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Caption: Scope
Operating Co. and Capitol Indemnity Corp. v. DNR
Administrative Law
Judge: Jensen
Attorneys: Boyko; Dodd; Voors
Date: May 31, 2007
FINAL ORDER
39. Permits numbered 31725, 32376, 31977, 41219, 31922, 33437 and 31390 issued to Respondent, Scope, are revoked.
40. Respondent, Scope, is ordered to properly abandon each site authorized by permits numbered 31725, 32376, 31977, 41219, 31922, 33437 and 31390 through the performance of site restoration required by 312 IAC 16-5-19.
41. The Department is authorized, in accordance with IC 14-37-13-2(e), to order a forfeiture of the blanket surety bond issued by Respondent, Capitol, to Respondent, Scope, associated with Permits numbered 31725, 32376, 31977, 41219, 31922, 33437 and 31390.
42. A statutory lien is foreclosed in favor of the Department on the casing and all equipment located on or removed from each well site authorized by permits numbered 31725, 32376, 31977, 41219, 31922, 33437 and 31390 as well as on the leasehold of the land upon which each well authorized by permits numbered 31725, 32376, 31977, 41219, 31922, 33437 and 31390 are located and upon any crude oil stored on the well site(s) or recovered at the time the well is abandoned.
43. If the Natural Resources Commission elects to abandon the well(s), the Commission may enter an order authorizing the agents, employees, or contractors to dispose of the casing and all equipment located on or removed from the well site(s) and any crude oil stored on the well site(s) or recovered at the time the well is abandoned. An inventory of the casing and all equipment and any crude oil shall be made, and the salvage or other reasonable market value of the casing, all equipment and any crude oil shall be applied as a credit to offset the actual costs incurred by the Commission in plugging and abandoning the well.
FINDINGS OF FACT AND
CONCLUSIONS OF LAW
CASE SUMMARY:
1. The instant proceeding was initiated by the Department of Natural Resources, Division of Oil and Gas (Department), with the filing of a Complaint for the Issuance of an Order to Revoke Permits and Forfeit Blanket Surety Bond (Complaint) on January 10, 2006. The Complaint identified Respondent, Scope Operating Company (Scope), as the permit holder of seven (7) permits (“subject permits”) to drill and operate oil and gas wells in Posey County, Indiana. The Complaint further identified, Capitol Indemnity Corporation (Capitol), as the surety for Scope that issued a thirty thousand dollar ($30,000.00) blanket bond associated with Scope’s oil and gas wells.
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2. According to the Complaint, the Department’s bases for seeking the revocation of the subject permits and forfeiture of the blanket bond arose from the issuance of certain notices of violation April 26, 2004 and an additional number of notices of violation on February 4, 2005 associated with the subject permits. The violations noted therein remained unabated as of January 10, 2006.
3. Scope, without explanation, failed to appear for a prehearing conference conducted on February 15, 2006 and on February 23, 2006 a Notice of Proposed Default was issued. Scope responded to the Notice of Proposed Default on March 3, 2006 and subsequently appeared by counsel, Timothy R. Dodd, on March 24, 2006. Scope’s justification for its failure to appear was unconvincing but Scope had, by that time, retained the services of counsel making future failures to appear unlikely. The Notice of Proposed Default was ultimately recalled.
4. At a subsequent status conference, Scope was afforded approximately thirty (30) days to ascertain which of the subject permits it intended to transfer and which of the wells associated with the subject permits that it intended to plug and abandon. Scope was further ordered to provide a date certain by which permit transfer applications would be submitted and the identity of the contractor and date of commencement of plugging activities for the remaining wells. See Report of Status Conference, dated April 18, 2007.
5. Scope failed to provide the information as previously ordered and the instant proceeding was scheduled for a final status conference and administrative hearing. The parties were also afforded a period of time within which to file motions for summary judgment. See Report of Status Conference, dated May 25, 2006.
6. On June 26, 2006, the Department timely filed its motion for summary judgment.
7. On June 28, 2006, during the previously scheduled final status conference, Scope’s counsel advised of Scope’s intention to plug each of the wells associated with the subject permits, identified the plugging contractor and the date of commencement of plugging activities. It was estimated that the wells associated with each of the subject permits would be plugged within approximately three (3) weeks. The administrative hearing was vacated; however, a schedule was established by which Scope and Capitol could file responses to the Department’s motion for summary judgment. The parties were advised that absent completion of Scope’s violation abatement the Department’s motion for summary judgment would be ripe for a decision on August 25, 2006. See Report of Status Conference, dated June 30, 2006.
8. Neither Scope, nor Capitol, filed a response to the Department’s motion for summary judgment.
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9. On August 25, 2006 the wells associated with the subject permits were not plugged. However, in lieu of rendering a decision on the Department’s motion for summary judgment, the Department sought to have its motion taken under advisement for a period of ninety (90) days to allow Scope to abate the violations associated with the subject permits. The Department agreed to file status reports as to Scope’s progress and Scope was advised that a failure to comply with the terms of the agreed upon extension would result in the immediate determination of the Department’s motion for summary judgment. See Report of Status Conference, dated August 25, 2006.
10. On October 4, 2006, the Department advised through a status report that the wells associated with the subject permits had been plugged but site restoration had not been completed as required by the notices of violation. See Claimant DNR’s Status Report, filed October 4, 2006. Thereafter, despite the Department’s agreement to additional extensions of time to allow Scope to complete the plugging and abandonment of the sites, which would eliminate the need to render a decision on the Department’s motion for summary judgment, Scope continues to delay and fail to abate the notices of violation. See Claimant DNR’s Status Reports, filed November 28, 2006, January 22, 2007 and March 29, 2007.
11. Substantively, this proceeding is controlled by IC 14-37 and 312 IAC 16.
12. The instant proceeding is governed procedurally by the Administrative Orders and Procedures Act, or AOPA, found at IC 4-21.5-3 and rules adopted to assist in the implementation of AOPA in proceedings before the Natural Resources Commission (Commission) located at 312 IAC 3.
13. The Commission has jurisdiction of the subject matter and the persons to the instant proceeding.
14. The
Commission is the ultimate authority for the instant proceeding. IC
14-10-2-3.
FINDINGS OF FACT:
15. Tim Higginbottom (Higginbottom), an employee of the Department since 1990 who presently serves in the capacity of Oil and Gas Field Inspector for the southern one-half of Posey and Vanderburgh Counties, is familiar with the requirements imposed by IC 14-37 and 312 IAC 16 governing the operation and maintenance of oil and gas wells. Affidavit of Tim Higginbottom.
16. Higginbottom, as part of his employment obligations, inspected oil and gas wells operated by Scope under permits numbered 31725, 31977, 41219, 31922 and 33437 on January 19, 2005 and permits numbered 32376, and 31390 on April 4, 2004 and April 1, 2004, respectively. Affidavit of Tim Higginbottom.
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17. Higginbottom, in the usual course of business reported his findings and notices of violation associated with his inspections of the sites associated with five of the subject permits were issued on February 4, 2005 while the remaining two notices of violation were issued on April 24, 2004. Affidavit of Tim Higginbottom, Exhibits C-1, C-1A, C-2, C-3, C-4, C-5, C-6 and C-7.
18. In each instance, along with other remedial action the notice of violation required Scope to “operate or plug and abandon, or obtain a temporary abandonment permit…” Id.
19. Higginbottom re-inspected each well site on February 21, 2006 and again on June 14, 2006 and discovered on each occasion at each site that the violations remained uncorrected. Affidavit of Tim Higginbottom.
20. Scope has not applied for temporary abandonment of the wells associated with the subject permits, has not sought an extension of time to abate the violations and did not timely seek administrative review of the notices of violations. Affidavit of James B. AmRhein and Complaint.
21. Scope, by
its President, Jeff Johnson, executed a blanket surety bond through Capitol on
October 15, 1997 binding itself as well as its heirs, executors, administrators,
successors and assigns, as the principal, to the State of Indiana to insure
compliance “with respect to the plugging of the well, the filling in of all
excavations, the removal of all concrete bases, discarding of machinery and
materials, the cutting off of all surface casings not less than thirty-six (36)
inches under the surface level and the restoration of the surface as nearly as
possible to its former condition prior to the drilling of each well covered by
the Bond.” Exhibit B.
CONCLUSIONS OF LAW:
22. Summary judgment is anticipated by AOPA at IC 4-21.5-3-23 which states in part as follows:
(a) A party may, at any time after a matter is assigned to an administrative law judge, move for a summary judgment in the party’s favor as to all or any part of the issues in a proceeding. The motion must be supported with affidavits or other evidence permitted under this section and set forth specific facts showing that there is not a genuine issue in dispute.
(b) …The judgment sought shall be rendered immediately if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits and testimony, if any, show that a genuine issue as to any material fact does not exists and that the moving party is entitled to a judgment as a matter of law. … Summary judgment may not be granted as a matter of course because the opposing party fails to offer opposing affidavits or evidence, but the administrative law judge shall make a determination from the affidavits and testimony offered upon the matters placed in issue by the pleadings or the evidence….
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(c) If a motion for summary judgment is made and supported under this section, an adverse party may not rely upon the mere allegations or denials made in the adverse party’s pleadings as a response to the motion. The adverse party shall respond to the motion with affidavits or other evidence permitted under this section and set forth specific facts showing that there is a genuine issue in dispute. If the adverse party does not respond as required by this subsection, the administrative law judge may enter summary judgment against the adverse party.
23. Summary judgment should be granted to terminate unnecessary litigation, when a moving party has sufficiently proved the non-existence of a genuine issue of material fact establishing entitlement to judgment as a matter of law. Indiana Department of Environmental Management v. Schnippel Construction, Inc., 778 N.E.2d 407 (Ind.App. 2002), Travelstead v. Vigo Coal Company and DNR, 10 CADDNAR 302 (2006), Reed v. Department of Natural Resources, 9 CADDNAR 65, (2002).
24. The evidence is not in dispute and the Department has established that no genuine issue of material fact exists and that it, as the moving party, is entitled to judgment as a matter of law.
25. As an entity issued a permit under IC 14-37-3, Scope is an “operator” as that term is defined at 312 IAC 16-1-38.
26. The evidence clearly proves that at the time of the Department’s filing of its Complaint, Scope was not operating the wells, had not sought temporary abandonment of the wells, had not sought an extension of time within which to plug and abandon the wells, had not sought administrative review of the notices of violations at issue herein, but had also not undertaken efforts to plug and abandon the wells.
27. In essence, Scope had ignored the Department’s notices of violation.
28. During the course of the instant proceeding, Scope set out to “plug and abandon” the wells associated with the subject permits to avoid revocation and bond forfeiture. However, despite multiple extensions of time agreed to by the Department, full plugging and abandonment of the sites associated with the subject permits remains elusive.
29. Necessary activity for the plugging and abandonment of oil and gas wells is set forth at 312 IAC 16-5-19.
30. According to the Department’s status report filed October 4, 2006, Scope has now plugged the wells associated with the subject permits in compliance with some of the requirements of 312 IAC 16-5-19.
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31. However, complete abatement of the violations has not been accomplished since the sites have not been abandoned, which requires the reclamation and restoration of the site as required by 312 IAC 16-5-19(p) & (q).
32. Before the Department filed its Complaint, Scope made no attempt to abate or address the violations by any means available and on that basis alone the subject permits could be revoked.
33. Scope’s partial abatement of the violations, occurring during the pendency of this proceeding, fails to negate the clear proof that the subject permits are ripe for revocation.
34. At the present time nearly four (4) years have passed since the Department issued its notices of violation and only partial violation abatement has been accomplished by Scope.
35. Throughout this proceeding Scope’s actions, or what might more appropriately be characterized as inactions, reflect its adeptness (through partial action, promises of action in exchange for extensions of time, failures to appear and failures to cooperate with counsel) at causing one delay after another in an apparent effort to shirk its statutory responsibilities.
36. Pursuant to IC 14-37-13-1(5), the commission is authorized to revoke the subject permits issued to Scope in accordance with IC 14-37 due to Scope’s failure to fully abate the violations, seek an extension of time to abate the violations or seek administrative review of the notices of violation.
37. Revocation of Scope’s permits as authorized by IC 14-37-13-1 et seq. is appropriate.
38. IC 14-37-6-5 requires that Scope’s blanket surety bond, filed in association with the subject permits, be forfeited as a result of the revocation of the subject permits.