CADDNAR

[CITE: DNR v. Holmes, 13 CADDNAR 228 (2014)]

 

[VOLUME 13, PAGE 228]

 

 

Cause #: 12-167G

Caption: DNR v. Holmes

Administrative Law Judge: Jensen

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

Date: January 14, 2014

 

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

 

FINAL ORDER

 

28. Permit 38175 issued to Holmes is hereby revoked.

 

29. Holmes is ordered pursuant to I.C. 14-37-13-2 to properly plug the well and abandon the well site associated with Permit 38175 and perform site restoration as required by 312 IAC 16-5-19.

 

30. The Department may elect to plug and abandon the well authorized by Permit 38175.

 

31. If the Department elects to plug and abandon the well associated with Permit 38175, Holmes remains liable for the costs of plugging and abandoning the well.

 

32. 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.

 

33. If the Department elects to plug and abandon the well associated with Permit 38175, 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 Permits” (“Complaint”) with the Natural Resources Commission (“Commission”) on September 25, 2012 alleging that Respondent, Stanley Holmes (“Holmes”), as the holder of permits issued by the Department for the drilling and operation of oil and gas wells, had “failed to abate” Notices of Violation (“NOV”) that had been issued, had failed to secure extensions of time to abate the NOVs and had failed to seek administrative review of the NOVs, such that a revocation of the permits was authorized.

 

2.      The Complaint sought the revocation of three permits identified numerically as 38175, 38502 and 44451. 

 

3.      A prehearing conference was conducted on October 26, 2012 with the Department and Holmes participating.  On October 26, 2012, Holmes reported that action was underway to abate the violations that formed the basis of the Department’s Complaint.  Thereafter, telephone status conferences were conducted on January 9, 2013, February 13, 2013 and April 4, 2013 before the Department reported satisfaction with the abatement of the violations associated with permits numbered 44451 and 38502 and advised that its Complaint as it related to these permits could be dismissed[1]. 

 

4.      The only permit remaining at issue in this proceeding is identified as permit numbered 38175.  (Hereinafter referred to as “Permit 38175”).

 

5.      Additional status conferences occurred on May 21, 2013, June 27, 2013, July 31, 2013, and September 19, 2013 during which time Holmes repeatedly indicated an intention to either plug the well associated with Permit 38175 or the expectation that a third party was interested in purchasing the well and taking transfer of Permit 38175.

 

6.      Ultimately, an administrative hearing was scheduled and conducted on November 7, 2013.

 

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

 

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

 

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

 

10.  Pursuant to 312 IAC 3-1-2, the Natural Resources Commission (“Commission”) is the ultimate authority as that term is defined at I.C. 4-21.5-1-15.

 

Findings of Fact:

 

11.  The parties agreed to have the administrative law judge accept the Department’s Complaint and attached Exhibits as a part of the record of the administrative hearing, with the exhibits retaining their original numbering. 

 

12.  Jon Limbach (“Limbach”) is an oil and gas well inspector employed by the Department’s Division of Oil and Gas for 7 years.

 

13.  Limbach inspected the well associated with the Permit on August 11, 2011.  The well had been cited for violations in the past but Holmes was a new operator for the well.  Limbach observed and recorded that the well was “valved off and leaking at gauge, leak had been previously repaired, and no identification sign posted”.  Testimony of Limbach.

 

14.  As a result of the August 11, 2011 inspection, Limbach, with the approval of Jim AmRhein, issued a NOV to Holmes for “a WNP2, which is a well not producing; a WOP1, which is a leak or fitting needs to be repaired or replaced; and an ID1 which is no identification sign or it is illegible.”  Id. & Claimant’s Exhibit B1.

 

15.  On November 18, 2011, Limbach reinspected the well site and recorded that the leak had been repaired and that the lack of identification signage had also been addressed.  As of that date the WOP1 and ID1 violations were released.  However, the well associated with Permit 38175 remained valved off and was not in production.  

 

16.  A subsequent inspection on February 13, 2012 revealed again that the well was still valved off and not producing.  Limbach referred the matter to Jim AmRhein for further enforcement action as the WNP2 violation remained unabated.

 

[VOLUME 13, PAGE 229]

 

17.  James Brian AmRhein (AmRhein), presently an Assistant Director for the Department’s Division of Oil and Gas has been employed with that Division for 24 years.  A portion of AmRhein’s present responsibilities is to manage the enforcement program, ensuring that timely notices are issued and recommending action to the Division Director.  In this capacity AmRhein authorized the filing of the Complaint initiating this proceeding.

 

18.  AmRhein acknowledged that while this proceeding has been pending he was contacted by a person who appeared very interested in taking transfer of the well.  However, the transfer application was never received by the Department. 

 

19.  Also during the pendency of this proceeding a required plugging plan had been submitted by Holmes but was not approved by the Department.  The Department sought revisions to the submitted plugging plan and Holmes failed to revise the plugging plan as instructed.   Testimony of AmRhein.  AmRhein explained that a plugging plan is required by administrative rule to provide information by which the Department can insure that the plugging is done in accordance with law to provide adequate protection of groundwater and coal resources. Without an approved plugging plan Holmes is not authorized to plug the well associated with Permit 38175.

 

 

Conclusions of Law:

 

20.  As a person to whom the Permit was issued, Holmes is an “operator” under 312 IAC 16-1-38.

 

21.  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…” Holmes is an “owner” as that term is defined at 312 IAC 16-1-39.

 

22.  The Department was authorized to issue the NOV to Holmes as the owner or operator of the well in association with Permit 38175.  I.C. 14-37-12-2 & 312 IAC 16-5-21.

 

23.  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.

 

24.  Holmes failed to abate the violation pursuant to 312 IAC 16-3-9(a)(6)(A) and also failed to request administrative review of the NOV under I.C. 4-21.5-3-6 as authorized at 312 IAC 16-3-9(a)(6)(C).

 

25.  There is also no evidence that Holmes 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).

 

26.  However, the NOV was issued by the Department on August 11, 2011.  The Complaint was not filed until September 25, 2012, after over a year had passed.  Therefore, Holmes was the beneficiary of a substantial extension of time to abate the violation before the Department escalated its enforcement efforts. 

 

27.  Furthermore, following the filing of its Complaint on September 25, 2012, the Department continued working with Holmes to allow either the transfer of Permit 38175 or the plugging of the well associated with Permit 38175.  Either action by Holmes would have avoided the revocation of Permit 38175.

 

 

[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 28 through 33, have been relocated to the “Final Order” section at the beginning of this document.]