John M. Denman Oil Co. v. State Corp. Comm'n of State
| Decision Date | 09 January 2015 |
| Docket Number | 110,861. |
| Citation | 51 Kan.App.2d 98,342 P.3d 958 |
| Parties | JOHN M. DENMAN OIL CO., INC., Appellant, and Gary and Kayla Bridwell, d/b/a Black Rain Energy, Appellees, v. STATE CORPORATION COMMISSION OF the STATE of Kansas, Appellee. Gary and Kayla Bridwell, d/b/a Black Rain Energy, Petitioners, v. State Corporation Commission of the State of Kansas, Respondent. |
| Court | Kansas Court of Appeals |
51 Kan.App.2d 98
342 P.3d 958
JOHN M. DENMAN OIL CO., INC., Appellant
and
Gary and Kayla Bridwell, d/b/a Black Rain Energy, Appellees
v.
STATE CORPORATION COMMISSION OF the STATE of Kansas, Appellee.
Gary and Kayla Bridwell, d/b/a Black Rain Energy, Petitioners
v.
State Corporation Commission of the State of Kansas, Respondent.
110,861.
Court of Appeals of Kansas.
Jan. 9, 2015.
Review Denied Sept. 24, 2015.
Thomas M. Rhoads, of Glaves, Irby & Rhoads, of Wichita, for appellant.
Dana Bradbury and Lane R. Palmateer, of Kansas Corporation Commission, for appellee.
Keith A. Brock, of Anderson & Byrd, LLP, of Ottawa, for petitioners.
Jeff Kennedy, of Martin, Pringle, Oliver, Wallace & Bauer, L.L.P., of Wichita, for amicus curiae Kansas Independent Oil and Gas Association.
David E. Bengtson, of Stinson Leonard Street LLP, of Wichita, for amicus curiae Eastern Kansas Oil & Gas Association.
Before GREEN, P.J., LEBEN and BRUNS, JJ.
Opinion
LEBEN, J.
John M. Denman Oil Company has appealed a Kansas Corporation Commission (KCC) order that Denman Oil must plug 41 abandoned oil wells. Denman Oil contends that only one party may be held legally responsible for the wells under
K.S.A. 55–179 and that since another party took over the mineral lease from Denman Oil, it is no longer responsible.
But K.S.A. 55–179(b) provides that “a person who is legally responsible shall include, but is not limited to, one or more” of several parties defined in that statute. And one of those who may be held responsible is “the original operator who ... abandoned such well.” There's no dispute that Denman Oil was the original operator who abandoned these wells, so the KCC's order requiring Denman Oil to plug them was proper.
Factual and Procedural Background
The trail leading to this appeal begins in August 2007, when the KCC received a complaint about abandoned oil wells, spills, and debris on the 160–acre M.A. Alexander oil-and-gas lease in Chautauqua County. When the KCC inspected the leased ground in April 2008, it found 32 abandoned wells. The KCC found another 12 abandoned wells in November 2010; those wells had been covered
by tall native grasses and missed on the first inspection.
The KCC's investigation eventually led it to order four parties—Denman Oil, Gary and Kayla Bridwell, and TSCH, LLC (a Florida limited-liability company)—to plug the wells.
Denman Oil operated the lease from at least 1939 until production ended in 1989. It did not plug the wells.
In 2008, Denman Oil assigned the lease to the Bridwells. The KCC entered into a compliance agreement with the Bridwells under which the Bridwells agreed to plug or begin production from at least two wells each month until all the wells were plugged or producing. The Bridwells returned three wells to production for a short time, but they didn't sell any oil or plug any wells.
Unsure whether the original lease was still valid, the Bridwells obtained new leases from the mineral owners in 2009. In 2010, they assigned the new leases to TSCH.
Before TSCH took over the leases, the KCC informed TSCH that if it took the lease assignment, it would be required to plug or produce from all the wells. TSCH got KCC authorization for injection into one well, ran pipe into two or three wells, and moved
two pump jacks onto the lease. But it did not produce from or plug any wells.
In June 2011, the KCC issued a show-cause order to Denman Oil, the Bridwells, and TSCH, ordering the parties to show cause why they should not be held responsible for plugging the wells and for paying the costs of investigating the matter. Denman Oil and the Bridwells participated in a hearing before the KCC on the issue; TSCH did not appear for that hearing.
Based on the hearing record, the KCC concluded that all 44 wells on the lease had been abandoned. The KCC also concluded that the abandoned wells “are causing or are likely to cause pollution of usable water or supply or loss of useable water” and that many of the wells “had rotted casing and high fluid levels.” The KCC ordered Denman Oil to plug all of the wells except for the three that the Bridwells had briefly produced from. The KCC ordered the Bridwells to plug all 44 wells and TSCH to plug 32 wells (on the understanding that TSCH had only taken assignment of those wells). The KCC ordered that these parties be jointly and severally liable for plugging the wells in common among them. The KCC rejected Denman Oil's claim that it should not be held liable since it had transferred the leases to the Bridwells: “An assignment of the lease to [the] Bridwell[s] ... some 19 years after production ceased on the lease does not change the fact that Denman abandoned the wells in 1989 and should have plugged them at that time.”
Denman Oil and the Bridwells (but not TSCH) appealed to the Shawnee County District Court. The district court granted partial relief to the Bridwells, ordering that they were only responsible for plugging the three wells they had produced from. The district court affirmed the KCC's order that Denman Oil plug the remaining 41 wells, and Denman Oil has appealed to this court. The Bridwells did not appeal, and the KCC has not appealed the district court's limitations of the agency's original order to the Bridwells. On appeal, then, the only matter before us is Denman Oil's appeal of the KCC's order that Denman Oil plug 41 wells.
Standards of Review on Appeal
The KCC is an administrative agency, so we review its ruling based on the standards set out in the Kansas Judicial Review Act, K.S.A. 77–601 et seq. That act provides eight bases for a court to grant relief from an agency's action. Denman Oil contends that three of them apply: (1) that the KCC erroneously interpreted the law; (2) that the KCC's ruling was based on facts not supported by substantial evidence; and (3) that the KCC's action was arbitrary and capricious or otherwise unreasonable. See K.S.A.2013 Supp. 77–621(c)(4), (7), (8). Denman Oil has the burden of showing KCC error, K.S.A.2013 Supp. 77–621(a)(1), and we can set aside the KCC's order if Denman Oil shows error on any of the three points.
As is usually the case in administrative appeals, evidence was gathered in the agency proceeding, and the district court did not independently hear any evidence. Accordingly,
we review even evidence-based issues without any required deference to the district court's decision. Kansas Dept. of Revenue v. Powell, 290 Kan. 564, 567, 232 P.3d 856 (2010) ; Muir v. Kansas Health Policy Authority, 50 Kan.App.2d 854, ––––, 334 P.3d 876, 878 (2014). There are no factual disputes of significance here, so this case ultimately comes down to a question of statutory interpretation. We also review those issues independently, without any required deference to the district court. Golden Rule Ins. Co. v. Tomlinson, 300 Kan. 944, ––––, 335 P.3d 1178, 1188 (2014).
Analysis
Kansas law has long protected the state's water resources. Since 1907, a statute has prohibited putting sewage or chemical waste into the state's waters. See K.S.A. 65–164 ; Nunn v. Chemical Waste Management, Inc., 856...
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