Slide 1

Report
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
2
www.jacksonkelly.com
3
www.jacksonkelly.com
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
4
www.jacksonkelly.com
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 provision of the West
Virginia code, any rule, or any order
5
www.jacksonkelly.com
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
6
www.jacksonkelly.com
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
7
www.jacksonkelly.com
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
8
www.jacksonkelly.com
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
9
www.jacksonkelly.com
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 § 22-10-7
10
www.jacksonkelly.com
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
11
www.jacksonkelly.com
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
12
www.jacksonkelly.com
Prior Policy on Calculating Penalties
•
•
•
•
•
•
Seriousness :
Negligence :
Good Faith:
History:
Economic Benefit:
Total:
________
+ ________
– ________
+ ________
+ ________
= ________
13
www.jacksonkelly.com
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
14
www.jacksonkelly.com
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
15
www.jacksonkelly.com
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
16
www.jacksonkelly.com
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
17
www.jacksonkelly.com
Economic Benefit
• In addition to the above factors, a penalty includes an
amount that represents the economic benefit 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
18
www.jacksonkelly.com
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 order to assess the
higher penalties permitted for such
violations
19
www.jacksonkelly.com
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
20
www.jacksonkelly.com
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
• All final orders issued by the director are subject
to review by the Environmental Quality Board
– W. Va. Code § 22-11-21
21
www.jacksonkelly.com
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
22
www.jacksonkelly.com
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
•
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”.
23
www.jacksonkelly.com
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 Order will contain both “Findings if Fact” and
“Conclusions of Law”
– 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
– 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
24
www.jacksonkelly.com
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).
• Thus, an admission that your company
violated a statute could allow a third party
to use that settlement agreement as proof
of your negligence
25
www.jacksonkelly.com
Consent Orders
Avoiding Future Liability
• 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)
26
www.jacksonkelly.com
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
27
www.jacksonkelly.com
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)
28
www.jacksonkelly.com
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.
29
www.jacksonkelly.com
FINDINGS OF FACT
• Negotiate to have favorable facts included
• On [date], OOG Supervising Inspector ** issued Notice
of Violation (NOV** to Operator for violating West
Virginia 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
30
www.jacksonkelly.com
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)
31
www.jacksonkelly.com
CONCLUSIONS OF LAW
•
CONCLUSIONS OF LAW
•
• West Virginia 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.”
32
www.jacksonkelly.com
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.
33
www.jacksonkelly.com
ORDER FOR COMPLIANCE
• Resumption of Activities. Upon execution
of this Consent Order, the Operator is
authorized to resume activities in West
Virginia
34
www.jacksonkelly.com
ORDER FOR COMPLIANCE
• Compare:
– Operator agrees that the Findings of Fact in
Paragraphs 1 through 13 above are true and
correct.
35
www.jacksonkelly.com
ORDER FOR COMPLIANCE
• 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.
(b) Unclear why this is necessary if there is already a legal
obligation to do so
(c) Could theoretically result in double penalties for violation of a
statute and violation of a consent order
36
www.jacksonkelly.com
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
37
www.jacksonkelly.com
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
• It can also cause an industry standard to be created
without the benefit of a period of notice and comment
38
www.jacksonkelly.com
Consent Orders –
Corrective Actions
• Install gas detection monitors on rig floor and
substructure on all rigs operating in West Virginia
• Installing an annular preventer along with a rotating head
and diverter for all future drilling operations in West
Virginia
• 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.
39
www.jacksonkelly.com
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:
•
Authority. This Consent Order is an Order of the Office of Oil and
Gas authorized and issued pursuant to W. Va. Code §§ 22-1-1 and
22-6-1 et seq.
40
www.jacksonkelly.com
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
41
www.jacksonkelly.com
Contact Information
Kenneth E. Tawney, Esq.
Jackson Kelly, PLLC
P.O. Box 553
Charleston, WV 25322
[email protected]
(304) 340-1189
42
www.jacksonkelly.com

similar documents