Facing millions of dollars in fines, dozens of violations, legions of complaints from homeowners as well as local governments, oil and gas operator Prospect Energy on Wednesday had its right to do business in Colorado canceled.
The Energy and Carbon Management Commission endorsed a settlement agreement between the commission staff and the Highlands Ranch-based company. Prospect Energy also has an agreement with Larimer County and Fort Collins to clean up sites.
As part of the agreement, $1.7 million in ECMC fines will be waived, with what funds the company has going toward securing and cleaning up its sites. Prospect Energy was fined for illegal flaring, spills and failing to do well-integrity tests.
Prospect Energy’s 59 wells will end up in the ECMC Orphan Well program and will eventually be plugged and abandoned by the state.
Under the agreement, Prospect Energy’s owner, Ward Giltner, must obtain commission approval before owning or operating any future oil and gas properties in Colorado. Giltner did not reply to email and telephone requests for comments.
The company, however, still faces $337,000 in fines from the state Air Pollution Control Division for air emission violations. In 2022, the division ordered one of Prospect Energy’s sites closed until dangerous emissions could be curbed.
“This is an exceptional and rare course of action,” APCD director Michael Ogletree said at the time. “This is a unique situation that calls for extraordinary measures to ensure we are protecting public welfare.”
Division inspectors found emissions of volatile organic chemicals and hydrogen sulfide, which smells like rotten eggs, on repeated visits to the company’s Krause facility tank battery.
“These issues have been going on for more than four years,” said Matt Lafferty, Larimer County principal planner. “The county and the city filed a formal complaint to push the ECMC.”
Prospect Energy operates mainly low-producing wells — 49 in Larimer County and 10 in Fort Collins — and several tank batteries for collecting produced water and oil. The wells date as far back as 1928.
“We have an old, outdated oil field that has seen the end of its life, and I am sure it is hard for owners to let go because they still make a little money,” Lafferty said.
Still, the passage in 2019 of Senate Bill 181, which made protection of public health, safety and welfare as well as the environment the priority in regulating oil and gas operations, has put pressure on small operators and low-producing fields, Lafferty said.
For example, Lafferty said, in 2020 the state adopted rules severely limiting flaring, the practice of burning off gas from oil and gas wells, and it created another violation for Prospect Energy.
“Once that ball started rolling on Prospect Energy, it was clear it didn’t have the resources,” Lafferty said. “Everyone is starting to take action. The snowball got pretty big.”
“This isn’t an oil and gas thing,” Lafferty said “It is a health and safety issue.”
Andrew Klooster, the Colorado field advocate for the environmental group Earthworks, first documented emissions from Prospect Energy, using an infrared FLIR camera, in 2021. Klooster said exasperated residents had contacted his group.
“People were complaining of odors, headaches, nausea,” Klooster said. “Krause tanks had holes in them because they were so old and decrepit,” he said, adding that even when they were replaced, emissions from hatches continued.
“An operator that was not interested in complying”
Klooster said over the years he has made 29 visits to Prospect Energy facilities finding repeated violations, with a big point of concern the Fort Collins Meyer tank battery, where in recent years the Hearthfire development — with homes going for $1 million or more — has been built.
“The refrain the county has been hearing from us and the community is that this was an operator that was not interested in complying with the air quality regulations,” Klooster said.
Meanwhile, ECMC inspectors were also logging a string of problems and began issuing violation notices in 2020. The company racked up 14 penalties adding up to $1.7 million.
Prospect Energy provided the ECMC staff with financial documents showing that it could not pay the fines, Caitlin Stafford, a senior assistant attorney general representing ECMC staff, told the commission.
Commissioner Trisha Oeth said she was “unhappy” with the company completely avoiding paying a fine. Stafford said it is the “hope the operator puts whatever remaining money they have to put the last bit of compliance.”
“It’s not the best outcome,” ECMC Chairman Jeff Robbins said, “but the only likely outcome.”
Prospect Energy still faces the air pollution fines. Under an agreement with the state air pollution division, the company was going to pay in installments, but failed to pay starting in March, according to Zachary Aedo, an agency spokesperson.
“On Tuesday, Aug. 13, the Colorado Attorney General’s Office filed a lawsuit on behalf of the division seeking compliance from Prospect Energy and its manager Ward Giltner with the terms of the enforcement agreement,” Aedo said in an email.
Under the terms of a separate agreement reached with Larimer County and Fort Collins, Prospect Energy will shut in all its wells and then hire an independent inspector, approved by the local governments, to check that none are leaking.
Any leaking wells will be repaired within 21 days. In addition, the company will remediate a flowline spill in the Country Club Reserve neighborhood east of the Fort Collins Meyer tank battery, and remove the surface equipment there and from the Krause facility to the north within 90 days.
Lafferty said that Prospect Energy hopes to recoup some money by selling off the equipment. He also said that the county’s inspector will participate in the third-party inspection of the shut-in wells.
“It has been a saga,” Klooster said. “Prospect gets out of paying some fines, but for the residents it is worth it for the peace of mind it will bring.”
