VERTEX was retained by an international property and casualty insurance carrier to assist them in their review of claimed costs/invoicing submitted by an Insured pertaining to an alleged release of produced water at a produced water treatment facility in southeastern New Mexico. The facility was comprised of 26 in-line, 500-barrel fractionation (frac) tanks, within which filtration and other treatment of the produced water was performed.
It was alleged that because of a lightning strike, 20 of the 26 frac tanks had been damaged, with associated releases of produced water, which was discovered during a routine inspection of the normally unmanned facility. It was further reported that visually impacted soil had been removed for off-site transport and disposal, after which the facility ceased operations and was decommissioned.
VERTEX reviewed the information and invoicing presented and noted that the release had not been reported to the applicable state regulatory authority (New Mexico Oil Conservation Division) or to the landowner (Federal Bureau of Land Management), as required. Additionally, no sampling and analysis of soil had been performed to assess contaminant concentrations relative to applicable regulatory remediation standards and no photo documentation of the damaged frac tanks and visually impacted soils was provided.
VERTEX’s review of invoicing submitted totaling $430,000 concluded that all of the invoiced work was related to facility decommissioning activities, including management of produced water remaining in the frac tanks, and not to remediation of environmental impacts (i.e., the reported excavation and disposal of contaminated soils).