ECMC hearing pauses after daylong Rule 2.11 fight over KP Kaufman wells; parties dispute economics, remediation and public‑health risk

The Colorado Energy and Carbon Management Commission spent most of its June 18 session on a contested Rule 2.11 “well or location closure” petition filed by the Town of Frederick and the City of Dacono seeking orders that would force KP Kaufman Company (KPK) to plug and abandon multiple older wells inside those municipalities.

A three‑part factual battle framed the day: applicants argued wells and associated facilities are impediments to development and must be removed; KPK argued that the wells still have measurable economic value and that private deals and ongoing remediation are resolving site issues; and independent and staff witnesses highlighted disputes about how to measure long‑term contamination and when a site should be considered a public‑health threat.

Why it matters: the hearing tested how ECMC staff and commissioners should weigh engineering forecasts, private market transactions and remediation status when a municipality asks the commission to compel plugging and abandonment. The case also exposed persistent disputes over how the agency accepts “background” sampling of naturally occurring metals, how flow‑line leaks are recorded and repaired, and how to compare private settlement or condemnation outcomes with administrative closure under Rule 2.11.

What happened: Commissioners heard four principal witnesses presented by KPK: Avi Mailer (vice president, land), Jeffrey Kaufman (president and COO), Lily Clark (director of engineering) and John Peterson (environmental consultant, formerly KPK executive). The company introduced dozens of exhibits documenting private plugging and abandonment (P&A) agreements, sales/settlement documents, engineering decline‑curve analyses and field cost data. KPK’s core points were: - KPK has executed many private agreements and condemnations settlements in the region that resulted in paid P&A and removal of infrastructure; comparable market transactions, it said, show positive value for many wells. - Field economics: KPK offered a detailed lease‑operating‑expense profile for the Spindle field and argued that vertically integrated operations and potential refracture and enhanced‑recovery work support continuing production. - Remediation and spills: KPK called multiple remediation projects “in progress,” said most acute hazards were addressed during emergency response, and disputed applicants’ claim that outstanding open files alone mean an active public‑health threat.

Applicants and intervenors pushed back with three focal lines of cross‑examination and evidence: the towns emphasized developers’ statements that oil infrastructure discourages new investment; they questioned KPK’s cost allocations and internal transfer pricing; and they flagged numerous historical releases and ongoing remediation files in municipal footprints. Counsel for Frederick and Dacono argued that some wells are low‑producing or shut in and that private P&A sales do not eliminate the need for administrative action under Rule 2.11.

Key technical testimony and corrections: KPK’s engineer Lily Clark ran decline curves and economic models that she said showed most subject wells were not uneconomic when refracture or other future uses were considered. The applicants’ economic witness, Dr. Liza Lencioni, filed a rebuttal analysis that KPK’s team identified contained a gas shrinkage data error; Lencioni filed an amended correction (RR) during the hearing correcting the shrinkage input and said the correction did not change her core conclusion that most wells failed the used‑and‑useful test in the applicants’ view. The parties agreed the corrected spreadsheet would be admitted and available for cross‑examination at a later date.

Remediation disputes: long, site‑by‑site disagreement over “background” concentrations of naturally occurring inorganics (metals, salts) proved the most contentious technical point. KPK’s consultant John Peterson described a recurring pattern: emergency response and source removal typically eliminate acute exposures; residual low‑level contamination then triggers protracted sampling and statistical disputes about whether concentrations exceed background for that immediate geologic setting. Peterson testified multiple KPK submittals were denied by staff and that the company often has to provide additional rounds of site‑specific background data before staff will accept closure. Staff representatives said the agency requires conservative protective approaches and case‑specific data to protect water and public health.

Procedural rulings and scheduling: the hearing officer’s prior order denying subpoenas was upheld on the record. The chair clarified that the applicants (the towns) carry the evidentiary burden as the petitioners under Rule 2.11. Commissioners set cross‑examination schedules and accepted a corrected Lencioni economics exhibit; they asked KPK to file full copies of any incomplete or redacted P&A agreements (under protective or sealed treatment if confidentiality clauses require it). The parties agreed to resume cross‑examination of the corrected economic exhibits and site details on June 20; commissioners signaled deliberation and any final action would follow after they had time to review the record.

What commissioners asked for: multiple commissioners requested full lease/assignment documents tied to the subject locations and asked staff/parties to clarify where KPK holds shallow rights only versus deeper formations. Commissioners repeatedly asked for clearer, site‑by‑site remediation status (excavation volumes, monitoring well results, open forms) so they could compare economic forecasts to contamination footprints.

The bottom line: the hearing did not resolve the petition. KPK presented an economic case for continuing production, including a corrected expert filing; the towns presented evidence they say shows continued planning and developer objections. Commissioners paused the hearing after a long day and scheduled continuation with the corrected economic rebuttal and time for cross‑examination on June 20, with the possibility of additional follow‑up if needed. The record shows the dispute hinges on (a) which economic model and cost allocations the commission accepts at face value; (b) how the agency treats private P&A deals and condemnation settlements as evidence of market value; and (c) whether residual contamination and contested background sampling constitute an administrative “threat” under Rule 2.11.

Votes and next steps: the commission approved routine consent items at roll call earlier in the meeting. No final administrative decision on the Rule 2.11 petition was made; the hearing will resume June 20 for economic cross‑examination and commissioner questions and is likely to include additional follow‑up documentary submissions on leases, P&A agreements, and remediation sampling.

Ending: Commissioners instructed parties to prepare lease and assignment documents, full P&A agreements (subject to confidentiality protections where required) and to be ready to proceed with targeted cross‑examination of the corrected economic exhibits on June 20; deliberations were expected to follow after commissioners had time to review the full evidence.