w w w. j a c k s o n k e l l y. c o m kenneth e. tawney, esquire 500 lee street east, suite 1600,...

w w w . j a c k s o n k e l l y . c o m

Kenneth E. Tawney, Esquire500 Lee Street East, Suite 1600, Charleston, WV 25301

Phone: 304-340-1189 • Fax: 304-340-1080

[email protected] • www.jacksonkelly.com

June 21, 2011

Notices of ViolationsNotices of Violationsandand

Consent OrdersConsent Ordersinin

West VirginiaWest Virginia


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Permitting Authority• In order to commence any well work, a person or In order to commence any well work, a person or

company must first receive a permit from the company must first receive a permit from the Office of Oil and Gas (OOG) Office of Oil and Gas (OOG) – W. Va. Code § 22-6-6W. Va. Code § 22-6-6

• In addition to issuing a permit for well work, the In addition to issuing a permit for well work, the OOG also issues a separate or consolidated OOG also issues a separate or consolidated water permit which governs and controls the water permit which governs and controls the discharge of pollutants into West Virginia watersdischarge of pollutants into West Virginia waters– W. Va. Code § 22-6-7 W. Va. Code § 22-6-7


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Penalty ProvisionsPenalty Provisions

• The Department of Environmental Protection The Department of Environmental Protection has authority to issue citations for violations has authority to issue citations for violations concerning both drilling and water useconcerning both drilling and water use– W. Va. Code § 22-6-3; § 22-11-6 W. Va. Code § 22-6-3; § 22-11-6

• An oil and gas inspector or agency director can An oil and gas inspector or agency director can find a violation of any applicable provision of the find a violation of any applicable provision of the West Virginia Code, any rule, or any order West Virginia Code, any rule, or any order – W. Va. Code § 22-6-3W. Va. Code § 22-6-3


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Potential Water ViolationsPotential Water Violations

• Allowing sewage, industrial wastes, or other wastes, or Allowing sewage, industrial wastes, or other wastes, or the effluent therefrom, produced by or emanating from the effluent therefrom, produced by or emanating from any point source, to flow into the water of the State any point source, to flow into the water of the State – W. Va. Code § 22-11-8W. Va. Code § 22-11-8

• Failing to comply with water quality standards and Failing to comply with water quality standards and effluent limitationseffluent limitations– W. Va. Code § 22-11-6W. Va. Code § 22-11-6

• Violating any provision of a prior Consent OrderViolating any provision of a prior Consent Order – W. Va. Code § 22-6-3W. Va. Code § 22-6-3


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Possible Penalties For Possible Penalties For ViolationsViolations

• An inspector can shut down operations An inspector can shut down operations until a violation is abateduntil a violation is abated

• If an imminent danger exists, the inspector If an imminent danger exists, the inspector can issue an order requiring the well can issue an order requiring the well operator to cease further operations until operator to cease further operations until the imminent danger has been abatedthe imminent danger has been abated– W. Va. Code § 22-6-3W. Va. Code § 22-6-3


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Possible Penalties For Violations

• If the inspector finds that the violation doesn’t If the inspector finds that the violation doesn’t present an imminent danger, he or she will present an imminent danger, he or she will determine a reasonable time in which the determine a reasonable time in which the violation must be abatedviolation must be abated– A “reasonable period of time” for a violation that A “reasonable period of time” for a violation that

doesn’t present an imminent danger shall not exceed doesn’t present an imminent danger shall not exceed seven daysseven days

• W. Va. Code § 22-6-3W. Va. Code § 22-6-3

– This period can be extended up to thirty days for good This period can be extended up to thirty days for good causecause


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Possible Penalties For Violations

• Any person or corporation that willfully violates Any person or corporation that willfully violates any provision or rule is subject to a civil penalty any provision or rule is subject to a civil penalty not to exceed $2,500 a day not to exceed $2,500 a day – W. Va. Code § 22-6-34W. Va. Code § 22-6-34


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Possible Penalties For Water Violations

• If any discharge or pollution constitutes a If any discharge or pollution constitutes a clear, present, and imminent danger to the clear, present, and imminent danger to the health of the public or to the fitness of a health of the public or to the fitness of a drinking supply, the director may issue an drinking supply, the director may issue an order requiring that the discharge be order requiring that the discharge be immediately stopped and abatedimmediately stopped and abated– W. Va. Code § 22-11-19W. 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 There is a cap on fines at $25,000 per day for any person or company that violates any provision of person or company that violates any provision of any permit issued under or subject to this articleany permit issued under or subject to this article– W. Va. Code § 22-11-22W. Va. Code § 22-11-22

• A company’s owner or operator can be found guilty A company’s owner or operator can be found guilty of a criminal misdemeanor and sentenced up to six of a criminal misdemeanor and sentenced up to six months in county jail for polluting water if he does so months in county jail for polluting water if he does so without a permit or refuses to comply with an issued without a permit or refuses to comply with an issued permitpermit – W. Va. Code § 22-11-24W. Va. Code § 22-11-24


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Possible Penalties for Abandoned Possible Penalties for Abandoned Well ViolationsWell Violations

• Any person who fails to plug an abandoned Any person who fails to plug an abandoned well within thirty days from the ordered date well within thirty days from the ordered date can be fined $25,000can be fined $25,000– W. Va. Code § 22-10-9W. Va. Code § 22-10-9

• This period can be extended up to one This period can be extended up to one hundred eighty days upon a showing of good hundred eighty days upon a showing of good cause cause – W. Va. Code § 22-10-9W. Va. Code § 22-10-9


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Prior Policy on Calculating PenaltiesPrior Policy on Calculating Penalties

• Seriousness :Seriousness : ________ ________

• Negligence : Negligence : + ________+ ________

• Good Faith: Good Faith: – ________– ________

• History: History: + ________+ ________

• Economic Benefit:Economic Benefit: + ________+ ________

• Total:Total: = ________= ________


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Seriousness of ViolationSeriousness of Violation• Based exclusively on the harm or potential harm to Based exclusively on the harm or potential harm to

human health or the environment human health or the environment – Minor - $200-$1000Minor - $200-$1000

• No potential for harm/administrative violationNo potential for harm/administrative violation– Moderate - $1000-$2000 Moderate - $1000-$2000

• Potential to harm human health or environmentPotential to harm human health or environment– Major - $2000-$5000Major - $2000-$5000

• Has resulted in harm or is an imminent dangerHas resulted in harm or is an imminent danger


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Negligence Negligence

• Reflects the amount of effort expended by the operator Reflects the amount of effort expended by the operator to prevent the violationto prevent the violation– 0% Increase in Base Assessment0% Increase in Base Assessment

• Beyond the operator’s control, so there was no negligenceBeyond the operator’s control, so there was no negligence

– 33% Increase in Base Assessment33% Increase in Base Assessment• Oversight by operator, could have been avoided if more Oversight by operator, could have been avoided if more

conscientious conscientious

– 67% Increase in Base Assessment 67% Increase in Base Assessment • Obvious and no action was taken prior to the violation being writtenObvious and no action was taken prior to the violation being written

– 100% Increase in Base Assessment100% Increase in Base Assessment• Operator failed to adequately respond to instructions by inspector to Operator failed to adequately respond to instructions by inspector to

prevent the situationprevent the situation


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Good FaithGood Faith• Refers to the promptness by the operator to Refers to the promptness by the operator to

abate the violationabate the violation• Reduces the penalty Reduces the penalty

– 50% Decrease in Base Assessment 50% Decrease in Base Assessment • Operator was already taking remedial actions at the time the Operator was already taking remedial actions at the time the

violation was written violation was written – 25% Decrease in Base Assessment25% Decrease in Base Assessment

• Operator took prompt remedial action and abated the Operator took prompt remedial action and abated the violation within the initial or extended time period violation within the initial or extended time period

– 0% Decrease in Base Assessment 0% Decrease in Base Assessment • Operator failed to take remedial actions to abate violation Operator failed to take remedial actions to abate violation

during abatement periodduring abatement period


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History of Prior ViolationsHistory of Prior Violations

• All violations written against the operator All violations written against the operator within the past 3 years are consideredwithin the past 3 years are considered– 1 – 5 Violations 1 – 5 Violations $200$200– 6 – 10 Violations 6 – 10 Violations $400$400– 11 – 15 Violations 11 – 15 Violations $800$800– 16 – 20 Violations 16 – 20 Violations $1600$1600– 21+ Violations 21+ Violations $3200$3200


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Economic BenefitEconomic Benefit

• In addition to the above factors, a penalty includes an In addition to the above factors, a penalty includes an amount that represents the economic benefit that the amount that represents the economic benefit that the operator received through noncompliance operator received through noncompliance

• Includes delayed or avoided costs through:Includes delayed or avoided costs through:– Failure to install, operate, or properly maintain required Failure to install, operate, or properly maintain required

treatment or control systemstreatment or control systems– Failure to conduct required testing or monitoring Failure to conduct required testing or monitoring – Improper disposalImproper disposal– Failure to obtain necessary permitsFailure to obtain necessary permits– Failure to establish or follow methods required by rules or Failure to establish or follow methods required by rules or

permits permits


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New Approach to New Approach to Assessing Penalties Assessing Penalties

• While this is the adopted assessment While this is the adopted assessment policy published on DEP’s website, the policy published on DEP’s website, the agency is currently assessing penalties for agency is currently assessing penalties for water violations in a manner which assess water violations in a manner which assess the higher penalties permitted for such the higher penalties permitted for such violationsviolations


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Contesting A Notice of Violation Contesting A Notice of Violation Under Chapter 22, Article 6Under Chapter 22, Article 6

• Only 15 days to apply to the director of OOG for Only 15 days to apply to the director of OOG for annulment or revision of a finding or order annulment or revision of a finding or order – W. Va. Code § 22-6-4W. Va. Code § 22-6-4

• The director then makes a special inspection after which The director then makes a special inspection after which an order is issued that includes findings and annuls, an order is issued that includes findings and annuls, revises, or affirms the order revises, or affirms the order – W. Va. Code § 22-6-4W. Va. Code § 22-6-4

• All final orders issued by the director are subject to All final orders issued by the director are subject to judicial review in circuit court judicial review in circuit court – W. Va. Code § 22-6-5W. 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 At any point after receiving a citation for either a drilling or water violation, an operator either a drilling or water violation, an operator may settle the matter through a Consent may settle the matter through a Consent Order Order

• The company and the DEP will come to an The company and the DEP will come to an agreement on what penalties the company agreement on what penalties the company will pay and what corrective actions it will will pay and what corrective actions it will take to prevent future violationstake to prevent future violations


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Office of Oil and Gas601 57th Street

Charleston, WV 25304(304) 926-0450 fax (304) 926-0452

Earl Ray Tomblin, GovernorRandy C. Huffman, Cabinet Secretary

www.dep.wv.gov

• CONSENT ORDER •

• 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 OrdersAvoiding Future Liability

• In drafting the consent order, special precaution must be In drafting the consent order, special precaution must be taken to ensure that your company is protecting itself against taken to ensure that your company is protecting itself against potential liability to third parties potential liability to third parties

• The Consent Order will contain sections as follows: The Consent Order will contain sections as follows:

– ““IntroductionIntroduction

– ““Findings of Fact” Findings of Fact”

– ““Conclusions of Law”Conclusions of Law”

– ““Order for Compliance”Order for Compliance”


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– If not carefully drafted, these Findings of Fact If not carefully drafted, these Findings of Fact could have the effect of admitting fault. This could have the effect of admitting fault. This fault could then be used against you by a third fault could then be used against you by a third party who is claiming damageparty who is claiming damage


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• In West Virginia, the violation of a statute is In West Virginia, the violation of a statute is prima facie evidence of negligenceprima facie evidence of negligence– Syl. Pt. 1, Anderson v. Moulder, 183 W. Va. 77, 79, Syl. Pt. 1, Anderson v. Moulder, 183 W. Va. 77, 79,

394 S.E.2d 61, 63 (1990).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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• “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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• The relevant contents of a settlement The relevant contents of a settlement agreement can be discovered in a future agreement can be discovered in a future third party casethird party case– W. Va. Rules Evid. 408; W. Va. Rules Evid. 408; Porter Hayden Co. v. Porter Hayden Co. v.

BullingerBullinger, 350 Md. 452, 469, 713 A.2d 962, , 350 Md. 452, 469, 713 A.2d 962, 970 (1998)970 (1998)


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• Thus, an admission that your company Thus, an admission that your company violated a statute could allow a third party violated a statute could allow a third party to use that settlement agreement as proof to use that settlement agreement as proof of your negligenceof your negligence


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Findings of Fact• 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 The Conclusions of Law outline the relevant sections of the West Virginia Code under sections of the West Virginia Code under which you are being cited. A blanket which you are being cited. A blanket admission of violations could again open the admission of violations could again open the door to further liability 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


• 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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• 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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• Resumption of Activities. Upon execution of this Consent Order, the Operator is authorized to resume activities in West Virginia


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• 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 ActionsCorrective Actions

• In the Consent Order, the DEP may want the operator In the Consent Order, the DEP may want the operator to agree to take certain corrective actions to agree to take certain corrective actions – These range from generic actions like “take all These range from generic actions like “take all

immediate steps necessary to comply with the code”immediate steps necessary to comply with the code”– To specific actions like “cement all fresh water To specific actions like “cement all fresh water

protection casings to surface,” or requiring that protection casings to surface,” or requiring that certain material be used in pipes or using a certain certain material be used in pipes or using a certain type of expensive blow-out preventer no other type of expensive blow-out preventer no other operator is required to useoperator is required to use


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• Consent agreements create a situation where it is possible for the Consent agreements create a situation where it is possible for the DEP to create different regulatory schemes DEP to create different regulatory schemes – company-specific rules and regulations can be created on a company-specific rules and regulations can be created on a

case-by-case basiscase-by-case basis• This can create unfair competitive advantages when one company This can create unfair competitive advantages when one company

is being required to implement expensive measures while is being required to implement expensive measures while competitors are notcompetitors are not

• Good argument can be made that without the benefit of a notice and Good argument can be made that without the benefit of a notice and comment and legislative review under the Administrative comment and legislative review under the Administrative Procedures Act, imposing standards in this manner constitutes Procedures Act, imposing standards in this manner constitutes unlawful rulemakingunlawful rulemaking– W. Va. Code § 29A-1-4; § 29A-3-16; W. Va. Code § 29A-1-4; § 29A-3-16;


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• 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 § 33-6-7(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 Also included in the Consent Order is the civil penalty assessment that the company civil penalty assessment that the company agrees to payagrees to pay– This amount is negotiated with DEPThis amount is negotiated with DEP– More difficult to negotiateMore difficult to negotiate


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Contact Information

Kenneth E. Tawney, Esq.Jackson Kelly, PLLC

P.O. Box 553Charleston, WV 25322

[email protected](304) 340-1189

w w w. j a c k s o n k e l l y. c o m kenneth e. tawney, esquire 500 lee street east, suite 1600,...

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