ORDER
[NOTE: ON NOVEMBER 19, 1999, BLACK BEAUTY COAL COMPANY FILED FOR JUDICIAL REVIEW IN THE VANDERBURGH SUPERIOR COURT (CAUSE NUMBER 82C01-9911-MI-491). ON NOVEMBER 14, 2003, AN AGREED ORDER OF DISMISSAL WAS FILED WITH FINAL ORDER OF DISMISSAL SUBSEQUENTLY ENTERED ON THE SAME DAY.]
Permit #S-00304 approved by the Department of Natural Resources in favor of Black Beauty Coal Company is affirmed but with the following additional conditions:
(1) Black Beauty shall not interfere with the lawful exercise of the rights of others who may own petroleum leasehold interests. Black Beauty shall conduct activities under Permit #S-00304 exercising reasonable care that it does not interfere with activities by petroleum leaseholders to explore for, drill, or produce oil or gas to the extent I-SMCRA allows enforcement by the Department.
(2) In the absence of a competent safety assessment and plan
submitted to and approved by the Director of the Department, Permit #S-00394 should be conditioned to prohibit Black Beauty from conducting surface coal mining operations within a 150-foot radius of Squires #1 Well.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
A. Administrative Review Applied to Black Beauty's I-SMCRA Permit
1. On July 15, 1994, Thomas W. Roberts, doing business as Enterprise Oil and Associates, ("Enterprise Oil") caused to be filed his "Petition for Administrative Review" and his "Petition for Stay of Effectiveness of Order" directed to an initial determination by the Department of Natural Resources (the "Department") to approve a permit in favor of Black Beauty Coal Company, Inc. "Black Beauty").
2. The permit authorized Black Beauty to engage in surface coal mining and reclamation activities pursuant to IC 13-4.1 [FOOTNOTE 1] and 310 IAC 12 ("I-SMCRA") at a site known as the "Lick Creek Mine" and designated as Permit #S-00304.
3. In addition to I-SMCRA, filing of the petition for review and the petition for stay are governed by IC 4-21.5 (the "administrative orders and procedures act" or "AOPA") and 310 IAC 0.6-1. [FOOTNOTE 2]
4. The Natural Resources Commission (the "Commission") is the "ultimate authority" for contests under the AOPA involving the approval or disapproval of I-SMCRA permits. IC 13-4.1-2-1 and IC 14-3-3-21 (since recodified as IC 14-34-2-2 and IC 14-10-2-3, respectively).
5. The Commission shall appoint administrative law judges and may create a division of hearings to assist with its responsibilities, including those under the AOPA. IC 14-3-3-6 (since recodified as IC 14-10-2-2). The Commission's Division of Hearings was established by a resolution approved by the Governor effective July 1, 1990. Establishment of Division of Hearings, Indexing of Final Adjudicative AGency Decision, and Transcript Fees, Information Bulletin #1, Natural Resources Commission, 13 Ind. Reg. 1938 (July 1, 1990).
6. An agency governed by the AOPA is required to make "all written final orders available for public inspection and copying," and for decisions issued after 1987, to index them by name and subject. The indexed compilation of final orders by the Commission is called "CADDNAR." Establishment of Division of Hearings, Indexing of Final Adjudicative Agency Decision, and Transcript Fees, Information Bulletin #1, Natural Resources Commission, 13 Ind. Reg. 1938 (July 1, 1990).
7. Final orders properly indexed may be relied upon by the agency as precedents. IC 4-21.5-3-32. Amendments
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made to the AOPA in 1997 also require, that in making findings for cases pertaining to the environment, natural and cultural resources, and professional licensing, the administrative law judge "must consider prior orders (other than negotiated orders) of the ultimate authority under the same or similar circumstances if those prior final orders are raised on the record in writing by a party." The administrative law judge "must state the reasons for deviations from those prior orders." P.L. 25-1997 as codified at IC 4-21.5-3-27. This requirement applies to decisions construing I-SMCRA and to most other decisions by the Commission and its administrative law judges.
8. The Commission and its administrative law judge are charged with providing administrative review under the AOPA to this proceeding. The administrative law judge is required to conduct "de novo review of evidence presented at administrative hearing, weighing evidence and reaching conclusion[s], rather than deferring to initial determination[s]" of the agency. "The administrative law judge (ALJ) is required to make findings based on evidence presented at hearing; this requires [the] ALJ to independently weigh evidence presented at hearing and to base recommendations exclusively on that record." Findings must be based upon the kind of evidence that is substantial and reliable. Indiana Dep't of Natural Resources v. United Refuse Co., 615 N.E. 2d 100, 10 (Ind.1993).
9. When the Department makes an initial determination to grant or deny a permit, and administrative review of the determination is taken, the burden of going forward and the burden of persuasion (sometimes collectively referred to as the "burden of proof") rest with the party seeking to set aside the determination. Indiana Dep't of Natural Resources v. United Refuse Co., 598 N.E.2d 603 (Ind. App. 1992), Natural Resources Commission v. Amax Coal Company, 638 N.E.2d 418 (Ind. 1994), and Indiana Department of Natural Resources v. Krantz Bros. Const. corp., 581 N.E.2d 935 (Ind. App. 1991). Shafer and Nash v. DNR and Wagoner, 7 Caddnar 17 (1993); IC 4-21.5-3-14. Also BRPWM v. DNR and Peabody Coal Company, 6 Caddnar 136 (1993).
10. Enterprise Oil relies in the "Post-Hearing Brief of Petitioner Thomas W. Roberts" upon Peabody Coal Company v. Indiana Department of Natural Resources, 606 N.E.2d 1306 (Ind. App. 1992) for the proposition that Black Beauty has the burden of proof in the instant case. This reliance is misplaced. Peabody Coal stands for the proposition that a company holding a mining permit has the burden of persuasion to show entitlement to a permit revision. Because the permittee in Peabody Coal Company was seeking to set aside an initial permit determination by the Department denying the revision, the permittee had the burden of proof. In the instant action, Enterprise Oil has the burden of proof precisely because it is Enterprise Oil that seeks to set an initial determination by the Department.
11. Enterprise Oil contests the sufficiency of protections provided by the permit or claimed leasehold interests in petroleum resources. Although not always framed separately, two threshold questions are also posed: Did Enterprise Oil have the requisite standing to obtain administrative review of the permit? Was Enterprise Oil entitled to notice that the permit had been granted in favor of Black Beauty? These threshold issues are considered first.
B. Standing by Enterprise Oil to Obtain Administrative Review
12. "Standing" is primarily a judicial doctrine, and it focuses on "whether the complaining party is the proper person to invoke the court's power." Pence v. State, 652 N.E.2d 486, 488 (Ind. 1995). Standing serves to limit jurisdiction over a particular case, for a court may only resolve
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real controversies in which the complaining party has a personal stake in the outcome of the lawsuit and has sustained, or is in immediate danger of sustaining, direct injury as a result of the complained conduct. Musgrave v. State Bd. of Tax Comm'rs, 658 N.E.2d 135, 138 (Ind. Tax 1995).
13. For consideration is administrative review by the Commission of a determination by the Department. A discussion of standing for judicial review is pertinent to a discussion of administrative review, since the scope of administrative review can reasonably be no less than for judicial review. The opposite does not follow. Hoosier Environmental Council v. RDI/Caesar's Riverboat Casino, et al., 8 Caddnar 48 (1998).
14. Whether a person has standing to seek administrative review is an issue separate and apart from whether the person may take judicial review. A party may have standing to participate in an administrative proceeding but lack standing to litigate. The functions of administrative review and judicial review differ. On administrative review, an agency must develop a full and complete record. Administrative review authorities evolve policy through a case-by-case process. Adjudicatory policy making is particularly appropriate where the administrative review authority is also the ultimate authority for the agency. ID. with supporting citations omitted.
15. The Indiana General Assembly has crafted a statutory relationship between the Department and the Commission designed to support meaningful review of decisions at the agency level. In the late 1980s, both the Department and the Commission were subjected to "sunset" evaluation under IC 4-26-3. Within that process, the Indiana Legislative Services Agency ("LSA") offered recommendations concerning whether the Commission should have a continued existence. The first alternative recommendation by LSA was to abolish the Commission, an alternative which the legislature rejected with the retention of the Commission under P.L. 28-1990. The second alternative, and the one more closely identified with the policy choice of the Indiana General Assembly, was also outlined by LSA: The Department's Director "would receive all day-to-day decision-making authority. Departmental decisions would be appealed through the administrative adjudication process, with the Commission acting as final adjudicative authority. This change in authority would be particularly effected in the DNR regulatory functions such a mining and water, as it would serve to process applications more efficiently on items with no conflict. Public notification and input would be continued on such initial actions." Id. and Indiana Legislative Services Agency, Matters of Resources, Recreation, and the Arts (May 1989).
16. In accordance with the resulting legislative design, the director or a Department employee delegated by the director now issue all permits for the Department. IC 14-11-3-1. Permits are subject to administrative review by the Commission. Administrative review is particularly noteworthy for issues involving "water" and, here "mining," which are likely to invoke public interest. Working properly together, the Department and the Commission form a complete administrative record supportive of reasoned agency action. Administrative review forms an element of policy making in which the Commission, as ultimate authority for the Department, has an important role. Hoosier Environmental Council v. RDI/Caesar's Riverboat Casino, et al., 8 Caddnar 48 (1998).
17. On the other hand, both the doctrine of separation of powers and the AOPA limit the scope of judicial review. Medical Licensing Bd. of Indiana v. Provisor, 653 N.E.2d 1035 (1995 Ind. App.). Judicial review is limited to determining whether an agency possessed jurisdiction over the subject matter, the agency's decision was made pursuant to proper procedures, was based upon substantial evidence, was not arbitrary or capricious, and was not in violation of any constitutional, statutory, or legal principle.
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Indiana Dept. of Natural Resources v. Peabody Coal Co., 654 N.E.2d 289 (1995 Ind. App.). The role of the Commission is not to determine who has standing to take judicial review. That is the exclusive province of the courts. Rather the determination is limited to deciding standing for administrative review. Id.
18. The subject of "standing" in an I-SMCRA case must, however, also be examined in light of Federal SMCRA and cases construing Federal SMCRA. I-SMCRA must conform to federal requirements. 30 U.S.C. 1255. Federal SMCRA provides a definition of "person having an interest which is or may be adversely affected, or person with a valid legal interest" in part as "one who uses any resource of economic, recreational, esthetic, or environmental value that may be adversely affected by mining." 30 C.F.R. 700.5. In National Wildlife Federation v. Hodel, 839 F.2d 694, (D.C. Circuit 1988), the Federal Court of Appeals was presented with a vigorous challenge to the standing of environmental groups to file lawsuits in Federal SMCRA cases. The D.C. Circuit held that standing under Federal SMCRA is much broader than standing in more traditional cases. The court held allegation that harm "could happen" is adequate to show standing and that Congress clearly signaled its desire to broaden the concept of standing. SMCRA primacy enforcement authority or "primacy" requires Indiana to adhere to the Federal SMCRA concept of standing when considering a case governed by I-SMCRA. Hoosier Environmental Council v. DNR and Solar Sources, Inc., 7 Caddnar 85 (1995).
19. Enterprise Oil avers "ownership of oil and gas leases on hundreds of acres, both within the permit area and adjoining the permit area" and that granting the permit to Black Beauty impinges upon the rights and privileges resulting from those leases. In addition, Enterprise Oil asserts ownership to an existing gas well located within the permit area. "The public as well as Roberts has an important interest in the safety of the existing gas well, and Roberts has a clear right to conduct oil and gas operations on hundreds of acres inside Black Beauty's permit area. . . ." Thomas W. Roberts' Opposition to Motions to Dismiss Petition for Administrative Review (August 19, 1994).
20. The averments by Enterprise Oil are sufficient to establish "standing" for administrative review of the permit granted to Black Beauty according to the agency structure crafted following "sunset" evaluation of the Department and the Commission. Particularly where administrative review is provided by the Department's "ultimate authority," the agencies must develop a full and complete record. Surface coal mining is one of the types of broad public-interest activities where LSA recommended to the legislature that a full and meaningful opportunity for review is essential. Enterprise Oil claims a proprietary interest relative to operations under the permit, but even if its claim were based solely upon safety and environmental concerns, standing would be established.
21. Even if the general standards for standing to take administrative review of a decision by the Department to grant a mining permit were found to be unsatisfied, however, the broader standards for standing under Federal SMCRA and I-SMCRA would be satisfied. Enterprise Oil is one who uses an economic resource "that may be adversely affected by mining" activities authorized in favor of Black Beauty.
22. Enterprise Oil has standing to initiate and pursue administrativereview in this proceeding.
C. Entitlement by Enterprise Oil to Notice of Permit Application Submission
23. I-SMCRA provides in the pertinent parts of IC 13-4.1-3-3(a) [since recodified as IC 14-34-3-3(a)] as follows: Sec. 3. (a) The application for a surface coal mining and reclamation permit shall include the
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following:
(1) The names and addresses of:
(A) the permit applicant;
(B) every legal owner of record of the property (surface and mineral) to be mined;
(C) the holders of record of any leasehold interest in the property;
(D) any purchaser of record of the property under a real estate contract;
(E) the operator, if he is a person different from the applicant; and
(F) if any person in clauses (A) through (E) is a business entity other than a single proprietor, the names and addresses of the principals, officers, and resident agent.
(2) the names and addresses of the owners of record of all surface and subsurface areas adjacent to any part of the permit areas.
24. As provided in IC 13-4.1-4-1(a) [since recodified as IC 14-34-4-1]: Sec. 1. (a) At the time of submission of an application for apermit or revision or renewal of a permit under this article, the applicant shall:
(1) place thee advertisement submitted as part of his application under IC 13-4.1-3-3(a)(6) [since recodified as IC 14-34-3-3(6)] in a local newspaper of general circulation in the county in which the proposed surface coal mining operation is located at least once a week for four (4) consecutive weeks;
(2) mail a copy of the advertisement to each person identified in the application under IC 13-4.1-3-3(a)(2) [since recodified as IC 14-34-3-3(2)]; and
(3) mail a copy to every person who has requested notice of such application.
25. The notice requirements set by IC 13-4.1-1-4-1(a) upon a permit applicant are threefold. Subdivision (1) requires newspaper publication. Enterprise Oil does not dispute that the newspaper publication was performed. Subdivision (2) requires mailing a copy of the advertisement "to each person identified in the application." Enterprise Oil claims this subdivision was violated. Subdivision (3) requires mailing to each person who has requested notice, and Enterprise Oil does not claim it made a request under this subdivision.
26. Black Beauty erred by not giving Enterprise Oil notice pursuant to IC 13-4.1-4-1(a), only if Enterprise Oil is within the class of persons defined by IC 13-4.1-3-3(a)(2). In order to qualify under 3(a)(2), Enterprise Oil must be each of the following three elements: (1) A record owner of (2) surface or subsurface areas that are (3) adjacent to the permitted area.
27. Enterprise Oil is the principal owner of several oil and gas leaseholds in the vicinity of the area permitting by Black Beauty. Leases and a pooling agreement were caused by Thomas Roberts to be properly recorded in Owen County, Indiana in 1973 and 1974. Affidavit of Thomas W. Roberts (April 5, 1995) attached to the "Claimant's Designation of Materials for Consideration in Opposition to Black Beauty Coal Company's Motion for Partial Summary Judgment" filed on April 7, 1995. The first element of IC 13-4.1-3-3(a)(2) is satisfied.
28. In addition, these leases purport to establish in favor of Enterprise Oil ("Thomas W. Roberts") an interest in subsurface mineral rights. The second element of IC 13-4.1-3-3(a)(2) is satisfied.
29. The third element is whether Enterprise Oil owns an interest "adjacent to any part of the permit area." In a "Nonfinal Order of Dismissal upon Fewer than All Issues" entered on November 30, 1994, the administrative law judge concluded there was nothing in the record of this proceeding upon which to determine any
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portion of the interests of Enterprise Oil were "adjacent" to the permit area. Evidence adduced at hearing must reverse this conclusion.
30. In the "Post-Hearing Brief of Petitioner Thomas W. Roberts" filed on December 17, 1998, he urges, "Now that the actual SMCRA permit boundaries of Roberts' recorded leases, totaling about 860 acres, are in evidence, it is clear that Roberts' property is not all within the permit boundary, but is in part adjacent to the permitted area. See, Exs. 1, 2, 3." In "Roberts' Reply Brief" filed on May 3, 1999, he correctly observes that "Black Beauty's and DNR's post-hearing briefs do not dispute that the evidence clearly shows Roberts' oil and gas leases are adjacent to the permit area as well as inside it."
31. Testimonies by Thomas W. Roberts and Dennis Swager were unrefuted that the recorded leasehold interests of Oil Enterprises were both within and adjacent to the area permitted by Black Beauty in Permit #S-00304. The leasehold interests were designated on Claimant's Exhibit 2 and Claimant's Exhibit 3 with green lines that, in some instances, were outsidebut adjacent to the permitted area. In addition, Roberts was asked on direct examination: "So you had valid leases both inside and adjoining the permit area?" He responded, "I claim that I do. Yes." Page 6, Lines 20 and 21, Hearing Transcript (September 3, 1997).
32. Enterprise Oil has caused the recordation of leasehold interests in which it claims to be a record owner of subsurface areas adjacent to the permitted area, and, as such, was entitled under IC 13-4.1-3-3(a)(2) to receive from Black a copy of the advertisement for the permit application.
D. Failure to Provide Enterprise Oil with Pre-Permit Notice Cured by Administrative Review
33. I-SMCRA does not prescribe a sanction for failure to comply with IC 13-4.1-3-3. The process contemplated by this statute is preliminary to a determination by the Department to approve or disapprove an I-SMCRA permit.
34. The AOPA governs generally the notice requirements for the issuance of orders, including a determination to approve or disapprove a permit. IC 4-21.5-3-5(a). The AOPA governs notice of determinations to approve or disapprove an I-SMCRA permit, including the conduct of any hearing and related proceedings. IC 13-4.1-4-5 [since recodified as IC 14-34-4-13]. Pursuant to AOPA, even the failure to notify a person affected by a permit does not invalidate the permit, unless an unnotified person is substantially prejudiced by lack of notice. IC 4-21.5-3-5(f). Boyd, et al. v. Department of Natural Resources and Floyd Commissioners, 8 Caddnar 5 (1997).
35. Upon the facts applicable to this proceeding, Enterprise Oil knew in 1994 of the existence of Black Beauty's coal mining lease. Cross-Examination of Thomas Roberts, Page 20, Lines 21, Hearing Transcript (September 3, 1997). Roberts met with the Department's Permit Specialist, Dave Phillips, and reviewed Black Beauty's application before the permit was approved. Direct Examination of Thomas Roberts, Page 5. Roberts sent written comments to the Department during the comment period, expressing concerns about the location of his well and access to it. Cross-Examination of Dave Phillips, Page 122, Lines 15 and 16. The attorney for Enterprise Oil discussed the application with Phillips in May 1994. Cross-Examination of Dave Phillips, Page 121, and Respondent's Exhibit C.
36. On June 16, 1994, the Department sent a letter to Enterprise Oil expressing appreciation for participation dduring the permitting process indicating the Department's intention to approve the permit in favor of Black Beauty, and advising Enterprise Oil of its opportunity to seek administrative review from the Commission under the AOPA. Direct Examination of Jeanne Lorenzo, Page 8, Lines 19 through 21, Hearing Transcript (September 4, 1997).
37. The "Petition for Administrative Review" caused by Enterprise Oil to
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be filed on July 15, 1994 was timely and provided Enterprise Oil with access to the rights and opportunities accorded by the AOPA. Among these rights and opportunities are those to file pleadings and motions, as well as to "submit offers of settlement." IC 4-21.5-3-17(a). Since 1996, an opportunity has been available for parties to seek mediation. IC 4-21.5-3.5. Prehearing conferences may be conducted to explore "settlement possibilities," clarify issues, and seek rulings on subpoenas, discovery orders, and protective orders. IC 4-21.5-3-19. Evidence is received so as to provide the parties with due process. IC 4-21.5-3-25. Addison v. Review Bd. of Indiana Employment Sec. Division, 397 N.E.2d 1037 (Ind. App. 1979).
38. With the participation by Enterprise Oil and the other parties in this proceeding, ample opportunity was provided for them to agree upon the resolution of any substantive issue. An agreement has not resulted, but there has been no showing by Enterprise Oil an agreement would have been achieved had Enterprise Oil received notice under IC 13-4.1-3-3. Given the tenor and duration of this proceeding, additional discussions among the parties before approval of the permit appear unlikely to have achieved a settlement. Any error occasioned by the failure of Black Beauty to provide notice to Enterprise Oil under IC 13-4.1-3-3 has been cured, essentially made harmless, by the access of the parties to remedies under the AOPA.
E. Conditioning of Black Beauty's I-SMCRA Permit to Protect Oil and Gas Production Leaseholds from the Conduct of Surface Coal Mining Operations
39. In large measure, the dispute between Black Beauty and Enterprise Oil is predicated upon conflicting proprietary claims to mineral rights. Enterprise Oil claims exclusive rights to oil and gas and cites IC 32-1-2-16 in support of the proposition "there can be no legitimate doubt that Black Beauty's leasehold rights are subservient to Roberts' leasehold rights." Post-Hearing Brief of Petitioner Thomas W. Roberts (December 17, 1998), p. 6. Black Beauty reflects negatively upon the aspirations of Enterprise Oil to someday produce gas from his leasehold interest, urging there is a "total lack of a solid development plan. . . . In addition, when he acquired his leases in the area, Roberts knew was coming into a coal mining area. . . . At most, Roberts merely has a dream,' however, this Tribunal does not deal in dreams." Black Beauty Coal Company's Post-Trial Brief (November 2, 1998), p. 6.
40. The Department and the Commission (on administrative review) lack authority to adjudicate property title disputes between parties based upon their claims to mineral rights. 310 IAC 12-3-21(c). Board of Commissioners of Clay County v. DNR, Northern Coal, 5 Caddnar 151 (1990). The Commission cannot determine which mineral rights are dominant and which subservient. The Commission cannot determine whose business aspirations are serious and whose are frivolous.
41. What the Commission must properly do is apply I-SMCRA, not in isolation, but within the broader context of Indiana law. As reflected in 30 U.S.C. 1255(a), state law is not superseded byFederal SMCRA "except insofar as such State law. . . is inconsistent with the provisions of" Federal SMCRA.
42. The legislative history of Federal SMCRA (P.L. 95-87) reflects Congressional sympathy for the importance of domestic fossil fuel resources, both coal and petroleum. The House Committee on Interior and Insular Affairs reported favorably on the legislation, noting the "future off the coal industry is bright and its use supportive of efforts to conserve the country's crucial but "dwindling supply of natural gas and oil." House Rep. (Interior and Insular Affairs Committee), No. 95-218, p. 57 (Apr. 22, 1977). The country's energy dependence upon oil and
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gas, and the extent of remaining coal reserves, were illustrated. Id. at p. 71.
43. I-SMCRA provides by rule at 310 IAC 12-5-71(b) that "surface mining activities shall be conducted in a manner which minimizes damage, destruction, or disruption of services provided by . . . oil, gas, and water wells. . . ."
44. At common law, Indiana has long-applied a "rule of reason" governing the enjoyment of competing mineral interests on a single parcel of land. A person who owns a leasehold interest in petroleum resources has an implied easement to drill through overlying coal stratums. At the same time, the easement does not extinguish the rights of an owner of coal resources. Neither does the easement guarantee to the owner of the petroleum leasehold the most convenient or least expensive means of access to the oil and gas.
45. "The position that the owner of the coal is also the owner of the hole from which it has been removed, and may forever prevent the surface owner from reaching underlying strata, has no authority in reason, nor, . . . in law . . . . The owner of the coal must so enjoy his own rights as to not interfere with the lawful exercise of the rights others who may own the estate, either above or below him. The right of the surface owner to reach his estate below the coal exists at all times. The exercise of it may be more difficult at some times than at others, and attended with both trouble and expense." Pyramid Coal Corp. v. Pratt, 229 Ind. 648, 99 N.E.2d 427, 25 A.L.R.2d 1245 (Ind. 1951) citing Chartiers Block Coal Co. v. Mellon, 152 Pa. 286 (1893).
46. Similarly, the owner of the petroleum interest and the owner of the coal interest each owe "due regard for each other and should exercise that degree of care and use which a just consideration
for the rights of the other demands. . . . This well-recognized obligation includes, at a minimum, the duty to exercise reasonable care to avoid interference" with the rights of the other. Columbia Gas Transm'n v. Limited Corp., 759 F. Supp. 343 (E.D. Ky. 1990), aff'd, 951 F. 2d 110 (6th Cir. 1992), 118 Oil and Gas Rep. 216 (1994).
47. Nothing in Federal SMCRA or I-SMCRA suggests a design that is inconsistent with state common law. Indeed, Federal SMCRA and I-SMCRA evince a policy that supports coal mine activities which are conducted so as to cause a minimum of disturbance to petroleum resources and production. Coal mine operators must properly exercise reasonable care to avoid interference with the rights of those who hold petroleum interests.
48. Black Beauty must not interfere with the lawful exercise of the rights others who may own petroleum leasehold interests. This obligation is generic to all such leaseholds, and is not limited to Enterprise Oil, but is no lesser responsibility for its general applicability. On the other hand, an easement to drill for oil and gas does not extinguish the rights of an owner of coal resources. The easement does not guarantee to a petroleum leasehold the most convenient or least expensive means of access to oil and gas.
49. Roberts claim of superiority relative to Black Beauty is at odds with Pyramid Coal Corp. Neither general principles of Indiana common law nor I-SMCRA provide Enterprise Oil with exclusive or superior rights to those of Black Beauty for the area included within Permit #S-00304. [FOOTNOTE 3] To hold that I-SMCRA recognizes an exclusive or superior right based on a petroleum leasehold, when Indiana common law does not, would effectively grant Roberts a windfall. I-SMCRA cannot protect property rights that do not exist. Neither can I-SMCRA transform a measured correlative right into one of superiority.
50. The owner of a petroleum interest and the owner of a coal interest each owe due regard to the rights of the other and must exercise that degree of care and use which a just consideration for the rights of the other demands. Enterprise Oil and Black Beauty have the mutual duty to exercise reasonable care to avoid interference with the rights of the other. Black Beauty must conduct activities under Permit #S-00304 in a manner that is consistent with these principles.
51. Where conflicting
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legal interest or uses are brought to the Department's attention during the administrative review of a permit, the Department my properly condition the permit to protect the rights of persons other than the permit holder. Hoosier Environmental Council v. Ind. Dept of Natural Resources and Foertsch Construction Company, Inc., 7 Caddnar 162 (1998). Permit #S-00304 should be conditioned to specify that Black Beauty must not interfere with the lawful exercise of the rights of others whho may own petroleum leasehol interests. Black Beauty shall conduct activities under Permit #S-00304 exercising reasonable care that it does not interfere with activities by petroleum leaseholders to explore for, drill, or produce oil or gas.
F. Conditioning of Black Beauty's I-SMCRA Permit to Protect Squire's #1 Well from the Conduct of Surface Coal Mining Operations
52. On July 30, 1973, the Department's Division of Oil and Gas issued to Thomas W. Roberts Permit 34290 to drill a geological structure test well. The well was authorized for placement at a site within Section 12, Township 9 North, Range 6 West (Jefferson Township) in Owen County. Respondent's Exhibit N1. On August 2, 1974, the Division of Oil and Gas issued Permit 34901 to Thomas W. Roberts to convert Permit 34290 to a gas well. The well is known as "Squires #1 Well." Respondent's Exhibit N and Direct Examination of Doug Kearby, Page 107, Lines 14 through 21, Hearing Transcript (September 3, 1997).
53. In 1996, a temporary abandonment permit was issued by the Division of Oil and Gas to Roberts with respect to the Squires #1 Well. At the time of the hearings in this proceeding, Squires #1 Well continued to be in lawful temporary abandonment status. Direct Examination of Doug Kearby, Pages 109 and 110, Hearing Transcript (September 3, 1997).
54. Squires #1 Well is located within the area permitted by Black Beauty for Permit #S-00304, and it is the only well for oil and gas purposes currently permitted in favor of Enterprise Oil (Roberts) within Permit #S-00304. Cross-Examination of Dennis R. Swager, Page 4, Lines 1 through 7, Hearing Transcript (September 2, 1997).
55. Permit #S-00304 does not specify a distance that Black Beauty must stay from Squires #1 Well while conducting surface coal mining operations. The Department's Division of Reclamation has interpreted I-SMCRA to require Black Beauty stay at least 100 feet away because Squires #1 Well is an "uncontrolled structure." Cross-Examination of Jeanne Lorenzo, Page 26, Lines 21 through 27, Hearing Transcript (September 4, 1997). The protection of a gas well from surface coal mining operations for public safety is not considered in an I-SMCRA permit review. Cross-Examination of Lorenzo at Page 33, Hearing Transcript (September 4, 1997).
56. SMCRA is intended not only to protect property rights but also public health and safety by preventing safety hazards that may result from surface coal mining. Hodel v. Indiana, 452 U.S. 314, 101 S. Ct. 2376, 2384-5 (1981).
57. Thomas Roberts testified as to the structure and mechanics of the casing and the wellhead for confining gas, which is under high pressure. "It's a very dangerous situation if you don't have that under control at all times. Very dangerous." Direct Examination of Roberts at Page 82, Hearing Transcript (September 2, 1997).
58. In Indiana, Federal law has been found generally to require a 300-foot diameter safety barrier be provided for each oil or gas well that penetrates a surface coal mine. Richardson v. Citizens Gas & Coke Utility, 422 N.E.2d 704, 713 (Ind. App. 1981). This principle is founded upon 30 U.S.C. 877(a), that states in pertinent part:
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Each operator of a coal mine shall take reasonable measures to locate oil and gas wells penetrating coalbeds or any underground area of a coal mine. When located, such operator shall establish and maintain barriers around such oil and gas wells in accordance with State laws and regulations, except that such barriers shall not be less than three hundred feet in diameter. . . . [FOOTNOTE 4]
59. In the absence of a competent safety assessment and plan submitted to and approved by the Director of the Department, Permit #S-00304 should be conditioned to prohibit Black Beauty from conducting surface coal mining operations within 150 feet of Squires #1 Well.
G. Conditioning of Black Beauty's I-SMCRA Permit Relative to Thatcher #1 Well and Thatcher #2 Well
60. On September 6, 1996, the Department's Division of Oil and Gas issued to Enterprise Oil Permit #50730 to drill and operate a well for a geologic structure test. The well was to be located at a specified point in Section 11, Township 9 North, Range 6 West in Owen County and was to be known as "Thatcher #1 Well." Claimant's Exhibit 6.
61. Also, on September 6, 1996, the Division of Oil and Gas issued to Enterprise Oil Permit #50731 to drill and operate a well for a geological structure test. The well was to be located at another specified point in Section 11, Township 9 North, Range 6 West in Owen County and was to be known as "Thatcher #2 Well." Claimant's Exhibit 7.
62. Enterprise Oil caused the Thatcher #1 Well and the Thatcher #2 Well to be staked and informed the mine foreman for Black Beauty of an intention to place casing on the ground at the well site. Enterprise Oil placed approximately 110 feet of 8 5/8 inch casing and about five joints next to the Thatcher #2 Well. Direct and Cross-Examination of Thomas W. Roberts, Page 10 and Page 29, Hearing Transcript (September 3, 1997).
63. The sites approved for the Thatcher #1 Well and the Thatcher #2 Well are within the area permitted by Black Beauty for Permit #S-00304. As mining activities moved toward the Thatcher #2 Well, Black Beauty removed the casing pipe without notice to Enterprise Oil and placed the casing on a subsoil stockpile several hundred feet away. Black Beauty then mined through the sites permitted for the Thatcher #1 Well and the Thatcher #2 Well. Cross-Examination of Bruce Evans, Pages 70 through 72, Hearing Transcript (September 3, 1997).
64. When Bruce Evans, Compliance Officer for Black Beauty, was asked whether his company was required to "respect" leasehold interests within the permitted area, he replied: "You said mineral rights. We are only concerned with the coal rights. Oil and gas is not something that we concern ourselves with." Then he was asked, "If someone else owns oil and gas rights in the same area that you want to mine, is it your interpretation as the laws compliance officer that you can disregard that oil and gas leasehold owner's leases?" He responded, "Yes, it is, if there is not a well present." Cross-Examination of Bruce Evans, Page 71, Lines 3 and 4, Hearing Transcript (September 3, 1997).
65. At issue in this proceeding is the initial determination by the Department to approve or disapprove Permit #S-00304, and what conditions might be appropriate to any approved ppermit. Whether activities Black Beauty, subsequent to the initial determination by the Department to approve Permit #S-00304, violate its terms or I-SMCRA, is an enforcement question. An enforcement question cannot be adjudicated in this proceeding. Compare IC 4-21.5-3-5 (that governs I-SMCRA permit reviews) and IC 4-21.5-3-6 (that governs most I-SMCRA enforcement reviews). Yet the interpretation by Black Beauty's Compliance Officer--that the company need only be concerned
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with the presence of an existing oil or gas well--is too narrow and is specifically rejected.
66. For the reasons stated previously in these Findings, Black Beauty must not interfere with the lawful exercise of the rights of Enterprise Oil or others who may own petroleum leasehold interests. Surface mining activities must be conducted in a manner which minimizes damage, destruction, or disruption of services provided by oil and gas wells. The owner of a petroleum interest and the owner of a coal interest each owe due regard to the rights of the other and must exercise that degree of care and use which a just consideration for the rights of the other demands. Enterprise Oil and Black Beauty have the mutual duty to exercise reasonable care to avoid interference with the rights of the other. Black Beauty must conduct activities under Permit #S-00304 in a manner that is consistent with these principles.
FOOTNOTES:
1. With the enactment of P.L.1-1995, IC 13-4.1 was recodified at IC 14-34. For the purposes of this proceeding, IC 13-4.1 applies. The result would have been the same, however, if decided under IC 14-34. See IC 14-8-3.
2. This multi-section rule was subsequently recodified as 312 IAC 3-1.
3. The principles in these findings are generic to coal mine operators and petroleum well operators seeking to conduct activities on the same land. If Enterprise Oil or Black Beauty claim some unique posture relative to their mineral rights for properties affected by Permit #S-00304, the claim must of necessity require the resolution of a property title dispute. As already indicated, the Commission lacks authority to resolve the dispute, and these parties must present any claim of this nature to a civil court.
4. In Richardson v. Citizens Gas & Coke Utility, the owners of underground gas storage wells successfully argued this position at trial, and the lower court decision was later affirmed on appeal. See, for example, page 25 of their "Objections to Appointment of Appraisers, Raising Matters Requiring Dismissal or Transfer and Warranting Entry of Judgment for Defendants" filed in the Marion Superior Court on February 28, 1977: "30 U.S.C. 877(a) clearly recognizes the compatibility of simultaneous coal, oil and gas extraction activities from the same surface strata. . . : Each operator of a coal mine shall take reasonable measures to locate oil and gas wells penetrating coal beds or any underground area of a coal mine. When located, such operator shall establish and maintain barriers around such oil and gas wells in accordance with state law and regulations, except that such barriers shall not be less than 300 feet in diameter. . . .' This law is applicable in Indiana since no other standard has been established in this state."