[CITE: Mid States Oil v. DNR, 4 CADDNAR 64 (1988)]
[VOLUME 4, PAGE 64]
Cause #: 87-047G
Caption: Mid States Oil v.
DNR
Administrative Law Judge: Drew
Attorneys: Dodd; Schaefer,
DAG
Date: January 13, 1988
ORDER
[NOTE: THE DIRECTOR OF THE
AGENCY WAS REVERSED ON JUDICIAL REVIEW BY THE GIBSON CIRCUIT COURT, CAUSE NO.
26C01-8801-CP-0005 ON SEPTEMBER 7, 1988. A TEXT OF THE DECISION BY THE GIBSON
CIRCUIT COURT FOLLOWS THE FINDINGS OF FACT BY THE ALJ. THE DNR DID NOT APPEAL
THE CIRCUIT COURT DECISION.]
The
Respondent's denial of Claimant's request to convert to a $20,000.00 blanket
bond is affirmed.
FINDINGS OF FACT
1.
On June 3, 1987, Mid States Oil Company, Inc. (The "Claimant")
requested administrative review pursuant to IC 4-22-1.
2.
IC 4-22-1 and IC 13-4-7 apply to this proceeding.
3.
The Department of Natural Resources (the "Department") is an agency
as defined in IC 4-22-1. The Natural Resources Commission of the Department
(the "Commission") is the ultimate authority for the Department with
respect to the subject matter of this administrative action.
4.
The Commission has jurisdiction over the subject matter and the parties to this
proceeding.
5.
Notice of hearing was given to: Mid States Oil Company, Inc., Oakland City,
Indiana; Theodore Uland, Jasper, Indiana; Timothy
Dodd, Evansville, Indiana; Michael Schaefer, Indianapolis, Indiana; and Gary
Fricke, Indianapolis, Indiana.
6.
At a prehearing conference conducted on July 8,1987,
both parties agreed that this case should be treated as a Summary Decision
pursuant to 310 IAC 0.5-1-1.
7.
On April 23, 1987, the Claimant requested by letter to the Division of Oil
& Gas of the Department (the "Respondent") to convert bonds
posted with the Respondent in the amount of $38,000.00 to a blanket bond in the
amount of $30,000.00.
8.
On May 27, 1987, the Respondent advised by letter that the Claimant's request
had been denied by the Commission at its May 22, 1987, meeting. Furthermore,
Claimant was advised that all future bonding be in the form of a Certificate of
Deposit or cash in the amount of &2,000.00 per well.
9.
Claimant thereupon filed its petition for review claiming Respondent had acted
arbitrarily and capriciously, abused its discretion, had discriminated against
the Claimant and had acted in excess of its statutory authority.
10.
Claimant also contended that the action of the Commission in denying Claimant's
request for blanket bond, was outside its statutory authority.
11.
IC 13-4-7-19 (a)(2) requires that "a person who has created or acquired a
well. . .execute and file with the Commission a bond not exceeding two thousand
dollars ($2,000.00) for each well drilled or produced."
12.
IC 13-4-7-19(b) further provides as follows:
(b)
Instead of a separate bond for each well, the applicant may:
(1)
post a bond in any amount for wells drilled, deepened, or converted under this
chapter; however, the maximum number of wells under the bond may not exceed
that number determined by dividing the principal sum of the bond by two thousand
dollars ($2,000.00); or
(2) post a blanket bond of thirty thousand dollars ($30,000.00)
for any number of wells \drilled, deepened or converted under this chapter.
13.
Claimant contends that IC 13-4-7-19(b) leaves to the applicant the discretion in
determining whether or not to post a $30,000.00 blanket bond covering any
number of permits.
14.
On its face, section (b) of IC 14-3-7-19 appears to give the applicant the
option in deciding between subsection (1) (which, in essence, requires a bond
in the amount of $2,000.00 per well) or subsection (2) (which allows for a
$30,000.00 bond regardless of the number of wells drilled, deepened or
converted.) However, these two subsections also appear to be in conflict with
one another.
15.
It is well-established in Indiana that when interpreting the meaning of a
statute, the primary objective is that the true intent of the legislature be
given effect and that words and phrases of a single section of a statute be
constructed in light of the statute as a whole.[FOOTNOTE 1]
16.
IC 13-4-7-9 authorizes the Commission to adopt rules and orders necessary to
administer the statute.
[VOLUME 4, PAGE 65]
Section
(I) of IC 13-4-7-9 allows the Commission to require a "reasonable
performance of the duty to plug each dry or abandoned well, and the repair of
each well causing waste or pollution."
17.
The obvious intention of this statute is to insure that public health hazards
posed by oil and gas wells are minimized and that the responsible parties
retain sufficient finical resources to repair and plug wells as it becomes
necessary.
18.
It would appear to be contrary to the legislature's intent if each operator
were allowed to make his own choice as to how much bond he should post
regardless of the number of wells he may have drilled, deepened or converted.
19.
The legislature has bestowed on the Commission the authority to adopt rules and
orders necessary to administer IC 13-4-7. One such example of the Commission's
authority
is that it may require "reasonable performance bonds" for each well.
Only the Commission or its authorized representative (in this case the
Respondent) can implement this legislative directive and it is their statutory
duty to determine what a "reasonable" bond shall be.[FOOTNOTE 2]
20.
It is unreasonable to assume that the entity who is to
be regulated would also have the authority to determine the manner by which it
is to be regulated.
21.
To allow the Claimant to determine the size or nature of its bond would defeat
the intended purpose of the bond as stated in IC 13-4-7-19 which reads in part:
The purpose of the bond is to provide for compliance with this chapter and the
rules of the Commission adopted pursuant to it. . .The
performance bond shall be in a form to be approved by the Commission.
22.
Respondent and the Commission have consequently acted within their scope of
authority by denying Claimant's request for a $30,000.00 blanket bond covering
20 different oil and gas permits.
23.
Respondent and the Commission have also acted within their scope of authority,
based upon IC 13-4-7, when, via letter dated May 27, 1987, the Commission
ordered Claimant to continue posting individual bonds with each application.[FOOTNOTE 3]
FOOTNOTES
1. Frame v. South Bend Community School
Corporation, 380 N.E. 2d 261 (1985), Indiana
State Highway Commission v. White, 291 N.E. 3d 350 (1973).
2. The statute does not detail what factors should be considered in determining
whether the amount of a bond is "reasonable." Nor does the
Respondent's letter to the Claimant fully explain the reason for its denial of
Claimant's request to convert to a blanket bond. Nevertheless, in it brief, Respondent stated that Claimant has a history of
non compliance with Indiana's oil and gas laws and attached copies of three
Notices of Violation's issued to the Claimant.
3. It is possible that part of Claimant's objection to Respondent's denial of
Claimant's request for a $30,000 blanket bond, occurred because Respondent gave
no indication of specified reason for denial. The Claimant could only assume
that Respondent was acting in a proper and reasonable manner. Perhaps in future
correspondence Respondent would be well-advised to detail any reason for
denying an operator's request for a blanket bond or conversion to one.
______________________________________________________________
[NOTE: CADDNAR citation does not apply to the court entry below.]
Gibson
Circuit Court
Walter
H. Palmer, Judge,
Dated
September 7, 1988:
FINDINGS OF FACT AND
CONCLUSION OF LAW
FINDINGS OF FACT
A.
The Court now incorporates herein the authenticated Record of Proceedings
before the Honorable Margaret A. Drew, as certified by Karen Knight, those
proceedings having been filed with this Court, the same being incorporated
herein and made a part hereof.
B.
That the Plaintiff (Mid States Oil Company, Inc.) Has posted
with the State of Indiana through the Department of Natural Resources, the sum
of approximately Thirty Eight Thousand Dollars ($38,000) in performance bonds
pursuant to IC 13-4-7-19.
C.
That at the time of the posting of said bonds, IC 13-4-7-19 provided in part as
follows: "(b) instead of a separate bond for each well the applicant may
(1). . .(2) post a blanket bond of Thirty Thousand Dollars ($30,000.00) for any
number of wells drilled, deepened or converted under this chapter."
D.
That on April 23, 1987, the Plaintiff requested the Department of Natural
Resources to convert its various bonds posted in connection with individual
wells to a blanket bond under the provisions of the statute cited hereinabove.
E.
That on May 22, 1987, the Defendant [Department of Natural Resources] denied
the Plaintiff's request.
F.
That on June 3, 1987, the Plaintiff appealed the decision of the Department of
Natural Resources of the State of Indiana which cause was docketed as Administrative
Cause No. 87-047G.
G.
That on March 4, 1988, a James M. Ridenour, acting as Secretary of the
Department of Natural Resources [sic., Natural Resources Commission], the
Defendant, sent and initiated its final order to the Natural Resources
Commission adopting the report of the proposed findings of fact of the
Administrative Law Judge entered on January 13, 1988, stating as follows:
"The denial of the Claimant's request to convert to a Thirty Thousand
Dollar ($30,000.00) blanket bond is affirmed."
H.
That the findings of the Administrative Law Judge, and the entry of a final
order by the Secretary of the Department of Natural Resources was without basis
in fact.
CONCLUSIONS OF LAW
A.
The law is with the Plaintiff, Mid States Oil Co., Inc. And
against the Defendant, Department of Natural Resources of the State of Indiana.
B.
The Court reviews the contentions of the parties contained in the Brief of the
Claimant Mid States Oil Co., Inc., the Plaintiff herein, and the contentions
made in the "Memorandum in Support of Motion for Summary Decision",
prepared by the Respondent, The Department of Natural Resources, Division of
Oil and Gas, as contained in the authenticated Record of Administrative
Proceedings.
C.
This Court finds that IC 13-4-7-9 (I) is a general statement of the authority
of the Defendant.
D. The Court further finds that IC 13-4-17-19 (b) is a specific
statement and direction by the legislature to the Department.
E. The Court finds that in accordance with appropriate rules of
statutory interpretation, the specific statement of the legislature controls
the general statement of the legislature.
F. The Court now finds the ruling of the Administrative Law
Judge in cause number 87-047G is erroneous.
G.
This Court now finds that The Department of Natural Resources of the State of
Indiana was without right in withholding and denying the request of the
Plaintiff to post a Thirty Thousand Dollar ($30,000.00) performance bond in
accordance with the statutory provisions in effect at the time of the request,
the same being IC 13-4-7-19 et. seq.
JUDGMENT
It
is therefore ordered, adjudged and decreed as follows:
1.
That the Plaintiff's Supplemental Petition for Review is granted.
2.
That the Defendant, The Department of Natural Resources of the State of
Indiana, (Oil & Gas Division) is ordered to grant the Plaintiff's request
for the right to post a Thirty Thousand Dollar ($30,000.00) blanket bond.
3.
That the parties are ordered to cooperate in order to expedite the
implementation of this Court's Order, Walter H. Palmer, Judge, Gibson Circuit
Court