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Farrell, Thomas J. - Order, July 30, 1996

Order, July 30, 1996

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of

Alleged Violations of Articles 23 and 71 of the New York State Environmental Conservation Law
and Parts 551 and 555 of Title 6 of the Official Compilation of
the Codes, Rules and Regulations of the State of New York

- by -

THOMAS J.FARRELL, JOAN G.FARRELL,
DENNIS J. WILLIAMS and STACY M. WILLIAMS,

RESPONDENTS.

ORDER

DEC Index No. D9-A113-93-12

WHEREAS:

PROCEEDINGS

  1. Pursuant to a January 6, 1994 Notice of Motion Without Hearing (the "Complaint") and subsequent rulings of Administrative Law Judge (ALJ) John H. Owen, an administrative enforcement hearing was convened before the ALJ on September 27, 1994 in the Department's Region 9 Headquarters, 270 Michigan Avenue, Buffalo, New York 14203, and concluded on that date. The Department Staff (the "Staff") were represented at the hearing by Carl G. Dworkin, Esq., and subsequently by Joseph M. Kowalczyk, Esq., who prepared the exceptions and comments filed on the ALJ's Recommended Decision. Robert E. Murrin, Esq., represented Respondents; however, as indicated in the ALJ's Report, Mr. Murrin did not appear at the adjudicatory hearing. Post-hearing briefs by Staff and Respondents (by Mr. Murrin) were received by the ALJ on January 6, 1995 and February 10, 1995, respectively. The ALJ's Recommended Decision was issued on April 22, 1996. Exceptions and comments were received from Staff on May 29, 1996. No exceptions and comments were filed by Respondents. The record closed on May 29, 1996, upon receipt of the exceptions in the Office of Hearings and Mediation Services.

Introduction

  1. In this proceeding Staff seeks an order imposing civil penalties on Respondents for alleged violation of the regulations applicable to the operation of oil and gas production facilities. Under ECL Article 23 and the attendant regulations implementing the statute, oil and gas well owners and operators are required to take measures to prevent waste of oil and gas resources, optimize recovery of oil and gas resources, and protect the rights of owners and the public. (ECL .23-0301). This Department-administered program requires that abandoned wells be properly plugged in order to seal off the fluids in the strata penetrated by a well so that the fluid from one stratum will not escape into another or to the surface. (ECL .23-0305.8(d) and (e)). It also requires the filing of annual production reports and compliance with other administrative requirements deemed appropriate to assure that the terms and intent of the statute are carried out.

The Complaint

  1. The Complaint alleges that Farrell and Williams have violated the requirements of ECL .23-0305.8(e) and 6 NYCRR ..551.1, 551.4 and 555.3. Specifically, Respondents have allegedly (1) failed to submit acceptable Organizational Reports which reports are required to track the activities or any change in activities concerning drilling, production, storage, well abandonments, etc., as required by 6 NYCRR .551.1; (2) failed to submit the required financial security to guarantee the performance of well plugging and abandoning obligations under 6 NYCRR .551.4; and, (3) have abandoned four oil and gas wells without plugging them as required by 6 NYCRR .555.3. The Staff request a penalty in the sum of $40,000 against the Farrells and $10,000 against the Williamses.

ALJ's Recommended Decision and Exceptions by Staff

  1. The ALJ's Recommended Decision, issued pursuant to 6 NYCRR .622.18(a)(2), recommended the charges against Respondents for abandoning four wells be dismissed, but agreed, in part, with Staff's allegations respecting Respondents failure to file Organizational Reports, annual production reports and financial security as required by the regulations. Staff asserts on exception that four wells were proven to be abandoned by Respondents, contrary to the ALJ's conclusions. Staff argues that the ALJ inappropriately discounted expert opinion about environmental and equipment conditions at the well sites submitted to prove abandonment and that the opinion evidence should be weighed in support of abandonment. In addition, Staff argues that the ALJ failed to properly take into account the regulations which required Respondents to report their activities to the Department. Staff implicitly argues that the reporting or lack of reporting of information required to track the activities of the owners or operators of the wells not in production is presumptive evidence that the wells were in fact abandoned.
  2. Furthermore, Staff disagrees in part with the ALJ's analysis regarding submission of a required well transfer application. Such applications to the Department are required to transfer liability from one owner/operator to another. Specifically, Staff assert that the ALJ erred in concluding that because the Department had not approved all well transfers between owners, the current owner (Williams) has no responsibility for submitting Organizational Reports, financial security or production reports from producing wells. According to Staff, during the pendency of the transfer of the wells from Respondent Farrell to Respondent Williams, Williams continues to meet the definitions of an owner or operator in the regulations. Accordingly, Staff asserts that because both parties were or are producing oil, both parties are liable for plugging abandoned wells, filing Organizational Reports, filing production reports and posting an acceptable financial security, and Williams must comply with the same requirements for the producing wells.

DECISION

  1. Upon my review of ALJ Owen's Recommended Decision, the exceptions and comments filed on it, I will adopt the ALJ's Findings, Conclusions and Recommendations insofar as they are not disturbed in my following decision.

Abandonment of Oil and Gas Wells

  1. As noted above, ECL .23-0305.8(d) requires that wells be plugged and replugged (if necessary) to prevent movement of fluids between strata, to prevent pollution of fresh water supplies, and for related public safety and conservation reasons. The regulations at 6 NYCRR Part 555 establish that it shall be unlawful for any owner or operator to abandon any well, wells, or lease without having plugged and abandoned the well. The term "abandon" is not defined in the regulations. In Williams and Meyers, Manual of Oil and Gas Terms, Ninth Edition (1994), "abandoned well" is defined as follows: "[a] well no longer in use, whether because it was drilled as a dry hole, or has ceased to produce or for some other reason cannot be operated." Its dictionary definition is: "To give up with the intent of never again claiming a right or interest in" (Webster's Ninth Collegiate Dictionary). Under 6 NYCRR Part 555 at ..555.2 and 555.3, wells must be permanently plugged and abandoned upon termination of their lawful shut-in or temporary abandonment period. The regulations set a one year period of lawful shut-in (applicable to wells capable of commercial production) and a 90 day period of lawful temporary abandonment (applicable to other wells, i.e., those wells not produced on a commercial basis). An extension of either the 90 day time period or the one year time period requires Department approval.
  2. A fundamental principle of the regulations affecting oil and gas wells in New York is that the status of all wells, whether they are active or inactive, must be annually reported to the Department until they are plugged and abandoned, and the Department has received and approved the plugging report in accordance with a permit. The requirement to report all wells not permanently plugged, whether in production or not in production, was recently affirmed In the Matter of Allegro Oil and Gas, Inc., Commissioner's Order, November 1, 1993. The reporting system, which our regulatory process depends upon, places full responsibility upon the owner/operator to ensure proper development, operation and utilization of the product, and after exhaustion of the resource or discontinuance of operations, the plugging of all abandoned wells. The regulatory scheme is designed to track oil and gas wells from their inception through production and then plugging of an abandoned well. The regulatory scheme is consistent with the long-established regulatory practice to require permittee's to monitor or report their activities as required by the applicable regulations. Failing to file the necessary reports necessary to monitor oil and gas production is considered presumptive evidence of well abandonment where an owner/operator does not report its wells.
  3. In this case, eight oil and gas wells were in production when the property, known as the "Wilson Lease," was under the control of one Vaughn. Vaughn sold the Wilson Lease to Thomas J. Farrell, who drilled two additional oil and gas wells. The Wilson Lease containing the 10 wells was subsequently sold to the Williamses. The last annual production report filed with Staff by Farrell acknowledged six producing wells; thus four were not reported and are presumed to have been abandoned.
  4. The Staff initially moved for an order without hearing against Respondents, based upon its assembled documentary evidence alleged to show abandonment. The ALJ denied the motion finding that the information provided by Staff was insufficient to conclude the wells were in fact abandoned and in need of plugging.
  5. Staff thereupon conducted a field survey and supplied testimony as well as documentary and photographic evidence for the purpose of showing that the wells were abandoned. The ALJ discounted Staff's information which sought to show that certain oil and gas wells had not been producing "recently" or for an "extended period of time." The ALJ interpreted this testimony as too vague to constitute proof of abandonment; thus, he found that Staff failed to carry their burden of proof and concluded that Respondents' wells were not proven to be abandoned as claimed by the Staff (see Hearing Report at p. 6).
  6. I conclude, however, that there is a presumption of abandonment based upon an owner/operator's failure to report well production as required. Given this conclusion, it was not necessary for Staff to seek to locate the abandoned wells in the field. I will evaluate the entire record evidence on this issue since it was a major focus in the Recommended Decision. As noted above, the ALJ rejected a DEC expert witness' conclusion based upon his evaluation that wells not in service "recently" or for an "extended period of time" was too vague to constitute abandonment. However, this testimony was characterized by the DEC witness as meaning years. It is clear that years of well inactivity would reasonably lead to a conclusion supporting abandonment consistent with the one year period in 6 NYCRR .555.2. Since, on this record, Staff witness Hoffman is the field person most familiar with the operation of oil and gas wells, their workings and attendant appurtenances used to recover oil and gas, and his familiarity with the Department's oil and gas program, greater deference must be given his opinion testimony than was given by the ALJ. This is particularly true where, as here, no contrary factual probative evidence or expert opinion was submitted by Respondents to contradict Staff witness Hoffman whatsoever. In addition, the record does not contain probative defenses by Respondents; it does contain self-serving statements, however these must be discounted in view of admissions by Respondents that at least three of the wells were abandoned. In fact, the post-hearing brief by Respondents attorney Murrin acknowledges three wells that "require plugging had not produced for a long period of time." (Br. at p. 1). All of these elements lead me to accept the fact that at least three of the wells were abandoned and not plugged.
  7. The ALJ reported that the well equipment may have been "scavenged from well to well" to rebut Staff witness Hoffman's testimony of the wells being abandoned more than a year. (Report at pps. 6 and 7). The ALJ inferred the well equipment may have been scavenged from the photographic evidence and other indirect information which, however, does not directly speak to scavenging; thus there is no record evidence to support scavenging of equipment from well to well for the purposes of invalidating the conclusions of witness Hoffman. The only mention of equipment being taken from one well to another, and which was characterized by the ALJ as 'scavenging', was in the context of one Respondents argument that a well was not producing because it had no well rod to pump oil. The context of the discussion was not about scavenging of equipment as a defense or to rebut witness Hoffman's conclusion about well inactivity for more than a year, but that the well in question could be put into production by simply installing a well rod.
  8. The ALJ's Finding of Fact 13 found that well DEC No. 10 was not on the Wilson Lease, as fully reported on page 4 of Appendix 4 to the Recommended Decision. Staff's exceptions do not specifically refute the finding but acknowledge nine of the ten wells are on the Wilson Lease. (Exception at p. 6). I will not disturb the ALJ's conclusion that DEC No. 10 is not on the Wilson Lease. Accordingly, ample evidence exists to find three wells, DEC Nos. 2, 5 & 9, are abandoned by Respondents and are in need of plugging. Based upon the foregoing, I reject the ALJ's Findings of Fact Nos. 14, 15 and 19, Conclusions of Law Nos. 4 and 9 and Recommendation No. 1.
  9. The ALJ relied upon the language in 6 NYCRR .555.2 (Shut- In Wells) which provides for a one year period of inactive status for wells capable of being produced on a commercial basis. Staff have charged Respondents with violation of 6 NYCRR .555.3 in the Complaint and have argued on exception that the 90 day temporary abandonment rule in 6 NYCRR .555.3 is applicable, meaning any inactivity beyond 90 days and no demonstration of sufficient good cause for further "temporary abandonment" may constitute proof of abandonment. Both regulatory provisions require the owner or operator to apply for a Department-approved extension of the period of inactive status. Respondents presented no documentary evidence to show an inactive status with Department permission beyond either 90 days or one year. Since the wells were inactive in excess of one year, they can be considered abandoned pursuant to 6 NYCRR ..555.1 and 555.2.
  10. In dicta, the ALJ held that if abandonment had been proven, the Staff would have had to prove when abandonment occurred and who was the owner/operator at that time. (Footnote No. 6). The dicta is not a finding of fact and is only an advisory opinion of the ALJ's reading of the statute. I disagree with the ALJ's interpretation, as I have with his interpretation of the regulations and the facts of this case.

Organizational Reports and Financial Security

  1. The ALJ reported that Respondents Williams have no right to produce and "it is not to be presumed that they are or have been producing in violation of the law, and hence they had and presently have no responsibility for production reports." (Report at p. 9). I cannot agree with that analysis as it is contrary to the regulations. The status of the transfer application cannot be used to avoid the required reporting by Williams. In fact, Respondent Williams makes numerous admissions that he is producing oil from six wells previously assigned to Farrell, and thus he has responsibility for filing annual well production reports as required by 6 NYCRR .551.2. Accordingly, I reject Findings of Fact No. 21 and Conclusions of Law Nos. 10 and 11. Recommendation No. 6 is modified to conform to the above.

Motion to Conform Pleading to the Proof

  1. Staff moved to conform the pleading to the proof offered at hearing. The motion was not ruled upon by the ALJ nor reported in the Hearing Report. The Respondents did not object nor did they otherwise respond to the motion. I grant Staff's motion to conform the pleading to the proof submitted. The Staff have asserted that there are more than 10 wells on the Wilson Lease, a fact unknown to Staff at the time they initiated the action. Staff's assertions arise from Respondents' answer gleaned from interrogatories produced in this case. Hearing Exhibit 3, prepared by Respondent Williams and received in evidence, indicates at least 14 wells on the Wilson Lease. However, Respondent Williams was only able to locate 9 of the 14. It is reasonable to conclude that a total of 14 wells exist based upon the documentary information submitted. This total includes those wells addressed in this proceeding. Accordingly, Respondents must conduct a survey to locate the additional wells and plug them or verify they already have been plugged, or in the alternative, attest that after a diligent search, these wells could not be found. Such survey will be designed and conducted with the approval of the Staff. However, attesting that wells not found or "lost" does not relieve the owner/operator of remedial activities should the "lost" wells be found or cause adverse environmental impacts in the future.

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

  1. Respondents Thomas J. Farrell and Joan G. Farrell are hereby assessed a joint and several civil penalty in the sum of $10,000 for failing to plug abandoned wells DEC Nos. 2, 5 and 9.
  2. Respondents Thomas J. Farrell and Joan G. Farrell are hereby assessed a joint and several civil penalty in the sum of $2,000 for failing to file Organizational Reports.
  3. Respondents Thomas J. Farrell and Joan G. Farrell are hereby assessed a joint and several civil penalty in the sum of $7,500 for failing to keep financial security in force.
  4. Respondents Thomas J. Farrell and Joan G. Farrell are hereby assessed a joint and several civil penalty for failing to submit Annual Production Reports, as follows:

    a) for the 1987 report: $750
    b) for the 1988 report - $750
    c) for the 1989 report - $750
    d) for the 1991 report - $750
    e) for the 1993 report - $750
    f) for the 1994 report - $750
    g) for the 1995 report - $750

  5. The total sum of $25,250 is hereby assessed against Respondent Thomas J. Farrell and Joan G. Farrell of which $3,000 is payable within 60 days of the date of this Order. Payment of the amount of $22,250 is suspended and will not be payable provided that the Respondent Farrells, to the satisfaction of the Regional Director, cure each violation found within 120 days of the date of this Order; i.e., submission of Organizational Reports, Annual Production Reports, and provision of financial security, as well as plugging abandoned wells DEC Nos. 2, 5 and 9, as well as completion of the requirements of Paragraph VII of this Order. Failure to .timely comply with any of the directives in this Order to the satisfaction of the Regional Director will cause the suspended amount to be fully assessed.
  6. Respondent Dennis J. Williams and Respondent StacyM. Williamss are hereby assessed a joint and several civil penalty in the sum of $6,000. The amount of $3,000 shall be payable within 60 days of the date of this Order and the balance is suspended, conditional upon their showing the Regional Director: (1) that wells DEC Nos. 2, 5 and 9 are plugged; (2) that completed and acceptable Organizational Reports are filed; (3) that financial security in an amount acceptable to the Department is posted; (4) that annual well production reports are submitted to the Department; and, (5) compliance with Paragraph VII of this Order is completed. Failing to comply with any of the directives within 120 days of the date of this Order will cause the suspended amount to be fully assessed.
  7. Respondents Farrells and Williamses must conduct a survey to locate the additional wells and as identified on Exhibit 3, (other than DEC Nos. 2, 5, 9 and DEC No. 10), and plug them or verify they already have been plugged, or in the alternative, attest that after a diligent search, the additional wells could not be found. Such survey will be designed and conducted with the approval of the Staff. However, attesting that wells not found or "lost" does not relieve the owner/operator of remedial activities should the "lost" wells be found or cause adverse environmental impacts in the future. Failing to comply with this directive within 120 days of the date of this Order will cause the suspended amount to be fully assessed, jointly and severally against Respondents.
  8. All communications between the Respondents and the Department in this matter shall be made to the Department's Region 9 Director, 270 Michigan Avenue, Buffalo, New York 14203-2999.
  9. The provisions, terms and conditions of this Order shall bind the Respondents, its 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: Michael D. Zagata, Commissioner

Dated: Albany, New York
July 30, 1996

To: Joseph M. Kowalczyk, Esq.
Compliance Counsel
Division of Environmental Enforcement
NYSDEC
50 Wolf Road
Albany, New York 12233-5500

Thomas J. Farrell
1100 W. Warren Road
Bradford, Pennsylvania 16701

Joan G. Farrell
1100 W. Warren Road
Bradford, Pennsylvania 16701

Dennis J. Williams
22 Parkside Drive
Limestone, New York 14753

Stacy M. Williams
22 Parkside Drive
Limestone, New York 14753

Robert E. Murrin, Esq.
Murrin & DeRose
613 Community Bank Building
Olean, New York 14760

STATE OF NEW YORK
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
50 Wolf Road
Albany, NY 12233-1550

In the Matter

- of -

the Alleged Violations of Articles 23 and 71 of the New York State Environmental Conservation Law
and Parts 551 and 555 of Title 6 of the Official Compilation of
Codes, Rules and Regulations of the State of New York

- by -

THOMAS J. FARRELL, JOAN G. FARRELL,
DENNIS J. WILLIAMS AND STACY M. WILLIAMS,

Respondents.

DEC Index No. D9-A113-93-12

HEARING REPORT

- by -

____________/s/____________
John H. Owen
Administrative Law Judge

Summary

This matter involves respondents Thomas J. Farrell and Joan G.Farrell of Bradford, Pennsylvania (husband and wife and former owners of the subject real property) failing to plug four allegedly abandoned crude oil and gas wells on the property, allegedly failing to file Organizational Reports, allegedly failing to provide financial security and file required Production Reports to the Department of Environmental Conservation (the "Department" or "DEC"). Respondents Dennis J. Williams and Stacy M. Williams of Limestone, New York (husband and wife and present owners of the subject real property) allegedly committed the same violations concerning the same crude oil and gas wells. Staff also sought the imposition of a $40,000 civil penalty upon each Farrell respondent and a $10,000 civil penalty upon each Williams respondent.

This report finds that even after a site inspection, the Staff has been unable to identify any specific well Staff claims is abandoned and has offered only the most vague proof that any wells are abandoned. Staff did show that additional Organizational Reports were due, that financial security had lapsed and was cancelled, and that certain required Production Reports had not been filed.

As to civil penalties this Report recommends that the Commissioner's penalty "release or compromise" authority be invoked in favor of the Farrell respondents to greatly reduce the civil penalties otherwise required, to suspend two-thirds of the reduced penalties against the Farrells as an incentive to cure the violations found.

As to the Williams respondents, this report recommends that they be afforded a self-executing dismissal of the charges against them as follows: (1) on the abandonment charges, one year after the Commissioner's order is received provided that each well on the site is then either producing or shut-in with Department approval, or has been properly plugged; 2) on the Organizational Reports and financial security charges, until the well transfers are about to be approved, provided that an Organizational Report is filed and acceptable financial security is posted; and, (3) on the Production Reports charges, that a Production Report is filed by March 31 following the first year in which the well transfers are approved.

Proceedings

This proceeding was commenced when, on February 4, 1994, the Staff of the Department filed with the Chief Administrative Law Judge of the Department's Office of Hearings a Notice of Motion for "Summary Order." The matter was assigned to Administrative Law Judge ("ALJ") John H. Owen who treated the motion as one "For Order without Hearing" under 6 NYCRR 622.12.

Staff, claiming that there were no issues of fact, sought an order of the Department's Commissioner summarily directing each respondent, pursuant to Environmental Conservation Law ("ECL") 23-0305.8(e) and 6 NYCRR 551.1, 551.2, 551.3 and 555.4 to (a) submit Organizational Reports and Production Reports, (b) submit financial security, and (c) plug the four allegedly abandoned wells.

Respondent Thomas J. Farrell filed and served a written response to the motion contending that as long as he and his wife Joan G. Farrell owned the property they complied with all legal requirements, that he looked for abandoned wells with a map furnished by Staff, that he could not find any, and that he believed no such wells exist. To this response there was attached a discovery demand in which the "Respondents' Farrell" [sic] demanded information as to the location of the alleged abandoned wells. There was no other or separate response by respondent Joan G. Farrell. Respondent Dennis J. Williams served and filed a written response stating that he and his wife Stacy M. Williams have attempted to comply with all legal requirements since coming to ownership of the property but Staff has prevented compliance, that they have looked for abandoned wells, located none, and believe none to exist. Here again, as with Thomas J. Farrell's response, there was attached to Dennis J. Williams' response a discovery demand in which the "Respondents' Williams" [sic] demanded the location of the wells similarly to the manner in which the Farrells demanded it.

By letter dated February 7, 1994 Staff counsel objected to the respondents' discovery demands as interrogatories which are allowed only by permission of the ALJ under 6 NYCRR .622.7(b)(2).

By letter dated February 11, 1994, the ALJ allowed respondents' discovery requests. By motion dated May 3, 1994 Staff sought leave to serve interrogatories. By letter of May 13, 1994, the ALJ allowed Staff's interrogatories and set response to them by June 24, 1994.

After studying the motion papers and responses the ALJ issued Rulings under date of July 28, 1994 which (1) denied the motion for order without hearing, (2) set an adjudicatory hearing for August 30, 1994, (3) directed Staff to respond to respondents' discovery demands within 15 days or explain under oath why it was unable to do so, and (4) directed respondents to respond to Staff's interrogatories within 15 days or explain under oath why they were unable to do so.

By letter of August 5, 1994 Staff sought reconsideration of the Rulings of July 28, 1994. Since it appeared to the ALJ that reconsideration was sought based upon respondents' responses to the interrogatories, a certain map that one or more respondents had allegedly furnished to Staff, and perhaps other material not before the ALJ when the Rulings of July 28, 1994 were issued, the ALJ by letter dated August 9, 1994 directed Staff to supply this new material to the ALJ immediately.

When Staff counsel refused upon the ground that it was not required to submit material furnished in discovery, the ALJ by Rulings issued August 17, 1994 denied reconsideration.

After some intermediate correspondence about dates, a new hearing date, September 27, 1994, was agreed to by the parties.

The hearing was held on that date at the Region 9 Headquarters, 270 Michigan Avenue, Buffalo, New York 14203 and concluded that same date. Carl G. Dworkin, Esq., Staff Counsel from the Department's Central Office (and who had prepared the motion and handled discovery for the Staff), presented the Staff's case.

Only respondent Thomas J. Farrell and respondent Dennis J. Williams appeared at the hearing. Robert E. Murrin, Esq., of Olean, New York, had represented all respondents from the outset but had explained by letter of September 20, 1994 that he would not be appearing at the hearing because his clients were unable to underwrite his travel expenses.

At the hearing, Mr. Dworkin called as witnesses John Hoffman, Mineral Resource Specialist II, Region 9 (Olean Office) and Richard Arieda, Mineral Resource Specialist III, Central Office, Albany. Respondent Thomas J. Farrell and Respondent Dennis J. Williams, who had been advised by the ALJ at the opening of the hearing and periodically throughout the hearing of all their rights and the procedure involved in the hearing, cross-examined Staff's witnesses and testified on their own behalf. Respondents called no other witnesses. Some 27 exhibits (all from Staff) were received in evidence. Post-hearing briefs were submitted by Mr. Dworkin (January 6, 1995) and Mr. Murrin (February 10, 1995).

Sometime thereafter Mr. Dworkin left the Department and was replaced by Joseph M. Kowalczyk, Esq., Compliance Counsel.

By letter dated June 16, 1995 Mr. Kowalczyk requested that the ALJ hold this Report in abeyance pending settlement discussions. The ALJ agreed and so advised counsel by telephone.

Thereafter Mr. Kowalczyk and Mr. Murrin engaged in settlement efforts, with Mr. Kowalczyk advising by letter of September 19, 1995 that settlement efforts had failed. The record closed upon receipt of that letter on September 22, 1995.

Discussion

This report will first examine the location and the physical status of the wells and all information in the record concerning them, and then determine which, if any, have been abandoned. Then the question of whether Organizational Reports must be filed, financial security posted and kept in place, and Production Reports filed will be taken up.

The motion for order without hearing had been denied basically because Staff was not able to point specifically to any allegedly abandoned wells and the respondents said there were none. Staff's presentation in the motion was based solely on deductive reasoning: that the documents show that Farrell received eight wells from one Vaughn, that he received permits to drill two more (and reported them drilled) and that the last reports show six wells producing, leaving four wells abandoned; however, the reports and other documents relied upon by Staff were generally inconsistent and even conflicting year to year; and were thus unreliable.

Ownership of the property is established by deeds, the first being a deed to the land, the mineral rights, the wells and well equipment from a Duane Vaughn and Alice Vaughn, his wife, to Thomas J. Farrell, dated March 15, 1976 (Exhs. M and 13); the second is a similar deed, dated October 2, 1980 from Thomas J. Farrell and Joan G. Farrell to Joan G. Farrell (Exhs. N and 26); and lastly a similar deed from Joan G. Farrell to Dennis Williams and Stacy M. Williams, dated April 16, 1992 (Exhs. O and 27).

Thomas G. Farrell testified at the hearing that when, in 1976, he was purchasing from the Vaughns, Duane Vaughn had had his "voice box" removed. Although Vaughn's wife was living at the time of the deed, it is a fair assumption that she had only limited knowledge about wells. The wife may have predeceased Vaughn, since Vaughn's daughter filed a Production Report for 1976 with the Staff in which she stated that her father passed away on April 6, 1976 (there is no mention of her mother), and that she had very little knowledge about well matters except that, "He [her father] sold his lease just prior to his death." (Exhibits D and 11)

If Farrell's point is that he could receive no detailed information about the wells from Vaughn, it overlooks the possibilities that Vaughn had some records and that Vaughn could have told Farrell whatever he wished, as well as answering Farrell's questions, in writing. That Farrell had some detailed information about the wells seems supported by the fact that after sort of blurting out at the hearing that he also received a bill of sale from Vaughn (the deeds contain only very general information about any wells), Farrell declined to produce it. All of this suggests that Farrell had more knowledge about the site than he was willing to reveal.

The Wells Generally

The property on which at least most the wells are located is along New York's border with Pennsylvania, in the Town of Carrollton in southern Cattaraugus County. Neither the motion papers nor the documents received in evidence at the hearing include any diagram of the property's boundaries.

A map by Williams was furnished in response to Staff's interrogatories and this became Exhibit 3. Nine wells are indicated by red X marks. DEC witness Hoffman said he received the map from Staff witness Arieda and understands it was prepared by Williams. Farrell also said Williams prepared it but Farrell objected to it saying:

"I have an objection. It is dated 1994 [there is no date on the map and Farrell must mean it was furnished in 1994] and I haven't owned the lease since 1992, so if you can drill approximately a well a week down there, there could be another 600 and some wells down for all I know."

After Williams conceded that he had furnished the map and placed the red Xs on it, the map was received in evidence although it was noted that Farrell disputed both the number and the locations of the wells.

As it turned out the Staff used the map as a guide when it went to the site, before the hearing, on September 20, 1994. The map appears to be basically a county tax map with other information placed on it.

There are certain landmarks on the map which were probably of assistance to the Staff. There is a road running basically north and south from Pennsylvania at the bottom and off the top of the map and there is a "Tuna Creek" indicated to the east of the road meandering irregularly to the southeast.

Three wells are indicated west of the road and six more east of the road and west of Tuna Creek. When Staff went to the site they say they found a total of ten wells, three west of the road and seven east of it. Staff also prepared a chart (received as Exh. 4) with columns for the photograph number, the DEC reference number, the official A.P.I. suspected well number, and a description of the equipment found at each well; also included was a diagram prepared by Staff showing the location of the ten wells found plus indications of the direction from which the photographs were shot. The map furnished by Williams to Staff is attached as Appendix II and the diagram prepared by Staff is attached as Appendix III.

Overall the location of the wells on Williams' map squares pretty well with Staff's diagram, with one notable exception: Suspected Well No. F-2 (American Petroleum Institute - "API" - number 009-14881) located and designated as such on Williams' map as the northerly most well, about equidistant between the Road and Tuna Creek, and on Staff's diagram (as DEC #10) at about the same location, has no red X on Williams' map.

In general the photographs (Exhs. 4A through 4K) show the wells equipped, at one extreme, with only a wooden pole sticking out of a casing (4K), to the other extreme, of all of the equipment necessary to produce (4A).

The Wells Individually

Every reference to any well in the record is collected well by well and is contained in the attached Appendix IV.

Summary of the State of the Wells

Staff witness Hoffman concluded from the site inspection (see Appendix IV) that three wells (DEC 2, 9 and 10) have not produced in an "extended period of time," one (DEC 5) has not produced "recently," five (DEC 1, 3, 4, 6 and 7) "appeared" producible, and one (DEC 8) was producing at the time of the inspection.

Alleged Abandonment

ECL 23-0305(8)(d) and (e) authorize the Department to require plugging of abandoned wells and reclaim the surrounding land and if the "owner or operator" neglects or refuses the Department is authorized to have the work done "...at the expense of the owner or operator whose duty it may be to plug..."

ECL 71-1305 states that is unlawful for "any person to: ...5. Abandon any oil, gas or solution mining well, or an intake or a well for the storage of oil or gas without first obtaining a permit from the department."

6 NYCRR 555.1 states:

"Policy. It shall be unlawful for any owner or operator to abandon any well, wells or lease without having plugged and abandoned such well or wells and effected surface restoration in the manner prescribed herein."

In relevant language 555.2 (Shut-In wells), 555.3 (Temporary abandonment) and 555.4 (Permanent abandonment) are to the same effect.

6 NYCRR 555.2 (Shut-In wells) provides that an oil or gas well may cease production for up to one year without notifying the Department and that after that the Department must agree to any further period in which there is neither production nor plugging.

Staff witness Arieda (with far greater experience than Staff witness Hoffman) testified that not only was that his understanding but that there was no way to determine when any of the wells at issue ceased producing (Trans p. 129).

This is supported in the case of those wells where we do not know what Staff witness Hoffman means by an "extended period of time" is or what "recently" means - DEC 2, 5, 9 and 10; even more so as to wells that "appeared producible" - DEC 1, 3, 4, 6 and 7; and most of all as to DEC 8 which Hoffman said was producing at the time of inspection.

Phrases such as especially "extended period of time" and "recently," not tied to the one-year standard that would trigger a finding of abandonment in fact, are entirely too vague to constitute proof of abandonment.

Nor does the condition of the well equipment speak at all on the question of abandonment as well equipment may have been scavenged from well to well. Similarly, the condition of the vegetation around a well is of no aid since there was no showing how much vegetation must likely be cut to get at a well, to get it to produce, and to keep it producing; or how much trampling or loss of vegetation is likely to result from well operation.

Similarly, the failure to file reports or even post financial security or comply with any other Department requirements is entirely equivocal evidence on the question of abandonment. Such failure may indicate that production has ceased and that the well(s) are abandoned; yet, it is equally plausible that the owner or operator was producing from all wells but simply not bothering to comply with the reporting or other requirements.

Lastly neither in the motion papers, at the hearing, nor in Staff counsel's post-hearing brief has Staff stated exactly which wells it considered abandoned.

Thus while some of the wells may have been actually abandoned, none have been proven by a preponderance of the evidence to have been abandoned.

Organizational Reports

Simply because no wells have been proven abandoned, does not mean that the Farrells are not responsible for filing a further Organizational Report, keeping financial security posted and in force, and filing Production Reports - for all wells on the land they sold to Williams - until the well transfers are approved by the Staff.

6 NYCRR 551.1(a)(2) requires each person who operates oil and gas wells to submit to the Department an Organizational Report and a new one within 30 calendar days of any change in the organization. 6 NYCRR 551.1(b).

Thomas J. Farrell did not file an Organizational Report until he did so under date of June 29, 1987 (Exh. A). At that time, as seen, Joan Farrell was sole owner of the property. Thomas J. Farrell filed all reports and other documents in his name only from 1976 through the Production Report for 1979 (Exh. I), Joan G. Farrell filed Production Reports in her name only for 1980 and 1981 (Exhs. K and 17 and L and 19), Thomas J. Farrell filed a Production Report for 1982 (Exhs. L and 19), Joan for 1983 (Exhs. L and 19), Thomas for 1984 (Exhs. L and 19), 1985 (Exhs. L and 19), 1986 (Exhs. L and 19), 1990 (Exhs. L and 19) and 1992 (Exhs. L and 19). Neither the insurance company on the well plugging bonds nor the Staff seems to have been made aware of Joan G. Farrell's sole ownership beginning October 2, 1980 (Exhs. N and 26) as they continued to send all correspondence solely addressed to Thomas J. Farrell through May 25, 1993 (See Exhs. Q and 7, R, T, V, W and Z).

Thomas J. Farrell in filing an Organizational Report some seven years after Joan G. Farrell became sole owner of the property acknowledged his continued involvement. Joan G. Farrell in filing some Production Reports in her name only after becoming sole owner of the property acknowledged her personal involvement. Thus it appears that each had the obligation to file a further Organization Report showing the involvement of Joan G. Farrell, although one such Report would suffice.

6 NYCRR 551.1(d) also required the Farrells to notify the Department within 30 calendar days of termination of their activities; however the Request for Well Transfer filed by all respondents in late 1992 (Exhs. Y and 8) apparently at least partially satisfied that requirement as Staff has not charged the Farrells with violation of this section which requires information not only of termination of activities, but also detailed information concerning the status of the wells in which the filer had any interest. Then too, it would appear the Farrell's activity would not be deemed to have ceased at least until the well transfers were about to be approved.

Organizational Reports are required to be submitted before operating, upon any change in personnel and upon closing operations. They are not required annually or at any other fixed times.

Thus there is only the one (amended) Organizational Report presently due from the Farrells.

Staff Counsel Dworkin advised all parties by letter of January 6, 1995 that Williams submitted an Organizational Report dated February 10, 1993 and that Staff was withdrawing that charge against the Williams respondents.

This filing, however, is by itself academic unless the well transfers are approved by the Staff and the Williams respondents perfect their right to operate by filing financial security and meeting all other requirements.

Financial Security

6 NYCRR 551.4(a) and (c) require the Farrells to submit to the Department and maintain in force financial security to guarantee well plugging and abandoning responsibilities.

Farrell testified that he had filed and maintained financial security in effect for approximately six months after selling the lease to the Williams; and Arieda agreed. The land and the wells were sold by Joan Farrell to the Williams by Deed dated April 16, 1992 (Exhs. O and 27) and the Request for Well Transfer form was signed by all respondents and submitted to the Department in late December 1992 (Exhs. Y and 8). The record does not show when the lease was assigned, if there was a separate lease.

6 NYCRR 551.4(c) required the Farrells to keep financial security in place until the Williams filed acceptable financial security. There is no showing that the Williams have even attempted to post financial security. It does not appear, however, that 6 NYCRR 551.4 requires the Williams to post financial security where the well transfers have not been approved and the Williams have no right to operate the wells.

Production Reports

6 NYCRR 551.2 requires a person who first produces oil and gas to keep certain production records and file others with the Department. This regulation provides that Production Reports must be kept and filed whether production takes place or not in any annual period. Thus the Farrell respondents were required to comply and will be required to comply at least until the well transfers are approved. The Williams respondents, however, have no right to produce. It is not to be presumed that they are or have been producing in violation of the law, and hence they had and presently have no responsibility for Production Reports.

As seen, the Farrell respondents filed production reports for 1977 (the Vaughn family filed one for 1976) through 1986, for 1990 and for 1991. Thus reports are due for 1987, 1988, 1989, 1991 and subsequent calendar years until the well transfers are approved.

Findings of Fact

  1. Respondent Thomas J. Farrell owned the land where most of the subject wells are located, as well as those wells, well equipment and the mineral rights from March 15, 1976 to October 2, 1980.
  2. Respondent Joan G. Farrell jointly owned with respondent Thomas J. Farrell what respondent Thomas J. Farrell had solely owned (See Finding 1 above), for some period of time between March 15, 1976 and October 2, 1980.
  3. Respondent Joan G. Farrell solely owned what she had formerly jointly owned (see Finding 2 above) from October 2, 1980 to April 16, 1992.
  4. Respondent Dennis Williams and respondent Stacy M. Williams jointly owned what respondent Joan G. Farrell had solely owned (see Finding 3 above) from April 16, 1992 presumably to date.
  5. Service of the motion papers complied with 6 NYCRR 622.6(a).
  6. Respondent Dennis Williams, to an unknown extent, participated in well operation on the subject site after obtaining joint ownership (with his wife) of the site and possibly prior to that.
  7. Staff's designated DEC 1 well is not F-1 (API #009-13948).
  8. Well F-1 (API #009-13948) is Staff's designated well DEC 4.
  9. Staff's designated DEC 9 well is not Wilson 6 (API #009-06753).
  10. Well Wilson 6 (API #009-06753) is Staff's designated well DEC 8.
  11. Staff's designated DEC 10 well is not F-2 (API #009-14881).
  12. Well F-2 (API #009-14881) is Staff's designated well DEC 6.
  13. Staff's designated DEC 10 well is outside the boundaries of the land purchased by the Farrell respondents and later sold to the Williams respondents.
  14. There is insufficient evidence concerning exactly when any well ceased production.
  15. Neither Respondent Thomas J. Farrell nor respondent Joan G. Farrell have abandoned any well(s).
  16. Respondent Thomas J. Farrell and respondent Joan G. Farrell failed to file an Organizational Report reflecting the involvement of respondent Joan G. Farrell.
  17. Respondent Thomas J. Farrell and respondent Joan G. Farrell have failed to keep acceptable financial security on file with the Department.
  18. Respondent Thomas J. Farrell and respondent Joan G. Farrell have failed to submit to the Department Production Reports for the calendar years 1987, 1988, 1989, 1991, 1993, 1994 and 1995.
  19. Neither respondent Dennis J. Williams nor respondent Stacy M. Williams abandoned any well.
  20. The wells transfers have never been approved by the Department.
  21. Neither respondent Dennis J. Williams nor respondent Stacy M. Williams ever obtained the right to operate any well(s) and never became responsible for submitting Organizational Reports, financial security or Production Reports.

Conclusions of Law

  1. The Department of Environmental Conservation has obtained personal jurisdiction over each respondent.
  2. While owning the subject site solely, respondent Thomas J. Farrell and respondent Joan G. Farrell each were both owners and operators within the meaning of ECL .23-0305(8)(d) and (e) and while owning the site jointly respondent Thomas J. Farrell and respondent Joan G. Farrell were both owners and operators on a joint basis.
  3. Respondent Dennis Williams prior to coming to (joint) ownership of the site, participated in well operation as an agent of the then site owner. After coming to joint ownership, the participation of respondent Dennis Williams remained as agent of the person to whom the wells are registered and the person who has the right to operate them.
  4. Neither respondent Thomas J. Farrell nor respondent Joan G. Farrell violated either ECL 23-0305(8)(d) or (e) nor 6 NYCRR Part 555 by abandoning and neglecting or refusing to plug any well(s).
  5. Respondent Thomas J. Farrell and respondent Joan G. Farrell each violated ECL 23-0305(8)(b) and 6 NYCRR 551.2 by failing to file a required Organizational Report.
  6. Respondent Thomas J. Farrell and respondent Joan G. Farrell each violated ECL 23-0305(8)(e) and (k) and 6 NYCRR 551.4 et seq. by failing to continuously keep on file with the Department and in force acceptable financial security.
  7. Respondent Thomas J. Farrell and respondent Joan G. Farrell each violated ECL 23-0305(e) and (k) and 6 NYCRR 551.2 by failing to submit to the Department Production Reports for calendar years 1987, 1988, 1989, 1991, 1993, 1994 and 1995.
  8. Neither respondent Thomas J. Farrell nor Respondent Joan G. Farrell are responsible for the well designated DEC 10.
  9. Neither respondent Dennis J. Williams nor respondent Stacy M. Williams violated ECL 23-0305(8)(d) or (e) nor 6 NYCRR Part 555 by abandoning and neglecting or refusing to plug any well(s).
  10. Neither respondent Dennis J. Williams nor respondent Stacy M. Williams violated ECL 23-0305(8)(e) and (k) or 6 NYCRR 551.4 et seq. by failing to post and keep in force financial security.
  11. Neither respondent Dennis J. Williams nor respondent Stacy M. Williams violated ECL 23-0305(e) and (k) or 6 NYCRR 551.2 by failing to submit Production Reports for any calendar year.

Discussion of Civil Penalties

Penalty recommendations in oil and gas mining matters call into play the Commissioner's Civil Penalty Policy ("CPP") dated June 20, 1990.

The CPP refers to economic benefit as a part of penalty calculations. Economic benefit is the estimated amount of money saved by a respondent or an additional profit realized by a respondent as a result of non-compliance. The Staff has made no economic benefit calculation and there is no information in the record from which the ALJ can make the economic benefit calculation.

The other main factor in penalty calculation is the gravity component.

The CPP divides the gravity component into two main subdivisions: 1) Potential harm and actual damage caused by the violation and 2) Relative importance of the type of violation in the regulatory scheme.

The potential harm of failing to submit a new Organizational Report is no greater than or different than the actual damage which is denying the Department accurate information concerning who is responsible for wells. The failure to post and keep in force financial security prevents the Department from having an available source of funds to, when necessary, plug and replug abandoned wells and remediate the surface areas. The failure to submit production reports prevents the Department from having accurate information as to the amount being produced (and the amount of depletion of the resource) by the oil and gas mining industry in the State of New York; yet this would seem to be offset somewhat by the requirement that purchasers and transporters are also required to submit reports.

The importance to the regulatory scheme of the violations involves depriving the Department of its right and duty to review and control regulated activities.

The CPP states that the gravity component is subject to downward or upward adjustment based on certain factors such as culpability, violator cooperation, history of non-compliance, ability to pay, and any other relevant factor.

The Farrells are culpable in failing to submit the documents, particularly as they had submitted each type of document previously, so that they were aware of the requirements.

Nor were they very cooperative in that they were not only aware of the requirements but had been reminded of them by the Staff a number of times.

There has been no proof of violations prior to or beyond those charged here.

Nor was there any specific proof of inability to pay penalties, although respondents did claim that they had been making little profit, if any. Yet, from all that appears this was a shoe-string, severely under-capitalized operation without any high degree of the necessary knowledge and skills.

The civil penalties for oil and gas mining violations are set out at ECL 71-1307. The maximum penalty for violations committed up to September 1, 1991 is $1,000 plus $500 for each day during which the violation continues; on and after September 1, 1991 the maximum penalty is $5,000 plus $1,000 per day of continuation.

The same section authorizes the Commissioner to release or compromise the penalty.

While the penalty factors, neither individually nor collectively, indicate that any adjustment to the maximum penalties is appropriate, the situation overall, including the total absence of proof of environmental harm resulting from the violations, should bring into play the Commissioner's penalty release and compromise authority.

Recommendations

  1. All charges against respondent Thomas J. Farrell and respondent Joan G. Farrell under ECL 23-0305.8(e) and 6 NYCRR Part 555 alleging abandonment of wells on their former property should be dismissed with prejudice.
  2. For failing to file a further Organizational Report (ECL 23-0305(8)(b) and 6 NYCRR 551.2) respondent Thomas J. Farrell and respondent Joan G. Farrell should be civilly penalized jointly and severally in the amount of $2500.
  3. For failing to post and keep in force financial security (ECL 23-0305(8)(e) and (k) and 6 NYCRR 551.4) respondent Thomas J. Farrell and respondent Joan G. Farrell should be civilly penalized jointly and severally in the amount of $7500.
  4. For failing to submit Production Reports (ECL 23-0305(e) and (k) and 6 NYCRR 551.2) respondent Thomas J. Farrell and respondent Joan G. Farrell should be civilly penalized jointly and severally as follows:

    a. for the 1987 report - $ 750
    b. for the 1988 report - $ 750
    c. for the 1989 report - $ 750
    d. for the 1991 report - $ 750
    e. for the 1993 report - $ 750
    f. for the 1994 report - $ 750
    g. for the 1995 report - $ 750

    TOTAL - $5250

  5. Of the penalties ($15,250 total) to be assessed against respondent Thomas J. Farrell and respondent Joan G. Farrell two-thirds ($10,166) should be suspended for sixty (60) days during which time these respondents must cure each violation found. Upon doing so upon a timely basis the suspended amount ($10,167) should be waived and upon failing to timely comply the suspended amount should be fully assessed.
  6. Respondent Dennis J. Williams and respondent Stacy M. Williams should be afforded a self-executing dismissal of the charges against them, as follows: (1) on the abandonment charges, one year after the Commissioner's order is received provided that each well on the site is then either legally producing or shut-in with Department approval or has been properly plugged in full compliance with 6 NYCRR Part 555; (2) on the Organizational Reports and financial security charges, until the well transfers are about to be approved, provided that an Organizational Report is filed and acceptable financial security posted; and, (3) on the Production Reports charges, that a Production Report is filed by March 31 following the first year in which the well transfers are approved.

APPENDIX I

Adequacy of Service of Process and Personal Jurisdiction Over the Respondents

Staff sent the motion papers to the respondents by certified mail-return receipt requested.

Only respondent Joan G. Farrell and respondent Dennis J. Williams signed any returned post office green cards.

Respondents Thomas J. Farrell, as noted however, responded to the motion in writing, was included in the reference to the "Respondents' Farrell" in the discovery demand, and appeared at the hearing. Respondent Joan G. Farrell signed the green card, was referred to as included in the "Respondents' Farrell" in the discovery demand, but did not appear at the hearing.

Respondent Dennis J. Williams signed the green card, was part of the reference to the "Respondents' Williams" in the discovery demand, and did appear at the hearing.

Respondent Stacy M. Williams did not sign any green card, was part of the discovery demand reference to the "Respondents' Williams," but did not appear at the hearing.

Personal jurisdiction has been obtained over Thomas J. Farrell because he responded to the motion and appeared at the hearing. The same is true as to respondent Joan G. Farrell because she signed the green card. The same is true as to respondent Dennis J. Williams because he signed the green card and appeared at the hearing.

As to respondent Stacy M. Williams, she did not sign, submit any response to the motion, requested discovery if at all only by general reference to "Respondents' Williams," and did not appear at the hearing.

Staff has submitted no affidavit of service of the motion papers and Staff did not check the box on the green cards designated "Restricted Delivery" which would require the mail deliverer to deliver the motion papers personally to each named respondent.

On the other hand, it seems clear that four sets of the motion papers were mailed, two to each marital residence and a spouse signed for both sets at each marital residence. Moreover, on the litigation backs in which Mr. Murrin's office enclosed the two sets of motion responses and discovery demands there appears, respectively, "Murrin & DeRose, attorneys for Respondents' [sic] Farrell and "Murrin & DeRose, attorneys for Respondents' [sic] Williams." Lastly, none of the respondents have raised the defense of ineffective service or lack of personal jurisdiction.

It is concluded, therefore, that each respondent was effectively served with process and the Department has obtained personal jurisdiction over each respondent, even Stacy M. Williams. This conclusion is further supported by the fact that Mr. Murrin appeared in writing for each respondent at his first opportunity and no respondent has raised the question of whether service was proper. Ineffective service and lack of personal jurisdiction may be waived by failure to raise those issues. See Civil Practice Law and Rules 3018b and 3211(8); see also Addesso v. Shemtob, 70 N.Y.2d 689 (1987).

APPENDIX IV

DEC #1 (F-1, API #009-13948)

Farrell admitted that he drilled an "F-1" with the above API number.

Hoffman said he found this well using the metes and bounds on the Drilling and Completion Report filed by Farrell (Exhs. H and 5), but Farrell said he did not put any metes and bounds there, only "...back road to Limestone." Moreover, said Farrell, this well is not on the Wilson farm, he never owned it, and has never been to where it is supposed to be.

Hoffman put on his summary of the site inspection (Exh. 4) that this well appeared to be producible and stated at the hearing that newer wells have electric motors, as this well has, but the he also said that the rust upon, and the growth around the equipment suggests that it was not producing for a long time. Hoffman never offered any opinion about when electric motors came in to general use or what constitutes "a long time." Williams said this well did produce, but not how long ago that was.

Williams said the API number (009-13948) was issued April 17, 1979 when the well drilling permit was issued (as was the case with DEC 9 - Wilson 6, and DEC 10 - F-2) and Hoffman said other API numbers may have been issued but he could find not reference to any others.

Other hearing exhibits in which F-1 is mentioned are: (1) the Annual Production Report for 1984 (Exhs. L and 21), where F-1 appears with its API number, along with five other wells without API numbers, and where the combined six wells are said to have produced about 260 barrels of oil and an estimated 520 barrels of water; (2) the Annual Well Report for 1990 (Exhs. L and 24) where F-1's API number (only) appears (along with F-2 by name and API number and four other wells without name or API number but numbered 2 through 5 and which shows all six wells producing the exact same amount of water ("42 est.") and oil ("32.46 est."). At the same time this Report shows location information only for F-1 (DEC 1) and F-2 (DEC 10) and only tank numbers for F-1 and F-2; (3) the Annual Well Report for 1992 (Exhs. L and 25) which shows F-1's API number but not its name ("F-1") and five other wells without names and not numbered and each marked "NA". Here again this Report shows location information and tank numbers only for F-1 and the second well (marked NA); and (4) a Request for Well Transfer (Exhs. Y and 8) filed in December 1992 which lists F-1 and F-2 by name and API number and four other wells without name or API number, listed three through six.

From this compiled information it seems clear that an F-1 is one of the few wells from which Farrell produced, that is to say it is mentioned in all of the many documents referred to above. From the fact that Williams did not refer to DEC 1 as F-1, and from the fact that Farrell contested F-1's location, it appears clear that DEC-1 is not F-1. (See DEC 4 below)

DEC 2

Hoffman's summary of the site inspection (Exh. 4) describes DEC 2 as having an "old rusty rod line pump jack" and as not having produced in an "extended period of time". There is not explanation of what an "extended period of time" means.

Williams said he simply has not reached this well in terms of production, has not abandoned it, and it only needs a rod line hooked up and then it will produce. Farrell added that the well was there when he purchased the property but it never produced.

There is no other reference to this well in the hearing exhibits.

DEC 3

Here Hoffman in his summary (Exh. 4) says this well has a pump jack and electric motor and appears to be producible. In his testimony he pointed to rags around the well head which he thought were there to absorb crude oil. Williams said the rags were used to prevent freezing. Farrell, for his part, questioned both abandonment of this well and its location.

DEC 4

Hoffman put down that his well has a pump jack and an electric motor, appears to be producible, and seems to have been recently serviced as evidenced by a pulling pole nearby.

Farrell said this well is F-1 (API #009-13948) which Williams' map (Exh. 3) shows 300 to 400 feet from the road and also pointed out that there is a well "FEE-1" indicated on Williams' map near the bank of Tuna Creek (with no red X) which Farrell says is on someone else's lease.

It is concluded that DEC 4 is F-1. This is based upon the fact that the condition of this well as stated by DEC witness Hoffman is consistent with the production reflected in the documents listed under DEC 1 above, Farrell said so, and Williams so. There is no purpose to Farrell or Williams falsely stating the location of a well, the existence of which they concede, or falsely changing their designation of such a well. This is especially true where Farrell and Williams are not contending that this well is outside of the property's boundaries.

DEC 5

Hoffman's summary (Exh. 4) says this well has a pump jack and electric motor, but does not "appear" to have produced "recently;" but Hoffman testified that it did not have a full season's growth around it.

DEC 6

Hoffman wrote (Exh. 4) that there is a pump jack and electric motor over this well with a red barrel used to absorb oil and as insulation in the winter and that it appears to be producible. Williams denied that the barrel was used to absorb oil.

Based upon the evidence referred to under DEC 10 below it is concluded that this well is F-2.

DEC 7

Other than there being no barrel and the location being different, the situation with this well is exactly the same as DEC 6.

DEC 8

Hoffman's summary (Exh. 4) states that there is a pump jack and electric motor over this well and that it was producing at the time of the inspection. Farrell said that "maybe it should be plugged."

While one can hardly be certain about it, it is more likely than not that DEC 8 is Wilson 6 (See DEC 9 below) in that it was producing at inspection and Wilson 6 bears the only API number remaining.

DEC 9 (Wilson 6, API #009-06753)

Hoffman's summary reports an "old rusty well head with no pump jack" from which he concluded that there has been no production for "an extended period of time."

Williams observed that it appeared producible to him and Farrell simply questioned how the API number was assigned.

The hearing exhibits have extensive reference to the "Wilson lease" or "Wilson Farm"; however, there is not hearing exhibit referring specifically to "Wilson 6", no Drilling Permit for Wilson 6, and no listing of Wilson 6's supposed API number.

There is no reason to believe that DEC 9 is Wilson 6.

DEC 10 (F-2, API #009-14881)

Hoffman's summary describes this well as having an eight (8) inch casing extending ten (10) inches above ground and a long wooden pole set in the casing and as appearing not to have produced "for an extended period of time."

The hearing transcript has Williams admitting that he drilled an F-2 but this may be in error since there is a 1980 F-2 Drilling Permit issued to Farrell and a Drilling and Completion Report filed by Farrell for an F-2 (Exhs. J and 6).

Whoever actually admitted drilling an F-2 also contested its location as shown on Staff's Exhibit 4. Hoffman said it was located with information in the application to drill, apparently metes and bounds, which squared with what he found in the field.

Farrell insisted that he put no metes and bounds on the application and that this well, as located by Staff, is not even on the land he purchased. For his part Williams agreed, pointed out that on his map (Exh. 3) F-2 has not red X, and said F-2 is the lowest red X on his map which corresponds at least roughly with DEC 6 on Staff's diagram, Exh. 4. Farrell said he paced it off from the Pennsylvania line and "the River" (by which he seems to mean Tuna Creek) with a 100 foot tape measure and that Staff has mis-located actual F-2 by over a thousand feet.

From the fact that DEC witness Hoffman, other than following Williams' map, offered no evidence that he was on the right site and the fact that both Farrell and Williams agreed that DEC 10 was off the site, Staff has failed to sustain its burden of proof that it is on the site.

The hearing exhibits which refer to F-2 (beyond the Drilling Permit and Completion Report, Exhs. J and 6) are: (1) a Bond Cancellation (Exhs. Q and 7) which contains a general description of the location ("Back road between Bradford, PA and Limestone, NY")' (2) the Request for Well Transfer (Exhs. Y and 8) where F-2 (and F-1) and four other unnamed and unnumbered wells), with all six wells shown to have produced the exact same quantities of both water and oil.

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