U N I T E D S T A T E S E N V ! R O N M E N T A L P R O T E C T I O N A G E N C Y WASHINGTON. D C 204W

MAR 2 9 I= OFFICE OF

WATER

MEMORANDUM

SUBJECT: Guidance for Financial Responsibility in Federally-Administered UIC Class I1 Programs UIC Program Guidance #65,

,I i n / ,

FROM :

TO:

"lichael 8. Off ice of

Water Management Division Directors Regions I-X

This guidance revises previous procedures for financial responsibility demonstrations by Class I1 injection well operators. Specifically, this guidance incorporates a number of the recommendations the national Workgroup developed after assessing experience, to date, in this aspect of direct implementation programs.

Backqround

UIC Program Guidance #39, issued on May 29, 1985, 'supplemented ODW's June 1984 guidance manual on "Financial Assurance for Federally-Administered UIC Programs." In keeping with the initial Agency decision to allow for the use of flexible.criteria-by the Regions to determine the adequacy of financial responsibility mechanisms, a Workgroup wa's formed in ,late 1987 to evaluate program experie,nce, to date, and to revise/update program guidance wherever necessary. The Workgroup was specifically charged to investigate alternatives and improvements for Class I1 operations since they constitute the largest part of the regulated community and have posed the most difficult compliance issues in this area. These changes will be the first part of a longer term effort to revise the Guidance Manual.

Guidance \

The Workgroup recommendations that have been' endorsed b management are grouped topically. Highlighted in Attachmen are areas where the Workgroup will.continueto examine, refln or modify financial responskbilif~ procedures.

Each area of change is highlighted with an explanation of the need for the revision based on the Workgroup's review and findings.,

A. Financial Statements

1. Recommended Revisions

* All financial statement demonstrations shou updated and reviewed annually.

* A "full" auditor's opinion 1s to be considered the only acceptable verification of the submitted Chief Financial Officer's (CFO) statement. In such a case, the CFO1 letter must be accompanied by an auditor's opinion verifying t figures in the letter.

* The only acceptable alternative to an independent auditor's opinion would be the submission of an annual corporate report distributed to shareholders, also know as a "glossy" financial statement, SEC 10X Report, or a FERC Form 2, which are audited documents.

* Earlier guidance did not incorporate an upd cycle for submissions of financial statements. .However, th fundamental premise of the use of statements is as an indic of current financial "well-being". Given the dramatic changes. in oil industry economics, it is imperative to review them on,a predictable, regular cycle which should alert a reviewer. to potential financial difficulties; tracking and trend analysis this data will help heighten the adequacy of this demonstration. Such a trend analysis will be examined under ODWts LOE contract with the goal of developing an early warning system that detects troubling financial trends. 'Many publicly-held corporations supply such data already to clients and shareholders, and the institution of this requiremen* wil have minimal impact on the regulated community.

* "Glossies", 10K or Form 2 reports are, in general, based on full scale audits and can be regarded as acceptable functional equivalents.

1' . Recommended Revisions

* Require the review of all types of bond submittals to assure that the bonding company is tested (and approved) under Department of Treasury Circular 570.

A list of bonding companies active nationally in both primacy and direct implementation programs is supplied as Attachment I1 and may prove a useful tool for operators who have had difficulty in obtaining a bond.

2. Rationale

* The need to review bond submittals against the Treasury circular was recommended in the initial guidance; this recommendation is reiterated here to underscore its importance.

C. Trustee Arranqements

1. Recommended Revisions

* Assure the use of a "neutral" trustee not connected to the operator in a way which presents a potential conflict of interest. The banking institution the operator deals with would be a neutral trustee.

2. Rationale

* Some States authorize attorneys to serv6 as trustees; the use of an attorney who also represents the owner or operator presents a potential for conflict of interest and must be avoided.

D. Alternative Method for Problem Cases

1. Recommended Revision

* Allow for the use, at the Director's discretion, of a "time payment plan" within the framework of an Administrative Order on Consent (AOC) in cases where other options have not succeeded. A model AOC and suggested criteria for evaluating potential applications is supplied as Attachment ---

2. Rationale

The model AOC is to be used for problcm cases, "

where an owner or operator has exhausted all options trying,.to. secure~an acceptable financial responsibility demonstration without success and remains in non-compliance. The AOC provide a viable alternative which would help avoid incurring a . ,

potentially unaddressed plugging liability. The AOC offers a cooperative approach which could allow for continued operatio under the terns of a fortnal enforcement actlion while avoiding action thatwould drive operators to bankruptcy and avoid UIC Program requirements. In any such case, the payment schedul must 'be carefully negotiated between EPA and the aperator to assure reasonable and timely coverage.

E. Pluaainq and Abandonment

1. Recommended Revisions

* Provides model documents in Attachment IV to:

- call-in the financial responsibility demonstration from the surety, bank or trustee; - advise a trustee to activate the (standby! crust - solicit the interest of potential plugging con-

tractors in bidding for a turn-key plugging and abandonment job ; - execute a contractual agreensnt between tk.e trustee and the contractor; and - use as .a sample plugging hid form.

2 . Rationale

* All the model languages provided offer a standardized approach to each step in the process of activakinq the financial responsibility mechanism(s). The models alsc \ ..

should help expedite Agency directives through the trustee to the plugging contractor and assure an environmentally protective well closure.

Implementation

The above listed points are recommended for immediate implementation. A resource impact analysis of these activities of existing work load models is warranted only if these provisions prove burdensome. Resource impacts of these changes should be considered an integral element of the Annual Compliance Review, UIC Program Guidance k 54.

Questions on thls guidance may be dlrected t , ~ J. Howard Beard at 382-7796 or George Hoessel, Region 111, at 597-9926.

Attachments

ATTACHMENT I

ATTACrnEMT I

. .

Areas of further investigation and analysis:

Financial Statements

* Further study of current financial statement crite and other alternatives to assess confidence 1 their meaningfulness as indicators of economi and equity considerations between large and small operator stability.

* Assess risk associated with trends and/or changes financial statement demonstrafions looking at between well field viability and operator stab

Bonds

* Assess risk associated with current practice of b bonds and the potential cost to the regulated communi of eliminating them entirely.

Plugging and Abandonment

* Assess potential numbers of wells currently not piugged and abandoned within federal I J I C program 2urisdic

* Assess environmental risks and financial impact of the closure of such wells.

* Develop a prioritization scheme for action to address these problem wells.

,

ATTACHMENT II

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ATTACHMENT

UN!TEO STATES ENVIRONMENTAL PROTECTION AGENCY REGION Ill

841 Chestnut Building Phlladelphla. Pennsylvan~a 19107

CERTIFIED HAIL RETCR!; RECEIPT RECCfSTED

Mr. K e r r y T. Snow sir. Thonas X. Snow Snow 6 Snow O i l Company P.O. Box 67 - Duhe C e n t e r , PA i b i 2 9

RE: I s s u a n c e of Adcl::s:ra:lve O r d e r on Consent ( K l n o i a l l Ho l low F a c i l i t y ) PASZR930.4YCX

Dear N e s s r s . Snob-: - A s you know, t i e C.S. Environ3en:a . l P r o t e c t i o n Agency (EPA)

i s s u e d Snow 6 Snov CI: Cc=;any a 2o : fce o f v i o l a t i o n w i t h a p r o p o s e d A d m i n i s t r a t i v e Order on Se?:e-be: 3 2 , 1 9 6 7 . Those documents c i t e d y o u r

, . coopany f o r vio!a:io:. o i :" S ~ a i e r , a Ac: ( A c t ) and t h e Under- g r o u n d I n j e c t i o n Con:::: ::IC) regulations; s p e c i f i c a l l y , y o u r f a i l u r e t o s u b m i t a n a c c e p t a b l e c e c s n s t r a c i o n o f f i n a n c i a l r e s p o n s i b i l i t y a n d t h e n e c e s s a r y r e s o c r c e s : 3 c i o s e , p l u g , and abandon :he r u l e a u t h o r i z e d G e l l s *

Le had s e v e r a : :e;e;kor.e c o ~ v e r s a c i o r ~ s v i t h you i n O c t o b e r c o n c e r n - i n g t h e v i . 0 1 a t i o n s . a : :kge i ( i n d f a l 1 i i o l i ow f a c i l i t y and t h e v a r i o u s o p t i o n s a v a i l a b l e f o r c o m p l i a n c e . T h e s e a r e i n c o r p o r a t e d i n t h e tex : of t h e e n c l o s e d ADMISISTXATil'S GXDER OS C3SSEhT. P l e a s e r e v i e v t h i s document c a r e f u l l y and i n d i c a t e you r a c c e p t a n c e of t h e s e t e r m b y s i g n i n g a n d r e t u r n i n g i t t o EPA w i t h i n t h i r t y d a y s . I f no comments a r e r e c e i v e d d u r i n g t h e t h i r t y d a y p e r i o d , I w i l l s i g n t h e Order and t r a n s m i t a copy back t o you. The Orde r w i l l become e f f e c t i v e on t h e c a r e of my s i g n a t u r e .

I f you have any q u e s t i o n s on t h i s m a t t e r , p l e a s e c o n t a c t George H o e s s e l of thet U I C S e c t i o n a t ( 2 1 5 ) 597-9928.

S i n c e r e l y ,

A l v i n R . H o r r l s , D i r e c t o r L a t e r Hanagemen: E l v i s i o n

E n c l o s u r e

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Snow 6 Snow O i l Conpany Duke C e n t e r , PA 1 6 7 2 9

W i n d f a l l H o i l o w F a c ~ ! ~ t y , PASZR930kqCK

D o c k e t So. 111-88-010-DS

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L a t e r A c t , $ 2 Y.S.C. 5 3C1:,-2<cj

The fo : ]o . . ' - - " " " " L C -. ..5 . . . a r e a a o e a n d OR3E?. .:X COSSEK i s s u e d ' u n d e r t h e

a u c n o r i t y v e s t e d i n t h e A d z i n i s t r a t o r o f t h e i d S t a t e s i n v i r o n m e n r a l

P r o t e c t i o n A g e n c y ( "E?ACt> by S e c t i o n 1 4 2 3 ( c ) o f t h e S a f e D r i n k i n g Water

Ac t ("SDk'A"), 4 2 C.S.C. 5 3 0 0 h - Z ( c ) . The A d a i o i s t r a t o r h a s d e l e g a t e d ,'

t h e a u t h o r i c y t o t a k e t h e s e a c t i o n s t o t h e R e g i o n a l A d m i n i s t r a t o r f o r

R e g i o n 111, who i n t u r n h a s d e l e g a t e d t h e m t o t h e G a t e r Management Dfv

1. Snow 6 Snok O i l C o z p a n y , ( " R e s p o n d e n t " ) , 1s a c o r p o r a t i o n o r g a -

n l z e c u n d e r t h e l a w s o i Pennsy1van :a a n ? i s a a t k o r l z e ? t o d o b u s l n e s s i n i(

e C o m o n w e a i t h o: F e n n s y l i a - : a and a s seek. i s a " p e r s c ~ " w i t h i n t h e L.

Docket Sunber 111-88-010-DS

2. Respondent ovns and o p e r a t e s t w e n t y - f i v e ( 2 5 ) r u l e a u t h o r i z e d

C l a s s 11 enhanced r e c o v e r y i n j e c t i o n w e l l s on t h e W i n d f a l l Hollow f a c i l i t y

a s d e f i n e d by 40 CFR 5 5 1 4 4 , 3 , 144.6, 146.3 and 146.5. T h e s e v e l l s were

i n v e n t o r i e d v i t h EPA on A p r i l 3 0 , 1984 , by t h e f o r m e r owner, Russe l A.

Brenan, i n compl iance v i t h 40 CFR § 144.26. Brenan n o t i f i e d EPA i n a

l e t t e r d a t e d December 8 , 1986 , t h a t t h e v e l l s had been s o l d . t o t h e Respon-

dent , . The Z i n d i a l l Hollo~., f a c i l i t y i s l o c a t e d i n O t t o Township, McKean,

County , P e n n s y l v a n l a .

3 . 4 3 C.F.R. 5 : ~ 4 . 2 5 ( c ) of t R e L':C r e g u l a t i o n s r e q u i r e s t h e owner o r

o p e r a t o r of a C l a s s I1 w e l l t 3 c a l n t a l n financial r e s p o n s i b i l i t y and r e -

s o u r c e s t o c l o s e , p ! ~ & a n c abandon t h e underground i n j e c t i o n o p e r a t i o n i n

a manner prescribed by E P A . ?ne f1nanc:al r e s p o n s i b i l i t y a s s u r a n c e was

due from t n e Respondent f o r t h e t v e n t y - f i v e ( 2 5 ) w e l l s a t t h e t ime of

t h e i r p u r c h a s e f r o m ?.usel Brenan i n December 1986. Respondent has f a i l e d

r o s u b n i t a c o n p l e t e and a c c e p t a b l e f i n a n c i a l a s s u r a n c e document and i s

t h e r e f o r e i n v i o l a t i o n o f 40 C.F.R. 5 144 .28 (d ) . _: x

4. G u " ~ and , EPA Region III

i s s u e d N o t i c e s of Noncompliance ("NO?;") and a p roposed A d m i n i s t r a t i v e

Order t o t h e Responden t , c i t i n g t h e v i o l a t i o n i n P a r a g r a p h 3 .

5. Respondent h a s d e m o n s t r a t e d h i s i n a b i l i t y t o o b t a i n a n a c c e p t - . .

a b l e f i n a n c i a l r e s p o n s i b i l i t y d e m o n s t r a t i o n by s u b m i t t i n g :

( a ) A f i n a n c i a l s t a t e m e n t r e v i e v e d and r e j e c t e d by EPA;

( b ) A r e j e c t e d a p p l i c a t i o n f o r a l e t t e r o f c r e d i t from your

Sand ~n t h e a n o ~ n t o f $ ; 0'

Docket tiumber 111-88-010-DS

-3-

( c ) TWO l e t t e r s of r e j e c t i o n from r e g i s t e r e d bon

6. Respondent h a s t h e r e f o r e a g r e e d t o e n t e r i n t o a r i m e paymenc

ag reemen t t o meet EPA's f i n a n c i a l r e 6 p o n s i b i i i : y r e q u i r e m e n t s t h r b u g h

ADMItiISTRA'IIVE O R D E R OK CONSENT.

7 . Respondent wa ives i t s r i g h t s t o a h e a t i n g p r i o r :o e n t r y

ORDER ON COSSEST under S e c t i o n 1 & 2 3 ( c ) ( 3 ) ( A ) of t h e SDWA, \

( c ) ( ~ ) ( A ) , and t o a p p e a l t h e en:ry o f t h e O R C E R under S e c t

of t h e SDKA, 4 2 C.S.C. § 30Ch-Z(c ) (6 ) . Respondenr r e s e r v e

may have under l a % t o o b j e c t t o o r c o n t e s t a a t t e r s no t wai

h e r e i n , i n c l u d i n g , but c o t l i m i t e d t o , ( i ) t h e f a c t u a l p r e

i m p o s i t i o n of s t i p u ! a : e d ' p e n a l t i e s unde r Pa rag raph 11 of t h i s ORDER O N C

and ( 2 ) any r e f u s a l of EPA t o g r a n t an ex rens :oc of t ime u

of t h i s GRDE2 ON COSSEST,

ORDER ON COKSEST

s, Based on t h e f o r e g o i n g S t i p u l a r i o n s and F i n d i n g s , h a v i n g t a k e n i

a c c o u n t ( 1 ) B e e p i n d e n t ' s good f a i t h e f f o r t s t o comply w i t h

SDUA and ( 2 ) . ' r u c h o t h e r m a t t e r s a s j u s t i c e may r e q u i r e i n c

a d m i n i s t r a t f v e r e c o r d , u n d e r t h e a u t h o r i t y of S e c t i o n 1423

5 300h-2(a) of t h e SDWA, I HEREBY ORDER and Respondent h e r

t h a t :

8. The p r o v i s i o n s o f t h i s ORDZk 0 5 COSSEhY s h a i ! a p p l y t o a n d b e

b i n d i n g upon Responden:, i t s o f f i c e r s , d i r e c t o r s , a g e n t s , s e r v a n t s , en-

Docket Xuober 111-88-010-DS

-4 -

p l o y e e s o r any s u c c e s s o r s and a s s i g n s o f t h e w e l l s . Respondent must p r o v i d e

n o t i c e t h i r t y days i n advance of any t r a n s f e r of owner sh ip o r o p e r a t i o n

of t h e s e w e l l s . h 'o t ice o f t h i s ORDER ON CONSEfl s h a l l be g i v e n t o any s u c c e s s o r s

i n i n t e r e s t of t h e w e l l s p r i o r t o t r a n s f e r of t h e f a c i l i t y o r i t s o p e r a t i o n .

Except a s p rov ided h e r e i n a f t e r , a c t i o n o r i n a c t i o n of a l l p e r s o n s , f i r m s ,

c o n t r a c t o r s , employees , a g e n t s o r c o r p o r a t i o n s a c t i n g u n d e r , t h r o u g h o r f o r

Responden t , s h a l l not excuse any f a i l u r e o f Respondent t o f u l l y p e r f o r m i t s

o b l i g a t i o n s under t h l s ORDER OK COhSEST. For pu rposes of t h i s ORDER ON

COSSEST, "Responaent" s h a i l be d e f i n e d t o be t h e ovne r s o r o p e r a t o r s of t h e

w e l l s , i n c l u d i n g any s ~ c c e s s o r s o r a s s i g n s .

9. Respondent s h a l l r a k e t h e ' f o l l o w i n g a c t i o n s i n a c c o r d a n c e w i t h

t h e f o l l o w i n g s c h e d u l e t o comply w i t h t h e r e q u i r e m e n r s o f t h e SDWA:

a . E n t e r i n r o a t r u s t ag reemen t w i t h a F e d e r a l o r S t a t e r e c o g n i z e d

t r u s t a a k i n g i n s t i t u t i o n i n acco rdance w i t h t h e model ag reemen t

i d e n t i f i e d i n E x h i b i t I by ( , 1988 ).

b. E s t a b l i s h t h i s t r u s t i n t h e amount of $ w i t h a

p r o v i s i o n t o i n c l u d e a d d i t i o n a l payments i n t o t h e t r u s t

o v e r t h e t ime p e r i o d 1988 - 1991.

c . When any w e l l l i s t e d i n E x h i b i t 2 i s reworked o r r e c o n s t r u c t e d

e o e n t e r i n t o compl i ance w i t h t h e SDWA, t h e UIC r e g u l a t i o n s

and t h e a p p l i c a b l e UIC program g u i d a n c e s , t h e ~ e s ~ o n d e n t

s h a l l make a minimum one-hal f payment o f - t h e w e l l ' s p l u g g i n g

c o s t p r i o r t o r e q u e s t i n g r e - a u t h o r i z a t i o n t o i n j e c t . F u l l

pay&en t f o r any w e l l r e t u r n & t o compliance i n t h i s manner

s h a l l be r e q u i r e d w i t h i n 180 days of t h e w e l l ' s r e - a u t h o r i z a t i o n

da t e :

Docket NucSer 111-88-010-3s

- 5- - ..

d , In any c a s e where s t a g g e r e d payments ' a r e made a s i q p a r a g r a p h

9 ( c ) a b o v e , Respondent s h a l l p r o v i d e a n . up-dated t r u s t a g r e e -

ment t o EPA t o document c o m p l i a n c e w i t h t h e s e p r o v i s i o n s .

e . Payment f o r a l l t w e n t y - f i v e (25) w e l l s o r t h e s u c c e s s f u l

p l u g g i n g and abandonment o f w e l l s n o t c o v e r e d by t h e Respon-

d e n t ' s e f f o r t s under t h i s p a r a g r a p h s h a l l be comple t

l a t e r t h a n May 1991.

f . The t o t a l amount a c c e p t a b l e t o EPA f o r f u l l cove rage s

be r e e v a l u a t e d e v e r y s i x months and s h a l l be a d j u s t e d a s

n e c e s s a r y t o a l l o w f o r e i t h e r i n c r e a s e d c o s t s o r d e c r e a s e d

p l u g g i n g ' cos:s r e s u l t i n g f rom c o r r e c t i v e a c t i o n accompl

w e l l s p lugged a t t h e o p s i o n of t h e Respondent and f o r any

o t h e r r e l e v a n t f a c t o r s .

10 . A f t e r t h e e f f e c t i v e ' d a t e of t h i s ORDS.3 OS COSSEh'i, Respondent

s h a l l no t conduc t any i n j e c t i o n o p e r a t i o p s i n t o t h e w e l l s i d e n t i f i e d i n . 1

E x h i b i t I1 u n l e s s a s a t i s f a c t o r y d e m o n s t r a t i o n of compl iance w i t h t h e ~ ~ c ~ ,

t h e UIC r e g u l a t i o n s and t h e a p p l i c a b l e UIC P r o g r a z Guidances and t h e Pro-

v i s i o n s of P a r a g r a p h 9 a r e f i r s t made t o EPA.

11. I n fha e v e n t t h a t Ilespondent v i o l a t e s a n y c o n d i t i o n s e t f o r t h .- -

-:.<

i n P a r a g r a p h 9 , upon demand and p u b l i c n o t i c e of t h e demand by t h e

D i r e c t o r , Respondent s h a l l pay s t i p u l a t e d p e n a l t i e s as f o l l o w s :

( a ) ' R e s p o n d e n t a g r e e s t o p a y a s t i p u l a e e d c i v i l p e n a l t y f o r . .

. . f a i l u r e t o meet t h e p r o v i s i o n s o f Pa rag raph 9 ( c ) w h i l e

r e s t a r t i c g any i n j e c t i o n w e l l i n t h e amount of 5100.00

p e r v e l : f a r each day t h e f a i l u r e c o n r i n u e s .

( b ) Respondent a g r e e s t o pay a s t i p u l a t e d p e n a l t y f o r 2-

a u t h o r i z e d i n j e c t i o n i n t o any i n j e c t i o n w e l l a t t h e Lawton

i n j e c t i o n f a c i l i t y i n t h e amount o f $5 ,000.00 for e a c h day

t h a t t h e i n j e c t i o n o c c u r s .

( c ) EPA s h a l l p r o v i d e Respondent w i t h v r i t t e n n o t i c e vheneve r

i t d e t e r m i n e s t h a t Respondent h a s i n c u r r e d a s t i p u l a t e d

p e n a l t y a s p rov ided i n Pa rag raphs l l ( a ) and l l ( b ) above.

P e n a l t y payments a s s t i p u l a t e d h e r e i n , i n t h e form

of a certified o r c a s h i e r ' s check made p a y a b l e t o t h e -. -

" T r e a s u r e r of t h e Uni ted S t a t e s of America", s h a l l be s e n t

t o t h e f o l l o w i n g a d d r e s s :

Regzonal Hea r ing C l e r k C. S. EPA, Region I11 P. 0. Box 36015 M Pittsburgh, P e n n s v l v a n l a 15251

A copy o f t h e check s h o u l d be s e n t t o t h e f o l l o w i n g a d d r e s s :

Regional Hea r ing C l e r k U . S. EPA, Region 111 841 Ches tnu t B u i l d i n g P h i l a d e l p h i a , P e n n s y l v a n i a 19107

12 , ( a ) ' I n any c a s e i n which a member of t h e p u b l i c comments on

t h e s t i p u l a t e d p e n a l t y demand, t h e commencer s h a l l have t h e r i g h t , and

'EPA s h a l l p rompt ly i n f o r m t h e commencer of t h e r i g h t , t o a p p e a l t h e

s t i p u l a t e d p e n a l t y demand under S e c t i o n 1 4 2 3 ( c ) ( 6 ) of t h e SDWA, and EPA

s h a l l i n f o r m Respondent of t h e p u b l i c comment and any e u b s e q u e n t a p p e a l

unde r S e c t i o n 1 4 2 3 ( c ) ( 6 ) .

( b ) I n any c a s e i n which Respondent c o n t e s t s t h e f a c t o f a n

a l i e g e d violation of any condition s e t f o r t h i n Pa rag raph 9 o r 1 0 , Respondent

may r e q u e s t a h e a r i n g b e f o r e t h e Reg iona l A d m i n i s t r a t o r u n d e r S e c t i o n

1423 ( c ) ( 3 ) ( A ) of t h e SDUA, 42 U.S.C. 5 300h-2(c) (3) (A) .

13. ( a ) I f EPA h a s n o t n o t i f i e d Respondent t h a t t h e r e h a s been

p u b l i c comment on t h e demand, Respondent s h a l l pay w i t h i n f o r t y - f i v e

( 4 5 ) d a y s a f t e r t h e demand; o r

( b ) I f EPA h a s n o t i f i e d Respondent i n a c c o r d a n c e w i t h Par

g r a p h 1 2 ( a ) a b o v e , Respondent s h a l l pay:

( i ) w i t h i n s e v e n t y - f i v e ( 7 5 ) d a y s a f t e r t h e demand

c a s e s of p u b l i c comment w i t h o u t a p p e a l ; o r .

( i i ) w l t h i n t e n ( 1 0 ) days of EPA's n o t i c e t h a t t h e re-

v i e v i n g f n i t e d S t a t e s D i s t r i c t Cour t h a s t a k e n f i n a l a c t i o n on

t h e a p p e a l by o t h e r t h a n s e t e i n g a s i d e o r remanding t h e s t i p

l a t e d p e n a l c y .

1 4 . T h i s ORDER O N CONSEST d o e s no t c o n s t l t u t e a w a i v e r , s u s p e n s i

o r o o d i f i c a t i o n o f t h e t e r m s and c o n d i t i o n s of t h e SDWA, UIC r e g u l a t i o n s

o r cond:t ions of any p e r m i t i s s u e d t h e r e u n d e r .

15. V i o l a t i o n of t h e t e r m s o f t h i s ORDER O N CONSENT a f t e r i t s e f f e c -

t i v e d a t e o r d a t e of f i n a l judgment i n t h e e v e n t of a n a p p e a l by a com-

m e n t e r a s d e s c r i b e d i n S e c t i o n 1 4 2 3 ( c ) ( 6 ) of t h e SWA, 6 2 U.S.C. 5 3

2 ( c ) ( 6 ) , may s u b j e c t Respondent t o f u r t h e r en fo rcemen t a c t i o n , f n c l u

a c i v i l a c t i o n f o r e n f o r c e m e n t o f t h i s ORDER ON CONSENT and p e n a l t i e s f o r

v i o l a t i o n s of t h e compl i ance t e r m s of t h i s ORDER O N CONSENT u n d e r S e c t i o n

1 4 2 3 ( b ) of t h e SDWA, 4 2 U.S.C. 5 300h-2(b) .

16. EPA,shall have the authority, to the extent authorized by

Section 1445 of the SDYA, 42 U.S.C. 5 300j-4, to enter the injection

facility and all related locations at reasonable times and upon written

notice.

17. This ORDER ON CONSENT is not and shall not be interpreted to

be a permit for the injection of fluids under Section 1421 of the SDVA,

42 U.S.C. 5 300h, nor shall it in any way relieve Respondent of any

obligation imposed by any permit issued thereunder, or of its obligation

to comply vith any provision of the SDUA, its implementing regulations,

or any other local, state or federal law. Nothing contained herein

shall be construed to prevent or limit EPA's rights to obtain penalties

or injunctive relief for any future violations not othervise covered by

this ORDER OK COSSEST under Section 1:23 of the SDCA, 42 U.S.C. 5 300h-2,

or other federal statutes and regulations.

18. If any event beyond the control of, and vithout the fault of,

the Respondent occurs which causes or may cause a delay in the achieve-

ment of any requirement of this ORDER OK COIISENT, Respondent shall

notify EPA orally, within four ( h ) days of the time Respondent has know-

ledge of the occurrence of such event and the fact that it will or may

delay complfsalce. A rrltten report of said event shall be submitted by - .- - certified mail to EPA vithin ten (10) days of the date Respondent became

aware of the event. Said report shall describe the event, its cause and

all attendant circumstances, and the measure(s) taken to prevent or

Dochei ho . !::-88-C?9-35

-9-

minimize any-auch event and to comply with the pertinent requirements of

this ORDER ON COXSENT as soon as possible, and the timetable by vhic

those measures are proposed to be implemented.

The burden of proving that any such event or failure is caused by

circumstances beyond ehe control of and without fault of Respondent, and

the length of delay attributable to such circumstances, shall rest with '

Respondent. Financial, economic, or business conditions, or changes

same, or unanticipated or increased costs or expenses, shall not relie

~ e s ~ o n d e n c of any obligation imposed under the terms of this ORDER ON

COSSE!;T, nor from paynent of any penalty set forth in this ORDER ON

CONSETT.

EPA will notify Respondeqt of its determination as to whether the

circumstances are beyond Respondent's control. If so, the time for

completio? of the affected requirements shall be extended for a period

equal to the excusable delay. Respondent shall waive its claim for an

extension if it fails to provide wrieten notice within ten (10) vorking

days of the date Respondent first becomes aware of the delay, or if it

fails to provide adequate proof of the cause of delay.

EFFECTIVE DATE

Pursuant to Section 1423(c)(3)(D) of ehe SDWA, 42 U.S.C. 5 300h-2

(c)(3)(D), chis ORDER OK COSSENT becomes effective thirty (30) days

from the date on which Respondent receives this ORDER, unless an appeal

Docket h u n b e r 111-88-010-CS

,. . - --. i s t aken by a pe r son o t h e r than Respondent who h a s commented on t h e ORDER

d u r i n g s a i d 30-day p e r i o d pursuan t t o S e c t i o n 1 4 2 3 ( c ) ( 6 ) of t h e SDWA,

42 U.S.C. 5 3 0 0 - 2 ( ~ ) ( 6 ) .

A l v i n R . Mor r i s , D i r e c t o r Water Management D i v i s i o n EPA, Region 111

- -

Date Date i

ATTACHMENT

Draft Procedure for Obtalninc 5 -- .- Plug;lng Contractor

. . -

1.) Vlrite a m e m o (sanple attached) to ill known.plugging - companies with a Standard Industrial Classification (SIC) Code and Industry No. 1389, Group No. 138 who may be interested or who know of others who may be interested in participating in the bidding process. The memo s.hould be sent on an area, county, state or regional basis as deter- mined by the Director.

2 , ) Based on the number of companies who express an interest . ,in participating in the bidding proces, a list of compa-

nies should be developed for future bidding purposes. Every two years, the list couldbe formally updated by writing a men3 ts all known coapanies similar to the one reEerenced aboae.

3.) All tgrn-key 3;;g:ing bids should be s u b a i t t e d o n a stan- dar? 31:;;~ir; ti5 f:r7 (san?!e at'tached). If a subcon- z trac:3r will be ctilized for various as?ects of the plugging 2 - 'h --.., this sbo-l? be indicated a?.? a discussion attached to t h e : i? a-3.;~: CLDEC.

4 , ) A tlne ac? let? 5-r the subrission of ?lugging bids should be estzZis?e? 2-5 eac- bidding participant should be infzr-sd zf tb:s ?ead!ine. N3 :ids should be opened or eva:;ate5 ?rizr t: the .deatline.

Y3te: 3cl.i one .>id will be d'eclared acceptable, The other bids should be ranked, accordingly.

5.) A tsr--key pluggin3 job can be defined as an abandonsent joSt3at inccrporates all the labor necessary, rigs, pl?eline, tools and services, cement, water, electricity, bridge plugs, perforating equipment, wireline and other intangible workover instruments necessary to complete a plugging job based on an EPA approved plugging-plan fron start. (move on rig) to finish (move off rig and restore land surface). Every turn-key plugging bid must take into account all workover intangible costs as well as labor cost.

6 . ) EPA shall, after determining an acceptable bid, direct the trustee, by certified letter, to engage the selected con- tra'ctor at the agreed-upon price. Release of payment will be contingent upon the documentation of a satisfactory plug- ging 205. EPA reserves the rig5t to witness the plugglng operatlo?.

On , 19-, the U.S. Environmental Protection Agency (EPA) requested to transfer funds from the following [bond or l/cl Into the Standby Trust held by

Name of well !8ond or l/cl No.

Accorcinp to the Standby Tr-st Agreement executed on - '

!9 , the Tr~lstee shall ?ro:.i5e payment for the cost an?-a~andonn+nt for the a b o v i-jectior: wel?(s) upon e written notice f - 3 ~ the E?; Pe~ioral AJninistratol. n;st be na5e as desis-,ate.'. in the written natice with ( 1 5 ) days af:er recei;t of the notice.

- :he ,rustee shal: in\,est and reinvest the ?rinci?al and inc of the f ~ n d an5 keep the h n t invest.? as a single fund, wi distinctio? between ?rinclpa! and inc=!?!e, in accordance wit Senera; invest-ent policies and guidelines and in accordance Section 6 of the StandSyTrcst Agreenent.

Within seven ( 7 ) daysafter receipt of funds into the standby Trust Account, you should notify the Regional Administrator o delegatee of EPA, by certified mail, that the funds ti received.' Commencing after initial transfer of the f the Standby Trust, you shall quarterly, at least ninety (90 days after receipt of the 'funds, furnish to EPA a statement con£ imi- the value of the trust.

" -- . - - If you h i k e additional questions or concerns do not h contact - . of my staff at

Sincerely,

CERTIFIED MAIL . - - - -- - - - PETL'D?: PECEIPT P f QUESTED --

-. DPAFT H E R O TO POTERTIAL --- PLUGGING CONTRACTOR -

Re: P l u g g i n g a n d Abandonment t o P o t e n t i a l P l u g g i n g C o n t r a c t o r

D e a r

The U.S. E n v i r o n m e n t a l P r o t e c t i o n Agency (EPA) is i n t h e process o f d e v e l o p i n g a l i s t o f c o n t r a c t o r s a n d / o r c o n s u l t i n g c o m p a n i e s who may b e i n t e r e s t e d i n p a r t i c i p a t i n g i n t h e b i d d i n g process f o r t u r n - k e y p l u g g i n g j o b s .

A t u r n - k e y p l u g g i n g j o b c a n be d e f i n e d a s a n a b a n d o n m e n t job t h a t i n c o r p o r a t e s a l l t 3 e l a b o r n e c e s s a r y , r i g s , p i p e l i n e t o o l s , a n d s e r v i c e s , c e m e n t , w a t e r , , e l e c t r i c i t y , b r i d g e p l u g s , p e r f o r - a t i n g e q u i p m e n t , w i r e l i n e a n d o t h e r < n t a n g i b l e w o r k o v e r i n s t r u - n e n t s n e c e s s a r y t 3 - 3 - ? 1 ~ t e a p l u g g i n g j o b b a s e d o n a n E P A ap?rover? ? l u p ~ i ; l n g p l a n f r o n s t a r t (mgve on r i g ) t o f i n i s h ( m o q o f f r i g a n d r e s t o r e l a n d s u r f a c e ) . E v e r y t u r n - k e y p l u g g i n g b i a n u s t . t a k e int : : accst:?: a!,l w a r i t o v e r i n t a n g i b l e c o s t s a s w e l l as

, l a b o r c o s t .

Turn -key p : , ~ ~ ; i n q . p r o c e d d r e s w i l l be u t i l i z e d i n c a s e s w h e r e t h e o w n e r o r o p e r a t ~ r o f a n i n j e c t i o n we:l h a s d e f a u l t e d on h i s r e g u l a t o r y r e s p c n s i b i l i t y f o r ' p r o ? e r p l u g c i n g a n d a b a n d o n m e n t . A l l s u c k p l ~ g ~ i n ; a n d a S a n d 3 n x e n t o ? e r a t i o n s w i l l b e e i t h e r w i t n e s s e d anC/or r e v i e w e d a t c o m p l e t i o n p r i o r t o r e l e a s e o f a n y p a y m e n t .

I f you a r e i n t e r e s t e d o r know o f a company who may b e i n t e r e s t e d i n p a r t i c i p a t i n g i n t h e b i d d i n g p r o c e s s , ? l e a s e s e n d t h e f o l l o w i n g , i n f o r m a t i o n t o t h e P , e g i o n a l A d n i n i s t r a t o r or d e l e g a t e e , U.S. EPA, [ A d d r e s s ] , A t t e n t i o n - U n d e r g r o u n d I n j e c t i o n C o n t r o l :

Conpeny O f f i c i a l Name o f Company A d d r e s s o f Company Phone Number o f Company

"Number o f Y e a r s i n t h e P l u g g i n g o r P l u g g i n g R e l a t e d B u s i n e s s

Year P l u g g i n g o r P l u g g i n g R e l a t e d B u s i n e s s Founded L i s t o f F o r m e r P l u g g i n g C l i e n t s

I f t h e r e a r e a d d i t i o n a l q u e s t i o n s o r c o n c e r n s , d o n o t h e s i t a t e t o c o n t a c t - o f my s t a f f a t

S i n c e r e l y ,

R e g i o n . a l Admi n i s t r a t o r o r D e l e g a t e e

-3 -

LEASE NA&?E- -- FIELD L3CATI ON COUNTY-7 STATE

PLUGGING b ABANDONMEST BID AMOUNT ITE3IZATIOK OF COSTS - -

Descr~ption

I Unit Time - Norral kerations 1

Eauip~ent - - Fuel 6 Electricity h'ater Pits, Reamers 6 C;trers -- Fishinc Tools, 5erv::es .--- - 1.;e!l Scrveys 6, Lzz?r-; - Special Services, ::-:;-e-t , .

Rentals, Safety Cc7tr21 I -- -- . . , : (' Cenenting - i

--I---- 5.

7uSc:ar I~s?ect :c7 Perfcraticg 6 V:IPELI::E , ! -- . . -r -- Suaervision - w..?' ,.never Overha? Yiscel:aneo>s Testing

! -.

W O R K O V E ~ A A S i B L E S I

Packers b Down Fole Eq-ipment 6 Cement Retainers & Bridce +

Plugs I Tubing I

Wellhead - all connectina parts Flosiline-;:. I Controll&le Valves I Other NoPPControllable Equipment

I I TOTAL BID AMOUNT I I

COMPANY NAME OF BIDDER DATE COMPANY OFFICAL TIME OF SUBMISSION --

(KAME b TITLE)

- Check if approved Plugging and Abandonment Plan is attached i/

- Check if P!ugs:nz bid is fsr a turn-key plugging job as defined in instr,ct:s~s

Draft ~ l w g i n g and .Abandonrent Agreement Between the R-dstee and Plujging Contractor

%IS PU)(;GING AVD A & 3 \ 4 X T KEE*fE.\T ( the "ligr-nt") has been entered i r i t oa so f - bj and between P

(date) (nune of plugging contractor)

a , the "Plqging (nane of s ta te) (cormration. r>artnershl~

Contractor", and the "~rustee". (name of Trustee)

WEREG, the U. S. Envirwmntal Protection Agency ("EPA") , an agency of the United States Govermnt, has established certain regulations applicable t o the plwging and abandonnent of the subject well(s) at :

( N w e of fac i l i ty ) Location Field s ta te

%e:eas, the P l q g i n ~ Contractor h a s been selected by EPA t o be the Plqging Coqtracto: under t h i s agreement, and the Plugging Contracto: has agreed to.. act as the plmging contractor.

mereas, t3e 2 - ~ s t e e has ~ r e e e to act as the t:ustee.

h ' 3 , W E X F O E , the Tllq;:?; C~ntractor and T-ustee agree as follars:

Section 1. k f i r i t i o i l s . As us& in t ? i s qreenent

( A ) "Plwcing Cantractor" mans the individgal or conpany who enters into t h i s qresnent or' any successor or assign of the Plugging Contractor that agrees t o p l q and -?don the subject wells i n accordance wit? the t e r n and conditions of th i s docunent.

( 9 ) eTnstee" mans the Tnstee who enters into t h i s agrranent and any swcessor tnstee respnsible for manmenent and dis&rsan?nt of funds generate", Sy a fo:tlfied bond, l e t t e r of credit or other mchanlsn for the p u F s e s of plugging and abandomnt aperation.

( C ) "Facility" or 'activity" mans any underground injection well os arny f ac i l i t y o r activity that is subject t o regulation by EPA m&r the Undergrad Injection Control Program. -

( 3 ; . " ~ d r . y k c & plugginc: j o y means a plugging and ahndonnent job tha t . incorporates a l l necessary lmr-, r i g s , pipeline, tmls, c-nt,, se lv ices , water, electricity, bridge plugs, perforatirq equipoent, 'wineline and e q u i p n t necessary t o carrplete a p lqg ing job based tin an EPA-approved pluggingplan f r m s t a r t (move on r i g ) t o f i n i s h ' (mve off r i g and res tore land sur face) . EYery t u b k e y plug '

job bid must take in to accmnt a l l mrkoveu intangible msts we.11 a s labor costs.

(E) "Grantor" of the S t adby Trust means the w e r or oper'ator &io entered in to t he Standby Rust Pgregnent and who has defaulted on, h i s regulatory r e s p n s i b i l i t y for pr-r plugging and

(F) *EPA-appzoved p l ~ g g i r q and abandoment plan" means the pr vfiich d e t a i l s the necessary ccrrponents of an &equate p l q g and abandonrent j o b for a f a c i l i t y a s described by the mi Pdministrator o r the delegatee.

Section 2 . Ident i f icat ion of F a c i l i t i e s and Pluaoing Estimate

T h i ~ qreement p r t a l n s t o the f a c i l i t i e s and piugging cost e s t k t e s ident i f ied in Schedsde A , attached her-eto and by t h i s reference made a pa:^ he:-eof, Sched~ile A lists, £0: each f a c i l i t y , the EPA P e ~ m i t Number, , .~'

i f applicaSle, the name, location, s t a t e and f i e l d of the well or &Ils a the E?;-acce?t& plffiging cast e s t ~ ~ a t e .

Sectior 3. Per.fo:~ance of Pun-Sev PlLia~ing

Within days of the exec~cion of t h i s A$zement, the Plugging Contractor p2.t c-lete the tu:-n-key pl*ging job i n a manner tha t i accepta'sle t o the Re~ iona l Akin ls t ra to : or: t'2e d e l q a t e e . The Plugg Contractw accepts r e s p n s i S i l i t y for a s s u y i ~ that the e l 1 is p l u ~ g e according t o the, EP.4 appovea P1ug;li.q and m a n d o m n t plan and nust s a d m a t e docmentation of the same.

Section 4 . P l w ~ i m and Abandorment Payment

Ihe Trustee sha l l w k e paymnt t o the Plu3ging Contr-actor as the EPA Regional Administrator o r the delegatee sha l l d i r e c t , i n writ ing, for cost t o plug and abasldon t5e in ject ion u e l l ( s ) covered by. this P ~ L B Payment must be trade a s designated i n the wri t ten notice w i t h i n f i f t een . .

(15) days a f t e r rece ip t of the notice. Tne snount due and payable to'the Plugging %tractor sha l l be no greater than the a m t EPA determined to be acceptable, during the biddiog process. jFelease of payment w i l l be c o n t i q n t upon and subject to adequate doamentation that the v e l l was p l q g e d i n a manner acceptable to EPA. EPA reserves the r i g h t t o w i t n e s the p lqg ing cperation.

Section 5. Successor %$tee.

The T r u s t m y resign or the Grantor of the hust may replace the Trustee, i n caq9iancpwith the t e r n of the ?rust Pqre-nt. The successor trustee shal l have the sane pcvers and duties as those conferzed upon the Trustee hereunder. ?he successor trustee shall give the Plqging Contractor a t leas t ten (10 ) days written notice of the date on which it shall assuae administratiwr of the Trust , and s h a l l notify the Plqging Contractor of h w t o contact the sircessor trustee and a l l other relevant information.

Section 6. Successor Pluggiw Contractor.

Ihe Plugging Contractor my resign or the EPA k y replace the Pluggim Contractor, hit s x h resignation or replacanent shall not be effective unt i l EPA has appointed a successor Plugginj Contractor and th i s successor accepts the appointment. h e successor Plqging Contractor shall have the sane per-s and duties as Lbse of the original plugging Contractor hereunder. Umn the successor Plqgina Cont:-actor's acce2tance of the appintmgnt, the original Plugging Contractor shall assign or transfer Q.5 responsibility to nlw and abandon the subject wlls t o the successor Pl'q'<ing Contractor. h e successor Plugging Contractor shall specify the date on which it assunes resmnsibility ts properly p l q and handon a s EPA has designated, i n a .,' . witing sent to the Pus tee , the EP.4 Regional Pdministrator or the delegatee, and the present ? l * c ; i n ~ Cont:-acto: by cert if ied mail ten (10) days before such change b e c m s effective.

Section 7. Amndnent cf Aareement.

%is a?reesnt r a y be mended only Sy w i t t e n agreement suSsequent t o the written apprjval of the Plqging Contractor ard the Trustee with the EPA Regional A.im.inistrator, or the delegatee.

Section 8. Irrevbcabilitv and Tefination.

SuS~ect to the r q h t of the parties t o e n d thls agreenent as provided i n Section 7 , t h l s ag remnt shall be irrevocable and shall contlnue unti l the subject well(s) are plugged and abandoned as approved by the P A .

Section 9. Choice of Lav.

This hgreemnt shall be administered, construed, and enforced accordir~g t o the laws o£.the State of

( ~ a m e of s ta te )

Section 10. Interpretation.

A. used i n th i s Rgreement, wrds i n the sirqular include the plural and words i n the plural incluje the singular. h e descriptive headings for each Section of th is Agr-nt are for convenience only and shall not affect the interpretatzon or legal efficacy of t h i s Pgreacent.

-4-

Ih. ~ ' I IXESS~WERDX, t?e paz tes hereto have caused t51s Agreenent t o be executed Ly-ehelr resrpctlve offlcers d u l y aucl7o:lze6 and the mrporate seals to be hereunto affixed and attested as of the date first above =Itten.

BY; isignature of ~ 1 ; g g ~ n i Contractor Off ic~al)

-- (l'itley'

Attest: - I t s :

(Titlei

I SELhL)

For Sample Use only Ccmparable Wrdlng k c e p t a b l e

SCHEarlJ: A

-- Ident i f icat lon of F a c i l i t e s and Cost E s t h t e s

Schedule A is referenced i n t h e trust agreerent dated

by and between

the 'plqgin;l cntractor" , and (Name of Trustee)

EPA permit No., i f applicable

Nsne of f a c l l i t y

Locatior; of f a c i l l t y ( S e c t l m , T m s h i p , Range)

Fleld

State

-4-acce3teS 31ugg:ng and abaqdo-~ent c3st e s t r a t e (913)

EP.% %mi t No. , i f a@ ScaSle

Same of f a c i l i t y

Location f a c i l i t y (Section, Township, Range)

.Field

state . .

EF~-acce& plugging and abandonmart&acat e s t m t e ( B I D )

Date of estimate (BID)

Re: Transfer of [ 1 Surety Bond/Letter of Credit m t s i n t o Standby Ynst Fund

b a r

UDon receipt bf y x r notice of cancellat ion da:32 [ U. S. E?virorre-ta: ~ r b t e z t i 3 n .+gene (@;I) requested [

I , t he

t3 s&?iC. t9 EPA a l re rna te f inancia? ass;i=ance ~y [ 1 date , E?R has no: reze:,de-! alte.mative f inancial ass=ance frm I . n,

S t t3 t ? 5 e 33:*,.pxtte: of c:e.'it ,4g;-,t exesitw on 1 1 i.. I

' f -: t nn. --..I i c . F.. --. . - CZTTZ-, t: r\:~:? t?e f - 1 1

1 and yw, I hereby ---"in % n " ~ > ~ e t t e r ( s ) of Credit

i7:3 tL.e S:a7d2,; -15: >,. t ' je 1 . . I :

I Within seven 171 days of receipt of Ghis l e t t e r , ~ J J a=e requested to no t i fy WKb by ce r t i f i ed m i l , t h a t t"ie f,mds have firen placed into the Standby 2-t f o r fo r the ps--;oses of pliggirg and aSandonnem.

- 2 -

If there are any a5<it:qna! q~estions or concerns, do not hesitate to. contact I I of my staff at (404) 347-3866.

Sincerely y o u r s , . . .

Regiorial Adninistraeor or

&legatee

CC: h u s t Conpany