CADDNAR

[CITE: DNR v. Flowline Specialties, Inc., 14 CADDNAR 114 (2016)]

 

 

[VOLUME 14, PAGE 114]

 

 

Cause #: 13-178G

Caption: DNR v. Flowline Specialties, Inc.

Administrative Law Judge: Jensen

Attorneys: Boyko (DNR); Shields (Flowline); Kasacavage (Estate)

Date: September 19, 2016

 

 

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

 

 

FINAL ORDER

 

28.  The Department’s Complaint is dismissed with respect to permits numbered 112, 240, 331, 403, 1715, 1718, 24552, 27274, 28169, 30315, 31730, 32426, 32558, 47173, 49755, 52434, 52608 and 52678.

 

29.  Permits numbered 34858, 36263, 36290, 36344, 36372, 36542, 40027, 40437, 41045, 41390, and 42357, issued to Flowline, are revoked.  (These permits are hereafter referred to as “the revoked permits”)

 

30.  Flowline is ordered to properly plug and abandon the wells authorized by the revoked permits as well as perform site restoration required by 312 IAC 16-5-19(c).

 

31.  The Department may elect to plug and abandon the wells authorized by the revoked permits.

 

32.  A statutory lien is foreclosed in favor of the Department on the casing and all equipment located on or removed from the well sites as well as upon the leasehold of the land upon which the wells are located and upon any crude oil stored on the well sites or recovered at the time the wells are plugged and abandoned.

 

33.  If the Department elects to plug and abandon the wells associated with the revoked permits, Flowline remains liable for the costs of plugging and abandoning the wells.

 

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

 

 

FINDINGS OF FACT AND CONCLUSIONS OF LAW

 

Case Summary and Jurisdiction:

 

1.     On October 28, 2013, the Claimant, Department of Natural Resources (Department), through its Division of Oil and Gas, by Counsel Ihor N. Boyko, filed with the Natural Resources Commission (Commission) its “Complaint for the Issuance of an Order to Revoke Permits” (Complaint) against the Respondent, Flowline Specialties, Inc. (Flowline).

 

2.     The Department’s complaint sought revocation of 29 permits identified by the permit numbers 112, 240, 331, 403, 1715, 1718, 24552, 27274, 28169, 30315, 31730, 32426, 32558, 34858, 36263, 36290, 36344, 36372, 36542, 40027, 40437, 41045, 41390, 42357, 47173, 49755, 52434, 52608, and 52678 for the reason that Flowline had failed to comply with a previous order of the Commission requiring Flowline to post bond for the wells. 

 

3.     The Department’s Complaint further alleged that Flowline had been issued a Notice of Violation with respect to permits numbered 240, 331, 27274, 28169, 30315, 32558, 34558, 36263, 36290, 36372, 36542, 40027, 40437, 41045, 41390, 42357 and had failed to abate the violations, seek an extension of time to abate the violations or request timely administrative review in accordance with Indiana Code § 4-21.5-3-6.

 

4.     The Department administers Indiana Code §§ 14-37 and 312 IAC 16 pertaining to the regulation of wells for oil and gas purposes. 

 

5.     Procedurally this matter is governed by the Administrative Orders and Procedures Act, Indiana Code §§ 4-21.5, and administrative rules adopted by the Commission at 312 IAC 3.

 

6.     The Commission is the “ultimate authority” with respect to substantive matters controlled by Indiana Code §§ 14-37 and 312 IAC 16. Indiana Code § 4-21.5-1-15; 312 IAC 3-1-2.

 

7.     The Commission possesses jurisdiction over the persons of the parties and the subject matter of this proceeding.

 

8.     Counsel, Kevin D. Shields (Shields), entered his appearance on behalf of Flowline on February 3, 2014.

 

9.     After several continuances, a prehearing conference was conducted on February 18, 2014 followed by status conferences that occurred on March 20, 2014, June 5, 2014, July 8, 2014, September 18, 2014, November 20, 2014.  During much of this time James David Lindsey (Lindsey), the President and sole shareholder of Flowline and also the owner and operator of the wells at issue was unable to participate in this proceeding due to illness. 

 

10.  At a status conference conducted March 24, 2015, Shields reported that Lindsey had passed.  Also appearing during the March 24, 2015 status conference was Jason Gibson (Gibson), who was identified as the sole beneficiary of Lindsey’s estate, who was joined by Kenneth Kasacavage, Counsel for Lindsey’s estate.  Gibson, by Counsellor Kasacavage, represented an interest in continuing efforts to resolve the instant proceeding.

 

11.  Additional status conferences were conducted on May 27, 2015, August 12, 2015, September 16, 2015, November 19, 2015, while Gibson and the Department were seeking to address the existing dispute through the transfer of permits to a different owner or operator.

 

12.  On March 22, 2016, the Department filed its motion to schedule an additional status conference noting that of the 29 permits originally at issue, 18 permits had been transferred to another owner or operator, which effectively resolved the Department’s Complaint with respect to those permits.  However, the Department reflected that its Complaint remained viable as to 11 of the permits, identified by permit numbers 34858, 36263, 36290, 36344, 36372, 36542, 40027, 40437, 41045, 41390, and 42357.

 

13.  At the April 26, 2016 status conference Mr. Kasacavage, represented that Gibson, as the Executor of Lindsey’s Estate intended within 30 days to acknowledge the accuracy of the Department’s Complaint with respect to the 11 remaining permits or request the scheduling of other proceedings.

 

14.  After a lengthy delay and the scheduling of an additional status conference, Gibson, as the Executor of Lindsey’s Estate filed a “Response and Acquiescence” on behalf of Flowline on August 26, 2016.

 

 

[VOLUME 14, PAGE 115]

 

 

Findings of Fact and Conclusions of Law:

 

15.  Based upon the Department’s representation that it had approved the transfer of 18 permits, identified by permits numbered 112, 240, 331, 403, 1715, 1718, 24552, 27274, 28169, 30315, 31730, 32426, 32558, 47173, 49755, 52434, 52608 and 52678, to another operator it is reasonably concluded that the Department’s Complaint should be dismissed with respect to these permits.  See “Claimant DNR’s Motion to Schedule Status Conference” filed March 22, 2016.  These permits will not be discussed further.

 

16.  The “Response and Acquiescence” filed on behalf of Flowline states, in part, as follows:

 

Comes now the Respondent by and through Jason Gibson, Executor of the Estate of James David Lindsey, who was the sole shareholder, Director and officer of the Respondent and states that Respondent acquiesces in the revocation of Permit Numbers 34858, 36263, 36290, 36344, 36372, 36542, 40027, 40437, 41045, 41390, and 42357.

 

17.   The representations of Gibson support the conclusion that the allegations set forth in the Department’s Complaint are accurate and represent a sufficient basis for the revocation of permits numbered 34858, 36263, 36290, 36344, 36372, 36542, 40027, 40437, 41045, 41390, and 42357.

 

18.  The Department issued a notice of violation to Flowline with respect to each the permits numbered 36263, 36290, 36372, 40027, 40437, 41045, 41390, and 42357.  Complaint Exhibits B-8, B-9, B-10, B-12, B-13, B-14, B-15, and B-16.

 

19.  With respect to the notices of violation, Flowline failed to timely abate the violations and failed to seek an extension of time within which to abate the violations.  Complaint, ¶4.

 

20.  Flowline did seek administrative review of the notices of violations in a proceeding before the Commission, Flowline Specialties, Inc. v. Department of Natural Resources, Administrative Cause Number 10-071G, however, that proceeding was dismissed following Flowline’s failure to appear for a status conference and failure to respond to a “Notice of Proposed Dismissal” issued by the Commission.

 

21.  With respect to each of the permits numbered 34858, 36263, 36290, 36344, 36372, 36542, 40027, 40437, 41045, 41390, and 42357, Flowline had also failed to post bond as required by Indiana Code § 14-37-6-1.  Complaint ¶5.

 

 

Conclusions of Law:

 

22.  In accordance with Indiana Code § 14-37-13-1(2) a permit for oil and gas purposes may be revoked if the “owner or operator has violated” Indiana Code §§ 14-37 or 312 IAC 16.

 

23.  A permit for oil and gas purposes may also be revoked if:

 

(5) The owner or operator has been issued a notice of violation under IC 14-37-12 and has failed to do at least one (1) of the following:

(A) Abate the violation within the prescribed period.

(B) 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.

(C) Request a proceeding under IC 4-21.5-3-6 within:

(i) thirty (30) days after receipt of the notification; or

(ii) the period provided by the division for abatement;

whichever is longer.

Indiana Code § 14-37-13-1(5)

 

24.  Flowline, as a person that was issued a permit for oil and gas purposes and that engaged in activity for which the permit was required under Indiana Code §§ 14-37 and 312 IAC 16, is an “operator”.  312 IAC 16-1-38.

25.  Flowline is also and owner, within the meaning of 312 IAC 16-1-39, in that it possess the right to drill into and produce oil and gas.

 

26.  The evidence establishes that with respect to the permits identified in Finding 18 Flowline was issued notices of violation in accordance with Indiana Code 14-37-12-2 that were not addressed in accordance with Indiana Code § 14-37-13-1(5).

 

 

27.  The evidence further establishes that with respect to each of the permits identified in Finding 17, Flowline had failed to post bond as required by Indiana Code § 14-37-6-1.

 

 

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