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Sahlem, William J. - Order, June 4, 2021

Sahlem, William - Order, June 4, 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 -

WILLIAM J. SAHLEM
Respondent.

ORDER

DEC Case No.
CO 9-20200622-106

In this administrative enforcement proceeding, New York State Department of Environmental Conservation (Department) staff alleges that respondent William J. Sahlem violated 6 NYCRR 551.2(b) by failing to timely file a complete and accurate annual well report for the 2019 calendar year for two gas wells known as the Siwiec 1 and Siwiec 2 wells located in the Town of Aurora, Erie County, New York. The wells are designated by American Petroleum Institute (API) Well Numbers 31-029-19753-00-00 and 31-029-20812-00-00, respectively.

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 [Findings of Fact Nos. 9 and 12]). 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 an annual well report for the 2019 calendar year for the Siwiec 1 and Siwiec 2 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, ¶ 13).

Department staff, in its papers, sought a total penalty of one thousand five hundred dollars ($1,500) for the failure to file an annual report for one calendar year, and the ALJ recommended that respondent William J. Sahlem 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, 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 William J. Sahlem failed to submit a timely and complete report for the Siwiec 1 and Siwiec 2 wells for the calendar year 2019. Notwithstanding the efforts of Department staff to obtain respondent's compliance, including numerous written and oral reminders, nothing in this record indicates that respondent filed an acceptable report for the 2019 calendar year until September 3, 2020, more than five months after the report was due (see e.g. Default Summary Report at 2-3 [Findings of Fact Nos. 4-8). 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; Affirmation of Anne Haas, Esq., dated April 6, 2021, ¶¶ 10-16).

Based on the record before me, the recommended penalty is authorized and appropriate. I direct that respondent submit the civil penalty of one thousand five hundred dollars ($1,500) to the Department within thirty (30) days of the service of this order upon respondent.

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

  1. 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 William J. Sahlem waived his right to be heard at the hearing.
  2. Based on the pleadings and papers submitted with and in support of Department staff's motion, respondent William J. Sahlem is determined to have violated 6 NYCRR 551.2(b), by failing to timely file a complete and accurate annual well report for the 2019 calendar year for the Siwiec 1 and Siwiec 2 wells in the Town of Aurora, Erie County (API Well Numbers 31-029-19753-00-00 and 31-029-20812-00-00).
  3. Respondent William J. Sahlem is hereby assessed a civil penalty in the amount of one thousand five hundred dollars ($1,500), 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 IV of this order.
  4. The annual well report 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, 3rd Floor
    Albany, New York 12233-6500
    Attn: Theodore N. Loukides, Chief.

  5. Any questions or other correspondence regarding this order shall also be addressed to Theodore N. Loukides at the address referenced in paragraph IV of this order.
  6. The provisions, terms and conditions of this order shall bind respondent William J. Sahlem and his agents, successors and assigns, in any and all capacities.

For the New York State Department
of Environmental Conservation

By: /s/

Basil Seggos
Commissioner

Dated: June 4, 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 -

WILLIAM J. SAHLEM,
Respondent.

DEFAULT SUMMARY REPORT

DEC Case No.CO 9-20200622-106

Procedural History

Staff of the New York State Department of Environmental Conservation (Department) served respondent William J. Sahlem (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 a timely annual well report for the 2019 calendar year for gas wells known as the Siwiec 1 and Siwiec 2 wells located in the Town of Aurora, Erie County, New York. The wells are designated by American Petroleum Institute (API) Well Numbers 31-029-19753-00-00 and 31-029-20812-00-00.

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) assessing a civil penalty in the amount of one thousand five hundred dollars ($1,500); and (3) 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 January 30, 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 was convened before me 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 William J. Sahlem maintains an address at 190 Reserve Road, West Seneca, New York. (See affidavit of Ted Loukides [Loukides Aff.], sworn to April 2, 2021, Exhibit 2.)
  2. Respondent William J. Sahlem operates the gas wells designated as API Well Numbers 31-029-19753-00-00 and 31-029-20812-00-00 and known as the Siwiec 1 and Siwiec 2 wells located in the Town of Aurora, Erie County, New York. (See Loukides Aff. ¶¶ 4, 5, 6, Exhibits 1, 2, 3.)
  3. 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. Exhibit 4 (AWR sent to respondent for the 2019 calendar year). (See Loukides Aff. ¶¶ 4, 7, Exhibit 4.)
  4. On January 8, 2020, Department staff mailed respondent a cover letter and AWR form for the 2019 calendar year, pre-printed with respondent's name, address and well information. The cover letter reminded respondent to file the completed AWR by March 31, 2020. Respondent failed to submit the 2019 AWR by March 31, 2020. (See Loukides Aff. ¶¶ 7, 8, Exhibit 4.)
  5. On July 20, 2020, Department staff mailed respondent a notice of violation (NOV) advising respondent that respondent had failed to file an acceptable AWR 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 AWR along with the signed order on consent. Respondent failed to submit the missing AWR or respond to the July 20, 2020 notice. The notice of violation and consent order were mailed by certified mail return receipt requested and were received by respondent on July 23, 2020. (See Loukides Aff. ¶ 9, Exhibit 5.)
  6. On August 19, 2020, respondent emailed a scanned copy of respondent's 2019 AWR to Department staff. Department staff deemed the AWR was unacceptable because respondent failed to indicate the number of months of production and the quantity of water injected each month. On August 20, 2020, Department staff telephoned respondent and explained the issues with the 2019 AWR. Respondent stated he would resubmit the corrected AWR. Staff further advised respondent that to resolve the matter that respondent must submit the order on consent and penalty payment as required by the NOV or contact the Office of General Counsel to discuss settlement of the matter. (See Loukides Aff. ¶ 10.)
  7. On August 21, 2020, respondent resubmitted the 2019 AWR and again did not include all the required information. Department staff emailed respondent and advised him of the problem. (See Loukides Aff. ¶ 11.)
  8. 8. On September 3, 2020, Department staff received an acceptable AWR for the 2019 calendar year. Respondent did not submit a signed order on consent or penalty payment and did not contact counsel's office to discuss settlement of the violation. (See Loukides Aff. ¶ 12, Exhibit 6.)
  9. Respondent did not answer the complaint. (See Haas Aff. ¶ 3.)
  10. 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's 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.)
  11. 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), which was received by respondent on January 30, 2021. (See Haas Aff. Exhibit C.)
  12. 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 a complete and accurate AWR for the 2019 calendar year for respondent's Siwiec 1 and Siwiec 2 wells, in violation of 6 NYCRR 551.2(b).

Staff's complaint requested a total civil penalty of one thousand five hundred dollars ($1,500). 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. ¶¶ 10-16).[1] 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. ¶ 13.)

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 one thousand five hundred dollars ($1,500) 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 one thousand five hundred dollars ($1,500) requested by Department staff, is supported and appropriate.

Conclusion of Law

By failing to timely file a complete and accurate annual well report for the 2019 calendar year for the Siwiec 1 and Siwiec 2 wells, respondent William J. Sahlem 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 William J. Sahlem violated 6 NYCRR 551.2(b) by failing to timely file a complete and accurate annual well report for the 2019 calendar year for respondent's Siwiec 1 and Siwiec 2 wells (API Well Numbers 31-029-19753-00-00 and 31-029-20812-00-00);
  3. directing respondent William J. Sahlem to pay a civil penalty in the amount of one thousand five hundred dollars ($1,500) within thirty days (30) of the service of the Commissioner's order upon respondent; and
  4. 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

[1] See Matter of Sahlem, Order of the Commissioner, January 4, 2021; Matter of Gilray, Order of the Commissioner, March 4, 2015; and Matter of Buffalo China, Inc., Order of the Commissioner, October 27, 2013. For each demonstrated violation, the Commissioner assessed a civil penalty of $1,500. (Haas Aff. ¶ 13).

APPENDIX A

Matter of William J. Sahlem
DEC Case No. CO 9-20200622-106
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. Copy of Matter of Sahlem, Order of the Commissioner, January 4, 2021.
  4. Affidavit of Ted Loukides, sworn to April 2, 2021, attaching Exhibits 1-6;
    1. Tax Parcel Map depicting location of well on property operated by William J. Sahlem;
    2. Organizational Report for William J. Sahlem, sworn to December 27, 2003;
    3. Request for Well Transfer to William J. Sahlem, sworn to August 6, 2003;
    4. Cover letter from Theodore N. Loukides to William J. Sahlem, dated January 8, 2020 with enclosed 2019 Annual Well Report form;
    5. Letter from Theodore N. Loukides to William J. Sahlem, dated July 20, 2020 (re: Notice of Violation - Failure to File Annual Well Report) with proposed order on consent, invoice and 2019 Annual Well Report form enclosed and USPS electronic proof of delivery attached; and
    6. 2019 Annual Well Report form from William J. Sahlem, received September 3, 2020.
  5. Affidavit of Service of Melissa Evans, sworn to April 6, 2021 (default motion papers).
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