1-22-14 v4-Comments on Draft Hughes Consent Order

BEFORE THE STATE OF FLORIDADEPARTMENT OF ENVIRONMENTAL PROTECTION

STATE OF FLORIDA DEPARTMENT IN THE OFFICE OF THEOF ENVIRONMENTAL PROTECTION WATER RESOURCE DIVISION

OGC FILE NO. 14-0012vs.

DAN A. HUGHES COMPANY, L.P.________________________________________/

CONSENT ORDER

This Consent Order (“Order”) is entered into between the State of Florida Department of

Environmental Protection, (”Department”) and the Dan A. Hughes Company, L.P. (“Company”),

to reach settlement of certain matters at issue between the Department and the Company.

The Department finds and the Company neither admits nor denies the following:

1. The Department is the administrative agency of the State of Florida having the

power and duty to protect Florida’s air and water resources and to administer and enforce the

provisions of Chapters 377 and 403, Florida Statutes (“F. S.”), and Chapters 62C-25 through

62C-30, Florida Administrative Code (“F.A.C.”). The Department has jurisdiction over the

matters addressed in this Order.

2. The Company is a “person” within the meaning of Section 403.161 and

403.031(5), F.S.

3. The Company obtained an Oil & Gas Well Drilling Permit from the Department

in December of 2012 (Permit No: 1349H, 20-30H Collier-Hogan Well) to construct a well to be

located at the Hogan Island Farm in Collier County, Florida.

TRADE SECRET 1Not subject to disclosureunder public record laws

4. Upon completion of the construction of the 20-30H Collier-Hogan Well (“Well”),

the Company obtained a Five Year Operation Permit in August of 2013 to operate the Well as

an oil production well.

5. On December 23, 2013 the Company submitted to the Department a Workover

Notification indicating that it intended to conduct a “Workover Operation” as described in

Exhibit 1 attached hereto. This notice stated that the Company planned to commence the

workover operation on 28 or 29 December. Subsequently, at the request of the Department,

the Company agreed to delay the workover operation until at least 30 December to allow the

Department more time to review and respond to the notice. The Company never received any

response to the notice from the Department.

6. The Workover Operation proposed by the Company began on December 30, 2013

and continued through January 1, 2014.

[7.] On December 31, 2013 the Department entered a Final Order Requiring Operations

at Well 20-3H Cease and Desist and served a copy of the Final Order on the Company on

December 31, 2013. The Department’s Final Order did not allege any violations of any

applicable laws or Department rules, stating instead that the Department “is not satisfied that it

has sufficient information that the proposed workover would be protective of the State’s

groundwater resources . . ..” The Company continued the Workover Operations until

approximately 2:30 PM on the afternoon of 1 January, 2014 failed to comply with the

Department’s Final Order. A copy of the Final Order is attached hereto as Exhibit 2.

7. The Company contends that at all times it was operating under a valid permit and

followed all applicable procedures required to conduct the Workover Operations described in

Exhibit 1, and its actions in doing so were legal and authorized in every way.


Having reached resolution of the matter, the Department and the Company mutually

agree and it is,

ORDERED:

[8.] Within 10 days of the effective date of this Order, the Company shall pay the

Department $35,00022,000 in settlement of the regulatory matters addressed in this Order. This

amount includes $320,000 for civil penaltiespayments and $52,000 for costs incurred by the

Department during the investigation of this matter and the preparation and tracking of this

Order. In lieu of paying civil payments to the Department, the Company may provide “in-kind”

payments by funding the studies required below.

WELL SAFETY

8.[9.] Immediately upon execution of this Order and prior to resuming any operations at

the subject well, the Company shall provide to the Department the information in paragraphs

10-13 below.

9.[10.] The Company shall provide Material Safety Data Sheets (MSDS) for all

materials used in the Workover Operation described in Exhibit 1 attached hereto, along with the

proportion and total volume of each material used in the Workover Operation.

10.[11.] The Company shall identify the total volume of water used in the Workover

Operation, and the source of the water, including the permit number if the water was obtained

from a permitted source and confirmation that the volume of water used for the Workover

Operation does not exceed any limitation set in the permit.

11.[12.] The Company shall provide the following information concerning the flowback

material management for the Well operations: (a) estimate of the total volume of flowback

material; (b) storage capacity at the pad to contain any flowback material that is anticipated to


be held onsite; (c) description of the secondary containment measures employed at the site; (d)

the final disposal location for the flowback material resulting from the Workover Operation;

and (e) and confirmation of the regulatory conditions on final disposal, including the permitting

agency and permit number(s).

[13.] The Company shall submit an Interim Spill Prevention and Cleanup Plan (“ISPC

Plan”) to be implemented at the Well. The ISPC Plan shall be subject to the Department’s

approval before resuming operations. If the Department requests additional information or

notifies the Company that the ISPC Plan is inadequate or otherwise unacceptable, the

Company shall provide the additional information or submit a revised ISPC Plan within the

time frame, not less than fourteen (14) days, specified by the Department in the request or

notification. Implementation of the Department approved ISPC Plan constitutes satisfaction of

this requirement.

RISK ANALYSIS AND MANAGMENT

154. The Company shall provide information and analysis to confirm that this and

other Workover Operations are was designed and carried out in a way that provides reasonable

assurance that it will not cause or contribute to any violation of any applicable groundwater

quality standardeliminates risk to the environment. To provide reasonable assurance that there is

no risk the Workover Operation will not cause or contribute to any violations of any applicable

of contamination to the groundwater quality standards from the Workover Operation at the Well,

the Company, at its sole expense, shall retain independent third-party experts with the

appropriate professional licenses qualifications to assess the level of risk develop a that the


Workover Operation will cause or contribute to a violation of any applicable groundwater quality

standards risk analysis (“Risk Analysis”) related to the activities of the Company as identified in

the Workover Operation. This analysis e Risk Analysis shall consider at a minimum, the

potential for fluids to migrate through the deep geological formations or the Well casing into

surrounding groundwater bearing zones with total dissolved solids concentrations of 10,000 ppm

or less. The Department and the Company shall make a good faith effort to reach mutual

agreement on the selection of the third-party experts and the “Scope of Work” to be performed

by the experts within 60 days of the effective date of this Order. If no agreement is reached

within 60 days of the effective date of this Order, the Department will select the experts to be

used and independently Neither the Department nor the Company shall unreasonably withhold

their approvale of the experts or the Scope of Work for the Risk Aanalysis; PROVIDED

HOWEVER, the Scope of Work will be limited to analyses reasonably necessary to provide

reasonable assurances that Workover Operations similar to the Workover Operations described

in Exhibit 1 will not cause or contribute to any violations of any applicable groundwater quality

standards. The experts shall prepare a Risk Analysis Report and submit the Report to the

Department within one year six months of the effective date of this Order. The Report shall rely

upon existing data, pertinent scientific literature and available site specific information.

16. Upon receipt of the Report, the Department shall review the Report and in a timely

manner determine whether it provides reasonable assurances that Workover Operations similar

to the Workover Operations described in Exhibit 1 will not cause or contribute to any violations

of any applicable groundwater quality standards. To this end, within 30 days of the receipt of the

Report the Department shall notify the Company and the Report author of any apparent errors or

omissions and request any additional information the Department is permitted by law to require.


If the Company believes that any request for additional information is unjustified, or seeks

information the Department is not permitted by law to require, the Department, at the request of

the Company, shall proceed to evaluate the Report. The Department shall determine whether the

Report provides reasonable assurances that Workover Operations similar to the Workover

Operation described in Exhibit 1 will cause or contribute to any violations of any applicable

groundwater quality standards within 90 days of the receipt of the Report or any timely requested

additional information. If the Department fails to make such a determination within the stated

time frame, the Report shall be deemed to be accepted by the Department as reasonable

assurances that Workover Operations similar to the Workover Operations described in Exhibit 1

will not cause or contribute to any violation of any applicable groundwater quality standard, and

the Company will no longer be subject to the prohibition against Workover Operations similar to

the Workover Operations described in Exhibit 1 set forth in paragraph 17, below. The

Department’s determination shall be agency action subject to challenge pursuant to Sections

120.569 and 120.57, Florida Statutes. The Department hereby agrees to provide written notice of

any such determination to the Company and also agrees that the Company’s substantial interests

will be affected by the Department’s determination as to whether or not the Report provides

reasonable assurances that Workover Operations similar to the Workover Operation described in

Exhibit 1will or will not cause or contribute to any violations of any applicable groundwater

quality standards. In addition, the Department hereby waives any objection it may otherwise

have had that the Company lacks standing to challenge any such determination by the

Department.

175. All No future Workover Operations similar to the Workover Operation described in

Exhibit 1 shall be implemented at any of for the Company’s wells (existing and proposed under


valid permits) shall not be implemented by the Company until the Workover Operations have

been reviewed and approved by the Department. This review and approval process shall remain

in place only until the Risk Analysis Report described in paragraph 15 above is submitted to the

Department, and the Department determines that the Risk Analysis Report provides reasonable

assurance that Workover Operations similar to the Workover Operation described in Exhibit 1

will not cause or contribute to any violations of any applicable no groundwater quality standards

contamination will occur from implementing procedures similar to the Workover Operation

described in Exhibit 1. The Department agrees to expeditiously review and respond to any

Workover notifications received from the Company, and shall either approve, deny or request

additional information regarding each Workover notification within thirty (30) days of receipt of

such notice. If the Department fails to approve, deny or request additional information within

thirty (30) days of receipt of a Workover notification, the Workover shall be deemed approved.

Notwithstanding anything contained in this Consent Order to the contrary, if at any time the

Department allows anyone else to conduct Workover Operations similar to the Workover

Operations described in Exhibit 1, the Company shall cease to be bound by the prohibition

contained in this paragraph.

186. Within 30 days of the effective date of this Order, the Company shall submit a

groundwater monitoring plan (“Plan”) to the Department. The objective of the Plan is to provide

reasonable assurance that the Workover Operation does not affect the groundwater above the

Underground Source of Drinking Water (USDW) line. The Plan shall be developed and

executed at the expense of the Company. The Plan shall include at a minimum: (a) a one-time

analytical sampling of the flowback material prior to its final disposal. The analyses to be

performed shall be based on the materials that are were introduced into the Well by the


Workover Operation and compared against established groundwater standards; i.e., the

parameters to be analyzed shall be those parameters that are present in the materials introduced

into the Well by the Workover Operation in concentrations exceeding any primary or secondary

drinking water standard. (b) installation of a series of four shallow observation wells, placed at

the NW, NE, SW, SE corners of the pad. The observation wells shall be designed to test the

extent of the Surficial Aquifer System, i.e. 145 feet; (c) installation of a one new deeper

groundwater monitoring well on the pad and southwest of the subject well to a depth equal to the

base of USDW. The exact depth of the deeper groundwater monitoring well will be established

based on the location of where the total dissolved solids is 10,000 ppm as determined by a suite

of logs run by the Company during drilling; (d) sampling and analyses of all wells for the

parameters found in the stimulation injection fluids in concentrations exceeding any primary or

secondary drinking water standard as defined by the Material Safety Data Sheets (MSDS) in

paragraph 10 above; (e) sampling and analyses of all observation and monitoring wells on a

quarterly basis for five (5) years from the date upon which the Department approves the

groundwater monitoring plan the life of the permit; (f) an inventory of freshwater supply wells

within a quarter mile buffer of the well bore hole; and (g) a schedule for implementing the Plan.

197. If the Department requests additional information or notifies the Company that

the Plan is inadequate or otherwise unacceptable, the Company shall provide the additional

information or submit a revised Plan within the time frame specified by the Department in the

request or notification. Within 30 days of notification from the Department that the Plan is

acceptable, the Company shall begin implementing the Plan.


WITHDRAWAL OF FINAL ORDER

20. In consideration of the mutual agreements set forth in this Consent Order, the

Department agrees to withdraw the Final Order Requiring Operations at Well 20-3H Cease and

Desist, and the same is hereby withdrawn.

SETTLEMENT OF ALL DISPUTES

21. This Consent Order is in settlement of all disputes between the Company and the

Department, and upon entry of this Consent Order, the Department and the Company shall

proceed to conduct all interactions with one another in a fair, mutually respectful and productive

manner.

CONFIDENTIALITY

2219. If any of the information submitted by the Company in response to the

requirements of this Order is considered a trade secret or is otherwise confidential information in

accordance with Chapter 377 or Section 403.111, F.S., the Company shall request upon submittal

of the information that the Department keep such information confidential. The Department will

thereafter keep such information confidential in accordance with the requirements of Chapter

377 and Section 403.111, F.S.

ORDER ADMINISTRATION

230. The Company acknowledges and waives its right to an administrative hearing

pursuant to Sections 120.569 and 120.57, F.S., on the terms of this Order. The Company

acknowledges its right to appeal the terms of this Order pursuant to Section 120.68, F.S., and

waives that right upon signing this Order.

241. If any event, including administrative or judicial challenges by third parties

unrelated to the Company, occurs which causes delay or the reasonable likelihood of delay, in


complying with the requirements of this Consent Order, the Company shall have the burden of

proving the delay was or will be caused by circumstances beyond the reasonable control of the

Company and could not have been or cannot be overcome by the Company’s due diligence. The

failure of a contractor, subcontractor, materialman or other agent (collectively referred to as

“contractor”) to whom responsibility for performance is delegated to meet contractually imposed

deadlines shall not be a cause beyond the control of the Company, unless the cause of the

contractor’s late performance was also beyond the contractor’s control. Upon occurrence of an

event causing delay, or upon becoming aware of a potential for delay, the Company shall notify

the Department orally within 24 hours or by the next working day and shall, within seven

calendar days of oral notification to the Department, notify the Department in writing of the

anticipated length and cause of the delay, the measures taken or to be taken to prevent or

minimize the delay and the timetable by which the Company intends to implement these

measures. If the parties can agree that the delay or anticipated delay has been or will be caused

by circumstances beyond the reasonable control of the Company, the time for performance

hereunder shall be extended for a period equal to the agreed delay resulting from such

circumstances. Such agreement shall adopt all reasonable measures necessary to avoid or

minimize delay. Failure of the Company to comply with the notice requirements of this

paragraph in a timely manner shall constitute a waiver of the Company’s right to request an

extension of time for compliance with the requirements of this Consent Order.

252. Entry of this Consent Order does not relieve the Company of the need to comply

with applicable federal, state or local laws, regulations or ordinances.

263. The terms and conditions set-forth in this Consent Order may only be enforced in

a court of competent jurisdiction pursuant to Sections 120.69 and 403.121, F.S. Failure to


comply with the terms of this Consent Order shall constitute a violation of Section 403.161(1)

(b), F.S.

274. All submittals and payments required by this Consent Order to be submitted to the

Department shall be sent to the Deputy Director of Beach Management, Mining & ERP, Division

of Water Resource Management, Florida Department of Environmental Protection, 3900

Commonwealth Blvd., MS 300, Tallahassee, FL 32303.

285. The Department hereby expressly reserves the right to initiate appropriate legal

action to prevent or prohibit any violations of applicable statutes or the rules promulgated there-

under that are not specifically addressed by the terms of this Consent Order.

296. This Consent Order is a settlement of the Department’s civil and administrative

authority arising under Florida law to resolve the matters addressed herein. This Order is not a

settlement of any criminal liabilities which may arise under Florida law, nor is it a settlement of

any violation which may be prosecuted criminally or civilly under federal law.

3027. Electronic signatures or other versions of the parties’ signatures, such as pdf or

facsimile, shall be valid and have the same force and effect as originals. No modifications of the

terms of this Order shall be effective until reduced to writing, executed by both Respondents and

the Department, and filed with the clerk of the Department.

NOTICE OF RIGHTS

3128. This Consent Order is a final order of the Department pursuant to Section

120.52(7), F.S., and it is final and effective on the date filed with the Clerk of the Department

unless a Petition for Administrative Hearing is filed in accordance with Chapter 120, F.S. Upon

the timely filing of a petition, this Order will not be effective until further order of the

Department.


3229. Persons who are not parties to this Order, but whose substantial interests are

affected by it, have a right to petition for an administrative hearing under Sections 120.569 and

120.57, F.S. Because the administrative hearing process is designed to formulate final agency

action, the filing of a petition concerning this Order means that the Department’s final action

may be different from the position it has taken in the Order.

The petition for administrative hearing must contain all of the following information:

a) The OGC Number assigned to this Order;

b) The name, address, and telephone number of each petitioner; the name, address, and

telephone number of the petitioner’s representative, if any, which shall be the

address for service purposes during the course of the proceeding;

c) An explanation of how the petitioner’s substantial interests will be affected by the

Order;

d) A statement of when and how the petitioner received notice of the Order;

e) Either a statement of all material facts disputed by the petitioner or a statement that

the petitioner does not dispute any material facts;

f) A statement of the specific facts the petitioner contends warrant reversal or

modification of the Order;

g) A statement of the rules or statutes the petitioner contends require reversal or

modification of the Order; and

h) A statement of the relief sought by the petitioner, stating precisely the action

petitioner wishes the Department to take with respect to the Order.


The petition must be filed (received) at the Department's Office of General Counsel, 3900

Commonwealth Boulevard, MS 35, Tallahassee, Florida 32399-3000 within 21 days of receipt of

this notice. A copy of the petition must also be mailed at the time of filing to the District Office

at the address indicated in Paragraph 35. Failure to file a petition within the 21-day period

constitutes a person’s waiver of the right to request an administrative hearing and to participate

as a party to this proceeding under Sections 120.569 and 120.57, F. S. Before the deadline for

filing a petition, a person whose substantial interests are affected by this Order may choose to

pursue mediation as an alternative remedy under Section 120.573, F.S. Choosing mediation will

not adversely affect such person’s right request an administrative hearing if mediation does not

result in a settlement. Additional information about mediation is provided in Section 120.573,

Florida Statutes and Rule 62-110.106(12), F.A.C.

FOR THE COMPANY:

________________________ __________________________DATE NAME

__________________________ TITLE

__________________________ COMPANY

__________________________ ADDRESS

DONE AND ORDERED this day of , 2014, in , Florida.


STATE OF FLORIDA DEPARTMENTOF ENVIRONMENTAL PROTECTION

____________________________

Filed, on this date, pursuant to Section 120.52, Fla. Stat., with the designated Department Clerk, receipt of which is hereby acknowledged.

______________________________ ___________________Clerk Date

Copies furnished to: Lea Crandall, Agency ClerkMail Station 35


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1-22-14 v4-Comments on Draft Hughes Consent Order

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