CADDNAR

[CITE: DNR v. Hill Oil Company, 10 CADDNAR 394 (2006)]

 

[VOLUME 10, PAGE 394]

 

Cause #: 06-009G

Caption: DNR v. Hill Oil Company

Administrative Law Judge: Jensen

Attorneys: Boyko; Bergstrom, pro se

Date: December 16, 2006

 

 

FINAL ORDER

 

41. The Department’s request for an Order revoking Permits 16348 and 45222 is denied for the reason that the violation have been abated and those permits were released by the Department from this proceeding. 

 

42. Permits numbered 34313, 18408, 12375, 12763, 39376, 19176, 18045, 17183, 16352, 28499, 42398, 42398, 24572, 17585, 20576 and 35359, issued to Respondent, Hill, are revoked.

 

43. Respondent, Hill, is ordered to properly plug and abandon each well authorized by permits numbered 34313, 18408, 12375, 12763, 39376, 19176, 18045, 17183, 16352, 28499, 42398, 42398, 24572, 17585, 20576 and 35359 as well as perform site restoration required by 312 IAC 16-5-19(c).

 

44. 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 34313, 18408, 12375, 12763, 39376, 19176, 18045, 17183, 16352, 28499, 42398, 42398, 24572, 17585, 20576 and 35359 as well as on the leasehold of the land upon which each well authorized by permits numbered 34313, 18408, 12375, 12763, 39376, 19176, 18045, 17183, 16352, 28499, 42398, 42398, 24572, 17585, 20576 and 35359 is located and upon any crude oil stored on the well site(s) or recovered at the time the well is plugged and abandoned.

 

45. If the Natural Resources Commission elects to plug and 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 plugged and 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.

 

46. As applicable to permits numbered 17183 and 18045, the effective date of the orders contained within paragraphs 42 through 45 is ninety (90) days from the date of issuance of this Final Order.  Respondent, Hill, shall be afforded such ninety (90) day period to effectuate the transfer of those permits. 

 

[VOLUME 10, PAGE 395]

 

47. The administrative law judge, as the delegate of the Natural Resources Commission, shall retain jurisdiction with respect to any contested matter arising from the order contained within paragraph 46.

 

 

FINDINGS OF FACT AND CONCLUSIONS OF LAW

 

1.      The instant proceeding was initiated by Claimant, the Department of Natural Resources, Division of Oil and Gas, (“Department”) which filed its “Complaint for the Issuance of an Order to Revoke Permits” (“Complaint”) with the Natural Resources Commission (“Commission”) on January 10, 2006.

 

2.      The Department’s Complaint alleges that Respondent, William E. Hill d/b/a/ Hill Oil Company (“Hill”) holds seventeen (17) permits (collectively referred to as “the Permits”) to drill and operate oil and gas related wells located in Posey County, Indiana.  The permits at issue are identified as 34313, 18408, 12375, 12763, 39376, 19176, 18045, 17183, 16348, 16352, 28499, 42398, 42398, 24572, 17585, 45222, 20576 and 35359.

 

3.      The Department’s Complaint also alleges that between July 9, 2003 and April 21, 2005 it issued Notices of Violation to Hill with respect to each of the Permits and a Civil Penalty Assessment was also issued regarding permit 34313. 

 

4.      According to the Department’s Complaint, Hill failed to abate the violations, secure an extension of time to abate the violations or timely seek administrative review of the Notice of Violation.

 

5.      A prehearing conference was conducted as scheduled on February 9, 2006, with Bonnie Bergstrom (“Bergstrom”) appearing in person on behalf of Hill.  At that time, Ms. Bergstrom advised that William E. Hill is deceased and Hill Oil Company is an unincorporated business entity.  See “Report of Prehearing Conference” issued February 20, 2006 and “Report of Status Conference” issued May 1, 2006.

 

6.      At the request of the administrative law judge, the parties provided supplementation to the record revealing that Bergstrom and her brother, Bobbie Hill, were the sole beneficiaries of William E. Hill’s estate and served as co-executors of that estate.  See “Report of Status Conference” issued June 5, 2006.

 

7.      Thereafter, notice of the instant proceeding was served upon Bobbie Hill, who was provided an opportunity to object to Bergstrom’s continued representation of Hill.  No objection was forthcoming from Bobbie Hill.

 

8.      Bergstrom has, throughout the pendency of the instant proceeding, continued her representation of Hill.[1]

 

[VOLUME 10, PAGE 396]

 

9.      An administrative hearing was conducted as scheduled on August 29, 2006.  Bergstrom represented Hill and the Department was represented by Counsel, Ihor N. Boyko.

 

10.  Substantively, this proceeding is controlled by IC 14-37-1 et seq., which specifies that a permit is subject to revocation pursuant to IC 14-37-13 in the event of an owner’s or operator’s failure to timely abate a violation.  IC 14-37-12-5.

 

11.  Pursuant to IC 14-37-13-1,

The commission may revoke a permit under this article if the commission finds any of the following:

…

(5) The owner or operator has been issued a notice of violation under IC 14-37-12 and has failed to do at least one (1) of the following:

(A) Abate the violation within the prescribed period.

(B) Secure in writing from the division an extension of time in which to abate the violation before the expiration of the period established for abatement.

(C) Request a proceeding under IC 4-21.5-3-6 within:

(i) thirty (30) days after receipt of the notification; or

(ii) the period provided by the division for abatement; whichever is longer.

 

12.  An “owner” for purposes of IC 14-37 is “a person who has the right to drill into and produce from a pool and to appropriate oil and gas produced from the pool for (1) the person or others; or (2) the person and others.”  312 IAC 16-1-39.

 

13.  An “operator” for purposes of IC 14-37 is “a person: (1) issued a permit under this article; or (2) engaged in an activity for which a permit is required under this article.”  312 IAC 16-1-38.

 

14.  Procedurally, IC 4-21.5, commonly referred to as the Administrative Orders and Procedures Act or “AOPA,” governs the conduct of this proceeding.

 

15.  The Commission is the ultimate authority over the activity of the Department with respect to IC 14-37-1 et seq. IC 14-10-2-3, IC 4-21.5.

 

16.  The Commission has jurisdiction over the persons of the parties and the subject matter of this proceeding.

 

[VOLUME 10, PAGE 397]

 

17.  During the administrative hearing, the parties stipulated as to the admissibility of the Department’s Exhibits A1 through A17, B1 through B17, C1 and C2, D1 through D4, as well as E1 and E2[2]. 

 

18.  Hill is the holder of the Permits.  Exhibits A1 – A17.

 

19.  William Timothy Higginbottom (“Higginbottom”), a sixteen (16) year veteran Field Inspector for the Department, testified in support of the Department’s Complaint.

 

20.   Higginbottom testified that with the exception of the Notice of Violation and Penalty Assessment pertaining to permit 34313, he recommended the issuance of the Notices of Violation based upon inspections conducted on the following dates:

Permit 18408                     April 18, 2005

Permit 12375                     April 18, 2005

Permit 12763                     April 18, 2005

Permit 39376                     April 11, 2005

Permit 19176                     April 18, 2005

Permit 18045                     April 14, 2005

Permit 17183                     April 17, 2005

Permit 16348                     April 18, 2005

Permit 16352                     April 19, 2005

Permit 28499                     April 11, 2005

Permit 42398                     April 11, 2005

Permit 24572                     April 11, 2005

Permit 17585                     June 13, 2003

Permit 45222                     April 21, 2004

Permit 20576                     August 20, 2003

Permit 35359                     September 13, 2004

 

Exhibits B1 – B17.

 

21.  Higginbottom performed each of the inspections upon which the Notices of Violation were premised and personally observed the violations.  Testimony of Higginbottom.

 

22.  James Bryan AmRhein (“AmRhein”), who serves as the Assistant Director of Permitting and Compliance for the Department, signed and officially issued the Notice of Violation and Penalty Assessment and Notices of Violation relating to the Permits on behalf of Higginbottom following his inspections.  Testimony of AmRhein.

 

[VOLUME 10, PAGE 398]

 

23.  The Notice of Violation and Penalty Assessment associated with Permit 34313 was issued for the reason that Hill had not paid the annual well fee as required by IC 14-37.  Exhibit B1.

 

24.  Hill had not, as of August 28, 2006, paid the annual well fee associated with Permit 34313.  Testimony of AmRhein.

 

25.  Furthermore, the 2005 annual well fees associated with the Permits, totaling one thousand five hundred dollars ($1,500.00), have not been paid. Testimony of AmRhein.

 

26.  The Department had also not, as of August 28, 2006, received any applications from Hill for the transfer of the Permits. Testimony of AmRhein.

 

27.  With the exception of Permit 18408, Higginbottom re-inspected each of the oil and gas well sites associated with the Notices of Violation during the week preceding the August 29, 2006 administrative hearing.

 

28.  Conditions were not appropriate due to the location of the oil and gas well associated with Permit 18408, to perform a re-inspection.  Testimony of Higginbottom.

 

29.  Higginbottom confirmed that the violations associated with Permit 16348 and Permit 45222 had been abated during the pendency of this proceeding and those two individual permits had been released from this proceeding.  Testimony of Higginbottom.

 

30.  With respect to Permit 18408, Higginbottom testified that no equipment was present to operate the well.  In the absence of equipment to operate the well, to abate the violation Hill would have been required to request temporary abandonment. 

 

31.  In order to obtain temporary abandonment for Permit 18408, Hill would have been obligated to contact Higginbottom, which has not occurred.  Testimony of Higginbottom.

 

32.  The violations previously identified by Higginbottom with respect to the remaining oil and gas wells, associated with Permits 12375, 12763, 39376, 19176, 18045, 17183, 16352, 28499, 42398, 24572, 17585, 20576 and 35359, had not been abated at the time of Higginbottom’s re-inspections.  Testimony of Higginbottom, Exhibits F3 – F8, F10 – F14, F16 and F17.

 

 

33.  Hill did not dispute the Department’s evidence relating to the violations associated with the Permits.  Testimony of Bergstrom.

 

[VOLUME 10, PAGE 399]

 

34.  Bergstrom however explained that she has not intentionally neglected her responsibilities with respect to the Permits.  In the past three years she spent $35,000.00 to plug three wells, “which is a lot more than some other people have done that I know” and there exists a limitation to funds available to plug additional wells while paying off the previous expenditures.

 

35.  With respect to the Seeger Lease, Permit 17585, the farmers removed everything while she was ill and have plowed “right up to the tank battery.”  Testimony of Bergstrom.

 

36.  Bergstrom additionally explained that while a road does exist to access the McCarty lease (Permits 18408 and 16352) someone took up the electric lines without her knowledge.  The electric associated with the Johnson lease (Permits 28499, 42398 and 24572) was removed by the farmers and the electricity for the Keck lease (Permits 12375 and 19176) ran off the Seeger lease, which was removed by the farmers.  “It’s hard to go in there and do something with the electric all down,”  Bergstrom said.

 

37.  Bergstrom observed members of the Reis family remove all of the equipment, including pressure pumps, necessary to plug the well, from the Reis lease (Permit 34313).  Bergstrom acknowledged that she should have taken action to stop the equipment removal but did not.  To her knowledge, the Reis family sold the equipment but she is unaware of the purchaser’s identity.  Testimony of Bergstrom.

 

38.  According to Bergstrom, the Scherer well (Permit 12763) was supposed to have been transferred along with some other wells that were successfully transferred.  However, the transfer of this particular permit did not occur.

 

39.  Bergstrom testified that the Schriefer wells (Permits 18045 and 17183) are located on her property and she would like to keep them and have them operated.

 

40.  The Department did not dispute Bergstrom’s explanation regarding the Permits or contest her past efforts to maintain compliance.