ORDER
The issuance by the Department of Natural Resources, Division of Oil and Gas, of Permit 51334 in favor of Thomas W. Roberts, doing business as Enterprise Oil & Associates, is affirmed.
FINDINGS OF FACT
A. Administrative Review of a Permit for Oil and Gas Purposes
1. On October 14, 1997, Black Beauty Coal Company ("Black Beauty") filed correspondence seeking to have the Indiana Department of Natural Resources (the "DNR") set aside a permit for oil and gas purposes granted in favor of Thomas W. Roberts ("Roberts"). On December 26, 1997, Black Beauty filed its "Amended Petition for Review" with respect to the same subject-matter as its October correspondence.
2. The correspondence and the amended petition described in Finding 1 initiated a proceeding under the IC 4-21.5 (sometimes called the "administrative orders and procedures act" or "AOPA"). The Indiana Natural Resources Commission (the "Commission") adopted rules at 312 IAC 3-1 to assist in its administration of the AOPA, and 312 IAC 3-1 also applies to this proceeding.
3. Pursuant to an application by Roberts, the DNR's Division of Oil and Gas made an initial determination on September 12, 1997 to grant Permit 51334 for a structure test well in section 12, township 9 north, range 6 west, in the northeast quarter of the northwest quarter of the northwest quarter, 350 feet NL, 350 feet EL in Owen County, Indiana, known as the "Fay Squires 2 Well."
4. Fay Squires 2 Well is a structure test well. A structure test well is one form of "well for oil and gas purposes," and at all pertinent times, was governed by IC 14-37 and 310 IAC 7-1.
B. Ownership of Subsurface Petroleum Lease and Application for a Permit for Oil and Gas Purposes
5. Black Beauty urges Roberts is not the owner of a valid, current lease at the site of Fay Squires 2 Well. As a consequence, Black Beauty alleges Roberts does not qualify to receive Permit 51334. Black Beauty also urges the DNR has a duty to inquire as to an applicant's ownership status regarding a well for oil and gas purposes. These two distinguishable but interlocking legal issues, weighing petroleum leasehold ownership against the DNR's permitting authority, are considered immediately following.
6. Black Beauty presents from Faye H. Squires an "Affidavit and Request for Cancellation of Oil and Gas Lease," as entered by the Owen County Recorder in Miscellaneous Book 73 at Page 35, on August 15, 1984, as support for the proposition Roberts does not have a valid oil and gas lease at the site of Fay Squires 2 Well.
7. In response, Roberts presents an August 31, 1998 affidavit in which he states he is the lessee.
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The affidavit states in pertinent part that Roberts has "tendered the annual rentals to the lessors under said lease every year since 1974, in accordance with the terms of the lease. A copy of my business record showing that each such payment was timely tendered by registered mail is attached. . . . I know, and my records show, that I tendered the annual rental check to lessors in 1984, by check No. 11544, dated April 17, 1984, and that the check was received and cashed by lessors, which is contrary to the affidavit of Faye H. Squires."
8. There is a genuine issue of material fact as to the ownership of the site where Faye Squires 2 Well was permitted. Black Beauty is not entitled to summary judgment. The issue can only be determined following a full evidentiary hearing, and no such hearing was conducted in this proceeding.
9. When the DNR makes an initial determination to grant or deny a permit, and administrative review of the determination is taken, the burden of going forward and the burden of persuasion (sometimes collectively referred to as the "burden of proof") rest with the party seeking to set aside the determination. Indiana Dep't of Natural Resources v. United Refuse Co., 598 N.E.2d 603 (Ind. App. 1992); Natural Resources Commission v. Amax Coal Company, 638 N.E.2d 418 (Ind. 1994); and Schafer and Nash v. DNR and Wagoner, 7 Caddnar 17 (1993).
10. Black Beauty has the burden of demonstrating ownership of the site of Faye Squires 2 Well is other than in Roberts. The burden has not been sustained in this proceeding.[FOOTNOTE 1]
11. Documentation that must generally accompany a well for oil and gas purposes is set forth in IC 14-37-4-5. The only portion of the statutory section pertaining to a delineation of a leasehold is subdivision one. IC 14-37-4-5(1) provides a permit application must include "(1) A plat of the land or lease upon which the well is to be located, together with all property and lease lines and the acreage within the tract."
12. The statute requires the permit application include either the plat of the land or the lease. The statute does not require the lease accompany the application. On its face, IC 14-37-4-5 does not require the Department to make inquiry into the validity of a lease, since the statute does not even authorize the Department to require submission of a lease.
13. Black Beauty has not sustained its burden of proof to establish Roberts is not the owner of a valid, current lease at the site of Fay Squires 2 Well. As a matter of law, in considering a permit application for a well for oil and gas purposes, the DNR has no duty to inquire as to an applicant's ownership status at the site of the well.
C. Notice to Disclose Matters of Public Record as a Prerequisite to Issuance of a Permit to Drill a Well for Oil and Gas Purposes
14. Black Beauty urges in a motion for summary judgment that Roberts failed to disclose information of public record to the DNR's Division of Oil and Gas "relating to Black Beauty's coal mining operations in the area as required by 310 IAC 7-1-21(f)(3)."
15. As provided in 310 IAC 7-1-21(f)(3), the "surveying requirements" for a permit application to drill a well for oil and gas purposes are to include "[i]nformation of public record and information which should have been known to the applicant."
16. Black Beauty cites no civil or administrative authority for the proposition 310 IAC 7-1-21(f)(3) was intended to require notice of "coal mining operations in the area." The interpretation sought by Black Beauty would be speculative and devoid of finite geographic boundaries. A survey cannot be expected to reflect the presence of active surface coal mining operations that might be in the area of, but at some undefined distance from,
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a proposed well. Indeed, there is uncertainty whether Black Beauty seeks reference only to active coal mining operations or whether it also seeks reference to any area on which coal mining has been permitted. The interpretation Black Beauty would give 310 IAC 7-1-21(f)(3) is unwarranted and is not legally supportable.
D. Notice to Black Beauty of the Pendency of the Application by Roberts for Faye Squires 2 Well as a Class II Well or a Noncommercial Gas Well
17. Black Beauty urges it was entitled to notification of application by Roberts of the permit to drill Faye Squires 2 Well "at least by publication as required under 310 IAC 7-1-21(k). Such failure caused the permit to be void."
18. The notice required in 310 IAC 7-1-21(k) is supplemental to the requirements of 310 IAC 7-1-21(i). Subsection (i) has application exclusively to a Class II well or a noncommercial gas well. By its terms, subsection (k) also has application exclusively to a Class II well or a noncommercial gas well. The permit for Fay Squires 2 well authorizes the drilling of a structure test well, as opposed to a Class II well or a noncommercial gas well. 310 IAC 7-1-21(k) is inapplicable to Faye Squires 2 Well.
E. Standing of Black Beauty to Seek Administrative Review of the Permit for Faye Squires 2 Well
19. As provided in IC 4-21.5-3-7(a), a person seeking to qualify for review of an agency order, including a permit, must file a written petition for review that states facts demonstrating:
(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.
20. A "person" is defined by IC 4-21.5-1-11 as an individual, agency, political subdivision, partnership, corporation, limited liability company, association, or other entity of any character. Black Beauty is a person.
21. Black Beauty is not the person to whom the order granting the permit for Faye Squires 2 Well was specifically directed and is not entitled to administrative review upon that basis.
22. The DNR contended (and Roberts joined in the contention) Black Beauty also lacks standing because it is not adversely affected by the order. They urged Black Beauty's Amended Petition for Review filed on December 26, 1997 "failed to demonstrate entitlement to relief." In support of its contention, the DNR cited IN Medical Waste Associates v. Maryland Waste Coalition, Inc. (327 Md. 596, 612 A.2d 241).
23. Black Beauty contended in the amended complaint it was "prejudiced by issuance of the . . ." permit for Faye Squires 2 Well "in violation of DNR's regulations and by being deprived of the opportunity to comment and/or request a hearing on the permit application prior to issuance. . . . Continued existence of the Structure Test Permit will substantially impair and impede Black Beauty's duly authorized, permitted and ongoing coal-mining operations at its Lick Creek Mine."
24. The Maryland Court of Appeals ruled the Waste Coalition had no standing to seek judicial review since it did not "have a property interest' of its own--separate and distinct from that of its individual members." Here Black Beauty is not making a claim on behalf of someone else but rather on its own behalf based upon a direct business or proprietary interest. In Medical Waste Associates is inapplicable to this proceeding.
25. A case more on point is Massa v. Peabody Coal Company, 698 F. Supp. 1446 (S.D.Ind. 1988) where the United States
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District Court for the Southern District of Indiana found individuals, who alleged personal injury and damage to their persons and property, had standing to maintain an action for injunctive relief under Indiana's Surface Mining Control and Reclamation Act as a private cause of action. This analogy is also supported by the AOPA in IC 4-21.5-3-5(b)(5), the section applicable to notice for the Faye Squires 2 Well, which provides service shall be made on "[e]ach person who has a substantial and direct proprietary interest in the subject of the order."
26. The Commission has generally applied an inclusory policy in determining who has standing to take administrative review of a permit decision by the DNR. Particularly for permits likely to invoke public interest, standing has been liberally construed. A permit for a well for oil and gas purposes is within the class likely to invoke public interest. The Commission policy is justified because, working properly together, the DNR and the Commission form a complete administrative record supportive of reasoned agency action. Hoosier Environmental Council v. RDI/Caesar's Riverboat Casiono, et al., 8 Caddnar 48 (1998). This inclusory policy may be based upon environmental and safety concerns, but it may also be founded upon competing proprietary interests, as where different business enterprises seek to extract coal and petroleum from the same real estate. Roberts, d/b/a Enterprise Oil and Associates v. DNR and Black beauty Coal Co., 7 Caddnar 206 (1999).
27. Black Beauty has a permit under the Indiana Surface Mining Control and Reclamation Act at the site of the permit for the Faye Squires 2 Well. Black Beauty has a proprietary interest at the site of Permit 51334. Because Indiana SMCRA places very substantial burdens for environmental protection and site reclamation upon its permittees, Black Beauty also has a legitimate interest in the proper environmental protection and site reclamation of an oil or gas well located within the permit boundaries of its surface coal mine. Black Beauty has standing to maintain this administrative proceeding.
F. Right of Black Beauty to Receive Notice of Permit 51334 and Effective Date of Permit 51334
28. AOPA establishes minimum notification requirements for the issuance of permits. As provided in IC 4-21.5-3-5(f), an agency is required to "make a good faith effort to identify and notify" persons who have a direct and substantial proprietary interest in the subject of the permit. "The agency may request that the applicant for the order assist in the identification of these persons. Failure to notify any of these persons is not grounds for invalidating" a permit, unless the "unnotified person is substantially prejudiced by the lack of notice. The burden of persuasion as to substantial prejudice is on the unnotified person."
29. The DNR has a duty to make a good faith effort to identify persons who have a direct and substantial proprietary interest in the consequences of a permit to drill a well for oil and gas purposes. At a minimum, notice should be provided to the fee owner when a permit applicant has a leasehold interest. An applicant might properly be required to inform the DNR of the name and address of the fee owner as a condition of a permit. Notice should then be provided to the fee owner of the site where a well is to be permitted. An applicant might also properly be required to inform the DNR of the name and address of any other owner of a mineral interest, at least where the interest is known to the applicant. Where that person is identified, the DNR should also provide notice to the owner of the other mineral interest.
30. Roberts filed his permit application with the DNR on September 11, 1997.
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Exhibit 1, Department's Response to Claimant's Discovery Request. On September 12, 1997, the DNR issued Permit 51334. Exhibit 2, Department's Discovery Response.
31. AOPA sets a minimum period between the issuance of a permit and when the permit becomes effective. As applicable to a permit for oil and gas purposes, effectiveness is achieved 15 days after notice of issuance. IC 4-21.5-3-5(f). If a notice is served through the United States mail, three days must be added to the effective date. IC 4-21.5-3-2(e).
32. The earliest date Permit 51334 could have been legally effective was September 27, 1997. If service of notice was made by United States mail, the date of legal effectiveness was deferred until September 30, 1997.
33. Black Beauty learned of the issuance of Permit 51334 on or about September 21, 1997, shortly after Roberts set well casing. Affidavit of Bruce Evans dated June 6, 1998.
34. Roberts acted prematurely relative to Permit 51334. When the casing was set, the permit had not yet become legally effective.
35. By letter dated October 9, 1997 addressed to the Commission's Division of Hearings, Black Beauty protested the issuance of Permit 51334. The protest forms the initiating documentation for this proceeding.
36. On November 10, 1997, Black Beauty removed a ten-foot long section of casing which had been sunk in the ground in furtherance of Permit 51334. Affidavit of Bruce Evans dated June 6, 1998.
37. Black Beauty has not demonstrated substantial prejudice resulting from the DNR's failure to provide Black Beauty with notice of the issuance of Permit 51334. To the contrary, Black Beauty has conducted surface coal mining operations with minimal regard for Permit 51334. If Black Beauty has a legal or factual basis why Permit 51334 should not ultimately be affirmed and acted upon, the instant proceeding provided a full and ample opportunity to articulate that basis. The substantive issues raised by Black Beauty have been found adversely to it as a matter of law, or Black Beauty has been found to have failed to sustain its burden of proof as to factual matters in dispute.
38. Any error by the DNR in not providing notice to Black Beauty relative to the issuance of Permit 51334 has been rendered harmless by the conduct of this proceeding.
39. The issuance of Permit 51334 should be affirmed.
FOOTNOTE
1. The parties were invited to illuminate whether, under the doctrine of primary jurisdiction, the
Commission could decide ownership rights relative to Squires 2 Well. "Black Beauty's Brief as
to Application of Doctrine of Primary Jurisdiction," filed on January 12, 1999, was found
persuasive on this point. The doctrine of primary jurisdiction does confer upon the Commission
the ability to decide ownership rights. The current state of the record is insufficient, however, to
allow a property rights determination. Summary judgment was sought, but there are facts in
genuine dispute. Black Beauty and Roberts may yet litigate their competing property claims in a
civil court, and if the court were to determine the petroleum leases claimed by Roberts to be
invalid, Roberts would be precluded from exercising rights under Faye Squires 2 Well.