CADDNAR

[CITE: DNR v. Alton, 14 CADDNAR 1 (2015)]

 

[VOLUME 14, PAGE 1]

 

 

Cause #: 13-177G

Caption: DNR v. Alton

Administrative Law Judge: Jensen

Attorneys: Boyko (DNR); pro se (Alton)

Date: January 12, 2015

 

 

[See Editor’s note at end of this document regarding change in the decision’s original format.]

 

                                                                                   

FINAL ORDER

 

36. The Permit issued to Alton is hereby revoked.

 

37. Alton is ordered pursuant to I.C. 14-37-13-2 to properly plug the well and abandon the well site associated with the Permit and perform site restoration as required by 312 IAC 16-5-19.

 

38. The Department may elect to plug and abandon the well authorized by the Permit.

 

39. If the Department elects to plug and abandon the well associated with the Permit, Alton remains liable for the costs of plugging and abandoning the well.

 

40. A statutory lien is foreclosed in favor of the Department on the casing and all equipment located on or removed from the well site as well as upon the leasehold of the land upon which the well is located and upon any crude oil or gas stored on the well site or recovered at the time the well is plugged and abandoned to secure the costs of plugging and abandoning the well.

 

41. If the Department elects to plug and abandon the well associated with the Permit, the Department’s agents, employees, or contractors shall dispose of all casing and equipment located on or removed from the well site and any crude oil or gas stored on the well site or recovered at the time the wells are plugged and abandoned.  An inventory of the casing and all equipment and any crude oil or gas shall be made, and the salvage or other reasonable market value of the casing, all equipment and any crude oil or gas shall be applied as a credit to offset the actual costs incurred in plugging and abandoning the well.

 

 

FINDINGS OF FACT AND CONCLUSIONS OF LAW

 

 

Procedural Background:

 

1.     The Claimant, Department of Natural Resources Division of Oil and Gas (“Department”) filed its “Complaint for the Issuance of an Order to Revoke Permit” (“Complaint”) with the Natural Resources Commission (“Commission”) on October 28, 2013 against Respondent, Rex Alton (“Alton”).

 

2.     The Department’s Complaint alleged that Alton is the holder of a permit authorizing the drilling or operation of an oil and gas well in Knox County Indiana identified by number 49389 (hereinafter referred to as “the Permit”) who had failed to address a Notice of Violation (“NOV”) issued to him by the Department on November 5, 2009.  The Complaint further alleged that Alton had failed to secure an extension of time to abate the NOV and had failed to seek administrative review of the NOV.

 

3.     The Department’s Complaint sought revocation of the Permit.   

 

4.     A prehearing conference was conducted as scheduled on December 11, 2013 and thereafter status conferences were conducted on January 16, 2014, March 20, 2014, April 24, 2014 and June 24, 2014 before this proceeding was scheduled for an administrative hearing on July 8, 2014.  Alton appeared for the prehearing conference and each status conference by teleconference. 

 

5.     The administrative hearing was ultimately rescheduled for and conducted on September 30, 2014 with notice provided to the parties on July 10, 2014.

 

6.     At all times Alton received U.S. Mail at 5441 S. St. Thomas Road, Vincennes, Indiana 47591.

 

7.     Alton failed to appear for the administrative hearing conducted on September 30, 2014.

 

8.     The regulation of a well drilled and operated for oil and gas purposes is governed by I.C. 14-37 and 312 IAC 16. 

 

9.     The Department is responsible for the administration of I.C. 14-37 and 312 IAC 16.  I.C. 14-37-2-1.

 

10.  Procedurally, the Department’s Complaint is controlled by I.C. 4-21.5-3 and 312 IAC 3.

 

11.  Pursuant to 312 IAC 3-1-2, the Commission is the ultimate authority as that term is defined at I.C. 4-21.5-1-15.

 

Findings of Fact:

 

12.  Alton was issued the Permit on February 6, 1990 to drill and operate a non-commercial gas well.  Claimant’s Exhibit 2.

 

13.  The Permit authorized Alton to reopen a well that had been drilled on March 16, 1947 by W.F. Lacy (“Lacy”) under a permit identified as 4273.  The well drilled by Lacy was plugged and abandoned on March 23, 1947.  Claimant’s Exhibit 1.

 

14.  Alton completed the well and filed a “Well Completion or Recompletion Report” on August 3, 1992.  Claimant’s Exhibit 3.

 

15.  Alton contended throughout the prehearing conference and status conferences that he had plugged the well authorized by the Permit but was unable to locate documentation necessary to confirm the plugging. 

 

16.  The Department possesses no documentation supporting Alton’s contention that the well was plugged or that Alton submitted a plugging plan for approval as required before well plugging may proceed. Testimony of James AmRhein[1].

 

17.  Jon Limbach (“Limbach”) is an oil and gas well inspector who has been employed by the Department’s Division of Oil and Gas for approximately eight years.

 

18.  Limbach inspected the well associated with the Permit on September 9, 2009 and after identifying it as an “open cased, inactive, non-commercial gas well” issued a warning of non-compliance associated with the well’s inactivity and for Alton’s failure to maintain required signage.  Testimony of Limbach.

 

19.  On November 5, 2009, following Alton’s failure to address the matters identified in the warning of non-compliance, Limbach issued a Notice of Violation (“NOV”).  Claimant’s Exhibit 11.

 

20.  On September 9, 2013, Limbach reinspected the well associated with the Permit.  At that time he determined that “heavy oil” was present between the production casing and the surface casing.  Limbach noted that the oil did not appear to be “crude oil” but, offered the opinion that the well was being used for the disposal of used oil.  Testimony of Limbach, Claimant’s Exhibits 6 & 7.

 

[VOLUME 14, PAGE 2]

 

21.  Limbach explained that an oil and gas well consists of two casings, one casing positioned inside of another larger casing.  The smaller diameter, internal, casing is commonly referred to in the industry as a “production casing” while the larger diameter, external, casing is referred to as the “surface casing.”  The production casing carries the oil or gas to the surface while the surface casing provides a secondary barrier between the oil or gas and sources of underground water.

 

22.  On September 9, 2013 Limbach also ran a “plumb-bob” into the production casing to a distance of 75 feet beneath the surface of the ground to verify that the well associated with the Permit was an open well.  Testimony of Limbach.  Limbach testified that current regulations require a well to be cemented to within three feet of the surface of the ground and for the casings to be cut off.

 

 On September 9, 2013, the well associated with the Permit was not plugged.

 

23.  Limbach reinspected the well again on July 7, 2014 and September 24, 2014.  Testimony of Limbach. 

 

24.  On July 7, 2014, the well associated with the Permit appeared exactly the same as it had in September 9, 2013.  Testimony of Limbach.

 

25.  By September 24, 2014 the production casing had been outfitted with a “nipple”, valve and gauge that showed pressure on the well.  Testimony of Limbach.  Limbach testified that upon removing the nipple and opening the valve the pressure reflected on the gauge did not change, which indicated that the gauge was “sprung” and inoperable.  Claimant’s Exhibit 9.  Heavy oil remained present between the production casing and the surface casing.  Testimony of Limbach, Claimant’s Exhibit 10. 

 

Conclusions of Law:

 

26.  Alton is an “operator” as defined at 312 IAC 16-1-38.

 

27.  As a “person who has the right to drill into and produce from a pool and to appropriate the oil and gas produced from the pool…” Alton is an “owner”.  312 IAC 16-1-39.

 

28.  The Department was authorized to issue the NOV to Alton as the owner or operator of the well in association with the Permit.  I.C. 14-37-12-2 & 312 IAC 16-5-21.

 

29.  Pursuant to 312 IAC 16-3-9:

 

Sec. 9. (a) The department may revoke a permit issued under IC 14-37 upon a finding that:

…

(6) the owner or operator has been issued a notice of violation under IC 14-37-12-2 and 312 IAC 16-5-21, and has failed:

(A) to abate the violation within the prescribed period;

(B) to 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; or

(C) to request a proceeding under IC 4-21.5-3-6 within thirty (30) days after service of the notification or within the period provided by the division for abatement, whichever is longer.

 

30.  Alton failed to abate the violation pursuant to 312 IAC 16-3-9(a)(6)(A).

 

31.  There exists no evidence that Alton sought administrative review of the NOV under I.C. 4-21.5-3-6 as authorized at 312 IAC 16-3-9(a)(6)(C) or that Alton sought or secured a written “extension of time in which to abate the violation before the expiration of the period established for abatement” as prescribed at 312 IAC 16-3-9(a)(6)(B).

 

32.  The NOV was issued on November 5, 2009 and the Department waited to file its Complaint until October 28, 2013. 

 

33.  Despite that delay, Alton did not address the violations noted by the Department.

 

34.  Because of Alton’s failure to appear for the scheduled administrative hearing an order of default could be issued pursuant to Indiana Code § 4-21.5-3-24 and 312 IAC 3-1-9.

 

 

[EDITOR’S NOTE: The original format of the Administrative Law Judge’s Findings of Fact, Conclusions of Law, and Final Order has been modified to correspond with CADDNAR format.  The Final Order, Paragraphs 36 through 41, has been relocated to the “Final Order” section at the beginning of this document.]