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Energy Control Unlimited, Inc. - Decision and Order, February 4, 1999

Decision and Order, February 4, 1999

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of

Alleged Violations of Article 23, Titles 1 through 19, and Article 71 of
the Environmental Conservation Law and Part 550 et seq. of Title 6 of
the Official Compilation of Codes, Rules, and Regulations of the State of New York

- by -

ENERGY CONTROL UNLIMITED, INC., and
RAYMOND L. AUSTIN,

Respondents.

Decision and Order

WHEREAS:

  1. The Department staff moved for an order without hearing pursuant to § 622.12 of Title 6 of the New York Compilation of Codes, Rules, and Regulations (6 NYCRR) before Administrative Law Judge (ALJ) Helene G. Goldberger.
  2. The attached rulings by ALJ Goldberger are adopted as my Decision and Order in this matter concerning 78 wells in the counties of Cattaraugus, Chatauqua, Erie and Wyoming owned and operated by Energy Control Unlimited, Inc. and Raymond L. Austin.
  3. As stated in the report, there are no triable issues of fact relating to the liability of respondents for failure to maintain financial security to secure proper plugging of wells pursuant to Environmental Conservation Law (ECL) § 23-0305(8)(e) and 6 NYCRR § 551.4 and for failure to prepare and to submit annual well production reports for the years 1996 and 1997 pursuant to ECL § 23-0305(8)(f) and 6 NYCRR § 551.2.

NOW, THEREFORE, have considered this matter, it is ORDERED that:

  1. Respondents Energy Control Unlimited, Inc. and Raymond L. Austin are found to have violated ECL § 23-0305(8)(e) and 6 NYCRR § 551.4 for failure to maintain financial security to secure proper plugging of wells.
  2. Respondents Energy Control Unlimited, Inc., and Raymond L. Austin are found to have violated ECL § 23-0305(8)(f) and 6 NYCRR § 551.2(b).
  3. Respondents will immediately cease production operations on all of their wells sites that are the subject of this proceeding.
  4. Respondents must plug and abandon the well sites in accordance with the Department's regulatory standards by no later than June 30, 1999 or submit proof of sufficient financial security to the Department for all the respondents' well sites by no later than April 30, 1999.
  5. For all those wells that have been transferred, respondents must submit to the Department complete well transfer applications by no later than March 15, 1999.
  6. Respondents are assessed a civil penalty in the amount of five thousand dollars ($5,000.00) which will remain suspended pending respondents' compliance with this Order.
  7. Respondents are assessed a penalty of one thousand dollars ($1,000.00) for each day respondents fail to comply with this Order.
  8. In the event that the Department staff notifies respondents that they have not complied with any term or condition of this Order, respondents will immediately pay the Department five thousand dollars ($5000) as well as the additional suspended penalty set forth in paragraph VII that is owed based upon the number of days the respondents have exceeded the time limitations set forth in this Order.
  9. All communications between respondents and DEC concerning this Order shall be made to the Department's Region 9 Director, 270 Michigan Avenue, Buffalo, New York 14203-2999.
  10. The provisions, terms, and conditions of this Order shall bind respondents, their officers, directors, agents, servants, employees, successors and assigns, and all persons, firms, and corporations acting for or on behalf of the respondents.

For the New York State Department
of Environmental Conservation

_____________/s/_____________
By: John P. Cahill, Commissioner

Dated: Albany, New York
February 4, 1999

TO: Energy Control Unlimited, Inc.
Raymond L. Austin
P.O. Box 288, Pine Street
South Dayton, New York 14138

Dominic R. Cordiscu,
Assistant Counsel
NYSDEC
Division of Environmental Enforcement
50 Wolf Road
Albany, New York 12233-5500

STATE OF NEW YORK
DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of

Alleged Violations of Article 23, Titles 1 through 19, and Article 71 of the Environmental Conservation Law and Part 550 et seq. of Title 6 of the Official Compilation of Codes, Rules, and Regulations of the State of New York by

ENERGY CONTROL UNLIMITED, INC., and
RAYMOND L. AUSTIN,

Respondents.

ALJ Rulings on Staff's

Motion for Summary Order

Background

On December 23, 1998, pursuant to Articles 23 and 71 of the Environmental Conservation Law (ECL) and Part 622 of Title 6 of the New York Compilation of Codes, Rules, and Regulations (NYCRR), the staff of the New York State Department of Environmental Conservation (DEC or Department) commenced this enforcement proceeding by service by certified mail of a notice of motion for an order without hearing and supporting affidavits upon the respondents Energy Control Unlimited, Inc. and Raymond L. Austin. Respondents submitted a letter by Raymond L. Austin dated January 15, 1999 in response and staff served a reply dated January 25, 1999.

Position of Staff

In its papers, the staff contends that the respondents, as owners/operators of 78 wells located in Cattagaugus, Chataugqua, Erie, and Wyoming counties have failed to maintain financial security for these wells since October 21, 1998 and have failed to report annual well production for 1996 and 1997 in violation of ECL § 23-0305(8)(e), (f) and 6 NYCRR §§ 551.4 and 551.2. As a remedy, staff requests that the Commissioner issue an order directing that respondents' wells be deemed abandoned and the wells be plugged and surrounding land reclaimed. The staff has not requested a payable penalty other than a suspended one of five thousand dollars ($5000) and an additional penalty of one thousand dollars ($1000) per day for each day the respondents fail to comply with the Commissioner's order.

Respondents, Energy Control Unlimited, Inc. and Raymond L. Austin, submitted their response in a letter signed by Mr. Austin dated January 15, 1999, stating that they are transferring the ownership of the wells and only 7 of the 78 wells remain under their ownership. Respondents claim they are "making efforts to bring the remaining seven wells into compliance . . ." Respondents also maintain that they are preparing to submit all annual reports to the Department from 1995 to the present and will also supply missing transfer requests.

In its reply of January 25, 1999, staff argues that respondents have not denied the allegations in the notice of motion that the financial security has been allowed to lapse. In addition, staff maintains that the Department's records do not reveal Department receipt or approval of transfer applications for any of the wells which are the subject of this proceeding.

Findings of Fact

  1. Respondents Energy Control Unlimited and Raymond L. Austin are the registered owners/operators of 78 wells located in Cattaraugus, Chataugqua, Erie, and Wyoming counties.
  2. Respondents had satisfied their obligation to maintain financial security on these wells through the use of bonds guaranteed by New York Surety Company in the amount of $270,000.00.
  3. In the fall of 1998, New York Surety Company was liquidated by order of the Supreme Court, Nassau County and the respondents' bonds were canceled effective October 21, 1998.
  4. Respondents have not obtained substitute financial security and have instead transferred ownership of 71 of the 78 wells.
  5. The respondents did not obtain approval from the Department for transfer of these wells pursuant to 6 NYCRR § 551.4(c).

Discussion

Section 622.12(d) provides that a contested motion for order without hearing will be granted if upon the filings, the action is established sufficiently to warrant granting summary judgment pursuant to the New York Civil Practice Law and Rules (CPLR). Pursuant to the CPLR, summary judgment is appropriate when no genuine, triable issue of material fact exists between the parties and the movant is entitled to judgment as a matter of law. CPLR § 3212(b); Friends of Animals v. Association of Fur Mfgrs., 46 NY 2d 1065, 1067 (1979). In the matter pending, respondents have not denied that they do not have financial security on the wells nor that they have not submitted annual reports for certain years to the Department. Rather, they attempt to defend the allegations of violation by stating that they have transferred most of the wells to new owners and they are attempting to bring the remaining wells into compliance.(1) With respect to the missing reports, respondents indicate that they are preparing them currently and will submit them to the Department for the years 1995 to the present.(2)

These defenses are not adequate to overcome the allegations by the Department. Section 23-0305(8)(e) of the ECL prohibits the transfer of wells while a violation of Article 23 or any regulation promulgated thereunder is pending. In addition, 6 NYCRR § 551.4(c) requires that an owner of a well is required to maintain financial security until a subsequent owner has so filed and the Department has approved the transfer or the well has been plugged and abandoned according to Part 555. In this case, none of these actions has been taken and therefore, respondents are in violation of this regulation. See, In the Matter of Liberty Oil Company, et al (Interim Decision and Order, July 1997).

In addition, to date, respondents have failed to submit the well production reports for these wells for the years 1996 and 1997 and are therefore in violation of 6 NYCRR § 551.2(b). While respondents may intend to submit these, they were not timely submitted and the Department was deprived of this necessary information that assists DEC in the regulation of this industry.

Staff has requested an order that requires the proper plugging and abandonment of these wells and in the event this work is not carried out in accordance with such an order, a penalty of five thousand dollars ($5,000.00) and one thousand dollars ($1,000.00) for each day there is a continuing violation be assessed of the respondents. ECL § 71-1307 allows for these penalty amounts for each violation of Article 23 or any rule or regulation promulgated pursuant to this article. While staff has not specifically stated the rationale for this sum, the amount seems more than reasonable based upon the unquestionable violations, the number of wells, and the option respondents have to comply with the Commissioner's order and not pay any fine.

The Department's primary method of ensuring that these wells are either in use or properly plugged and abandoned is through the record-keeping and security requirements of Article 23 and the attendant regulations. See, Liberty, supra; Matter of Farrell and Williams (Commissioner's Order July 30, 1996). Therefore, the imposition of a penalty when there has been a violation of these requirements is important in order to encourage compliance.

Conclusion and Recommendation

Based upon the facts and discussion as set forth above, I find the respondents Energy Control Unlimited, Inc. and Raymond L. Austin liable for the violations set forth in the staff's notice of motion. I recommend that the Commissioner's Order contain the following requirements:

  1. the cessation of respondents' production operations;
  2. that respondents plug and abandon the well sites in accordance with the Department's regulatory standards by no later than June 30, 1999; or
  3. submit proof of sufficient financial security to the Department for all the respondents' well sites by no later than April 30, 1999;
  4. for all well transfers, submit complete well transfer applications by no later than March 15, 1999;
  5. a suspended penalty of five thousand dollars ($5,000.00) and one thousand dollars ($1,000.00) for each day respondents fail to comply with the above stated requirements.

_____________/s/_____________
Helene G. Goldberger
Administrative Law Judge

Dated: Albany, New York
February 1, 1999

TO: Energy Control Unlimited, Inc.
P.O. Box 288, Pine Street
South Dayton, New York 14138

Raymond L. Austin
P.O. Box 288, Pine Street
South Dayton, New York 14138

Dominic R. Cordiscu,
Assistant Counsel
New York State Dep't of
Environmental Conservation
Division of Environmental Enforcement
50 Wolf Road
Albany, New York 12233-5500

1. As part of theirs response, respondents submitted as Exhibit A a copy of a document entitled "Wells Registered to Energy Control Unlimited, Inc." that lists the wells. Next to each well listed respondents have placed a symbol indicating transfer to the County Sheriff, Steadman Energy, or to the surface landowner. Next to seven of the wells listed, respondents note that they are "negotiating to assign". In their letter of January 15, 1999, respondents state that they are making efforts to bring the seven wells into compliance.

2. Attached to the affidavit of Charles Gilchrest submitted in support of staff's motion is Exhibit E which are the annual well production reports for the years 1994 and 1995.

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