Bled dry by the state: One oil company’s fight to survive ECMC’s war of attrition

By Jen Schumann | Rocky Mountain Voice

An oil company’s $7M cleanup plan became the state’s excuse to shut it down.

Jeffrey Kauffman stood at the edge of an excavation site—not to check production, but to explain why there wasn’t any. There was no rig, no flaring, no signs of oil moving to market. Just a fenced-off hole in the earth—and a state agency that wouldn’t let them fill it back in.

“This one’s cost between $200,000 and $300,000,” said Kauffman, who serves as KPK’s Chief Operating Officer. “We submitted clean soil results months ago. Still no approval to close it.”

The site is one of roughly a dozen that KPK has excavated under orders from the Colorado Energy and Carbon Management Commission (ECMC). Some holes have remained open since early 2024. This one, the size of an Olympic swimming pool, sits just yards from a public road—raising the question of whether public safety is truly the agency’s concern.

A war of attrition

At the company’s field office, Jeffrey Kauffman pointed to a custom-built mobile rig. “We designed that ourselves to test older wells and avoid unnecessary replacements,” he said. “It saved money. It increased safety.”

Jeffrey Kauffman stands at the AD Jeffers A #1 well, a Codell/Niobrara/Sussex producer in the Spindle field on the southwest edge of the Wattenberg in Weld County.

A 1600-horsepower mud pump that powers hydraulic circulation during drilling. “It provides the pressure and flow to drill the hole,” Kauffman note

“It’s just a big crane, really,” Kauffman pointed out the drawworks and derrick system,built to lift hundreds of thousands of pounds of pipe in and out of the wellbore. The rig, completed in 2013–2014, was designed for scale—but has sat idle due to permitting slowdowns.

But for Jeffrey Kauffman, the machinery represents far more than sunk costs or stalled operations. “This is what you want to be doing,” he said. “Creating real raw value in the economy.” He called oil and gas production “just the beginning of the value chain for the entire economy,” adding, “Natural resources have made nations.”

But shifting rules have complicated even basic field operations. “The rules change mid-job, or they say we can’t use our own lab data,” Jeffrey said. 

Jeffrey added, “We’re not even running an energy company anymore. We’re running a full-time compliance firm. And that’s before we even get to production.”

Jeff Peterson, KPK’s Roustabout Manager who has worked at the company for 21 years, recalled an incident involving his son, T.J., who also works there as a welder.

“T.J. had just finished welding a line transition and came over still wearing his jeans,” said Jeff Peterson. “He had his proper gear with him, but he wasn’t welding at the moment. The inspector didn’t even ask—just looked at his pants and said, ‘Maybe you should find a better company to work for–who will equip you better.’ That was the moment it clicked—we weren’t being inspected. We were being judged.”

Mani Silva, Manager of Production Operations at KPK has been with the company as long as Peterson. “Now we’re constantly in defense mode,” he said. “You work a 12-hour day, you’ve got 50 notices of violation waiting in your inbox and the phone rings because they think there’s an issue on site.”

“It takes a toll,” Silva admitted. “Who the hell wants to come to work when you’re doing everything right and all you hear is that you’re doing a sh**ty job? We’re following the rules. We know this land. But all they see is violations.”

Silva stayed—but everything changed. “This job got me through my divorce. It’s my home. But it’s changed. I’m not in production anymore—I’m just here to keep up with ECMC paperwork. I’m constantly juggling between the job I was hired for–and what feels like a war to kill the company that’s been my livelihood.”

Silva is one of the people who shows up—day or night—when something needs attention in the field.

“Jeff and I—there’ve been times when an emergency happens and we’re out here at two o’clock in the morning trying to figure out whatever the issue is,” Silva said. “We’ll find it, we’ll get it resolved and under control.”

Even as regulatory pressures mount, Peterson said the company has never stopped caring for the people who keep it running. “There’s always a bouquet of flowers waiting when someone loses a parent. That might seem small, but it means something. We’re not a bunch of heartless rabbit killers—we’re a family.”

He added, “Whenever somebody’s going through something, we help and show up for each other. No matter what.”

“The $200,000 hole.” That’s what Jeff Petersen (left) and Mani Silva (right) call it—each new depth brought fresh ECMC demands for soil sampling and deeper excavation, stretched out over months.

Moving goalposts—and stacked agencies

The most expensive excavation to date — a full remediation near the Schaeffer residence — cost KPK more than $1.2 million. The project was triggered after ECMC shut in multiple wells, causing pressure buildup and secondary leaks in the valley below. Even after the site was excavated, cleaned and fitted with groundwater monitoring wells, the commission’s directives forced KPK to revisit work they had already completed.

In another instance, an ECMC staffer reported a sheen on a nearby duck pond and decided to alert federal officials. 

“EPA folks came out. We asked, ‘Where’s the sheen?’ They couldn’t find anything,” Kevin Kauffman said. 

An EPA official collects water samples at the channel behind the Schaeffer residence, where an ECMC regulator cited possible sheen.

Kevin Kauffman (center) joins EPA officials during a site visit tied to state-triggered federal escalation.

KPK obtained FOIA records showing minimal concern from federal regulators. ECMC’s internal emails were 85 percent redacted.

“That was the moment I knew they weren’t just trying to enforce,” Kevin Kauffman said. “They were trying to bleed us out.”

Even standard remediation steps have turned into regulatory traps. When regulators spotted oil near cattails, staff pushed KPK to clean them—a move that would have violated federal law without Army Corps approval. “They tried to set us up,” one team member said. “If Kevin did what they said, that could’ve been a felony.”

During another exchange, Kevin recalled one of the seventeen federal attorneys telling him he should be ashamed of what his company had done.

“Seventeen attorneys showed up just to intimidate us,” he said. One leaned toward Kevin Kauffman and said, “You should be very afraid.” Kauffman didn’t blink. “How dare you,” he shot back, “And one U.S. attorney actually apologized on behalf of the entire United States.” It was a rare glimpse behind the curtain, laying bare the intimidation tactics KPK has faced for years.

A state-engineered shut-in

Under ECMC orders, KPK was forced to shut in dozens of wells tied into shared gathering systems. The pressure buildup triggered more leaks.

“They forced us to shut in these wells, then blamed us when pressure built and lines burst,” Jeffrey Kauffman said. “You can’t create the conditions for failure and call us bad operators.”

He described a site near the Schaeffer residence where stagnant pressure caused a new rupture.

“They literally made us lock out and tag all the valves,” he said. “We had emails from staff saying we couldn’t touch them. Then in the hearing they said, ‘You should have opened the line.’ What are we supposed to do?”

The $133 million bond—and the wells they won’t let them fix

In fall 2023, ECMC demanded $133 million in financial assurance—over triple what KPK projected as necessary.

“We submitted detailed cost projections, and staff actually agreed with us,” Kevin Kauffman said. “Then the Commission tossed it and went with a blanket figure based on the orphan well program—which almost never happens.”

For KPK, the financial chokehold coincided with shifting rules on the ground–including some that defied common sense.

Jeffrey Kauffman described one such mandate: “They wanted us to test a 20-pound line to 100 pounds,” he said. “They said, ‘We want to find the failures before they fail.’ But you don’t test lines to failure. That’s not how this industry works. You don’t pressure-test to failure. You follow the rule: maximum anticipated pressure. For us, that’s 20—anything beyond that risks blowing the line.”

Company records show KPK estimated its full closure costs under $11 million– a figure that ECMC staff initially supported. The Commission ultimately rejected the estimate and imposed what Kevin Kauffman called “the largest bond order in state history.” 

“And then they suspend our Certificates of Clearance,” Kevin added, “so we can’t sell product to raise money for cleanup.”

Meanwhile, the holes stay open.

Kevin Kauffman added, “They’ve stolen our time. We used to run an oil company. Now we fight off more than 50 violations a month.”

Bonding as a weapon, not a safeguard

By the time the ECMC hit KPK with $133 million in financial assurance requirements—the largest ever imposed on a Colorado operator—the groundwork had already been laid. ECMC framed KPK as a company that ignored deadlines, cut corners and dragged its feet.

An independent analysis by Ramboll Americas Engineering Solutions Inc. offers a stark contrast.

The data shows KPK wasn’t plagued by repeat spills like others in the field.

Ramboll Report, p. 4 (Figure 3). KPK had fewer facilities with repeat spill incidents than major operators like Chevron and Occidental—undermining claims that the company posed an elevated environmental risk.

In the three years leading up to the bonding order, KPK had a better spill reporting time than most of its peers. The average delay was just 1.14 days—well within state requirements and in some cases faster than larger operators like Noble Energy and PDC.

Their total spill volume didn’t stand out either. According to the expert analysis submitted with the amended complaint, KPK’s volumes were not elevated compared to the rest of the industry. Their rate of repeat incidents was lower. Their documentation was timely. Their performance was well within the range of compliance.

“KPK had the fewest missed reporting deadlines,” the report concluded, “and did not show a trend of increasing noncompliance.”

But it wasn’t just about what was enforced—it was about who was doing the enforcing, and how often they singled out KPK.

Ramboll Report, p. 7 (Figure 8). KPK received up to 6.4 times more Conditions of Approval from key ECMC environmental specialists than peer operators—evidence of targeted scrutiny by individual inspectors.

Despite this, KPK faced a disproportionate wave of denials. And the state moved forward with the bond—escalating financial pressure based not on environmental threat but, as the lawsuit argues, on political targeting.

An insider’s view

New staff have drawn their own conclusions. Dustin Case, KPK’s Environmental & Air Quality Manager, joined the company after working for a large oil producer.

“They want the little guys gone,” Case said. “If enough smaller operators get buried or bought out, all that’s left are big companies. ECMC can collect bigger fees and deal with fewer people. Less work, more money.”

He added, “The way they treat us makes it pretty obvious.”

Legislative backdrop: A new law, a narrowed path

When SB24-229 cleared the legislature in May 2024, it wasn’t just presented as an ozone fix. For those already under scrutiny, it looked like the state was handing even more firepower to the very agencies behind the crackdown. But for smaller producers already under pressure, it looked like a blueprint for extinction.

The law required ECMC and the Air Quality Control Commission to cut NOx emissions by 50 percent by 2030 and gave ECMC new power to revoke licenses, not just drilling permits. It also expanded civil penalties to more than $47,000 per day, created paths for immediate cease-and-desist orders and made it harder for operators to delay enforcement through the courts.

Operators with multiple alleged violations could now face full license suspension—even before a hearing. And any well deemed “marginal” could now be reclassified as an orphan well, triggering costly reclamation orders.

Jeff Robbins, chair of ECMC, supported the bill and testified it would help the agency hold bad actors accountable. “Operators will be required to maintain a license to operate in addition to their permits,” Robbins told lawmakers. “This gives us additional authority… and ensures polluters can’t continue while the courts sort it out.”

That line, KPK argues, captures exactly how the state has stacked the deck.

But not everyone agreed.

Former U.S. Rep. Ed Perlmutter, a Democrat and longtime friend of Kevin Kauffman, broke with his party and testified against the bill. Calling into a House Finance Committee hearing on May 4—his birthday—Perlmutter told lawmakers, “You cannot have the state be the prosecutor, be the judge, the jury and the executioner.” He later said, “This agency’s been given a lot of power over the last couple years.” He warned that the changes in Sections 10 and 11 would let ECMC put an operator out of business before they could even get to court, and said the language was “written to defeat all the places where the court has ruled against them.” When asked if the bill could cut off appeals in ongoing cases, he didn’t pause. “Absolutely, yes, I do.” His warning in May 2024 wasn’t about party lines. It was about the guardrails that keep one branch of government from holding all the cards.

In his May 2024 testimony, Perlmutter framed his opposition as a constitutional issue. Limiting judicial review of ECMC orders, he said, strips away one of “the most basic things of our government… that you have a fair and impartial tribunal.” He argued that Sections 10 and 11 undermine due process and the separation of powers by allowing the same agency that brings an enforcement action to effectively control the outcome before a case reaches court.

For operators like KPK, those principles aren’t abstract — they can be the difference between fighting a regulatory order in front of a neutral judge or being forced to shut down before a case is even heard.

Not a single House Republican voted for it. Every Democrat backed the bill, clearing the way for what followed.

For KPK, the bill arrived like a codification of everything they were already living through: record bonding demands, redacted agency emails and delayed approvals that dragged on while costs mounted.

The state-level lawsuit: Penalties that prevent compliance

KPK’s January 2025 lawsuit in Colorado District Court alleges that ECMC’s escalating penalties have made it financially impossible for the company to complete the very remediation the agency claims to prioritize. Among the supporting documents is an expert affidavit from Dr. Timothy Considine, an energy economist who testified that excessive fines from ECMC may be defeating their own environmental goals.

“Issuing exorbitantly high penalties could also impede the operator’s ability to manage the environmental impacts,” Considine stated. “The Commission should seek to find the ‘sweet spot’ for penalties.”

The complaint also highlights selective enforcement, citing ECMC’s own data showing that major operators were delinquent in submitting key forms—Forms 19 and 27—at more than 100 sites without facing enforcement. “Yet the ECMC had not commenced any enforcement proceedings against these other operators,” the filing notes.

KPK further alleges that ECMC relied on a vague ‘catchall’ rule to impose bespoke requirements. “Staff has used this catchall rule to selectively and prejudicially create new regulatory requirements for KPK even when not necessary or reasonable,” the company wrote.

The Commission also denied the company’s discovery requests and failed to provide a clear standard for ‘substantial compliance’ with the CPA. “The Hearing Officer denied all of KPK’s interrogatories, requests for production and deposition requests,” the filing states. That procedural roadblock, they argue, crippled KPK’s ability to defend itself.

More recently, a December 2023 filing shows how ECMC attempted to reimpose penalties that were already stayed by court order. The motion asserts that new NOAVs mirror the sanctions suspended under Order 863—raising concerns that the agency is using duplicate enforcement pathways to sidestep judicial review. “The Commission is now embarked on a campaign… with the apparent goal of putting KPK out of business before this appeal is completed,” KPK’s counsel wrote.

In some cases, alleged violations stem from paperwork delays or pre-CPA issues. One such NOAV includes “eight alleged violations that occurred before the CPA was issued… in October and November of 2020.” Others cite “failing to submit Supplemental Forms 27 on a quarterly basis” as grounds for harsh penalties. These low-level administrative gaps now carry high-dollar consequences. “The Commission should seek to find the ‘sweet spot’ for penalties.”

But it wasn’t just about what was enforced—it was about who was doing the enforcing, and how often they singled out KPK.

Ramboll Report, p. 8 (Figure 6). Despite being painted as a regulatory outlier, KPK’s remediation project count was a fraction of Chevron’s or Occidental’s.

KPK’s filing argues that the Commission’s pattern of escalating enforcement—paired with delayed approvals, inaccessible communications and ignored engineering projections—has violated the company’s due process rights under both state and federal law.

Pending litigation

KPK has filed state and federal lawsuits alleging regulatory takings, due process violations and selective enforcement—backed by internal affidavits and field data.

Don’t stop here. What happened in the field was only one part of a much bigger fight.

• Part One: The Rule 211 gamble – When cities used a cleanup law to fast-track development.
• Part Three: The man Polis vowed to destroy – The legacy, the lawsuit and the moment the governor made it personal.