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Farrell, Thomas J. - Ruling, July 28, 1994

Ruling, July 28, 1994

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

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

RULINGS

DEC Index No.
R9-A113-93-12

Proceedings

This matter involves respondents Thomas J. Farrell and Joan G. Farrell (husband and wife and former owners of the subject real property) allegedly failing to properly plug abandoned crude oil and gas wells on their former property and allegedly failing to provide financial security and required documents to the Department of Environmental Conservation ("the Department" or "Staff"). Respondent Dennis J. Williams and Stacy M. Williams (husband and wife and present owners of the subject real property) allegedly committed the same violations concerning the same crude oil and gas wells.

The Department Staff has served pursuant to 6 NYCRR 622.12 upon each respondent and filed with the Chief Administrative Law Judge of the Department a Notice of Hearing, dated January 6, 1994, and a Notice of Motion for "Summary Order" also dated January 6, 1994 which documents have a supporting affidavit and exhibits attached. The Staff seeks an order of the Department's Commissioner summarily directing respondents, pursuant to ECL 23-0305.8(e) and 6 NYCRR 551.1, 551.4 and 555.3 to a) submit required reports, b) submit financial security, and c) to plug four allegedly abandoned wells. Staff also requests that a civil penalty be imposed upon respondents Farrell in the amount of $40,000 and that a civil penalty be imposed upon respondents Williams in the amount of $10,000.

In written response the Farrell respondents (Thomas J. Farrell is a Forest Technician for the Forest Services of the United States Department of Agriculture) have stated under oath that they have complied with all applicable laws, rules and regulations of the Department, that they have attempted but failed to locate the claimed abandoned wells, that the Department furnished them with a map allegedly showing the location of the abandoned wells, that with the map the wells could not be located, and that there are no abandoned wells upon the property in question. Respondents Williams have stated under oath that they have attempted to comply with the requirements and file the documents but were prevented from doing so by the Department, that they have made a diligent search for the subject wells, and that no such wells are upon their property.

Along with their affidavits in response all respondents served discovery demands pursuant to 6 NYCRR 622.7 and CPLR 3102 and 3120 requesting that the Department state the exact location of the subject wells in accordance with stated standards. The Department has not responded to these demands. Instead the Department requested leave to serve interrogatories pursuant to 6 NYCRR 622.7(b)(2). By letter dated April 20, 1994 counsel to all respondents stated that he had no objection to the interrogatories. The Administrative Law Judge ("ALJ") assigned to this matter granted leave and directed that response to the interrogatories be supplied by June 24, 1994. No response to the interrogatories (which were entirely devoted to eliciting the well locations) has been served or filed to date.

Further Discussion of the Motion Papers and Responses

The way the motion papers are set up makes the situation extremely difficult to understand. In an effort to shed some light on the situation the 26 exhibits were rearranged in more or less chronological order.

What the Exhibits Show

A DEC Bureau of Minerals' Purchaser or Transporter's Annual Crude Oil Report ("P/TACOR") for 1973 (part of Exhibit X) shows that a Duane Vaughn, an owner of the site (the "Wilson Farm"), the wells and so forth just prior to the Farrells, sold or shipped 448 barrels of crude oil. The same report by Vaughn for 1974 (also a part of Exhibit X) shows 392 barrels. A DEC Bureau of Minerals' Operator's Annual Production Report ("OAPR") dated January 26, 1976 shows (Exhibit C) that Vaughn produced 438 barrels on the "Wilson Lease" in 1975.

Vaughn gave formal notice to the DEC under date of February 4, 1975 (part of Exhibit C) that he intended to plug and abandon "Well No. 5...Bureau of Mineral Resources Identification No. 31-009-06655".

The P/TACOR for 1975 (Exhibit E) shows 438 barrels from Vaughn at the "Wilson Farm" and the OAPR for 1976 (Exhibit D) shows just over 127 barrels produced, that Vaughn had passed away April 9, 1976, and that "...He sold his lease just prior to his death."

Vaughn and his wife had conveyed the site to Thomas Farrell by deed dated March 15, 1976. That deed conveyed several parcels of land. As to wells and so forth, one such parcel was conveyed in these terms:

"ALSO all the right, title and interest of the parties of the first part in the oil, gas and mineral rights and all of the right, title and interest of the parties of the first part in all of the oil wells, machinery and installations used in the production of crude oil and natural gas on or under to the following described lands:..."

Another parcel was conveyed in these terms:

"ALSO all of the right, title and interest of the parties of the first part in and to all oil wells located upon the following described lands:..."

third parcel was conveyed in these terms:

"ALSO all of the oil, gas and minerals in, on or under that CERTAIN PIECE, PARCEL OR TRACT OF LAND situate in the Town of Carrollton, County of Cattaraugus and State of New York, and ALSO all of the oil wells, equipment and devices thereon used in the production and marketing of crude oil therefrom, bounded and described as follows:..." (Exhibit M)

The P/TACOR for 1976 (part of Exhibit X) shows Thomas Farrell producing 351 barrels. The same form for 1977 (part of Exhibit X) shows that just over 197 barrels from "Wilson" going into "Tank No. 17722 and just over 196 barrels from the "Wilson Fee" going into "Tank no. 17831". The OAPR for 1977 (Exhibit G) shows "Wilson" producing 365 barrels from 6 active wells, the same form for 1978 (part of Exhibit G) shows 311 barrels from 6 active wells at "Wilson Farm," and the same form for 1978 (part of Exhibit X) shows just under 276 barrels from "Wilson" going into "Tank No. 17722" and just over 95 barrels going into "Tank No. 17831".

Exhibit P is an Individual Well Plugging and Surface Restoration Bond dated April 12, 1979 that Thomas Farrell obtained for "Well Number 1", Exhibit H is a drilling permit dated April 17, 1979 then issued to Thomas Farrell for "#F-1 Well" and a Well Drilling and Completion Report for "Well No. F-1" showing that as a new and producing well. (Strangely the Report is dated January 16, 1979 some 3 months prior to the issuance of the permit but shows "Date Drilling Commenced" as April 19, 1979, two days after the permit was issued.)

Exhibit S is a plugging bond for "Well number F-2" issued to Thomas Farrell under date of January 22, 1980.

The P/TACOR for 1979 (part of Exhibit) shows almost 437 barrels going into Tank No. 11722 from "Wilson" and about 235 barrels into Tank No. 17831 from "Wilson Fee".

On January 28, 1980 Thomas Farrell obtained a drilling permit for "#F-2 well" and reported under date of May 20, 1982 that drilling had commenced on January 28, 1980 and that the subject well was new and producing (Exhibit J).

The OAPR for 1979 shows Farrell producing 671 barrels from 8 active wells, with one well inactive (Exhibit I). The P/TACOR for 1980 shows about 283 barrels going into Tank No. 17722 from "Wilson" and about 28 barrels into Tank No. 17831 from "Wilson Fee". The OAPR for 1980 shows Joan Farrell produced 505 barrels from 6 active wells with 2 inactive.

Thomas and Joan Farrell (after an intermediate deed from Thomas to Joan and Thomas) by deed dated October 21, 1980 had conveyed the site to Joan Farrell (Exhibit N).The intermediate deed is not an exhibit and the papers do not show its date.

This deed conveys the same three parcels, in terms of mineral rights and so forth exactly as they were conveyed in the deed from the Vaughns to Thomas Farrell (Exhibit M).

The OAPR for 1981 filed by Joan Farrell shows 6 active wells and 2 inactive, with no production information as to the active wells except the handwritten note: "All six active wells average approximately 2 bbls. of oil and 6 bbls. of water per day. No gas." The P/TACOR for 1981 shows about 582 barrels produced (Exhibit K).

The OAPR for 1982 (Exhibit L) filed by Thomas Farrell shows 682 barrels from 6 active (no inactive) wells. The Annual Well Status, Production Report ("AWSPR") filed by Joan Farrell for 1983 shows 6 active and no inactive wells with 410 barrels going into Tank Nos. 17722 and 17831, the same form for 1984 filed by Thomas Farrell shows about 260 barrels from "F-1 and 5 other wells," all active. The same form for 1985 shows the same well information and about 253 barrels produced and the same form for 1986 shows 6 active wells, the same tank numbers and about 148 barrels produced (Exhibit L). An Annual Well Report ("AWR") signed on May 27, 1991 by Thomas Farrell shows F-1 and F-2 with their identification numbers and 4 other unidentified wells, all active and producing about 33 barrels per well, and the same form signed by Thomas Farrell on January 16, 1993 shows F-1 with its identification number, five other wells designated "NA", and the same tank numbers but zero production (Exhibit L).

Under date of June 29, 1987 Thomas Farrell had filed an Organizational Report which contains no well information (Exhibit A).

P/TACORs, each listing Joan Farrell as owner, filed for 1987, 1988 and 1989 refer to the same tank numbers and show total production as 177 barrels for 1987, 139 for 1988 and 66 for 1989 (Exhibit X).

A Penzoil Crude Oil Royalty report dated January 8, 1991 shows Joan Farrell as owner and shows 115 barrels stored for Penzoil in the same tanks.

An Oil and Gas Referrals form, undated with the only indication of the time period being the printed notation "REV #3 2/13/91", is said by the Staff to show 7 unplugged wells in the name of Thomas Farrell as follows:

WELL NAME AMERICAN PETROLEUM INSTITUTE
("API") NUMBER
FARRELL F-1 31-009-13948
FARRELL F-2 31-009-14881
WILSON #1 31-009-68552
WILSON #2 31-009-68553
WILSON #3 31-009-68554
WILSON #5* 31-009-06655
WILSON #6 31-009-06753

*Since the numbers for Wilson #3 and Wilson #5 are consecutive there is apparently no Wilson #4.

This Referrals form (Exhibit B) is not signed by anyone.

An AWR form was signed by Thomas Farrell May 27, 1991 showing 6 producing wells with F-1 and F-2 specifically referred to (well name and number, API number and tank number) while the other 4 wells are not referred to by well name and number, API number or tank number. Each of the 6 wells are said to have produced an estimated 32.46 barrels each for a total of 194.80 barrels (Exhibit L).

A Penzoil Report dated January 8, 1992 shows Joan Farrell as owner, the same tank numbers, and 148.40 barrels produced (Exhibit X).

By deed dated April 16, 1992 Joan Farrell deeded the site to Dennis and Stacy Williams and conveyed the three parcels, as to mineral rights and so forth, in the language identical to that in the prior deeds (Exhibit O).

A Bond Cancellation was issued to Thomas Farrell for F-2 from an insurance company and received by the Staff on October 30, 1992 and it states that: "Thomas T. Farrell has sold his wells. Bond is no longer needed" (Exhibit T). By letter to Thomas Farrell about the cancellation dated November 2, 1992 the Staff referred to "six active wells", "two wells" and "the well" (Exhibit V). A further letter from the Staff about the same matter refers to "six wells" (Exhibit W).

A Request for Well Transfer was signed and sworn to by the Farrells and the Williamses under date of December 19, 1992. This lists F-1 and F-2 with their API numbers and F-3 through F-6 with no API numbers (Exhibit Y).

An AWR form was signed by Thomas Farrell on January 16, 1993 (Exhibit L). It lists no well names or numbers, the API number for F-1 and "NA" for 5 other wells.

A Bond Cancellation form dated November 4, 1993 and received November 9, 1993 by the Staff apparently concerns F-1 and is otherwise the same as the cancellation notice concerning F-2 (Exhibit Q).

It is also very difficult to keep track of the wells in the exhibits. For instance, when the Farrells "drilled" F-1 and F-2 in 1979 and 1980 the API numbers for these wells remained the same after the "drilling" was stated to have resulted in "new" wells (Exhibits H and J).Since the API numbers remained the same it would appear that these were not "new" wells but rather pre-existing wells drilled deeper. If otherwise, the Staff has not made that clear.

The summary of the exhibits given above has indicated how the wells were listed and categorized over the years but it is well to put them together:

1.) 1975 - 8 active wells (Exhibit C)

2.) 1977 - 6 active wells (Exhibit G)

3.) 1978 - 6 active wells (Exhibit G)

4.) 1979 - 8 active wells, 2 inactive (Exhibit I)

5.) 1980 - 6 active wells, 2 inactive (Exhibit K)

6.) 1981 - 6 active wells, 2 inactive; all 8 listed as "Wilson" without well numbers or API numbers (Exhibit K)

7.) 1982 - 6 active wells, no inactive

8.) 1983 - 6 active wells, no inactive

9.) 1984 - F-1 (with API number) and 1 other active well (with no well name or number and no API number (Exhibit L)

10.) 1985 - F-1 (with API number) and 5 other unidentified active wells (Exhibit L)

11.) 1986 - 6 totally unidentified active wells (Exhibit L)

12.) 1990 - 6 checks in the active box with F-1's API number and F-2's name, well number and API number on the first two lines (Exhibit L)

13.) 1991 (actually anytime after 2/14/91) - 7 wells, Farrell 1 and 2 and Wilson 1, 2, 3, 5 and 6, all with API numbers (Exhibit B)

14.) 1992 - 6 wells, F-1, F-2 (with API numbers) and F-3, F-4A well numbered 4 appears for the first time. See Footnote 2., F-5 and F-6 (without API numbers)(Exhibit Y) - 6 active wells with F-1's API number and the 5 others designated "NA" (Exhibit L)

As to which wells have been producing over the years, the exhibits show that whenever production figures have been stated as to specific wells the well name or number or API number is, with one exception, exclusively those of F-1 or F-2. Indeed as late as 1992, an AWR indicates that only F-1 was producing (Exhibit L). The only exception is the AWR for 1990 (Exhibit L) where Thomas Farrell has obviously divided total production by the number of wells indicated (6 active) and assigned the average amount as an "estimated" amount of production by each well (Exhibit L). Even here, however, no well names or numbers or API numbers are set out except in respect to F-1 and F-2. This situation seems also to be reflected in and supported by the fact that whenever tank numbers are supplied they are along the first two lines of the forms which always supplied information as to F-1 and F-2 (See, e.g. Exhibits L and X).

Claims in the Supporting Papers

Staff has not stated the well names or numbers, the API numbers, or even the location of the 4 wells it wishes plugged. The Department's records are apparently no help in these respects since if there were any Department records dealing with the matters they surely would have been presented in the motion papers. As it is, the only well location information in the motion papers beyond "The Wilson Farm," "The Wilson Lease," or "Bradford, Town of Carrollton, Cattaraugus County" is:

1. "Well No. 5" - "Limestone 7 Quad, (I) 14,950' 5/42 02'30" and 1,850' W78 37 30" ELEV. 1420' GR. TOPO" (Exhibit C, 2/4/75)

2. "F-1" - "Back road to Limestone" Limestone I 10'5/42.60 1750' W78 37'30" " (Exhibit H, 1/16/79)

3. "F-2" - "Back road between Bradford, PA and Limestone, NY" (Exhibit 5, 1/22/80), and

4. "F-2" - "Back road to Limestone [metes and bounds description illegible]" (Exhibit 2, 5/20/80)

As previously noted Thomas Farrell stated under oath that the Department furnished him a map with which he was unable to find any of the wells. The Department has neither denied this nor included the map in the motion papers.

Also as previously noted the parties are asking each other for the locations of the wells and neither party has responded to he other.

The crux of the Department's theory that there exists 4 abandoned wells is represented by the following extract from the supporting affidavit:

"27. The records described in Paragraphs 14, 15 and 16 show that Respondent T. Farrell took ownership of 8 wells from Vaughn in 1976. Respondent T. Farrell drilled one well in 1979 and reported having 9 wells in 1979. Respondent T. Farrell drilled another well in 1980. Since 1982, Respondents T. Farrell and J. Farrell have only reported having 6 wells. It is my considered judgment that the four wells unreported since 1982 have not been produced since that time."

The cited Paragraphs 14, 15 and 16 read as follows:

"14. In the Department's files is the Vaughn 1976 annual production report, which recites the owner's death and sale of the lease prior to his April 1976 death. The form is signed by the trustee of his estate. A copy of that report is attached and made a part of this affidavit as Exhibit D. (See also, P. 23 and Exhibit M, infra.)

15. In the Department's files is the National Transit Company 1975 transporters report for the Wilson lease, which shows Vaughn as the owner. A copy of that report is attached and made a part of this affidavit as Exhibit E.

16. In the Department's files is the National Transit Company 1976 transporters report for the Wilson lease, which shows Respondent T. Farrell as the owner. A copy of that report is attached and made a part of this affidavit as Exhibit F."

Neither Exhibit D nor E nor F mention any wells. Cited Paragraph 23 of the supporting affidavit alleging that Joan Farrell reported 6 active and 2 inactive wells for 1980 and 1981 is true. Exhibit M is the deed from Vaughn to Farrell which has previously been shown to contain only the most generalized language concerning wells, mineral rights, equipment and so forth.

None of the documents establish how many wells, whether active or inactive, the Farrells received from Vaughn.

The Staff has not supplied any information concerning the nature of the land at the site, such as topography, undergrowth and so forth. Nor is there any information concerning any use the land might be or have been subjected to, other than mining, such as farming or logging.

Discussion

It appears that all of the Staff's requests for relief are tied to the alleged four abandoned wells.

As seen, the Staff has not identified these wells by well name(s) or number(s), API number(s), by production data showing that specific wells were producing one year and not the next, or otherwise.

Nor has the Staff established the specific location of any such wells.

ECL 23-0305(8) has provided since apparently 1972 that:

"With respect to oil pools or fields and natural gas pools or fields, the department shall have power to:...

i. Require the taking and making of well logs, well samples, directional surveys and reports on well locations and elevations, drilling and production, and further require their filing pursuant to the provisions of this article."

6 NYCRR Part 552 concerns permits for well drilling, deepening and so forth and provides at Section 552.1(b) effective since January 1966:

"Each copy of the application must be accompanied by a neat, legible plat which has been certified as to correctness by a licensed land surveyor or licensed civil engineer. The plat must be drawn to scale and show the boundaries of the lease or unit containing the well, the distance in feet from the well to the two nearest boundaries, the distance in feet from the well to the nearest well completed in the objective pool (if same is within one mile). Both of the latter two distances may be obtained by scaling from a map, stadia measurements, pacing, odometer or other reasonably accurate means. However, if the distance between the well and the nearest well completed in the objective pool is such that there is a possibility of violation of the spacing requirements of sections 663.1 or 553.3, the distance between the well and the nearest well completed in the objective pool shall be measured accurately on the ground. The plat also must have indicated thereon the latitude and longitude of the well and the scaled distances in feet in east-west and north-south directions from the nearest corner of the United States Geological Survey topographical map upon which the well location is situated, with the topographical map being identified by title, date and as to whether seven and one-half minute or 15 minute coverage."

6 NYCRR 552.3 provides that the plat as described at 552.1 is required for any reissuance of a permit for any new location or to any new well owner.

It is interesting to note the following which appeared on page 36 of the June 23, 1994 issue of the Department's Environmental Notice Bulletin:

CHAUTAUQUA COUNTY DRILLING PERMITS

Well Owner

CABOT OIL & GAS CORP
3 GATEWAY CENTER SUITE 2000
PITTSBURGH, PA 15222-1011

Well Name & Location

MESSENGER, C #2A
API#: 013-22488
Lat : 9450 ft S 420730
Long: 9470 ft W 793230
Town: SHERMAN

Well Data

Proposed TD (ft): 4500
Surface Elevation : 1652
Proposed Well Type: G
Permit Issue Date : 6/21/94
Quad: NORTH CLYMER (B)"

Without the location information that the Staff was authorized to require since Vaughn owned the wells, it may be now virtually impossible to locate any wells other than perhaps F-1 and F-2 which apparently have not been abandoned.

Wherever the other wells were abandoned there was left possibly as little as an inch or two of well casing above the then surface. Since that time farm tractors, log skidders or other equipment could have lodged obstructions down in the well casing, with the same equipment or even heavy rain then filling up the casing with mud or debris to its top. Over time undergrowth could have rendered the well casing totally invisible at least to the naked eye.

The problem is compounded by the fact that the site is apparently a rather extensive tract of land. Without taking time to plot out from the deeds the boundaries of the entire site it is enough to note that just three of the parcels deeded from the Vaughns to Thomas Farrell in 1976 (Exhibit M) are stated to contain 54 acres, 20 acres, and 13 acres.

Respondents may be telling the truth when they say they know of no abandoned wells. The Staff would point out on the other hand that Vaughn and the Farrell respondents referred to various numbers of largely if not totally unidentified wells beyond F-1 and F-2. Yet there is no assurance that the Farrells actually ever knew where these other wells were. Vaughn and the Farrells appear to have been almost exclusively concerned with F-1 and F-2 since, as the records show, their income came from these wells. The Farrells may well have simply continued more or less Vaughn's reference to wells to preserve their rights to these perhaps phantom wells in the event that F-1 and/or F-2 went dry or preserve their right to one or more of such wells to use as waterwells, especially if the property was to be subdivided for residences or businesses.

If the respondents do not know where the allegedly abandoned wells are they cannot plug them. If the Commissioner were to order the respondents to plug four abandoned wells and the respondents did not comply because they cannot find any such wells, the Commissioner could direct the Staff to do or arrange the plugging at the respondents' expense (See ECL 23-0305(8)(e)). But if the Staff cannot locate such wells, to that extent no plugging will take place.

If no one can find any abandoned wells at the site, unfortunately, any such wells may manifest themselves by one or more explosions over time; but if the wells cannot be found, this cannot be helped.

On the one hand the Staff failed to require and receive the well location information to which it was entitled. Yet on the other hand the respondents Farrell should not have reported wells which they themselves were unable to locate.

Respondents Farrell have not been very forthcoming. While they cannot be expected to prove a negative (that there are no abandoned wells) still they could have told us what wells actually produced over the years and what happened to the others. They may feel or have been advised that until the Staff makes out a prima facia case they are entitled to stand mute.

Yet, the Staff has established that the respondents Farrell and the respondents Williams have reported, represented if you will, that there are wells beyond F-1 and F-2.

Especially because of the public purposes involved and because of the danger involved, the Respondents are not entitled to a dismissal.

On the other hand, no order to plug wells should be issued until there is more assurance that there are abandoned, unplugged wells at the site.

An adjudicatory hearing must be convened in the matter. There the Staff may attempt to sustain its burden by calling Staff or retained licensed surveyors or metallurgical engineers. The setting of a hearing will also afford the respondents the same opportunity to benefit from expert testimony and/or to be more forthcoming in their own behalf.

Issues and Established Facts

There exist substantive disputes of facts sufficient to require a hearing, including a) whether there are any abandoned wells at the site, b) what are their exact locations, c) whether any of them are unplugged, d) whether financial security, reports and so forth are required, and e) what amount of penalties, if any, should be imposed.

About the only issues here that are not in real and substantive dispute are 1) that the Farrells formerly owned the site and the wells, 2) that the Williamses now own the site and the wells, 3) that the Farrells (who remain responsible for the wells until the DEC approves the transfer) have not filed financial security or the reports (their conclusory statement that they have complied with all requirements, without copies of their filings and so forth, is not sufficient to raise an issue), and 4) that the Williamses have been prevented from perfecting the transfer by this enforcement action.

Rulings

  1. The motion for a "summary order" (technically for an "order without hearing" - 6 NYCRR 622.12) is denied.
  2. An adjudicatory hearing shall be held at the Region 9 Headquarters, 270 Michigan Avenue, Buffalo, NY 14203-2999 on Tuesday, August 30, 1994, at 10:00 A.M.
  3. Staff is directed to respond to respondents' discovery demands within 15 days after the date of these rulings, or explain under oath and specifically the reasons why it is unable to comply.
  4. The respondents are directed to respond to Staff's interrogatories within 20 days after the date of these rulings, or explain under oath and specifically why they cannot comply.

/s/
John H. Owen
Administrative Law Judge

Dated: July 28, 1994
Albany, New York

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