NORDIC TRUSTEE This notice is only published in the Norwegian language. Please contact Nordic Trustee ASA for information. T il ob ligasjonseierne i: ISIN : NO 001 0654841 -FRN Crudecorp ASA Subordinated Unsecured Callable Bond Issue 2012/2017 O slo, 2 M y 2014 Informasjon om korrespondanse mellom Crudecorp ASA og Nordic Trustee ASA På bakgrunn av informasjon som er mottatt, ble vedlagt brev sendt til Crudecorp ASA den 6 mai 2014. Tilbakemeldingen fra Crudecorp ASA følger nedenfor: ISINN00010654841 - FRN CRUDECORP ASA SUBORDINATED UNSECURED CALLABLE BOND ISSUE 2012/2017 1. INNLEDNING Vi viser til kommunikasjon vedrørende ovennevnte, sist brev fra Nordic Trustee ASA ("NT") av 6. mai og møte mellom NT, advokatfirmaet Schjødt og Crudecorp AS ("Crudecorp" eller "Selskapet") 15. mai 2014. De sentrale problemstillingene ble gjennomgått i møtet, ogfaktumfremstillingen i NTs brev ble korrigert. I det følgende gis en kortfattet oppsummering av det vi anser som det sentrale for NT som representant fo r obligasjonseierne i nevnte lån. 2. MISREPRESENTATION Basert på korrespondanse mellom California Valley Regional Water Quality Control Board ("CVRWQ") og Crudecorp AS' datterselskap CMO Inc., synes NT å trekke den slutning at oljeproduksjonen på Bakersfield ble stanset på grunn av lokal forurensningslovgivning. Dette er ikke korrekt. Selskapet sørget av eget initiativ for at den metode for håndtering av vannavfall som CVRWQ har reagert på opphørte i januar 2014, forut for inspeksjonen. Årsaken til at oljeproduksjonen på Bakersfield ble stanset ca. 15. mars 2014, var at tilgjengelige injeksjonsbrønner ikke kunne ta imot mer vann. I ettertid har CVRWQ gitt Selskapet tillatelse til å starte opp igjen deler av oljeproduksjonen, og dette skjedde ca. 15. april 2014. Vi kan på denne bakgrunn ikke se annet enn at de faktiske opplysninger som ble gitt i brev av 1. april 2014 var korrekte. For øvrig påpeker vi at Selskapet arbeider med løsninger for å komme tilbake i full produksjon, og at det er grunn til å anta at dette vil skje i løpet av noen uker.
NORDIC TRUSTEE 3. BR UDD PÅ INFORMASJONSPLIKTEN OG PLIKTEN TIL Å OPPTRE I HENHOLD TIL LOKAL LOVGIVNING Videre påpekes i brevet fra NT at CMO Inc.s brudd på lokal lovgivning vil kunne føre til en "Event o f Default" under låneavtalen. Forutsetningen er at det aktuelle forhold ikke er rettet innen 10 virkedager etter at Selskapet har blitt notifisert om bruddet av NT. Gitt at de aktuelle forhold opphørte i januar 2014 kan vi ikke se at dette er en relevant problemstilling. Tilsvarende gjelder for anførselen om at manglende underretning om det anførte regelbrudd. 4. MANGLENDE OPPFYLLELSE A VPLIKTEN TIL Å OVERSENDE ETTERSPURT INFORMASJON NT påpeker at man i e-post av 3. april 2014 etterspurte ytterligere informasjon om hvordan den pågående produksjonsstansen påvirker Selskapets økonomi. Etter vår vurdering var de opplysningene som ble gitt i brev av 1. april 2014 dekkende og innenfor rammene av Selskapets informasjonsplikter etter obligasjonslåneavtalen. Det ble eksplisitt fremhevet at driftsstansen ikke ville ha noen vesentlig innvirkning på Selskapets tilbakebetalingsevne. På bakgrunn av henvendelsen fra NT kan vi imidlertid utdype som følger: CMO Inc. var i negativ EBITDA-posisjon i de to første månedene i første kvartal 2014. En begrenset steam- og produksjonsaktivitet under driftsstansen medførte betydelige besparelser i variable kostnader, og Selskapet unngikk dermed en vesentlig forverring av økonomisk resultat/kontantstrøm i mars og april 2014. Eksempelvis var steamrelaterte kostnader 85 % lavere i april enn i februar 2014. Steamrelaterte kostnader utgjorde i februar 76 % av totale driftskostnader i operatørselskapet. Vi håper dette ga et adekvat svar på spørsmålene fra NT. For øvrig viser vi til Selskapets finansielle rapportering. 5. OPPSTÅTT EN SITUASJON MED MULIG "MATERIAL AD VERSE EFFECT" Under forutsetning om at Selskapet ikke har oppfylt sine informasjonsplikter, indikeres det i brevet at produksjonsstansen kan ha en "Material Adverse Effect" på Crudecorp. Som det vil ha fremgått over, er dette etter vårt skjønn klart nok ikke tilfelle. 6. OPPLYSNINGSPLIKT SOM FØLGER A V ABM-REGLENE Det bes om en redegjørelse fo r Selskapets vurderinger med hensyn til plikten til å offentliggjøre informasjon under ABM-reglene. På bakgrunn av redegjørelsene over, fremstår det klart for Selskapet at produksjonsstansen ikke hadde slik betydning for Selskapet eller obligasjonslånet at den skulle utgjøre innsideinformasjon i ABMreglenes forstand. Selskapet kan heller ikke sees å ha brutt noen av de konkrete informasjonsplikter som fremkommer av ABM-reglene. 7. OPPL YSNINGSPLIKTEN O VERFOR OSLO BØRS Med hensyn til spørsmålet om informasjonsplikt for den perioden Crudecorps aksjer var notert på Oslo Børs, nøyer vi oss med å vise til pkt. 6 over.» - 2 -
NORDIC TRUSTEE Eventuell spørsmål til ovennevnte kan rettes til Nordic Trustee ASA. Yours sincerely N ofd ic T rusted. O '/ ( iør^gen Andersen V edlegg -3-
NORDIC TRUSTEE CrudecorpASA Oslo 06.05.2014 Att: Geir Utne Berg Sendt pr. E-post: geir.utne.berg@crudecorp.com ISIN N00010654841 - FRN Crudecorp ASA Subordinated Unsecured Callable Bond Issue 2012/2017 Viser til tidlig korrespondanse vedrørende ovennevnte lån. På bakgrunn av opplysninger (nevnt nedenfor) som har kommet obligasjonseierne i hende har v i mottatt sterke reaksjoner fra obligasjonseiere som totalt utgjør en beslutningsdyktig gruppe. Misrepresentation Reaksjonene kommer blant annet på bakgrunn av vedlagt korrespondanse (bilag 1 og 2) mellom California V alley Regional Water Quality Control Board («CVRWQ») og CMO Inc. (datterselskap 100 % eid av Crudecorp A SA ) der det kommer frem at CVRWQ, ved sin inspeksjon den 11. februar 2014, avdekket at CMO Inc. håndterte «vannavfall» i strid med California Water Code section 13260 (a) og derfor risikerte ansvar etter California Water Code section 13261 (b) (1). CMO Inc. opplyser i sitt brev av 21. mars 2014 (Bilag 2) til CVRWQ at man, «In order to comply immediately with the notice of violation re. pur sumps, we have stopped all steaming and production so it no longer contributes to the sumps». Til tross for dette opplyser Crudecorp ASA til Norsk Tillitsmann ASA i brev datert 1. april 2014 (fra advokatfirmaet Schjødt på vegne av Crudecorp A SA ) at det ikke er riktig at oljeproduksjonen på Bakerfield er blitt stanset på bakgrunn av lokal forurensningslovgivning. Sistnevnte oppfattes som en bevist uriktig opplysning fra Crudecorp A SA som i henhold til låneavtalens pkt. 15.1 (d) i seg selv fremstår som en «Event o f default». PO Box 1470 Vika. N-0116 Oslo, Haakon VIIs gate 1. Oslo nordictrustee.com
Brudd på informasjonsplikten og plikten til å opptre i henhold til lokal lovgivning At CMO Inc. har opptrådt i strid med lokal lovgivning er i seg selv et brudd på låneavtalens pkt. 13.4 (f), som igjen v il kunne føre til en «Event o f Default» etter låneavtalens pkt. 15.1 (b). Videre synes den manglende orientering om den ulovlige aktivitet å være i strid med informasjonsplikten til Crudecorp ASA jfr. låneavtalens pkt. 13.2.1 (a). Manglende oppfyllelse av plikten til å oversende etterspurt informasjon Senest ved vår e-post den 3. april 2014 etterspurte vi ytterligere informasjon knyttet til hvordan den pågående produksjonsstansen påvirker selskapets økonomi. Dette blant annet for å kunne bedre forstå hvordan produksjonsstansen påvirker den finansielle situasjonen til Crudecorp ASA. Denne forespørselen anses å være innenfor hva Nordic Trustee A SA (tidl. Norsk Tillitsmann A SA ) med rimelighet kan kreve utlevert i henholdt til låneavtalens pkt. 13.2.1 (i). På bakgrunn av den påløpte tid er vi av den oppfatning at fristen i låneavtalen er overskredet, med den konsekvens at Crudecorp ASA også synes å ha handlet i strid med denne bestemmelsen. D et presiseres at det fortsatt bes om å få oversendt informasjon og dokumentasjon vedrørende selskapets finansielle situasjon, slik at obligasjonseiem e på egen hånd kan gjøre seg opp sin mening om hvorvidt det foreligger en situasjon med «Material Adverse Effect». Oppstått en situasjon med mulig «Material Adverse Effect» På bakgrunn av at Crudecorp A SA ikke har oppfylt sin opplysningsplikt, jfr. ovenfor, er det vanskelig å forstå hvorfor produksjonsstansen ikke skal ha en «Material Adverse Effect» for Crudecorp A SA, herunder dets datterselskap CMO Inc. Obligasjonseiem e er fortsatt av den oppfatning at det har oppstått en situasjon med «Material Adverse Effect», og er av den oppfatning at den manglende informasjonen fira Crudecorp ASA underbygger dette. Opplysningsplikten som følger av ABM-reglene V iser for øvrig til opplysningsplikten som følger av ABM-reglene, herunder hvorvidt Crudecorp ASA anser å ha opprettholdt disse forpliktelsene. D et bes i den forbindelse om en redegjørelse for hvorfor Cmdecorp ASA mener det ikke har vært forpliktet til å offentliggjøre ytterligere informasjon. Opplysningsplikten overfor Oslo Børs Aksjen til Cmdecorp A SA var registrert på O slo Børs helt frem til 18. mars 2014. D et bes om en redegjørelse for hvorfor Cmdecorp A SA mener det ikke var forpliktet til å infomiere O slo Børs om den ulovlige opptreden som ble avdekket av CVRWQ ved dets inspeksjon den 11. februar 2014 og orientert om gjennom brev datert 28. februar 2014.
Obligasjonseiere som signaliserer at de vil si opp lånet På bakgrunn av de ovennevnte påpekte forhold har en beslutningsdyktig gruppe av obligasjonseiem e gitt signaler om at de v il si opp lånet dersom det ikke mottas dokumenterte opplysninger som viser at det ikke har oppstått en «Event o f Default». M isnøyen blant obligasjonseieme synes å grunne på de forhold som er nevnt over. Nordic Trustee ASA stiller seg til disposisjon for et eventuelt møte dersom Crudecorp A SA ønsker å diskutere hvordan man kan forsøke å rette opp i den oppståtte situasjon. Med vennlig h ils / / Ncfcmc Trustee A SA (tidl. Norsk Tillitsmann ASA) v / Jørgen Andersen B ilag 1: K opi av brev fra California V alley Regional Water Quality Control Board til CMO Inc. datert 28 februar 2014. B ilag 2: K opi av brev fra CMO Inc. til California V alley Regional Water Quality Control Board datert 21 mars 2014 Kopi: Advokat Bjame Rogdaberg pr. e-post: bjro@schjodt.no
B <- (& 3 / W a te r B o a r d s Central Valley Regional Water Quality Control Board 28 February 2 0 1 4 NOTICE OF VIOLATION Tim Jordan CM O, Inc. 5001 California A v e n u e - Suite 105 Bakersfield, C A 93309 C E R T IF IE D M A IL 7013 2250 0002 0464 2730 IN S P E C T IO N R E P O R T - C M O, INC., M IT C H E L L E A S E, C H IC O -M A R T IN E Z O IL FIE LD, K E R N C O U N T Y Central V alley Regional W ater Quality Control Board (Central Valley W a te r Board) staff (Staff) inspected the subject facility on 11 February 2 0 1 4 in response to a complaint concerning the alleged disposal of produced wastewater to land. Staff s observations and comments are presented in the enclosed inspection report. Three unlined surface impoundments (sumps) at th e facility were observed being used for percolation and evaporation of oil field produced w ater.' Produced w ater disposal operations at the facility are not regulated by W aste Discharge Requirements (W D R s). Analytical results of a water sam ple collected from one of the sumps demonstrate that produced w ater exceeds the maximum salinity limits contained in the W ater Q uality Control Plan fo r the Tulare Lake Basin, Second Edition, revised January 2 0 0 4 (Basin Plan). Therefore, th e California W ater C o d e requires the submission of a Report of W aste Discharge (R W D ) for the issuance of W D R s for th e discharge. The discharge of high salinity w astew ater to unlined sumps at the facility may pose a threat to the beneficial uses of underlying groundwater. Oil field produced water is also being discharged to the land surface north of th e facility. T he discharges of wastewater to land may pose a threat to the beneficial uses of underlying groundwater and surface water, and present a th reat to cattle and wildlife. C M O, Inc. has not submitted a R W D for the disposal of produced w ater to the sumps or to land surrounding th e facility. Failure to submit a com pleted R W D and the appropriate filing fee for the discharge of w aste to land is a violation of California W ater Code (W ater Code) section 13260(a), and could result in an administrative civil liability or oth er enforcement action in accordance with W ater Code Section 13261 (b)(1). Civil liability may be administratively im posed by the Central V alley W ater Board in an am ount that shall not exceed one thousand dollars ($1,000) for each day in which the violation occurs. In addition, discharging to the sumps is a violation o f W ater Code section 13350, which can be penalized in the amount of $5,000 for each day of the sum p s use. Section 13350 is also being violated for the discharges to land surface north of the facility, which could, result in an additional daily $ 5,000 penalty every tim e this discharge occurs. Karl E. Longley SgD, P.E., chair Pamela C. Greedon P.E., BCEE, executive officer 1685 H Street, Fresno, CA 93706 l www.waterboards.ca.90v/cer1tralvalley O RECYCLEOPAPER
CMO, Inc. Mitchel Lease, Chico-Martinez Oil Field Kern County 2 28 February 2014 To minimize potential liability, discharges of produced w ater to th e sumps and the spraying of produced w ater to the land must cease immediately. By 10 M arch 2014, please submit documentation indicating that disposal of w astew ater to sumps and to th e land has ceased. T h e Report of W aste Discharge (Form 200) can be accessed on our website at http://www.waterboards.ca.gov/dublications form s/form s/docs/form200.pdf If you have any questions, please contact Ryan W est at (559) 4 4 5-6 1 8 8 or by em ail at Rvan.W est@.waterboards.ca.aov. D A N E S. JO H N S O N S enior Engineering Geologist PG No. 4 2 3 9 Enclosure: Inspection Report Laboratory Analytical Results. cc: Departm ent of Fish and Wildlife, Bakersfield M iketo land, C D O G & G R, Bakersfield
5F OFFICE. WDID UNREG _ ORDER NO. REG MEASURE ID FACILITIES INSPECTION REPORT UNREG PROGRAM PARTY ID 1/5 PAGE NO. CMO, INC. DISCHARGER NAME 5001 CALIFORNIA AVENUE-SUITE 105 STREET ADDRESS BAKERSFIELD, CA 93309 CITY, STATE, ZIP CODE TIM JORDAN DISCHARGER CONTACT PERSON CHICO-MARTINEZ, MITCHEL LEASE FACILITY NAME S % Of SECTION 35. T28S. R20E, MDB&M STREET ADDRESS KERN COUNTY CITY, STATE, ZIP CODE TIM JORDAN FACILITY CONTACT PERSON (661} 748-1902 tim.iordan@cmdecorp.com (661) 748-1902 tim.iordan@crudecorp.com TELEPHONE NO. E-MAIL ADDRESS TELEPHONE NO. E-MAIL ADDRESS G E N E R A L IN S P E C TIO N IN F O R M A T IO N Inspection Type: A Type Complaint Inspection Lead Inspector R.West 2/11/2014' to 2/11/2014 11:15am Clear, Sunny INSPECTION DATE(S) INSPECTION TIME GENERAL WEATHER CONDITIONS INSPECTION ATTENDEES) Scott Moore Central Valley Water Board (559) 445-5170 ScottMoore@.waterboards.ca.qov NAME COMPANY/AGENCY TELEPHONE NO. E-MAIL ADDRESS NAME COMPANY/AGEN C Y TELEPHONE NO. E-MAIL ADDRESS NAME COMPANY/AGENCY TELEPHONE NO. E-MAIL ADDRESS ~INSPECTION SUMMARY (for CIWQS entry - 500 character maximum) Central Valley W ater Board staff (Staff) received a complaint that produced water was allegedly being discharged to land that is used for grazing cattle. Staff conducted an inspection of the Mitchel Lease in the Chico-Martinez Oil Field and surrounding property. A water sample was collected from a surface impoundment on the Mitchel Lease and from, ponded water at one of the discharge areas identified by the complainant. Erosion channels were present at several of the discharge areas which flowed to an ephemeral drainage channel. INSPECTION VIOLATIONS SUMMARY (if applicable) Identity VIOLATIONS noted during inspection in table below. For each violation documented entered into CIWQS, Identify Violation ID and Violation Type, describe violation, and identify section of the WDRs or Water Code violated. Label Violation ID Violation Type Violation Description Section of the WDRs Violated V1 Effluent Violation Discharge of high salinity produced water to unlined sumps Tulare Lake Basin Plan V2 Effluent Violation Discharge of high salinity produced water to the land surface Tulare Lake Basin Plan V3 CWC Violation Failure to submit a completed Report of Waste Discharge CWC section 13260(a) V 4 V5 V6 SMR violations? Yes No IEI Not Evaluated Notes: File Review violations? Yes No 0 Not Evaluated Notes: OTHER VIOLATIONS (if applicable) Lead Inspector ID: 139472 Signature: Date: Inspection Tracking Information Reviewed by: (1) (2) (3) (RKW) 139472 CIWQS Coordinator Filename: CIWQS Entry Date: CIWQS Inspection ID:
FACILITIES INSPECTION REPORT 2/5 CMO, INC. MITCHEL LEASE, CHICO-MARTINEZ OIL FIELD FACILITY INFORMATION Oil field production facility.. FACILITY DESCRIPTION (e.g., total area In acres, number of waste management units, eta) Active STATUS (active, inactive, closed) Oilfield produced water. ; ' UNREG Surface Impoundments WASTE TYPES ' FACILITY CLASSIFICATION Three unlined surface impoundments that are covered with netting. DISPOSAL DESCRIPTION (e.g., composting, landfill, surface Impoundment, etc.) BACKGROUND INSPECTION GIS DATA GIS Equipment used: MANUFACTURER - MODEL SERIAL NO. 'DATUM Description of Measured Point Latitude Longitude Datum Comments Centroid of Sump Area 35.441962-119.789633. NAD 83 INSPECTION OBSERVATIONS AND FINDINGS Describe observations and findings and identify those that document and reference each violation listed in the Inspection Violations Summary table by identifying the cited violation number within parentheses following the observation/finding (e.g., Exposed-waste on top dedr (V1)). The Mitchel Lease (Facility) in the Chico-Martinez Oil Field was inspected as a result of a complaint received regarding the disposal of oil field produced water to land used for cattle grazing. Produced water disposal operations to surface impoundments (sumps) at the Facility are not regulated by Waste Discharge Requirements. Water samples were collected and photographs were taken to document observations (see pages 4 and 5). The Facility contains three sumps (Sumps 1-3) that are used for percolation and evaporation of produced water. All three sumps are covered with netting and contained produced water coated with crude oil (Photographs 1 and 2). A produced water sample was collected from Sump 3. Land surrounding the Facility is used for cattle grazing. Staff observed several locations where it appeared that produced water had been discharged to land north of the Facility. Tire tracks were visible at the discharge locations and it looked as though a vacuum truck had driven around and continually discharged produced water to land at a few locations (see Photographs.3 through 6). Staff collected a water sample from ponded produced water discharged to land (see Photograph 5). At some of the discharge areas, it appeared as if a vacuum truck had parked and discharged produced water to a single spot (see Photographs 7 through 9), where the produced water then flowed, creating erosional flow channels (see Photographs 10 and 11) that led to an ephemeral drainage channel (see Photograph 12) which contained very moist soils and showed erosional signs, due to water flow. It is unknown how før produced water traveled down the ephemeral drainage channel. No trucks were observed discharging at the time of the inspection. However, the California Division of Oil, Gas, and Geothermal Resources conducted an inspection of the Facility on 12 February 2014, and witnessed vacuum trucks disposing produced water to land. According to the complainant, vacuum trucks have been transporting produced water from the Facility and discharging it to land for approximately one-and-a-half years. SAMPLING INFORMATION AND OBSERVATIONS Were samples collected during the inspection? IHI Yes No Are sample results included in report? P Yes 0 No Did discharger collect split samples? i P Y e s [>3 No SAMPLE COLLECTION INFORMATION AND OBSERVATIONS RKW021114-1 Water sample - ponded produced water discharged to land 11:15 am 5 SAMPLE ID SAMPLE DESCRIPTION/OBSERVATIONS SAMPLE TIME (hours) PHOTO NO. RKW021114-2 Water sample - Sump 3, CMO, Chico Martinez Oil Field 12:20 pm 3 SAMPLE ID SAMPLE DESCRIPTION/OBSERVATIONS SAMPLE TIME (hours) PHOTO NO.
FACILITIES INSPECTION REPORT CMO, INC. MITCHEL LEASE, CHICO-MARTINEZ OIL FIELD 3/5 SAMPLE ID SAMPLE DESCR1PTION/OBSERVATIO NS SAMPLE TIME (hours) PHOTO NO. SAMPLE ID SAMPLE DESCRIPTION/OBSERVATIONS DISCUSSION OF SAMPLING RESULTS Discuss sampling results (e.g., discuss whether sampling results show compliance with WDRs). SAMPLE TIME (hours) PHOTO NO. W ater sample RKW021114-1 was collected from ponded produced water discharged to land. The sample was submitted to a state-certified laboratory and analyzed for general minerals. The analytical results were: specific conductance (EC) 7,200 microsiemens per centimeter (ps/cm), total dissolved solids (TDS) 4,300 milligrams per liter (mg/l), chloride 1,400 mg/l, boron 38 mg/l, sulfate 310 mg/l, orthophosphate 1.0 mg/l, nitrate 3.0 mg/l, nitrite was not detected (ND), total alkalinity 1,300 mg/l, bicarbonate alkalinity 1,600 mg/l, carbonate alkalinity ND, hydroxide alkalinity ND, calcium 97 mg/l, hardness 320 mg equivalent, iron 7.6 mg/l, magnesium 19 mg/l, manganese 0.34 mg/l, potassium 140 mg/l, and sodium 1,400 mg/l. W ater sample RKW021114-2 was collected from Sump 3 at the Facility. The sample was submitted to a state-certified laboratory and analyzed for general minerals and BTEX (benzene, toluene, ethylbenzene, and xylenes). The analytical results were: EC 6,600 ps/cm, TDS 3,700 mg/l, chloride 1,500 mg/l, boron 32 mg/l, sulfate 85 mg/l, orthophosphate 0.046 mg/l, nitrate 0.36 mg/l, nitrite ND, total alkalinity 1,100 mg/l, bicarbonate alkalinity 1,300 mg/l, carbonate alkalinity ND, and hydroxide alkalinity ND, calcium 59 mg/l, hardness 290 mg equivalent, iron 0.33 mg/l, magnesium 33 mg/l, manganese 0.11 mg/l, potassium 120 mg/l, and sodium 1,200 mg/l. Analytical results for BTEX were: benzene 0.81 micrograms per liter (pg/l), toluene 1.4 pg/l, ethylbenzene 1.9 pg/l, and xylenes 3.5 pg/l. Based on a comparison of the analytical results (RKW021114-1 and RKW021114-2), CMO is discharging oil field produced water to land. Summarize the conclusions of the inspection^) below. CONCLUSIONS 1. There are three unlined sumps at the Facility that are being used for percolation and evaporation of ojl field I produced w ater.. 2. Produced water disposed to the three sumps at the Facility exceeds the maximum salinity limits contained in the Water Quality Control Plan for the Tulare Lake Basin, Second Edition, revised January 2004 (Basin Plan). The discharge of high salinity produced water to unlined sumps at the Facility may pose a threat to the beneficial uses of underlying groundwater. CMO, Inc. has not submitted a Report of Waste Discharge (RWD) for the disposal of produced water to sumps at the Facility. 3. Produced water from the Facility is being disposed to land north of the Facility. The discharges of waste to land may pose a threat to the beneficial uses of underlying groundwater, and present a threat to wildlife 4. The impacts to wildlife from produced water flow in the ephemeral drainage channel are unknown. '
FACILITIES INSPECTION REPORT 4/5 CMO, INC. MITCHEL LEASE, CHICO-MARTINEZ OIL FIELD PHOTOGRAPHS i Photograph 1. - Sumps 1 and 2. Photograph 2. - Sump 3. A water sample was collected from this sump. Photograph 4. - Another discharge area that showed tire tracks. Photograph 5. - Ponded discharged produced water. A water sample was collected here. Photograph 6. - Another area where discharged produced water was ponded.
FACILITIES INSPECTION REPORT 5/5 CMO, INC. MITCHEL LEASE, CHICO-MARTINEZ OIL FIELD PHOTOGRAPHS Photograph 7. - Erosional feature caused by the discharge of produced water to land. Photograph 8. - Another erosional feature caused by the discharge of produced water to land. Photograph 9. - Erosional feature caused by the discharge of produced water from a vacuum truck. Photograph 10. - View of erosional flow channel caused by the discharge of produced water to land. Photograph 1 1.- View of erosional flow channel caused by the discharge of produced water to land. ' Photograph 12. - View of ephemeral drainage channel that received runoff flow from discharged produced water.
TW IN IN G s N <. 2527 Fresno Street Fresno, CA 9372] (559) 268-7021 Phone (559) 268*0740 Fas California ELAP Certificate # 1371 RAVQCB - Fresno Project: 13-0LM50 1685 E Street Project Number, Reported: Fresno CA. 93706-2007 Project Manager: Ryan West 2/25/14 RKW021114-1 4B11054-01 (WasteWater) Reporting Analyie Resul1 Limit MDL Units Dilution Butch Prepared Analyzed Method Notes Inorganics.Total Alkalinity ns CaC03. 1300 1-0 0.23 mg/l i T4B1II5 02/11/14 02/11/14 SM2320B Bicarbonate Alkalinity ns HC03 1600 1.3 0.23 mg/l i T4B1I15 02/11/14 02/11/14 SM2320B Carbonate Alkalinity ns C03 - ND 1.0 0.23 mg/l i T4B1115 02/11/14 02/11/14 SM2320B Hydroxide Alkalinity as OH ND 1.0 0.23 mg/l 1 T4B1J15 02/11/14 02/11/14 SM2320B Cnrion/Anion Balance (% Difference) 0.76 % 1 - U4B250S,02/25/14 02/25/14 * CALC Chloride =' 1400 80 0.74 mg/l 40 ' U4B1209 02/12/14 02/13/14 EPA 300.0 Specific Conductance (EC) 7200 1.0-0.26 p.s/cm I T4B1115 02/11/14 02/11/14 SM25IQB Nitrate ns N03 3.0 2.0 0.018 mg/l 1 T4B1116 01/11/14 02/12/14 EPA 300.0 Nitrite as N ND 0.30 0.011 mg/l 1 T4B1I16 02/11/14 02/12/14 EPA 300.0 Orthophosphate ns P 1.0-0.050 0.023 mg/l, 1 U4B1205 02/12/14 02/12/14 EPA 353.3/SM4500P Sulfate as S04 310 80 0.38 mg/l 40 U4B1209 02/12/14 02/13/14 EPA 300.0 Total Dissolved Solids.4300. 40 32 mg/l '. 4 U4B1303 02/13/14 02/14/14 SM 2540C M etals-t otals Boron 38-2.0 0.033 mg/l 20 U4B13I5 *02/14/14 02/24/14 EPA 200.7 Calcium 97 ' 0,20 0.015 mg/l 1 U4B13I5 02/14/14 02/18/14 EPA 200.7 Hardness 320 1.3 mg equiv. 1 [CALC] 02/14/14 D2/1S/14 [CALC] CaC03/L Iron 7.6 0,20 0.034 mg/l 1 U4BI315 02/14/14 02/1S/14 EPA 200.7 Magnesium 19 0.20 0.018 mg/l i v U4B1315 02/14/14 02/18/14 EPA 200.7 Mnngane.se 0.34 0.010 0.00035 mg/l 1 U4B13I5 02/14/14 02/IS? 14 EPA 200.7.Potassium 140 2.0 0.15 nig/l 1 U4B1315 02/14/14 02/1S-M4 * EPA 200.7 Sodium 1400 40 10 mg/l 20 1 U4B1315 02/14/14 02/24/14 EPA 200.7 Moore Twining Associates, Inc. Juliane Adams, Director of Analytical Chemistry 77«results in this report apply to the samples analysed in accordance irrv/i the chain of custody document. This analytical report must be reproduced in its entirety. Page 3 of 14
, f M O O R E TW IN IN G A li A - ; / > / / \ f. 2527 Fresno Street Fresno, CA 33721 (559) 268-7021 Phone (559) 268-0740 Fax Calif omia ELAP Certificate HI 371 RWQC'B - Fresno Project: 13-014-"" 1685 E Street Project Number: Reported: Fresno CA, 93706-2007 Project Manager: Ryan West 2/25/14 RKW021114-2 4B11054-02 (Waste Water) * Reporting Analyte Result Limit MDL Units Dilution Bnich Prepared Analyzed Method Notes Inorganics Total Alkalinity as CaC03 uoo 1.0 0.23 mg/l l T4B1115 02/11/14 ' 01LI/14 SM2320B Bicarbonate Alkalinity as HC03 1300 1.3 0.23 - mg/l 1. T4BI115 02/11/14 02/11/14-. SM2320B. Carbonate Alkalinity as CD3 ND 1.0 0.23 mg/l 1 T4B1I15 02'*H/14 0111/14 SM2320B Hydroxide Alkalinity as OH ND 1.0 0.23 mg/l TAB 1115 02/11,114 Oil 1/14 SM2320B t_ * Cation/Adion Balance (% Difference) 3.S % J U4B2508 02/25/14 0175/14 ' CALC Chloride 150» 40 0.37 mg/l t 20 U.4B1209 02/12/14 02/13/14 EPA 300.0 Specific Conductance (EC) 6600 1.0 0.26 ps/cm l T4B1U5. 02/11/14 0111/14 SM2510B Nitrate ns*n03 0.36 2.0 0.018 mg/l i T4B11I6 02/11/14 02/12/14 EPA 300.0 j Nitrite as N ND 0.30 0.011 mg/l 1 T4B1I16 02/11/14 0112/14 EPA 300.0 Orthophosphate as P 0.046 0.010 0.0046 mg/l i U4B1205 02/12/14 0112/14 EPA 365.3/SM4500P Sulfate as $04 85 40 0.19 mg/l 20 U4B1209 02/12/14 0113/14 EPA 300.0 Total Dissolved. Solids 3700 40 32 mg/l 4 U4B1303 02/13/14 02/14/14 SM 2540C 1 M etals-totals Boron 32 2.0 0.033. mg/l 2Q U4B13I5 01/14/14 02/24/14 EPA 200.7 Cnlcium 59 0.20 0.015 mg/l 1 U4BI315 0114/14 02/18/14 '1 EPA 200.7 Hardness 290 1.3 rag equiv. CaC03/L 1 [CALC] 0114/14 D2/1S/I4 [CALC] Iron»;/s3 0.20 0.034 mg/l I U4B13I5 02/14/14 02/18/14 EPA 200.7 Magnesium 33 p.20 0.018. mg/l l <U4B1315 02/14/14 02/18/14 EPA 200.7 Manganese 0.11 0.010 0.00035 mg/l 1 U4B1315 0114/14 02/18/14 EPA 200.7 Potassium 120 2,0 0.15 mg/l i U4B1315 02/14/14 02/13/14 EPA 200.7 Sodium 1200 40 10 mg/l 20 U4B1315 02/14/14 02/24/14 EPA 200.7 Volatile Organics '. Methyl tert-butyl Ether (MTBE) ' ND 1.0.. 0.64' Pg/L i U4B1203 02/12/14 02/J3/14 EPA S260B Benzene 0.81 0.50 0.16 Pg/L 1 U4B1203 0112/14 02/13/14 EPA S260B Toluene 1.4 0.50 0.12 pg/l 1 U4BI203 02/12/14 02/13/14 EPA S260B Ethylbenzene 1.9 0.50 0.080 pg/l 1 1 U4B1203 011114 02-M3/14 EPA S260B m,p-xylene 2.3 0.50 0.17 pg/l 1 U4B1203 02'12-14 02/13-'14 EPAS260B o-xyleite 1.1 0.50 0.093 (ig/l 1 U4B1203 0212.14 02/13/14 EPA S260B Xylenes 3,5 0.50 0.2G Hg/L 1 U4BI203. 02/12/14 02/13/14 EPA S260B Sntro$ata: Toluene-dS. 102 % 70-120 U4B1205 02/12/14 02.73/24, EPA S260B Surrogate: D ibrom ojhiorom atlw ne 1 0 2 % 7 0-1 3 0 U4B1203 0 X 1 2,1 4 027374 EPA $ 2 6 0 3 Surrogate: 4 Bromqfft.iorobenzene - Ill % 70-130 U4B12Ö3 02V 2 14 02fi3>14 EPA S2603 Moore Twining Associates* Inc. Jnliane Adams. Director of Analytical Chemistry The results in this report apply to the samples analyzed in accordance with the chain of custody document. This analytical report must be reproduced in its entirety. Page 4 of 14
/?/ ( a y CMO, INC 5001 California Ave., Suite 105 Bakersfield, CA 93309 March 21,2014 (661) 246-9110 Office (661) 762-7770 Lease To: California Valley Regional Water Quality Control Board 1685 E Street Fresno, CA 93706 (559) 445-5525 ATTN: Dane Johnson RE: Inspection Report - CMO, INC., Mitchel Lease, Chico Martinez Oil Field, Kern County«28 February 2014 Dear Dane, CMO, INC., has had many changes over the last 4 months, with new lease personnel and management on hand we are doing everything in our power to ensure that the Chico Martinez lease is fully compliant with the request to cease use of our produced water sumps and discharging of fluids on the property. As of the receipt of the violation, the discharging of water throughout the property has fully ceased. In order to comply immediately with the notice of violation re. our sumps, we have stopped all steaming and production so it no longer contributes to the sumps. We are working on cleaning and removing all the fluids in all three sumps to meet with disposal requirements, as well as, locating companies to assist in the proper disposal of the remaining fluids and sludge. We have already put in motion all the steps necessary to get our water treatment plant in motion sooner than originally planned. Furthermore, we are doing everything in our power to ensure the process of eliminating the sumps complies with Water Quality Control Board. We implore you to accept our sincere apologizes for any infractions implied by the apparent negligence of our prior management. Please work with us as We find our solutions, thank you. Yours sincerely, 5Q01 California Avo Suite IBS Bakersno'd CA 93309 (S61) 748-1902 (661) 748-1899FAX