Marbob Energy v. Oil Conservation Com'n

• Decision Date: 11 March 2009
• Docket Number: No. 30,710.,30,710.
• Parties: MARBOB ENERGY CORPORATION, a corporation, Petitioner-Petitioner, v. The NEW MEXICO OIL CONSERVATION COMMISSION, Respondent-Respondent.
• Court: New Mexico Supreme Court

206 P.3d 135

2009 NMSC 013

MARBOB ENERGY CORPORATION, a corporation, Petitioner-Petitioner, v. The NEW MEXICO OIL CONSERVATION COMMISSION, Respondent-Respondent.

No. 30,710.

Supreme Court of New Mexico.

March 11, 2009.

Holland & Hart, L.L.P., William F. Carr, Larry J. Montaño, Ocean Munds-Dry, Kristina Elena Martinez, Santa Fe, NM, for Petitioner.

Gary K. King, Attorney General, David K. Brooks, Special Assistant Attorney General, Santa Fe, NM, for Respondent.

Belin & Sugarman, Alletta D. Belin, Santa Fe, NM, for Amicus Curiae New Mexico Citizens for Clean Air & Water, Inc.

OPINION

CHÁVEZ, Chief Justice.

{1} The Oil Conservation Commission (the Commission) promulgated New Mexico Administrative Code regulation 19.15.14.1227 NMAC (12/1/08) (Rule 1227),¹ giving itself and the Oil Conservation Division (the Division) the authority to assess civil penalties and impose other sanctions against any person who violates the Oil and Gas Act (the Act), NMSA 1978, Sections 70-2-1 to -38 (1935, as amended through 2004), or any rule, order, or regulation issued thereunder. Petitioner Marbob Energy Corporation (Marbob) appealed the Commission's order to the district court, arguing that the Commission exceeded its statutory authority when it implemented Rule 1227. The district court upheld the Commission's order, holding that the Legislature's broad grants of authority and jurisdiction to the Commission and the Division include the authority to assess the civil penalties authorized by the Act. We reverse and hold that the specific provisions of Section 70-2-28 require the Attorney General to bring an action in court to assess civil penalties for violations of the Act and rules, orders, and regulations issued thereunder.

I. BACKGROUND

{2} The Commission was created by Section 70-2-4 of the Act and has two primary duties regarding the conservation of oil and gas: prevention of waste and protection of correlative rights. Section 70-2-11(A); Santa Fe Exploration Co. v. Oil Conservation Comm'n of N.M., 114 N.M. 103, 112, 835 P.2d 819, 828 (1992). The Commission may also make rules and regulations to implement and enforce the Act. See § 70-2-11(A) (granting the Division the authority to make and enforce rules, regulations, and orders); § 70-2-11(B) (granting the Commission concurrent jurisdiction with the Division "to the extent necessary for the [C]ommission to perform its duties as required by law"). Marbob is an oil and gas producer subject to the authority of both the Commission and the Division.

{3} In September 2005, the Division filed an application for rule adoption and amendment with the Commission, requesting that the Commission adopt or amend certain provisions of the New Mexico Administrative Code pertaining to the regulation of oil and gas. Among the requested changes, the Division asked the Commission to adopt Rule 1227, thereby establishing administrative "compliance proceedings." "A compliance proceeding is an adjudicatory proceeding in which the [D]ivision seeks an order imposing sanctions for violation of a provision of the Oil and Gas Act, or a provision of a rule or order issued pursuant to the [A]ct." 19.15.5.10(B) NMAC (citation omitted). Among the several sanctions available in Rule 1227, the Division and the Commission may assess civil penalties pursuant to Section 70-2-31(A) of the Act.² 19.15.5.10(B)(2) NMAC. The Commission granted the Division's application with its Order No. R-12452 on November 10, 2005, implementing Rule 1227 upon its publication in the New Mexico Register.

{4} Marbob timely filed an application for rehearing with the Commission under the Act. The Commission took no action on Marbob's application, automatically making Order No. R-12452 final ten days after Marbob's filing. See § 70-2-25(A). Marbob appealed the Commission's decision to the district court on several grounds, and the district court upheld the Commission's decision. Marbob petitioned the Court of Appeals for a writ of certiorari to the district court, which was denied. Marbob then petitioned this Court for a writ of certiorari, which we granted to determine whether the Division or the Commission has the statutory authority to assess civil penalties. Marbob Energy Corp. v. N.M. Oil Conservation Comm'n, 2007-NMCERT-011, 143 N.M. 156, 173 P.3d 763.

II. DISCUSSION

A. STANDARD OF REVIEW

{5} We are asked to determine whether Rule 1227 granted the Division and the Commission authority not provided by the Act. It is well settled that "[a]n agency may not create a regulation that exceeds its statutory authority." Gonzales v. N.M. Educ. Ret. Bd., 109 N.M. 592, 595, 788 P.2d 348, 351 (1990) (citation omitted). To determine whether Rule 1227 complies with the Act, we must look to the Act to determine whether the Legislature granted the Division or the Commission the authority to impose civil penalties. As a result, our analysis is one of statutory construction, and we review the district court's decision upholding Rule 1227 de novo. See N.M. Indus. Energy Consumers v. N.M. Pub. Regulation Comm'n, 2007-NMSC-053, ¶ 19, 142 N.M. 533, 168 P.3d 105 ("Statutory interpretation is . . . review[ed] de novo.").

{6} In construing the Act, the Commission encourages us to defer to its interpretation of the Act's provisions that it contends authorize the Division to assess civil penalties. We decline to afford the Commission such deference. When an agency construes a statute that governs it, the court will accord some deference to the agency's interpretation. Morningstar Water Users Ass'n v. N.M. Pub. Util. Comm'n, 120 N.M. 579, 583, 904 P.2d 28, 32 (1995). In addition, the court will confer a heightened degree of deference to the agency on legal questions that determine fundamental policies within the scope of the agency's statutory function. Id. These two principles suggest that we should defer to the Commission's construction of the Act because the Commission is construing its governing statute and the legal question before us is whether the Commission or the Division may achieve its statutory function of conserving oil and gas by enforcing the Act through the assessment of civil penalties. However, these principles are not the only guideposts we observe in determining whether an agency's interpretation of its governing statute should be accorded deference.

{7} Statutory construction is a question of law. State v. Romero, 2006-NMSC-039, ¶ 6, 140 N.M. 299, 142 P.3d 887. As such, "the court is not bound by the agency's interpretation [of its own statute] and may substitute its own independent judgment for that of the agency because it is the function of the courts to interpret the law." Morningstar, 120 N.M. at 583, 904 P.2d at 32. Moreover, we are less likely to defer to an agency's interpretation of the relevant statute if the statute is clear and unambiguous, as it is in this case. See Doña Ana Mut. Domestic Water Consumers Ass'n v. N.M. Pub. Regulation Comm'n, 2006-NMSC-032, ¶ 10, 140 N.M. 6, 139 P.3d 166. Also, if statutory construction is not within the agency's expertise, this Court should afford little, if any, deference to the agency on issues of statutory construction. N.M. Indus. Energy Consumers, 2007-NMSC-053, ¶ 19, 142 N.M. 533, 168 P.3d 105. The Commission's specialized expertise pertains to the regulation and conservation of oil and gas. See § 70-2-4 (stating that the commissioners "shall be persons who have expertise in the regulation of petroleum production by virtue of education or training."). Nothing in the Act requires the Commissioners to be trained in matters of statutory interpretation. Thus, we conclude that statutory construction is not within the Commission's specialized expertise. Cf. N.M. Indus. Energy Consumers, 2007-NMSC-053, ¶ 19, 142 N.M. 533, 168 P.3d 105 (holding that statutory construction is not a matter within the Public Regulation Commission's expertise). For these reasons, whether the Legislature intended to bestow upon the Commission or the Division the authority to assess civil penalties as part of the Act's overall compliance regime is a question of law, and we accord the Commission little deference on this matter.

B. SECTION 70-2-28 REQUIRES THAT THE ATTORNEY GENERAL BRING AN ACTION TO ESTABLISH LIABILITY AND ASSESS PENALTIES FOR VIOLATIONS OF THE ACT OR RELATED RULES OR ORDERS

{8} The parties' dispute essentially amounts to conflicting interpretations of Sections 70-2-28 and -31 of the Act. Marbob argues that Section 70-2-28 mandates that the Attorney General bring suit to assess the penalties authorized by Section 70-2-31 for violations of the Act or related rules or orders. The Commission argues that Sections 70-2-28 and -31 are silent about who may assess penalties and that the Division and the Commission may therefore assess penalties by virtue of the broad statutory authority granted to them in Sections 70-2-6 and -11 to enforce the Act. The Commission further specifically contends that regarding civil penalties, the Attorney General's role is limited in Section 70-2-31 to collecting the penalties previously assessed by the Division. We agree with Marbob that it is the role of the Attorney General to establish liability and assess the civil penalties authorized under the Act.

{9} In construing a statute, our charge is to determine and give effect to the Legislature's intent. N.M. Indus. Energy Consumers, 2007-NMSC-053, ¶ 20, 142 N.M. 533, 168 P.3d 105. In discerning the Legislature's intent, we are aided by classic canons of statutory construction, and "[w]e look first to the plain language of the statute, giving the words their ordinary meaning, unless the Legislature indicates a different one was intended." Id. "When statutory language is clear and unambiguous, [this Court] must give effect to that language and refrain from further statutory interpretation." Anadarko Petroleum Corp. v. Baca, 117 N.M. 167, 169, 870 P.2d 129, 131 (1994) (internal quotation marks and...