[CITE: Drake v. DNR and Dillier, et al., 1
CADDNAR 35 (1982)]
[VOLUME 1, PAGE 35]
Cause #: 81-023G
Caption: Drake v. DNR and Dillier, et al.
Administrative Law Judge: Clayton
Attorneys: Drake and Lieber; Miller, DAG; Lowry
Date: March 21, 1982
ORDER
[NOTE: THE CASE WAS UPHELD ON
JUDICIAL REVIEW AND AFFIRMED ON APPEAL. The
Hancock Circuit Court dismissed an action for judicial review brought by Drake
on the basis that he failed to satisfy the procedural requirements of the
administrative adjudication act (IC 4-22-1) in seeking to perfect that review.
The decision of the Hancock Circuit Court was affirmed in Drake v. Indiana Natural Resources Com’n (1983), Ind. App., 453
N.E.2d 288. See also a companion
decision: Drake v. Indiana
Department of Natural Resources (1983), Ind. App., 453
N.E.2d 293.]
The
Natural Resources Commission issues and adopts the following final ORDER: That
a ten (10) acre drilling unit exception be granted to Dillier and Pierce and that the June 24, 1981, action of
the Natural Resources Commission be affirmed.
FINDINGS OF FACT
1.
The Department of Natural Resources is an agency of the State of Indiana duly
empowered to conduct administrative hearings pursuant to IC 4-22-1-1 et seq.
2.
The Department of Natural Resources has jurisdiction of both the subject matter
and the parties to this cause.
3.
The Division of Oil and Gas is a Division of the Department of Natural
Resources pursuant to IC 13-4-7-1.
4.
IC 13-4-7-13 states: "For the prevention of waste, to prevent dissipation
of the natural resources of this state, and to avoid augmentation and
accumulation or risk arising from the drilling of an excessive number of wells
the commission shall, after due investigation and a hearing, have full power
and authority in accordance with the provisions of section 9-D (subsection D of
IC 13-4-7-9) hereof to establish such drilling unit or units, which shall
include any unit, only one well which has been completed in each producing
horizon to which such unit is applicable, as it may find to be reasonable and
practicable, having consideration for the regional geologic characteristics and
all other pertinent facts conducive to the most efficient and economical
ultimate recovery of oil and gas therefrom and shall
make such orders, rules and regulations as will regulate the spacing of wells
within such limits...
5.
IC 13-4-7-8 prohibits the waste of oil or gas and declares such waste to be
unlawful.
6.
IC 13-4-7-7 and IC 13-4-7-9 authorizes the Department to adopt rules and
regulations to administer the powers granted to the Commission and to
administer the provisions of the Oil and Gas Act [IC 13-4-7-1 through IC
13-4-7-26] and specifically authorizes the making of rules "to regulate
the spacing of all wells for the production of oil and gas input, injection or
disposal purposes and the issuances of permits for the drilling of wells. Twin
wells may be drilled on the same tract to different sandstone or limestone
formations allocating the acreage in the tract for each producing formation as
provided in this Act..."
7.
Regulation 310 IAC 7-1-31(B) establishes drilling unit spacing requirements for
limestone reservoirs as follows:
"(B)
LIMESTONE.
For limestone reservoirs, except in established Ordovician
reservoirs, half of a quarter, quarter section, containing twenty (20) acres,
more or less, as established by the Official U.S. Public Lands Survey by the
Rectangular Surveying System for the State of Indiana."
8.
Regulation 310 IAC 7-1-31(E) establishes exceptions to the general drilling
unit spacing requirements set forth in 310 IAC 7-1-131 by stating that:
"(E)
Smaller Drilling Units.
When geological and pool conditions justify, smaller drilling units may be
approved and staggered locations at lesser distance may be permitted in the
discretion of the Commission.”
9.
Regulation 310 IAC 7-1-32 (A) requires that before the Commission may grant an
exception to the general drilling unit spacing requirements, a hearing must be
conducted pursuant to notice.
10.
Regulation 310 IAC 7-1-32 requires that any person desiring an exception to any
general drilling unit spacing requirement file a verified petition with the
Commission setting forth the desired exception and the reasons therefore.
11.
W.L. Dillier and Frances M. Pierce, (hereinafter
"Dillier and Pierce") are producers of
crude oil in the State of Indiana.
12.
Pursuant to 310 IAC 7-1-32 Dillier and
[VOLUME 1, PAGE 36]
Pierce
filed a verified petition dated February 23, 1981, requesting an exception to
the general drilling unit spacing requirements and a permit to drill the Janie
Drake Well #2 on a ten (10) acre spacing unit.
13.
On May 19, 1981, Homer R. Brown, Director of the Division of Oil and Gas,
conducted a hearing pursuant to 310 IAC 7-1-32 (A).
14.
At the June 24, 1981, meeting of the Natural Resources Commission, upon the
recommendation of Homer R. Brown, the Commission granted the drilling unit
spacing exception requested by Dillier and Pierce.
15.
By letter dated July 9, 1981, Ronald L. Drake, Attorney representing Petitioner
Mervin E. Drake, requested that an administrative hearing be conducted to
review the Commission's June 24, 1981, action granting the Dillier
and Pierce exception for the Janie Drake Well #2.
16.
The purpose of the drilling unit spacing requirements is to prevent the
drilling of an excessive number of wells in a particular reservoir which would
prematurely release the pressure in the reservoir, reduce the ultimate recovery
of oil from the reservoir, and cause waste of oil and gas.
17.
The proposed Janie Drake Well #2 lies within an area known as the Fairbanks Oil
Field in Sullivan County, Indiana.
18.
The production of oil from the pools in the Fairbanks oil field is decreasing
and additional stimulation or additional wells are needed to increase the
production of oil from the field.
19. The
oil wells in the Fairbanks oil field produce from the Devonian limestone
formation which is approximately one hundred and fifty (150) feet thick and is
located from approximately 2100 feet to 2250 feet beneath the surface of the
land.
20.
Drilling the proposed Janie Drake Well #2 will increase the ultimate recovery
of oil from the area in question because the pools are fine grain dolomite and
there is not enough lateral continuity between the grains to allow the fluid to
move through the pool into boreholes on a spacing pattern of one (1) well to
twenty (20) acres.
21.
The general drilling unit spacing requirement of twenty (20) acres [310 IAC
7-1-31 (B)] will not effectively drain the oil from the area in question
because of the low permeability and low porosity of the formation.
22.
It is estimated that the proposed Janie Drake Well #2 would produce
approximately 25,000 barrels of oil and that the approximate value of such oil
is $75,000.
23.
The production of oil from the proposed Janie Drake Well #2 will have no effect
on the present production of oil from the surrounding oil wells.
24.
The Petitioner offered no evidence to show that the drilling of the proposed
Janie Drake Well #2 would result in the drilling of an excessive number of
wells or would result in the waste of oil and gas.
25.
Petitioner did not refute or offer any evidence to show that geological and
pool conditions do not justify an exception to 310 IAC 7-1-31 (B).
26.
The drilling of the proposed Janie Drake Well #2 and the production of oil therefrom in accordance with the 10 acre drilling unit exception, will not reduce the ultimate recovery of oil from
the Fairbanks oil field.
27.
The Department of Natural Resources has not cited Dillier
and Pierce for violation of any statute, rule or regulation of the Department.
28.
There was no evidence offered that Petitioner, Mervin E. Drake, is the fee
simple owner or possesses any legal interest whatsoever in the real property on
which the proposed Janie Drake Well #2 would be located.
29.
Homer R. Brown did not act impartially in recommending to the Natural Resources
Commission that the exception for the Janie Drake Well #2 be granted.
30.
Petitioner did not allege or show that he suffered or will suffer any injury
because of the drilling unit exception granted for the Janie Drake Well #2.
31.
310 IAC 7-1-31 and 310 IAC 7-1-32 are duly promulgated regulations of the
Department of Natural Resources.
32.
310 IAC 7-1-31(E) is neither a variance nor an amendment of 310 IAC 7-1-31(B).
33.
310 IAC 7-1-31(E) is an "exception" to the general drilling unit
requirements set forth in 310 IAC 7-1-31(B).
34.
310 IAC 7-1-31(E) is not unconstitutionally vague or over broad since it sets
"geological and pool conditions" as standards for the granting of
exceptions to the general drilling unit spacing requirements.
35.
The Department of Natural Resources has acted in accordance with and complied
with the statutes, rules and regulations of the Department.
36.
The sole issue to be considered in this administrative cause is whether,
pursuant to 310 IAC 7-1-31 (E), geological and pool conditions justify the
granting of an exception to the general drilling until requirements set forth
in 310 IAC 7-1-31 (B).
37.
Any evidence relating to any issue other than the issue specified in...[Finding
36] is irrelevant to the determination of this administrative cause.
38.
Geological and pool conditions
[VOLUME 1, PAGE 37]
justify the granting to Dillier and Pierce an exception to the general drilling
unit spacing requirements so that the proposed Janie Drake Well #2 can be
drilled on a ten (10) acre drilling unit.
39.
All issues relating to the validity, construction or interpretation of the 1969
oil lease executed by Janie Drake and Herman Drake, or any rights, duties or
liability arising therefrom, are outside the
jurisdiction of an administrative hearing and must be adjudicated de novo in a
court of law.
40.
Any allegations by Petitioner that Dillier and Pierce
are or have been in violation of any of the Department's statutes, rules or
regulations are outside the scope of this administrative cause and all evidence
offered in support of such allegations is irrelevant.
41.
Regulation 310 IAC 7-1-31(B) does not affect or alter the rights and
obligations of private parties to a contract.
42.
Homer R. Brown, Director of the Division of Oil and Gas, has not acted
impartially, arbitrarily or capriciously toward the Petitioner.
43.
The Natural Resources Commission did not act arbitrarily or capriciously or
abuse its discretion in granting to Dillier and
Pierce a drilling unit exception for the proposed Janie Drake Well #2.
44.
Because Petitioner failed to allege or show that he suffered or will suffer
some direct injury by the Commission granting the exception sought by Dillier and Pierce, Petitioner failed to show that he is
the fee simple owner of the real property on which the proposed Janie Drake
Well #2 would be located, Petitioner still failed to establish his legal standing
since Petitioner did not allege or show some direct injury attributable to the
granting of Dillier and Pierce exception.