ASOMEO LLC - Order, May 26, 2021

Order, May 26, 2021

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 (ECL) and Title 6
of the Official Compilation of Codes, Rules and Regulations of the
State of New York (6 NYCRR),

- by -

ASOMEO LLC,
Respondent.

ORDER

DEC Case No. CO 9-20200622-77

In this administrative enforcement proceeding, New York State Department of Environmental Conservation (Department) staff alleges that respondent ASOMEO LLC violated 6 NYCRR 551.2(b) by failing to timely file complete and accurate annual well reports for the 2018 and 2019 calendar years for three oil wells (known as the HG 3-28-17 and HG 2-28-17 wells [located in the Town of Clarksville, Allegany County, New York] and the Hill 21 oil well [located in the Town of Carrolton, Cattaraugus County, New York]). The wells are designated by American Petroleum Institute (API) Well Numbers 31-003-28388-00-00, 31-003-28390-00-00 and 31-009-28372-00-00, respectively, and are operated by respondent.

Administrative Law Judge (ALJ) Michael S. Caruso of the Department's Office of Hearings and Mediation Services was assigned to this matter and prepared the attached default summary report, which I adopt as my decision in this matter, subject to my comments below.

As set forth in the ALJ's default summary report, respondent failed to file an answer to the complaint served by Department staff in this matter, and failed to appear for the adjudicatory hearing scheduled for March 9, 2021 (see Default Summary Report at 3-4 [Findings of Fact Nos. 10 and 13]). At the March 9, 2021 adjudicatory hearing, Department staff made an oral motion for a default judgment. ALJ Caruso reserved on the motion, and Department staff later submitted a written motion for default judgment with supporting papers.

As a consequence of respondent's failure to answer or appear in this matter, the ALJ recommends that Department staff's motion for a default judgment be granted (see Default Summary Report at 6). I concur that staff is entitled to a judgment on default pursuant to 6 NYCRR 622.15. The pleadings and the papers submitted with and in support of the motion provide sufficient facts to enable me to determine that staff has a viable claim that respondent failed to timely file the annual well reports for the 2018 and 2019 calendar years for the HG 3-28-17, HG 2-28-17 and Hill 21 wells and, therefore, is in violation of 6 NYCRR 551.2(b).

Department staff correctly points out that the requirement to file annual well reports is important to determining the status of the State's resources given the potential or actual environmental harm that may result from the lack of accurate, annual information about well activity. The identification of non-producing wells for plugging is significant for the prevention of groundwater contamination (see Motion for Default Judgment, Exhibit A, Affirmation of Anne Haas, Esq., dated April 6, 2021, ¶ 13; see also Affidavit of Ted Loukides, sworn to April 2, 2021, ¶ 17).

Department staff, in its papers, sought a total penalty of three thousand dollars ($3,000) for the failure to file annual well reports for two calendar years, and the ALJ recommended that respondent ASOMEO LLC be directed to pay this amount. ECL 71-1307(1) provides that any person who violates any provision of ECL article 23 or commits any offense described in ECL 71-1305 shall be liable for a penalty of up to eight thousand dollars ($8,000) for the first day of violation and up to two thousand dollars ($2,000) per day for each day the violation continues. ECL 71-1305(2) provides that it is unlawful for any person to violate any rule or regulation promulgated pursuant to ECL article 23, which would include the regulatory requirement at issue here -- 6 NYCRR 551.2(b). In other proceedings of this nature, Department staff has requested similar civil penalties (see Matter of Sahlem, Order of the Commissioner, dated January 4, 2021, at 3 [$4,500 penalty for failure to file annual well reports for 3 calendar years], Matter of Gilray, Order of the Commissioner, March 4, 2015, at 2; Matter of Buffalo China, Inc., Order of the Commissioner, October 27, 2013, at 2). In those cases, a civil penalty of $1,500 was assessed for each time that a well owner or operator failed to timely submit an annual well report.

The record demonstrates that respondent ASOMEO LLC failed to submit timely and complete reports for the three wells in calendar years 2018 and 2019. Notwithstanding the efforts of Department staff to obtain respondent's compliance, including numerous written reminders, nothing in this record indicates that respondent filed reports for the 2018 and 2019 calendar years (see e.g. Default Summary Report at 2-3 [Findings of Fact Nos. 5-9). The civil penalty that Department staff is requesting is consistent with ECL 71-1307(1), the Department's Civil Penalty Policy (DEE-1), dated June 20, 1990, and administrative precedent (see Default Summary Report at 5-6; Affirmation of Anne Haas, Esq., dated April 6, 2021, ¶¶ 10-12, 14).

Based on the record before me, the recommended penalty is authorized and appropriate. I direct that respondent submit the civil penalty of three thousand dollars ($3,000) to the Department within thirty (30) days of the service of this order upon respondent. In addition, within thirty (30) days of the service of this order upon respondent, respondent ASOMEO LLC is directed to submit to the Department complete and accurate oil well reports for calendar years 2018 and 2019 for the HG 3-28-17, HG 2-28-17 and Hill 21 wells.

NOW, THEREFORE, having considered this matter and being duly advised, it is ORDERED that:

1. I. Department staff's motion for a default judgment pursuant to 6 NYCRR 622.15 is granted. By failing to answer or appear in this proceeding, respondent ASOMEO LLC waived its right to be heard at the hearing.
2. II. Based on the pleadings and papers submitted with and in support of Department staff's motion, respondent ASOMEO LLC is determined to have violated 6 NYCRR 551.2(b), by failing to timely file complete and accurate annual well reports for the 2018 and 2019 calendar years for the HG 3-28-17 and HG 2-28-17 wells in the Town of Clarksville, Allegany County (API Well Numbers 31-003-28388-00-00 and 31-003-28390-00-00, respectively), and the Hill 21 well (API Well Number 31-009-28372-00-00) in the Town of Carrolton.
3. III. Within thirty (30) days of the service of this order upon respondent ASOMEO LLC, respondent shall submit to the Department complete and accurate annual well reports for the 2018 and 2019 calendar years for the wells referenced in paragraph II of this order.
4. IV. Respondent ASOMEO LLC is hereby assessed a civil penalty in the amount of three thousand dollars ($3,000), to be paid within thirty (30) days of the service of this order upon respondent. Payment is to be by certified check, cashier's check or money order made payable to the New York State Department of Environmental Conservation at the address noted in paragraph V of this order.
5. V. The annual well reports and civil penalty payment shall be sent to the following address:
   
   New York State Department of Environmental Conservation
   Division of Mineral Resources
   Oil and Gas Compliance Enforcement Section
   625 Broadway, 3^rd Floor
   Albany, New York 12233-6500
   Attn: Theodore N. Loukides, Chief.
   
   
6. VI. Any questions or other correspondence regarding this order shall also be addressed to Theodore N. Loukides at the address referenced in paragraph V of this order.
7. VII. The provisions, terms and conditions of this order shall bind respondent ASOMEO LLC and its agents, successors and assigns, in any and all capacities.

For the New York State Department
of Environmental Conservation

By: /s/

Basil Seggos
Commissioner

Dated: May 26, 2021
Albany, New York

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 (ECL) and Title 6
of the Official Compilation of Codes, Rules and Regulations of the
State of New York (6 NYCRR),

- by -

ASOMEO LLC,
Respondent.

DEFAULT SUMMARY REPORT

DEC Case No.CO 9-20200622-77

Procedural History

Staff of the New York State Department of Environmental Conservation (Department) served respondent ASOMEO LLC (respondent) with a notice of hearing and complaint dated January 28, 2021, alleging a violation of ECL 71-1305(2) and 6 NYCRR 551.2(b), for failure to file timely annual well reports for the 2018 and 2019 calendar years for three wells (known as the HG 3-28-17 and HG 2-28-17 wells [located in Clarksville, Allegany County, New York] and the Hill 21 well [located in Carrolton, Cattaraugus County, New York]). The wells are designated by American Petroleum Institute (API) Well Numbers 31-003-28388-00-00, 31-003-28390-00-00 and 31-009-28372-00-00, respectively.

The complaint seeks an order of the Commissioner (1) finding respondent in violation of ECL 71-1305(2) and 6 NYCRR 551.2(b); (2) directing respondent to submit the missing annual well reports to the Department; (3) assessing a civil penalty in the amount of three thousand dollars ($3,000); and (4) granting such other relief as the Commissioner may deem appropriate.

Service of the notice of hearing and complaint was made by certified mail and was received by respondent on February 1, 2021 (see 6 NYCRR 622.3[a][3]). Respondent failed to answer the complaint as directed in the notice of hearing. As stated in staff's January 28, 2021 notice of hearing, a virtual adjudicatory hearing convened at 10:00 a.m. on March 9, 2021. (See affirmation of Anne Haas [Haas Aff.], dated April 6, 2021, ¶ 2, Exhibits B, C.) Department staff was represented by Anne Haas, Esq., Office of General Counsel, New York State Department of Environmental Conservation, 625 Broadway, Albany, New York. No one appeared on behalf of respondent (id. at ¶ 4).

I noted for the record that respondent had failed to answer the complaint and failed to appear for the adjudicatory hearing. Department staff moved orally for a default judgment pursuant to 6 NYCRR 622.15. I reserved on the oral motion, allowing the record to remain open for Department staff to submit the documentation required by 6 NYCRR 622.15(b). By cover letter dated April 6, 2021, staff submitted a written motion for a default judgment with supporting papers (see Appendix A, attached hereto [listing documents submitted on motion]). Department staff served the motion and supporting papers on respondent by first class mail on or about April 6, 2021 (see Affidavit of Service of Melissa Evans, sworn to April 6, 2021). Respondent did not respond to the motion.

Applicable Regulatory Provisions

Section 551.2 Production and purchase reports.

* * *

"(b) Each person who first produces, sells or purchases oil and gas produced in the State and the operator of each gas storage facility in the State must file with the department on a form the department prescribes a statement of the oil and gas produced, sold, purchased or stored. The information contained in this statement must be compiled on a calendar year basis and must be filed no later than March 31st next following the close of the calendar year, unless the department requires otherwise."

* * *

Findings of Fact

1. Respondent ASOMEO LLC. maintains an address at 5500 Main St., Suite 100, Williamsville, New York. (See Haas Aff. ¶ 5, Exhibit D; affidavit of Ted Loukides [Loukides Aff.], sworn to April 2, 2021, Exhibit 2.)
2. Respondent is an active domestic limited liability company in the State of New York. (See Haas Aff. ¶ 5, Exhibit D.)
3. Respondent ASOMEO LLC operates the wells designated as API Well Numbers 31-003-28388-00-00, 31-003-28390-00-00 and 31-009-28372-00-00 and known as the HG 3-28-17 and HG 2-28-17 wells (located in Clarksville, Allegany County, New York) and the Hill 21 well (located in Carrolton, Cattaraugus County, New York). (See Loukides Aff. ¶¶ 4, 6, 7, 8, Exhibits 1, 2, 3, 4, 5.)
4. Respondent is required to file annual well reports (AWRs) with the Department for each calendar year for each well respondent operates on a form supplied by the Department, as typified by Loukides Aff. Exhibits 6 and 9 (AWRs sent to respondent for the 2018 and 2019 calendar years). (See Loukides Aff. ¶¶ 4, 10, 14, Exhibits 6, 9.)
5. In January 8, 2019, Department staff mailed respondent a cover letter and AWR forms for the 2018 calendar year, pre-printed with respondent's name, address and well information. The cover letter reminded respondent to file the completed AWRs by March 31, 2019. Respondent failed to submit the 2018 AWRs by March 31, 2019. (See Loukides Aff. ¶¶ 10, 11, Exhibit 6.)[1]
6. On May 19, 2019, Department staff mailed respondent a notice of violation (NOV) notifying respondent that respondent had failed to file acceptable AWRs for calendar year 2018. The NOV advised respondent of the potential penalties for failing to submit the required AWRs and potential enforcement if respondent failed to submit the 2018 AWRs within 30 days. (See Loukides Aff. ¶ 12, Exhibit 7.)
7. On July 17, 2019, Department staff mailed respondent a second NOV advising respondent that respondent had failed to file acceptable AWRs within 30 days of the first NOV. Included with the NOV was an order on consent to settle the matter within thirty days. The NOV advised respondent of the potential penalties for failing to submit the required AWRs along with the signed order on consent. Respondent failed to submit the missing AWRs or respond to the July 17, 2019 notice. The notice of violation and consent order were mailed by certified mail return receipt requested, but Department staff was unable to confirm receipt by respondent. (See Loukides Aff. ¶ 13, Exhibit 8.)
8. On January 8, 2020, Department staff mailed respondent a cover letter and AWR forms for the 2019 calendar year, pre-printed with respondent's name, address and well information. The cover letter reminded respondent to file the completed AWRs by March 31, 2020. Respondent failed to submit the 2019 AWRs by March 31, 2020. (See Loukides Aff. ¶¶ 14, 15, Exhibit 9.)
9. On July 20, 2020, Department staff mailed respondent an NOV advising respondent that respondent had failed to file acceptable AWRs by March 31, 2020. Included with the NOV was an order on consent to settle the matter within thirty days. The NOV advised respondent of the potential penalties for failing to submit the required AWRs along with the signed order on consent. Respondent failed to submit the missing AWRs or respond to the July 20, 2020 notice. The notice of violation and consent order were mailed by certified mail return receipt requested, and received by respondent on July 27, 2020. (See Loukides Aff. ¶ 16, Exhibit 10.)
10. Respondent did not answer the complaint. (See Haas Aff. ¶ 3.)
11. Ted Loukides is an employee of the Department and is a Mineral Resources Specialist 4 in the Department's Division of Mineral Resources. Mr. Loukides is the Section Chief of the Oil and Gas Compliance and Enforcement Section in the Division's Bureau of Resource Development and Reclamation. Mr. Loukides duties include the administration of the provisions of ECL article 23 and 6 NYCRR part 550, et seq. including reporting requirements. Mr. Loukides has access to and is custodian of Department records relating to the operation of oil and gas wells, including all annual well reports (AWRs) submitted to the Department. (See Loukides Aff. ¶¶ 1-3.)
12. As shown by the affidavit of service of Melissa Evans, sworn to March 25, 2021, Department staff served the notice of hearing and complaint, statement of readiness, order on consent and invoice, on respondent by certified mail, pursuant to 6 NYCRR 622.3(a)(3), that was received by respondent on February 1, 2021. (See Haas Aff. Exhibit C.)
13. Respondent failed to appear at the March 9, 2021 hearing. (See Haas Aff. ¶ 4; hearing record.)

Discussion

A respondent upon whom a complaint has been served must serve an answer within 20 days of receiving a notice of hearing and complaint (see 6 NYCRR 622.4[a]). A respondent's failure to file a timely answer "constitutes a default and a waiver of respondent's right to a hearing" (6 NYCRR 622.15[a]). In addition, attendance by a respondent at a scheduled pre-hearing conference or hearing is mandatory, and failure to attend constitutes a default and a waiver of the opportunity for a hearing (see 6 NYCRR 622.8[c]; see also 6 NYCRR 622.15[a] ["A respondent's ... failure to appear at the hearing or the pre-hearing conference ... constitutes a default and waiver of respondent's right to a hearing"]).

Upon a respondent's failure to answer a complaint or failure to appear for a pre-hearing conference or hearing, Department staff may make a motion to an ALJ for a default judgment. Such motion must contain:

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

"(2) Proof of respondent's failure to appear or failure to file a timely answer;

"(3) Consistent with CPLR 3215(f), proof of the facts sufficient to support the violations alleged and enable the ALJ and commissioner to determine that staff has a viable claim;

"(4) A concise statement of the relief requested;

"(5) A statement of authority and support for any penalty or relief requested; and

"(6) Proof of mailing the notice required by [6 NYCRR 622.15(d)], where applicable."

(see 6 NYCRR 622.15[b][1] - [6] [effective September 16, 2020]).

As the Commissioner has held, "a defaulting respondent is deemed to have admitted the factual allegations of the complaint and all reasonable inferences that flow from them" (Matter of Hunt, d/b/a Our Cleaners, Decision and Order of the Commissioner, July 25, 2006, at 6 [citations omitted]). In addition, in support of a motion for a default judgment, staff must "provide proof of the facts sufficient to support the claim[s]" alleged in the complaint (Matter of Queen City Recycle Center, Inc., Decision and Order of the Commissioner, December 12, 2013, at 3). Staff is required to support its motion for a default judgment with enough facts to enable the ALJ and the Commissioner to determine that staff has a viable claim (see Matter of Samber Holding Corp., Order of the Commissioner, March 12, 2018 [Samber], at 1 [citing Woodson v Mendon Leasing Corp., 100 NY2d 62, 70-71 (2003)]; see also 6 NYCRR 622.15[b][3], CPLR 3215[f]).

The record establishes that: (i) Department staff served the notice of hearing and complaint upon respondent; (ii) respondent failed to file an answer to the complaint, as directed in the cover letter and notice of hearing served with the complaint, and respondent failed to appear for the adjudicatory hearing scheduled on March 9, 2021, as directed in the notice of hearing; (iii) Department staff's papers provide proof of the facts sufficient to support the violations alleged and enable me to determine that staff has a viable claim; (iv) Department staff's papers include a concise statement of the relief requested (see motion for default judgment, wherefore clause; Haas Aff. Exhibit B [complaint]); (v) staff's motion includes a statement of authority and support for the penalty and relief requested (see Haas Aff. ¶¶ 10-16); and (vi) Department staff provided proof of service of the motion papers on respondent (see affidavit of service of Melissa Evans, sworn to April 6, 2021). Respondent did not file or serve a response to staff's motion. Based upon the foregoing, the Department is entitled to a default judgment in this matter pursuant to the provisions of 6 NYCRR 622.15.

Department staff's submissions in support of the motion for a default judgment provide proof of facts sufficient to enable me to determine that staff has a viable claim that respondent failed to timely file complete and accurate AWRs for the 2018 and 2019 calendar years for respondent's HG 3-28-17, HG 2-28-17 and Hill 21 wells, in violation of 6 NYCRR 551.2(b).

Staff's complaint requested a total civil penalty of three thousand dollars ($3,000). Staff's submissions on the motion for a default judgment elaborate on the requested civil penalty, discussing the Department's Civil Penalty Policy, DEE-1, and administrative precedent concerning similar violations (see Haas Aff. ¶¶ 10-14).[2] Department staff asserts that reporting requirements, such as those at issue here, provide the Department with important information about the status of the State's resources. According to Department staff, the failure to timely submit AWRs may result in potential and actual environmental harm. Staff explains that the AWRs identify non-producing wells for plugging, and that the failure to plug non-producing wells may result in contamination of groundwater with petroleum products, and the release of harmful greenhouse gases. In addition, Department staff transmits production information to affected State agencies and local governments for real property tax purposes. (Haas Aff. ¶ 13; Loukides Aff. ¶ 17.)

ECL 71-1307(1) provides that any person who violates any provision of ECL article 23 or commits any offense described in ECL 71-1305 shall be liable for a penalty of up to eight thousand dollars ($8,000) for the first day of violation and up to two thousand dollars ($2,000) per day for each day the violation continues. ECL 71-1305(2) provides that it is unlawful for any person to violate any rule or regulation promulgated pursuant to ECL article 23, which would include the regulatory requirement at issue here -- 6 NYCRR 551.2(b). Department staff's proposed civil penalty of three thousand dollars ($3,000) is consistent with the Department's Civil Penalty Policy (DEE 1, issued June 20, 1990) as well as applicable provisions of ECL article 71 and prior Commissioner orders. Furthermore, staff demonstrated the importance of AWRs to the regulatory scheme. The Commissioner has previously held that "the timely filing of complete and accurate AWRs is critical to the regulatory requirements of this program" (see Matter of Buffalo China, Inc., Order of the Commissioner, October 27, 2013, at 2). Accordingly, I conclude that the penalty of three thousand dollars ($3,000) requested by Department staff, is supported and appropriate.

Conclusion of Law

By failing to timely file complete and accurate annual well reports for the 2018 and 2019 calendar years for the HG 3-28-17, HG 2-28-17 and Hill 21 wells, respondent ASOMEO LLC violated 6 NYCRR 551.2(b).

Recommendation

Based upon the foregoing, I recommend that the Commissioner issue an order:

1. granting Department staff's motion for default;
2. holding that respondent ASOMEO LLC violated 6 NYCRR 551.2(b) by failing to timely file complete and accurate annual well reports for the 2018 and 2019 calendar years for respondent's HG 3-28-17, HG 2-28-17 and Hill 21 wells (API Well Numbers 31-003-28388-00-00, 31-003-28390-00-00 and 31-009-28372-00-00, respectively);
3. directing respondent ASOMEO LLC to submit complete and accurate annual well reports for the 2018 and 2019 calendar years within thirty (30) days of the service of the Commissioner's order upon respondent;
4. directing respondent ASOMEO LLC to pay a civil penalty in the amount of three thousand dollars ($3,000) within thirty days (30) of the service of the Commissioner's order upon respondent; and
5. directing such other and further relief as he may deem just and appropriate.

/s/

Michael S. Caruso
Administrative Law Judge

Dated: Albany, New York
April 30, 2021

APPENDIX A

Matter of ASOMEO LLC
DEC Case No. CO 9-20200622-77
Motion for Default Judgment

1. Cover letter, dated April 6, 2021, from Anne Haas, Esq., filing and attaching staff's motion papers.
2. Notice of Motion for Default Judgment, dated April 6, 2021.
3. Motion for Default Judgment, dated April 6, 2021, attaching Exhibit A and affidavit of Ted Loukides;
   1. Affirmation of Anne Haas, Esq., dated April 6, 2021, attaching Exhibits B-D;
   2. Cover letter, Notice of Hearing, Complaint, and Statement of Readiness all dated January 28, 2021, and proposed Order on Consent and Invoice;
   3. Affidavit of Service of Melissa Evans, sworn to March 25, 2021, attaching United States Postal Service (USPS) electronic proof of delivery; and
   4. NYS Department of State, Division of Corporations, Entity Information, regarding ASOMEO LLC, reflecting information through March 23, 2021.
4. Affidavit of Ted Loukides, sworn to April 2, 2021, attaching Exhibits 1-8;
   1. Tax Parcel Maps depicting location of wells on properties operated by ASOMEO LLC;
   2. Organizational Report for ASOMEO LLC, sworn to February 23, 2015
   3. Permit to Drill 31-003-28388-00-00 (HG #3-28-17 well) issued to ASOMEO LLC, dated May 9, 2017;
   4. Permit to Drill 31-003-28390-00-00 (HG #2-28-17 well) issued to ASOMEO LLC, dated May 23, 2017
   5. Permit to Drill 31-009-28372-00-00 (Hill 21 well) issued to ASOMEO LLC, dated August 31, 2017;
   6. Cover letter from Theodore N. Loukides to ASOMEO LLC, dated January 8, 2019 with enclosed 2018 Annual Well Report forms;
   7. Letter from Theodore N. Loukides to ASOMEO LLC, dated May 9, 2019 (re: Notice of Violation - Failure to File Annual Well Report) with 2018 Annual Well Report forms enclosed and USPS electronic proof of delivery attached;
   8. Letter from Theodore N. Loukides to ASOMEO LLC, dated July 17, 2019 (re: Second Notice of Violation - Failure to File Annual Well Report) with proposed order on consent, invoice and 2018 Annual Well Report forms;
   9. Cover letter from Theodore N. Loukides to ASOMEO LLC, dated January 8, 2020 with enclosed 2019 Annual Well Report forms; and
   10. Letter from Theodore N. Loukides to ASOMEO LLC, dated July 20, 2020 (re: Notice of Violation - Failure to File Annual Well Report) with proposed order on consent and invoice enclosed and USPS electronic proof of delivery attached.
5. Affidavit of Service of Melissa Evans, sworn to April 6, 2021 (default motion papers).

[1] Department staff provided respondent with two preprinted AWRs, one AWR for the two wells located in Allegany County, New York and one AWR for the well located in Cattaraugus County, New York.

[2] See Matter of Sahlem, Order of the Commissioner, dated January 4, 2021; Matter of Gilray, Order of the Commissioner, dated March 4, 2015; and Matter of Buffalo China, Inc., Order of the Commissioner, dated October 27, 2013. For each demonstrated violation, the Commissioner assessed a civil penal

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