|
AOGCC reaffirms denial of petition for forced expansion of North Cook Inlet unit Commission issues decision on applications for rehearing of Danco application and revised decision on remand reflecting minor corrections, clarifications or revisions Kristen Nelson PNA Editor-in-Chief
The Alaska Oil and Gas Conservation Commission has issued its final decision on applications for rehearing in the application of Danco Inc. to for forced integration of two tracts into the North Cook Inlet unit and a revised decision on remand (Conservation Order 391B) which the commission said reflects “several minor respects in which the Decision on Remand should be corrected, clarified, or revised…”
As in its Dec. 3 decision on remand (Conservation Order 391A), the commission denied the petition.
In its 29 page final decision on application for rehearing the commission responded to 34 pages of appeal documents on issues ranging from technical to legal. The technical issues raised in the applications for rehearing cover the scope of the applicants’ arguments. The legal issues raised in the application, and the commission’s responses, illustrate some of the major issues in the case. Legal issues on appeal The commission said petitioners suggested in the application for rehearing that the Legislature intended to facilitate expansion of voluntary units “for the benefits of adjoining tract owners excluded by ‘the the big oil companies.’ Rather, the legislature’s goal was to afford ‘the best known methods for the prevention of waste,’“ the commission said.
A 1978 legislative letter of intent “specified that the compulsory unitization power should only be exercised ‘in cases of extreme necessity.’ This belies the petitioners’ theory that the Commission and its predecessor agencies were established ‘to force working and royalty interests to cooperatively unitize their interests so that (their) rights would be protected.’ … the primary problem that compulsory unitization is designed to solve is quite different from what the petitioners assume. An oil and gas conservation agency’s power of compulsion is typically needed to force into a unit, minority tract owners who do not want to join, rather than to force majority tract owners to accept minority tract owners who do want to join,” the commission said.
Unitization is not designed to deal with drainage of hydrocarbons from adjacent tracts, the commission said, but to prevent waste, insure greater ultimate recovery and protect correlative rights: “The traditional remedy for drainage,” the commission said, “is the much more direct self-help expedient of drilling a well on one’s own land...”
In response to a question in the appeal on how an adjacent royalty owner protects his property rights, the commission said: “if the working interest owner is violating a fiduciary (or other) obligation toward the royalty owner by not drilling an offset well or taking other appropriate action, the royalty owner may pursue whatever legal or equitable remedies are available in an appropriate forum for breach of that obligation. … the unitization statute is not intended as a remedy for contract or tort claims between a property’s royalty and working interest owners.” Duty to investigate The petitioners argued that they were required only to file their petition — that it was the commission’s statutory duty to independently investigate and gather evidence.
The commission said the Legislature “prescribed a detailed process for adjudicating petitions for involuntary unitization” in Alaska Statute 31.05.110: “It seems implausible that, having prescribed an ajudicatory method… the legislature would have intended the filing of a petition … also to trigger an additional mandatory investigative process.”
The commission said “… under the petitioners’ theory it was not sufficient for the Commission to afford them a full evidentiary hearing and to consider all of the evidence presented; rather, the Commission would have been obligated, merely on the basis of the petitioners’ unsupported allegations, to conduct its own program of fact gathering, including issuing subpoenas to obtain documents from others, and to carry out its own review and technical analysis of (all?) potentially data — in other words, to do the petitioners work for them.”
The commission cited a case in which the Alaska Supreme Court defined the investigation duties of the Alaska Public Utilities Commission as “obligating the Commission only to ‘conduct a hearing’ and to ‘afford (the complainant) an opportunity to present evidence’ after the complainant had demonstrated what amounted to probably cause that his complaint was valid.” The commission said the court ruled in the same case: “There is no ‘right’ to have the commission act.” Conflicts of interest The petitioners said in their application for rehearing that they repeatedly objected to commission members’ “conflicts of interest.” The commission said petitioners “fail to cite to anything in the record supporting this claim” and the commission itself searched the record for any instance in which petitioners raised an objection and found no instance in which petitioners objected to Commissioner Julie Heusser’s participation (Heusser worked for ARCO Alaska, since acquired by Phillips) and only a single instance when petitioners raised an issue of conflict of interest for Commissioner Cammy Taylor (Taylor was a state assistant Attorney General), in a pre-hearing conference in October 2000. Taylor said then in response to a question from counsel for the petitioner that she had no recollection of being involved with anything related to the case when she was with the Department of Law and counsel for the petitioners said he assumed that resolved the issue.
Since those objections were not raised in the course of the hearing they are untimely now, the commission said. The commission said objection to representation of the commission by the Department of Law is “likewise both untimely and unfounded.” That issue was only raised in June 2001, the commission said — eight months after the pre-hearing conference occurred and three months after the hearing began. Lappi language removed David Lappi, an expert witness for the petitioners in the proceedings before the commission, criticized a general finding by the commission in order 391A regarding his analysis, which he described as a “value judgment” about him.
The commission said in the original decision on remand that it found “that Mr. Lappi’s analysis as described in his testimony does not conform to generally accepted professional methods for petroleum geology or geophysics and is not credible or persuasive.”
In order 391B, the commission said the finding “was limited to the analysis described in Mr. Lappi’s testimony and was not a value judgment about a person. However, there may be some merit to the point that since most of Mr. Lappi’s testimony took place in in camera sessions and is not available to the public, his ability to defend his analysis outside of these proceedings is limited.”
The commission said that it recognized that point, and withdrew the language in question.
| 