DWQ-2025-001946

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UTAH DEPARTMENT OF ENVIRONMENTAL QUALITY
DIVISION OF WATER QUALITY

IN THE MATTER OF:
Citation Oil & Gas Corp.
14077 Cutten Road
Houston, TX 77069-2212

STIPULATED COMPLIANCE ORDER

Docket No. I21-16

This Stipulated Compliance Order (“Agreement” or “Order”) is entered into voluntarily by and
between the Director of the Utah Division of Water Quality (“Director”), under the Director’s
legal authorities described below and Citation Oil & Gas Corp. (“Citation”) in its capacity as
the operator legally responsible for the operation of the Upper Valley Unit Crude Oil Sales
Gathering Line within the Upper Valley Unit oil field located in Garfield County, Utah
(“Facility”), jointly referred to hereafter as “the Parties.”

By entering into this Agreement, the Parties wish, without further administrative or judicial
proceedings, to establish compliance requirements and stipulate to civil penalties arising out of
alleged violations of the Utah Water Quality Act, Utah Code §§ 19-5-101 through 19-5-126
(the “Act”), and corresponding regulations in the Utah Admin. Code R317-1-1 through R317-
801-6 (“Water Quality Rules”) and Utah Admin. Code R305-7-101 through R305-7-611.

STATUTORY AND REGULATORY AUTHORITY

1. The Director has authority to administer the Act pursuant to Utah Code § 19-1-
105(1)(e), and to enforce the Water Quality Rules in Utah Admin. Code R317 through
the issuance of orders, as specified in Utah Code §§ 19-5-106(2)(d) and -111. The
Director also has authority to settle any civil action initiated to compel compliance with
the Act and implementing regulations pursuant to Utah Code § 19-5-106(2)(k).

FACTS AND FINDINGS

The Director relies upon the following Facts and Findings for purposes of this Agreement:

1. Citation is a “person” as that term is defined in Utah Code § 19-1-103(4).

2. On November 1, 2021, Citation notified the Division of Water Quality (“Division”) of
a crude oil gathering line leak at the Facility. The leak was reported as a release of
approximately 300 barrels of crude oil, which flowed into a narrow gulch (“gulch")
and then into the Pet Hollow ephemeral tributary (“dry wash”). This release volume
was later updated to be 400 barrels of crude oil based on the volume of crude oil
recovered (i.e., 396 barrels).

3. On November 18, 2021, the Division of Water Quality (“Division”) issued Notice
of Violation and Compliance Order, Docket No. I21-16 (the “NOV/CO”).
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4. On May 5, 2022, the Division and Citation entered into a Tolling Agreement. Among
other things, the Tolling Agreement required that Citation complete cleanup of the
Pet Hollow dry wash area by May 1, 2022.

5. Citation completed interim cleanup activities in Pet Hollow dry wash on March 25,
2022. The Company submitted its Pet Hollow Cleanup Confirmation Report on June
15, 2022. On August 3, 2022, the Division agreed that the Cleanup Confirmation
Report met the requirements of the Tolling Agreement with respect to Pet Hollow.

6. Upon discovery of this release, Citation constructed an earthen bermed area at the base
of the gulch to retain runoff. Citation later installed a “T” drain with sorbent material
to allow water to pass through the berm while retaining sediment and oil sheen, if any.

7. Throughout cleanup operations in the gulch, Citation relied on hand tools to place
impacted material into sandbags, which were placed in numerous staging areas in
the gulch. By October 18, 2023, Citation had removed all sandbags, trash, and
debris from the gulch. By October 30, 2023, Citation had properly disposed of this
material in the Garfield County Landfill.

8. The Division and Citation agree to the monitoring and sampling plan specified in the
Order below to address residual contamination and the remaining threat of pollution in
the gulch, if any, and to prevent further migration and contamination of downgradient
soils and/or waters.

ORDER

1. Based on the foregoing Facts and Findings, the agreement of Citation, and good
cause appearing, the Director ORDERS as follows:

a. Based on the application of the Division’s penalty policy, contained in Utah
Admin. Code R317-1-8, to the violation specified in the NOV/CO, the Division
has calculated a civil penalty of $575,000
i. Citation shall pay $287,500 to the Division of Environmental Quality
as described in paragraph 2 below.
ii. The Director agrees to hold $87,500 in abeyance as described in
paragraph 3 below, related to Mitigation Project.
iii. The Director agrees to hold $200,000 in abeyance as described in
paragraph 4 below, related to inspections, sampling, monitoring and
berm integrity.

2. Citation shall pay $287,500 within thirty (30) calendar days of the effective date of
this Agreement, using one of the following options:

a. CHECK – Payable to the Division of Water Quality. The payment shall be
sent to:
Division of Water Quality
P.O. Box 144870
Salt Lake City, Utah 84114-4870

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OTHER - For other available payment options, please contact the Division of
Water Quality Finance staff at [e-mail].

3. The Director agrees to hold $87,500 of civil penalties in abeyance so long as Citation:

a. Meets all payment terms outlined in paragraph 2 of this Order;
b. Applies $87,500 to fund a Mitigation Project(s) according to each of
the following parameters:
i. The mitigation project(s) must be approved by the Division
Director within six (6) months of the effective date of this
Agreement.
ii. The mitigation project(s) must benefit the Escalante Pariah Watershed.
iii. The mitigation project(s) must be in addition to all
regulatory compliance obligations;
iv. The mitigation project(s) should closely address the
environmental effects of the violation;
v. The actual cost to Citation, after consideration of tax benefits,
must reflect a deterrent effect;
vi. The mitigation project(s) must primarily benefit the environment
rather than benefit Citation;
vii. The mitigation project(s) must be judicially enforceable; and
viii. The mitigation project(s) must not generate positive public
perception for violations of the law.
c. If Citation fails to comply with any of these parameters then $87,500 will
no longer be held in abeyance and shall become due and payable to the State
of Utah within thirty (30) calendar days of written notification by the
Division.

4. The Director agrees to hold $200,000 in civil penalties in abeyance so long as Citation:

a. Meets each condition of the Inspection Plan specified in paragraph 5 of
this Order.
i. If Citation fails to comply with any term listed in paragraph 5, then
$50,000.00 will no longer be held in abeyance for each term or
condition that Citation fails to comply with.
b. Meets each condition of the Sampling and Monitoring Plan specified
in paragraph 6 of this Order, until Corrective Action Concentration
Limits (“CACL”) have been achieved.
i. If Citation fails to comply with any term listed in paragraph 6 then
$10,000.00 will no longer be held in abeyance for each term or
condition that Citation fails to comply with.
c. Ensures the functional integrity of the constructed berm, identified in paragraph
5.a. of this Order, to sufficiently contain runoff.
i. If at any time it is determined, by Citation or otherwise, that the berm
has failed to contain runoff and has not been reconstructed as per
paragraph 5.a.iv.2., then $50,000.00 will no longer be held in
abeyance.
d. Meets the CACLs within two (2) years of monitoring and sampling
in accordance with paragraph 6 of this Order.
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i. Failure to meet the CACLs within two (2) years constitutes a failure
of the abeyance terms and $200,000 will no longer be held in
abeyance.
e. The total accumulated amount removed from abeyance under paragraphs 4.a.,
4.b., 4.c. and 4.d. of this Order may not exceed $200,000. Penalties no longer
held in abeyance shall become due and payable to the State of Utah within
thirty (30) calendar days of written notification by the Division.

5. Inspection Plan: Citation shall adhere to the following inspection plan for the 1)
constructed berm; and 2) spill path between the release point near the tank battery
where the spill originated and the constructed berm (“Spill Path”).

Citation shall submit a summary of each inspection, including photographic
documentation (before and after photos) utilizing geotags and time stamps within seven
(7) calendar days upon completion of each inspection.

a. Constructed berm:

i. Effective: Citation shall, within 5 calendar days of the effective date
of this agreement, initiate the Inspection Plan for the constructed
berm.
ii. Frequency: Citation shall inspect the constructed berm within seven
(7) calendar days after any nonfrozen precipitation event which
exceeds one-quarter (0.25) inch within a twenty-four (24)-hour
period. Additionally, Citation shall inspect the constructed berm
within seven (7) calendar days of any snowmelt runoff. Citation shall
install a rain gauge with telemetric functionality at the Upper Valley
Unit Field Office and shall maintain the logs through the duration of
this Agreement. Citation shall include applicable logs in its
inspection summary and shall provide all logs to the Division upon
request. At minimum, Citation shall inspect the berm quarterly.
iii. Location: Citation shall visually inspect the constructed berm,
located downstream of the release source and at the base of the
gulch, approximately 37°41’27.78’’N and 111°45’45.96’’W.
iv. Contents: The inspection shall document: 1) berm integrity; and 2)
the presence or absence of an oil sheen in the water collected within
the berm.
v. Action Items:
1. If a sheen is present in waters within the berm, Citation shall
remove it using absorbents or other appropriate methods.
2. If the inspection reveals failure of the berm, Citation
shall reconstruct the berm within fourteen (14) calendar
days.

b. Spill Path

i. Effective: Citation shall within five (5) calendar days of the
effective date of this agreement, initiate the Inspection Plan for the
spill path.
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ii. Frequency: Citation shall visually inspect the Spill Path semi-annually.
iii. Location: The Spill Path is between the battery tank where the
spill originated to the constructed berm.
iv. Action Items: Citation shall remove and properly dispose any
observed semi or free liquid crude oil contamination which appears
larger than one-half (0.5) inch in diameter (excluding weathered
staining on trees and tree roots, rocks, and/or bedrock).

6. Sampling and Monitoring Plan: To fully define the nature and extent of the
groundwater contamination and therefore complete the groundwater Contamination
Investigation required under Utah Admin. Code R317-6-6.15(D)(1), Citation will
adhere to the following sampling and monitoring plan for 1) soils; 2) surface water;
and 3) shallow groundwater.

Samples shall be analyzed at an EPA certified laboratory using EPA approved sampling
and testing methods. All samples shall be managed and controlled such that no holding
times are exceeded. Citation shall provide the Division with all analytical reports within
seven (7) calendar days of receipt.

a. Soil Monitoring and Sampling

i. Effective: Citation shall, within thirty (30) calendar days of the
effective date of this agreement, initiate the Soil Monitoring and
Sampling Plan. If the ground is frozen thirty (30) days after the
effective date, sampling shall be initiated once the ground is no longer
frozen.
ii. Notice: Citation shall notify the Division at least seven (7) calendar
days prior to conducting soil sampling.
iii. Frequency: Citation shall conduct soil sampling within the Spill
Path annually.
iv. Location: Citation shall collect one (1) soil sample every one hundred
(100) feet at a depth interval of between one and six (1-6) inches or to
monitoring point refusal. Citation shall provide a segmented site map,
with photographic documentation utilizing geotags and time stamps,
indicating where samples were collected.
v. CACL: Citation shall analyze all samples for Total Petroleum
Hydrocarbons (TPH). Samples shall meet the following CACL for
soils:
1. Per Utah Admin. Code R317-6-6.15(B)(2)(b)(1), soil samples
shall contain less than or equal to 5,000 mg/kg of TPH analyzed
in the appropriate molecular weight range (here Oil & Grease /
Hexane Extractable Material via EPA Method 9071B) as a
maximum.
vi. Duration: Citation shall continue annual sampling and monitoring
until all sample locations meet the CACL, or until the average (± 1
standard error of the mean) of all sampling locations meet the CACL
and the surface water CACL is met; or until Citation is required to
submit a Corrective Action Plan pursuant to paragraph 8 of this
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Order. Once the CACL has been achieved at a sampling location
subsequent sampling is not required for that sampling location.

b. Surface Water Monitoring and Sampling

i. Effective: Citation shall, within fourteen (14) calendar days of the
effective date of this agreement, initiate the Surface Water
Monitoring and Sampling Plan. Notwithstanding the foregoing,
sampling shall be initiated only once there is a qualifying nonfrozen
precipitation or snowmelt event.
ii. Notice: Citation shall notify the Division within twenty-four (24) hours
after any surface water sampling event.
iii. Frequency: Citation shall, within seven (7) calendar days after any
nonfrozen precipitation event which exceeds one-quarter (0.25)
inch within a twenty-four (24) hour period conduct surface water
sampling of waters collected within the berm when a sheen is
absent. Additionally, Citation shall similarly conduct surface water
sampling of snowmelt runoff waters collected within the berm
when a sheen is absent within seven (7) days of a snowmelt runoff
event.
iv. Location: Citation shall conduct surface water sampling at its
constructed berm located at 37°41’27.78’’N and
111°45’45.96’’W.
v. CACL: Per Utah Admin. Code R317-6-6.15(F)(2) the CACL for Oil
& Grease in water samples shall be less than or equal to ten (10)
mg/L. If a sheen is observed during the sampling event, that sampling
event will be counted as a failed CACL. If a sheen is absent, Citation
shall collect water samples for Oil & Grease analysis. When
sampling is not possible due to safety concerns, Citation shall notify
the Director within seven (7) calendar days and conduct the required
sampling as soon as safe conditions return. When sampling is not
possible following a qualifying precipitation event due to lack of
water behind the berm, Citation shall notify the Director within seven
(7) calendar days and the sampling event will not be counted in the
tally of consecutive events. Citation shall provide photographic
documentation utilizing geotags and time stamps, for sampling which
demonstrate whether a sheen is present or absent and whether water
has accumulated in the bermed area.
vi. Duration: Citation shall continue sampling and monitoring
in accordance with paragraph 6.b. until:
1. The soil sampling along the Spill Path is below the CACL for
each sampling location;
2. The CACL has been achieved for eight (8) consecutive
sampling events, not including any lost qualifying precipitation
events due to berm failure, at which time Citation shall
discontinue monitoring and sampling; or
3. If, after two (2) years following the effective date of this
agreement less than eight (8) qualifying precipitation events
occur, Citation may discontinue monitoring if CACLs are
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achieved for each sampling event following a qualifying
precipitation event and the number of lost qualifying
precipitation events due to berm failure are replaced with an
equal number of samples associated with qualifying
precipitation events that achieve the CACL.

c. Shallow Groundwater Monitoring and Sampling

i. Effective: Citation shall, within thirty (30) calendar days of the
effective date of this agreement, initiate the Shallow
Groundwater Monitoring and Sampling Plan.
ii. Notice: Citation shall notify the Division at least seven (7)
calendar days prior to conducting sampling.
iii. Frequency: Citation shall monitor shallow groundwater downstream
of the constructed berm quarterly.
iv. Location: At minimum, three (3) total samples shall be collected if
possible during each sampling event with one sample every one
hundred (100) feet, beginning immediately below the berm and
continuing downstream for an additional two hundred (200) feet.
Citation shall attempt sampling up to groundwater depths of three
(3) feet (or less if monitoring point refusal). Citation shall provide a
site map indicating where samples were collected, or attempted,
with photographic documentation utilizing geotags and time stamps,
and indicate whether groundwater was encountered.
v. CACL: Per Utah Admin. Code R317-6-6.15(F)(2) the CACL for
O&G in water samples shall be less than or equal to ten (10) mg/L.
vi. Duration: Citation shall continue monitoring in accordance with
paragraph 5.c. until the CACL has been achieved for two (2)
consecutive sampling events. If, after four (4) consecutive quarters of
attempted monitoring and sampling no groundwater is present,
sampling and monitoring shall be discontinued and Citation shall be
deemed to satisfy this requirement.

d. Reporting

i. Annually, on the anniversary of the effective date of this Agreement
and continuing for one (1) additional year unless otherwise notified by
the Director, Citation shall submit to the Director an assessment of the
results from 6.a. through 6.c., describing any remaining contamination
present. This assessment shall be prepared by a professional engineer
or professional geologist.

7. If all conditions of paragraphs 5 (Inspection Plan) and 6 (Sampling/Monitoring Plan)
of this Order are met, the Director will waive implementation of a Corrective Action
Plan. Upon dismantling of the berm and reclaiming the area to the satisfaction of the
United States Forest Service, a closure letter will be issued to Citation.

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8. If, after two (2) years of monitoring and sampling, Citation does not meet the CACLs,
Citation shall submit a Corrective Action Plan to the Director for review and approval
in accordance with Utah Admin. Code R317-6-6.15(E).

GENERAL PROVISIONS

1. The Parties recognize that this Agreement has been negotiated in good faith and
nothing herein constitutes an admission of any liability. Citation does not admit to, and
retains the right to controvert in any subsequent proceedings other than proceedings to
implement or enforce this Order, the validity of the facts and violations alleged in the
NOV/CO. Citation further agrees it will not contest the basis or validity of this Order or
its terms.

2. The violations described herein will constitute part of Citation’s compliance history
where such history is relevant, including any subsequent violations. Citation
understands and agrees that this Agreement is not and cannot be raised as a defense to
any other action to enforce any federal, state, or local law.

3. Citation agrees to the terms, conditions, and requirements of this Order. By signing this
Order, Citation understands, acknowledges, and agrees that it waives: (1) the opportunity
for an administrative hearing pursuant to Utah Code § 19-1-301; (2) the right to contest
the findings in the NOV/CO; and (3) the opportunity for judicial review.

4. This Agreement is subject to a 30 day notice and comment period. The Parties each
reserve the right to withdraw from this Agreement if comments received during the
notice period result in a modification to the terms and conditions.

5. The “Effective Date” shall be the date this Order is executed by the Director. The Director
will not sign the Order until after the Division has provided public notice of the proposed
Order and has solicited and reviewed any public comments received.

6. This Order includes a civil penalty in excess of $25,000 and therefore must be
presented to, reviewed by, and approved or disapproved by the Board. See Utah Code §
19-5- 104(3)(h). Final approval by the Director of this Order shall not occur until it is
approved by the Board. The Order will be presented to the Board for final action after
the Division has provided public notice of the proposed Order and has solicited and
reviewed any public comments received. All public comments, and the Director’s
responses, shall be provided to the Board in connection with the Director’s request for
final action.

7. The dates set forth in the Order section of this Order may be extended in writing by
the Director, in the Director’s sole discretion, based on Citation’s showing of good
cause. Good cause for an extension generally means events outside of the reasonable
control of Citation, such as force majeure, inclement weather, contractor or supplier
delays, and similar circumstances. However, the Director expects Citation to employ
reasonable means to limit foreseeable causes of delay. The timeliness of Citation’s
request for an extension shall constitute an important factor in the Director’s
evaluation.

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8. Nothing in this Order shall preclude the Director from taking actions to include additional
penalties against Citation for future violations of State or Federal law.

9. The Parties acknowledge that neither the Director nor the Board has jurisdiction
regarding natural resource damage claims, causes of action, or demands. Therefore, such
matters are outside the scope of this Order.

10. The person signing this Order on behalf of Citation represents to the Director that
they have the full legal authorization to do so and agrees that the Director may rely
on that representation.

11. This Agreement is binding upon each of the Parties and their respective heirs,
successors, and assigns. Any change in ownership or corporate or legal status,
including but not limited to, any transfer of assets or real or personal property, shall in
no way alter the status or responsibilities of the parties under this Agreement.

12. This Order may be amended in writing if signed by both Parties.

COMPLIANCE AND PENALTY NOTICE
As of the Effective Date, this Order shall constitute a final administrative order. Compliance
with the provisions of this Order is mandatory. All violations of the Act, the Water Quality Rules,
and this Order will be strictly enforced during the time that this Order remains in effect. The Act,
Utah Code § 19-5-115, provides that any person who violates a rule or order made or issued
pursuant to the Act may be subject, in a civil proceeding, to a state district judge imposing a civil
penalty per day of violation.

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