K.P. Kauffman Company Settlement

(Washington, DC - January 21, 2020) - K.P. Kauffman Company, Inc. (KPK) is a privately-held oil and natural gas exploration and production company headquartered in Denver, Colorado. KPK operates oil and natural gas exploration and production facilities in the Denver-Julesburg Basin. This Clean Air Act case concerns KPK’s operations in an area of Colorado designated as serious nonattainment for the 8-hour ozone National Ambient Air Quality Standard (NAAQS).

• Overview
• Violations
• Injunctive Relief
• Mitigation Projects
• Pollutant Impacts
• Health Effects and Environmental Benefits
• Civil Penalty
• Comment Period
• Contact

Overview of Companies

K.P. Kauffman Company, Inc. (KPK) is a privately-held oil and natural gas exploration and production company headquartered in Denver, Colorado. KPK operates oil and natural gas exploration and production facilities in the Denver-Julesburg Basin. This Clean Air Act case concerns KPK’s operations in an area of Colorado designated as serious nonattainment for the 8-hour ozone National Ambient Air Quality Standard (NAAQS).

KPK’s Colorado operations include oil and natural gas wells and condensate storage tanks. A condensate storage tank collects liquid hydrocarbons that have been separated from natural gas after production from an oil and natural gas well. The liquid hydrocarbons, or condensate, are stored in tanks until transfer for sale via tank truck or pipeline. Multiple tanks sited together are called a tank battery or tank system. Vapor control systems are required at tank systems to capture and recover or combust the condensate’s hydrocarbon vapors. Improperly or inadequately designed, sized, operated, or maintained vapor control systems can lead to uncontrolled emissions of volatile organic compounds (VOCs), which contribute to the formation of ground-level ozone and may contain hazardous air pollutants such as benzene.

This settlement covers 67 condensate tank systems and associated vapor control systems regulated by Colorado State Implementation Plan requirements.

Violations

The settlement resolves allegations made in an October 5, 2018 complaint filed in U.S. District Court for the District of Colorado. The United States and the State of Colorado’s complaint alleged that KPK violated Colorado’s Regulation 7, Section XII requirements to minimize VOC emissions from its oil and natural gas production operations in the Denver ozone nonattainment area. More specifically, the settlement resolves alleged violations of Regulation 7, Section XII requirements relating to installation, operation, maintenance, design, and sizing of vapor control systems at condensate storage tanks. These Regulation 7, Section XII requirements are incorporated into Colorado’s federally-approved State Implementation Plan. Because Colorado’s State Implementation Plan was approved by the EPA, the Section XII requirements are federally enforceable under the Clean Air Act. The settlement also resolves alleged violations of Regulation 7, Section XVII requirements to control VOC emissions from oil and gas operations, which are enforceable only by the State of Colorado.

Injunctive Relief

The settlement requires the following actions to resolve the alleged Clean Air Act violations:

• KPK must ensure that its vapor control systems are capable of capturing and routing emissions to a control device in one of two ways: (1) modify its vapor control systems by installing and operating an automated system that will control flow rates to the tank system; or (2) follow an engineering evaluation process and modify vapor control systems that do not have capacity to capture and route the vapors to the emission control device. KPK will verify proper operation of each tank system with an infrared camera inspection.
• KPK will evaluate the condition of all pressure relief valves, thief hatches, blowdown valves, and mountings and gaskets on each condensate storage tank to assess the need to repair, replace, or upgrade equipment and address any evidence of VOC emissions from that equipment.
• KPK will develop and implement a directed inspection and preventative maintenance program to ensure proper upkeep and operation of its vapor control systems and associated operations.
• KPK will perform monthly or quarterly infrared camera inspections (depending on the tank system’s production volume) at all tank systems subject to the settlement to detect and respond to emissions and indicia of emissions.
• KPK will install pressure monitors with continuous data reporting at tank systems to verify that storage tanks are not experiencing increased pressure readings indicative of tank over-pressurization and possible VOC emissions.
• The settlement includes measures to proactively detect recurring issues and identify and implement actions to prevent further recurrence. Each quarter, KPK will conduct a review of indicia of emissions at its tank systems to identify and address underlying and contributing causes. Additionally, KPK will conduct an annual records review of maintenance and corrective action work to identify recurrent or systemic issues and associated opportunities for improved operations.

Implementation of these actions will cost an estimated $2.5 million and is expected to reduce VOC emissions from KPK’s operations by approximately 424 tons per year.

Mitigation Projects

KPK will implement three environmental mitigation projects to further reduce its operations’ VOC emissions.

• KPK will install rod lifts at 12 oil and natural gas wells to reduce or eliminate the need to unload the well—a procedure used to increase well production during which emissions are vented to the atmosphere.
• KPK will use a Boreal Laser to scan for methane emissions at all well production facilities covered by the settlement, and, if necessary, will follow up with corrective actions to address observed emissions.
• KPK will implement the settlement’s operation and maintenance requirements, including increased inspections, at four well production facilities not covered by air pollution regulations due to their size.

KPK estimates that these mitigation projects will reduce its VOC emissions by an additional 131 tons per year.

Pollutant Impacts

Ozone is not emitted directly from air pollution sources. Instead, it is a photochemical oxidant formed when certain chemicals—VOCs and nitrogen oxides (NOx)—in the ambient air react with oxygen in the presence of sunlight. VOCs and NOx are called “ozone precursors.” Sources that emit ozone precursors are regulated to reduce ground-level ozone in the ambient air. The Denver-area is currently classified as serious nonattainment for the 8-hour ozone NAAQS. The Denver ozone nonattainment area spans Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, Jefferson, and parts of Larimer and Weld counties.

The Denver-area’s location next to the Rocky Mountains makes it prone to temperature inversions, in which warm air traps cooler air near the ground such that pollutants do not rise into the atmosphere. These inversion conditions can lead to an unhealthy—and even visible—air pollution buildup.

KPK’s oil and gas exploration and production operations emit VOCs, NOx, and other pollutants. As a result of the settlement’s injunctive relief and mitigation projects, VOC emissions from KPK’s operations will be reduced by approximately 556 tons per year. The settlement will also result in reductions of hazardous air pollutants in the Denver-area.

Health Effects and Environmental Benefits 

Ground-level ozone can cause temporary breathing difficulty for people with asthma, airway inflammation, and even permanent scarring of lung tissue from repeated exposure. This settlement’s emissions reductions will help address the Denver-area’s ozone nonattainment status generally, as well as the visible buildup of air pollution during inversion conditions.

Civil Penalty

KPK will pay a $1 million civil penalty that will be evenly split between the United States and the State of Colorado.

Comment Period

The proposed settlement, lodged with the U.S. District Court for the District of Colorado, is subject to a 30-day public comment period and final court approval.  Information on submitting comment is available at the Department of Justice.

Contacts for Further Information

Lauren Hammond, Senior Assistant Regional Counsel
Office of Regional Counsel
U.S. Environmental Protection Agency – Region 8
1595 Wynkoop Street (8ORC-R)
Denver, Colorado  80202
303-312-7081
hammond.lauren@epa.gov

Tim Sullivan, Attorney-Advisor
Air Enforcement Division
Office of Civil Enforcement
Office of Enforcement and Compliance Assurance
U. S. Environmental Protection Agency
1595 Wynkoop Street (8MSU)
Denver, Colorado  80202
303-312-6196
sullivan.tim@epa.gov