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SM ENERGY COMPANY PLEADED GUILTY AND WAS SENTENCED IN U.S. FEDERAL COURT

FOR IMMEDIATE RELEASE
Wednesday, December 12, 2012

Michael W. Cotter, United States Attorney for the District of Montana, announced today that during a federal court session in Billings on December 12, 2012, SM Energy Company pleaded guilty to three misdemeanor violations of the Migratory Bird Treaty Act in connection the deaths of birds at the company's drilling facilities in Montana, Wyoming, and Nebraska. Pursuant to a plea agreement, U.S. Magistrate Judge Carolyn S. Ostby placed the company on probation for one year and ordered it to pay $22,500 in fines, $7,500 toward improvement of migratory bird habitat, and to continue implementing a $300,000 comprehensive remediation program intended to prevent future bird deaths at the company's drilling and storage sites.

SM Energy Company is headquartered in Denver, Colorado and operates oil and gas mining operations in several western states, including Montana, Wyoming, and Nebraska. The company's oil and gas mining operations employ temporary "reserve pits" to store fluid accumulated during drilling operations. The fluid in reserve pits usually contains petroleum and chemical substances harmful to birds that land on the pits and ingest or become coated with the fluid. Reserve pits can be made "bird-safe" by various means, including covering them with netting to prevent birds from coming into contact with the toxic fluids.

In 2005, agents of the U.S. Fish and Wildlife Service ("USFWS") documented the deaths of migratory birds at un-netted (or insufficiently netted) reserve pits at drilling facilities in Montana, Nebraska, and Wyoming operated by a Billings-based company called Nance Petroleum ("Nance"), which later became an independent wholly-owned subsidiary of SM Energy Co. The USFWS notified Nance Petroleum of these mortalities and encouraged the company to net or otherwise remediate the sites.

The Migratory Bird Treaty Act makes it unlawful for a person or corporation to "take" (in this case, meaning "kill") a migratory bird without specific authorization from the U.S. Fish and Wildlife Service. Title 16, United States Code, Sections 703, 707(a). Over 1,000 species of birds native to North America are subject to the Act's protection. Classified as a "petty offense" or Class B misdemeanor, the maximum penalty that can be imposed on a corporation that violates the Act is a $15,000 fine (or twice the gross gain from the violation) and five years probation. Many violations are handled via "Notices of Violation," which are "ticket"-type citations issued by USFWS agents. The USFWS issued a Notice of Violation for $3,025 to Nance Petroleum in 2005 for 12 migratory birds found dead at one of its un-netted reserve pits in Wyoming, which Nance paid.

In 2007 and 2008, the USFWS conducted follow-up inspections of sites operated by Nance Petroleum in Montana, Wyoming, and Nebraska. Agents found the dead migratory birds listed in Counts One, Two, and Three of the criminal Information in this case at Nance Petroleum facilities in those states, which remained un-netted or insufficiently netted. In all these cases, the birds died as the result of contact with liquids harmful to wildlife in the pits.

In 2009, after contact from government counsel, Nance began to address the avian mortality issues at its operations. Nance hired a consulting company to examine its facilities and prepare an Avian Protection Plan ("APP") describing appropriate measures for reducing the hazard to avian wildlife and enhancing its rescue/rehabilitation efforts. In November 2009, Nance was merged into SM Energy Company. The APP was completed and presented to the USFWS and government, which approved it in March 2012.

SM Energy Company's efforts to quantify the scope and cause of avian mortality at its facilities in Montana, Wyoming, and Nebraska, develop an APP for reducing future mortalities during the course of its otherwise lawful commercial activity, and cooperate with and report this information to the USFWS, facilitated the government's investigation. In the absence of the defendant's cooperation and remediation in this matter, the government would have sought a substantially larger fine and community service payment and a longer term of probation.

Pursuant to the provisions of the Migratory Bird Treaty Act and the plea agreement in this case, the $22,500 fine will be directed to the North American Wetlands Conservation Fund for work directly benefitting migratory birds in Montana, Wyoming, and Nebraska. The $7,500 community service payment will be made to the National Fish and Wildlife Foundation, a private, non-profit, 501(c)(3) tax-exempt organization, established by Congress in 1984 and dedicated to the conservation of fish, wildlife and plants and the habitat on which they depend. The defendant will not claim this payment as a tax deduction or characterize it in any manner or forum as a donation or contribution. The funds will be directed to the Foundation with the proviso that they be used in projects designed to enhance migratory bird habitat in Montana, Wyoming, and Nebraska. SM Energy Company will continue to implement the Environmental Compliance Plan filed with the plea agreement. The purpose of the ECP is to minimize and prevent, to the maximum extent reasonably possible, future migratory bird mortalities at the defendant's facilities in Montana, Wyoming, and Nebraska. Implementing the ECP will cost the company approximately $300,000, according to comments in court today by Gregory E. Goldberg, counsel for SM Energy Company.

These charges arose after a multi-year pattern of bird deaths at company sites, notification by the Fish and Wildlife Service, and failure of the defendant company's subsidiary to take reasonable measures to make the hazardous sites bird-safe," said Cotter. "This case illustrates our commitment to encouraging the use of environmental "best practices" by industry, and to enforce the law in cases where lack of compliance results in harm to a protected public resource."

The case was investigated by the United States Fish & Wildlife Service, and prosecuted by the U.S. Attorney's Office and the Environmental Crimes Section of DOJ's Environment and Natural Resources Division.

 

 

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