R. Gonzalez Secretary/Treasurer, Precinct 2

Staff Report & Agenda Item Details

M. R. Gonzalez Secretary/Treasurer, Precinct 2 John Dorris Vice President, Precinct 3 Janet Groth Precinct 1 Weldon Blackwelder Precinct 3 Vanessa Cardwell City of Fort Stockton Quorum Present. Board members absent: Jeffery McMahon, Ronald Cooper, Terry Whigham Merrell Daggett and Alvaro Mandujano, Jr. Others present: Paul Weatherby, Mike Gershon, Raymond Straub, Vince Clause, Gail Reeves, Ty Edwards, Harvey Gray, Melissa Mills, Rod Ponton, Darrell Peckham, Brock Thompson, Jeff Williams, Ed McCarthy, Jr., Mike Thornhill, Morgan Johnson, Homer Mills, James Cravens, Gil Van Deventer, Gerald D. Lyda, Steve Finch, Frank Urias, Tommy Ervin, Mr. and Mrs. David Mitchell, Glenn Honaker, Jim Perkins, Don Burns, Stanley Weiner, Stan Weiner, Alan Murphy, Chance Murphy, Adam Friedman, Doug May, Alyson McDonald, Joe Shuster, Chris Alexander, Santiago Cantu, Gladys Dorris, and Bob Beal/Fort Stockton Pioneer. CONTINUATION of SHOW CAUSE HEARING ON ALLEGED VIOLATION OF DISTRICT’S RULES BY BUGINGTON ENERGY, LLC I Call to Order at 10:04 a.m. by President Jerry McGuairt Il Show Cause Hearing on alleged violations of District's Rules 14.1(d), 14.2(a) and (c), and 14.3(a)-(c) pertaining to waste, pollution and degradation of quality of groundwater by BUGINGTON ENERGY, LLC and Bugington Energy, LLC’s compliance with District’s May 2015 enforcement order. Bugington Energy, LLC, did not have any of their company officers or employees in attendance at the hearing. Bugington Energy, LLC, was represented by Morgan Johnson of McGinnis Lochridge law firm. She stated that she is not making a formal appearance — only observing. On July 2, 2015, the law firm of McGinnis Lockridge sent a letter contending that the District does not have jurisdiction over these matters; rather the Railroad Commission has exclusive jurisdiction. While Bugington intends to be cooperative, Bugington denies the District's allegations and will not waive its position that the hearing and enforcement action are unlawful. Middle Pecos GCD Minutes for July 21, 2015 Page 2 Bugington’s letter also stated that the Railroad Commission is reviewing a work plan with an estimated time of approval to be in August. On May 19, 2015 an Order was issued to Bugington Energy, LLC as follows: Bugington Energy, LLC must submit to the District by July 3, 2015, a work plan prepared by a competent person licensed by the Texas Board of Professional Geoscientists and experienced with oil field spills that meets the following requirements: (A) identifies constituents of concern that could degrade groundwater quality; (B) determines the lateral and vertical extent of those constituents of concern by evaluation including excavation, soil borings or otherwise; (C) incorporates findings from this evaluation into the work plan; and (D) proposes an appropriate action plan for remediation to be considered and approved by the District's Board President and General Manager. There has been no communication from/with Bugington or their representatives and no compliance with the May 19, 2015 order. Today the penalty phase will begin. Order #2, July 21, 2015: (1) Having failed to comply with the May 19, 2015 District Order to submit a proper work plan to outline all possible groundwater contamination sources, the extent of the migration of that contamination, and an ultimate plan for remediation, Bugington must submit to the District by September 4, 2015, a revised work plan, using the same enunciated standards as previously ordered by the District in its May 19, 2015 order, to properly identify and remediate all pollution to groundwater as a result of Bugington’s violation of District rules. (2) Bugington shall remit to the District the penalty amount of $30,000.00 (thirty thousand and no/100 dollars) no later than August 17, 2015. (3) Bugington may be responsible for remitting to the District the additional penalty amount of $100,000.00 (one hundred thousand and no/100 dollars), subject to reduction

This motion is scored as RESTRAINS_GOVERNMENT (Impact Weight: 4.5/10). Under the Bastiat Liberty Watchdog Index, voting YES on measures that cap or reduce ad valorem tax burdens, expand taxpayer exemptions, retire debt early, enforce competitive bidding caps, or remove regulatory/zoning barriers to private property rights earns a positive Pro-Liberty score.