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Murray Energy Corp. v. Division of Mineral Resources Management

Court of Appeals of Ohio, Seventh District

September 23, 2013

MURRAY ENERGY CORPORATION, ET AL., APPELLEES,
v.
DIVISION OF MINERAL RESOURCES MANAGEMENT, APPELLANT, and OXFORD OIL COMPANY, APPELLANT.

Administrative Appeal from the Reclamation Commission, Case No. RC-11-006.

For Plaintiffs-Appellees Murray Energy Corporation, et al. Attorney Mark Stemm Attorney Michael Wehrkamp Porter, Wright, Morris & Arthur, LLP.

For Defendant-Appellant Division of Mineral Resources Management Attorney Molly Corey Attorney Daniel Martin Assistant Attorneys General Environmental Enforcement Section Ohio Department of Natural Resources.

For Intervenor-Appellant Oxford Oil Company Attorney Timothy McGranor Attorney John Keller Vorys, Sater, Seymour and Pease, LLP.

Hon. Gene Donofrio Hon. Joseph J. Vukovich Hon. Cheryl L. Waite.

OPINION

DONOFRIO, J.

(¶1} This consolidated appeal involves two decisions of the Reclamation Commission concerning a permit to drill an oil and gas well issued by the Chief of appellant Ohio Department of Natural Resources, Division of Mineral Resources Management (DMRM), to appellant Oxford Oil Company (Oxford). The site of the proposed well is located on property appellee Murray Energy Corporation (Murray) intends to mine for coal. The chief issued the permit with conditions and Murray appealed that decision to the commission. Oxford filed a motion asking the commission to dismiss Murray's appeal on the procedural grounds that Murray lacked standing and that its appeal was untimely. The commission first denied Oxford's motion to dismiss and then reversed the chiefs issuance of the permit. Before this court, Oxford appeals the commission's decision denying its motion to dismiss Murray's appeal of the issuance of the permit to the commission and the DMRM appeals the commission's decision reversing the chief's issuance of the permit.

(¶2} This case concerns property owned by Dale Russell in Goshen Township, Belmont County, Ohio. Consolidated Land Company (CLC) has the coal and mining rights to the property. Russell leased the oil and gas rights to Oxford, a registered oil and gas operator in Ohio.

(¶3} Oxford submitted two oil and gas well permit applications to the chief of the DMRM on February 10, 2011. (Application Nos. aPATT019352 and aPATT019354.) The first application was for a vertical well, while the second application was for Oxford to plug-back the vertical well and drill out horizontally. Despite being drilled vertically and horizontally, the proposed well would penetrate the Pittsburgh No. 8 coal seam at the same location and in the same manner leading the chief to consolidate review of the two applications. Therefore, Oxford would effectively be operating only one well, known as the proposed Russell No. 1 Well (hereinafter referred to in the singular and/or as "the proposed well").

(¶4} Goshen Township, the proposed site of Oxford's oil and gas well, is designated as a "coal bearing township" under R.C. 1561.06. Therefore, R.C. 1509.08 required that the chief notify the owner or lessee of any "affected mine" about the applications. Records showed that the Ohio Valley Coal Company (OVCC) is actively mining the Pittsburgh No. 8 coal seam at the Powhatan No. 6 Mine approximately four miles east of the proposed Russell No. 1 Well.

(¶5} CLC, mentioned earlier, serves as OVCC's land holding company, maintaining title to the coal and mining rights until shortly before OVCC actually mines an area. CLC and OVCC are subsidiaries of Murray Energy Corporation (Murray). The coal mined by OVCC is transferred to another Murray subsidiary, American Energy Corporation (AEC), for sale to utilities that use it to generate electricity.

(¶6} On February 14, 2011, the chief sent a letter to OVCC notifying it about Oxford's applications for the proposed well. In the letter, the chief also informed OVCC of R.C. 1509.08's requirement that it provide support establishing it has an "affected mine, " and, if so, giving it the opportunity to object to the proposed well.

(¶7} On February 21, 2011, OVCC and CLC filed an objection to the proposed well, citing four reasons: (1) they intend to mine the coal at the site of the proposed well; (2) the proposed well would interfere with that mining; (3) they own that coal along with an uninterrupted right of way access to it and through it; and (4) Ohio public policy favors coal development when conflicts arise with oil and gas. They also noted that they could not identify any alternative drilling sites within their coal reserves.

(¶8} The chief determined that OVCC and CLC's objection was unfounded since conditions could be placed on the permit. In his May 13, 2011 letter decision, the chief acknowledged that OVCC has a permit to longwall mine[1] the Pittsburgh No. 8 coal seam in Goshen Township and is actively mining in an area to the east of the proposed well. However, the chief observed that there is not an active permit to mine coal in the area beneath the site of the proposed well, there is no pending application to mine coal from that property, and OVCC did not indicate when they intended to mine the property. Specifically, the chief found that OVCC and CLC's objection was "not sufficiently well founded because conditions to the permit can reasonably be expected to prevent a substantial risk that the oil and gas operation will result in violation of RC Chapter 1509 that will present an imminent danger to public health or safety or damage to the environment."

(¶9} The chief indicated that a permit to drill the Russell No. 1 Well would be issued to Oxford on the condition that Oxford, if it cannot establish superior property rights in a court of competent jurisdiction, plug and abandon the well in accordance with federal Mine Safety and Health Administration (MSHA) standards before OVCC's mining approached the well. OVCC and CLC, along with Murray and AEC (hereinafter collectively referred to as Murray) requested that the chief informally review his initial decision, pursuant to R.C. 1513.13(A)(3). Murray sought greater detail and clarification of the conditions.

(¶10} The chief held a meeting with representatives from the DMRM, Murray, and Oxford participating. Following that meeting and in a June 14, 2011 letter decision, the chief stood by his initial decision to issue the permit. However, he revised the conditions in an attempt to address Murray's concerns.

(¶11} On June 29, 2011, Murray appealed the chiefs May 13, 2011 and June 14, 2011 letter decisions to the Reclamation Commission. Oxford moved to dismiss Murray's appeal on the basis that it was not timely filed within fifteen days of the chiefs May 13, 2011 decision. The commission denied the motion on September 21, 2011. Oxford appealed that decision to this court in case number 12-BE-37.

(¶12} The commission heard Murray's appeal of the chiefs May 13, 2011 and June 14, 2011 letter decisions with all parties presenting witnesses and evidence. On October 6, 2011, the commission vacated the chiefs approval of the applications to drill the proposed well. The commission concluded that the chief lacked the statutory decision authority to impose the permit conditions, likening the chiefs actions to an adjudication of a property rights dispute for which it was not a tribunal of competent jurisdiction. The commission found that it would not reach the issue of whether Murray owned an affected mine since the chief had exceeded his authority. The commission remanded the matter to the chief to take actions consistent with its decision. The DMRM appealed that decision to this court in case number 12-BE-38. This court consolidated Oxford's appeal (12-BE-37) and the DMRM's appeal (12-BE-38) in the interest of judicial economy. 11/29/2011 J.E.

STANDARD OF REVIEW

(¶13} The standard of review of a reclamation commission's decision is defined by statute. R.C. 1513.14(A) directs that the court of appeals "affirm the decision of the commission unless the court determines that it is arbitrary, capricious, or otherwise inconsistent with law, in which case the court shall vacate the decision and remand to the commission for such further proceedings as it may direct." As such, this court's standard of review from the decision of the Reclamation Commission is "limited". Pleasant City v. ODNR, Div. of Reclamation, 67 Ohio St.3d 312, 316 (1993); Buckeye Forest Council v. Division of Min. Res. Mgmt., 7th Dist. No. 01 BA18, 2002-Ohio-3010, ¶ 7.

(¶14} In such cases, a reviewing court begins with the presumption that the Commission's action was valid. C. & T. Evangelinos v. Division of Min. Res. Mgmt., 7th Dist. No. 03BE70, 2004-Ohio-7061, ¶ 18; Buckeye Forest, 7th Dist. No. 01 BA18 at ¶ 7, 16. We recognize that the legislature has delegated certain authority to the Commission and that the Commission has accumulated substantial expertise. Buckeye Forest, 7th Dist. No. 01 BA18 at ¶ 29, 31, 43, citing R.C. 1513.02. See also Tri-State Reclamation, LLC v. Division of Mines and Min. Res. Mgmt, 5th Dist. No. 04CA19, 2005-Ohio-6439 (deferring to agency interpretation of statutes). Thus, deference must be given to the expertise of the Commission in determining whether the mining application should be approved. See Pleasant City, 67 Ohio St.3d at 320.

STATUTORY FRAMEWORK

(¶15} Section 36, Article II of the Ohio Constitution provides that laws may be passed "to provide for the regulation of methods of mining, weighing, measuring and marketing coal, oil, gas and all other minerals." Pursuant to this authority, and pursuant to the police power of the state to control and conserve the natural resources of Ohio, see e.g. State v. Martin, 168 Ohio St. 37, 40-41, 151 N.E.2d 7 (1958), the General Assembly has enacted a number of statutes regulating the production of coal and oil and gas, including R.C. Chapter 1509, which deals only with oil and gas production.

(¶16} R.C. 1509.05 provides in part that "[n]o person shall drill a new well * * * without having a permit to do so issued by the chief of the division of mineral resources management * * *." R.C. 1509.08 addresses proposed wells in coal bearing townships.

OXFORD'S APPEAL 12-BE-37


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