Ohio Dep't of Nat. Res. v. Big Sky Energy, Inc, Case No. CT2019-0086

• Decision Date: 08 September 2020
• Docket Number: Case No. CT2019-0086
• Citation: 2020 Ohio 4374
• Parties: STATE OF OHIO, DEPARTMENT OF NATURAL RESOURCES, DIVISION OF OIL & GAS RESOURCES MANAGEMENT Plaintiff-Appellee v. BIG SKY ENERGY, INC. Defendant-Appellant
• Court: Ohio Court of Appeals

2020 Ohio 4374

STATE OF OHIO, DEPARTMENT OF NATURAL RESOURCES,DIVISION OF OIL & GAS RESOURCES MANAGEMENT Plaintiff-Appellee v. BIG SKY ENERGY, INC. Defendant-Appellant

Case No. CT2019-0086

COURT OF APPEALS MUSKINGUM COUNTY, OHIO FIFTH APPELLATE DISTRICT

September 8, 2020

JUDGES: Hon. W. Scott Gwin, P.J. Hon. Patricia A. Delaney, J. Hon. Earle E. Wise, Jr., J.

OPINION

CHARACTER OF PROCEEDING: Appeal from the Muskingum County Court of Common Pleas, Case No. CH2014--0231

JUDGMENT: AFFIRMED

APPEARANCES:

For Plaintiff-Appellee:

DAVID YOST

OHIO ATTORNEY GENERAL

BRIAN A. BALL

GENE PARK

2045 Morse Road, Bldg. A-3

Columbus, OH 43229

For Defendant-Appellant:

GINO PULITO

230 Third Street

Elyria, OH 44035

Delaney, J.

{¶1} Defendant-Appellant Big Sky Energy, Inc. appeals the November 6, 2019 judgment entry of the Muskingum County Court of Common Pleas.

FACTS AND PROCEDURAL HISTORY

Big Sky Energy, Inc.

{¶2} Defendant-Appellant Big Sky Energy, Inc. is an Ohio corporation that owns and operates oil and gas production wells throughout the State of Ohio. Big Sky Energy is registered as Owner #1333 with the Plaintiff-Appellant State of Ohio, Department of Natural Resources, Division of Oil and Gas Resources Management ("Division"). Robert Barr is the president of Big Sky Energy.

{¶3} Relevant to this appeal, Big Sky Energy is the owner, pursuant to R.C. 1509.01(K), of three wells located in Muskingum County: ES & D Powelson #1 Well, ES & D Powelson #2 Well, and Miller #1 Well.

{¶4} Pursuant to statutory requirements, Cincinnati Insurance Company issued a bond to Big Sky Energy in the amount of $15,0000. The bond served as a blanket bond for all wells registered to Big Sky Energy.

Orders from the Chief

{¶5} On August 1, 2011, the Chief of the Division of Oil and Gas Resources Management issued Order 2011-30 requiring Big Sky Energy to plug and abandon Miller #1 Well within 30 days of the Order. An inspection conducted by the Division after September 1, 2011 showed that Miller #1 Well was not plugged or restored.

{¶6} On August 14, 2013, the Chief issued Orders 2013-39 and 2013-40 requiring Big Sky Energy to plug and abandon the Powelson #1 Well and Powelson #2 Well within 30 days. After September 13, 2013, the Division inspected Powelson Well #1 and Powelson Well #2 and found that they were not plugged and the well sites were not restored.

{¶7} On January 29, 2014, the Chief issued Orders 2014-43 and 2014-44 to Big Sky Energy and Cincinnati Insurance Company, which stated that based on Big Sky Energy's failure to comply with Order 2011-30, the entire amount of Big Sky Energy's $15,000 bond was forfeited. Effective immediately, Big Sky Energy was not permitted to operate any wells or produce from any wells in the State of Ohio. Pursuant to R.C. 1509.071(A), in lieu of forfeiture of the total amount of the bond, Cincinnati Insurance Company or Big Sky Energy could properly plug, abandon, and restore the Miller #1 Well or it could pay the State of Ohio the cost of plugging and abandoning the well.

{¶8} Upon receiving Order 2014-43, Big Sky Energy submitted an application to plug Miller #1 Well on February 7, 2014. The plugging permit was issued on March 14, 2014.

{¶9} On February 25, 2014, Big Sky Energy appealed Orders 2014-43 and 2014-44 to the Oil and Gas Commission.

{¶10} The well site for Powelson #1 Well was restored on May 4, 2014.

{¶11} Big Sky Energy plugged Miller #1 Well on May 8, 2014.

Request for Preliminary and Permanent Injunction

{¶12} On June 10, 2014, the Division filed a complaint for injunctive relief and civil penalties with the Muskingum County Court of Common Pleas against Big Sky Energy for its failure to timely plug the three oil and gas wells.

{¶13} The Powelson Well #1 was plugged on July 22, 2014.

{¶14} Big Sky Energy restored the Miller #1 Well site on September 24, 2014.

{¶15} On December 4, 2014, the Oil and Gas Commission dismissed the appeal of Orders 2014-43 and 2014-44 as moot because Big Sky Energy plugged and restored Miller #1 Well. See Big Sky Energy v. Division of Oil & Case Resources Mgmt., Appeal Nos. 860 & 861 (Dec. 4, 2014). The administrative order stated:

1. O.R.C. §1509.071(A) allows for the forfeiture of bond, and the posting of replacement bond, where an owner has failed to comply with certain provisions of law, or certain orders and agreements. However, O.R.C. §1509.071(A) allows an owner the option of properly plugging and abandoning a non-compliant well in lieu of total forfeiture. In these matters, Big Sky Energy has exercised its option to plug and abandon Miller #1 Well in order to avoid forfeiture of its $15,000 blanket bond.

2. As Big Sky Energy has exercised its option under O.R.C. §1509.071(A) to perform plugging and restoration of Miller #1 Well and the associated well site, Big Sky Energy has avoided forfeiture and shall not, at this time, be required to repost bond in the amount of $50,000.

{¶16} On May 13, 2015, the Division filed a motion to amend its complaint based on the December 4, 2014 administrative order. The trial court granted the motion and the amended complaint was filed on June 5, 2015.

{¶17} The Division and Big Sky Energy negotiated a Partial Consent Order on Preliminary Injunction, which was filed with the trial court on August 25, 2015. The Partial Consent Order set a compliance schedule for plugging and restoring the remaining wells. No later than September 15, 2015, Big Sky Energy was to plug and abandon Powelson #2 Well; no later than September 22, 2015, Big Sky Energy was to file a plugging report; and finally, no later than November 1, 2015, Big Sky Energy was to restore the Powelson #2 Well site.

{¶18} Big Sky Energy plugged the Powelson #2 Well on November 25, 2015.

{¶19} A bench trial was held on August 22, 2017.

Judgment Entry

{¶20} On November 6, 2019, the trial court issued its judgment entry after hearing the testimony of the parties and receiving proposed findings of fact and conclusions of law from both parties. The trial court found Big Energy plugged the three wells and restored two well sites. The trial court noted that none of the plugging or cleanup was done within the time periods indicated by the Chief's orders.

{¶21} In defense, Big Sky Energy argued the contractual concept of "impossibility of performance" due to financial insolvency after Trumbull County ordered in a separate case to cease all company operations. Big Sky Energy also argued the remaining well site did not pose any threat to the environment.

{¶22} The trial court first ordered Big Sky Energy to restore the well site of the Powelson #2 Well. The trial court next ordered and enjoined Big Sky Energy to pay a civil penalty of $133,960.00 calculated as follows:

For Count One, the sum of $70,760.00 results as one percent (1%) of the maximum daily amount for the total days of violation arising at the Powelson #2 Well between August 26, 2015, the effective date of the partial consent order between the parties, and August 22, 2017, the date of the hearing in this matter, being 728 days, with 34 days occurring before September 28, 2015 at a rate of $4,000.00 per day and 694 days occurring on and after September 29, 2015 at a rate of $10,000.00 per day.

For Count Two, the sum of $23,920.00 results as one percent (1%) of the maximum daily amount for the total days of violation arising at the Powelson #1 Well between September 13, 2013, the effective date of the Chief's Order 2013-29, and May 4, 2015, the date the Powelson #1 Well well site was restored being 598 days, all occurring before September 28, 2015 at a rate of $4,000.00 per day.

For Count Three, the sum of $39,280.00 results as one percent (1%) of the maximum daily amount for the total days of violation arising at the Miller #1 Well between August 31, 2011, the effective date of the Chief's Order 2011-30, and May 8, 2014, the date the Miller #1 Well was plugged, being 982 days, all occurring before September 28, 2015 at a rate of $4,000.00 per day.

{¶23} Finally, the trial court ordered Big Sky Energy to pay fees and costs for the action, including $5,000.00 attorney's fees incurred by the State of Ohio.

{¶24} It is from this judgment entry Big Sky Energy now appeals.

ASSIGNMENTS OF ERROR

{¶25} Big Sky Energy raises two Assignments of Error:

{¶26} "I. THE TRIAL COURT ABUSED ITS DISCRETION AND COMMITTED REVERSIBLE ERROR BY FINDING THAT DEFENDANT-APPELLANT BIG SKY ENERGY INC. FAILED TO COMPLY WITH ORDERS ISSUED BY THE OHIO DEPARTMENT OF NATURAL RESOURCES.

{¶27} "II. THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT ORDERED DEFENDANT-APPELLANT BIG SKY ENERGY INC. TO PAY $133,960.00 IN CIVIL PENALTIES."

ANALYSIS

{¶28} Big Sky Energy argues in its appeal that the trial court erred in finding it failed to comply with the Chief's orders and based on the failure to comply, imposed civil penalties. We disagree.

{¶29} Before we begin our analysis, we note that while both Big Sky Energy and the Division refer to the transcript of the August 22, 2017 bench trial in their appellate briefs, the parties did not file a written transcript with the appellate record.¹ Pursuant to App.R. 9(B)(1), "[i]t is the obligation of the appellant to ensure that the proceedings the appellant considers necessary for inclusion in the record, however those proceedings were recorded, are transcribed in a form that meets the specifications of App.R. 9(B)(6)." When portions of the transcript necessary for resolution of assigned errors are omitted from the record, the reviewing court has nothing to pass upon and thus, as to those assigned errors, the court has no choice but to presume the validity of the lower court's proceedings, and affirm. Goble v. Grosswiler, 5th Dist. Richland No. 2018 CA 0102, 2019-Ohio-4443, 2019 WL 5595795, ¶ 35 citing Knapp v. Edwards Laboratories, 61 Ohio St.2d 197, 400 N.E.2d 384 (1980). Pursuant to that standard, we consider the two Assignments of Error raised by Big Sky Energy.

I.

{¶30} In its first Assignment of Error, Big Sky Energy contends the...