Francis Root Oil Co. - Final Decision and Order, March 25, 1996
Final Decision and Order, March 25, 1996
STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION
In the Matter
Alleged Violations of Environmental Conservation Law ("ECL") Article 23 and Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York ("6 NYCRR") Part 551
- by -
FRANCIS ROOT OIL CO.
FINAL DECISION and ORDER
DEC File No. D9-A113-93-08
This Final Decision and Order is issued in reference to the initial Motion for Summary Order and a subsequent Motion for Leave to Amend Motion for Summary Order filed by the Department Staff in the matter of alleged violations of ECL 23-0305.8(f) and 6 NYCRR 551.1 and 551.2 by Francis Root Oil Co., 1441 White Hill Road, Bolivar, New York 14715. The attached Supplementary Summary Report submitted by Administrative Law Judge ("ALJ") Robert P. O'Connor with respect to these Motions is accepted as my Decision subject to the remarks below.
The issues in the instant proceeding relate to Department Staff allegations that Respondent failed to timely submit Annual Well Reports for the reporting years 1990, 1991 and 1992, and that Respondent failed to maintain the appropriate required financial security to guarantee its well plugging and abandoning obligations. A hearing was conducted by ALJ O'Connor on May 2, 1995 to consider these allegations and to also consider the appropriate civil penalty and/or other relief to be assessed Respondent for the violations found in the initial Decision and Order dated January 3, 1994 and for any other violations found in the instant proceeding.
As noted by ALJ O'Connor, Respondent failed to present any documentary evidence to support its contentions that the reports were timely submitted. Additionally, Respondent acknowledged that it did not have the required financial security in place after September 10, 1993. Therefore, as in the previous Decision and Order, these factors weigh heavily against Respondent's interests. Here, as previously, the case presented by the Department Staff establishes Respondent's liability for the alleged violations.
NOW, THEREFORE, have considered this matter, it is ORDERED that:
- Respondent, Francis Root Oil Co., is found to have violated 6 NYCRR 551.1 in that Respondent failed to submit an amended Organizational Report upon changing its mailing address in 1987. Failure to notify the Department of a change in mailing address is a minor infraction of the regulations and no penalty is assessed for this violation. Respondent shall, however, comply with the requirement to file an amended Organizational Report, as in Paragraph VI. below.
- Respondent, Francis Root Oil Co., is found to have violated the ECL 23-0305.8(f) and 6 NYCRR 551.2 in that Respondent did not completely fill out and timely file the required Annual Well Reports for its 39 oil wells in Allegany County, New York for the reporting years 1990, 1991 and 1992.
- Respondent, Francis Root Oil Co., is found to have violated 6 NYCRR 551.4(a)and (c) in that Respondent did not maintain the required financial security to guarantee its well plugging and abandoning obligations.
- For its failure to timely and completely file the required Annual Well Reports, Respondent is assessed a civil penalty in the amount of twenty-five thousand dollars ($25,000). Of the civil penalty, five thousand dollars ($5,000), shall be due and payable no later than 30 days following service of the Commissioner's Order upon Respondent.
- For its failure to maintain the required financial security, Respondent is assessed a civil penalty in the amount of twenty-five thousand dollars ($25,000). Of the civil penalty, five thousand dollars ($5,000), shall be due and payable no later than 30 days following service of the Commissioner's Order upon Respondent.
- The remaining portion of the civil penalty, forty thousand dollars ($40,000), shall be suspended upon condition that within 60 days of service of the Commissioner's Order upon Respondent, Respondent shall satisfactorily and completely fill out and submit to the Department Staff the Annual Well Reports for the reporting years 1990, 1991 and 1992 and an amended Organizational Report. Annual reports and other required filings for all subsequent reporting years, i.e. -- 1993, 1994 and 1995, shall also have been submitted, completely filled out and in proper form, within such 60 day period. Copies of all these reports shall be filed with local authorities as directed by the Department.
- Additionally, Respondent shall submit to the Department within such 60 day period following service of this Order upon Respondent, (a) financial security acceptable to the Department in the amount of $40,000, (b) a contract acceptable to the Department for the transferal of Respondent's interest in the 39 wells to a bonded operator, or (c) a schedule acceptable to the Department for the phased plugging and abandoning of its 39 wells.
- Failure to comply with the conditions in Paragraphs VI. and VII. above shall cause the suspended $40,000 portion of the civil penalty to immediately become due and payable.
- All communications between Respondent and the Department concerning this Order shall be made to the Director, Division of Mineral Resources, Room 290, New York State Department of Environmental Conservation, 50 Wolf Road, Albany, New York 12233-6500.
- The provisions, terms and conditions of this Order shall bind the Respondent, its officers, directors, agents, servants, employees, successors and assigns and all persons, firms and corporations acting for or on behalf of the Respondent.
For the New York State Department
of Environmental Conservation
By: Michael D. Zagata,
Albany, New York
Dated: March 25, 1996
STATE OF NEW YORK
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
In the Matter
- of -
Alleged Violations of Environmental Conservation Law ("ECL") Article 23 (Mineral Resources) and Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York ("6 NYCRR")Parts 551 (Reports and Financial Security)
FRANCIS ROOT OIL CO.
1441 White Hill Road
Bolivar, New York 14715
DEC Index Number D9-A113-93-08
SUPPLEMENTARY SUMMARY REPORT
This Supplementary Summary Report addresses outstanding issues and recommends penalties in the instant proceeding to enforce provisions of the Oil, Gas and Solution Mining Law, ECL Article 23, and the attendant rules and regulations in 6 NYCRR Part 550, et seq.
In response to a Motion for Summary Order in the above captioned matter, the Administrative Law Judge ("ALJ") prepared an initial Summary Report and Rulings, and on January 3, 1994, the Commissioner of Environmental Conservation issued an Interim Decision and Order. In that initial Interim Decision and Order, the Commissioner granted summary judgement on a portion of the motion and remanded the remainder of the motion to the ALJ for hearing. The January 3, 1994 Interim Decision and Order, along with the ALJ's Summary Report and Rulings, is incorporated herein in its entirety and is attached hereto as Appendix "A".
In granting partial summary judgement, the Commissioner determined Respondent had failed to file an amended Organizational Report for a change in mailing address and had failed to fully complete the required items of information on the Annual Well Report forms submitted for the reporting years 1990, 1991 and 1992, all in violation of ECL 23-0305.8(f) and 6 NYCRR 551.1 and 551.2.
The portion of the Motion for Summary Order remanded for hearing relates to the allegations that Respondent violated ECL 23-0305.8(f) and 6 NYCRR 551.2(b) for failure to timely file Annual Well Reports for reporting years 1990, 1991 and 1992. Additionally, the hearing is to determine the issue of Respondent's alleged lack of financial security required by 6 NYCRR 551.4(a) and (c), as raised in the Staff's subsequent Motion for Leave to Amend Motion for Summary Order. Finally, as required in the Interim Decision, the hearing is to determine the appropriate civil penalty and/or other relief to be assessed Respondent.
Following lengthy, but unfruitful, negotiations between the Department Staff and Respondent to resolve the disputed issues outside the hearing process, said hearing was conducted by Administrative Law Judge Robert P. O'Connor in the morning of May 2, 1995 in the Department's Region 9 office at 270 Michigan Avenue, Buffalo, New York.
The Department Staff was represented by Joseph H. Looby, Esq., Senior Attorney in the Department's Division of Environmental Enforcement, 50 Wolf Road, Albany, New York. Appearing as a witness for the Department Staff was Richard A. Arieda, Mineral Resource Specialist 3 in the Department's Division of Mineral Resources in Albany, New York.
The Respondent was represented by Embser and Woltag, P.C., 164 North Main Street, Wellsville, New York (G. William Gunner, Esq., of Counsel). Francis R. Root, Respondent's proprietor, appeared as the sole witness on behalf of Respondent.
Position of the Department Staff
The Department Staff maintains that, despite repeated reminders to Respondent to file its Annual Well Reports for the reporting years 1990, 1991 and 1992, Respondent failed to timely file such reports, in violation of ECL 23-0305.8(f) and 6 NYCRR 551.2(b). Further, the Staff alleges that Respondent did not maintain the required financial security to guarantee the performance of its well plugging and abandoning obligations, in violation of 6 NYCRR 551.4(a) and (c).
The Department Staff seeks relief in the way of penalties for all alleged violations, including those found in the Interim Decision, in the aggregate amount of $60,500, coupled with an order requiring Respondent to post suitable financial security in the amount of $40,000.
Position of the Respondent
Respondent contends that all required Annual Well Reports for reporting years 1990, 1991 and 1992 were timely submitted as required by the Department's regulations, with the minor exception of the 1992 report being submitted two to three days late. With respect to the allegations of failure to timely file the 1990, 1991 and 1992 Annual Well Reports, Respondent seeks dismissal of the charges on the basis that the Department Staff has not established the violations by substantial evidence.
Respondent contends that circumstances currently prevailing in the oil industry, e.g. -- low price per barrel of product, combined with low production, conspire against him, making it impossible for him to secure bonding or obtain a letter of credit for his wells. Since Respondent lost bonding for his wells through no fault of his own, Respondent seeks an opportunity to arrive at a negotiated remedial course of action rather than be penalized for the lack of financial security.
FINDINGS OF FACT
Alleged Failure to Timely Submit Annual Well Reports
In conjunction with the charges related to Respondent's failure to timely submit the Annual Well Reports for 1990, 1991 and 1992, the reader is referred to the initial Summary Report, attached hereto as Appendix "A", and specifically to Findings of Fact Numbers 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 22, 23 and 24 of the initial Summary Report.
- The instant hearing record clarifies prior Finding of Fact Number 3, in that Respondent Francis Root Oil Co. is presently a sole proprietorship, with Francis R. Root doing business under the Respondent's trade name. During the times for which Respondent's Annual Well Reports are at issue here, however, Francis Root Oil Co. was co-owned by Francis R. and Beverly J. Root.
- Further, prior Finding of Fact Number 5 is clarified, in that Respondent acquired the working interest under an oil and gas lease in thirty-five (35) wells located in the Town of Alma, Allegany County, New York, from Quaker State in 1985. These wells are sometimes referred to as the "Lot 80" wells. Respondent's working interest is a seven-eighths (7/8) share of the wells' production, subject to the costs of all exploration and development. The owners of the oil and gas interests in the Lot 80 wells are Quaker State Corporation and Triton Energy, and they receive one-eighth (1/8) share of the wells' production, free of any exploration and development costs. Respondent's lease for the Lot 80 wells gives him the rights to produce oil from such wells as long as it is economically feasible to do so. At the conclusion of production, the wells are to be plugged, and the production rights will revert to Quaker State or Triton Energy. The Department also lists Respondent as operator of four (4) other nearby wells, known as the White F1 and F2 and Brown R1 and R2 wells.
- The Department's Minerals Division Staff sent Respondent a total of eight reminder letters advising of the submission requirements and deadlines for Annual Well Reports, three for the 1990 reports, three for the 1991 reports and two for the 1992 reports. These were form letters routinely sent by the Staff to remind owners of leases for unplugged oil, gas or injection wells in the State of their obligation to submit Annual Well Reports. Additionally, the Staff sent Respondent a Cease and Desist Directive advising of alleged violations for failure to timely submit the Annual Well Reports for 1990, 1991 and 1992. (See prior Findings of Fact Numbers 6, 7, 8, 10, 12 and 14.)
- When Annual Well Reports are received from the regulated community each spring, i.e. - the filing deadline for the reporting year is March 31 of the succeeding year, a clerical staff person in the Department's Minerals Division central office in Albany checks such receipt against a computer listing of the seventeen hundred plus (1,700+) registered entities in the State. There have been occasional, though infrequent, instances in the Minerals Division of reports which were received, but improperly logged or filed, or not marked on the computer listing as received, or stamped as being received on a day other than the day on which they were actually received. Instances have occurred in which reports for activities under two or more related names or a corporate title with two names were mistakenly filed under the wrong name.
- In the Department's alphabetical listing of oil and gas well leases, individual names are generally listed on a "last name first" basis. The Department's listing for Francis Root Oil Co., however, is listed under "F". A search of the Department's files by Minerals Division Staff could not find the reports in question, i.e. - Respondent's Annual Well Reports for reporting years 1990, 1991 and 1992, prior to the submission of alleged copies of the reports and a cover letter from Beverly J. Root dated June 4, 1993. (See prior Findings of Fact Numbers 4, 9, 11, 13, 15 and 16.)
- A search of the Allegany County real property tax records conducted in July 1993 could not find any "oil and gas" reports from Respondent for the reporting years 1990, 1991 and 1992. (See prior Findings of Fact Numbers 22, 23 and 24.)
- Beverly J. Root was responsible for compiling the information required on Respondent's Annual Well Reports, for preparing the Report forms and for submitting them to the Department and the Allegany County Coordinator of Real Property Taxes and the local tax assessor. To the best of Francis R. Root's knowledge, Respondent's Annual Well Reports for 1990, 1991 and 1992 were submitted as required on a timely basis, with the exception of the 1992 Report being "a little bit late."
Alleged Lack of Financial Security
- When Respondent acquired its working interest in the Lot 80 wells, in accordance with the provisions of ECL 23-0305.8(e) and 6 NYCRR 551.4(a) and (c), it also obtained appropriate financial security in the form of a bond from an Ohio insurance company. Respondent's bond was cancelled when the insurance company entered into bankruptcy proceedings.
- Respondent was able to obtain an alternative financial security of $40,000 in the form of a letter of credit from Norstar Bank dated September 10, 1990. At the time, Respondent's wells were producing between 240 and 300 barrels of oil per month, and the price of oil was $25 to $27 per barrel.
- On November 16, 1992, Respondent was notified that Norstar Bank had become Fleet Bank and the number of the letter of credit was changed accordingly. All other terms and conditions remained the same.
- On May 18, 1993, Fleet Bank notified Respondent that the bank elected not to renew the letter of credit for any period beyond its expiration date of September 10, 1993.
- On July 16, 1993, the Department's Minerals Division notified Respondent via a certified letter that the letter of credit would expire on September 10, 1993 and that an alternate form of financial security amounting to $40,000 was required to be on file with the Department by August 15, 1993. Respondent did not claim the certified mail despite at least two notifications by the U.S. Postal Service. On August 27, 1993, the Department Staff personally served on Respondent an August 24, 1993 letter from the Department advising Respondent of the requirement to have the expired letter of credit fully replaced by acceptable financial security by September 10, 1993.
- In the spring of 1993, a pump failure caused Respondent's oil production to decrease, eventually reaching a level of approximately 90 barrels per month, with the price of oil at approximately $13 to $15 per barrel. Respondent speculates that due to the low level of production and insufficient income from sales of oil, Fleet Bank elected not to renew the letter of credit.
- The Department Staff did not make any effort to draw on the letter of credit prior to its expiration.
- Respondent made unspecified attempts to obtain an alternative form of financial security, but was unable to get a bond or a line of credit. There is no indication in the record of the hearing that Respondent made any attempts to transfer the wells to another bonded operator.
- From early 1991 to December 15, 1994, the Roots were in the process of getting divorced. At the time of the hearing in mid-1995, the price of oil was approximately $17.50 per barrel. At the same time, Francis R. Root claimed to have a bank account of approximately $500 and some Quaker State stock, and he was subject to a judgment, unspecified, regarding settlement of the divorce proceedings.
- Barring the ability to obtain some form of financial security or to transfer the wells to another bonded operator, Respondent is ultimately responsible for plugging the wells, upon their abandonment. From the testimony and evidence presented, there is currently no indication of any environmental hazard associated with Respondent's wells. The Department Staff does not presently seek plugging of the wells as a form of relief in this matter.
Alleged Failure to Timely Submit Annual Well Reports
With respect to the charges concerning Respondent's alleged failure to timely submit Annual Well Reports for 1990, 1991 and 1992, the reader is referred to the initial Summary Report, attached hereto as Appendix "A", and specifically to Conclusions Numbers 3, 6, 7, 8, 9 and 10 of the initial Summary Report.
- Respondent was presented with ample notice of the requirement to timely submit Annual Well Reports, three times in 1991 for the 1990 reports, three times in 1992 for the 1991 reports and twice in 1993 for the 1992 reports. Yet all the credible evidence presented in the instant proceeding demonstrates that Respondent failed to submit the 1990, 1991 and 1992 Annual Well Reports by the required deadlines. It was only after the Department Staff issued a Cease and Desist Directive in May 1993, specifying the penalties for failure to comply with the statutory and regulatory reporting requirements, that Respondent produced the required reports.
- Corroborating Respondent's failure to timely submit the Annual Well Reports for 1990, 1991 and 1992 is the statement of the Allegany County Director of Real Property Tax Services that the County's records were devoid of any such reports from Respondent for 1990, 1991 and 1992.
- Therefore, having carefully reviewed and weighed the evidence presented in this matter, I conclude Respondent violated the provisions of ECL 23-0305.8(f) and 6 NYCRR 551.2(b) by failing to timely file its Annual Well Reports for 1990, 1991 and 1992.
Alleged Lack of Financial Security
- Upon acquisition of its working interest in the Lot 80 wells, Respondent originally obtained the requisite financial security to guarantee the performance of its well plugging and abandoning obligations. When the issuer of the original bond cancelled the bond in 1990, Respondent promptly sought and received an alternative form of financial security by way of a bank letter of credit. Respondent's gross revenue from oil production at the time is conservatively computed to be in excess of $65,000 annually (250 barrels x 7/8 interest x $25 per barrel x 12 months = $65,625).
- When the issuing bank decided not to extend Respondent's letter of credit beyond its September 10, 1993 expiration date, Respondent was unsuccessful in its unspecified attempts to get another form of financial security. Respondent's gross revenue from oil production at this time is conservatively calculated to be slightly in excess of $12,000 annually (90 barrels x 7/8 interest x $13 per barrel x 12 months = $12,285).
- Respondent does not dispute its failure to maintain financial security following the expiration of its letter of credit on September 10, 1993. It does, however, claim that the bank's failure to extend the letter of credit occurred through no fault of its own, but rather as a result of low oil production and insufficient income from sales of oil, coupled with the strain of pending divorce proceedings.
- No evidence was presented by either the Department Staff or Respondent which would indicate that the wells currently pose any threat to the environment.
- Regardless of the circumstances, it is clear that Respondent has failed to maintain the requisite financial security to guarantee its well plugging and abandoning obligations since September 10, 1993. Such a failure causes Respondent to be in violation of the provisions of ECL 23-0305.8(e) and 6 NYCRR 551.4(a) and (c).
The burden of proof in an enforcement proceeding such as this rests with the Department Staff on all charges and matters which they affirmatively assert in the instrument which initiated the proceeding [6 NYCRR 622.11(b)(1)]. The standard of proof regarding the factual matters considered in the proceeding requires the party bearing the burden of proof, i.e. - the Department Staff, to sustain that burden by a preponderance of the evidence [6 NYCRR 622.11(c)]. A preponderance of the evidence is defined as a greater weight of evidence, or evidence which is more credible and convincing to the mind (Black's Law Dictionary, West Publishing Co., 1968).
In the instant matter, Respondent did not present any documentary evidence, but relied on its owner/proprietor recounting events as he believed they occurred. The Department Staff, on the other hand, presented a variety of documentation to support the allegations presented in its initial Notice of Motion for Summary Order and subsequent Motion for Leave to Amend. When fairly considered, the documentary evidence of the Department Staff is more credible and convincing than the recollections of Mr. Root, particularly since during the time in question he had assigned the duty and responsibility for Respondent's bookkeeping, record keeping and report submission to Beverly J. Root, his then wife.
Therefore, as demonstrated by the record developed in this matter, Respondent violated the applicable sections of the Environmental Conservation Law ("ECL") and Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York ("6 NYCRR") by its failure to timely submit its 1990, 1991 and 1992 Annual Well Reports, and by its failure to maintain suitable financial security after September 10, 1993 to guarantee its well plugging and abandoning obligations.
The initial Summary Report and Interim Decision demonstrated that Respondent violated the pertinent parts of the ECL and 6 NYCRR by failure to file an amended Organizational Report for a change in mailing address and by failure to fully complete the required items of information on the Annual Well Report forms which were eventually submitted to the Department for the reporting years 1990, 1991 and 1992.
ECL 71-1307 provides that violation of any of the provisions of or failure to perform any duty imposed by ECL Article 23 or any rule or regulation promulgated thereunder shall cause liability for a civil penalty not to exceed five thousand dollars ($5,000) and an additional penalty of one thousand dollars ($1,000) for each day during which such violation continues.
In the instant case, the Department Staff has recommended that Respondent be assessed a total of $60,500 in civil penalties pursuant to ECL 71-1307.
(a) For failure to maintain suitable financial security, Staff seeks a penalty of $1,000 plus $50 per day (for 590+ days) = $1,000 + $29,500 = $30,500, as appropriate "to penalize . . . and specifically deter Respondent to not engage in such unlawful practices in the future as well as generally deter others who would otherwise contemplate such illegality."
(b) For failure to timely submit Annual Well Reports for reporting years 1990, 1991 and 1992, i.e. - three separate violations, Staff seeks $5,000 for each violation = $5,000 x 3 = $15,000, "(I)n light of the Department's numerous attempts to obtain (the missing reports), and Respondent's blatant disregard of such attempts."
(c) For failure to properly complete all the required information on the 1990, 1991 and 1992 Annual Well Reports when finally submitted to the Department, and failure to submit completed reports even after summary judgment was granted in the Commissioner's Interim Decision and Order, i.e. - a separate violation for each of the three reports, Staff seeks $5,000 x 3 = $15,000.
(d) Additionally, Staff seeks an order requiring Respondent to post suitable financial security in the amount of $40,000 to guarantee the performance of its well plugging and abandoning obligations.
Respondent asserts that no environmental harm is presently resulting from the wells. The Staff did not contest this assertion, but counters that the wells will inevitably degrade with time. The Staff did not, however, speculate on what environmental damage, if any, might occur from the wells.
Plugging of oil and gas wells upon their being abandoned is required by law, both to avoid environmental damage and contamination from the seepage of brine and/or hydrocarbons into groundwater and surrounding soils and to prevent the waste of oil and gas resources of the State. A primary concern of the Staff's is that the Department, i.e. - the taxpayers of the State, might ultimately have to plug Respondent's oil wells and remediate any environmental damage for Respondent's failure to maintain the required financial security, and then seek restitution from Respondent.
Respondent claims that the bonding and then the letter of credit which he had used as financial security were in both instances lost through no fault of his own. Mr. Root claims that, currently, low production and poor market conditions, combined with the after effects of a divorce, do not provide Respondent with enough income to obtain the financial security sought by the Department Staff, although Respondent did not offer any statement of financial condition or assets as evidence. Nor did Respondent state what specific efforts it attempted in seeking to obtain the required financial security after the letter of credit was not renewed.
Respondent urges that imposition of a financial penalty will in this instance only act as an impediment to a transfer of the wells to a bonded operator and that a shut-in would not resolve the situation relative to the goal of environmental protection. Respondent further seeks examination of the liability of owners where an operator's bonding has lapsed. As noted above, Respondent is the operator; Quaker State and Triton Energy are the owners of the oil and gas interests.
With respect to this last item, ECL 23-0305(8)(e) provides, "Primary liability for the expense of such plugging or replugging and first recourse for the recovery thereof shall be to the operator unless a contract for the production, development, exploration or other working of the well, to which the lessor or other grantor of the oil and gas rights is a party, shall place such liability on the owner or on the owner of another interest in the land on which the well is situated." In the instant case, Respondent has not presented any contract which places liability for plugging on the owner of the oil and gas rights for Respondent's wells. Therefore, the issue of owners' liability for plugging Respondent's wells, should it become necessary, is moot and will not be considered further.
The same section of law - ECL 23-0305(8)(e), however, also provides, "The aforementioned bonding requirements shall remain the obligation of the original operator regardless of changes in operators unless a subsequent operator has furnished the appropriate bond or substitute as herein provided acceptable to the department and approval for the transfer of the well plugging responsibilities to the subsequent operator has been granted by the department."
Therefore, on the issue of financial security, it seems that if Respondent is unable to obtain suitable financial security, as it claims, then Respondent must either plug and properly abandon the wells or seek transfer of the wells to a bonded operator. In the simplest of terms, if Respondent cannot meet its obligations to guarantee the plugging and properly abandoning of its wells, Respondent must get out of the oil well business and/or transfer its interests to someone who is able to meet such obligations. Whatever the outcome, to be avoided is a situation wherein the State must take temporary possession of an improperly abandoned well and plug the well to prevent environmental damage, and then seek recompense from the operator.
With respect to Respondent's violations relating to its annual reports, i.e. - failure to timely submit and failure to properly complete the reports, these violations are serious because they deprive the Department Staff of its own requirements, as a required by law, to monitor and regulate the oil and gas resources of the State. Furthermore, the information on such reports provides the basis for local assessors to adjust the tax rolls in their respective municipalities where oil and gas well operations are occurring. Many local governments depend on these tax revenues in preparing their annual budgets.
Having considered these factors, I find that while a significant penalty is appropriate as a deterrent, the fundamental purpose of environmental enforcement is to promote compliance with environmental laws and thereby improve and protect New York's natural resources and environmental quality. Therefore, in this matter it is appropriate to assess a two part civil penalty, comprised of a payable portion and a portion which should be suspended upon condition Respondent submits and subsequently adheres to an acceptable compliance schedule. Failure of Respondent to comply with such schedule should be cause for the suspended portion of the penalty to immediately become payable.
In view of the record compiled in this matter, I recommend Respondent be assessed a civil penalty in the amount of $50,000 for the charged violations. Of that total amount, $10,000 should be payable within 30 days, and the remaining $40,000 should be suspended upon condition that Respondent submit to the Department within 60 days, (a) acceptable financial security in the amount of $40,000, (b) a contract for the transferal of Respondent's interest in the 39 wells to a bonded operator, or (c) a schedule for the phased plugging and abandoning of its 39 wells.
Robert P. O'Connor
Administrative Law Judge
To: Francis Root Oil Co.
1441 White Hill Road
Bolivar, New York 14715
Francis R. Root, Proprietor
Francis Root Oil Co.
1441 White Hill Road
Bolivar, New York 14715
G. William Gunner, Esq.
Embser & Woltag
164 North Main Street
Wellsville, New York 14895-1152
Joseph H. Looby, Esq.
Division of Environmental Enforcement
New York State Department of
50 Wolf Road
Albany, New York 12233-5500
Gregory H. Sovas
Director, Division of Mineral Resources
New York State Department of
50 Wolf Road
Albany, New York 12233-6500