CADDNAR

[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.