 22-6-1(l) of gas well identified as API # 47-51-***, also
designated the [Farm Name] 1H, located in ** County, West Virginia, and was authorized by a well work permit
issued by OOG to Operator on **, 20**.
On [date], while in the process of drilling out three frac plugs on the [Farm Name] 1H, Operator experienced an
equipment malfunction while trying to remove 2 7/8” tubing from the well. The tubing being used by Operator
collapsed and failed which resulted in the escape of gas and completion fluids from the well for several hours.
This potentially dangerous situation led to the notification of emergency responders, evacuation of nearby
residents, closure of Route ** and the stoppage of electricity, all as precautionary measures.
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Findings of Fact
• Negotiate to have favorable facts included
• On [date], OOG Supervising Inspector ** issued Notice
of Violation (NOV** to Operator for violating W. Va. Code
§22-6-7(b)(1) for “. . . allowing pollutants or the effluent
therefrom, produced or emanating from any point
source, to flow into the water of this State.” There was
no finding that pollutants or the effluent therefrom
escaped from the well site.
• Assure that stated facts are accurate
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FINDINGS OF FACT
• Avoid cause and effect
– Instead of
• “contractor allowed the gas buster tanks to
overflow”
– Say
• “the gas buster tanks overflowed”
– (Unless you want to point finger at contractor)
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CONCLUSIONS OF LAW
– The Conclusions of Law outline the relevant
sections of the West Virginia Code under
which you are being cited. A blanket
admission of violations could again open the
door to further liability
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CONCLUSIONS OF LAW
•
CONCLUSIONS OF LAW
• The “Mud Puddle Statute”
• W. Va. Code § 22-11-3(23) defines “water” or “waters” as “. . . any
and all water on or beneath the surface of the ground, whether
percolating, standing, diffused or flowing, wholly or partially within
this state, or bordering this state and within its jurisdiction, and
includes, without limiting the generality of the foregoing, natural or
artificial lakes, rivers, streams, creeks, branches, brooks, ponds
(except farm ponds, industrial settling basins and ponds and water
treatment facilities), impounding reservoirs, springs, wells,
watercourses and wetlands.”
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ORDER FOR COMPLIANCE
ORDER FOR COMPLIANCE
• After a full and complete negotiation of all matters set forth in this
Consent Order, and upon mutual exchange of the covenants
contained herein, the Parties desiring to avoid litigation and
intending to be legally bound, it is hereby ORDERED by the Office
of Oil and Gas and AGREED to by Operator as follows:
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ORDER FOR COMPLIANCE
• Findings. Operator does not admit to any
factual or legal determinations made by
the Office of Oil and Gas and reserves all
rights and defenses available regarding
liability or responsibility in any proceedings
regarding Operator other than
proceedings, administrative or civil, to
enforce this Order.
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ORDER FOR COMPLIANCE
• Resumption of Activities. Upon execution
of this Consent Order, the Operator is
authorized to resume activities in West
Virginia
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ORDER FOR COMPLIANCE
• Compare:
– Operator agrees that the Findings of Fact in
Paragraphs 1 through 13 above are true and
correct.
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Consent Orders –
Corrective Actions
• In the Consent Order, the DEP may want the operator
to agree to take certain corrective actions
– These range from generic actions like “take all
immediate steps necessary to comply with the
code”
– To specific actions like “cement all fresh water
protection casings to surface,” or requiring that
certain material be used in pipes or using a certain
type of expensive blow-out preventer no other
operator is required to use
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Consent Orders –
Corrective Actions
• Consent agreements create a situation where it is possible for the
DEP to create different regulatory schemes
– company-specific rules and regulations can be created on a
case-by-case basis
• This can create unfair competitive advantages when one company is
being required to implement expensive measures while competitors
are not
• Good argument can be made that without the benefit of a notice and
comment and legislative review under the Administrative Procedures
Act, imposing standards in this manner constitutes unlawful
rulemaking
– W. Va. Code § 29A-1-4; § 29A-3-16;
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Consent Orders –
Corrective Actions
• Install gas detection monitors on rig floor and substructure on
all rigs operating in WV
• Installing an annular preventer along with a rotating head and
diverter for all future drilling operations in WV
• Installing fresh water protection casing prior to penetrating a
known void where gas is known to exist for well control
purposes
• Continue to supply, as available, information resulting from
any investigation into the **, 20** incident.
• This is a very broad, potentially detrimental requirement.
Define precisely what your obligation is.
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Consent Orders –
Corrective Actions
• 4. Corrective Actions. For all current and future Operator activities,
Operator shall immediately and permanently implement the
following practices:
(a) Take all immediate steps to comply with W. Va. Code § 33-67(b)(1), including, but not limited to, preventing pollutants or
effluents therefrom, produced by or emanating from any point
source, to flow into the waters of this State.
• Unclear why this is necessary if there is already a legal obligation to
comply with law
• Could theoretically result in double penalties for violation of a statute
and violation of a consent order
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Consent Orders - Penalties
• Also included in the Consent Order is the
civil penalty assessment that the company
agrees to pay
– This amount is negotiated with DEP
– More difficult to negotiate
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Contact Information
Kenneth E. Tawney, Esq.
Jackson Kelly, PLLC
P.O. Box 553
Charleston, WV 25322
[email protected]
(304) 340-1189
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