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Fitzgerald Brothers, L.P. - Order, December 29, 2003

Order, December 29, 2003

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the matter of the alleged violation of Articles 23 and 71 of the New York State
Environmental Conservation Law ("ECL"), and Parts 551 and 555 of Title 6 of the Official
Compilation of Codes, Rules and Regulations of the State of New York

- by -

FITZGERALD BROTHERS, L.P.,

Respondent.

ORDER

Case No: D8-1007-0111

WHEREAS:

  1. Pursuant to a notice of hearing and complaint, dated August 8, 2003, staff of the New York State Department of Environmental Conservation ("DEC" or the "Department") commenced an administrative enforcement proceeding against respondent Fitzgerald Brothers, L.P. The complaint alleged that respondent is an owner of certain gas and/or oil wells, including the Hamilton Walter I, Hamilton Walter, Imhoff, White 1, and Badger wells, all of which are located in Ontario County, New York.
  2. The complaint alleged further that respondent violated section 23-0305(8)(f) of the Environmental Conservation Law ("ECL"), and section 551.2 of title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York ("6 NYCRR") by failing to submit annual well reports for calendar years 1996 to 2002, inclusive. In addition, the complaint alleged that respondent violated ECL 23-0305(8)(e) and 6 NYCRR 551.4 by failing to file and maintain adequate financial security coverage for respondent's wells at any time since July 9, 1984. Section 551.4 provides that the owner or operator of a well must keep financial security continuously in force to satisfy the well plugging and abandonment obligations imposed under Part 555.
  3. Department staff served the notice of hearing and complaint upon respondent by certified mail/return receipt requested. Service of process was accomplished in accordance with 6 NYCRR 622.3(a)(3).
  4. The notice of hearing directed that respondent file an answer with the Department within 20 calendar days of respondent's receipt of the notice of hearing and complaint. The notice of hearing also stated that failure to answer would constitute a default and waiver of the right to a hearing. The time for respondent to serve an answer expired on or about September 3, 2003, and no answer has been received.
  5. Failure to answer a complaint is grounds for entry of a default judgment pursuant to 6 NYCRR 622.15, and an order assessing penalties and/or directing other relief may be issued.
  6. Department staff made a motion for default judgment, dated September 12, 2003, with respect to respondent's failure to answer the complaint. Respondent did not respond to the motion for default judgment.
  7. I adopt the conclusions of Administrative Law Judge Maria E. Villa's summary report on motion for default judgment, attached hereto.

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

  1. Pursuant to 6 NYCRR 622.15, respondent is found to be in default and has waived its right to a hearing in this enforcement proceeding. Accordingly, Department staff's allegations against respondent are deemed to have been admitted by respondent.
  2. As set forth in detail in the complaint, respondent violated ECL 23-0305(8)(f) and 6 NYCRR 551.2 by failing to submit annual well reports for calendar years 1996 to 2002, inclusive. In addition, respondent violated ECL 23-0305(8)(e) and 6 NYCRR 551.4 by failing to file and maintain adequate financial security coverage for respondent's wells at any time since July 9, 1984.
  3. Within thirty days of service of this order, respondent shall correct all violations set forth herein.
  4. For the violations set forth in Paragraph II, above, respondent is assessed a civil penalty of Forty Three Thousand Five Hundred Seventy One Dollars ($43,571.00). Ten Thousand Eight Hundred Ninety Three Dollars ($10,893.00) is due and payable to the Department of Environmental Conservation within thirty days of service of this order. The remainder of the civil penalty (Thirty-two Thousand Six Hundred Seventy Eight Dollars ($32,678.00)) shall be suspended provided respondent corrects the violations set forth in Paragraph II within thirty days of service of this order upon respondent. If respondent does not comply, or the penalty payment is not timely made, the entire suspended portion of the penalty shall become due and payable upon due notification by the Department.
  5. The penalties set forth in Paragraph IV above shall be paid by certified check, cashier's check, or money order to "NYSDEC," and sent to the address in Paragraph VI.
  6. All communications between respondent and Department staff concerning this Order shall be made to: Richard A. Sherman, Esq., Assistant Counsel, New York State Department of Environmental Conservation, Bureau of Enforcement and Compliance Assurance, 625 Broadway, 14th Floor, Albany, New York 12233-5500.
  7. The provisions, terms and conditions of this order shall bind respondent, all agents, servants, employees, successors and assigns and all persons, firms and corporations acting for or on behalf of respondent.

For the New York State Department
of Environmental Conservation

/s/
By: Erin M. Crotty, Commissioner

Dated: Albany, New York
December 29, 2003

(VIA CERTIFIED MAIL)

Fitzgerald Brothers, L.P.
690 North Wayne Street
Kenton, Ohio 43326-1342

(VIA REGULAR MAIL)

Richard A. Sherman, Esq.
Assistant Counsel
New York State Department
of Environmental Conservation
Bureau of Enforcement and Compliance Assurance
625 Broadway, 14th Floor
Albany, New York 12233-5500

STATE OF NEW YORK :DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of the Alleged Violation of
Articles 23 and 71 of the New York State
Environmental Conservation Law ("ECL"),
and Parts 551 and 55 of Title 6 of the Official
Compilation of Codes, Rules and Regulations
of the State of New York ("6 NYCRR")

- by -

FITZGERALD BROTHERS, L.P.,
File No. D8-1007-0111

Respondent.

Summary Report On
Motion for Default
Judgment

PROCEEDINGS

Pursuant to Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York ("6 NYCRR") Section 622.15, Staff of the New York State Department of Environmental Conservation ("Department Staff") moved for a default judgment against the Respondent, Fitzgerald Brothers, L.P. ("Respondent"). Department Staff made its motion on September 12, 2003 by filing the following papers with the Department's Office of Hearings and Mediation Services:

  1. A Notice of Motion for Default Judgment, dated September 12, 2003;
  2. The Affirmation of Richard A. Sherman, Esq. in Support of Motion for Default Judgment (the "Sherman Affirmation"), dated September 12, 2003;
  3. A proposed Order; and
  4. An Affidavit of Service dated September 12, 2003.

On or about August 8, 2003, Staff mailed to Respondent via certified mail, return receipt requested, a Notice of Hearing and Complaint, both dated August 8, 2003. The receipt for certified mail was signed by Respondent on August 14, 2003. Pursuant to 6 NYCRR Section 622.4(a), the time for Respondent to answer or otherwise move with respect to the Complaint expired on or about September 3, 2003. The Sherman Affirmation states that no answer to the Complaint was received.

The Complaint alleged that Respondent is an owner of certain gas and/or oil wells, including the Hamilton Walter I, Hamilton Walter, Imhoff, White 1, and Badger wells. Although the Complaint does not state where the wells are situated, the wells database, a public record maintained by the Division of Mineral Resources, indicates that all five of the wells are located in Ontario County, New York.

The Complaint alleged further that Respondent violated Section 23-0305(8)(f) of the Environmental Conservation Law ("ECL"), and Section 551.2 of Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York ("6 NYCRR") by failing to submit Annual Well Reports for calendar years 1996 to 2002, inclusive. In addition, according to the Complaint, Respondent violated ECL 23-0305(8)(e) and 6 NCYRR Section 551.4 by failing to file and maintain adequate financial security coverage for Respondent's wells at any time since July 9, 1984. Section 551.4(a) provides that the owner or operator of a well must keep financial security continuously in force to satisfy the well plugging and abandonment obligations imposed under Part 555.

According to the Complaint, on February 25, 2002, and May 2, 2002, Department Staff mailed Orders on Consent to Respondent. Other than a receipt for certified mail for the first mailing, no further written reply from Respondent to those mailings was received. No response to the Department's motion for default judgment has been received, as of the date of this Summary Report.

The administrative law judge requested justification from Department Staff as to the penalty amount, and in response, Department Staff provided the Affirmation of Richard Sherman, Esq., dated November 4, 2003 (the "Sherman Affirmation"). According to the Sherman Affirmation, the penalty sought is well within the range authorized by ECL Section 71-1307(1), which provides that any person who violates any provision of ECL Article 23, or commits any offense described in ECL Section 71-1305, shall be liable for a penalty not to exceed $5,000 and an additional penalty not to exceed $1,000 for each day during which the violation continues.

Department Staff contended that each failure to submit a required Annual Well Report subjects Respondent to a separate penalty of up to $5,000, and each day that the Annual Well Report remains outstanding subjects Respondent to a separate additional penalty of $1,000 per day per outstanding report. Under this formula, Department Staff maintained that the maximum statutory penalty for this violation was in excess of eight million dollars, but took the position that this amount was excessive. Instead, Department Staff sought to penalize Respondent $500 for each failure to file annual reports for calendar years 1996 to 2002, for a total of $3500, and $1 per day for each day of continuing violation for each failure to file. Thus, from April 1, 1997 to August 8, 2003 (the date of the Complaint), Department Staff sought $2,320; from April 1, 1998, $1,955; from April 1, 1999, $1,590; from April 1, 2000, $1224; from April 1, 2001, $859; from April 1, 2002, $494; and from April 1, 2003, $129, for a total of $8,571. Adding this subtotal to the $3,500 subtotal results in a total of $12,071.

With respect to the failure to maintain financial security, Department Staff alleged that Respondent failed to maintain adequate financial security with the Department at any time since Respondent filed its Organizational Report. Department Staff asserted that the maximum penalty for this violation was seven million dollars. The actual penalty sought was derived from the amount of outstanding financial security ($12,500) and one thousand dollars per year for each of the 19 years that the violation continued. Adding the $19,000 subtotal to the $12,500 results in a total penalty of $31,500. According to Department Staff, these penalties were higher than those for the failure to submit Annual Reports, due to the nature of the violation. Department Staff pointed out that the lack of financial security could leave the State without recourse if Respondent abandoned these wells without properly plugging them.

The Sherman Affirmation went on to state that the combined penalty for all Annual Well Reports and financial security violations described in the Complaint, as of August 8, 2003, was $43,571. Department Staff stated that, in an effort to provide an incentive for Respondent to return to full compliance, the Complaint and the motion proposed suspension of 75% of the penalty requested so long as Respondent remains in compliance with the Commissioner's Order. Under this formula, $32,678 would be suspended, for a payable penalty of $10,893.

Default Procedures

Section 622.15 of 6 NYCRR, "Default procedures," provides in pertinent part:

(a) A respondent's failure to file a timely answer . . . constitutes a default and a waiver of respondent's right to a hearing . . . .

(b) The motion for a default judgment may be made orally on the record or in writing and must contain:

(1) proof of service upon the respondent of the notice of hearing and complaint or such other document which commenced the proceeding;

(2) proof of the respondent's failure to appear or failure to file a timely answer; and

(3) a proposed order.

(c) Upon a finding by the ALJ that the requirements of subdivision (b) of this section have been adequately met, the ALJ will submit a summary report, which will be limited to a description of the circumstances of the default, and the proposed order to the commissioner.

The following Findings are based upon the papers submitted, as identified above.

FINDINGS

  1. On August 8, 2003, the Notice of Hearing and Complaint were sent certified mail return receipt requested, addressed to Fitzgerald Brothers, L.P., 690 North Wayne Street, Kenton, Ohio 43326-1342.
  2. The United States Postal Service returned the return receipt for certified mail, signed by Rosemary Fitzgerald, on August 14, 2003. The original return receipt is attached to the Affidavit of Service of the Notice of Hearing and Complaint.
  3. Respondent is an owner of certain gas and/or oil wells, including the Hamilton Walter I, Hamilton Walter, Imhoff, White 1, and Badger wells. Although the Complaint does not state where the wells are situated, the wells database, a public record maintained by the Division of Mineral Resources, indicates that all five of the wells are located in Ontario County, New York.
  4. The Complaint alleges that Respondent violated Section 23-0305(8)(f) of the Environmental Conservation Law ("ECL"), and Section 551.2 of Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York ("6 NYCRR") by failing to submit Annual Well Reports for calendar years 1996 to 2002, inclusive. The Complaint alleges further that Respondent violated ECL 23-0305(8)(e) and 6 NYCRR Section 551.4 by failing to file and maintain adequate financial security coverage for Respondent's wells at any time since filing its Organizational Report, for a period of 19 years. Section 551.4 provides that the owner or operator of a well must keep financial security continuously in force to satisfy the well plugging and abandonment obligations imposed under Part 555.
  5. Department Staff's Complaint and motion for default judgment seek the correction of the violations set forth in Paragraph 4, above, and the imposition of a civil penalty of $43,571.00, with $10,983.00 payable and $32,678.00 suspended pending compliance with the Commissioner's Order.
  6. On September 12, 2003, this motion was served upon Respondent.
  7. As of September 12, 2003 (the date of the motion papers), Respondent had not served an answer or otherwise moved with respect to the Complaint.
  8. No response to the Department's motion has been filed.
  9. The requirements for a default judgment have been met adequately as prescribed by 6 NYCRR Section 622.15(b).

CONCLUSION

Respondent violated Section 23-0305(8)(f) of the ECL, and Section 551.2 of 6 NYCRR by failing to submit Annual Well Reports for calendar years 1996 to 2002, inclusive. In addition, Respondent violated ECL Section 23-0305(8)(e) and 6 NCYRR Section 551.4 by failing, over a 19-year period, to file and maintain adequate financial security coverage for Respondent's wells. Section 551.4 provides that the owner or operator of a well must keep financial security continuously in force to satisfy the well plugging and abandonment obligations imposed under Part 555. The motion for a default judgment can be granted as proposed. The penalty requested is appropriate. This Summary Report and Proposed Order (attached hereto) are referred to the Commissioner for final determination.

/s/

Maria E. Villa
Administrative Law Judge

Albany, New York
November 5, 2003

(VIA CERTIFIED MAIL)

Fitzgerald Brothers, L.P.
690 North Wayne Street
Kenton, Ohio 43326-1342

(VIA REGULAR MAIL)

Richard A. Sherman, Esq.
Assistant Counsel
New York State Department
of Environmental Conservation
Division of Environmental Enforcement
625 Broadway, 14th Floor
Albany, New York 12233-5500

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