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Utah's largest oil producer to pay $600,000 fine for EPA violation

Published: Tuesday, Oct. 29 2013 5:08 p.m. MDT

SALT LAKE CITY — The largest producer of crude oil in Utah has agreed to pay a $600,000 fine for violating federal regulations on the Uintah and Ouray Indian Reservation.

Newfield Exploration spokesman Keith Schmidt confirmed Tuesday that the Texas-based energy company and the Environmental Protection Agency have resolved a "complaint regarding administrative reporting."

"The complaint does not involve any environmental spills, pollution or contamination," Schmidt said.

EPA regulators allege that Newfield operated 442 Class II injection wells within the boundaries of the Ute Indian Tribe's reservation during an 18-month period without adequate proof that it could pay to safely close and abandon those wells, if necessary.

"Having the financial resources to properly plug and abandon injection wells protects underground sources of drinking water," Justice Department attorney Heidi Hoffman wrote in the EPA complaint filed against Newfield last week in U.S District Court in Salt Lake City.

"Adequate financial assurance also protects the public from having to pay for the costs of plugging abandoned injection wells should the company go out of business or otherwise not be able to pay for this important work," Hoffman wrote.

Energy companies operate about 144,000 Class II wells in the United States, injecting more than 2 billion gallons of salt water into the ground every day, according to the EPA. Other fluids associated with energy development are also injected into the wells, either to improve the production of oil and gas from nearby wells or for disposal purposes.

A federal program authorized by the Safe Drinking Water Act requires companies to prove that they can afford to safely close and abandon the Class II injection wells they operate, should it become necessary. Companies can provide that proof in two ways: either with a surety bond sufficient to cover the wells the company is permitted to operate, or through the use of audited corporate financial statements.

Since 2005, Newfield chose to submit financial statements to meet the federal requirement, according to the EPA complaint.

Letters from Newfield's chief financial officer to the EPA in 2008 and 2009, however, "self-identified" that the company failed to meet two of the five benchmarks required for proof of financial responsibility, the complaint states.

"These letters demonstrated (a) lack of financial assurance respectively for the years 2009 and 2010," Hoffman wrote.

She also noted in court papers that Newfield was aware of the deficiency, but "did not attempt to put in place alternative financial assurance, such as a surety bond," as required by federal regulations.

Under the terms of a proposed consent decree, Newfield has agreed to pay a $600,000 fine and use a surety bond through the end of the year to provide proof of adequate financial assurance.

The company could drop the surety bond in January and return to submitting audited financial statements to the EPA, so long as it meets restrictions and reporting requirements outlined in the negotiated settlement.

The proposed consent decree is set to be published Thursday in the Federal Register, opening a 30-day public comment period. Once the 30 days have elapsed, attorneys for the EPA can ask U.S. District Judge David Nuffer to enter a final ruling.

Email: gliesik@deseretnews.com

Twitter: GeoffLiesik

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