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Kansas levies $75,000 fine, shutdown order on oil company

Dion Lefler | Wichita Eagle

Saying a Lenexa oil company had reaped more than $1 million on illegal drilling operations, the Kansas Corporation Commission on Thursday turned a $100 violation into a $75,000 fine and ordered commission staff to shut down and seal the company’s wells.

Since June 2013, Viva International Inc. has been penalized on 87 different violations of state oil regulations, had its license suspended 11 times and paid two $10,000 fines for operating on a suspended license, according to commission records.

“This represents more dockets, more violations, and more license suspensions than for any other operator during this time frame,” the order said. “All of operator’s production during a total of 109 days this calendar year has been illegal.

“Given operator’s historical rate of production, and assuming an average Kansas crude-oil first-purchase price of $80 per barrel, this represents over $1.1 million in gross revenue from illegal oil production.”

The company’s phone was answered by machine and no one returned a message seeking comment.

State law requires oil companies to acquire licenses and provide the KCC with detailed information on all well locations and operations, primarily to protect the state’s water resources from pollution.

But according to commission documents, Viva provided incomplete and incorrect records, ignored repeated requests for more information and continued to operate unlicensed wells.

The original violation cited in the order carried a $100 fine for failing to provide information. Viva paid that in August but didn’t provide the requested information, triggering a license suspension, records show.

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In September, KCC investigators checked on some of the company’s wells and confirmed they were still pumping oil even though Viva’s license was suspended and they should have been shut down.

Under state law, the KCC can fine an operator as much as $10,000 a day for ongoing violations of state regulations.

Commissioner Jay Emler recommended the $75,000 penalty, saying that the two previous $10,000 fines had apparently not gotten the company’s attention.

“If they’re simply going to ignore or flout the orders of the commission, we need to take a stronger stance,” Emler said.

Commissioner Pat Apple said he thinks the company is treating the commission and its earlier fines as “just a cost of doing business.”

Both Emler and Apple said they wouldn’t support such a large penalty if Viva was a minor producer making an honest attempt to comply with the regulations.

“This company has at least 570 wells in the state of Kansas, so it’s not a small operator,” Emler said.

 

Reach Dion Lefler at 316-268-6527 or dlefler@wichitaeagle.com.

 

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