An oil producer active on tribal lands in the Uinta Basin has agreed to pay a $600,000 fine for not making sufficient financial arrangements to cover the environmental risks associated with its network of injection wells.
The U.S. Environmental Protection Agency reached the agreement with Houston-based Newfield Production Co., which has put up a bond in lieu of its failure to demonstrate financial responsibility, a violation of the federal Safe Drinking Water Act.
Last month, the company entered into a consent decree in U.S. District Court, opening a public comment period through the end of November.
The violation stems from Newfield's 442 injection wells, situated in Duchesne County mostly on the Uintah and Ouray Indian Reservation. The wells are used to enhance production in the Monument Butte oil field. Operators inject fluids down them in ways that get hydrocarbon-bearing formations to push more oil and gas up through other wells.
"Companies like Newfield have an obligation to demonstrate they have sufficient resources to operate responsibly in Indian country," said Mike Gaydosh, EPA enforcement director in Denver, in a press release. "In this case, Newfield did not provide adequate documentation of financial reserves to ensure the protection of water resources and the safe operation of wells used to dispose [of] production wastes."
Federal law obligates such producers to secure money up front, either through bonds or proof of financial soundness, to also ensure the company safely plugs and reclaims abandoned injection wells. The requirement is intended to shield taxpayers from this expense should the company become insolvent.
In 2005, Newfield elected to use financial statements for this purpose. But in 2008 and 2009 the company failed to meet debt-to-equity ratio requirements, yet Newfield had not secured the necessary bond, according to the EPA's suit filed last month in Salt Lake City.
Newfield officials could not be reached Wednesday, but according to recent financial disclosures filed with the Securities and Exchange Commission, they took action once the EPA issued a notice of violation in August 2010.
"We promptly complied with the EPA's request to put in place alternate financial assurance," Newfield officials wrote.