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Uinta Basin oil producer slapped with record $2.1M fine

Published March 31, 2011 5:54 pm

Production tracking • Employee disabled valves that can affect royalty payments.
This is an archived article that was published on sltrib.com in 2011, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

A Denver-based company has agreed to pay a U.S. Bureau of Land Management record civil settlement of $2.1 million for an employee's disabling of production gauges that could have affected royalty payments at a Uinta Basin well field.

Berry Petroleum will pay the fine because a worker installed disabled equalizer valves on 154 wells on federal and tribal lands at Brundage Canyon, south of Duchesne, but provided false diagrams showing them operational, according to the BLM.

Those valves allow oil to flow from one well-site tank to another after the first is full. BLM officials say disabling them — essentially allowing oil to flow from tank to tank freely — removes one measure of production.

BLM spokesman Matt Spangler said the company paid the appropriate royalties but is also paying the fine for its employee's actions. Most of the oil field was on Uintah and Ouray tribal lands, he said. Tribes keep all royalties generated on reservations, while federal and state treasuries split the proceeds elsewhere.

BLM Director Bob Abbey applauded the settlement. "We will vigorously enforce the regulations that assure that oil and gas production is properly accounted for," he warned "so that tribes and taxpayers receive their fair return in royalties."

The company told the BLM that its employee disabled the valves to avoid overflow spills from storage tanks, according to the agency, though company managers were unaware of the disabling.

Berry Vice President and General Counsel Davis O'Connor said the employee, who was suspended after the violation last May and later left the company, thought he was acting in everyone's best interests by opening the valves to prevent spills resulting from fast flow during early production at the wells. Each tank holds 400 barrels, he said, but some wells were producing up to 1,000 barrels a day.

The employee was not trying to defraud royalty owners, O'Connor said, and production numbers still could be measured at a separate valve outlet tracking sales. He acknowledged, though, the violation of federal rules.

"The agency," he said, "is endeavoring to send a message to the regulated community that there's a new sheriff in town."