A Denver District Court judge has upheld an order by state regulators against an oil and gas company that faces a $2 million fine and could lose its ability to operate in Colorado.
Judge Andrew Luxen ruled against Denver-based K.P. Kauffman Co. Inc., which sued the Energy and Carbon Management Commission over its decision to terminate an agreement with the company.
The ECMC said K.P. Kauffman, or KPK, hadn’t complied with an agreement to clean up well sites and spills cited in multiple state complaints. The state moved forward with plans to fine the company and restrict its ability to transport and sell its product.
The family-owned KPK, which has about 1,200 wells in northeastern Colorado, filed a lawsuit accusing state regulators of breach of contract for ending an agreement that required the company to comply with state regulations. In 2023, the ECMC terminated the agreement after finding KPK had failed to “substantially comply” with its provisions and that a pattern of violations by the company threatened public health, safety and environment.
The state agency said KPK could lose its license to operate in Colorado if it didn’t comply with regulations within a certain time frame. A court put the penalties on hold after KPK sued.
But that court is the same one that last week rejected KPK’s claim that the ECMC broke a contract when it ended the agreement with the company. Luxen’s ruling found that the agreement was a regulatory agency’s action rather than a separate, negotiated contract.
Luxen also rejected KPK’s claim that the ECMC’s decision was arbitrary and that the commission abused its discretion. The judge said the commission’s decision to end the agreement with KPK “is supported by substantial evidence in the record.” He dismissed the company’s argument that the state’s action was drastic, saying the record shows that KPK missed 68 “milestone dates” of the agreement and failed to carry out plans to address alleged violations.
Although the state’s order was upheld, its ongoing dispute with KPK isn’t over. Another legal claim by the company is still pending.
And John Jacus, an attorney representing KPK, said the company intends “to vigorously appeal the orders.” He said in a statement that ECMC ended the agreement with KPK just 14 months into its five-year term. The court rulings “affirm the imposition of millions in civil penalties and other business-ending sanctions after a series of administrative hearings in which the Company was denied due process at every turn,” he added.
In 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.
When it ended the cleanup agreement with KPK, the ECMC said the company had failed to “substantially comply” with it. ECMC staffers testified that only three of 58 projects identified had been completed.
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