'Recurring negligence': Larimer County files complaint against oil company after fire

Larimer County officials are asking state agencies to hold Prospect Energy accountable for a series of air pollution violations and a recent fire at the operator’s oil storage sites near Fort Collins.

The county filed a complaint against Prospect Energy with the Colorado Oil and Gas Conservation Commission and called on the Colorado Air Pollution Control Division to investigate the May 9 fire, which occurred less than 300 feet from homes in the Hearthfire neighborhood. County officials said in the COGCC complaint that they suspect Prospect Energy's poor maintenance practices caused the fire.

In their letter to the state air pollution division, county staff accused Prospect of “recurring negligence” and encouraged the state to invoke serious penalties against the operator, potentially going as far as revoking its permit or assessing penalties of up to $47,357 a day for each law broken.

“The county’s position is that if this operator is not able to conduct its operations safely, it should not be allowed to operate at all,” Larimer County principal planner Matt Lafferty wrote in the county’s May 24 letter to the Air Pollution Control Division.

The county also requested an update from the Air Pollution Control Division on their investigation of Prospect Energy's Krause tank battery site north of Fort Collins, where regulators and environmental advocates have repeatedly documented air pollution that violates state law. Prospect’s list of suspected regulatory violations has continued to grow over the course of the monthslong state investigation, but the operator has yet to face penalties.

Prospect Energy owner Ward Giltner didn’t respond to Coloradoan questions about the fire, Larimer County’s complaint and the status of the state investigation.

The fire occurred at Prospect’s Fort Collins Meyer tank battery, a crude oil and produced water storage site at 1229 E. Douglas Road. Poudre Fire Authority firefighters arrived at the scene at about 7 a.m. and saw fire and black smoke pouring from a 25-foot combustor, PFA spokesperson Annie Bierbower said.

Prospect’s field supervisor discovered that a water control line had failed, which caused produced water to overflow from a storage tank and reach a combustion chamber meant to burn gas. Produced water contains crude oil, combustible liquids and flammable vapors, so the combustor caught fire. When the field supervisor shut down the system, the overflow stopped and the fire self-extinguished. The incident also resulted in two barrels of produced water being spilled at the storage site.

Matt Sura, an oil and gas attorney who serves as special counsel for Larimer County, said in the COGCC complaint that the county believes the fire likely resulted from poor maintenance practices and should result in multiple COGCC violations.

“While this incident was contained within the oil and gas working pad surface, the equipment that failed is located only 165 feet from the closest home,” the complaint states. “This incident caused a lot of fear and concern from nearby residents.”

Lafferty added in the county’s letter to the air pollution division that PFA considered the fire preventable.

“The event appeared to be caused by the operator’s recurring negligence,” he wrote. “Prospect Energy’s equipment does not appear to be routinely maintained or inspected.”

Larimer County commissioners were unanimous in their direction to file the COGCC complaint and urge the state to escalate enforcement of its air pollution laws. The complaint gives the county a seat at the table as COGCC investigates the fire and considers penalties, Sura told commissioners at a work session earlier this month. It also gives Larimer County the ability to request a hearing before the COGCC if county leaders aren’t satisfied with the outcome of the complaint.

“We need to take some action,” Commissioner John Kefalas said at the May 16 work session, adding that the Air Pollution Control Division keeps “saying they’re going to enforce things, and they keep investigating. I don't know what it's going to take for them to assess (appropriate) penalties or possibly do, at some point, a cease-and-desist.”

Prospect Energy facilities have been under scrutiny

The state’s ongoing investigation of Prospect stemmed from a series of complaints about air pollution and odors at two Prospect sites: the Fort Collins Meyer tank battery, the site of the fire, and the Krause tank battery, located about 4 miles northeast of Colorado Highway 14 and U.S. Highway 287.

Despite several attempted repairs and the replacement of two leaking produced water tanks at the Krause site, state regulators have repeatedly documented air pollution leaking from equipment at both sites. Many of the state inspections followed complaints from Earthworks, an environmental nonprofit whose staff use specialized infrared cameras to document oil and gas emissions that are invisible to the naked eye. Earthworks Colorado field representative Andrew Klooster has been working with Von Bortz, who owns Rescued Friends Animal Sanctuary about 1,000 feet from the Krause site, for a year and a half to document air pollution at the sites and report the problems to the state.

The latest:Operator replaces leaking tanks at oil site near Fort Collins, but concerns persist

Lafferty noted in his letter to the state that “several of these complaints were the result of improper equipment maintenance including holes, thief hatch seals, and thief hatch springs for oil and produced water storage tanks, that the operator would attempt to repair only after being notified of the complaint.”

The Air Pollution Control Division issued a compliance advisory on March 2 detailing eight suspected violations at the Krause site. The allegations include a series of illegal emissions, odor violations and failure to carry out eight mandatory leak detection and repair inspections between 2020 and 2021. Sura told commissioners that the latter allegation was especially problematic because those inspections are required for all sites close to homes.

As part of the enforcement process, Prospect was required to submit a written response to the alleged violations and meet with state regulators to discuss the compliance issues. A spokesperson for the Air Pollution Control Division confirmed the meeting took place in April but declined to share Prospect’s written response or discuss potential outcomes of the enforcement process, citing the confidential nature of the investigation.

Now the state is waiting for a preventive maintenance plan, maintenance records and an odor management plan from Prospect. It’s not clear how much longer the state investigation will continue.

The Fort Collins Meyer site is also under investigation by the Air Pollution Control Division. State regulators documented emissions from a crude oil storage tank at the site in April and issued a notice of violation in May.

Prospect has a history of compliance issues at the two sites under investigation. The Air Pollution Control Division cited the operator in March 2019 for failing to secure construction permits and file a required air pollution notice at the Krause and Fort Collins tank battery sites. The state fined Prospect $7,350 for those violations, far below the allowable fine of up to $15,000 per day.

The state cited Prospect again in October 2019 for illegal emission venting from two condensate tanks and for being out of compliance with updated best management practices to reduce emissions from liquid unloading. The state didn’t penalize Prospect for that violation.

The previous compliance issues are relevant because state regulators take operators’ history of compliance into account when leveling penalties.

Bortz, the Larimer County resident who lives near the Krause site, said he was happy to hear that the county is pursuing accountability for Prospect. But he’s not ready to celebrate yet. He wants to see the site shut down for good.

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Larimer County considers whether to enforce its own regulations

Bortz, Klooster and regional environmental advocates have also been calling on Larimer County leaders to flex the county’s own regulatory muscle rather than deferring to the state enforcement process. The county adopted new oil and gas regulations last year after the 2019 passage of Colorado Senate Bill 181. The law led to stricter state regulations on the oil and gas industry and gave local governments the authority to adopt oil and gas regulations that are stricter than state standards.

More:Larimer County tightens oil and gas rules, becoming perhaps the most strict in the state

Larimer County’s regulations prohibit venting, require routine leak detection and repair inspections and require repair of leaks within 72 hours of detection. The regulations state that operators must take “the most appropriate safety response action,” potentially going as far as shutting down the facility, when leaks pose an imminent safety risk to people, wildlife or the environment. The county regulations are explicit that all those provisions apply to both new and existing facilities — but the county attorney’s office has told commissioners that their regulations don’t apply to facilities that existed before the regulations were adopted in 2021.

Mike Foote, a former state senator and sponsor of SB 181, objected to that interpretation. In a March email to the Coloradoan, Foote noted that several relevant provisions of the county regulations explicitly apply to existing facilities and haven’t been legally challenged.

The state legislation gave local governments the right to impose fines for leaks, spills and emissions, Foote said. He added that Colorado case law also “supports new health and safety regulations applying to existing facilities, particularly in those industries that have an existing expectation of regulation.”

“Finally,” Foote wrote, “common sense would also indicate it doesn't make sense for inspection, enforcement, and safety regulations to apply to only new facilities. If the opposite were true, Larimer County would have safety and inspection regulations that apply to zero facilities, since no new (permits) have been approved for Larimer County since the effective date of the updated Larimer rules.”

“The county clearly has the authority to inspect and enforce safety regulations on existing facilities,” he added. “Whether it chooses to use that authority may be a different matter.”

At their May 16 work session, county commissioners contemplated the possibility of modifying the county regulations to add enforcement power. The county regulations already give the county community development director the authority to issue cease-and-desist orders to operators and fine them up to $15,000 per violation per day, among other potential recourse.

But one missing link in the chain of county inspection and enforcement is the county’s lack of a specialized camera to detect leaks, like the one used by state inspectors and Earthworks. County commissioners have expressed interest in buying one, possibly in collaboration with the city of Fort Collins, but they haven’t approved the purchase yet. The commissioners said at the May 16 work session that they’re still interested in buying a camera but want to know more about how much it would cost and whether current staff could take on the oversight work.

Another possible next step for the county is pursuing the plugging and abandoning of Prospect Energy wells that are linked to air pollution and public safety issues. The COGCC recently adopted new financial assurance rules that require operators to take out higher bonds and other financial assurances on wells. The intent of the regulations is to hold operators financially responsible for plugging and cleaning up wells.

In the former regulatory landscape, it made more financial sense for companies to keep some low-producing wells in operation because it would be more expensive to plug them. The new financial assurance requirements will shift the parameters of those decisions. Prospect Energy currently has about $250,000 posted for financial assurance at the COGCC, Sura estimated, but he predicted that under the new rules the operator may have to post as much as $3 million to $4 million.

More:Fort Collins, Larimer County pursue regional air quality monitoring as ozone action looms

Prospect has to turn in its financial assurance plan to the COGCC as soon as July 1, with the deadline for each operator determined based on how many wells it operates. The county can engage in that process by asking Prospect to consider plugging low-producing wells or by requesting that COGCC place some of Prospect’s inactive and low-producing wells on the plugging list. County staff are evaluating which of Prospect’s wells are both low-producing and present potential threats to public health, safety and welfare, Sura said.

“There is going to be an internal conversation at some of these oil and gas companies already” about plugging and abandoning wells, Sura said. “Giving them the benefit of the county's view as to what wells should be plugged and abandoned, which wells you all consider the most problematic … I think that would be helpful to have that discussion sooner than later so they can incorporate those ideas into their financial assurance plan.”

Some of Prospect’s low-producing wells produce about $200 worth of oil a day, Commissioner Kristin Stephens estimated at the work session.

“Clearly it’s not profitable,” she said, adding that it may come out in the financial assurance process that Prospect can’t afford to make the necessary repairs. “My guess is that, potentially, some of these things will move them into a place where they're just more comfortable shutting (the facilities) down, which is fine, because they're too close to homes, and they're problematic.”

“That fire must have been pretty scary,” she added. “It’s one thing to have emissions that smell bad. It's quite another thing to see something on fire in what feels like your backyard. We've got to fix it.”

Jacy Marmaduke covers government accountability for the Coloradoan. Follow her on Twitter @jacymarmaduke. Support her work and that of other Coloradoan journalists by purchasing a digital subscription today.