A class action lawsuit filed by shareholders against Anadarko Petroleum paints a picture of a company with a culture of putting production ahead of safety. The suit, with information provided by nine former employees and two contractor employees, says the company “repeatedly and deliberately” violated multiple Colorado safety regulations. These violations led to the explosion of a home in Firestone, CO on April 17, 2017, killing two people and injuring a third.
According to the suit, Anadarko’s widespread violations of the Colorado Oil & Gas Conservation Commission (COGCC) safety rules “…all but guaranteed a disaster”. The lawsuit alleges that negligence and safety violations by the company caused share prices to fall, hurting investors. The lead plaintiff is the Philadelphia Ironworkers Benefit and Pension fund, which owns Anadarko stock.
One of the former employees states that a single person was responsible for checking the safety of all of Anadarko’s flow lines in the Wattenberg field in Weld County. Twelve to twenty people would have been needed to adequately do the job. The lawsuit states that “this employee brought up the issue of inadequate staffing with her superior approximately 12 times between late 2016 and March 2017, when she quit in disgust”.
The lawsuit concludes that “Anadarko’s senior executives… callously disregarded known, widespread violations of the [COGCC’s] rules that endangered the Colorado communities in which Anadarko did business. They lied about it to the Commission. They lied about it to investors. They violated the securities laws.”
Events Leading Up to the Firestone Explosion
In October of 2013, Anadarko and its chief competitor in the Wattenberg field, Noble Energy, exchanged ownership of approximately 100,000 acres of land in the Wattenberg field in Colorado – the Land Swap.
Through the Land Swap, Anadarko acquired more than 1,550 existing wells, most of which had been drilled up to 50 years before in rural areas of Weld County and were in desperate need of repairs or needed to be plugged and abandoned altogether. These wells included the Firestone Well, which was drilled in 1993.
Starting in the early 1990’s, the area grew rapidly and developers built houses close to the wells. The COGCC does not require companies to disclose to the public or to developers the location of oil and gas lines. It does, however, have regulations in place to protect public safety. The lawsuit alleges Anadarko routinely violated five of the Commission’s regulations:
1) Rule 1102 a. (2) – “[w]henever an operator discovers any condition that could adversely affect the safe and proper operation of its pipeline, it shall correct it within a reasonable time.”
2) Rule 1101 a. – all pipelines shall be locatable by a tracer line or location device to facilitate the location of such pipelines.
3) Rule 1102 d. – flowline and pipeline locations must be registered with the Utility Notification Center, CO 811. CO 811 operates a hotline for information about the location of flowlines that utilities companies and the general public can call before digging to ensure they do not rupture flowlines.
4) Rule 1101 e. (1) – every year all flowlines must be pressure-tested to their maximum anticipated
5) Rule 1103 – every abandoned pipeline shall be disconnected from all sources of natural gas and petroleum and cut off and sealed at the ends. Notice of such abandonment shall be filed with the Commission and with the local governmental jurisdiction. This rule applies even if a flowline is not located near a building.
Because Anadarko routinely failed to comply with these five regulations, as development encroached closer and closer to the old wells developers severed flowlines without being aware they had done so.
Even knowing this, Anadarko elected to turn on many of the old wells in desperate need of repairs because lease terms required Anadarko to actually operate the wells in order to maintain its lease. If Anadarko lost a lease, it would have to renegotiate it with the owner of the mineral rights. Since the leases were often signed decades earlier, at prices much lower than today’s prices, it was top priority for Anadarko to maintain these old leases so they wouldn’t have to be renegotiated.
The Firestone Well was one of those old Land Swap wells which had been turned on. However, when the well was activated “…Anadarko’s measurements did not report any methane production through the meter, a physical impossibility. Though Anadarko had sent a work crew to inspect this anomalous result, the overworked employees had not found the problem. The flowline had leaked methane into the home, which exploded when the homeowner tried to install a heater”.
“Following the explosion, Anadarko admitted that 2,400 of its flowlines had been abandoned, but not sealed, in violation of Commission Rule 1103. Anadarko also added an additional 400 wells to the list of wells it needed to plug and abandon, more than doubling the number of wells on that list”
Read the complete Class Action Lawsuit here.