An oil and gas company that has been battling the state for several years over what regulators say is a pattern of violations is suing to overturn an order imposing a $2.3 million penalty and restrictions on its ability to sell its oil and gas.
In a lawsuit filed Tuesday, Denver-based K.P. Kauffman Co. asked the Denver District Court to put the order on hold while the court reviews a decision by the state Energy and Carbon Management Commission.
The lawsuit is the second that K.P. Kauffman, also called KPK, has filed against the state. A Denver District judge put an earlier order against KPK on hold in 2023 after the company sued to scuttle that one.
The earlier order by ECMC, formerly the oil and gas commission, declared KPK out of compliance with state rules and moved to suspend all the company’s certificates of clearance. That would have essentially shut down its production because a company needs the certificates to move its product from the well sites and sell its oil and gas.
In December, the ECMC approved another order to suspend KPK’s certificates for six locations where regulators say there are ongoing violations of state rules. The new lawsuit challenges the order. The company has requested trials in both cases.
Suspending the certificates prevents KPK from transporting and selling the oil and gas it produces, the lawsuit said. “This production represents a significant portion of KPK’s primary source of revenue that it uses to pay its 158 employees and third-party vendors and to fund its remediation efforts,” according to the lawsuit.
The family-owned company has about 1,200 wells in the Denver-Julesburg basin of northeastern Colorado. The majority of the wells are low-producing.
During a series of hearings before the ECMC over the past few years, attorneys for KPK have accused the state of selective enforcement of its rules. State officials have cited a number of alleged violations by KPK, including spills at well sites, leaks in lines at well sites, contaminated soil and the failure to turn in timely and accurate reports.
The ECMC ended a cleanup agreement with KPK in 2023, saying the company had failed to “substantially comply” with it. ECMC staffers testified that only three of 58 projects identified had been completed and that the company’s practices threatened public health and safety and the environment.
KPK said in its new lawsuit that ECMC’s findings violated its own rules for enforcement proceedings and violated the company’s right to due process. Witnesses for the company disputed that the state had proved there was a pattern of violations.
“KPK continues to be the victim of selective prosecution by the ECMC despite recent information and belief that other Colorado oil and gas operators are submitting fraudulent and fabricated reports to close environmental remediation locations,” John Jacus, an attorney representing the company, said in an email.
State investigators are investigating reports that two environmental consulting firms submitted false data on cleanup and restoration work on 344 oil and gas locations, mostly in Weld County. The ECMC said the investigation was launched after oil and gas operators that hired the consultants alerted regulators.
ECMC spokeswoman Kristin Kemp said the agency doesn’t comment on ongoing litigation.
“What I can say is that ECMC is committed to fulfilling its statutory obligations to protect public health, safety, welfare, the environment and wildlife resources. That can result in our agency taking enforcement actions against operators who are non-compliant with ECMC rules,” Kemp said in an email.
She said KPK has 36 active notices of alleged violation.
Get more business news by signing up for our Economy Now newsletter.
