ROAD RUNNER OIL v. BOARD OF OIL, GAS & MIN.

Decision Date25 July 2003
Docket NumberNo. 20020710-CA.,20020710-CA.
Citation76 P.3d 692,2003 UT App 275
PartiesROAD RUNNER OIL, INC., and Gavilan Petroleum, Inc., Petitioners, v. BOARD OF OIL, GAS AND MINING, Department of Natural Resources, Respondent.
CourtUtah Court of Appeals

Kelly Williams and Phillip W. Lear, Lear & Lear LLP, Salt Lake City, for Petitioners.

Mark L. Shurtleff, Attorney Generals Office, and Kurt Seel, Assistant Attorney General, Salt Lake City, for Respondent. Before BENCH, DAVIS and GREENWOOD, JJ.

OPINION

DAVIS, Judge:

¶ 1 Road Runner Oil, Inc. (Road Runner) and Gavilan Petroleum, Inc. (Gavilan) appeal an order from the Board of Oil, Gas and Mining (Board) requiring Petitioners to permanently plug and abandon four wells in Duchesne County. We affirm.

BACKGROUND

¶ 2 On November 9, 2000, Road Runner and Gavilan (collectively, Petitioners) were notified by letter from the Division of Oil, Gas and Mining (Division) that seven of their wells in Duchesne and Uintah Counties were not in compliance with Utah Administrative Code R649-3-36. This regulation requires owners of wells that have not been active or productive for five years to permanently plug the wells, unless the Division approves an extended shut-in time based upon a showing of good cause by the well operator. See Utah Admin. Code R649-3-36(3). The seven wells had not been active or productive for at least eight years.1 The Board's letter also noted that Petitioners were not in compliance with Utah Administrative Code R649-3-15 and-16, which deal with pollution and surface damage control of oil wells and reserve pits.

¶ 3 At Road Runner's request, the Division held an informal hearing on the matter on December 14, 2000. At this hearing, the parties agreed to enter into a consent decree by January 4, 2001, to address the Division's concerns. The Division reserved the right to proceed with adjudicatory proceedings in the event that a consent decree was not reached. The Division and Petitioners failed to reach a consent decree, and on April 27, 2001, the Division ordered Petitioners to clean up the Birch 1-25 Well within thirty days. Petitioners commenced the clean up process in a timely fashion. However, on June 22, 2001, a landowner complained that the Birch 1-25 Well, located on his property, had not been cleaned up properly.

¶ 4 On July 10, 2001, the Division sought a Request for Agency Action to order Petitioners to permanently plug and abandon the seven wells that were not in compliance with Utah's Oil and Gas Conservation Rules. On August 22, 2001, the Board conducted a hearing as a formal adjudication. The Board issued its Findings of Fact, Conclusions of Law and Order on September 7, 2001, concluding that Petitioners violated R649-3-36 at each of the seven subject wells and ordered the permanent plugging and abandonment of each well. Notwithstanding the express provisions of R649-3-36(1.3), Petitioners did not contest the accuracy of the Division's records concerning Petitioner's liability, or put on evidence of the downhole integrity of the wells. See Utah Admin. Code R649-3-36(1.3). Petitioners did put on evidence that various third parties may have an interest in taking responsibility for the wells. The Board held this order in abeyance for a period of six months to allow Petitioners an opportunity to ascertain whether a third party, Wind River Resources Corporation (Wind River), would be interested in acquiring any of the seven wells. As a condition for this six-month abeyance, Road Runner and Gavilan were ordered by the Board to "take action to address all immediate threats to public safety, health and welfare within sixty (60) days of [the] Order." The Order also notified the parties of their rights to reconsideration and judicial review.

¶ 5 On February 27, 2002, at the end of the six-month abeyance period, the Board convened another hearing. "The purpose of the hearing was to allow Road Runner and Gavilan an opportunity to report on those arrangements [with Wind River] and thereby show cause why the wells ... should not be plugged and abandoned as ordered on September 7, 2001." At the hearing, Wind River indicated "its continued interest in and progress toward unit operation" covering three of the seven wells, known as the Roosevelt Unit Wells. However, Wind River "declined ... to take over operation of the [remaining four wells, known as the] Duchesne County Wells." Subsequently, in its Findings of Fact, Conclusions of Law and Order dated April 12, 2002, the Board again ordered Petitioners to plug and abandon the four Duchesne County Wells in which Wind River had no interest. As part of its reasoning, the Board found that the evidence of the "potential viability of the Duchesne County Wells is speculative, not supported by downhole evidence as required by [Utah Administrative Code] R649-3-36(1[.3]) and does not demonstrate what waste would be prevented or correlative rights protected by allowing [Utah Administrative Code] R649-3-36 to continue to be violated." The Board also found that Petitioners had remedied "all surface conditions which constitute immediate threats to health, safety, and welfare at the well sites with the exception of remediating the emergency pit for the Sorenson [ ]1-6 Well."

¶ 6 On May 10, 2002, Petitioners filed a "Petition to Modify Order or in the Alternative Petition for Rehearing." The Board granted the petition for the purpose of rehearing certain issues to resolve any ambiguity between its September 7, 2001 order and its January 8, 2002 order, each of which discussed different purposes for the February 27, 2002 hearing. Specifically, the September 7, 2001 order stated that the purpose of the February 27, 2002 hearing was to determine if Road Runner had made arrangements with Wind River to take responsibility for the wells. The January 8, 2002 order stated that the purpose of the February 27, 2002 hearing was to have Road Runner and Gavilan "present their report evaluating the subject wells for primary and secondary recovery of oil and gas resources or for plugging and abandoning." In a May 31, 2002 order, the Board set a July 31, 2002 hearing date and limited the petition and parties to addressing five questions.2

¶ 7 Testimony and arguments presented at the July 31, 2002, hearing resulted in the Board's August 16, 2002 order. This order reaffirmed the Board's previous orders to "plug, abandon, and restore" the Duchesne County Wells. Specifically, the Board found that the six-month abeyance period granted by the Board was to ascertain the interest of Wind River in taking over production of the wells. The Board also concluded that when considering the option of allowing a well operator to keep its wells shut-in longer than one year, the analysis under R649-3-36 "constitutes a weighing and balancing of various factors including, but not limited to, the benefits of [sic] society of keeping the well shut-in[ ] against the risk the well poses to human health, safety and the environment." In addition to considering the length of time that the wells had been inoperable or inactive, the Board also concluded that "[w]ell integrity data are a specific factor to be weighed as part of the good cause test."3 In reaching its decision, the Board concluded that "[Road Runner and Gavilan] failed to carry their burden of demonstrating good cause to keep the Duchesne Wells shut-in."

¶ 8 Road Runner and Gavilan now appeal the Board's decision to order plugging, abandonment, and restoration of the Duchesne County Wells. We affirm the Board's decision.

ISSUES AND STANDARDS OF REVIEW

¶ 9 On appeal, Road Runner and Gavilan argue the following substantially prejudiced them: (1) the Board's decision was not based upon substantial evidence; (2) the Board ignored evidence demonstrating good cause; (3) the Board erroneously interpreted and applied Utah Administrative Code R649-3-36; (4) the Board's decision was arbitrary and capricious, and contrary to the Board's prior practice; and (5) the Board's decision was an abuse of discretion and contrary to a rule of the Board.

¶ 10 "Under Utah Code Ann. § 63-46b-16(4) [(1997) ], the appellate court reviewing an agency action may grant relief if `the agency has erroneously interpreted or applied the law' and a party has been `substantially prejudiced.'" Hegarty v. Board of Oil, Gas, and Mining, 2002 UT 82,¶ 17, 57 P.3d 1042 (citation omitted). "A party alleging substantial prejudice from agency action is entitled to relief only if the agency action is not supported by substantial evidence." Board of Equalization v. Sinclair Oil Corp., 853 P.2d 892, 892 (Utah 1993). Furthermore, when challenging an agency action as not based upon substantial evidence, appellants have a duty to "marshal all of the evidence supporting the findings and show that despite the supporting facts, the [Board's] findings are not supported by substantial evidence." First Nat'l Bank of Boston v. County Bd. of Equalization, 799 P.2d 1163, 1165 (Utah 1990).

ANALYSIS

¶ 11 Utah Administrative Code R649-3-36 delineates the procedures that must be followed if an oil well operator desires to shut-in or temporarily abandon its wells for a period longer than twelve months.

1. Wells may be initially shut-in or temporarily abandoned for a period of twelve (12) consecutive months. If a well is to be shut-in or temporarily abandoned for a period exceeding twelve (12) consecutive months, the operator shall file a Sundry Notice providing the following information:
. . . .
1.3. An explanation and supporting data if necessary, for showing the well has integrity, meaning that the casing, cement, equipment condition, static fluid level, pressure, existence or absence of [u]nderground [s]ources of [d]rinking [w]ater and other factors do not make the well a risk to public health and safety or the environment [(collectively referred to as "downhole integrity") ].
2. After review the Division will either approve
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4 cases
  • Benson v. Standards
    • United States
    • Utah Court of Appeals
    • July 8, 2011
    ...prior practice are ... reviewed to determine if an inconsistency is justified by a fair and rational basis.” Road Runner Oil, Inc. v. Board of Oil, Gas & Mining, 2003 UT App 275, ¶ 25, 76 P.3d 692 (internal quotation marks omitted); see also Utah Code Ann. § 63G–4–403(4)(h)(iii).ANALYSISI. ......
  • Tippets v. Department of Commerce, 2007 UT App 366 (Utah App. 11/8/2007)
    • United States
    • Utah Court of Appeals
    • November 8, 2007
    ...show that despite the supporting facts, the [agency's] findings are not supported by substantial evidence." Road Runner Oil, Inc. v. Board of Oil, Gas & Mining, 2003 UT App 275, ¶ 10, 76 P.3d 692. Tippets argues, in essence, that the facts show that the agency's decision was incorrect. Howe......
  • Lowrey v. Workforce Appeals Bd.
    • United States
    • Utah Court of Appeals
    • July 29, 2011
    ...show that despite the supporting facts, the [agency's] findings are not supported by substantial evidence.” Road Runner Oil, Inc. v. Board of Oil, Gas & Mining, 2003 UT App 275, ¶ 10, 76 P.3d 692. Lowrey's argument on appeal merely asserts that the Department provided no evidence to contrad......
  • Living Rivers v. Dep't of Natural Res., Div. of Oil, Gas, & Mining
    • United States
    • Utah Court of Appeals
    • May 3, 2012
    ...that the Board made an error of law or exceeded its discretion in approving the petition. See generally Road Runner Oil, Inc. v. Utah Bd. of Oil, Gas & Mining, 2003 UT App 275, ¶ 10, 76 P.3d 692 (“A party alleging substantial prejudice from agency action is entitled to relief only if the ag......
1 books & journal articles
  • Utah Standards of Appellate Review - Third Edition
    • United States
    • Utah State Bar Utah Bar Journal No. 24-1, February 2011
    • Invalid date
    ...fairly detracts from the weight of the board's evidence. See Rd. Runner Oil, Inc. v. Bd. of Oil, Gas and Mining, 2003 UT App 275, ¶ 15, 76 P.3d 692 (citing Grace Drilling Co., 776 P.2d at 68); see WWC Holding, 2002 UT 23, ¶ 8 (providing that in evaluating sufficiency of evidence, appellate ......

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