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Department of Natural Resources shallow gas leasing decision appealed Three applicants for noncompetitive leases tell Superior Court in Anchorage that applications made prior to regulations and prior to opening of land should be accepted Kristen Nelson PNA Editor-in-Chief
Ted Williams of Spearfish, S.D., and Kenneth Schlenker and William Fulton of Billings, Mont., have appealed a Department of Natural Resources, Division of Oil and Gas decision on shallow gas leases to state Superior Court in Anchorage.
The men first appealed a Sept. 19, 1999, decision by the division to the DNR Commissioner. On Aug. 16 of this year, the commissioner denied the appeal, agreeing with the division’s decision.
On Oct. 15, Williams, Schlenker and Fulton appealed DNR’s decision in state court.
In the August decision on appeal, signed by Mark Myers, director of the Division of Oil and Gas, and DNR Commissioner Pat Pourchot, the state summarizes its position.
Shallow gas leasing enacted in 1996 The shallow gas leasing program, which provides for leasing on a first-come, first-served basis rather than competitively, was established by the Legislature in 1996. The statute authorized the DNR commissioner to adopt regulations necessary to implement the program.
Williams, Schlenker and Fulton submitted letters and deposits for shallow natural gas leases in October 1998, but, the state said, “the commissioner had not yet opened lands for noncompetitive shallow gas leasing, or provided the requisite notice.” The division did, however, accept the letters as applications to be held until shallow natural gas lease forms were developed.
The state said that in 1999 the division determined that, under state regulations, “it could not properly accept applications or deposits for noncompetitive shallow natural gas leases until the commissioner had opened land and provided public notice.” The state returned the letters and deposits.
Public notice published in 2000 In January 2000, the division published a notice that shallow gas lease applications would be accepted Feb. 29 on a first-come, first-served basis. Where applications overlapped, the division said, the priorities among applications would be determined by a public drawing.
Williams, Schlenker and Fulton submitted applications for the Feb. 29 opening covering the same acreage they had originally sought. They obtained rights to some of the acreage but not all. Their appeal covers the acreage they did not obtain.
Open for leasing The appellants argued that the Alaska shallow gas leasing program, enacted in 1996, superceded prior regulations requiring the commissioner to open noncompetitive land, and provide public notice, before leasing.
The state said the assertion that the shallow gas leasing program superceded prior regulations governing noncompetitive mineral procedures “would leave the state in an untenable position. If the appellants were correct, the likely result would be an unregulated land rush upon passage of the statute with the first person to know of the passage having the advantage over all others. There would be no uniformity in the application process or in selection of land for leases.”
Appellants also argued that state law provides that all lands not closed to mineral leasing are open except as otherwise provided in the statute — and the lands at issue had not been closed to mineral leasing. The state said the statutory requirement is that lands be open to noncompetitive mineral leasing except as otherwise provided, and also said that specific restrictions are provided in the shallow gas leasing law: it gives the director of the Division of Oil and Gas the right to determine which lands will be open for lease.
Final decision and appeal “It is well within the commissioner’s discretion to adopt regulations and establish procedures that are reasonable and necessary to implement, interpret, or make specific the provisions of the shallow natural gas leasing act. There is no requirement to accept applications before regulations and procedures are in place,” DNR said in its decision.
DNR also said the appellants “were not unfairly prejudiced… (but were) afforded an opportunity to participate on the same footing as every other applicant by submitting applications when land was opened for shallow natural gas leasing.”
Appellants told the court DNR erred in agreeing with the Division of Oil and Gas rejection of the original applications and erred in “subjecting the appellants’ earlier-filed shallow natural gas lease applications to the state’s later simultaneous shallow natural gas lease drawing and award process.” Appellants also argue the state’s decision is “in error on the facts, and is arbitrary and capricious, in its determination that the appellants have not been unfairly prejudiced by the state’s rejection of their earlier-filed applications…”
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