[CITE: Mid States Oil Co. v. DNR, 5 CADDNAR 110 (1990)]
[VOLUME 5, PAGE 110]
Cause #: 89-104G
Caption: Mid States Oil Co., v. DNR
Administrative Law Judge: Teeguarden
Attorneys: Dodd; Zlatos, DAG
Date: April 9, 1990
ORDER
The transfers in question from Cherokee Drilling and Techtonic Resources to Mid States Oil should not be
approved and new permits issued to Mid States until Mid States brings all wells
permitted to it into compliance with Oil and Gas rules and pays all penalties
assessed for violations. Further, no permit should be issued in connection with
an application for transfer of a permit to Mid States Oil if the well in
question is not in compliance since such a transfer would put Mid States into a
position of being in violation within the meaning of IC 13-8-59 (1). The
Department may not prevent transfers to corporations in which Ted Uland is an officer or director solely because of IC
13-8-5-9 (2).
FINDINGS OF FACT
1. On or about June 12, 1989, the Division of Oil and Gas (Division) of the Department of Natural Resources (Department) forwarded a letter to the hearings section of the Department indicating Mid States Oil Company (Mid States) wished to take administrative review of a Division decision not to approve permit transfers of certain oil wells.
2. IC 4-21.5, IC 13-8, and 310 IAC 7 apply to these proceedings.
3. The Department is an agency within the meaning of IC 4-21.5-1-3 and the Natural Resources Commission (Commission) is the ultimate authority for the Department with respect to these proceedings.
4. Mr. Theodore Uland (Uland) is the President of Mid States Oil Company.
5. Mid States Oil Company holds a number of permits for oil wells from the Department.
6. Uland was also an officer and Director of Cherokee Drilling, a now-defunct entity, which was involved with oil and gas drilling.
7. The Department has a unsatisfied judgment against Cherokee Drilling obtained in Sullivan Circuit Court for violations of oil and gas laws.
8. Uland was an officer in Lear Resources which also was involved with oil and gas wells.
9. In May of 1989 Mid States attempted to obtain by transfer several oil and gas permits issued to other companies, namely HYSLOP #3 from Cherokee and McCarter #1 and #2, Schwenk #1 and #2, and Weisheit #1 from Techtonic.
10. On or about October 3, 1988, Mid States entered into an agreement with the Department to correct all occurrences of non-compliance by October 14, 1988. This agreement was signed by Ted Uland.
11. As of the date of this hearing, some violations were corrected but some Mid States wells remained in violation.
12. The Department introduced evidence of numerous violations over a long period of time chargeable to Cherokee Drilling and Lear Resources.
13. The violations above primarily deal with failure to plug an abandoned well, improper handling of salt water and waste fluid disposal, and drilling or conversion without a permit.
14. Mid States owes outstanding civil penalties assessed as a result of violations.
15. IC 13-8-5-9 sets forth the grounds for refusing a permit to an application. It states that the commission may refuse to issue a permit if an applicant or officer, partner, or director of the applicant:
(1) is in violation of this article or would be in violation of this article if the permit were issued, or
(2) controls or has controlled a well for oil and gas purposes and has demonstrated a pattern of willful violations of this article that have resulted in irreparable damage to the environment indicating an intention not to comply with this article.
16. As stated in the partial summary judgment decision, the evidence shows that Uland is an officer and director in Mid States which is in violation of Oil and Gas regulations. Accordingly, the Commission may refuse to grant Mid States any future permits until its wells comply with the Oil and Gas rules and, further, until all civil penalties assessed to Mid States have been paid.
17. The number of similar types of violations by companies in which Uland is an officer or director and the failure of at least two of said companies to pay civil penalties leads to the conclusion that Mr. Uland has demonstrated a pattern of willful violations and indicates an intention not to comply with oil and gas laws.
18. Failure to plug wells and failure to properly control salt
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water and other discharges clearly have the potential of causing irreparable damage to the environment.
19. IC 13-8-5-9 (2), however, requires that the Department prove by a preponderance of the evidence that the violations have resulted in irreparable damage to the environment.
20. A review of the exhibits and testimony leads the administrative law judge to the conclusion that the Department has not shown actual irreparable environmental damage has resulted.
21. Accordingly, on the issue of whether or not the commission may refuse to issue Mr. Uland or one of his corporations a permit under IC 13-8-5-9 (2), the administrative law judge concludes that this section may not be relied upon at this time as the sole basis of a permit denial.