Barclay Petroleum, Inc. v. Ohio State Department of Natural Resources
| Decision Date | 13 March 2001 |
| Docket Number | 00AP-592,01-LW-0855 |
| Parties | Barclay Petroleum, Inc., Appellant-Appellee v. Ohio State Department of Natural Resources, Appellee-Appellant. |
| Court | Ohio Court of Appeals |
APPEAL from the Franklin County Court of Common Pleas.
Daniel J. Igoe; Whiteside & Whiteside, and Alba L. Whiteside, for appellee.
Betty D. Montgomery, Attorney General, Raymond J. Studer and Brett A. Kravitz, for appellant.
Appellant, the Ohio State Department of Natural Resources Division of Mineral Resources Management (f/k/a the Division of Oil and Gas; hereinafter "the division"), appeals from a judgment of the Franklin County Court of Common Pleas vacating a prior decision of the Oil and Gas Commission ("the commission"), which had ordered appellee, Barclay Petroleum, Inc. ("Barclay"), to assume responsibility for plugging an unused oil well.
The property in question is known as Harper Well #1, located in Jackson Township, Vinton County, Ohio. On October 1, 1997, the chief of the division issued an order, pursuant to R.C. 1509.03, finding Barclay to be the owner of record, as defined in R.C. 1509.01, for Harper Well #1, and further finding that the well was incapable of producing oil or gas in commercial quantities. Under the chief's order, Barclay, as the owner of record, was required to either place the well into production, or have it "properly plugged and abandoned pursuant to [R.C. 1509.12]."
Barclay appealed the chief's order to the commission. After a hearing, at which the parties presented evidence and witnesses, the commission rendered a decision affirming the chief's order. Among the findings of fact set forth in the commission's order were that Barclay had submitted a signed Request for Change of Owner ("Form 7") signed by its president, Mr. Bruce Kelley, attesting that Barclay was the owner of the well and had the right to appropriate oil and gas produced from the well. The commission further found that the transfer of Harper Well #1 to Barclay took place on January 29, 1991, as recorded by the division, and that no subsequent transfer had been filed with the division since. The commission thus concluded that Barclay was the record owner of the well for purposes of regulation by the division. Finally, the commission found that Barclay had never consistently operated the well, although it had prepared the well for production and briefly pumped the well to determine if it was productive. An inspection by the division had revealed that the flow line between the well and storage tank was broken, no sales meter was placed on the well, and the well was not being used for domestic purposes.
Based upon these factual findings, the commission determined, under its conclusions of law, that Barclay was the "owner" of Harper Well #1, as defined in R.C. 1509.01(K), and that Barclay was thus responsible under R.C. 1509.12 for plugging the well once it became incapable of producing oil or gas in commercial quantities. The commission accordingly concluded that the chief's order that Barclay plug the well was not unlawful or unreasonable, and affirmed the chief's order.
Barclay thereafter appealed the commission's order to the Franklin County Court of Common Pleas pursuant to R.C. 119.12.
The court of common pleas determined on appeal that the order of the commission was not reasonable and lawful, and vacated the commission's order. The court of common pleas based its decision on multiple grounds. First, the court determined that the statutory requirements for processing a Form 7 had not been met, because the Form 7 submitted in 1991 for Harper Well #1 was not accompanied by a true copy of the assignment of lease or bill of sale for the well, despite the fact that, on the Form 7 itself, it is explicitly stated that: "THIS REQUEST MUST BE ACCOMPANIED BY A TRUE COPY OF THE ASSIGNMENT OF LEASE OR THE BILL OF SALE." The court also noted that the section of the form set aside for the notarized statement by the prior owner or transferor was left blank and, although the form stated the name of the last operator of the well, a Mr. Nicholas Ross, as transferor, the form did not contain his signature, only that of Mr. Kelley on behalf of Barclay as transferee. The court concluded that the Form 7 submitted on behalf of Barclay was incomplete and ineffective to effect the transfer of Harper Well #1 to Barclay.
In addition, the court of common pleas found that the Form 7 had been submitted in 1991 by an attorney, Mr. Ray Michalski, who was retained by other parties to the transaction and purported to submit the application for transfer on behalf of Barclay, but, in fact, acted without Barclay's consent. The court noted that it was uncontroverted that attorney Michalski had been specifically instructed by Mr. Kelley for Barclay that a transfer should not be effected until an operating agreement for the well had been obtained by Barclay from the parties holding an oil and gas lease granted by the landowners, and that, in fact, no such agreement had ever been obtained by Barclay. The court also noted testimony that, several months after the transfer, when Barclay became aware that the well had been put in its name, Barclay contacted attorney Michalski and repeatedly demanded that the well be taken out of Barclay's name, insisting that the transfer should not have taken place. The court thus concluded that the application for transfer of Harper Well #1 to Barclay had been submitted by an agent for Barclay acting outside the scope of his authority and was "a nullity."
Finally, the court concluded that the entire procedure by which the division processed the incomplete and improperly submitted Form 7 violated Barclay's constitutional right to due process, based upon a lack of notice and opportunity to be heard.
The court of common pleas thus concluded in sum that the transfer of Harper Well #1 to Barclay was procedurally defective, that Barclay had never intended to submit the application at all, that the improper processing amounted to a violation of Barclay's constitutional rights, and that the transfer to Barclay should not be given effect to make Barclay liable for plugging the unproductive well.
The Ohio Department of Natural Resources has timely appealed and brings the following assignment of error:
THE COMMON PLEAS COURT ERRED AND ABUSED ITS DISCRETION WHEN IT HELD THAT THE DECISION OF THE OIL AND GAS COMMISSION WAS UNLAWFUL AND UNREASONABLE BECAUSE THE COMMISSION, IN AFFIRMING THE ORDER OF THE CHIEF OF THE DIVISION OF OIL AND GAS, CORRECTLY DETERMINED THAT BARCLAY BECAME THE "OWNER" OF THE HARPER WELL #1 AS DEFINED IN R.C. 1509.01(K) AND IS RESPONSIBLE FOR PLUGGING THE WELL.
Initially, we note that the standard of review for the court of common pleas on appeal from the Oil and Gas Commission is whether the commission's order was reasonable and lawful. Johnson v. Kell (1993), 89 Ohio App.3d 623, 625. In Johnson, this court based its standard of review on R.C. 1509.37, which provides that, ' (Emphasis sic.) "Unlawful" is defined as that which is not in accordance with law, while "unreasonable" is defined as that which is not in accordance with reason or that which has no factual foundation. Johnson, at 626, citing Citizens Commt. v. Williams (1977), 56 Ohio App.2d 61, 70.
Upon appeal to this court from the court of common pleas, however, our standard of review is more restrictive:
In reviewing an order of an administrative agency, an appellate court's role is more limited than that of a trial court reviewing the same order. *** The appellate court is to determine only if the trial court has abused its discretion. ***
Lorain City Bd. of Edn. v. State Emp. Relations Bd. (1988), 40 Ohio St.3d 257, 260-261. The term "abuse of discretion" connotes more than a mere error of judgment, but, rather, signifies that the trial court's attitude was unreasonable, arbitrary or unconscionable. Blakemore v. Blakemore (1983), 5 Ohio St.3d 217.
As set forth above, the court of common pleas concluded that Barclay had never become the record owner of Harper Well #1 because the pertinent form was submitted without Barclay's authorization, the form itself was deficient or incomplete in several respects, and that the aggregate result of the actions of the division in processing the application for change of ownership amounted to a violation of Barclay's constitutional right to due process.
We will first address the court of common pleas' conclusion that Barclay has suffered a constitutional deprivation in the present case. In doing so, we leave for later discussion the question of whether the Form 7 was improperly submitted by an agent acting outside the scope of his authority, or was defective on its face, since these questions do not address the...
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