[CITE: Mid-Central Production v. DNR, 14 CADDNAR 174 (2017)]
[VOLUME 14, PAGE 174]
[Editor’s Note: Final Order follows Findings of Fact and Conclusions of Law.]
Cause #: 17-018G
Administrative Law Judge: Jensen
Caption: DNR v. Mid-Central Production Corp
Attorneys: Boyko (DNR); pro se (Mid-Central)
Date: July 11, 2017
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Procedural Background and Jurisdiction
1. On February 18, 2017, the Petitioner, Mid-Central Production Corporation (Mid-Central), filed correspondence with the Natural Resources Commission (Commission), which stated, “We qualify under (A), (B), and (C). and, yes we demand a hearing.”[1] Attached to Mid-Central’s correspondence was a copy of a “Notice of Violation and Penalty Assessment” (NOV) issued by Department of Natural Resources (Department), on February 7, 2017.
2. The NOV specified that Mid-Central had failed to pay annual well fees required by Ind. Code § 14-37 and assessed a $250.00 penalty for the failure. The NOV provided further:
To qualify for administrative review pursuant to IC 4-21.5-3-6, you must petition for review in writing. The petition must state facts that demonstrate the following:
(A) The petitioner is a person to whom the order is specifically directed;
(B) The petitioner is aggrieved or adversely affected by the order, or
(C) The petitioner is entitled to review under any law.
3. Administrative Law Judge Sandra L. Jensen, was appointed to preside in accordance with Ind. Code § 14-10-2-2.
4. A prehearing conference was scheduled for and conducted on March 16, 2017, with Mid-Central appearing by its President, Winston Fullerton (Fullerton) and the Department appearing by counsel, Ihor Boyko, and Division of Oil and Gas Assistant Director James AmRhein.
5. It is not contested that Fullerton is the President of Mid-Central and has acted as the representative of Mid-Central in all dealings with the Department and throughout this proceeding before the Commission.
6. The instant proceeding was heard contemporaneously with Department of Natural Resources v. Mid-Central Production Corporation, Administrative Cause Number 16-153G.
7. An administrative hearing was conducted on April 25, 2017.
8. The Department is the administrative agency responsible for the regulation of wells for oil and gas purposes under Ind. Code §§ 14-37 and 312 IAC 16.
9. The Commission is the “ultimate authority” for the Department relating to matters governed by Ind. Code §§ 14-37 and 312 IAC 16. Ind. Code § 4-21.5-1-15; 312 IAC 3-1-2.
10. The Commission has jurisdiction over the subject matter and the parties to the instant proceeding.
11. The Commission must conduct this proceeding de novo. Daniel v. Johnston & Fultz Excavating (Vinyl Seawall), 12 CADDNAR 317 (2011), citing Burke’s Vinyl Seawalls & Reynolds v. DNR at 346 applying DNR v. United Refuse Co., Inc., 615 N.E.2d 100 (Ind. 1993).
Findings of Fact and Conclusions of Law
12. The NOV was served upon Mid-Central following its failure to pay annual well fees as required by Ind. Code §§ 14-37-5.
13. Annual well fees are required to be paid “not later than February 1, 2017 annually for each permit for a well for oil and gas purposes “in existence on November 1” of the preceding year. Ind. Code § 14-37-5-1(c).
14. James B. AmRhein (AmRhein) is an Assistant Director for the Department’s Division of Oil and Gas who has been responsible for the enforcement and permitting program for 27 years. Testimony of AmRhein. AmRhein testified that Mid-Central did not pay annual well fees for any of its seven permits, identified as permits numbered 39593, 39852, 44416, 46009, 50085, 51307, and 44749.
15. Mid-Central did not offer evidence that it had paid the annual well fees for any of the seven permits. However, Fullerton, on behalf of Mid-Central, questioned the validity of a requirement to pay annual well fees for permits that are in existence but that are also the subject of a complaint for revocation filed by the Department and pending before the Commission.
16. The evidence reveals that on February 1, 2017, when the annual well fees became due by operation of Ind. Code § 14-37-5-1(c), Department of Natural Resources v. Mid-Central Production Corporation, Administrative Cause Number 16-153G was pending before the Commission seeking the revocation of six of Mid-Central’s seven permits for oil and gas purposes. On February 1, 2017, one of Mid-Central’s permits, permit numbered 44749, was not the subject of the Complaint for revocation pending before the Commission.
17. The permits at issue grant Mid-Central the authority to drill or deepen a well for oil and gas purposes, which is an activity regulated by the Department in accordance with Ind. Code §§ 14-37 and 312 IAC 16.
18. An “operator” of an oil and gas well is a person who is issued a permit under Ind. Code §§ 14-37 or is engaged in activity for which a permit under Ind. Code §§ 14-37 is necessary. 312 IAC 16-1-38. Mid-Central is an “operator.”
19. An “owner” of an oil and gas well is “a person who has the right to drill into and produce from a pool and appropriate oil and gas produced from the pool for (1) the person or others; or (2) the person and others.” Ind. Code 312 IAC 16-1-39. Mid-Central is also an “owner.”
20. Ind. Code § 14-37-5-1 is clear that:
Sec. 1. …
(b) An oil and gas well owner or operator must pay an annual fee that is based on the number of well for oil and gas purposes for which the person has permits as of November 1 of each year.
21. It is not contested that Mid-Central was the holder of permits numbered 39593, 39852, 44416, 46009, 50085, 51307, and 44749 on November 1, 2016. Testimony of AmRhein, Exhibits A-1 through A-7.
22. Proceeds from the payment of annual well fees are deposited into the “oil and gas environmental fund” established by Ind. Code § 14-37-10-2, in part to “supplement the cost required to abandon a well that has had a permit revoked under IC 14-37-13-1.” Ind. Code § 14-37-10-3(1).
[VOLUME 14, PAGE 175]
23. The purpose of the annual well fee being intended to cover the cost of plugging and abandoning wells for which the owner or operator has neglected responsibility it is reasonable to conclude that the annual well fee is due and payable as long as a permit is in existence for a well that has not been properly plugged and abandoned by the operator.
24. Mid-Central, which has neglected its responsibility to professionally fulfill its obligations as set forth in Ind. Code §§ 14-37 and 312 IAC 16, is exactly the type of owner or operator causing the need to create the “oil and gas environmental fund” and the necessity for each and every owner and operator to contribute to the financial stability of the fund.
25. The fact that six of Mid-Central’s seven permits, which were in existence on November 1, 2016, were subject to a Department’s Complaint for Revocation when the annual well fee became due on February 1, 2017, is immaterial and does not excuse Mid-Central from its responsibility to pay annual well fees as required by Ind. Code §§ 14-37-5.
26. Mid-Central was and remain responsible for the payment of the annual well fee required by Ind. Code § 14-37-5.
FINAL ORDER
27. The NOV and Penalty Assessment issued to Mid-Central by the Department on February 7, 2017 is hereby affirmed.
28. Mid-Central is ordered to pay the annual well fees in accordance with Ind. Code § 14-37-5-1.
29. Mid-Central is ordered to pay the civil penalty of $250.00.[2]
[1] Typographical and grammatical errors are repeated as in the original correspondence.
[2] The order to pay the civil penalty is also addressed in Finding 69 of the “Findings of Fact and Conclusions of Law with Nonfinal Order” issued in Department of Natural Resources v. Mid-Central Production Corporation, Administrative Cause Number 16-153G. Mid-Central is not required to pay this penalty assessment twice.