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Home My WebLink AboutO 191Other Order 191 Docket Number: OTH-19-002 French Petition on Waste, Court Remand 1. September 3, 2021 Supreme court remand 2. ---------------------- Supreme court documents 3. October 28, 2021 Notice of public hearing, email distribution 4. December 13, 2021 French pre-hearing documents (4 pages held confidential) 5. December 15, 2021 Hearing transcript, French presentation, Regg presentation 6. ---------------------- Emails 7. February 7, 2022 French reconsideration request 8. March 18, 2024 French letter re: jurisdiction 9. March 21, 2024 AOGCC response to French letter ORDERS STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue Anchorage, Alaska 99501 Re: Petition for a Hearing on a ) Other Order 191 Complaint of Waste. ) Docket Number: OTH-19-002 AS 31.05.060(a) ) January 20, 2022 On March 1, 2019, the Alaska Oil and Gas Conservation Commission (AOGCC) received a “petition for a hearing on a complaint of waste,” dated February 28, 2019, from Hollis S. French (French). French alleged “waste occurred from an 8” line carrying fuel gas to Platform A in Cook Inlet, which is operated by Hilcorp.” According to French, “the line leaked gas to the atmosphere for approximately three months in the winter and spring of 2017, at a rate of approximately 300,000 scf per day.” French requested a hearing to be allowed to urge AOGCC to take action upon his complaint. AOGCC investigated the leak at the time it occurred and determined the leaking gas had been purchased by Hilcorp Alaska, LLC (Hilcorp) from a third-party provider. At the time of AOGCC’s investigation, French was an AOGCC commissioner. The AOGCC does not have authority under the Alaska Oil and Gas Conservation Act (the Act) to make a determination related to post-production use of commercially sold gas. In Other Order 150, AOGCC denied the request for a hearing. French appealed. On September 3, 2021, the Alaska Supreme Court reversed the superior court’s affirmance of Other Order 150, noting that AOGCC’s factual statements regarding its investigation and waste determination were unsupported by evidence in the administrative record and, in turn, the findings in Other Order 150 were not supported by substantial evidence that AOGCC had investigated the leak and concluded it was not waste. The court remanded the matter to AOGCC for further proceedings consistent with its opinion. On December 15, 2021, AOGCC held a hearing on the petition. At the hearing, French asked the AOGCC to expand its jurisdiction to declare the pipeline leak waste. He also proposed that the AOGCC could selectively enforce leaks of commercially sold gas by exercising “prosecutorial discretion.” At the hearing, James Regg testified as to the investigation undertaken by AOGCC at the time of the 2017 leak. Since March of 2003, Regg, a Senior Petroleum Engineer, has been AOGCC’s inspection program supervisor. Regg’s duties include technical assessment project management, development of regulations, and inspections and regulatory enforcements for both onshore and offshore oil and gas operations. Other Order 191 January 20, 2022 Page 2 of 3 Regg testified that in the course of its investigation into the leak, AOGCC reviewed its field files, its inspection files, and the Cook Inlet oil and gas pipeline infrastructure. AOGCC reviewed the custody transfer points for produced natural gas in the onshore and offshore Cook Inlet region, comparing the information from produced natural gas flow schematics with AOGCC records to confirm the custody transfer measurement points. AOGCC gathered information regarding the source of the gas leaking from the pipeline going out to Platform A, including volumes of natural gas produced, sold, purchased and used in the operation of Platform A. AOGCC also reviewed information obtained from the Alaska Department of Environmental Conservation, the Federal Pipeline and Hazardous Materials Safety Administration, and Hilcorp. Based upon its investigation, AOGCC determined that Platform A required the purchase of third-party natural gas to operate the platform. AOGCC further determined that the gas flowing out to Platform A had been purchased from the East Cook Inlet Gas Gathering System, a third-party common carrier pipeline operated by Harvest Pipeline on the Kenai Peninsula that transports natural gas produced by several operating companies, and that the gas had passed through a custody transfer meter prior to entering the common carrier line. Oil and gas conservation law, which developed in response to the rush to find oil, was aimed at practices by drillers that resulted in loss of recoverable hydrocarbons when wells were drilled inefficiently, gas was flared, and well spacing and production was done in a manner that dissipated reservoir pressure thereby reducing ultimate recovery from a reservoir. These kinds of practices were defined as waste. The primary purpose behind the prohibition against “waste” is to maximize ultimate resource recovery. By law, all gas must pass through a custody transfer meter prior to being severed from the property where it is produced. The custody transfer meter – where volumes of oil and gas are measured, royalties and taxes determined, and ownership of the oil or gas is transferred – is the point at which AOGCC has always deemed oil and gas resources to have been recovered. It is at this point that gas or oil can no longer be the basis for a waste determination under the Act. Nothing in the AOGCC’s enabling act or its legislative history suggests that the Alaska Legislature intended to expand the AOGCC’s authority to regulate wasteful uses of oil or gas after it has been produced and purchased. In addition, the AOGCC is not aware of, and French has cited no instance of, any conservation agency in the United States that has exercised its authority to make a waste determination as to gas or oil which has been produced and become private property. The AOGCC understands the concern over the loss of gas because of the pipeline leak. However, the AOGCC is not empowered to expand the definition of waste just because the event was compelling or garnered national attention. The AOGCC, like any administrative agency, can only act within the scope of its statutory authority. To expand its authority, as suggested by French, would mean that the AOGCC would be extending its authority over cases like the Exxon Valdez tanker spill, a rupture in an Enstar Natural Gas Company’s gas line that serves its residential or business customers, and even private consumers who are wasteful with the oil or gas they purchase. The Legislature did not include that authority in the Act. Other Order 191 January 20, 2022 Page 3 of 3 That the gas being transported in the line in question was commercially purchased gas – gas that had previously been metered at the custody transfer meter, severed from the property, subject to royalty payments, and sold to Hilcorp – is undisputed. Therefore, the gas which escaped during the Hilcorp leak cannot be the basis for a waste determination by the AOGCC. French’s petition is denied. Done at Anchorage, Alaska and Dated January 20, 2022. Jeremy M. Price Daniel T. Seamount, Jr. Jessie L. Chmielowski Chair, Commissioner Commissioner Commissioner RECONSIDERATION AND APPEAL NOTICE As provided in AS 31.05.080(a), within 20 days after written notice of the entry of this order or decision, or such further time as the AOGCC grants for good cause shown, a person affected by it may file with the AOGCC an application for reconsideration of the matter determined by it. If the notice was mailed, then the period of time shall be 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to be erroneous. The AOGCC shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed. Failure to act on it within 10 days is a denial of reconsideration. If the AOGCC denies reconsideration, upon denial, this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed within 40 days after the date on which the application for reconsideration was filed. If the AOGCC grants an application for reconsideration, this order or decision does not become final. Rather, the order or decision on reconsideration will be the FINAL order or decision of the AOGCC, and it may be appealed to superior court. That appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision on reconsideration. In computing a period of time above, the date of the event or default after which the designated period begins to run is not included in the period; the last day of the period is included, unless it falls on a weekend or state holiday, in which event the period runs until 5:00 p.m. on the next day that does not fall on a weekend or state holiday. Jessie L. Chmielowski Digitally signed by Jessie L. Chmielowski Date: 2022.01.20 08:02:18 -09'00' Dan Seamount Digitally signed by Dan Seamount Date: 2022.01.20 08:03:51 -09'00' Jeremy Price Digitally signed by Jeremy Price Date: 2022.01.20 09:50:21 -09'00' 1 Carlisle, Samantha J (OGC) From:Salazar, Grace (OGC) <grace.salazar@alaska.gov> Sent:Thursday, January 20, 2022 10:30 AM To:AOGCC_Public_Notices Subject:[AOGCC_Public_Notices] AOGCC Other Order No. 191 Attachments:OTH 191.pdf The Alaska Oil and Gas Conservation Commission has issued the attached Other Order No. 191 regarding Petition for a Hearing on a Complaint of Waste (Hollis French). Grace ____________________________________ Respectfully, M. Grace Salazar, Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 Direct: (907) 793‐1221 Email: grace.salazar@alaska.gov https://www.commerce.alaska.gov/web/aogcc/ __________________________________ List Name: AOGCC_Public_Notices@list.state.ak.us You subscribed as: samantha.carlisle@alaska.gov Unsubscribe at: https://list.state.ak.us/mailman/options/aogcc_public_notices/samantha.carlisle%40alaska.gov From:Salazar, Grace (OGC) To:Hollis French Subject:AOGCC Other Order 191 Date:Thursday, January 20, 2022 10:04:00 AM Attachments:OTH 191.pdf Dear Mr. French, Please see attached Other Order 191. Grace ____________________________________ Respectfully, M. Grace Salazar, Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 Direct: (907) 793-1221 Email: grace.salazar@alaska.gov https://www.commerce.alaska.gov/web/aogcc/ AOGCC 333 W 7th Avenue, Anchorage, AK 99501 TO: BERNIE KARL K&K RECLYCLING, INC. PO BOX 58055 FAIRBANKS, AK 99711 Mailed 1/20/22gs INDEXES 9 Alaska Oil and Gas Conservation Commission 333 West Seventh Avenue Anchorage, Alaska 99501-3572 Main: 907.279.1433 Fax: 907.276.7542 www.aogcc.alaska.gov March 21, 2024 Hollis S. French 2640 Telequana Drive Anchorage, Alaska 99517 Dear Mr. French, On March 18, 2024, the Alaska Oil and Gas Conservation Commission (AOGCC) received your correspondence addressing concerns regarding a matter the AOGCC previously investigated and issued a final decision on in 2022.1 While your letter will be part of the public record, the AOGCC considers this matter closed. Sincerely, Brett W. Huber, Sr. Chair, Commissioner 1 Alaska Oil and Gas Conservation Commission, Other Order 191 (January 20, 2022). Brett W. Huber, Sr. Digitally signed by Brett W. Huber, Sr. Date: 2024.03.22 13:59:33 -05'00' 8 March 15, 2024 Commissioner Brett Huber Alaska Oil and Gas Conservation Commission 333 W. 7" Avenue Anchorage, AK 99501 Dear Commissioner Huber, 2640 Telequana Drive Anchorage, Alaska 99517 RECFIVE® MAR 18 [024 AOGCC I've recently reviewed correspondence between AOGCC and Representative Jennie Armstrong and was dismayed to find the AOGCC erroneously describing its jurisdictional powers. I write to correct the record. This controversy began in 2017 when a large leak of natural gas was discovered in Cook Inlet. In answering a complaint I filed alleging waste, AOGCC put forth these reasons in defense of its position that its jurisdiction ends at the leaseline or sales gas meter: 1. "The agency does not have jurisdiction over gas sold by a vendor." 2. "The agency does not have jurisdiction over gas Hilcorp purchased from Harvest Pipeline." 3. "The agency does not have jurisdiction over gas metered and severed from a property." These three rationales are from Other Order 150, issued March 20, 2019. 1 appealed the agency's ruling and the majority of the brief I filed in Superior Court was devoted to rebutting these reasons. (I've included a copy of my briefing with this letter.) I focused on the police power of the state and listed examples from legal cases in which the police power was not defeated by commercial transactions. See the material gathered at Tab A, under the heading, "The police power of the state applies to private sales of oil and gas and to both sides of the meter." In response to my argument in Superior Court, the agency articulated three new rationales for lacking jurisdiction: 4. "Waste only occurs when recoverable hydrocarbons are lost" 5. "Once metered and severed, the gas has been produced, and ceases to be a recoverable resource" 6. "The combined effect of custody transfer and severance from the lease is that the resource has been produced, and in turn there is no longer a natural resource subject to a waste determination" In my reply, I focused on demonstrating the weakness of these rationales. For example, I pointed out that there is no definition in Alaska law for "recoverable hydrocarbon." As you might imagine, undefined terms are generally a poor place to put a lot of legal emphasis. 1 also noted that the agency failed to consider many of the listed examples in the statutory definition of waste, found at Alaska Statute 31.05.170(15), and which pertained to the leak of gas in Cook Inlet. (A copy of that statute is found at Tab B.) I noted that the leak of gas in Cook Inlet directly led to losses in oil production. I also used a 1947 case from Texas to show how broadly one can read the Texas definition of waste, and, by extension, since the two are very similar, Alaska's definition of waste. Finally, I pointed out the absurdity of the position taken in point 6: how in the name of reason can one even suppose that gas downstream of the meter is no longer a natural resource? The ruling in Superior Court was in favor of the agency. I appealed. When the case got to the Alaska Supreme Court, the agency had to defend the Superior Court decision. In attempting to harmonize what the AOGCC said itself in Other Order 150 with what the Superior Court judge wrote in his decision, the agency made some grievous mischaracterizations of the record. I pointed this out to the Supreme Court in a heading titled, "The dilemma faced by the agency caused it to misrepresent what Other Order 150 actually said." It was in this vein that I pointed out the agency reached a legal low point when it argued that "f a]bsent waste, there is no waste jurisdiction" I stated that the agency's reasoning put the cart before the horse. Imagine how pleased I was when the Supreme Court, in its decision, repeated the phrase: "The Commission's jurisdiction argument puts the cart before the horse." (The Court's decision can be found under Tab E.) But more important than repeating my argument back to me, the Alaska Supreme Court, having considered the rationales advanced by the AOGCC for lacking jurisdiction, rejected every single one, ruling specifically that the agency had jurisdiction over the leak of gas in Cook Inlet. All of this brings us to the correspondence with Rep. Armstrong. The letter dated May 17, 2023, states that "while the AOGCC has jurisdiction nearly everywhere to investigate whether waste exists, if that investigation reveals that that (sic) the alleged oil and gas waste occurred after the oil or gas was produced and purchased (which is typically at the lease/unit line as mentioned in the earlier response) then it cannot be considered 'waste' under the AOGCC's enabling act and the AOGCC does not have jurisdiction or authority to enforce a waste determination." It should be simple for the agency to cite the exact statute in 'AOGCC's enabling act" that supports this position. The failure to do so should be tantamount to a confession of error. The statute, which does not exist, would have to say something like, "The waste of oil and gas on the lease is prohibited," or that "The waste of oil and gas, in the production of oil and gas, is prohibited." This is an approach some states take. Alaska, however, did not. See, for example, the material gathered in my Supreme Court Brief, beginning at Tab C, under the heading "A comparison of Alaska's petroleum conservation laws with those of other states leads to the conclusion that Alaska's laws are to be broadly construed." Alaska, having the benefit of writing 2 its petroleum conservation laws long after most other oil producing states did, drafted its statutes without restricting them to simply the production side. While he was alive, I discussed the history of Alaska's petroleum conservation laws with Vic Fischer. He paid me the honor of coming to visit me when I worked at the Commission, and I asked him to gather his recollections and send them to me. Here is what he sent: The waste of oil and gas in the state is Prohibited (AS 31.05.095)(1955) During the 1955 session of the Alaska Territorial Legislature I was in Juneau representing the Alaska League of Cities (now Alaska Municipal League), working on statehood issues, and tracking what else was going on. I clearly remember Rep. Irene Ryan's leadership in enactment of legislation dealing with oil and gas. But Ryan, as a geologist who had studied the experience of other regions, also knew that Alaska must be ready to deal with oil and gas impacts when significant development occurred. Keep in mind that the 1955 statute was written and passed two years before the Swanson River discovery. There had been no discoveries in Cook Inlet, much less the North Slope. But most of us were aware of ongoing leasing and other activities on the Kenai and other places, and Rep. Ryan's comprehensive legislation on oil and gas was considered basic to Alaska's future. The prohibition of oil and gas waste is a clear statement of a broad principle to be applied uniformly across the then territory and the future state. As with like basic principles included in the Alaska Constitution, the drafting of which began later in 1955, we would certainly not have supported a narrow, technical application of this statute. Vic Fischer Irene Ryan was a fascinating person who went on the serve in the State Senate and in Governor Egan's cabinet. She was a true Alaska pioneer. She was very knowledgeable about the oil industry; indeed, she was investing in Alaska oil projects during the 1950's and 1960's. She was perfectly capable of drafting a law that put the AOGCC's jurisdictional line at the sales meter or leaseline or anywhere else. She did not. She drafted a law with statewide application. What that law says, in clear and unambiguous words, is that the waste of oil and gas in the state is prohibited. Those words, so short and simple, cover nothing less than the entire vastness of Alaska. The Territorial Legislature put the world on notice that, in Alaska, wasting the state's most precious resource was not going to be tolerated anywhere in the state. That was the law in 1955 and that remains the law today. The Cook Inlet gas leak easily satisfied two different statutory definitions of waste and arguably satisfies two more. (Remember that only one statutory definition needs to be satisfied to sustain a finding of waste.) First, it was waste in the ordinary sense of the word. The leaking 3 gas did not accomplish any work. Most of the natural gas produced in Southcentral Alaska is used to heat homes or generate electricity. The gas that leaked did neither. It vented directly to the atmosphere. It was wasted. Second, the leak involved the unnecessary dissipation of reservoir energy. In other words, the reservoir energy from which this gas originated, instead of being used to lift oil from the ground in a gas lift design, or instead of being used to power a turbine that would energize a waterfiood system to enhance oil recovery, dissipated into the air. The specific use for which this gas was intended, fuel gas for Platform A, meant a shutdown of the platform when the leak was being repaired. The loss of oil production which resulted from the leak further buttresses this point. Third, the leak created an unnecessary fire hazard. Almost all leaks of natural gas do this. Granted, the flammability of this particular leak was never put to the test by trying to ignite it. Nevertheless, natural gas, especially compressed gas, is extremely dangerous when it escapes the confines of a pipe. Finally, the leak involved the "escape into the open air of gas, from a well producing oil or gas." I believe that, because this gas can be traced back to a well in Alaska, that it satisfies the definition. The commission could decide to take a stricter view of the matter, given that this gas had been mingled with gas from other wells. Having demonstrated that the leaking gas was waste under Alaska law, the only question left is whether the commission had jurisdiction. In the hands of gifted legal theorists, jurisdiction can be a bit of a tricky subject. One reason for this rests in the nature of our federalist system of government. A national government of limited powers is created and controlled by the US Constitution. States, by contrast, are typically referred to as possessing general powers. James Madison described the difference this way: The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. Figuring out state jurisdiction is generally easier than figuring out federal jurisdiction. At the state level, you only need two guidelines. The first is to know that jurisdiction is like a light switch. It is either on or off. See the material at Tab D, under the heading 'Jurisdiction is either on or off." The other guideline is from the great Supreme Court Justice Oliver Wendell Holmes who wrote over one hundred years ago, that 'Jurisdiction is authority to decide the case either way." The Fair v. Kohler Die and Specialty Co., 228 U.S. 22, 25 (1913). 0 The commission's jurisdictional powers are set out in two statutes, both of which employ sweeping language. Alaska Statute 31.05.027 says in relevant part: The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States. Alaska Statute 31.05.030(a)says: The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter. The commission's formulation of jurisdiction as expressed to Rep. Armstrong is inconsistent with these two statutes. Under AOGCC's conception, its jurisdictional power in Alaska flickers on or off, depending on where the leak of gas is. That isn't right. You might also note that this formulation is very similar to ones already advanced in court hearings. See points 1 through 6 above. Yet those arguments failed. The Alaska Supreme Court said plainly that the agency had jurisdiction over the gas leak in Cook Inlet. In doing so it affirmed that Alaska law granted to AOGCC the power to decide the case. AOGCC's position, which is without statutory support, would remove that authority from the agency. The agency's failure to learn from this case is regrettable. The Cook Inlet gas leak stands as a nearly perfect rebuttal to the AOGCC's point of view on jurisdiction. The Cook Inlet gas leak, besides wasting a very large volume of precious natural gas, something currently in short supply in the Cook Inlet basin, caused a notable loss of oil production. This is a stubborn fact that has yet to be addressed by the agency either in its legal pleadings or elsewhere. The agency's failure to act upon the Cook Inlet leak is a matter of record. However, the larger point at stake here looks past this one incident. AOGCC's powers are crucial to the protection and conservation of Alaska's most valuable resource, now and in the future. Those powers were set by law in 1955 and must not be diminished by anyone, least of all by those employed to wield them. Sincerely yours, ►,V Hollis S. French 5 IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE HOLLIS S. FRENCH, Appellant, V. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee. ) Agency Case: OTH-19-002 ) Appeal Case: 3AN-19-6694CI APPEAL FROM THE ALASKA OIL AND GAS CONSERVATION COMMISSION Filed on the day of _ Anchorage Superior Court Clerk of the Superior Court By APPELLANT'S BRIEF Hollis S. French 2640 Telequana Drive Anchorage, Alaska 99517 (907)244-7135 AK Bar No. 9606033 2019 Deputy Clerk TABLE OF CONTENTS TABLE OF CONTENTS.......................................................... i TABLE OF AUTHORITIES...................................................... ii STATUTES PRINCIPALLY RELIED UPON ............................. v JURISDICTIONAL STATEMENT ............................................. ISSUES PRESENTED FOR REVIEW .......................................... STATEMENT OF THE CASE ................................................... STANDARD OF REVIEW ....................................................... 6 ARGUMENT....................................................................... I. The waste of oil and gas in the state is prohibited ..................... II. The police power of the state applies to private sales of oil and gas and to both sides of the meter ...................................... 14 A. The police power overrides private contract rights.......... 18 B. The police power survives metering and severing........... 21 111. The primary purpose behind the prohibition against waste is to maximize resource recovery ............................................ 25 A. Losing gas to the atmosphere does not maximize resource recovery........................................................... 25 B. Oil production was immediately reduced by the gas leak in Cook Inlet ..................................................... 27 C. Longer term production losses are attributable to the leak. 28 CONCLUSION............................................................ 30 TABLE OF AUTHORITIES FEDERAL CASES Brown v. Maryland, 25 U.S. (12 Wheat.) 419 (1827)---------------------- 15 License Cases, 46 U.S. (5 How.) 504 (1847)-------------------------------- 15,17 New York v. Miln. 36 U.S. 102 (1837)------------------------- ------------- 16 Ohio Oil Company v. Indiana (No. 1), 177 U.S. 190 (1900)-------------- 23.26 Union Dry Goods v. Georgia Public Service Corp.. 248 U.S. 372 (1919) 18,19 United States v. Alaska, 422 U.S. 184 (1975)------------------------------- 11.13 United States v. Lopez, 514 U.S. 549 (1995)-------------------------------- 16 ALASKA CASES Alaska Crude Corp. v. State, DNR, 261 P.3d 412 (Alaska 2011)-------- 8,13 Alyeska Pipeline Service Co. v. State, 288 P.3d 736 (Alaska 2012)----- 6 Cabana v. Kenai Peninsula Borough, 21 P.3d 833 (Alaska 2001) ----- 8 Exxon Corp. v. State, 40 P.3d 786 (Alaska 2001)------------------------- 8 Shephard v. State Dept. of Fish and Game, 897 P.2d 33 (Alaska 1995) 8 State, DNR v. Greenpeace, 96 P.2d 1056 (Alaska 2000)----------------- 8 Tesoro Alaska Petroleum v. Kenai Pipeline, 746 P.2d 896 (Alaska 1987)------------------------------------------------------------------ 13 Union Oil Co. of Cal. v. Dept. of Revenue, 560 P.2d 21 (Alasla 1977)------------------------------------------------------------------ 6.14 ii CASES FROM OTHER JURISDICTIONS Bel Oil Co. v. Roland, 137 So. 308 (Louisiana 1962)------------------ 3 Jamieson v. Indiana Natural Gas & Oil Company, 128 Indiana 555, 28 N.E. 76 (Indiana 1891)------------------------------------------------- 23 STATUTES AS 31.05.027------------------------------------------------------------------ 4, 11, 14 AS31.05.030------------------------------------------------------------------- 7,11 AS31.05.095------------------------------------------------------------------- 7, 26 AS 31.07.170(15)------------------------------------------------------------- 25 OTHER AUTHORITIES Alex DeMarban, Hilcorp Agrees To Temporarily Shut Down Oil Production To Fight Cook Inlet Gas Leak, March 25, 2017------------ 28 Dan Carpenter, Investigation Finds Hilcorp Gas Leak Poses Risks & Started Earlier Than First Reported, March 7, 2017----------------- 27 ConocoPhillips, Inc., Prudhoe Bay Unit Facility Information --------- 25 Cathy Foerster, Written Testimony to the House Subcommittee on Energy and Mineral Resources, October 13, 2017----------------------- 12 Forbes, #745 Jeffrey Hildebrand Harvest Midstream, Our Aflliates 20 20 Norman J. Hyne, Nontechnical Guide to Petroleum Geology, Exploration, Drilling and Production 2"a Ed. 2001---------- 2,23 Dan Joling, Alaska Underwater Gas Leak Continues, 2nd Group to Sue, March1. 2017------------------------------------------------------------------ 26 Linkedin, Hilcorp Company Profile 20 iii James Madison, The Federalist Paper No. 45 15 Leslie Moses, The Constitutional, Legislative and Judicial Growth of Oil and Gas Conservation Statutes, 13 Miss. L.J. 353 (1941)----------- 17,24 Regulatory Commission of Alaska, Natural Gas Rates ------ ------------ 25 Bernard Schwartz, A History of the Supreme Court (Oxford University Press) 1993------------------------------------------------------------------ 16, 17 State ofAlaska v. BP Exploration, Alaska, Trial Motion, 2009 WL 7274134--------------------- ----------------------------------------- -------- 24 State of Alaska, Department of Environmental Conservation, Hilcorp Natural Gas Leak From 8 " Pipeline -------- — ----------------------------- 26 U.S. Energy Information Administration, Frequently Asked Questions 25 H. Williams & C. Meyer, Oil and Gas Law, Volume 8 (2018)--------- 3 Wikipedia, Prudhoe Bay Oil Spill 24 Gordon S. Wood, The Creation of the American Republic 1776 -1787 (1969)--------------------------------------------------------------------------- 8 iv STATUTES PRINCIPALLY RELIED UPON ALASKA STATUTE 31.05.027 The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States. The authority of the commission further applies to all land included in a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.180(p). ALASKA STATUTE 31.05.030(a) The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter. ALASKA STATUTE 31.05.095. The waste of oil and gas in the state is prohibited. ALASKA STATUTE 31.05.170(15) "waste" means, in addition to its ordinary meaning, "physical waste" and includes (A) the inefficient, excessive, or improper use of, or unnecessary dissipation of, reservoir energy; and the locating, spacing, drilling, equipping, operating or producing of any oil or gas well in a manner which results or tends to result in reducing the quantity of oil or gas to be recovered from a pool in this state under operations conducted in accordance with good oil field engineering practices; (B) the inefficient above -ground storage of oil; and the locating, spacing, drilling, equipping, operating or producing of an oil or gas well in a manner causing, or tending to cause, unnecessary or excessive surface loss or destruction of oil or gas; (C) producing oil or gas in a manner causing unnecessary water channeling or coning; (D) the operation of an oil well with an inefficient gas -oil ratio; (E) the drowning with water of a pool or part of a pool capable of producing oil or gas, except insofar as and to the extent authorized by the commission; (F) underground waste; (G) the creation of unnecessary fire hazards; (H) the release, burning, or escape into the open air of gas, from a well producing oil or gas, except to the extent authorized by the commission; u JURISDICTIONAL STATEMENT This is an appeal from a final administrative decision by the Alaska Oil and Gas Conservation Commission ("AOGCC" ), designated as Other Order 150 and issued March 20, 2019. Appellant timely filed an application for reconsideration April 8, 2019, to which the AOGCC did not respond. The application for reconsideration was deemed denied ten days later, or April 18, 2019. This appeal was timely, filed on May 1, 2019. This Court has jurisdiction pursuant to AS 44.62.560(a); AS 22.10.020(d); and Ak. R. App. P. 601(b). ISSUES PRESENTED FOR REVIEW Were AOGCC's rulings regarding its jurisdiction contrary to the governing law. Specifically, did the agency err by ruling that: 1. It does not have jurisdiction over gas sold by a vendor; 2. It does not have jurisdiction over gas metered and severed from a property, and: 3. It does not have jurisdiction over gas Hilcorp purchased from Harvest Pipeline. STATEMENT OF THE CASE Appellant filed a petition for a hearing on a complaint of waste with the Alaska Oil and Gas Conservation Commission on February 28, 2019. The petition identified the source of the waste as gas that leaked to the atmosphere 1 from an 8" line carrying fuel gas to Platform A in Cook Inlet, operated by Hilcorp. The petition noted that the gas leaked from the pipeline at a rate of approximately 300,000 standard cubic feet per day, and did so for approximately three months in the winter and spring of 2017. In denying appellant's petition for a hearing, AOGCC issued Other Order 150 in which the agency did not dispute the underlying facts asserted in the petition, but incorrectly stated that "[o]nce oil or gas is metered and severed from the property, AOGCC's authority to make a waste determination regarding use of the oil or gas is at an end." Other Order 150 does not identify the location of the lease where the gas was "metered and severed," though it must have happened in Southcentral Alaska, as there is no gas import facility in the state and no pipeline carrying gas off the North Slope. Neither "metered" nor "severed" is defined in Alaska law. Gas metering generally refers to measurement.' Severance is defined as "separation of a mineral or royalty interest from other interests in the land by 1 "Gas volume is measured by a gas meter on the flowline. An orifice gas meter is commonly used. It measures the difference in gas pressures on gas flowing through an orifice (a round hole in a plate) on both sides of the orifice. The higher the flow rate, the greater the pressure drop across the orifice .... The gas velocity has been calibrated to gas volume by a meter prover. Meter provers are used for both gas and liquid meters. They compare the volume of fluid flowing through the accurately calibrated meter prover with the same volume of fluid flowing through the meter being tested... [The gas meter] is used to determine gas payments to the operator." Norman J. Hyne, Nontechnical Guide to Petroleum Geology, Exploration, Drilling and Production 2"d Ed., p. 373-74 (2001). 2 grant or reservation."2 Severed also can mean "the point at which natural resources are severed from the surface of the earth."' Other Order 150 did not explain the legal significance of metering and severing with respect to the agency's jurisdiction. The Order simply asserted that metering and severing puts an end to the agency's authority to act. This misconception of the agency's jurisdiction underlies two other rulings included in Other Order 150: (1) that the agency does not have jurisdiction over gas which has been sold by a vendor, and (2) that the agency does not have jurisdiction over gas sold by one company to another. In relevant part the order states that: AOGCC investigated the leak at the time it occurred. AOGCC initially believed the source of the gas was upstream` gas, i.e., gas which remained an AOGCC-regulated resource and had not been metered and severed from the property. Had that proven to be the case. the gas leak would have constituted waste and AOGCC would have instituted an enforcement action against Hilcorp. However, AOGCC's investigation ultimately revealed the leaking gas had been purchased by Hilcorp from a third -party provider, Harvest Pipeline (Harvest), and was being shipped back to Platform A. z H. Williams & C. Meyer, Oil and Gas Law, Volume 8, p. 960 (2018). ' Bel Oil Corp. v. Roland, 137 So.2d 308, 310 (Louisiana 1962) 4 The terms 'upstream' and `downstream' generally mean the same in the oil industry as they do in the rest of the world. They simply refer to a direction of flow. In this case the gas well would be the beginning of the flow. Steel pipe carries the gas away from the well -- downstream. At some point the gas goes through a custody transfer meter, where it is measured, and it is typically at this point that the state would claim its royalty share of the production, and would levy its production tax, if any. Downstream of the meter the gas joins a interconnected distribution system that brings the gas either to an underground storage well, or to its end users, whether homes, power generation plants, or, in this case, an 8" line that supplies fuel gas to Platform A's generators and turbines. 3 The primary purpose behind the prohibition against waste is to maximize resource recovery. Consequently, like every other state's oil and gas conservation regulatory authority, AOGCC regulates waste occurring upstream (occurring before oil or gas is metered and severed from the property) in connection with drilling, exploration, and production activities. Neither AOGCC nor any of its counterparts in other states has ever attempted to extend its juris- diction over waste to gas which has been sold by a vendor. Once oil or gas is metered and severed from the property, AOGCC's authority to make a waste determination is at an end. The gas involved in the Hilcorp leak had been sold by Harvest to Hilcorp. AOGCC does not have waste jurisdiction over gas Hilcorp purchased from Harvest. Absent jurisdiction, there is no basis for a hearing.s Appellant timely filed for reconsideration of Other Order 150, pointing out that AS 31.05.027 6 gives the agency statewide jurisdiction over waste. Appellant pointed out that if the Legislature had wanted the agency's jurisdiction to terminate at the meter, it would have said so. Appellant summarized the gas leak this way: Here's what happened in Cook Inlet two winters ago: a gas line burst and spewed gas to the atmosphere for several months. That is waste. The lack of gas led to the platform shutting down, which resulted in a loss of production. That is bad. The waste led to a loss of production.7 s Record at 0005. 6 "The authority of the cormnission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States." 7 Record at 0001. m In seeking reconsideration, Appellant also alerted the AOGCC that: • An AOGCC commissioner had testified to Congress that "Alaska statutes give AOGCC responsibility to exert jurisdiction on all lands within the state of Alaska (except Denali National Park) and all state waters." The Commissioner of the Department of Natural Resources determined that the leak of gas led to a reduction in Platform A's oil production.8 • The loss in oil production from Platform A provided an additional basis, besides the waste of the gas, for AOGCC to exert jurisdiction. as it was in alignment with the commission's own position, in Other Order 150, that the "primary purpose behind the prohibition against waste is to maximize resource recovery." The commission did not respond to the application for reconsideration. "'The Middle Ground Shoal A Platform was temporarily shut down in 2017 due to a leaking fuel gas pipeline.... Production information demonstrates that current production has dropped below 975 BOPD because of the shutdown. Prior to this shutdown, production was approximately 1.150 BOPD. Production returned at approximately 1,000 BOPD, and has since declined below 975 BOPD. Production in general from this platform has been in decline, but a decline curve analysis of oil production prior to the shutdown shows that production would not have declined to 1000 BOPD by the date that production returned. Importantly, the decline curve shows that without the 2017 shutdown production would currently be above 975 BOPD. " Record at 0003 (emphasis supplied). 5 STANDARD OF REVIEW The issue before this court is one of statutory construction. "When reviewing an agency's interpretation of a statute, we apply the reasonable basis standard when the interpretation implicates agency expertise or a determination of fundamental policies within the scope of the agency's statutory functions. We apply the independent judgment standard when `the agency's specialized knowledge and experience would not be particularly probative on the meaning of the statute."'9 Deciding the limits of the agency's jurisdiction does not implicate the expertise of the AOGCC.10 Thus the independent judgment standard applies. 9 Alyeska Pipeline Service Co. v. State, 288 P.3d 736, 740 (Alaska 2012)(footnotes omitted). to "[W]here, as here, the issues to be resolved turn on statutory interpretation, the knowledge and expertise of the agency is not conclusive of the intent of the legislature in passing a statute. Statutory interpretation is within the scope of the court's special competency, and it is our duty to consider the statute independently." Union Oil Co. of Cal. v. Dept. of Revenue, 560 P.2d 21, 23 (Alaska 1977)(footnote omitted). 2 ARGUMENT I. "THE WASTE OF OIL AND GAS IN THE STATE IS PROHIBITED."" The words quoted above are the law. They are also the fundamental rule of petroleum conservation. AOGCC's rulings on its jurisdiction set out in Other Order 150 fail to take into account the sweeping and powerful nature of this basic conservation statute. The statute, which predates statehood and has not been amended since, declares with logical simplicity that there is no place in all of Alaska where it is lawful to waste oil or gas. The statute is a model of clarity. AOGCC's rulings on its jurisdiction would have the effect of amending the statute by replacing the words "in the state" with the words "upstream of the meter." The Legislature was certainly capable of drafting and passing such a narrow law, but it did not. AOGCC's rulings on its jurisdiction circumscribe its own powers, to the benefit of the oil industry, and to the detriment of the public it purports to serve. The comprehensive nature of the statute is in keeping with the vital place that natural resources, particularly oil and gas, occupy in the state. Our state's jurisprudence is replete with recognitions that there is a public interest in the 11 A5 31.05.095. 7 conservation of Alaska's natural resources.12 Consider these examples, all from significant natural resource cases that came before the Alaska Supreme Court: "Natural resources are of prime importance to the public."' 3 "[T]he protection of state natural resources vindicates an important public interest."14 "That the natural resources of the state belong to the state, which controls them as trustee for the people of the state, is explicit in the Alaska Constitution."' 5 The public's interest in conserving Alaska's vital natural resources can only be defended by state agencies. Or, as historian Gordon Wood put it, "Since the people obviously could not `exercise the powers of government personally,' they must `trust to agents."'16 The AOGCC is the state agent charged with protecting the public's interest in oil and gas conservation.17 Its failure to understand the proper limits of its own jurisdiction must be corrected, otherwise 12 Exxon Corp. v. State, 40 P.3d 786, 791 (Alaska 2001). 13 State, DNR v. Greenpeace, 96 P.2d 1056, 1062 (Alaska 2004). 14 Cabana v. Kenai Peninsula Borough, 21 P.3d 833, 837 fn.16 (Alaska 2001). 15 Shephard v. State Dept. of Fish and Game, 897 P.2d 33, 40 (Alaska 1995). 16 Gordon S. Wood, The Creation of the American Republic 1776-1787, p. 546 (1969). 17 "AOGCC is an `independent quasi-judicial agency of the state' created by the Alaska Oil and Gas Conservation Act. AS 31.05.005(a). AOGCC, which has authority over all land subject to the state's police power, regulates to prevent waste, insure greater recovery, protect correlative rights and underground water, and further public health and safety. See AS 31.05.027; AS 31.05.095; AS 31.05.100; AS 31.05.110; AS 31.05.030." Alaska Crude Corp. v. State, Depart- ment of Natural Resources, 261 P.3d 412, 414 fn.3 (2011). 0 the public's interest in preventing the waste of a precious natural resource will not be protected across vast parts of the state. The factual case before the court could not be better drafted to illustrate these principles. As appellant pointed out to the AOGCC on reconsideration: Here's what happened in Cook Inlet two winters ago: a gas line burst and spewed gas to the atmosphere for several months. That is waste. The lack of gas led to the platform shutting down, which resulted in a loss of production. That is bad. The waste led to a loss of production.18 Note that the AOGCC does not dispute any of the facts in the preceding sentences. The agency does not dispute that a large volume of natural gas spewed directly to the atmosphere. The agency does not dispute that oil production was reduced as a result. Other Order 150 concedes that. but for the metering and severing of the gas, "the gas leak would have constituted waste and AOGCC would have instituted an enforcement action against Hilcorp." 19 This is an important concession, as it sharpens the legal question presented in this case. The agency's analysis essentially creates an absolute barrier to the exercise of AOGCC _jurisdiction at the place where the natural gas was metered and severed from the lease where it was produced. In other words, Other Order 150 asserts that, downstream of the meter, AOGCC's authority is non-existent. 18 Record at 0001. 19 Record at 0005. E Other Order 150 does not specify where exactly the metering and severing it refers to took place. While the order declares that "AOGCC investigated the leak at the time it occurred," 20 the agency submitted no documentation of its own, none at all, to substantiate this aspect of the case when it filed its record as required by Appellate Rule 604(b)(1). This is a point worth a moment's consideration. While it may be something of a relief for this court to not face a voluminous record, as is so often the case in administrative appeals, the lack of any documentation to flesh out the parameters of this so-called investigation reveals the lackluster effort put forth by the AOGCC in this case. Apparently, not a single piece of paper in the agency's files can be found that documents this investigation. No field notes from an agency inspector. No letter from AOGCC to Hilcorp demanding pertinent information. No public hearing on the matter. Appellant would be happy to allow the agency some extra time to supplement the record, if it has something to add, however unlikely that may be. Perhaps a future AOGCC hearing will flesh out the details of which well or wells on which lease supplied the gas to the 8" fuel gas line going to Platform A that burst sometime in the winter of 2017. As a practical matter, the gas must have come from a well in Southcentral Alaska. There is no pipeline carrying gas away from the North Slope. There is no natural gas import facility in the state. Whatever the source of the gas, it came from an Alaskan well. Appellant points 20 Record at 0005. ME these facts out only to prevent red herrings from cropping up. For the legal issues to be resolved in this case, however, the location of the metering is not germane. Again, there is no dispute that gas from an Alaskan well spewed from the broken 8" fuel gas line running to Platform A. And there is no dispute that the leak took place in Alaskan waters. 21 There is no better legal answer to the agency's flawed position on its own jurisdiction than the text of the relevant statutes. The first statute states: The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States?2 And the second says this: The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter.23 If you wanted to establish a robust watchdog agency, these are the words you would choose. Imagine for a moment that a law enforcement agency was given these powers. What portion of the state would lie beyond its reach? 21 The dividing line between state and federal waters in this portion of the state runs along a line across Cook Inlet at Kalgin Island. All oil development infrastructure in Cook Inlet is north of the line. In a case involving a proposed oil lease sale in Kachemak Bay, which is south of Kalgin Island, the US Supreme Court noted that "[t)he upper, or inner portion, of the inlet is not in dispute, for that part is conceded to be inland waters subject to Alaska's sovereignty." United States v. Alaska, 422 U.S. 184, 185 (1975). zz AS 31.05.027 (emphasis added). 23 AS 31.05.030(a) (emphasis added). 11 The narrow position the agency has adopted regarding its jurisdiction over a major leak of gas in Cook Inlet squarely conflicts with the plain language of both statutes. According to the agency, the authority of the commission does not apply to all land in the state; it only applies to land in the state that is upstream of the place where gas is metered. According to the agency, the commission does not have jurisdiction and authority over all persons and property, public and private; it only has that power upstream of the meter. Both conclusions are seriously incorrect. Moreover, the agency's position on its jurisdiction conflicts with sworn testimony it has given to Congress. Then -commissioner Cathy Foerster submitted testimony to encourage the federal government to allow states to assume more control over oil and gas development. She stated "Alaska statutes give AOGCC responsibility to exert jurisdiction on all lands within the state of Alaska (except Denali National Park) and all state waters."24 The agency's current position on its jurisdiction cannot be harmonized with Commissioner Foerster's sworn testimony. This is remarkable. The agency promised to Congress that it would assert jurisdiction on all lands within the state and on all state waters, without any qualification or limitation. Yet, according to Other Order 150, the agency does not have the duty or the obligation to exert jurisdiction on a gas line that runs through Cook Inlet. 24 Written testimony of Cathy Foerster to the House Committee on Natural Resources: Subcommittee on Energy and Mineral Resources, October 13, 2017. 12 Remember these are state waters, waters the United States Supreme Court has specifically identified as "inland waters subject to Alaska's sovereignty."25 Holding strong cards, in the form of statutes and court decisions, and having boasted to Congress of its plenary powers, the agency's feeble response to this leak is difficult to understand. The position the agency has adopted in Other Order 150 regarding its jurisdiction is at odds with the plain language of the relevant law and a sworn statement it submitted to Congress. Additionally it is at odds with the Alaska Supreme Court's understanding of the agency's jurisdiction.76 The agency's position must be corrected by this court. The "goal of statutory construction is to give effect to the legislature's intent" and the court must do so using the common meaning of the words in the law, unless those words have acquired a peculiar meaning.`7 The Alaska Territorial legislature declared with great precision and economy that "the waste of oil and gas in the state is prohibited." Not one of those words is ambiguous or difficult to understand. The legislature has declared that the agency's authority 25 United States v. Alaska, 422 U.S. 184, 185 (1975). 26 "AOGCC ... has authority over all land subject to the slate's police power." Alaska Crude Corp. v. State, Department of Natural Resources, 261 P.3d 412, 414 fn.3 (2011). 21 "The goal of statutory construction is to give effect to the legislature's intent, with due regard for the meaning the statutory language conveys to others. In this respect, we have repeatedly stated that unless words have acquired a peculiar meaning, by virtue of statutory definition or judicial construction, they are to be construed in accordance with their common usage." Tesoro Alaska Petroleum v. Kenai Pipeline, 746 P.2d 896, 905 (Alaska 1987)(intemal citation omitted). 13 applies to "all land in the state lawfully subject to its police powers" and to "all persons and property, public and private." Despite these sweeping words, the AOGCC has, without justification and without a statutory basis of support, taken the position that a major gas leak that went on for months in an oilfield just south of Anchorage, a gas leak that caused an oil production platform to shut down and to lose production, is beyond its power. The agency's position diminishes the value of Alaska's nonrenewable oil and gas resources, and does so by abdicating its responsibility to defend the public interest in preventing waste. The agency's interpretation of its own jurisdiction is not entitled to any deference from this court.28 This court must exercise its independent judgment. The court should heed the plain language of the statutes and in doing so should find that the agency may use its powers in this case. II. THE POLICE POWER OF THE STATE APPLIES TO PRIVATE SALES OF OIL AND GAS AND TO BOTH SIDES OF THE METER. The agency's interpretation of its jurisdiction is contrary to law for another independent reason. It does not account for the police powers of the state. AS 31.05.027 provides that "the authority of the commission applies to all land in the state lawfully subject to its police powers." It is not simple to define the exact boundary of a state's police powers, but as the following history demonstrates, they most certainly are sufficient to give the commission the authority to act in this case. 28 Union Oil Co. of Cal. v. Dept. of Revenue, 560 P.2d 21, 23 (Alaska 1977). 14 That a state would be armed with a general sovereign power was first posited during our nation's founding. The concept's origins can be traced to the theory of federalism embodied in the Constitution. James Madison, writing in the Federalist Papers, described the distinction between the powers of the proposed national government and those of the states this way: The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State govermuents are numerous and indefinite. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.29 The `powers reserved to the several States' gradually became known as police powers. The term was first coined by Justice Marshall in Brown v. Marvland30 in 1827. Twenty years later, in 1847, the idea was articulated in this fashion: (W]hat are the police powers of a state? They are nothing more or less than the powers of government inherent in every sovereignty to the extent of its dominions. And whether a State passes a quarantine law, or a law to punish offenses, or to establish courts of justice, or requiring certain instruments to be recorded, or to regulate com- merce within its own limits, in every case it exercises the same power, that is to say, the power to govern men and things within the limits of its dominion. It is by virtue of this power that it legislates 31 29 James Madison, Federalist Paper No. 45. 30 25 U.S. (12 Wheat.) 419, 442-43 (1827). 31 License Cases, 46 U.S. (5 How.) 504, 583 (1847). is The License Cases, from which the above quote is taken, confirmed the power of the states to regulate the sale of liquor imported from abroad. The decision was in accord with a case from ten years earlier, New York V. Miln,32 that upheld a New York law requiring shipmasters to submit to the city a list of passengers landing from abroad and to post security for them, which was attacked as violating the Commerce Clause. Miln and the License Cases were crucial to the development and articulation of the police power concept.33 While these cases from long ago may seem a bit dusty and obscure, Madison's concept of federalism, based on a national government of enumerated powers, and state governments armed with general police powers, retains its vitality in the modern day: We start with first principles. The Constitution creates a Federal Government of enumerated powers. See Art. I, § 8. As James Madison wrote: `The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite.' The Constitution mandates this ... by withholding from Congress a plenary police power that would authorize enactment of every type of legislation. To uphold the Government's contentions here, we would have to pile inference upon inference in a manner that would convert congressional authority under the Commerce Clause to a general police power of the sort retained by the States. ,34 32 36 U.S. 102 (1837). 33 See Bernard Schwartz, A History of the Supreme Court, p. 78-81, (1993). 34 United States v. Lopez. 514 US 549, 552 (1995). 16 As the quoted material above from Lopez makes clear, the Court was concerned about granting to the federal government a "general police power of the sort retained by the States." By contrast, the Court takes for granted that state governments possess "`numerous and indefinite powers to order affairs within their borders. Indeed, it is the police power that undergirds each state's oil and gas conservation statutes.35 Appellant makes these points to impress upon the court that the Territorial Legislature, acting in 1955, was guided by and referencing over one hundred years of jurisprudence when it declared that the "authority of the commission [AOGCC] applies to all land in the state lawfully subject to its police powers." As shown. a state's police powers are "nothing more or less than the powers of government inherent in every sovereignty to the extent of its dominions."36 The police power essentially represents the limits of a state's sovereignty.37 This power, as will be demonstrated in the following sections, overwhelms the thin rationales for inaction adopted by the AOGCC in Other Order150. 35"The State's power to legislate for the protection of its natural resources... is based essentially upon its police power." Leslie Moses, The Constitutional, Legislative and Judicial Growth of Oil and Gas Conservation Statutes, 13 Miss. L.J. 353, 363 (1941). 36 License Cases, supra n.31. 37 See Schwartz, supra at n. 33, "In [this] conception, police powers and sovereign powers are the same." 17 A. The police power overrides private contract rights. Other Order 150 claims that the AOGCC may not act in this case because its investigation revealed that "the leaking gas had been purchased by Hilcorp from a third -party provider, Harvest Pipeline (Harvest) and was being shipped back to Platform A."38 Without explaining why, the agency simply asserts that "AOGCC does not have waste jurisdiction over gas Hilcorp purchased from Harvest. ,39 The agency claims further that never in history has the agency or its counterparts in other states "ever attempted to extend its jurisdiction over waste to gas which has been sold by a vendor."40 Other Order 150 attempts to suggest that the private sale of gas defeats the state's power to regulate. The problem for the agency is that this line of reasoning was thoroughly rejected by the United States Supreme Court one hundred years ago. In Union Dry Goods v. Georgia Public Service Corp.4' the Court was presented with a dispute over rates for electricity set by the Railroad Commission of Georgia, and a claim that the rates impaired a contract between the plaintiff and the defendant. The Court began its analysis by noting that electric light and power is a subject in which "the public has an interest which justifies rate regulation by the State in the exercise of its police power."42 The Court was ,just warming up, however, and it would go on to articulate a 38 Record at 0005. 391d. 40 Id. 4' 248 U.S. 372 (1919). "Id. at 3 75 . iE comprehensive series of legal principles governing what should occur when the right to contract conflicts with the public good: That private contract rights must yield to the public welfare, where the latter is appropriately declared and defined and the two conflict, has often been decided by this court. One whose rights, such as they are, are subject to state restriction, cannot remove them from the power of the State by making a contract around them. The contract will carry the infirmity of the subject matter. There is no absolute freedom to do as one wills or to contract as one chooses. The guaranty of liberty does not withdraw from legislative supervision that wide department of activity which consists in the making of contracts, or deny to government the power to provide restrictive safeguards. Liberty implies the absence of arbitrary restraint, not immunity from reasonable regulations and prohibitions unposed in the interests of the community. This court has so often affirmed the right of the State in the exercise of its police power to place reasonable restraints like that here involved, upon the freedom of contract that we need only refer to some of the cases in passing.43 The legal principles set forth above should end the debate on this point. The Union Dry Goods case obliterates the idea, as set out by the AOGCC in Other Order 150, that the sale of natural gas by one party to another puts that gas beyond the police power of the state. The AOGCC's elevation of Hilcorp's contract rights over the public interest in managing Alaska's invaluable oil and gas resources is embarrassing to the agency, or it should be. Whether the agency 431d. at 375-76 (internal citations omitted). 19 is embarrassed or not, the rationales it has offered should be rejected by this court. One more point. The agency stated that in the course of its investigation it learned that the gas that leaked from the fuel gas line running to Platform A had been purchased by Hilcorp from a company the order identifies as "Harvest Pipeline (Harvest)."44 The court should know a few more facts about this transaction. Hilcorp is privately owned. Its website claims that it is "the largest privately owned oil and natural gas company in the country."45 Its sole owner is reported to be a man named Jeff Hildebrand,46 though, as with any private company, that is subject to change without notice to the public. Harvest, which identifies itself as "Harvest Midstream" on its website'47 is a pipeline company. The relationship between Hilcorp and Harvest is simple: they both belong to the same person. Or as Harvest's website puts it: "Harvest's and Hilcorp's affiliation begins with common ownership."48 With these facts in mind, reconsider the assertion in Other Order 150 that the gas that leaked to the atmosphere from the 8" fuel gas line running towards 44 Record at 0005. 45 Linkedin, Hilcorp Company Profile, www.linkedin.com/company/hileorp (last visited June 29, 2019). 46 Forbes, #745 Jeffrey Hildebrand, www.forbes.com/profile/Jeffrey-hildebrand/ #197812bl33b (last accessed June 30, 2019). 47 Harvest Midstream, Our Aff lliates, www.harvestmidstream.com/our-affilliates (last accessed June 29, 2019). 48 Id. 20 Platform A was gas that had been "purchased by Hilcorp from a third -party provider." The statement, we can now see, is very likely to be false. Harvest and Hilcorp share "common ownership." When Hilcorp and Harvest engage in commercial transactions, there is no third parry to the deal. if the agency had conducted a hearing on this matter, these facts, which are not hard to ascertain, might have come to tight. To reiterate: In Other Order 150 the AOGCC is of the view that the months' long leak of gas in Cook Inlet was rendered absolutely beyond the reach of the state's oil and gas conservation watchdog by having undergone a sale that passed it from one corner of Mr. Hildebrand's pocket to another corner. To allow this commercial arrangement to defeat the police power of the state would represent a triumph for corporatism and would render the public interest an orphan. This court should rule that the AOGCC's rationales on this point are flawed, inconsistent with the language of the statute and the legal precedents cited, and should be rejected. B. The police power survives metering and severing. Finally, Other Order 150 takes the position that "[o]nce oil or gas is metered and severed from the property, AOGCC's authority to make a waste determination regarding use of the oil or gas is at an end." 49 The analysis here begins by noticing that the agency cites no statute to support its position. There is 49 Record at 0005. 21 none. Lacking a legal basis for its position, AOGCC should have at least supplied a rationale for the order. Other Order 150 does not attempt to supply a rationale, either. At this point it seems worth asking the question: What is so special about metering and severing? How does metering and severing bring the authority of the AOGCC, which the law says extends to "all land in the state lawfully subject to its police powers," to an end? As described previously, the natural gas in this case came up from an Alaskan reservoir through a wellhead located in Alaska. Steel pipe carried it away from the well. The metering and severing Other Order 150 refers to probably took place on the lease where the well sits. It certainly took place somewhere in Southcentral Alaska. Metering is accomplished for gas by passing it through a measuring device. Once metered for custody transfer purposes, the gas is then considered to be severed from the lease. The order does not explain what happened when the gas was metered and severed such that the jurisdiction of the AOGCC was totally defeated. While the mechanical layout of the metering shed where the metering took place might be of some interest, for the legal purposes of this case, however, the exact details are irrelevant. Unless the gas was metered immediately prior to its export from the state, which, since the shuttering of Kenai's LNG export facility in 2011, does not happen anywhere in Alaska, the gas was crossing Alaskan soil when it entered the meter, and was still crossing Alaskan soil when it exited the meter, and was 22 headed for somewhere in Alaska. It was subject to the police power of the state at all moments. Two cases should help guide the court on this point. The first is from the nineteenth century. When the state of Indiana passed a law in 1891 prohibiting gas pipelines from operating at a pressure greater than 300 pounds, it was attacked by on the grounds that the enforcement of the law by the state impaired interstate commerce.50 The case was analyzed by the US Supreme Court in the seminal case of Ohio Oil Company v. Indiana (No.]),5' wherein the Court noted that the pipeline statute at issue in Jamieson was upheld on the grounds that "the dangerous nature of the product, its susceptibility to explosion and the consequent hazard to life and property which might arise from movement through pipes, made the act of transmitting it a fit subject for police regulation."'' The relevance of this old case to the Cook Inlet leak is that gas transmission lines are generally referred to as `downstream.'53 Gas in transmission lines has been metered and severed from the lease. Thus, the AOGCC's claim in Other Order 150 that "[n]cither AOGCC nor any of its counterparts in other states has ever attempted to extend its jurisdiction over waste to gas which has been sold by a vendor" should be viewed with skepticism, given that gas in transmission lines is so Jamieson v. Indiana Natural Gas & Oil Company, 128 Indiana 555 (1891). " 177 U.S_ 190 (1900).. 52Id. at 206. 53 See Hyne, supra at fn. 1, p. 543, defining `upstream' as petroleum exploration, drilling and production, and `downstream' as pertaining to transportation, refining and marketing. 23 subject to the police power of a state, and it is by and through the police power that conservation commissions do their job.54 The other case is from the twenty-first century, and from Alaska. In March of 2006, a very large oil spill was discovered at Prudhoe Bay. The spill was traced to a hole in a pipeline operated by BP Exploration, Alaska.55 The pipeline was a `transit line' carrying processed oil. BP faced significant legal consequences, which included a lawsuit filed by the State of Alaska. Two of the counts of the State's complaint made allegations of waste. BP moved the trial judge to stay the waste counts. The argument it made for doing so rested on its view that the "AOGCC ... has primary jurisdiction to investigate and determine whether waste of oil or gas occurred.'>se The brief presents a concise summation of the agency's powers: The AOGCC, by statute and by operation of the leases between BPXA and the state, has primary jurisdiction to investigate and determine whether waste of oil or gas occurred. The AOGCC has comprehensive jurisdiction to regulate oil and gas conservation in general and to make determinations concerning waste in particular. The governing statute expressly directs the AOGCC to investigate waste. The AOGCC has adopted specific regulations prohibiting waste. It has plenary power to adjudicate issues of waste and to require actions to address waste.57 54 Moses, supra at fn. 35. ss Wikipedia, Prudhoe Bay Oil Spill, en.wikipedia.org/wiki/Prudhoe Bay_oil_ spill. s6 State of Alaska v. BP Exploration, Alaska, Trial Motion, 2009 WL 7274134 at 9. 57 Id. (footnotes omitted)(emphasis supplied). Pt,! The BP spill case is relevant here for two reasons. First, the oil that spilled had been metered for allocation purposes.$$ It had been severed from whatever specific Prudhoe Bay lease it had been produced from. It was downstream oil. Second, note that BP considers AOGCC's powers to prevent waste to be not only "plenary," but primary compared to those of the State Department of Law. While Appellant readily concedes that BP's view of AOGCC's jurisdiction is not dispositive. the court reasonably would conclude that its argument in this instance is persuasive. In sum, there is nothing in the metering and severing of oil and gas from the leases that renders it beyond the police power of the state. and that claim by the AOGCC as a basis for declining to exercise jurisdiction is fatally flawed. 111. THE PRIMARY PURPOSE BEHIND THE PROHIBITION AGAINST WASTE IS TO MAXIMIZE RESOURCE RECOVERY. The heading above appears in Other Order 150. Appellant agrees with the agency that maximizing resource recovery is one of the purposes of the prohibition against waste. The Order does not explain, however, the application of the principle to the Cook Inlet gas leak. Appellant will now attempt to do so. se Prudhoe Bay Unit Facility Information, htip://www.fairbanks pipeline company. com/pdf/CGF-CCP_Facility_Description.pdf 25 A. Losing gas to the atmosphere does not maximize resource recovery. Gas venting directly to the atmosphere is waste.59 Ipso facto. While this is a rule of petroleum conservation today, in the early days of the petroleum industry, before the nature of oil reservoirs was understood, it was believed that allowing the gas from a reservoir to vent to atmosphere was a necessary first step to getting oil out of the ground. As reservoir engineering developed, however, the crucial place that gas holds in increasing oil production from a reservoir became clear. Many of the first petroleum conservation laws were directed at ending the wasteful practice of venting gas. Indeed, the statute at issue in Ohio Oil Company v. Indiana (No. 1)60 forbade the venting of gas from a well for longer than two days. The oil company argued that the state legislature had. "by making it unlawful to allow the gas to escape made it practically impossible to profitably extract the oil."61 The argument was rejected. The gas venting of times past was intentional. The gas leak here was an accident, but the impact on resource recovery is the same. It is self-evident that losing gas to the atmosphere does not maximize resource recovery. The facts of this case bear out that rule. The gas leak in Cook Inlet was not small. The volume of gas that was emitted from the leaking fuel gas line running to Platform A was estimated at between 200,000 and 300,000 sef per 59 AS 31.05.170(15)(H). 60 177 U.S. 190 (1900). 61 Id. at 211. 26 day.62 The leak was first discovered on February 7, 2017, and was not repaired until a clamp was put on the line by divers on April 13, 2017.63 While it is not possible to know precisely how much gas was lost, given the uncertainty that 64 surrounds exactly when the leak began. even a few days of leaking at that rate is substantial. Consider that, as of 2014, the average home in Anchorage uses about 137 ccf of gas per month 65 A `ccf equals 100 Sef.66 Thus, even using the lower estimate of 200,000 scf of lost gas per day, enough gas was leaking every day to heat a home in Anchorage for over a year.67 The gas was lost permanently to the atmosphere. It was not recovered. It was wasted. The AOGCC exists to prevent waste. It had the authority to act in this case. It should have. But it didn't. B. Oil production was immediately reduced by the gas leak in Cook Inlet. 62 Dan Joling, Alaska Underwater Gas Leak Continues, 2"d Group to Sue, March 1, 2017, www.cbe.ca/news/canada/north/alaska gas-leak-cook-inlet-lawsuit- 1.4005024 fi3 Hilcorp Natural Gas Leak From 8 " Pipeline, http://dec.alaska.gov /spar/ppr/spit l-information/response/2017/04-hicorp/ 64 Dan Carpenter, Investigation Finds Hilcorp Gas Leak Poses Risks & Started Earlier Than First Reported, March 7, 2017, www.ktau.com/content/news/ Investigation -finds -Hi leorp-gas-leak-poses-risks--starter-earlier-than-first- reported-415636093.htinl 65 Natural Gas Rates, Regulatory Commission of Alaska, http://rca.alaska.gov/ RCAWeb/Documents/ Reports/2014Gas.pdf 66 Frequently Asked Questions, www.cia.gov/tools/fags/faq.php?id=45&t=8 67 Each home uses 137 ccf per month. 137 times 100 equals 13,700 scf. 200,000 scf of lost gas per day divided by 13,700 (gas usage each month) equals 14.6 months. Appellant cautions the court that he is not an engineer. 27 More detrimental to resource recovery was the effect of the gas leak on oil production. Platform A is situated in what's known as the Middle Ground Shoal .68 It is one of two remaining Middle Ground Shoal platforms still producing oil. Fixing the gas leak required Hilcorp to shut down oil production from the Middle Ground Shoal field.69 Monthly production data from the AOGCC for the Middle Ground Shoal in 2017 shows the following: Month Barrels March 41.791 April 72 May 55 June 0 July 0 August 0 September 1%564 As the court can readily observe, shutting down the platforms reduced the oil production from them to zero for three months. The platforms were shut down because of the gas leak. The gas leak caused the reduction in oil barrels produced. In other words, resource recovery was impaired due to the wasted gas. 68 Record at 0003. 69 Alex DeMarban, Hilcorp Agrees To Temporarily Shut Down Oil Production To Fight Cook Inlet Gas Leak, March 25, 2017, www.adn.com/business- economy/energy/2017/03/25/following-talks-with-governor-about-cook-inlet-gas- leak-hilcorp-agrees-to-temporarily-shut-down-oil-production/ go The reduction in oil production should have prompted the AOGCC to assert jurisdiction in this case. C. Longer term production losses are attributable to the leak. Other production losses are attributable to the leak besides the production lost during the months listed above. Production from the field before the leak was about 1150 barrels of oil per day.70 When production was returned however, it was about 150 barrels a day less. Production soon declined below 975 barrels of oil per day. Hilcorp, relying on production going below 975 barrels of oil a day, applied to the state for a reduction in the royalties it owed to the state. based upon a state law allowing the same. The royalty relief request was sent to the Department of Natural Resources. Then -Commissioner Andy Mack rejected the request, citing the leak as the reason for the reduction.71 These lost barrels do not represent a maximization of recovery. To be clear, the reduction in oil production is not defined as waste itself. Nevertheless the conclusion that there was oil production lost due to wasted gas is inescapable. Thus, by the terms of its own cardinal rule, the reduction in resource recovery ought to have spurred the AOGCC to action. But it did not move. 70 Record at 0003. 71 Record at 0003. 29 CONCLUSION The agency's inaction in the face of the Cook Inlet gas leak is to the detriment of the public it serves. The agency is failing to protect the abiding public interest in Alaska's most valuable natural resource. Oil and gas built Alaska, and will sustain Alaska into the future, if the resource is wisely managed. There is a public interest in the conservation of natural resources. The public interest in the lost gas, a natural resource of the state, is considerable. One need only recall the critical place that natural resources occupy in Alaska, as set out by appellant on page eight of this brief, to see how this case must be decided. The court should reverse the decision below, rule that the AOGCC had, and indeed, still has, jurisdiction over this case, and require that AOGCC comply with the law enacted by the legislature defining its jurisdiction. DATED: July 15, 2019 6C2;(- -- Hollis S. French Alaska Bar No. 9606933 30 IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE HOLLIS S. FRENCH, Appellant, V. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee. Agency Case: OT14-19-002 ) Appeal Case: 3AN-19-6694CI APPEAL FROM THE ALASKA OIL AND GAS CONSERVATION COMMISSION APPELLANT'S REPLY Filed on the day of Anchorage Superior Court Clerk of the Superior Court By Hollis S. French 2640 Telequana Drive Anchorage, Alaska 99517 (907)244-7135 AK Bar No. 9606033 2019 Deputy Clerk TABLE OF CONTENTS TABLE OF CONTENTS.......................................................... i TABLE OF AUTHORITIES...................................................... iii STATUTES PRINCIPALLY RELIED UPON ................................. v ARGUMENT....................................................................... 1 I. AOGCC's Rationales For Its Belief That It Lacks Jurisdiction Over The Cook Inlet Gas Leak Are Not Supported By Any Relevant Statute or Case. ......................................... 1 A. What does `waste' mean within the context of petroleum conservation? ....................................... 2 B. AOGCC's flawed rationales: ................................. 8 1. "Waste occurs when recoverable hydrocarbons arelost." ................................................. 8 2. "Once metered and severed, the gas has been produced, and ceases to be a recoverable natural resource." ..................................... 11 3. "The combined effect of custody transfer and severance from the lease is that the resource has been produced, and in turn there is no longer a natural resource subject to a waste determination." ....................................... 12 II. AOGCC's Flawed Understanding Of Its Jurisdiction Fails To Protect The Public Interest In The Conservation Of Alaska's Oil And Gas Resources Over Vast Parts Of TheState............................................................ 14 III. The Appropriate Standard Of Review Is The Independent Judgment Standard ................................. 16 CONCLUSION.................................................................. 20 TABLE OF AUTHORITIES FEDERAL CASES Ohio Oil Co. v. Indiana (No.1), 177 U.S. 190 (1900)...................... 13 ALASKA CASES Alaska Crude Corp. v. State, 261 P.3d 412 (Alaska 2011).................. 15 City of Kenai v. CINGSA, 373 P.3d 473 (Alaska 2016)................... 7 Exxon Corp. v. State, 40 P.3d 786 (Alaska 2001)........................... 14 McKibben v. Mohawk Oil Co., 667 P.2d 1223 (Alaska 1983)............. 9 Mukluk Freight Lines, Inc. v. Nabors Drilling, Inc., 516 P.2d 408 (Alaska 1973)..................................................................... 19-20 Sprucewood Inv. Corp. v. Alaska Housing Finance Corp., 33 P.3d 1156 (Alaska 2001).................................................................... 8 State of Alaska v. BP Exploration, Alaska, Trial Motion, 2009 WL 7274134........................................................................... 14 Union Oil Co. of Cal. v. Dept. of Revenue, 560 P.2d 21 (Alaska 1977) 17-18 CASES FROM OTHER JURISDICTIONS Jamieson v. Indiana Natural Gas & Oil Company, 128 Indiana 555 (1891)............................................................................. 13 Mobil Oil Corp. v. State Corporation Commission, 608 P.2d 1325 (Kansas 1980)................................................................... 16 Osborn v. Texas Oil & Gas Corp., 661 P.2d 71, 76 O. & G.R. 101 (Ok. Ct. App. 1983)............................................................ 16 Railroad Commission v. Shell Oil Co., 206 S.W.2d 235 (Texas 1947).... 3-7. 16 iii STATUTES AS 31.05.027...................................................................... 1,8 AS 31.05.095...................................................................... 1, 5, 8 AS 31.05.170(15)............................................................... 1-3. 10 OTHER AUTHORITIES American Heritage Dictionary, 5 h Edition, 2016........................... 7 AOGCC Other Order 150...................................................... 1,8 Evan D. Johnson, Anchorage, We Have A Problem. The Cold, Harsh Truth About The Alaska Oil And Gas Conservation Commission's Ability To Regulate Gas -Cap Production (A Texas Perspective), 44 Houston Law Review 1455(2007).......................................... 6 Patrick H. Martin, The Jurisdiction of State Oil and Gas Commission, 18A RMMLF-INST 3(1985).......................................... 16 8 Patrick H. Martin and Bruce Kramer Williams & Meyer Oil and Gas Law, Manual of Terms(2019)............................................... 2,15 70 STATUTES PRINCIPALLY RELIED UPON ALASKA STATUTE 31.05.027 The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States. ALASKA STATUTE 31.05.095 The waste of oil and gas in the state is prohibited. ALASKA STATUTE 31.05.170(15) (15) `'waste" means, in addition to its ordinary meaning, "physical waste" and includes (A) the inefficient, excessive, or improper use of, or unnecessary dissipation of, reservoir energy; and the locating, spacing, drilling, equipping, operating or producing of any oil or gas well in a manner which results or tends to result in reducing the quantity of oil or gas to be recovered from a pool in this state under operations conducted in accordance with good oil field engineering practices; (B) the inefficient above -ground storage of oil; and the locating, spacing, drilling, equipping, operating or producing of an oil or gas well in a manner causing, or tending to cause, unnecessary or excessive surface loss or destruction of oil or gas; (C) producing oil or gas in a manner causing unnecessary water channeling or coning; (D) the operation of an oil well with an inefficient gas -oil ratio; (E) the drowning with water of a pool or part of a pool capable of producing oil or gas, except insofar as and to the extent authorized by the commission; (F) underground waste; (G) the creation of unnecessary fire hazards; (H) the release, burning, or escape into the open air of gas, from a well producing oil or gas, except to the extent authorized by the commission; v (I) the use of gas for the manufacture of carbon black, except as provided in this chapter; (J) the drilling of wells unnecessary to carry out the purpose or intent of this chapter. kv ARGUMENT Appellant's opening brief set out a simple, statute -based case showing that AOGCC's Other Order 150 erroneously disclaimed jurisdiction over a major leak of gas in Cook Inlet. Appellant's proof rests on three statutory legs: 1) the waste of oil and gas in the state is prohibited'; 2) the authority of the commission applies to all land in the state subject to its police powers 2; and 3) gas escaping into the air is waste' AOGCC responded. Appellant addresses AOGCC's arguments below. I. AOGCC's Rationales For Its Belief That It Lacks Jurisdiction Over the Cook Inlet Gas Leak Are Not Supported By Any Relevant Statute Or Case. AOGCC has failed to cite a legal basis for declining jurisdiction over the gas leak in Cook Inlet. Instead. AOGCC's brief creates confusion around the concept of waste and makes several unsupported assertions about waste that do not appear in Other Order 150 and that it failed to buttress with citations to relevant statutes or cases from Alaska, or anywhere else. The Court should view these unsupported rationales for what they are — mere assertions. Appellant will begin by defining and discussing the concept of waste, and then will analyze each flawed rationale the agency has put forward. I AS 31.05.095. 2 AS 31.05.027. 3 AS 31.05.170(15). 1 A. What does `waste' mean within the context of petroleum conservation law? A leading treatise on oil and gas law begins its treatment of the concept of waste this way: The term is too broad and has too many meanings for a one- or two- sentence definition. In the oil industry, it suggests the ultimate loss of oil or gas. The prevention of waste is conservation. The term is best understood when broken down. There is physical waste (q.v.) and economic waste (q.v.). Physical waste is the loss of oil or gas that could have been recovered and put to use. Such waste can occur on the surface or underground. ... [T]he reader is directed to the specific statutes of the states for the precise meaning of the term in that state."`' The treatise advises us to now turn to Alaska's definition of waste, found at AS 31.05.170(15).' The first thing to note about Alaska's definition of waste is that there is no reference to economic waste therein. The case before this court. however, is about the physical waste of gas. The relevant portions of Alaska's definition of waste are: (15) "waste" means, in addition to its ordinary meaning, "physical waste"' and includes (A) the inefficient, excessive, or improper use of, or unnecessary dissipation of, reservoir energy;..... (G) the creation of unnecessary fire hazards: 4 8 Patrick H. Martin & Bruce M, Kramer, Williams & Meyers Oil and Gas Law, Manual of Oil and Gas Terms (2019) at 1131 (emphasis supplied). s The full definition is set out under Statutes Principally Relied Upon, at p. v. There are ten specific examples of waste in the full definition. E (H) the release, burning, or escape into the open air of gas, from a well producing oil or gas, except to the extent authorized by the commission. Each of the lettered definitions arguably pertain to this case of gas escaping to the atmosphere from an 8" line running to Platform A. For example, taking the definition at (A): the gas that vented to the atmosphere had the effect of unnecessarily dissipating the energy of the reservoir from which it originated. Regarding (G): the gas that vented to the atmosphere created an unnecessary fire hazard. And as to (H): the gas escaped to the atmosphere.6 The lettered definitions describe some, but not all, of the forms that waste can take under Alaska law. The introductory phrase to the lettered examples is far broader than the specific examples in the lettered definitions. Alaska's definition of waste begins this way: "'waste' means, in addition to its ordinary meaning, `physical waste' and includes....."7 The phrase "in addition to its ordinary meaning —and includes" is not to be lightly passed over. A 1947 case decided by the Texas Supreme Court8 turned on 6 Appellant assures the Court, contrary to the assertions made by AOGCC in its brief on p. 7, that he has read this definition to the end on numerous occasions. To the point raised by AOGCC on p. 7 of its brief, that the definition "explicitly requires [the gas escaping into the air] to be gas `from a well producing oil or gas,"' Appellant would simply respond: gas in Alaska comes from wells, and nowhere else. AS 31.05.170(15)(in part)(emphasis supplied). a Railroad Commission v. Shell Oil Co., 206 S.W.2d 235 (Texas 1947). 3 a similar phrase in that state's petroleum conservation laws. The Texas statute combined into one law a statewide prohibition on waste and then defined waste, as Alaska does today, by reference to ten specific examples, and prefaced its list with the phrase "[t[he term 'waste' among other things shall specifically include:.... „' 0 The Texas statute. wrote the Texas Supreme Court, significantly prefaces an enumeration of ten specific wasteful practices with the declaration that waste among other things should specifically include the practices there interdicted. That language must have been deliberately selected to avoid narrowing the sweeping language in the first sentence of the article, by which all waste in the handling of oil and gas was declared unlawful and prohibited, as well as to preserve the wide scope of [the statute], which was aimed with the utmost generality at the prevention of waste.' � The analysis of the Texas court is equally applicable to the similar phrase in Alaska's definition of waste. The idea common to both preambles is that there are many forms of waste, and the lettered examples are not exhaustive of them. Before going further it is instructional to compare side -by -side the Texas law prohibiting waste and its Alaska counterpart. 9 "The production, storage or transportation of crude petroleum oil or of natural gas in such a manner, in such amount, or under such conditions as to constitute waste is hereby declared to be unlawful and is prohibited. The term `waste' among other things shall specifically include:" Id. at 239. to Id. 11 Id. (emphasis in the original). 4 Texas: The production, storage or transportation of crude petroleum oil or of natural gas in such a manner, in such amount, or under such conditions as to constitute waste is hereby declared to be unlawful and is prohibited.12 Alaska: The waste of oil and gas in the state is prohibited.13 In Railroad Commission v. Shell, quoted above, the Texas anti -waste statute is described as "sweeping" and having a "wide scope." As the Court can see, the Alaska statute, written eight years after the Texas case was decided, is written in more general terms. It would be a fair inference for the Court to draw that our Alaska Territorial legislators, working in 1955, decided to improve upon the Texas statute preventing waste, making it more sweeping and giving it an even wider scope. In Railroad Commission v. Shell, the Texas Court finished its analysis this way: The term waste has an ordinary and generally accepted meaning. Whatever the dictates of reason. fairness and good judgment under all the facts would lead one to conclude is a wasteful practice in the production, storage, or transportation of oil and gas, must be held to have been denounced by the legislature as unlawful. The Constitution had vested in the lawmaking body the duty of preventing waste, not of part but of all the natural resources of this State, and it must not be considered that the legislature meant by its enactments to discharge less than the full duty which was thus entrusted to it.14 12 Id. 13 AS 31.05.095. 14 206 S.W.2d at 239. 5 This 1947 Texas case is important for two reasons. First, it is helpful in that it provides the Court with some context for our Alaskan laws on petroleum conservation. Texas wrote its petroleum conservations laws beginning in 1919. Alaska did not take up the same task until 1955. As one writer explains it: Alaska, on the other hand, has enjoyed the luxury of more hindsight in its regulation of the oil and gas industry, benefiting not only from Texas's mistakes but also from technological advances in drilling and recovery methods over the last fifty years. As custodian to one of the last abundant reserves of U.S. domestic oil supply, Alaska has shown a keen awareness of its prominent role in maintaining the delicate balance between politics and economics that dictates oil and gas regulation. Accordingly, the Alaska legislature has given its regulator, agency in charge of oil conservation -the Alaska Oil and Gas Conservation Commission (AOGCC)-far greater authority to regulate waste and correlative rights than Texas bestowed upon its agency, the Texas Railroad Commission (RRC). i_ The analysis above supports an inference from which this Court could conclude that the authority of AOGCC to act in this case, to assert .jurisdiction, should be construed broadly. The Texas case is equally important because it sheds light on how we are to understand the phrase "in addition to its ordinary meaning... and includes" in Alaska's definition of waste. We can presume that the phrase was "deliberately selected to avoid narrowing the sweeping language" of our statewide prohibition on waste. We can presume that it was "deliberately selected" to "preserve the 15 Evan D. Johnson, Anchorage, We Have A Problem: The Cold, Harsh Truth About The Alaska Oil And Gas Conservation Commission's Ability To Regulate Gas -Cap Production (A Texas Perspective), 44 Houston Law Review 1455, 1457 (2007)(footnotes omitted)(emphasis supplied). 2 wide scope" of our statewide prohibition against waste. We can presume that the Territorial legislature meant to prevent the waste "not of a part but of all of the natural resources of this State." This analysis is consistent with Alaska law regarding the interpretation of statutes: "[w]e presume that the legislature intended every word, sentence, or provision of a statute to have some purpose, force, and effect, and that no words or provisions are superfluous." 16 Alaska's definition of waste includes the "ordinary meaning" of waste. What, then, is the ordinary meaning of waste? Let's start with the dictionary. The dictionary meaning of 'waste,' is "to fail to take advantage of or use for profit: lose: waste an opportunity. " 17 With the foregoing in mind, consider the gas that leaked for several months directly to the atmosphere from the 8" line running towards Platform A. Was that gas lost? Yes. Was it put to use? No. Was it used for profit? Again, no. That gas was wasted, or, in other words, it was not conserved. The gas that leaked to atmosphere was waste according to the ordinary meaning of the term. In sum, Appellant believes, as a leading treatise attests, that the prevention of waste is conservation. Yet the Alaska Oil and Gas Conservation Commission, 16 City of Kenai v. CINGSA, 373 P.3d 473, 480 (Alaska 2016)(imernal citations omitted). 17 The American Heritage Dictionary of the English Language, Fifth Edition (2016) at 1955 (emphasis in the original). P1 whose central statutory mission is to prevent waste of oil and gas in the states, and told explicitly in statute that it has statewide authority19 to do its job can't see that it has jurisdiction to act in this instance of a long term release of gas to the atmosphere, in the middle of Cook Inlet, from a pipeline running straight to an oil production platform. The reasons AOGCC offered in its brief for failing to do its job are all flawed, as the following analysis demonstrates. 13. AOGCC's flawed rationales: 1. "Waste occurs when recoverable hydrocarbons are lost."20 AOGCC's brief cites no law, no definition and no case in support of this sentence. The Court should view the unsupported assertion at I.B.I with suspicion. AOGCC had more than three months to research and to write its brief.'' It failed during that time to find a case, statute, law review article or treatise to support the sentence quoted above. Alaska law does not define "recoverable hydrocarbon." Other Order 150 certainly did not rely on this tern. Other Order 150 makes no mention of "recoverable hydrocarbons." The agency on appeal has inserted a 18 "The waste of oil and gas in the state is prohibited." AS 31.05.095, 19 "The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States." AS 31.05.027. 20 Brief of Appellee, p. 3. 21 Appellant filed his brief in this appeal on July 15, 2019. AOGCC filed its brief on October 21, 2019. concept foreign to both the Order it issued, and to petroleum conservation — that waste only occurs when a "recoverable" hydrocarbon is lost — to cobble together a rationale for its decision that it lacked jurisdiction. Invented terms are a weak foundation upon which to build. A longer variant of the sentence quoted in I.B.1 appears on p. 5 of AOGCC's brief. There, the agency asserts that In oil and gas conservation, waste occurs when recoverable natural resources — here gas — are lost, i.e., during production the operator damages the interest of another in the gas. This sentence does come with a footnote, number 12 in Appellee's brief. The footnote does not direct the reader to Alaska's statutory definition of waste. Instead, the footnote cites three cases, not one of which touches even remotely upon petroleum conservation law. The first cited case is Sprucewood Inv. Corp. v. Alaska Housing Finance Corp. 22 If the names of the parties suggests that this case might not be relevant, a brief review of the facts of that case confirms it. The case is not about oil and gas conservation. It does not discuss recoverable hydrocarbons, or any kind of hydrocarbon. The first sentence of the case informs us that "[t]he main question presented in this case is how to interpret a `demolition" contract."23 There is a reference to waste in Sprucewood, but it is waste as that term pertains to real 22 33 P.3d 1156 (Alaska 2001). 23 Id. ;i estate. 24 If the Court is puzzled by the agency's selection of a case about a real estate dispute to make a point about how waste is to be understood in the world of oil and gas conservation, so is Appellant. The second case is McKibben v. Mohawk Oil Co." That case concerned a business dispute over a mine near Fairbanks.26 There are no hydrocarbons present in McKibben. As in the Sprucewood case, the waste referred to in McKibben is not oil and gas waste, but waste within the context of real estate law. The Court in McKibben cited directly to treatises on real estate when it wrote that: Waste occurs when the owner of a possessory estate engages in unreasonable conduct that results in physical damage to the land and substantial diminution in the value of estates owned by others in the same land. See W. Burby, Real Property § 12 (3d ed. 1965); 2 H. Tiffany, Real Property § 630 (3d ed. 1939).27 AOGCC's citation to a real estate definition of waste should trouble the Court. In any event, neither Sprucewood nor McKibben is on point. Neither case cites to the oil and gas law definition of waste found at 31.05.170(H). The final case cited in footnote 12 of AOGCC's brief simply informs us that McKibben was 24 Id. at 1165. 25 667 P.2d 1223 (Alaska 1983). 26 "[T]he complaint alleges that defendants breached the lease; committed waste and conversion; engaged in unworkmanlike mining; and intentionally diluted the ore." Id. 27 Id. at 1228. FS17 overruled on different grounds by another case. In short, none of the cases cited by AOGCC in footnote 12 are about oil and gas conservation law. 2. "Once metered and severed, the gas has been produced, and ceases to be a recoverable natural resource."28 This concept is related to the one listed in I.B.I above, and equally foreign to petroleum conservation theory and law. AOGCC cites no law, no definition, and no case to support the statement quoted in I.B.2. The agency repeats the assertion in a slightly altered way three more times in its brief. It claims that "[t]he gas had been produced, was [sic] no longer a recoverable natural resource;"29 and that "[m]etered and severed gas is no longer a recoverable resource•'30and that "[b]ecause the leaking gas had passed through a custody transfer meter and been severed, it was no longer a recoverable natural resource, and therefore not waste."31 This invented concept is no more legitimate having been rephrased in different ways. 28 Brief of Appellee, p. 6. 29 Brief of Appellee, p. 6. 30 Brief of Appellee, p. 8. 31 Brief of Appellee, p. 2. 11 In general, it is difficult to prove a negative_ However, Appellant can confidently assert that no Alaskan case refers to a `recoverable natural resource."32 AOGCC had a duty to provide a legal basis for its assertions. It failed. It appears as if the agency has created this term out of thin air. 3. "The combined effect of custody transfer and severance from the lease is that the resource has been produced, and in turn there is no longer a natural resource subject to a waste determination."" AOGCC now takes a turn into uncharted waters, The sentence in I.B.3 comes without a footnote pointing the Court to a statute, a court decision, a law review article, or a treatise, to substantiate it. In I.B.2 above, metering and severing of the natural gas in question supposedly rendered that natural gas no longer 'recoverable.' Now, in I.B.3, the gas in question becomes no longer a natural resource.' Appellant is at a loss here. The position put forward in I.B3 is shocking. How does natural gas stop being a natural resource? More importantly, what Alaskan statute says that? None. As noted above, the agency had three months to 32 A WESTLAW search of phrase `recoverable natural resource" in the Alaska database conducted November 12, 2019, returned zero cases. A Google Scholar search of the same term within the Alaska courts database conducted November 14, 2019, returned zero cases. 33 Brief of Appellee, p. 10. 34 AOGCC makes this same point in a slightly different way at the bottom of page 7 of its brief. The sentence is a bit convoluted, but the gist of it is that gas is no longer a natural resource after it is produced and custody and ownership of the gas has transferred to the operator. 12 prepare its brief. It apparently could not find a case or a passage in a textbook or even one of its own regulations that explains the magic it claims that happens by flowing gas through a custody transfer meter; magic that somehow changed the natural gas from one of the Kenai Peninsula's oil and gas reservoirs into.....? Not a natural resource? What is it then? Contrary to AOGCC's novel argument, the natural gas is still natural gas, it is still flammable, and it is still one of Alaska's most valuable natural resources. The agency appears to have created this rationale out of thin air. Before leaving this point, Appellant would remind the Court of the cases cited in Appellant's Brief at pp. 23-25. The first, Jamieson v. Indiana Natural Gas & Oil Company' involved natural gas in transmission lines, much like the transmission line running to Platform A in this case. The case was later analyzed by the US Supreme Court in Ohio Oil Co. v. Indiana (No.1),36 wherein the Court noted that the pipeline statute at issue in Jamieson was upheld on the ground that "the dangerous nature of the product, its susceptibility to explosion and the consequent hazard to life and property which might arise from movement through pipes, made the act of transmitting it a fit subject for police regulation."37 The Court could reasonably rely on Jamieson for the proposition that gas in 35 128 Indiana 555 (1891). 36 177 U.S. 190 (1900)(emphasis supplied). 37 Id. at 206. 13 transmission lines is subject to Alaska's police power and therefore subject to the jurisdiction of AOGCC. The second case, State of Alaska v. BP Exploration, 38 involved oil in transmission lines. In the latter case, BP did not question the authority of AOGCC to adjudicate a case of waste of a natural resource that was severed from its lease and had been passed through a custody transfer. Indeed, BP wrote that AOGCC "has plenary power to adjudicate issues of waste and to require actions to address waste." AOGCC failed to discuss, much less distinguish, these two cases in its brief. In sum, not one of AOGCC's rationales for its position on its jurisdiction is supported by Alaska law. IL AOGCC's Flawed Understanding Of Its Jurisdiction Fails To Protect The Public Interest In The Conservation Of Alaska's Oil And Gas Resources Over Vast Parts Of The State. There is a public interest in the conservation of Alaska's natural resources.39 AOGCC's brief does not discuss this vital aspect of its mission. The words "public interest" do not appear in its brief. The agency's description of its role in the state, offered at several points in its brief, focuses on drilling and 38 State of Alaska v. BP Exploration, Alaska, Trial Motion, 2009 WL 7274134 at 9. 39 Exxon Corp. v. State, 40 P.3d 786, 791 (Alaska 2001). 14 wells.40 While those descriptions are not inaccurate, they are incomplete. This Court should be aware that the Alaska Supreme Court takes a broader view of the agency's mission than does the agency itself: AOGCC is an `independent quasi-judicial agency of the state' created by the Alaska Oil and Gas Conservation Act. AS 31.05.005(a). AOGCC, which has authority over all land subject to the state's police power, regulates to prevent waste, insure greater recovery, protect correlative rights and underground water, and further public health and safety 41 The agency's first mission is to prevent waste, according to the Alaska Supreme Court. As noted in a leading oil and gas law treatise, "[s]uch waste can occur on the surface or underground."42 Yet the agency disclaims jurisdiction over waste occurring on the surface but past the point of metering and severing. Aboveground waste of Alaska's most precious natural resource occurring downstream of the point of metering and severing is waste over which the Alaska Oil and Gas Conservation Commission is powerless, according to the agency's rationales in Other Order 150. 40 "The AOGCC is the regulatory and enforcement authority over wells and drilling operations involving the production of hydrocarbon natural resources." Brief of Appellee at p. 3; "AOGCC is the regulatory and enforcement authority over drilling and well operations for production of hydrocarbon natural resources, often referred to by the shorthand of `everything downhole."' Brief of Appellee at p. 4. 41 Alaska Crude Corp. v. State, 261 P.3d 412, 414 (fn. 3)(Alaska 2011). 42 See fn. 4, p 2. 15 The legal question before the Court is simple: does the agency's Jurisdiction extend past the point of metering and severing? Packed within that question is a significant impact on the public interest in protecting Alaska's natural resources. A ruling in favor of the agency would render vast portions of the state beyond AOGCC's reach. Such a ruling would be contrary to Alaska's petroleum conservation laws, which Appellant asserts were designed to be all -encompassing as to waste. In other words, if petroleum conservation laws in Texas protect "not ... part but ... all the natural resources"43 of that state, Alaska deserves no less. The situation before the court is not unheard of in the law. Oil and gas commissions do not always appreciate the full extent of their powers. "In some instances we find a commission asserting that it lacks certain authority. but a court concluding otherwise.' 44 This Court should protect the public interest in preventing waste by correcting the agency's flawed understanding of its own jurisdiction. III. The Appropriate Standard Of Review Is The Independent Judgment Standard. The issue before the Court is one of statutory construction. The general rule for statutory construction cases is set out in Union Oil Co. of Cal. v. Dept. of 43 Railroad Commission v. Shell. 206 S. W at 239. 44 Patrick H. Martin, The Jurisdiction of State Oil and Gas Commission, 18A RMMLF-INST 3 at 7 (1985)(citing Mobil Oil Corp. v. State Corporation Commission. 608 P.2d 1325 (Kan. 1980) and Osborn v. Texas Oil & Gas Corp., 661 P.2d 71, 76 O. & G.R. 101 (Ok. Ct. App. 1983)). 16 Revenue: "[W]here, as here, the issues to be resolved turn on statutory interpretation, the knowledge and expertise of the agency is not conclusive of the intent of the legislature in passing a statute. Statutory construction is within the scope of the court's special competency, and it is our duty to consider the statute independently."/5 The Union Oil case concerned the appropriate interpretation to be given a provision of an oil and gas production tax law enacted by the Legislature and a regulation interpreting the statute promulgated by the Department of Revenue. The Department urged the Court to adopt the reasonable basis standard of review. The Court's discussion of the issue is helpful: In support of a reasonable basis standard of review, the Department argues that its interpretation made all the complicated variables of the tax calculation fit together in an efficient and workable manner ...' and was based upon `... the department's expertise in administering tax calculations, taxpayer notifications and payment procedures'.... These considerations do not warrant application of the reasonable basis test. While tax structure and collection procedures do involve certain policy considerations which we consider in independently interpreting this statute, none of the policy .judgments argued in this case is the type of specialized agency .judgment which has caused us to apply the reasonable basis test in the past. 46 45 560 P.2d 21, 23 (Alaska 1977)(footnote omitted). 46 Id. at 24 (footnote omitted). 17 The Court ruled that the independent judgment standard was the correct one to be applied' A comparison between two sets of precedents cited by the Court in Union Oil and the standard of review applied in each case reveals the weakness of the agency's position on this point. Here are issues the Union Oil Court found to be properly reviewed through the reasonable basis test: questions of oil discovery evaluation and prediction of future well productivity; • procedures adopted for competitive bidding for oil and gas leases and criteria for qualified applicants for such leases; • decisions regarding initiation of a rate investigation pursuant to charges of discrimination; and • conclusions relatine to the desirability of creating a borough.aR Compare that list of issues to this one, to which the Court has applied the independent judgment standard of review: • interpretation of a statute relating to public land auction procedures; • a determination whether administrative procedures were consistent with due proeess.49 47 Id. 48 Id at 25, fn. 6 (internal citations omitted). 49 Id at 25, fn. 7 (internal citations omitted). EM The last example comes from Mukluk Freight Lines, Inc. v. Nabors Drilling, Inc.50 The case is instructive. Mukluk involved the transfer of a trucking company's authority to operate. Several trucking competitors challenged the transfer. The matter went before the Alaska Transportation Commission. It announced that it intended to hold an evidentiary hearing in the matter .51 The Transportation Commission then issued an order cancelling the evidentiary hearing. "In the place of an evidentiary hearing, the Commission announced that it would employ a `modified procedure."'52 That order was appealed to superior court, which ruled that in "transfer proceedings the Commission had discretionary authority to either grant or deny evidentiary hearings." An appeal to the Alaska Supreme Court followed. The first question the Court had to decide was the proper standard of review. The Court noted that the reasonable basis standard applies to cases in which the "particularized experience and knowledge of the administrative personnel goes into the detennination."i3 The Court set out the test for the independent judgment standard: The other kind of case presents questions of law in which knowledge and experience in the industry affords little guidance so 516 P.2d 408 (Alaska 1973). sl Id. at 408-409. sz Id. 53 Id. 19 toward a proper consideration of the legal issues. These cases usually concern statutory interpretation or other analysis of legal relationships about which courts have specialized knowledge and experience. Consequently, courts are at least as capable of deciding this kind of question as an administrative agency.`4 The question in this case concerns the extent of the AOGCC's jurisdiction. This is a classic question of law. To use the words of the Mukluk Court: the knowledge and experience of AOGCC `affords little guidance' on this question. The knowledge and experience of AOGCC is directed towards questions of well engineering and geology. For the foregoing reasons, in reviewing this case, the Court must apply its independent judgment. CONCLUSION The laws of the state of Alaska give to the Alaska Oil and Gas Conservation Commission statewide jurisdiction over waste. Appellant seeks an order from this Court that could be as narrow as this: the agency would not be exceeding its powers to assert jurisdiction over the gas leak in Cook Inlet. AOGCC has taken a position at odds with the law. at odds with the historical place Alaska occupies in the development of petroleum conservation doctrines, and at odds with good public policy. The agency has taken the position that, as far as its authority goes, this leak of Alaskan natural gas might as well have happened in Canada, or in Venezuela. The agency has taken the position 54 Id. 20 that, even if the leak were twice as voluminous and still going on today, it would be powerless to act. The agency is mistaken. For the foregoing reasons, the court should reverse the decision below, rule that AOGCC had, and indeed, still has, jurisdiction over this case, and require that AOGCC comply with the law enacted by the legislature defining its jurisdiction. DATED: November 20, 2019 Hollis S. French Bar No. 9606933 Pursuant to Ak. R. App. P. 513.5(c)(2), I hereby certify that Appellant's Reply is in 13 point Times New Roman. Hollis S. French 21 Alaska Statute 31.05.170(15): "waste" means, in addition to its ordinary meaning, "physical waste" and includes (A) the inefficient, excessive, or improper use of, or unnecessary dissipation of, reservoir energy; and the locating, spacing, drilling, equipping, operating or producing of any oil or gas well in a manner which results or tends to result in reducing the quantity of oil or gas to be recovered from a pool in this state under operations conducted in accordance with good oil field engineering practices; (B) the inefficient above -ground storage of oil; and the locating, spacing, drilling, equipping, operating or producing of an oil or gas well in a manner causing, or tending to cause, unnecessary or excessive surface loss or destruction of oil or gas; (C) producing oil or gas in a manner causing unnecessary water channeling or coning; (D) the operation of an oil well with an inefficient gas -oil ratio; (E) the drowning with water of a pool or part of a pool capable of producing oil or gas, except insofar as and to the extent authorized by the commission; (F) underground waste; (G) the creation of unnecessary fire hazards; (H) the release, burning, or escape into the open air of gas, from a well producing oil or gas, except to the extent authorized by the commission; (I)the use of gas for the manufacture of carbon black, except as provided in this chapter; (1) the drilling of wells unnecessary to carry out the purpose or intent of this chapter. IN THE SUPREME COURT OF THE STATE OF ALASKA HOLLIS S. FRENCH, Appellant, ) V. ) Supreme Court No. S-17822 ALASKA OIL AND GAS CONSERVATION ) COMMISSION, ) Superior Court No. Appellee. ) 3AN-19-06694 CI 1 APPEAL FROM THE SUPERIOR COURT THIRD JUDICIAL DISTRICT AT ANCHORAGE THE HONORABLE ERIC AARSETH, PRESIDING THE HONORABLE ADOLF ZEMAN, PRESIDING APPELLANT'S BRIEF HOLLIS S. FRENCH AK Bar No. 9606033 2640 Telequana Dr. Anchorage, AK 99517 (907)244-7135 hsfrench@gmail.com Filed in the Supreme Court of the State of Alaska, this day of 2020 Clerk of the Appellate Court TABLE OF CONTENTS TABLE OF CONTENTS.......................................................... i TABLE OF AUTHORITIES.................................................... iii AUTHORITIES PRINCIPALLY RELIED UPON .......................... ix JURISDICTIONAL STATEMENT ............................................. ISSUES PRESENTED FOR REVIEW .......................................... STATEMENT OF THE CASE ................................................... 2 ARGUMENT.................................................................... I. The AOGCC Had Jurisdiction to Decide the Issue Presented in French's Petition ..................................................... A. Jurisdiction is Either On or Off ................................ B. In Which the Geography of the Kenai Peninsula's Oil and Gas Fields, the Technology by Which Gas is Trans- ported, and the Location of the Leak are Illuminated, But Not Its Source .................................................. 10 C. The Plain Language of AOGCC's Jurisdictional Statutes Give the Agency Statewide Powers .............. 16 D. All Available Evidence Points to a Broad Reading of AOGCC's Jurisdictional Statutes ............................ 21 In settings other than Other Order 150, the commission has asserted that its powers are statewide ............... 21 2. The regulated community interprets the statutes broadly. 22 3. The public policy which animates petroleum conser- vation law points to a broad reading of AOGCC's jurisdictional reach ............................................ 23 TABLE OF CONTENTS, con't 4. A comparison of Alaska's petroleum conservation laws with those of other states leads to the conclusion that Alaska's laws are to be broadly construed ............... 25 E. AOGCC's Rationales For Lacking Jurisdiction are Contrary To Law and Good Public Policy ................................. 28 1. Buying or selling gas does not remove it from the jurisdiction of AOGCC....................................... 28 2. Neither metering nor severing defeat the jurisdiction of AOGCC........................................................ 31 3. Alaska and other states have exercised jurisdiction over downstream gas ............................................... 33 a. Other states ................................................ 33 b. Alaska petroleum conservation laws extend down- stream, to transmission ................................. 35 i. Carbon black ...................................... 35 ii. CINGSA........................................... 37 F. The Rule Advanced by AOGCC Leads to Absurd Results. 38 1. A leak just past the meter. Or Farther ....................... 38 2. A leak just outside CINGSA ............................... 39 3. A leak closer to Platform A ................................. 40 II. The Superior Court Erred in Affirming Other Order 150's Denial of A Hearing to Appellant ............................................ 42 III. The Superior Court Erred in Awarding Attorney's Fees in the Amount of $6270...................................................... 44 CONCLUSION............................................................... 47 ii TABLE OF AUTHORITIES FEDERAL CASES Champlin Refining Company v. Corporation Commission, 286 U.S. 210 (1933)----------------------------------------------------------------------------- 25 Ex Parte McCardle, 7 Wall. 506 (1869) License Cases, 46 U.S. (5 How.) 504 (1847) E 16 Ohio Oil Company v. Indiana (No. 1), 177 U.S. 190 (1900)-------------- 32 Pennoyer v. Neff, 95 U.S. (5 Otto) 714 (1889) 17 Union Dry Goods v. Georgia Public Service Corp., 248 U.S. 372 (1919) 29 United Parcel Service, Inc. v. Chadwick's of Boston, Ltd., 900 F. Supp. 557 (D. Mass. 1995)------------------------------------------------------------ 9 United States v. Alaska, 422 U.S. 184 (1975)------------------------------- 21 ALASKA CASES Alaska Crude Corp. v. State, DNR, 261 P.3d 412 (Alaska 2011)-------- 18 American National Bank and Trust Company v. International Seafoods of Alaska, Inc., 735 P.2d 747 (Alaska 1987)--------------------------------- 17 B-C Cable Co., Inc. v. City and Borough of Juneau, 613 P.2d 616 (Alaska 1980)------------------------------------------------------------------ 17 Cabana v. Kenai Peninsula Borough, 21 P.3d 833 (Alaska 2001) ----- 45 City of Kenai v. CINGSA, 373 P.3d 473 (Alaska 2016)------------------ 13 Colville Environmental Services, Inc. v. North Slope Borough, 831 P.2d 341 (Alaska 1992)----------------------------------------------------- 17 Exxon Corp. v. State, 40 P.3d 786 (Alaska 2001)------------------------- 45 Far North Sanitation, Inc. v. Alaska Public Utilities Commission, 825 P.2d 867 (Alaska 1992)------------------------------------------------------ 9 iii Forquer v. State, Commercial Fisheries Entry Commission, 677 P. 2d 1236 (Alaska 1984)------------------------------------------------------------- 41,42 Gold Country v. Fairbanks North Star Borough, 270 P.3d 787 (Alaska 2012)------------------------------------------------------------------------------ 43,44 Homer Electric Association v. City of Kenai, 816 P.2d 182 (Alaska 1991)----------------------------------------------------------------------------- 6 Jeffries v. Glacier State Telephone Co., 604 P.2d 4 (Alaska 1979) ----- 15 Johnson v. State, 421 P.3d 124 (Alaska 2018)----------------------------- 9 Kenai Peninsula Fisherman's Co-op Association v. State, 628 P.2d 897 (Alaska 1981)------------------------------------------------------------------- 19 Matanuska Electric Association, Inc. v. Chugach Electric Association, Inc., 99 P.3d 553 (Alaska 2004)---------------------------------------------- 9 Moore v. State, 553 P.2d 8 (Alaska 1976)------------------------------------ 16 Regulatory Commission of Alaska v. Matanuska Electric Association, 436 P.3d 1015 (Alaska 2019)---------------------------------------------- 6 Riddle v. Lanser, 421 P.3d 35 (Alaska 2018)------------------------------- 8 Shephard v. State Dept. of Fish and Game, 897 P.2d 33 (Alaska 1995) 45 State, Dept. of Commerce, Community and Economic Development v. Alyeska Pipeline Service Co., 262 P.3d 593 (Alaska 2011)------------- 6,20 State, DNR v. Greenpeace, 96 P.2d 1056 (Alaska 2000)----------------- 45 Tesoro Alaska Petroleum v. Kenai Pipeline, 746 P.2d 896 (Alaska 1987)------------------------------------------------------------------ 6,19 CASES FROM OTHER JURISDICTIONS Bel Oil Co. v. Roland, 137 So. 308 (Louisiana 1962)------------------- 30 iv Jamieson v. Indiana Natural Gas & Oil Company, 128 Indiana 555, 28 N.E. 76 (Indiana 1891)------------------------------------------------- 32 Lone Star Gas Company, Inc. v. The Railroad Commission of Texas, 798 S.W. 2d 888 (Tex. Ct. App. Austin 1990)---------------------------- 33 Mobil Oil Corp. v. State Corporation Commission, 608 P.2d 1325 (Kan. 1980)------------------------------------------------------------------- 40 Osborn v. Texas Oil & Gas Corp., 661 P.2d 71 (Ok. Ct. App. 1983) - 40 Railroad Commission v. Shell Oil Co., 206 S.W.2d 235 (Texas 1947) 23 State ex. rel. v. Sinclair Pipe Line Company, 180 Kan. 425, 304 P.2d 930 (1956)--------------------------------------------------------------------- 25 ALASKA CONSTITUTION ArticleVIII §2----------------------------------------------------------------- 45 ALASKA STATUTES AS31.05.005------------------------------------------------------------------- 18 AS31.05.009------------------------------------------------------------------- 7 AS 31.05.027------------------------------------------------------------------- passim AS31.05.030---------------------------- -------------------------------------- passim AS 31.05.060(a)--------------------------------------------------------------- 2, 42, 43 AS31.05.095------------------------------------------------------------------- 18,25 AS. 31.05.120------------------------------------------------------------------ 35 AS 31.05.170(6)--------------------------------------------------------------- 10 AS 31.05.170(15)-------------------------------------------------------------- 26 v ALASKA REGULATIONS 20 AAC 25.020----------------------------------------------------------------- 11 STATUTES FROM OTHER JURISDICTIONS Arkansas: A.C.A. § 15-72-102---------------------------------------------- 26 California: Cal.Pub.Res.Code § 3300-------------------------------------- 33 Kansas: K.S.A. 55-701------------------------------------------------------- 25 Louisiana: LSA-R.S. 30:3--------------------------------------------------- 26 North Dakota: NDCC § 38-08-02------------------------------------------ 26 Oklahoma: 52 Okla. Stat. § 236-------------------------------------------- 25 OTHER AUTHORITIES Alaska Rule of Appellate Procedure 508(e)(4)(B)------------------------ 44,45 AOGCC, AOGCC, 50 Years of Service to Alaska (rev10/10/10)------- 27, 31, 36 Earl Boebert and James M. Blossom, Deepwater Horizon, A Systems Analysis of the Macondo Disaster, Harvard University Press (2016) -- 38 Tim Bradner, Hilcorp Acquires Additional Inlet Oil Assets, Alaska Journal of Commerce, 7/7/2015--------------------------------------------- 39 Dan Carpenter, Investigation Finds Hilcorp Gas Leak Poses Risks & Started Earlier Than First Reported, KTUU, March 7, 2017------- 2,10 Alex DeMarban, Hilcorp Agrees to Temporarily Shut Down Oil Production to Fight Cook Inlet Gas Leak, Alaska Daily News, March 27, 2017----------------------------------------------------------------------- 2,10 CINGSA, Cook Inlet Natural Gas Storage, Alaska, cingsa.com/about- cingsa--------------------------------------------------------------------------- 38 CIRCAC, Fact Sheet: Cook Inlet Oil and Gas Production, circac.org (April 2000)-------------------------------------------------------------------- 14,31 vi CIRCAC, Platform Information, Cook Inlet, Alaska, First Edition, circac.org (1993)----------------------------------------------------------- James A. Clark, Three Stars For The Colonel, The Biography of Ernest O. Thompson, Random House (1954)-----------------------. Anthony J. Colangelo, What Is Extraterritorial Jurisdiction, 99 Cornell L. Rev. 1303 (2014)----------------------------------------- Havard Devold, Oil and Gas Production Handbook, an Introduction To Oil and Gas Production (ISBN 978-82-997886-1-8)--------------- K.K. DuVivier, Sins of the Father, 1 Tex. A&M J. Prop. L. 391, 404 (2014)-------------------------------------------------------------------------- Richard H. Fallon, Jr. & Daniel Meltzer, Habeas Corpus Jurisdiction, Substantive Rights, and the War on Terror, 120 Harv. L. Rev. 2029 (2007)-------------------------------------------------------------------------- Cathy Foerster, Written Testimony to the House Subcommittee on Energy and Mineral Resources, October 13, 2017-------------------- Forbes, 4745 Jeffrey Hildebrand, www.forbes.com/profile/jeffrey- hildebrand/# 197812b 133b------------------------------------------------. Gordon Harrison, Alaska's Constitution, a Citizen's Guide, Alaska Legislative Affairs Agency, Fifth Edition (2012)---------------------. Harvest Midstream, Our Affiliates, www.harvestinidstream,com/our- affiliates------------------------------------------------------------------------- Zaz Hollander, Small Team Boards Burned Cook Inlet Platform to Begin Damage Assessment, Anchorage Daily News, Oct. 3, 2013 --- Ralph Horween, What Are the Essentials for Sound Oil Conservation For Illinois? 5 J. Marshall L.Q. 223 (1939)------------------------------- Norman J. Hyne, Nontechnical Guide to Petroleum Geology, Exploration, Drilling and Production, 2"d Ed. (2001)--------- IOGCC, A Study of Conservation of Oil and Gas in the United States, (1964)--------------------------------------------------------------------------- W. 34 17 15, 30, 31, 37 22 E7 20,47 12 11 12 w 26 passim 22 vii IOGCC, Member States, iogcc.publishpath.com/Default.aspx? shortcut=member-states&OriginalDomain=iogcc.ok.gov----------------- 22 Dan Joling, Alaska Underwater Gas Leak Continues, 24d Group to Sue, Associated Press, March 1, 2017--------------------------------------------- 2,10 Evan D. Johnson, Anchorage, We Have A Problem: The Cold, Harsh Truth About The Alaska Oil And Gas Conservation Commission's Ability To Regulate Gas -Cap Production (A Texas Perspective), 44 Houston Law Review 1455 (2007)---------------------------------------- 24 Kenai Landing, Inc. v. CINGSA, Brief of Appellee, 2018 WL 2971925 (Alaska)------------------------------------------------------------- 22, 35, 36, 38 Evan Tsen Lee, The Dubious Concept of Jurisdiction, 54 Hastings L.J. 1613 (2003)-------------------------------------------------------------------- 17 Linkedin, Hilcorp Company Profile, www.linkedin_com/company/ hilcorp-------------------------------------------------------------------------- 12 Patrick H. Martin, The Jurisdiction of State Oil and Gas Commission, 18 A RMMLF-INST 3 (1985)----------------------------------------------- 40 Patrick H. Martin & Bruce M. Kramer, Williams & Meyers Oil and GasLaw (2019)--------------------------------------------------------------- 1 1, 18, 28, 30 Leslie Moses, The Constitutional, Legislative and Judicial Growth of Oil and Gas Conservation Statutes, 13 Miss. L.J. 353 (1941)----------- 16 Blakely M. Murphy, ed., Conservation of Oil & Gas, a Legal History 1948, Section of Mineral Law, American Bar Association -------------- 24 NaturalGas.org., The Transportation of Natural Gas, naturalgas.org/ naturalgas/transport ----------------------------------------------------------- 15 Order Remanding Other Order 151 to The Alaska Oil and Gas Conservation Commission, Superior Court Judge Herman Walker, April 7, 2020------------------------------------------------------------------- 42 Prudhoe Bay Unit Operating Agreement ----------------------------------- 28 Noel Sargent, Conservation and the Police Power, 12 Ill. L.R. 162, (1917-1918)-------------------------------------------------------------------- 32 viii Bernard Schwartz, A History of the Supreme Court, Oxford University Press(1993)------------------------------------------------------------------- 16 State of Alaska v. BP Exploration, Alaska, Trial Motion, 2009 WL 7274134------------------------------------------------------------------------- 21 U.S. Energy Information Administration, Alaska state profile and energy estimates, eia.gov/state/analysis.php?sid=AK-------------------- 13 Howard Williams, Conservation of Oil and Gas, 65 Harv. L. Rev. 1155 (1952)--------------------------------------------------------------------- 34 Wikipedia, Deepwater Horizon Oil Spill ---------------------------------- 36 Wikipedia, Exxon Valdez Oil Spill ------------------------------------------ 36 Wikipedia, Texas City Refinery Explosion -------------------------------- 36 Wikipedia, Upstream (petroleum industry) -------------------------------- 11 Gordon S. Wood, The Creation of the American Republic 1776 -1787 (1969)--------------------------------------------------------------------------- 23 Erich W. Zimmerman, Conservation in the Production of Petroleum, Petroleum Monograph Series Volume 2 (Yale) (1957)---------------------- 23 AUTHORITIES PRINCIPALLY RELIED UPON ALASKA CONSTITUTION Article VIII § 2 The legislature shall provide for the utilization, development, and conservation of all natural resources belonging to the State, including land and waters, for the maximum benefit of its people. AS 31.05.005(a) ALASKA STATUTES ix There is created as an independent quasi-judicial agency of the state the Alaska Oil and Gas Conservation Commission composed of three commissioners appointed by the governor and confirmed by the legislature in joint session. In making appointments to the commission under AS 31.05.009 and this subsection, the governor shall consider and give preference to a person who demonstrates experience in oil and gas operations in the state. AS 31.05.009 Members shall be qualified as follows: (1) one member shall be a petroleum engineer who (A) holds a certificate of registration as an engineer under AS 08.48 and, under regulations adopted to implement that chapter, has qualified as a petroleum engineer; or (B) has earned a degree from a university in the field of engineering and has at least 10 years of professional subsurface experience in the oil and gas industry in drilling, well operations, production process operations, reservoir engineering, or a combination thereof; for the purposes of this subparagraph, a person meets the requirement of earning a degree in the field of engineering if the person obtains an undergraduate or graduate degree in engineering that meets the requirements for program accreditation by the Engineering Accreditation Commission of the Accreditation Board for Engineering and Technology and the person completes university or industry training specific to petroleum engineering that illustrates application of engineering principles to the problems encountered and methods used in the petroleum industry, including drilling, production, reservoir engineering, fluid flow through subsurface formations, and hydrocarbon transportation; (2) one member shall be a geologist who (A) holds a certification as a professional geologist under AS 08.02.011 and has professional experience in the field of petroleum geology; or (B) has earned a degree in the field of geology from a university accredited in the field of geology and has a minimum of 10 years professional experience in the field of petroleum geology; and (3) one member who shall have training or experience that gives the person a fundamental understanding of the oil and gas industry in the state. AS 31.05.027 The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States. The authority of the commission further applies to all land included in a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.180(p). AS 31.05.030 (a) The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter. (b) The commission shall investigate to determine whether or not waste exists or is imminent, or whether or not other facts exist which justify or require action by it. (c) The commission shall adopt regulations and orders and take other appropriate action to carry out the purposes of this chapter. (d) The commission may require (1) identification of ownership of wells, producing leases, tanks, plants, and drilling structures; (2) the making and filing of reports, well logs, drilling logs, electric logs, lithologic logs, directional surveys, and all other subsurface information on a well for which a permit to drill has been issued by the commission, subject to the following: (A) the reports required to be filed by the commission under this paragraph shall be filed within 30 days after the completion, abandonment, or suspension of the well; and (B) the well logs, drilling logs, electric logs, lithologic logs, directional surveys, and all other information required to be filed by the commission under this paragraph shall be filed within 90 days after the completion, abandonment, or suspension of the well, unless extended by the commission on request; (3) the drilling, casing, and plugging of wells in a manner that will prevent the escape of oil or gas out of one stratum into another, the intrusion of water into an oil or gas stratum, the pollution of fresh water supplies by oil, gas, or salt water, and prevent blowouts, cavings, seepages, and fires; (4) the furnishing of a reasonable bond with sufficient surety conditions for the performance of the duty to plug each dry or abandoned well or the repair of wells causing waste; (5) the operation of wells with efficient gas -oil and water -oil ratios, and may fix these ratios; (6) the gauging or other measuring of oil and gas to determine the quality and quantity of oil and gas; (7) every person who produces oil or gas in the state to keep and maintain for a period of five years in the state complete and accurate records of the quantities of oil and gas produced, which shall be available for examination by the commission at all reasonable times; (8) the measuring and monitoring of oil and gas pool pressures; (9) the filing and approval of a plan of development and operation for a field or pool to prevent waste, ensure a greater ultimate recovery of oil and gas, and protect the correlative rights of persons owning interests in the tracts of land affected. (e) The commission may regulate (1) for conservation purposes and, to the extent not in conflict with regulation by the Department of Labor and Workforce Development or the Department of Environmental Conservation, for public health and safety purposes, (A) the drilling, producing, and plugging of wells; (B) the perforating, fracture stimulation, and chemical treatment of wells; xi (C) the spacing of wells; (D) the disposal of salt water, nonpotable water, and oil field wastes; (E) the contamination or waste of underground water; (F) the quantity and rate of the production of oil and gas from a well or property; this authority shall also apply to a well or property in a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.180(p); (G) the underground injection of gas for purposes of storage; (2) the disposal of drilling mud, cuttings, and nonhazardous drilling operation wastes in the annular space of a well for which a permit to drill has been issued by the commission; in this paragraph, a "nonhazardous drilling operation waste" means a waste, other than a hazardous waste identified by the Environmental Protection Agency in 40 C.F.R., Part 261, 1 its regulation identifying and listing hazardous wastes, associated with the act of drilling a well for exploratory or production purposes. (f) The commission may classify a well or a specific portion of a well as an exploratory, development, service, or stratigraphic test well and may classify a development well as an oil or gas well for purposes material to the interpretation or enforcement of this chapter. (g) When the commission finds sufficient likelihood of an unexpected encounter of oil, gas, or other hazardous substance as a result of well drilling in an area of the state, the commission may, by regulation, designate the area and specify a depth in the area as one in which wells or any boring into the soil in excess of the specified depth but not otherwise subject to this chapter are subject to the regulations and requirements adopted under this section. The designation of an area or specification of a depth under this subsection does not constitute a certification that no hazardous substance will be encountered in another area or at a lesser depth, and the state is not liable for any damages arising from such an unexpected encounter of a hazardous substance. (h) The commission may take all actions necessary to allow the state to acquire primary enforcement responsibility under 42 U.S.C. 300h-1 and 42 U.S.C. 300h-4 (Safe Drinking Water Act of 1974, as amended, 42 U.S.C. 300f — 300j-26), for the control of underground injection related to the recovery and production of oil and natural gas and the control of underground injection in Class I wells, as defined in C.F.R. 144.6, as amended. (i) The commission shall accept written plans submitted by lessees for purposes of AS 38.05.180(f)(5). If a lessee submits a plan, the commission shall hold a public hearing on the plan and, within 45 days after receipt of the plan, grant approval of the plan if the plan contains a voluntary agreement by the lessee to use its best efforts to employ residents of this state, consistent with law, and to contract with firms in this state for work in connection with the development of the field, including the fabrication and installation of required facilities, whenever feasible. The decision of the commission to grant approval may not be appealed. 0) For exploration and development operations involving nonconventional gas, the commission (1) may not (A) issue a permit to drill under this chapter if the well would be used to produce gas from an aquifer that serves as a source of water for human consumption or agricultural purposes xii unless the commission determines that the well will not adversely affect the aquifer as a source of water for human consumption or agricultural purposes; or (B) allow injection of produced water except at depths below known sources of water for human consumption or agricultural purposes; (2) shall (A) regulate hydraulic fracturing in nonconventional gas wells to ensure protection of drinking water quality; (B) regulate the disposal of wastes produced from the operations unless the disposal is otherwise subject to regulation by the Department of Environmental Conservation or the United States Environmental Protection Agency; (C) as a condition of approval of a permit to drill a well for regular production of coal bed methane, require the operator to design and implement a water well testing program to provide baseline data on water quality and quantity; the commission shall make the results of the water well testing program available to the public. (k) The commission shall certify to the Department of Natural Resources the volume of oil production from a field or platform for the purposes of AS 38.05.180(f)(6)(A), (C), (E), and (G). (0 For purposes of AS 46.04.050(c) and upon application by the operator, the commission shall evaluate the likelihood that a well at a natural gas exploration facility may penetrate a formation capable of flowing oil to the ground surface and issue a determination based on results of the evaluation. If the commission determines that evidence obtained through the evaluation demonstrates with reasonable certainty that a well will not penetrate a formation capable of flowing oil to the ground surface, it shall report its determination to the Department of Environmental Conservation. In this subsection, (1) "natural gas exploration facility" has the meaning given in AS 46.04.050 (c); (2) "oil" has the meaning given in AS 46.04.050(c (m) The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of AS 41.06, except for provisions in AS 41.06 for which the Department of Natural Resources has jurisdiction. (n) Upon request of the commissioner of revenue, the commission shall determine the commencement of regular production from a lease or property for purposes of AS 43.55.160 (f) and (g) and 43.55.165(n) and (o). AS 31.05.060(a) The commission may act upon its own motion or upon the petition of an interested person. On the filing of a petition concerning a matter within the jurisdiction of the commission under this chapter, the commission shall promptly fix a date for the hearing, and shall cause notice of the hearing to be given. The hearing shall be held without undue delay after the filing of a petition. The commission shall enter its order within 30 days after the hearing. AS 31.05.095. The waste of oil and gas in the state is prohibited. AS 31.05.090 (a) A person shall apply for and receive a permit from the commission before drilling (1) a well in search of oil or gas; (2) a well in support of the recovery or production of oil or gas; (3) an underground injection well for the purpose of gas storage; or (4) an underground injection well for which the state has acquired primary enforcement responsibility under AS 31.05.030(h). (b) A person must submit a separate permit application for each well. The permit application must be in the form required by the commission and include all information required by the commission. (c) After receiving an application under (b) of this section, the commission shall promptly approve or deny the application for a permit to drill. (d) In making a determination under (c) of this section, the commission shall consider whether the (1) proposed well is contrary to law, a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, or term of a permit issued by the commission; or (2) applicant is in violation of a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, or term of a permit issued by the commission and the magnitude of such violation. AS 31.05.120 The use of gas from a well producing gas only, or from a well which is primarily a gas well for the manufacture of carbon black or similar products predominantly carbon is declared to constitute waste prima facie, and the gas well may not be used for this purpose unless it is clearly shown at a public hearing held by the commission, on application of the person desiring to use the gas, that waste would not take place by the use of the gas for the purpose applied for, and that gas which would otherwise be lost is now available for such purpose, and that the gas to be used cannot be used for a more beneficial purpose, such as for light or fuel purposes, except at prohibitive cost, and that it would be in the public interest to grant the permit. If the commission finds that the applicant has clearly shown a right to use the gas for the purpose applied for, it shall issue a permit upon terms and conditions it finds necessary in order to permit the use of the gas and at the same time require compliance with the intent of this section. AS 31.05.170(6) "gas" includes all natural gas and all hydrocarbons produced at the wellhead that are not oil. xry AS 31.05.170(15) "waste" means, in addition to its ordinary meaning, "physical waste" and includes (A) the inefficient, excessive, or improper use of, or unnecessary dissipation of, reservoir energy; and the locating, spacing, drilling, equipping, operating or producing of any oil or gas well in a manner which results or tends to result in reducing the quantity of oil or gas to be recovered from a pool in this state under operations conducted in accordance with good oil field engineering practices; (B) the inefficient above -ground storage of oil; and the locating, spacing, drilling, equipping, operating or producing of an oil or gas well in a manner causing, or tending to cause, unnecessary or excessive surface loss or destruction of oil or gas; (C) producing oil or gas in a manner causing unnecessary water channeling or coning; (D) the operation of an oil well with an inefficient gas -oil ratio; (E) the drowning with water of a pool or part of a pool capable of producing oil or gas, except insofar as and to the extent authorized by the commission; (F) underground waste; (G) the creation of unnecessary fire hazards; (H) the release, burning, or escape into the open air of gas, from a well producing oil or gas, except to the extent authorized by the commission; ALASKA REGULATIONS 20 AAC 25.020 Designation of Operator. (a)If an owner of a property wishes to designate a new operator for the property, the owner shall submit to the commission for approval a Designation of Operator (Form 10-411). The commission will not approve the designation of a new operator without the signature of the newly designated operator on the same Designation of Operator form. By signing the Designation of Operator form, the newly designated operator agrees to accept the obligations of an operator. The newly designated operator shall furnish a bond and, if required, security as provided for in 20 AAC 25.025. The commission's acceptance of the designated operator's bond constitutes the release of the former operator's bonding obligation for the property indicated on the Designation of Operator form. (b) The operator shall notify the commission in writing not later than 30 days after any change in the operator's office address, primary telephone number, electronic mail address, or principal contact. Arkansas OTHER STATE STATUTES I:VL A.C.A. § 15-72-102 (15) "Waste", in addition to its ordinary meaning, means "physical waste" as that term is generally understood in the oil and gas industry. California Cal.Pub.Res.Code § 3300. The unreasonable waste of natural gas by the act, omission, sufferance, or insistence of the lessor, lessee or operator of any land containing oil or gas, or both, whether before or after the removal of gasoline from the gas, is opposed to the public interest and is unlawful. The blowing, release, or escape of gas into the air shall be prima facie evidence of unreasonable waste. Kansas K.S.A. 55-701. Waste of natural gas prohibited -- The production of natural gas in the state of Kansas in such manner and under such conditions and for such purposes as to constitute waste is hereby prohibited. Louisiana LSA-R.S. 30:3. Definitions (16) "Waste", in addition to its ordinary meaning, means "physical waste" as that term is generally understood in the oil and gas industry. North Dakota NDCC § 38-08-02. Definitions. 19. "Waste" means and includes: a. Physical waste, as that term is generally understood in the oil and gas industry. Oklahoma 52 Olka. Stat. §236. Waste prohibited. The production of natural gas in the State of Oklahoma, in such manner, and under such conditions as to constitute waste, shall be unlawful. Texas V.T.C.A. § 85.045. The production, storage, or transportation of oil or gas in a manner, in an amount, or under conditions that constitute waste is unlawful and is prohibited. V.T.C.A. § 85.046. Waste (a) The term "waste," among other things, specifically includes.... xvi JURISDICTIONAL STATEMENT Issues number one and two are an appeal from a final decision by Superior Court Judge E. Aarseth designated as Order Re: and distributed June 9, 2020. The superior court case was an appeal from a decision of the Alaska Oil and Gas Conservation Commission. A timely filed motion for reconsideration of Order Re: was denied June 30, 2020. This appeal was timely filed on July 8, 2020. This Court has jurisdiction pursuant to AS 22,05.0 1 0(c); and Ak. R. App. P. 202(a). Issue three is an appeal from an award of attorney's fees in this case by Superior Court Judge A. Zeman in Order Granting Motion for Rule 508(e) Attorney Fees, distributed August 10, 2020, and joined to this appeal by motion. ISSUES PRESENTED FOR REVIEW Did the superior court err by: 1. Affirming the rulings of the Alaska Oil and Gas Conservation Commission that it had no jurisdiction over gas sold by a vendor; that it had no jurisdiction over gas metered and severed from a property; and that it had no jurisdiction over gas Hilcorp purchased from Harvest Pipeline; 2. Affirming the ruling of the Alaska Oil and Gas Conservation Commission that denied Appellant a hearing before the agency on a petition regarding waste of gas; and 3. Awarding attorney's fees in the amount of $6270. STATEMENT OF THE CASE Appellant filed a petition for a hearing on a complaint of waste with the Alaska Oil and Gas Conservation Commission ("AOGCC") on February 28, 2019.' The factual allegations in the petition were these: The waste occurred from an 8" line carrying fuel gas to Platform A in Cook Inlet, which is operated by Hilcorp. The line leaked gas to the atmosphere for approximately three months in the winter and spring of 2017, at a rate of approximately 300,000 scf per day.z The petition cited AS 31.05.060(a).3 Relying on the statute, Appellant requested a hearing. Other Order 150, issued by AOGCC on March 20, 2019, denied Appellant's request for a hearing by erroneously disclaiming jurisdiction over the gas leak.' The agency's order disclaimed jurisdiction in three related, but distinct ways. In relevant part Other Order 150 reads: AOGCC investigated the leak at the time it occurred. AOGCC initially believed the source of the gas was upstream gas, i.e., gas which remained an AOGCC-regulated resource and had not been metered and severed from the property. Had that proven to be the case, the gas leak would have constituted waste and AOGCC would 1 Exc. 001. 2 Id. And see Alex DeMarban, Hilcorp Agrees to Temporarily Shut Down Oil Production to Fight Cook Inlet Gas Leak, Alaska Daily News, March 25, 2017; Dan Carpenter, Investigation Finds Hilcorp Gas Leak Poses Risks & Started Earlier Than First Reported, KTUU, March 7, 2017; Dan 7oling, Underwater Gas Leak Continues, 21" Group to Sue, Associated Press, March 1, 2017. 3 AS 31.05.060(a) states "The commission may act upon its own motion or upon the petition of an interested person. On the filing of a petition concerning a matter within the jurisdiction of the commission under this chapter, the commission shall promptly fix a date for the hearing, and shall cause notice of the hearing to be given. The hearing shall be held without undue delay after the filing of a petition. The commission shall enter its order within 30 days after the hearing." ° Exc.002. 2 have instituted an enforcement action against Hilcorp. However, AOGCC's investigation ultimately revealed the leaking gas had been purchased by Hilcorp from a third -party provider, Harvest Pipeline (Harvest), and was being shipped back to Platform A. The primary purpose behind the prohibition against waste is to maximize resource recovery. Consequently, like every other state's oil and gas conservation regulatory authority, AOGCC regulates waste occurring upstream (occurring before oil or gas is metered and severed from the property) in connection with drilling, exploration, and production activities. Neither AOGCC nor any of its counterparts in other states has ever attempted to extend its jurisdiction over waste to gas which has been sold by a vendor. Once oil or gas is metered and severed from the property, AOGCC's authority to make a waste determination is at an end. The gas involved in the Hilcorp leak had been sold by Harvest to Hilcorp. AOGCC does not have waste jurisdiction over gas Hilcorp purchased from Harvest. Absent jurisdiction, there is no basis for a hearing.' Thus, according to Other Order 150, the AOGCC lacks jurisdiction over 1. Gas sold by a vendor; 2. Gas that has been metered and severed from the property; 3. Gas Hilcorp purchased from Harvest. Appellant timely moved the AOGCC to reconsider Other Order 150 on April 8, 2019.E The agency did not respond. The motion was deemed denied by operation of law ten days later, or April 18, 2019.7 Appellant timely filed an appeal of Other Order 150 in superior court on May 1, 2019. 5 Exc.002. 6 Exc.004. ' Exc.003. Kl Appellant's points on appeal were challenges to the jurisdictional rulings of Other Order 150.8 The case was briefed and oral arguments were held. Superior Court Judge E. Aarseth issued his ruling in an order titled Order Re:9 and dated June 9, 2020. A close reading of the superior court order reveals that the lower court misperceived what AOGCC actually said in Other Order 150. The superior court framed the issue of the case this way: "we are presented with reviewing AOGCC's investigation and determination of whether or not waste existed."10 Other Order 150 did not ask whether or not waste existed. It certainly did not rule that the gas that leaked in Cook Inlet was not waste. Other Order 150 ruled that AOGCC lacked jurisdiction: "Absent jurisdiction, there is no basis for a hearing. French's request for a hearing is DENIED."" The superior court order unfortunately did not address the jurisdictional rulings of Other Order 150. The lower court went on to apply the rational basis test to a determination not made by the AOGCC and ruled in favor of the agency.12 Appellant timely filed for reconsideration, citing two grounds. First, Appellant pointed out that the court's order did not address the jurisdictional rulings of Other Order 8 Exc. 009, Exc. 011. 9 Exc.025-035. to Exc.034. 11 Exc.002. 12 Exc.035. 0 150, and thus had overlooked a material question in the case presented.13 Second, the superior court overlooked the fact that the AOGCC denied Appellant a hearing.14 Appellant's motion for reconsideration was denied June 30, 2020.15 This appeal was timely filed July 8, 2020. In response to the final ruling from the superior court, AOGCC moved for attorney's fees.16 Superior Court Judge A. Zeman made an award of attorney's fees, in an order dated August 10, 2020.17 By motion the award was added to the issues on review in this appeal. STANDARD OF REVIEW There are three issues on appeal. The first issue confronts the jurisdictional rulings of AOGCC in Other Order 150. Appeal of Other Order 150 was taken to superior court, which upheld the order. When the superior court acts as an intermediate court of appeal, this Court gives no deference to the lower court's decision.18 This Court independently scrutinizes the merits of the administrative determination.19 The administrative determination in question is Other Order 150's ruling that "[a]bsent jurisdiction, there is no basis for a hearing."20 To properly scrutinize that decision 13 Exc.036-037. 14 "Absent jurisdiction, there is no basis for a hearing. French's request for a hearing is DENIED." Exc. 002. is Exc.041. 16 Exc.042-043. 17 Exc.044-047. is Tesoro Alaska Petroleum v. Kenai Pipeline, 746 P.2d 896, 903 (Alaska 1987). 19 Id. 20 Exc.002. 5 will require the Court to examine the statutes that confer jurisdiction upon the AOGCC: AS 31.05.02721 and AS 31.05.030(a).22 The rule for interpreting a statute is well settled: The proper interpretation of a statute presents a question of law that we review de novo, `adopting the rule of law most persuasive in light of precedent, reason, and policy.'23 When the issue is the extent of a state agency's jurisdiction, this Court has consistently applied the independent judgment standard: [w]here the statute to be construed ... is, as in this case, the very statute that defines the scope of the agencys function, the court properly makes its own interpretation 24 This case involves the scope of AOGCC's authority. This is not an instance where the agency's expertise, which is in geology and engineering, merits any deference.25 The three precedents cited in fn. 24 took up the question of the extent of a state agency's authority. The three precedents cited are on -point. All three reviewing Courts employed 21 AS 31.05.027 reads: "The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States." 22 AS 31.05.030(a) reads: "The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter." 23 State, Dept. of Commerce, Community and Economic Development v. Alyeska Pipeline Service Co., 262 P.3d 593, 596 (Alaska 2011). 24 Homer Electric Association v. City of Kenai, 816 P.2d 182, 184 fn. 10 (Alaska 1991)(emphasis supplied); Tesoro, 746 P.2d at 903; Regulatory Commission of Alaska v. Matanuska Electric Association, 436 P. 3d 1015, 1025 (Alaska 2019): "We exercise our independent judgment on [any] issue concerning the scope of an agency's authority since it involves statutory interpretation, or analysis of legal relationships, about which courts have specialized knowledge and expertise." 25 The commission has three commissioners. By law one must be a petroleum engineer, one must be a petroleum geologist, and the third is a member of the public who has a "fundamental understanding of the oil and gas industry in the state." AS 31.05.009. IN the independent judgment standard. Appellant respectfully urges the Court to follow its own precedents and employ the independent judgement standard of review in analyzing the extent of the AOGCC's jurisdiction. The second issue for review is the superior court's affirming the AOGCC decision that denied French a hearing before the agency on his petition. 26 Simple logic leads to the use of the independent judgment standard on this point. If the agency had jurisdiction, it was compelled by AS 31.05.060(a) to grant a hearing to Appellant. If the agency did not have jurisdiction, then the agency properly denied the request. Indeed, the Court's resolution of the jurisdictional question essentially resolves this point of appeal as well. This Court's determination of the jurisdictional question posed by this appeal, as outlined above, should be undertaken through the application of the independent judgment standard. Likewise, the Court should employ the same exacting standard here. The third issue on appeal is the award of attorney's fees. Abundant case law on this point is clear that, in reviewing an award of attorney's fees, the appropriate standard is abuse of discretion.27 26 "Absent jurisdiction, there is no basis for a hearing." Exc. 002. 27 Riddle v. Lanser, 421 P.3d 35, 44 (Alaska 2018). 7 ARGUMENT I. THE AOGCC HAD JURISDICTION TO DECIDE THE ISSUE PRE- SENTED IN FRENCH'S PETITION. Other Order 150 declared unambiguously that AOGCC could not hold a hearing because it lacked jurisdiction over the basis of Appellant's petition, which was a reported gas leak in Cook Inlet. The superior court did not rule either way on this fundamental question. The failure to take up the question of jurisdiction led the lower court astray. A. Jurisdiction is Either On or Off. Jurisdiction is foundational. The first step in any case is to determine jurisdiction. This is not a new concept. Without jurisdiction the court cannot proceed at all in any cause. Jurisdiction is power to declare the law, and when it ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the cause.38 There has not been any better enunciation of the principle since Ex Parte McCardle, and what was true in 1869 remains true today. "Jurisdiction is a threshold issue that functions as an on -off switch. ,29 Either you have it or you don't. The boundary of jurisdiction is marked with a "bright-line."30 When there is a question about jurisdiction, "the answer to the question must be YES or NO."31 28 Ex Parte McCardle, 7 Wall. 506, 514 (1869). 29 Richard H. Fallon, Jr. & Daniel Meltzer, Habeas Corpus Jurisdiction, Substantive Rights, and the War On Terror, 120 Harv. L. Rev. 2029, 2049 (2007). 30 Matanuska Electric Association, Inc. v. Chugach Electric Association, Inc., 99 P.3d 553, 559 fn. 20 (Alaska 2004)(citing United Parcel Service, Inc. v. Chadwick's of Boston, Ltd., 900 F.Supp. 557, 563 (D. Mass. 1995)). 31 900 F. Supp. at 563 (emphasis in the original). 1.1 Jurisdictional issues therefore have to be taken up first. If raised by a party or identified by the court, a potential flaw in subject -matter jurisdiction is a threshold issue that we must decide before addressing other issues presented in an appeal." The rule applies as much to administrative agencies as it does to any court. "Jurisdictional defects deprive the agency of power to adjudicate or regulate the subject matter."33 AOGCC correctly understood that there is a limit to its power. Its error was putting the bright -line end to its powers in the wrong place. As will be shown, the agency believes its powers terminate at the point between production of oil and gas and transmission of the same. The incorrect positioning of its jurisdictional boundary is contrary to law and public policy; it is contrary to and inconsistent with the way the regulated industry understands AOGCC's jurisdiction; it is contrary to the place Alaska holds in the development of petroleum conservation law; and it leaves enormous regulatory gaps that could lead to absurd legal results, as the following subsections demonstrate. B. In Which the Geography of the Kenai Peninsula's Oil and Gas Fields, the Technology by Which Gas is Transported, and the Location of the Leak are Illuminated, But Not Its Source. The petition French filed with the AOGCC alleged that a leak from a line carrying fuel gas to Platform A in Cook Inlet constituted waste.34 Without confirming any details 32 Johnson v. State, 421 P.3d 124, 138 (Alaska 2018). 33 Far North Sanitation, Inc. v. Alaska Public Utilities Commission, 825 P.2d 867, 870 (Alaska 1992). 34 Exc. 001: "The waste occurred from an 8" line carrying fuel gas to Platform A in Cook Inlet, which is operated by Hilcorp. The line leaked gas to the atmosphere for E of the petition such as the duration of the leak or its daily or ultimate volume, AOGCC concurred in Other Order 150 that there was a gas leak, and added that its investigation revealed that "the leaking gas ... was being shipped back to Platform A."35 French's understanding of the location of the leak, and the agency's understanding of the location of the leak, are both consistent with news reports of the leak.36 Both parties agree that the leaked material was natural gas.37 What is unclear from the record, since there was never a hearing on this leak before the commission, is the source of the gas. Both sides agree that the gas was flowing towards the platform. This means the gas was coming from a source located somewhere else. That in all likelihood means the gas came from wells on the Kenai Peninsula. AOGCC said in its order that it initially believed the source of the gas was upstream gas, i.e., gas which remained an AOGCC-regulated resource and had not been metered and severed from the property. Had that proven to be the case, the gas leak would have constituted waste and AOGCC would have instituted an enforcement action against Hilcorp.38 approximately three months in the winter and spring of 2017, at a rate of approximately 300,000 scf per day." 35 Exc.002. 36 DeMarban, supra n.2; Carpenter, supra n.2; Joling, supra n.2. 37 Exc. 001; Exc. 002; and see AS 31.05.170(6): "'gas' includes all natural gas and all hydrocarbons produced at the wellhead not defined as oil." 38 Exc.002. 10 To understand these two sentences requires some knowledge of the oil industry. The "upstream gas" that the agency is referring to is the gas that was coming out of the wells on Platform A.39 According to AOGCC, when gas is upstream it is subject to the AOGCC's jurisdiction. First question, then, is "upstream" of what? The passage suggests that the agency marks its jurisdictional boundary as starting from the well and ending at the point where the gas was "metered and severed from the property." Most Alaskans know that petroleum wells pierce oil and gas reservoirs and bring a mixture of oil and gas to the surface of the earth in steel pipes. The legal framework for this process is familiar to practitioners: the oil industry gains access to land and executes leases with the mineral rights owner for the right to drill wells and produce the reservoir.40 In Alaska, the mineral rights owner is often the State of Alaska.41 This is true even when the owner of the land over the minerals is a private landowner. This is the basic definition of severance: when title to minerals beneath the earth is owned by different hands than the title above it, to the surface of the earth above the minerals " When it comes to an oil or gas well, or an oil or gas field, AOGCC regulations make the operator of the lease the entity that is legally responsible for what happens there 43 In 39 Wikipedia, Upstream (petroleum industry), last accessed October 20, 2020. 40 Norman J. Hyne, Nontechnical Guide to Petroleum Geology, Exploration, Drilling and Production, 334 (Second edition, 2001). 41 Gordon Harrison, Alaska's Constitution, a Citizen's Guide, 139 (Fifth Edition, 2012). 42 Patrick H. Martin & Bruce Kramer, Williams & Meyers Oil and Gas Law, Manual of Terms, 625-26 (2019). 43 See 20. AAC. 25.020. Designation of Operator. the case of Platform A, AOGCC names Hilcorp as the operator against whom it would have pursued an enforcement action, had the gas been coming from Platform A.44 But the gas was flowing out to the platform, coming from somewhere else. There is no direct evidence before the Court regarding the source of the gas. Because there was no hearing conducted before the agency, and because there are no records of the agency's investigation, the information the Court has about the source of the natural gas that leaked is merely conjectural" AOGCC in its order says the "leaking gas had been purchased by Hilcorp from a third -party provider, Harvest Pipeline (Harvest).i46 The order does not say where Harvest Pipeline got the gas, or how the agency gained this information. Hilcorp is reported to be privately owned. Its website claims that it is "the largest privately -owned oil and natural gas company in the country."47 Its sole owner is reported to be a man named Jeff Hildebrand.48 Harvest, which identifies itself as "Harvest Midstream" on its website,49 is a pipeline company. The relationship between Hilcorp and 44 Exc.002. 45 Exc. 001-008. Of the seven pages of material the agency submitted to the superior court in its transmittal of record — all seven pages — two pages are Other Order 150, and the rest were first sent to the agency by French. No records of the agency's investigation apparently were kept. 46 EXc.002. 47 Linkedin, Hilcorp Company Profile, accessed June 29, 2019). 48 Forbes, #745 Jeffrey Hildebrand, #197812bl33b (last accessed June 30, 2019). 49 Harvest Midstream, Our Aflliates, (last accessed June 29, 2019). www.linkedin.com/company/hilcorp (last www.forbes.com/profile/Jeffrey-hildebrand/ www.harvestmidstream.com/our-affilliates 12 Harvest is simple: they both belong to the same person. Or as Harvest's website puts it: "Harvest's and Hilcorp's affiliation begins with common ownership."so AOGCC does not identify the point of sale where Hilcorp purchased the gas from Harvest. The internal logic of the AOGCC's order suggests that the sale happened somewhere onshore: "the leaking gas had been purchased... and was being shipped back to Platform A." Otherwise the gas leaking from the pipeline would have still have belonged to Harvest. For the purposes of this appeal, this point -of -sale does not need to be identified. This is because AOGCC disclaims jurisdiction as soon as gas is "metered and severed from the property." The location of "the property" from which this gas was metered and severed is not identified by AOGCC. It can only be identified by inference. Alaska does not import natural gas. There is no pipeline carrying North Slope gas to Southcentral Alaska.51 Where did the gas come from? The agency's investigation stopped short of the source. Without all the facts, Appellant can only suggest that there are two likely sources: oil and gas wells on the Kenai Peninsula, or from a storehouse of gas called CINGSA. CINGSA is an acronym for Cook Inlet Natural Gas Storage Alaska, LLC.52 CINGSA, located on the Kenai Peninsula, has leases that allow it to store natural gas in a depleted reservoir owned by the State of Alaska and Cook Inlet Region, Inc.53 The basic so Id. 51 U.S. Energy Information Administration, Alaska state profile and energy estimates, eia.gov/state/analysis.pbp?sid=AK, last accessed October 20, 2020. 52 City of Kenai v. CINGSA, 373 P.3d 473, 473 (Alaska 2016). 53 Id. 13 idea of CINGSA is that excess gas is pumped into the reservoir during the summer, when gas demand is low, and taken out of the reservoir in the winter, when demand is high. There are seventeen producing gas fields on the Kenai Peninsula.54 Appellant regrets that there is not a piping diagram before the Court showing how the Kenai Peninsula's oil and gas wells, and CINGSA, and the leak of fuel gas from an 8" pipeline running towards Platform A all interconnect. This detailed inquiry into the platform's exact location, and the pipelines that connect Platform A to the shore, and the location of gas fields on the Kenai Peninsula including the location of CINGSA and lease points -of - sale, would all best have taken place at the agency, in a hearing that develops a proper record. Nevertheless, on the facts before the Court, it is reasonable to assume the leaked gas had come from one or more reservoirs on the Kenai Peninsula, that it was metered as it left those individual gas fields, and it may have stopped on its journey in a reservoir controlled by CINGSA.55 According to AOGCC, it lost jurisdiction to this gas back at the property where it came from, because the gas was "metered and severed"56 there. Generally, the meter marks 54 CIRCAC, Fact Sheet: Cook Inlet Oil and Gas Production, www.cireac.org/wp- content/uploads/AOGA_CI_ Fact_Sheet.pdf, 1 (April 2000). 55 A reader might be asking "why was the gas flowing towards Platform A? Don't platforms produce oil and gas? Shouldn't the gas be flowing towards shore?" There is no answer in the record. It may be the case that the aging wells on Platform A do not produce enough gas for all the needs of the platform, and that gas was being shipped to the platform to help the platform run. 56 Exc.002. 14 a point of sale as the gas leaves the lease, or property.57 The meter also represents the limit of "production" as the gas joins a transmission line.58 Presumably this is also where Harvest bought the gas, and may have been where it was "sold by a vendor" to adopt the language of the AOGCC in Other Order 150. AOGCC does not explain with any precision at all in Other Order 150 where this point is. Wherever it came from, the gas would have had to travel by a steel transmission line from the lease or property where it was produced to a connection with the steel pipeline that ran out to Platform A.59 Before it got all the way to Platform A, however, much of the gas leaked to the atmosphere. case. With this much factual background, we can now approach the laws that apply to this C. The Plain Language of AOGCC's Jurisdictional Statutes Give the Agency Statewide Powers. "The jurisdiction of the agency depends ... upon the administrative authority conferred upon it by the relevant statutes."60 There are two statutes that define the jurisdiction of the AOGCC. The first is AS 31.05.027: The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States. The other is AS 31.05.030(a): 57 Havard Devold, Oil and Gas Production Handbook, an Introduction to Oil and Gas Production, 53 (ISBN 978-82-997886-1-8). 58 See Hyne, supra, at 543, defining `upstream' as petroleum exploration, drilling and production, and `downstream' as pertaining to transportation, refining and marketing. 59 NaturalGas.org., The Transportation of Natural Gas, naturalgas.org/ naturalgas/transport, last accessed October 20, 2020. 60 Jefferies v. Glacier State Telephone Co., 604 P.2d 4, 8 fn. 9 (Alaska 1979). 15 The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter. The first grants the commission the power to exercise its authority on "all land in the state lawfully subject to its police powers." There is no definition of "land" in Title 31, though it is defined expansively elsewhere in state law.61 The police power of a state has, since the early days of our nation, represented "nothing more or less than the powers of government inherent in any sovereignty to the extent of its dominions."62 Thus the police power represents the extent of a state's sovereignty.63 Indeed, a "State's power to legislate for the protection of its natural resources ... is essentially based upon its police power."" Thus, according to the plain language of AS 31.05.027, the AOGCC may apply its authority anywhere the state police may apply theirs. For all practical purposes, this represents the length and breadth of the entire state. There does not appear to be any substantive difference between the "authority" referred to in the first statute, AS 31.05.027, and the "jurisdiction and authority" referred to in the second, AS 31.05.030(a). The Legislature also used the terms interchangeably in 61 "The general definition section of the Alaska Land Act provides the following definition of `lands': Sec. 38.05.365. Definitions.... (16) `state lands' or `lands' means all lands, including shore, tide and submerged lands, or resources belonging to or acquired by the state." Moore v. State, 553 P.2d 8, 25 (Alaska 1976)(emphasis in citation). 62 License Cases, 46 U.S. (5 How.) 504, 583 (1847), and see Exc. 013-024. 63 See Bernard Schwartz, A History of the Supreme Court, 78-81 (1993). 64 Leslie Moses, The Constitutional, Legislative and Judicial Growth of Oil and Gas Conservation Statutes, 13 Miss. L.J. 353, 363 (1941). 16 the statute conferring jurisdiction on the Alaska Public Utilities Commission.65 The two terms may have first been associated with one another in the case of Pennoyer v. Neff." One scholar suggests the terms are exactly equivalent: "we should say that jurisdiction equals authority."67 Another tells us that "the word `jurisdiction' is basically a legal term for power."68 By the plain language of the two statutes, AOGCC has "authority" that applies to "all land" and it has "jurisdiction and authority" over "all persons and property, public and private." The plain language of the two statutes grant power to the state's petroleum conservation commission to conserve oil and gas on all land, and with respect to all persons, and all property. It is hard to quickly think of an exception to this grant of power. Either statute alone would at least seem to cover the months -long leak of natural gas from a pipeline somewhere in Alaska. 65 "Sec. 42.05.641. Regulations by municipality. The commission's jurisdiction and authority extend to public utilities operating within a city or borough, whether home rule or otherwise." Cited in B-C Cable Co., Inc. v. City and Borough of Juneau, 613 P.2d 616, 618 (Alaska 1980) and Colville Environmental Services, Inc. v. North Slope Borough, 831 P.2d 341, 349 (Alaska 1992). 66 95 U.S. (5 Otto) 714, at 722 (1889): "The other principle of public law referred to follows from the one mentioned; that is, that no State can exercise direct jurisdiction and authority over persons or property without its territory...." Cited in American National Bank and Trust Company v. International Seafoods of Alaska, Inc., 735 P.2d 747, 750 fn. 6 (Alaska 1987). 67 Evan Tsen Lee, The Dubious Concept of Jurisdiction, 54 Hastings L.J. 1613, 1641 (2003). 68 Anthony J. Colangelo, What Is Extraterritorial Jurisdiction, 99 Cornell L. Rev. 1303, 1310 (2014). 17 These two jurisdictional statutes, read together, declare that there is no place in the state of Alaska where the state's petroleum conservation commission may not exercise its authority and jurisdiction if it is working to carry out the purposes and intent of the chapter in which these statutes appear. The mission of AOGCC has been succinctly described by this Court: AOGCC is an `independent quasi-judicial agency of the state' created by the Alaska Oil and Gas Conservation Act. AS 31.05.005(a). AOGCC, which has authority over all land subject to the state's police power, regulates to prevent waste, insure greater recovery, protect correlative rights and underground water, and further public health and safety.69 The Alaska Crude Court appropriately declared that the first duty of the Commission is to "prevent waste." The statutory support for this duty is found at AS 31.05.030(b)70 which commands the agency to investigate whether waste exists and AS 31.05.09571 which tells the agency it can look statewide to find it_ This is all in keeping with basic conservation law. The essence of conservation is to prevent waste, according to a leading treatise on oil and gas law, which states with admirable economy: "The prevention of waste is conservation."72 69 Alaska Crude Corp. v. State, DNR, 261 Pad 412,414 fn. 3 (Alaska 2011)(emphasis supplied). 70 "The commission shall investigate to determine whether or not waste exists or is imminent, or whether or not other facts exist which justify or require action by it." 71 "The waste of oil and gas in the state is prohibited." This statute was passed by the Territorial Legislature in 1955 and was revised only after statehood, to reflect that fact. The original text, which appeared as the first section in the territory's new petroleum conservation statutes, reads: "The waste of oil and gas is prohibited in the Territory of Alaska." Ch. 40, sec. 1, SLA 1955. 72 Martin & Kramer, supra, at 1131. 0 This Court has further defined conservation: "'Conserving' implies controlled utilization of a resource to prevent its exploitation, destruction or neglect."73 This is in keeping with the basic philosophy of resource conservation, which is not a doctrine of non- use, but rather one of wise use. The guidelines for statutory analysis, which are surely familiar to this Court, also contain these rules: The goal of statutory construction is to give effect to the legislature's intent, with due regard for the meaning the statutory language conveys to others. In this respect, we have repeatedly stated that unless words have acquired a peculiar meaning, by virtue of statutory definition or judicial construction, they are to be construed in accordance with their common usage.74 Appellant urges the Court to construe the wording of the two statutes that define the boundaries of the state's petroleum conservation commission's jurisdiction in accordance with their common usage. "The authority of the commission applies to all land in the state lawfully subject to its police powers," says AS 31.05.027 in relevant part. This is not a technical tax statute that uses arcane or specialized terms. This is a broad grant of authority. Couple that expansive grant of authority with this language from AS 31.05.030(a): "The commission has jurisdiction and authority over all persons and property, public and private." Either statute, standing alone, sweeps broadly across the state of Alaska according to the common usage of their terms. Read together, the two statutes leave very 73 Kenai Peninsula Fisherman's Co-op Association v. State, 628 P.2d 897, 903 (Alaska 1981)(citing to Webster's Dictionary). 74 Tesoro, 746 P.2d at 905. 19 little, if any, of Alaska that is not covered by the jurisdiction of the AOGCC if it is working towards one of the purposes and intents of its chapter. It is true that this Court has declined to mechanically apply a "plain meaning" rule of statutory interpretation, instead adopting a sliding scale approach.75 Under the sliding scale, the plainer the meaning of the statute, "the more convincing the evidence of contrary legislative intent must be.i76 D. All Available Evidence Points to a Broad Reading of AOGCC's Juris- dictional Statutes. In settings other than Other Order 150, the commission has asserted that its powers are statewide. AOGCC submitted this testimony to Congress by way of encouraging the federal government to allow states to assume more control over oil and gas development: Alaska statutes give AOGCC responsibility to exertjurisdiction on all lands within the state of Alaska (except Denali National Park) and all state waters."77 75 "In interpreting a statute we `look to the plain meaning of the statute, the legislative purpose, and the intent of the statute.' We have declined to mechanically apply the plain meaning rule when interpreting statutes, adopting instead a sliding scale approach: `The plainer the statutory language is, the more convincing the evidence of contrary legislative purpose or intent must be.' We apply this sliding scale approach even if a statute is facially unambiguous." State, Dept. of Commerce, 262 P.3d at 596. 76 Id. 77 Written testimony of Cathy Foerster to the House Committee on Natural Resources: Subcommittee on Energy and Mineral Resources, October 13, 2017. www.congress.- gov/115.crec/2017/10/13/CREC-2017-10-13.pdf. Appellant and Foerster were both commissioners in October 2017. 20 The testimony of this AOGCC commissioner was presumably based upon a plain reading of the two jurisdictional statutes" Yet this testimony conflicts with, and cannot be harmonized with Other Order 150's rulings on jurisdiction. In testifying to Congress, the agency promised to "exert jurisdiction on all lands within the state of Alaska... and all state waters." In Other Order 150, the agency stated that do so would be unparalleled in history.79 If the Court had to decide this case based only on the language of the jurisdictional statutes, and the testimony submitted to Congress by the agency in 2017, and the agency's Other Order 150, it would have to conclude that Other Order 150 was the odd man out. 2. The regulated community interprets the statutes broadly. Attorneys for BP Exploration have argued in state court that AOGCC's powers with respect to a suspected case of waste of metered oil were primary to those of the state's Department of Law.80 Their argument would apply equally to metered gas. Likewise, lawyers for CINGSA have acknowledged AOGCC's jurisdiction over their well and reservior, whose purpose is to store for future use natural gas produced in other reservoirs 78 With the notable exception of Denali National Park. Appellant is unaware of any statute that excludes Denali National Park from the jurisdiction of the AOGCC. Note that AS 31.05.027 specifically includes "land of the United States and land subject to the jurisdiction of the United States." This discrepancy does not need to be resolved, given that the gas leak in question occurred in the upper Cook Inlet, a part of the state specifically identified as "subject to Alaska's sovereignty" in United States v. Alaska, 422 U.S. 184, 185 (1975). 79 "Neither AOGCC nor any of its counterparts in other states has ever attempted to extend its jurisdiction over waste to gas which has been sold to a vendor." Exc. 002. 80 State of Alaska v. BP Exploration, Alaska, Trial Motion, 2009 WL 7274134 at 9. 21 and transported to the CINGSA injection site.B1 Neither company's view is dispositive of the issue in this case, nevertheless, it is worth noting that their view of the agency's jurisdiction comports with the position advanced herein. 3. The public policy which animates petroleum conservation law points to a broad reading of AOGCC's jurisdictional reach. The International Oil and Gas Compact Commission, founded in 1935 by an act of Congress, is an organization that "helped create a framework to promote the conservation of oil resources through stricter regulation.s82 In a 1964 study, the IOGCC wrote that The importance, indeed the necessity, of petroleum to modern society, especially in the United States, is self-evident. National security and also normal civilian life and activities depend so much on a reliable and adequate supply of petroleum that the lack of such supply for more than a short time would be disastrous.... It necessarily follows that the prevention of reasonably avoidable waste or loss of petroleum, a non-renewable resource so vital to our lives, is essential. The public interest is self-evident.83 The IOGCC's statement of purpose further reads: "The purpose of this compact is to conserve oil and gas by the prevention of physical waste thereof from any cause."84 Alaska is a member state.85 There is an economic basis to petroleum conservation laws: 81 Kenai Landing, Inc. v. CINGSA, Brief of Appellee CINGSA, 2018 WL 2971925 at 6-7. 82 K.K. DuVivier, Sins of the Father, 1 Tex, A&M J. Prop. L. 391, 404 (2014). 83 IOGCC, A Study of Conservation of Oil and Gas in the United States, 1964, 10-11. 84 Id. at 5 (emphasis supplied). 85 IOGCC, Member States, iogcc.publishpath.com/Default.aspx?shortcut=member- states&OriginalDomain=iogcc.ok.gov, last accessed October 20, 2020. 22 To the economist ... conservation was something that served the public rather than the private interest and which only the government, as the agency representing the public interest, could accomplish. Even as conservative an economist as John Bates Clark had this to say: `In many instances the individual wins a profit by what inflicts upon the public a melancholy waste. Exploitation usually makes the individual richer and the people poorer, and it nearly always gives the individual far less than it takes from the public."' One easy way of thinking about conservation and waste is to see them as opposite sides of the same coin. Conservation is simply the prevention of waste. It is hard to overstate just how central the idea of preventing waste is to petroleum conservation law. Consider this from the petroleum state of Texas, written in 1947: The term waste has an ordinary and generally accepted meaning. Whatever the dictates of reason, fairness and good judgment under all the facts would lead one to conclude is a wasteful practice in the production, storage, or transportation of oil and gas, must be held to have been denounced by the legislature as unlawful. The Constitution had vested in the lawmaking body the duty of preventing waste, not of part but of all the natural resources of this State, and it must not be considered that the legislature meant by its enactments to discharge less than the full duty which was thus entrusted to it.87 And lastly, this analysis of Texas oil and gas law vis a'vis Alaska helps put our state laws in a historical context. Alaska, on the other hand, has enjoyed the luxury of more hindsight in its regulation of the oil and gas industry, benefiting not only from Texas's mistakes but also from technological advances in drilling and recovery methods over the last fifty years.... Accordingly, the Alaska legislature has given its regulatory agency in charge of oil 86 Zimmerman, Conservation in the Production of Petroleum, Petroleum Monograph Series Volume 2, 28 (1957)(emphasis supplied); and see Gordon S. Wood, The Creation of the American Republic 1776-87, 546 (1969): "Since the people obviously could not `exercise the powers of government personally,' they must `trust to agents."' 87 Railroad Commission v. Shell Oil Co., 206 S.W.2d 235, 239 (Texas 1947). 23 conservation- ...the AOGCC far greater authority to regulate waste and correlative rights than Texas bestowed upon its agency, the Texas Railroad Commission (RRC).S8 With all this in mind, we can now turn to Alaska. Our foundational law of petroleum conservation is found at AS 31.05.095: "The waste of oil and gas in the state is prohibited." The statute is a model of clarity. Read it again. This law would appear (from just a couple of quick readings) to apply statewide, and when you add to that reading some knowledge of the history and development of petroleum conservation law, and the policy which animates it, one can begin to appreciate the errors of Other Order 150. Good public policy runs contrary to the agency's cramped view of its own authority. 4. A comparison of Alaska's petroleum conservation laws with those of other states leads to the conclusion that Alaska's laws are to be broadly construed. The Alaska Territorial Legislature passed Alaska's petroleum conservation laws in 1955.s9 This was late compared to other states.90 As in other areas of the law, Alaskan lawmakers took wise advantage by adopting the best practices of the moment. AOGCC's jurisdictional statutes are broadly written. Whereas some states restrict the authority of their conservation agency to production, which is generally considered to 88 Evan D. Johnson, Anchorage, We Have A Problem: The Cold, Harsh Truth About The Alaska Oil And Gas Conservation Commission's Ability To Regulate Gas -Cap Production (A Texas Perspective), 44 Houston Law Review 1455, 1457 (2007)(footnotes omitted)(emphasis supplied). 89 Chapter 40 SLA 1955. 91) Blakely M. Murphy, ed., Conservation of Oil & Gas, a Legal History 1948, Section of Mineral Law, American Bar Association. Pal be the meter,91 Alaska's laws do not contain such a restriction. AS 31.05.027 applies to "all land in the state" and AS 31.05.030(a) applies to "all persons and property, public and private." Compare that with state law in Oklahoma, for example, where the US Supreme Court found in 1933 that "the waste -prevention statutes are limited to production, and do not relate to the sale or transportation of the oil or gas.s92 This ruling would have been available for Alaska lawmakers to read in 1955. (The limitation is still in place today in Oklahoma.93) Kansas, like Oklahoma, also limited its petroleum conservation laws to production.94 Since AOGCC's jurisdictional statutes do not contain any restriction of their reach to "production" it is reasonable to infer that Alaska lawmakers did not intend for the power granted in AS. 31.05.027 and AS 31.05.030(a) to stop at the limit of production. The power would continue to extend downstream, to transmission. The police power cuts across oil field leases and lease lines. It was recognized to do so in 1939, sixteen years before Alaska wrote its petroleum conservation law. "The police 91 See Hyne, supra, at 105. 92 Champlin Refining Company v. Corporation Commission, 286 U.S. 210 (1933). 93 52 Olka. Stat. §236: "Waste prohibited. The production of natural gas in the State of Oklahoma, in such manner, and under such conditions as to constitute waste, shall be unlawful." 94 State ex. rel. v. Sinclair Pipe Line Company, 180 Kan. 425, 304 P.2d 930 (1956). And see K.S.A. 55-701: "The production of natural gas in the state of Kansas in such manner ... as to constitute waste is hereby prohibited." Q power, of course, cuts across any lease obligations, express or implied.i95 If the police power cuts across a lease, it can cut across a meter located on the lease. Turning now to Alaska's definition of waste,96 it is also, if not the most broadly written, among the broadest of all the states. In states that wrote their petroleum conservation laws before Alaska, the definition of waste sometimes contains a limitation: that the concept of waste be understood, "as that term is understood in the oil and gas industry."97 Alaska law contains no such limitation. Not adopting a common limitation to the legal concept of waste is evidence that Alaska lawmakers intended a broad application of its definition of waste. 95 Ralph Horween, What Are the Essentials of Sound Oil Conservation Legislation for Illinois? 5 J. Marshall L.Q. 223, 233 (1939). 96 AS 31.05.170(15) reads: "waste" means, in addition to its ordinary meaning, "physical waste" and includes (A) the inefficient, excessive, or improper use of, or unnecessary dissipation of, reservoir energy; and the locating, spacing, drilling, equipping, operating or producing of any oil or gas well in a manner which results or tends to result in reducing the quantity of oil or gas to be recovered from a pool in this state under operations conducted in accordance with good oil field engineering practices; (B) the inefficient above -ground storage of oil; and the locating, spacing, drilling, equipping, operating or producing of an oil or gas well in a manner causing, or tending to cause, unnecessary or excessive surface loss or destruction of oil or gas; (C) producing oil or gas in a manner causing unnecessary water channeling or coning; (D) the operation of an oil well with an inefficient gas -oil ratio; (E) the drowning with water of a pool or part of a pool capable of producing oil or gas, except insofar as and to the extent authorized by the commission; (F) underground waste; (G) the creation of unnecessary fire hazards; (H) the release, burning, or escape into the open air of gas, from a well producing oil or gas, except to the extent authorized by the commission; 97 Arkansas: A.C.A. § 15-72-102 (15) "Waste", in addition to its ordinary meaning, means "physical waste" as that term is generally understood in the oil and gas industry. Louisiana: LSA-R.S. 30:3. Definitions (16) "Waste", in addition to its ordinary meaning, means "physical waste" as that term is generally understood in the oil and gas industry. North Dakota: NDCC § 38-08-02. Definitions. 19. "Waste" means and includes: a. Physical waste, as that term is generally understood in the oil and gas industry. 26 Finally, the first order ever issued by the agency, titled Order No. 1 and passed August 7, 1958, was to adopt rules and regulations "of a general nature and Territory -wide applicability."98 From the outset, the agency had to know that it was small, and trying to cover a big, big place. Alaska is twice as big as Texas, after all. E. AOGCC'S Rationales For Lacking Jurisdiction are Contrary to Law and Good Public Policy. Other Order 150 disclaims the jurisdiction of AOGCC in three different sentences, listed as follows in the order in which they appear in Other Order 150. 1. "Neither AOGCC nor any of its counterparts in other states has ever attempted to extend its jurisdiction over waste to gas which has been sold by a vendor." 2. "Once oil or gas is metered and severed from the property, AOGCC's authority to make a waste determination is at an end." 3. "AOGCC does not have waste jurisdiction over gas Hilcorp purchased from Harvest." None of these explanations withstand much scrutiny. 1. Buying or selling gas does not remove it from the jurisdiction of AOGCC. The operative verbs in the first and third explanations above are "sold" and "purchased." The idea common to both sentences is that transferring the ownership of the gas places it beyond the power of AOGCC. Such a position is contrary to the plain language of AS 31.05.027 and AS 31.05.030(a). Transferring the ownership of natural gas 98 AOGCC, AOGCC, 50 Years of Service to Alaska, inside cover (rev. 10/10/10), available at 333 W. 7' Ave. Anchorage, AK (emphasis supplied). 27 does nothing to impede the jurisdiction of AOGCC as it is defined in either AS 31.05.027 or AS 31.05.030(a). Appellant would assert the agency has jurisdiction over the gas by its presence in the state. That is the jurisdiction of AS 31.05.027: "[t]he authority of the commission applies to all land in the state lawfully subject to its police power." The other approach is to think of gas as a property, which it is. AS 31.05.030(a): "The commission has jurisdiction and authority over all ... property, public and private." Natural gas can be a public property, where the gas belongs to the state, as is the case in reservoirs before the rights to develop them are leased, or when the state takes a royalty - in -kind share of gas. Gas can also be privately owned, and the ways in which its ownership can be divided and transferred are limited only by the imagination of the commercial entities involved. A leading treatise informs us that a contract for the purchase and sale of oil is normally less complex than is a contract for the purchase and sale of gas or casinghead gas. 99 Take, for example, just one section of the Prudhoe Bay Operating Agreement that deals with Separator Off-Gas.1 ' Given the intricacies of ownership alluded to in Part 99 Martin & Kramer, supra, at 625-26. 100 Part 40.101: "During the Interim Period, allocation of Separator Off -Gas shall be made in the manner described in Part 27.200 or Part 27.300, as appropriate, except that in said Parts all procedures required at Major Gas Sale shall be required at Interim Gas Sale, and Working Interest Owners shall not be required to take gas in kind during the Interim Period. Each Working Interest Owner who takes or disposes of Separator Off -Gas Production during any month shall, for purposes of calculating such Working Interest Owner's Gas Reserve Debt under Section 27.901, be deemed to have taken or disposed of Oil Rim Off -Gas and Gas Cap Off -Gas in such volumes that the same ratio which exists 0 40.101, it may not be possible with any high degree of certainty to determine the ownership of any individual molecule of gas, or even a TCF of it, found within reach of the area covered by the agreement, that being Prudhoe Bay, the state's largest oil field. No matter. The gas at Prudhoe Bay hasn't left the state, and it is either public property or private. Either way, if it is in Alaska, it falls under the jurisdiction of the AOGCC. Other Order 150's two declarations that the private sale of gas defeats the agency's jurisdiction conflict with the plain language of the jurisdictional statutes, and they conflict with legal precedent. Over a century ago the US Supreme Court ruled that contract rights must bow before the state's police power. In Union Dry Goods v. Georgia Public Service Corp."' the Court declared that One whose rights, such as they are, are subject to state restriction, cannot remove them from the power of the State by making a contract around them. The contract will carry the infirmity of the subject matter.102 AOGCC never identifies how it claims to know that the gas that leaked in this case had been purchased by Hilcorp from Harvest. If it reviewed a contract between the two entities, it did not submit any evidence of having done so. No matter. Whether that contract is scrawled on the back of a napkin, or runs to several volumes, like the Prudhoe Bay between that Working Interest Owner's allocation of Oil Rim Off -Gas for the month and its allocation of Gas Cap Off -Gas for the month is maintained between its Oil Rim Gas Debits for the month and its Gas Cap Gas Reserve Debits for the month." Prudhoe Bay Unit Operating Agreement, available at Department of Natural Resources, 550 W. 7' Avenue, Suite 1360, Anchorage, AK. 101 248 U.S. 372 (1919). 102 Id. at 375. at Operating Agreement, the contract cannot remove the natural gas from state supervision. One cannot contract around the power of AOGCC's jurisdictional statutes. 2. Neither metering nor severing defeat the jurisdiction of AOGCC. Other Order 150 takes the position that "[o]nce oil or gas is metered and severed from the property, AOGCC's authority to make a waste determination regarding use of the oil or gas is at an end.s103 The analysis here begins by noticing that the agency cites no statute to support its position. There is none. Lacking a legal basis for its position, AOGCC should have at least supplied a rationale for the order. Other Order 150 does not attempt to supply a rationale, either. Neither "metered" nor "severed" is defined in Alaska law. Gas metering generally refers to measurement.104 Severance, as noted earlier, can be defined as "separation of a mineral or royalty interest from other interests in the land by grant or reservation."105 As noted above, this idea means that the surface owner of land may not own the mineral rights underneath. Severed also can mean "the point at which natural resources are severed from the surface of the earth."106 This would generally happen at the wellhead.117 103 Exc.002.. 104 "Gas volume is measured by a gas meter on the flowline. An orifice gas meter is commonly used. It measures the difference in gas pressures on gas flowing through an orifice (a round hole in a plate) on both sides of the orifice. The higher the flow rate, the greater the pressure drop across the orifice.... [The gas meter] is used to determine gas payments to the operator." Hyne, supra., 373-74 (emphasis in the original). 105 Martin & Kramer, supra, at 625-26. 106 Bel Oil Corp. v. Roland, 137 So.2d 308, 310 (Louisiana 1962). 107 "The wellhead sits on top of the actual oil or gas well heading down to the reservoir." Devold, supra, at 13 30 AOGCC erroneously puts a bright -line jurisdictional boundary for itself at the point where oil and gas is metered and severed from the property. This would generally be at the point of "fiscal metering," where relative shares between governments and financial partners are assessed.108 Appellant asked for judicial review of this jurisdictional ruling, but that review did not happen on appeal. The superior court was not free to skip over this crucial determination. AOGCC does not explain in Other Order 150 what happened when the gas was metered and severed such that the jurisdiction of the AOGCC was totally defeated. It also does not tell us where exactly this happened. There may be as many as seventeen metering sheds where the metering could have taken place at the exits from the seventeen gas fields on the Kenai Peninsula that could have supplied the gas that leaked.109 Or the gas may have come in part from CINGSA, as the leak began in winter, when CINGSA is generally exporting gas. The agency's investigation did not answer this question. From French's perspective, and for the legal purposes of this case, however, the exact piping details are irrelevant. Unless the gas was metered immediately prior to its export from the state (which does not happen anywhere in Alaska, unfortunately) the gas 108 "Partners, authorities, and customers all calculate invoices, taxes and payments based on the actual product shipped out. Often custody transfer takes place at this point, which means transfer of responsibility or title from the producer to a customer...or pipeline operator." Devold, supra, at 53. 109 CIRCAC, supra, at n.54; See also Cook Inlet Basin Map, Appendix C, AOGCC, AOGCC: 50 Years of Service to Alaska, 87 (rev 10/10/10). 31 was crossing Alaskan soil when it entered the meter, and was still crossing Alaskan soil when it exited the meter, and was headed for somewhere in Alaska. It was subject to the police power of the state at all moments. And if it is on land that is subject to the state's police power, it is subject to the jurisdiction of the AOGCC. 3. Alaska and other states have exercised jurisdiction over downstream gas. a. Other States. Indiana passed some of the earliest oil and gas laws. An 1894 statute "prohibited the wasteful burning of natural gas by the owner."' 'I This was not a statute directed at the location of the well, but at the end -user located in towns where "flambeau lights" were used for illumination. The law was upheld."' An 1891 Indiana statute prohibiting gas pipelines from operating at a pressure greater than 300 pounds was attacked on the grounds that the enforcement of the law by the state impaired interstate conmlerce.112 The case was analyzed by the US Supreme Court in the seminal case of Ohio Oil Company v. Indiana (No.1),111 wherein the Court noted that the pipeline statute at issue in Jamieson was upheld on the ground that the dangerous nature of the product, its susceptibility to explosion and the consequent hazard to life and property which might arise from movement through pipes, made the act of transmitting it a fit subject for police regulation.14 110 Noel Sargent, Conservation and the Police Power, 12 Ill. L.R. 162, 169 (1917- 1918). ill Id 112 Jamieson v. Indiana Natural Gas & Oil Company, 128 Indiana 555 (Indiana 1891). 113 177 U.S. 190 (1900). 114 Id. at 206. 32 In short, the police power of Indiana covered gas in transmission lines. The relevance of these cases to the Cook Inlet leak is that flambeau lights and gas transmission lines are `downstream.' � 15 Gas carried in transmission lines has been metered and severed from the lease. Gas in flambeau lights has been bought from a vendor. Thus, the AOGCC's claim in Other Order 150 that "[n]either AOGCC nor any of its counterparts in other states has ever attempted to extend its jurisdiction over waste to gas which has been sold by a vendor" simply is false. Texas is another state that has extended its jurisdiction downstream of the meter.16 California is another. Their statute for waste explicitly makes gas escaping into air "prima facie evidence of unreasonable waste.""" There is no express limitation of the California law to upstream gas. Appellant readily concedes that the ultimate relevance of other state's conservation laws to a question of Alaska conservation law is limited. b. Alaska petroleum conservation laws extend downstream, to transmission. i. Carbon black. 115 See Hyne, supra at 543, defining "`upstream' as petroleum exploration, drilling and production, and `downstream' as pertaining to transportation, refining and marketing." 116 See Lone Star Gas Company, Inc. v. The Railroad Commission of Texas, 798 S.W. 2d 888, 893 (Tex. Ct. App. Austin 1990)(commission has statutory rulemaking authority over gas moving in intrastate pipelines)(overruled on other grounds). "' Cal.Pub.Res.Code § 3300: "The unreasonable waste of natural gas by the act, omission, sufferance, or insistence of the lessor, lessee or operator of any land containing oil or gas, or both, whether before or after the removal of gasoline from the gas, is opposed to the public interest and is unlawful. The blowing, release, or escape of gas into the air shall be prima facie evidence of unreasonable waste." 33 Carbon black is a petroleum product that was at one time crucial to the manufacture of tires. When carbon black is made, there is incomplete combustion of the natural gas used to make it. Making carbon black is a wasteful thing to do. History written in 1954 about the Panhandle gas field in Texas allows us to approach the subject of carbon black as it was understood in that era in the United States. The field had fifty-five gasoline plants and twenty-five carbon black plants. These plants were popping more than 500 million cubic feet of residue gas into the air every day. That was a half -a -billion cubic feet of rank waste of residue gas, a valuable product from nature's storehouse that could never be replaced."' The wastefulness of carbon black was well -established in the 1950's. Conservation reformers took notice. New laws were needed. An entirely different type of conservation measure is the prohibition or regulation of the use of natural gas for the manufacture of carbon black. `End -use' controls of this type are designed, not to maximize recovery, but to stretch the available supply of gas over a longer period of time by prohibition of the use of gas for relatively less beneficial or important uses.' 1 9 It is possible that the 1955 Alaska Territorial legislators were good readers, and that one or more of them were aware that Random House had recently published a biography of the man credited with being the father of petroleum conservation, or that a Harvard Law Review article from 1952 contained some pertinent legal analysis that might be of help to the territory as it began to write laws about oil and gas. But even if no one in Alaska was 118 James A. Clark, Three Stars for the Colonel, the Biography of Ernest O. Thompson, 194, Random House (1954)(emphasis supplied). 119 Howard R. Williams, Conservation of Oil and Gas, 65 Harv. L. Rev. 1155, 1179 (1952). 34 aware of these passages, we can still glean an insight into the intention of the Alaska Territorial legislators. The presence of a statute regulating carbon black indicates a concern about wasteful uses of precious natural resources. And so, in 1955, the Territorial Legislature passed A.S. 31.05.12012' and made it unlawful to manufacture carbon black without a permit from the AOGCC. It only seems logical that if AOGCC can prevent a wasteful use of gas anywhere in the state, then it should be able to hold a hearing regarding what certainly would appear to be the pure waste of natural gas, like here, where it was shooting straight into the waters of upper Cook Inlet and, after bubbling to the surface, into the atmosphere, all for a period of several months. ii. CINGSA. As noted earlier, CINGSA is a gas storage reservoir located on the Kenai Peninsula. "In natural gas storage facilities, customers pay to inject gas purchased elsewhere into the storage reservoir, store the gas, and later withdraw it when needed.""' "AOGCC approved 120 The statute reads: "The use of gas from a well producing gas only, or from a well which is primarily a gas well for the manufacture of carbon black or similar products predominantly carbon is declared to constitute waste prima facie, and the gas well may not be used for this purpose unless it is clearly shown at a public hearing held by the commission, on application of the person desiring to use the gas, that waste would not take place by the use of the gas for the purpose applied for, and that gas which would otherwise be lost is now available for such purpose, and that the gas to be used cannot be used for a more beneficial purpose, such as for light or fuel purposes, except at prohibitive cost, and that it would be in the public interest to grant the permit. If the commission finds that the applicant has clearly shown a right to use the gas for the purpose applied for, it shall issue a permit upon terms and conditions it finds necessary in order to permit the use of the gas and at the same time require compliance with the intent of this section." 121 Kenai Landing, supra at 6-7. 35 the CINGSA injection order and regulates CINGSA safety, pressure limits, and other operational matters."122 AOGCC has jurisdiction over CINGSA by virtue of the statutes cited in in. 122. Injection wells were added to the agency's portfolio of responsibilities in 2007.121 From the agency's perspective, this was not an extension of its jurisdiction to a new area. The agency wrote that the changes in the law were merely a clarification of its powers.124 In Other Order 150, AOGCC did not discuss the possibility that some of the gas that leaked had come from CINGSA, where it has jurisdiction. F. The Rule Advanced by AOGCC Leads to Absurd Results. Hydrocarbons are extremely dangerous. The following discussion will raise the possibility of oil spills and gas releases, of fires and explosions, and loss of human life. None are rare in the oil and gas industry. For specific examples, consider the Exxon Valdez oil spill, the Deepwater Horizon disaster, and the explosion and fire at BP's Texas City refinery on March 23, 2005.12s With these in mind, consider three hypotheticals. 122 Id. (citing AS.31.05.030(d) and (e)(1)(G); and AS 31.05.090(1)(3)). 123 Ch 54 SLA 2007. 124 "Other changes clarified the Commission's authority to regulate underground storage of natural gas." AOGCC, supra, at 68. 125 The Exxon Valdez spilled 10 million gallons of crude oil (Wikipedia, The Exxon Valdez Oil Spill (last accessed Sept. 27, 2020). The Deepwater Horizon explosion in the Gulf of Mexico cost the lives of eleven, and led to what is considered to be the largest marine hydrocarbon spill in history (Wikipedia, Deepwater Horizon Oil Spill (last accessed Sept. 27, 2020) and Earl Boebert and James M. Blossom, Deepwater Horizon, A Systems Analysis of the Macondo Disaster (2016). The fire and explosion at BP's Houston refinery killed 15 and injured 180 others (Wikipedia, Texas City Refinery Explosion, last accessed Sept. 27, 2020). 36 1. A leak just past the meter. Or farther. The physical place where oil and gas are metered and severed from the lease, and where the ownership of the hydrocarbon is likely to have changed hands,12' can be located. A person standing at that metering location onshore on the Kenai Peninsula could point to the transmission lines carrying the two separate hydrocarbon streams — crude oil in one, and natural gas in the other -- away from the lease. That person could point to a leak from either pipeline that is within sight, just a few feet away, or perhaps a bit farther, where there are rivers and homes and schools. The Alaska Oil and Gas Conservation Commission's jurisdiction is completely off where both those leaks on the Kenai Peninsula are happening, according to Other Order 150.127 Make the leaks as big as your imagination will allow. The amount of gas escaping straight into the atmosphere could make a deafening roar. AOGCC jurisdiction is still off. Set the gas on fire. Still off. The commission's statewide powers would not allow it to even hold a hearing, according to the reasoning of Other Order 150, on a leak fifty feet downstream from a meter, or anywhere farther downstream.128 That is absurd. 126 Devold, supra, at 53. 127 To understand the way jurisdiction turns off the way it goes on, like a light switch, or crossing a bright -line, just think of an imaginary gas pipeline leaving the state overland through Canada. AOGCC's jurisdiction turns off at the border. 128 To the extent the reader is interested in a stopping point for the agency's statewide powers to investigate and hear cases of waste, consider first the boundary of the state, which is currently crossed by crude oil in tankers, but not by any gas. In the state, consider the place crude oil is refined. AOGCC's statutes do not cover gasoline. Somewhere inside a refinery, AOGCC's powers come to an end. For natural gas, consider where gas is separated into its constituent parts, such as propane. A propane tank is filled with gas, but not natural gas as we think of it from the well. For the most nervous among us, yes, by this 37 2. A leak just outside of CINGSA. CINGSA is located in Kenai.12' A visit to their website allows for a bird's eye view of the facility. AOGCC has jurisdiction over CINGSA.130 The agency approved CINGSA's injection order.131 Yet CINGSA is downstream of any meter on any lease besides its own. Thus, the gas arriving at CINGSA is gas over which the agency has disclaimed jurisdiction. It is not clear from Other Order 150's logic where the agency would draw the boundary of its jurisdiction around CINGSA. AOGCC's rule is unworkable for gas going into and out of CINGSA. 3. A leak closer to Platform A. In this example we get the closest to the actual circumstances of this case. Imagine that the leak in this case happened a little further west from where it occurred. Keep moving the leak west until you are getting closer to Platform A. Platform A sits six miles offshore.132 The history of Platform A begins in 1964, when Shell Oil Company set it, the first platform installed in Cook Inlet, in eighty feet of water and on top of the Middle Ground Shoal, a promising geological formation. Shell hit oil. The platform had an expected lifespan of twenty years.133 At its height, the field theory the AOGCC could check the natural gas connections behind your house, if it had a warrant or permission to do so. But that case is not this one. 129 CINGSA, Cook Inlet Natural Gas Storage, Alaska, cingsa.com/about-eingsa (last accessed Sept. 27, 2020). 130 AS.31.05.030(d) and (e)(1)(G). 131 Kenai Landing, supra, 6-7. 132 CIRCAC, Platform Information, Cook Inlet, Alaska, First Edition, 1993 (available at circac.org, last accessed Sept. 27, 2020). 133 Id R produced over 50,000 barrels of oil a day. In 2015, the Middle Ground Shoal was producing about 1750 bbls a day.134 Producing platforms are staffed.1 ' The gas leak in this case was identified by AOGCC and the petition French filed as "fuel gas."136 This suggests the gas was going to be burned on Platform A in an engine powering either a compressor or perhaps a generator. For the hypothetical, it doesn't matter what the company planned to do with it, once the gas got to the platform. Now imagine the leak in this case had happened closer to its targeted end -point, but short of it, maybe by just a few feet, or by a hundred feet. The leak can be small, and relatively harmless. Or the leak could light on fire and burn the platform down to the water, and create an ecological disaster. If the AOGCC has nothing to say about this leak when it is closer to shore, then, when, as we move the leak closer and closer to the platform, does the agency begin to think about reasserting jurisdiction, if at all? A mile away, the agency is powerless to do something about a gas leak from a pipe marked "fuel gas." But move the leak close enough to a platform, and then it can act? How does that work? The agency's rule, strictly applied, 134 Tim Bradner, Hilcorp Acquires Additional Inlet Oil Assets, Alaska Journal of Commerce, 7/7/2015 (available at www.alaskajoumal.com/business-and-finance/2015-07- 07/hilcorp-acquires-additional-inlet-oil-assets, last accessed September 29, 2020). 135 See Zaz Hollander, Small Team Boards Burned Cook Inlet Platform to Begin Damage Assessment, Anchorage Daily News, updated Sept. 28, 2016 (available at w.ww.adn.com/energy/article/hilcorp-hopes-get-investigators-aboard-burned-cook-inlet- platform/2014/10/03, last accessed September 29, 2020)(noting that the fire began in the crew's quarters). 136 Exc. 001, Exc. 002. 39 could leave itself powerless to even hear a case in which metered gas is threatening to or has caused a fire and explosion that destroyed an oil platform in Cook Inlet. This is absurd and unworkable. The final point here is that, believe it or not, from time to time even conservation authorities misjudge the extent of their own power. "In some instances we find a commission asserting that it lacks certain authority, but a court concluding otherwise.i137 AOGCC has asserted it lacks a certain authority to hear French's petition on the gas leak in Cook Inlet. This Court should conclude otherwise. To sum up: the plain meaning of AS. 31.05.027 and AS 31.05.030(a) give the agency statewide powers to investigate waste. Agency testimony to Congress is consistent with the statutes' plain meaning, and so is the interpretation given the statutes by the regulated community. The rule proposed by the agency in Other Order 150 is unworkable. Together, this leaves little doubt that AOGCC has jurisdiction to hear cases of suspected petroleum waste that occur anywhere in the state. II. THE SUPERIOR COURT ERRED IN AFFIRMING OTHER ORDER 150'S DENIAL OF A HEARING TO APPELLANT. Appellant's petition filed with AOGCC requested a hearing. Other Order 150 denied Appellant's request, citing a lack of jurisdiction. As Appellant demonstrated in 137 Patrick H. Martin, The Jurisdiction of State Oil and Gas Commission, 18A RMMLF-INST 3 at 7(citing Mobil Oil Corp. v. State Corporation Commission, 608 P.2d 1325 (Kan. 1980) and Osborn v. Texas Oil & Gas Corp., 661 P.2d 71, 76 O. & G.R. 101 (Ok. Ct. App. 1983)). m Section I above, the agency was mistaken. In affirming Other Order 150, Order Re: upheld the denial of a hearing to Appellant. This is error. The statute cited in Appellant's petition to AOGCC, AS 31.05.060(a), reads as follows: The commission may act upon its own motion or upon the petition of an interested person. On the filing of a petition concerning a matter within the jurisdiction of the commission under this chapter, the commission shall promptly fix a date for the hearing, and shall cause notice of the hearing to be given. The hearing shall be held without undue delay after the filing of the petition. The commission shall enter its order within 30 days after the hearing. The law grants a statutory right to a hearing if two preconditions are met: 1. an interested person must file 2. a petition concerning a matter within the jurisdiction of the commission. Assuming these two preconditions are met, the statute tells the commission that it "shall" promptly fix a date for the hearing etc. The statute is similar to the statute analyzed in Forquer v. State, Commercial Fisheries Entry Commission.138 In that case, the fishermen plaintiffs were denied a hearing before the commission in spite of a statute promising otherwise.13' The error resulted in remand. "' 138 677 P. 2d 1236 (Alaska 1984). 139 Id. at 1241-42. 140 Id. at 1243. 41 A case141 recently litigated in Anchorage Superior Court also involved the failure of AOGCC to honor the promises of AS 31.05.060(a).14I The case resulted in a finding that the agency was wrong to do so. "Upon finding the Commission erred, this Court remands the issue back to the Commission so it may fix a date for a hearing on [Appellant's] petition of waste."143 The court's ruling focused on the meaning to be given to the four instances of "shall" in AS. 31.05.060(a). AOGCC argued in Superior Court that it had the discretion to not comply with the statute. The judge disagreed: The Commission's argument is also troubling because it is entirely inconsistent with the Court's interpretation of the mandatory provisions of AS 31.05.060(a), which the Court found are intended to afford an interested person notice of an issue and an opportunity for expression of opinion. The Court found fixing a date for a hearing, causing notice of the hearing to be given, holding a hearing, and entering an order mandatory under AS 31.05.060(a). The Commission erred because it did not comply with these mandates.'" This superior court order does not control the outcome of this case, it is true. Appellant would assert that the Forquer case does. In any event, this Court could reasonably conclude that, under the circumstances of this case, the promises made in AS 31.05.060(a) should be kept by remanding this case with instructions for AOGCC to hold a hearing. 141 3AN-19-06531 CI. 142 Order Remanding Other Order 151 to The Alaska Oil and Gas Conservation Commission, Superior Court Judge Herman Walker, April 7, 2020. 143 Id. 144 Id. at 26 (footnotes omitted). 42 HI. THE SUPERIOR COURT ERRED IN AWARDING ATTORNEY'S FEES IN THE AMOUNT OF $6270. The award of $6270 in attorney's fees was an abuse of discretion. AOGCC's demand for attorney's fees should have been reduced or eliminated by the superior court under Alaska Rule of Appellate Procedure 508(e)(4)(B). Rule 508 was amended by SCO 1843, effective April 15, 2015. The amendment gives the court discretion to modify an award where "the court determines that an award of fees would be so onerous to the non - prevailing party that it would deter similarly situated litigants from the voluntary use of the courts if not reduced."146 This language parallels the wording of Civil Rule 82(b)(3)(I), which allows an adjustment in attorney's fees awards if a court determines that a variation is warranted, taking into consideration "the extent to which a given fee award may be so onerous to the non -prevailing party that it would deter similarly situated litigants from the voluntary use of the courts."146 In Gold Country v. Fairbanks North Star Borough.47 this Court upheld a trial court's denial of an award of attorney's fees, citing the public policy implications behind the rule: This rule provision embodies the concern expressed by Justice Matthews in his dissenting opinion in Bozarth v. Atlantic Richfield Oil Co., where he cautioned: `If the superior court is to serve its constitutional purpose as a forum available to all the people, superior court judges must consider whether an award of attorney's fees will impair the constitutional right of access to the courts.' In State v. Native Village of Nunapitchuk, we expressly stated that Rule 82(b)(3)(I) `continues to apply to all cases,' including "those 145 Ak.R.App.Proc.508(e)(4)(B). 146 Ak.R.Civ.Proc.82(b)(3)(I). 147 270 P.3d 787 (Alaska 2012). 43 intended to effectuate public policies." We further observed that `[t]rial courts remain free to reduce awards that would otherwise be so onerous to the losing party as to deter similarly situated litigants — including litigants that would have previously been identified as public interest litigants — from accessing the courts.' .... Here, the superior court determined that an award of fees against Gold Country would chill further suits seeking review of the government's actions under its own processes. 148 The underlying claims in Gold Country were alleged violations of the Open Meetings Act.149 There was no money judgment sought in the case.15' While unsuccessful on the merits, the superior court found no bad faith on the part of the litigants.151 This Court should look to the same factors herein. Appellant sought no money damages in this case. Appellant had no economic incentive to file the complaint. Appellant did not litigate in bad faith. Appellant sought a hearing on a claim of waste of the state's natural resources. To award attorney's fees against Appellant would work to dissuade similarly situated litigants from seeking voluntary use of the courts. The award of attorney's fees15. in this case was an abuse of discretion. Additionally, Appellant will point out that Appellee filed an eleven -page brief in the superior court case. Appellee's claimed attorney's fees thus amount to nearly $3000 per double-spaced page of legal writing.153 This Court should find that Appellee's fees are 148 Id. at 800 (internal citations and footnotes omitted). 149 Id. at 790. ISO Id. at 799. 151 Id 152 Exc.043-046. 153 The total amount of fees claimed by counsel for AOGCC was $31,350. Exc. 042. CV unreasonable, and thus not "necessarily incurred" as required by Rule 508(e)(4). For the foregoing reasons, this Court should find the award of attorney's fees was an abuse of discretion, and remand accordingly. CONCLUSION There is a public interest in the conservation of natural resources,15' which are of prime importance to the public."' The natural resources of Alaska belong to the state, which controls them as trustee for the people of the state.l "6 The promise is explicit in the Alaska Constitution."' The maximum benefit of the state's natural gas resources is not attained when gas is released directly to the atmosphere. The state statutes defining the jurisdiction and authority of the Alaska Oil and Gas Conservation Commission are broad enough to encompass the months' long release of natural gas to the atmosphere in upper Cook Inlet. The breadth of the jurisdictional statutes is consistent with the agency's promise to Congress to "exert jurisdiction on all lands within the state of Alaska... and all state waters"158 and consistent with the interpretation given those statutes by the regulated community.15' The petition Appellant filed with the AOGCC was sufficient to trigger the 154 Exxon Corp. v. State, 40 P.3d 786, 791 (Alaska 2001); and Cabana v. Kenai Peninsula Borough, 21 P.3d 833, n.16 (2001): "[T]he protection of state natural resources vindicates an important public interest." 155 State, DNR. V. Greenpeace, 96 P.2d 1056, 1060 (Alaska 2004). 156 Shephard v. State Dept. of Fish and Game, 897 P.2d 33, 40 (Alaska 1995). 157 Article VIII §2 provides: "The legislature shall provide for the utilization, development, and conservation of all natural resources belonging to the State, including land and waters, for the maximum benefit of its people." isa Foerster, supra at n.77. 159 BP Exploration, supra at n.80; Kenai Landing, supra at n.81. 45 statutory promise of a hearing "on a matter within the jurisdiction of the agency" found in AS 31.05.060(a). In light of the foregoing, Appellant respectfully urges this Court to reverse the court below and remand this case for a hearing before the Alaska Oil and Gas Conservation Commission. Hollis S. French AK Bar No. 9606033 Dated September 30, 2020 Typeface Certification I certify that the typeface in this document is 13-point Times New Roman. Hollis S. French m FILE® IN THE SUPREME COURT OF THE STATE OF ALASKA HOLLIS S. FRENCH, Appellant, V. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee. JAN I j' 2021 APPELLATE COURTS STATFOOF THE RECEIVED JAN 2 5 2021 APPELLATE COURTS Supreme Court No. OF THE 5-17822 STATF OP ALASKA Superior Court No. 3AN-19-6694 CI CERTIFICATE OF SERVICE I certify that I caused a copy of Appellant's Reply to be served upon: 1. Thomas Ballantine State of Alaska, Department of Law Assistant Attorney General 1031 W. 4" Avenue, Suite 200 Anchorage, AK 99501 By placing a true copy in First Class Mail to the address above on this date. DATED: January 19, 2021 Hollis S. French Bar No. 9606933 IN THE SUPREME COURT OF THE STATE OF ALASKA HOLLIS S. FRENCH, Appellant, ) Supreme Court No. S-17822 ALASKA OIL AND GAS CONSERVATION ) COMMISSION, ) Superior Court No. Appellee. ) 3AN-19-06694 CI APPEAL FROM THE SUPERIOR COURT THIRD JUDICIAL DISTRICT AT ANCHORAGE THE HONORABLE ERIC AARSETH, PRESIDING THE HONORABLE ADOLF ZEMAN, PRESIDING APPELLANT'S REPLY HOLLIS S. FRENCH AK Bar No. 9606033 2640 Telequana Dr. Anchorage, AK 99517 (907)244-7135 hsfrench@gmail.com Filed in the Supreme Court of the State of Alaska, this 28th day of January , 2021 I� Arr�a� ¢erL Clerk of the Appellate Court TABLE OF CONTENTS TABLE OF CONTENTS.......................................................... i TABLE OF AUTHORITIES...................................................... ii AUTHORITIES PRINCIPALLY RELIED UPON ................................. iv ARGUMENT....................................................................... 1 I. AOGCC Has a Statutory Duty to Hold a Hearing ...................... 1 II. AOGCC's Rationales in Defense of Other Order 150 Fail........... 3 A. The Dilemma Faced by the Agency Caused it to Misrepresent What Other Order 150 Actually Said ............................... 3 B. Appellant's Petition Was Sufficient to Trigger a Hearing....... 7 C. The Legislature's Actions or Inactions are Irrelevant ............. 8 D. CINGSA Creates Insuperable Difficulties for AOGCC's Position................................................................. 9 E. AOGCC Ignores the Public Interest in Preventing Waste....... 11 CONCLUSION.................................................................... 13 i TABLE OF AUTHORITIES FEDERAL CASES Borough of Duryea, Pennsylvania v. Guarnieri, 131 S. Ct. 2488 (2011)... 7 The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, (1913)............... 5 Helvering v. Hallock, 309 U.S. 106(1940).................................... 9 Ohio Oil Co. v. Indiana (N6.1), 177 U.S. 190 (1900)........................ 11 ALASKA CASES Allen v. Alaska Oil and Gas Conservation Commission, 154 P.3d 664 (Alaska 2006) .. .................................................................... 9 Cabana v. Kenai Peninsula Borough, 21 P.3d 833 (Alaska 2001) ........ 13 Kenai Landing, Inc. v. Cook Inlet Nat. Gas Storage Alaska, LLC, 441 P.3d 954 (Alaska 2019).......................................................... 9 Exxon Corp. v. State, 40 P.3d 786 (Alaska 2001)............................ 13 Far North Sanitation, Inc, v. Alaska Public Utilities Commission, 825 P.2d 867 (Alaska 1992).......................................................... 3 Northwest Medical Imaging, Inc. v. State, Dept. of Revenue, 151 P.3d 434 (Alaska 2006)................................................................ 5,6 CASES FROM OTHER JURISDICTIONS People v. Associated Oil Co., 211 Cal. 93 (Cal. 1930)....................... 12 Townsend v. State, 147 Ind. 624 (Ind. 1897).................................. 11 STATUTES AS 31.05.005(a)................................................................... 6 AS 31.05.027...................................................................... 1 ii AS31.05.030...................................................................... 1,2 AS31.05.060(a)................................................................... 1,3 AS 31.05.070(a)................................................................... 3 AS31.05.095...................................................................... 1 STATUTES FROM OTHER JURISDICTIONS Kansas: K.S.A. § 55-701....................................................... 2 Oklahoma: 52 Okla. Stat. § 236................................................ 2 OTHER AUTHORITIES AOGCC, AOGCC, 50 Years of Service to Alaska (rev 10/10/10).......... 9 John W. Broomes, Waste Not, Want Not: The Marketable Product Rule Violates Public Policy Against Waste of Natural Gas Resources, 150 Kan. L. Rev. 149 (2014)......................................................... 10 Wm. E. Colby, The Law of Oil and Gas, 31 Cal. L. Rev. 357 (1943)...... 12 S. Dorsett & S. McVeigh, Jurisdiction (New York: Routledge, 2012) .... 5 William N. Eskridge, Jr., Interpreting Legislative Inaction, 87 Mich. L. R. 67 (1988).................................................................... 9 Stephen A. Higgenson, A Short History of the Right to Petition Government for the Redress of Grievances, 96 Yale L. J. 142 (1986)..... 7 Robert J. Martineau, Subject Matter Jurisdiction on Appeal: Reining in an Unruly Horse, 1988 BYU L. Rev. 1(1988)............................ 5 8 Patrick H. Martin and Bruce Kramer Williams & Meyer Oil and Gas Law(2019)......................................................................... 10 H. H. Rumble, Limitations on the Use of Property by Its Owner, 5 Virginia L. Rev. 297 (1918).................................................. 11 iii AUTHORITIES PRINCIPALLY RELIED UPON ALASKA CONSTITUTION Article I § 6 The right of the people peaceably to assemble, and to petition the government shall never be abridged. ALASKA STATUTES AS 31.05.005(a) There is created as an independent quasi-judicial agency of the state the Alaska Oil and Gas Conservation Commission composed of three commissioners appointed by the governor and confirmed by the legislature in joint session. In making appointments to the commission under AS 31.05.009 and this subsection, the governor shall consider and give preference to a person who demonstrates experience in oil and gas operations in the state. AS 31.05.027 The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States. AS 31.05.030 (a) The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter. (b) The commission shall investigate to determine whether or not waste exists or is imminent, or whether or not other facts exist which justify or require action by it. (c) The commission shall adopt regulations and orders and take other appropriate action to carry out the purposes of this chapter. (d) The commission may require (1) identification of ownership of wells, producing leases, tanks, plants, and drilling structures; (2) the making and filing of reports, well logs, drilling logs, electric logs, lithologic logs, directional surveys, and all other subsurface information on a well for which a permit to drill has been issued by the commission, subject to the following: iv (A) the reports required to be filed by the commission under this paragraph shall be filed within 30 days after the completion, abandonment, or suspension of the well; and (B) the well logs, drilling logs, electric logs, lithologic logs, directional surveys, and all other information required to be filed by the commission under this paragraph shall be filed within 90 days after the completion, abandonment, or suspension of the well, unless extended by the commission on request; (3) the drilling, casing, and plugging of wells in a manner that will prevent the escape of oil or gas out of one stratum into another, the intrusion of water into an oil or gas stratum, the pollution of fresh water supplies by oil, gas, or salt water, and prevent blowouts, cavings, seepages, and fires; (4) the furnishing of a reasonable bond with sufficient surety conditions for the performance of the duty to plug each dry or abandoned well or the repair of wells causing waste; (5) the operation of wells with efficient gas -oil and water -oil ratios, and may fix these ratios; (6) the gauging or other measuring of oil and gas to determine the quality and quantity of oil and gas; (7) every person who produces oil or gas in the state to keep and maintain for a period of five years in the state complete and accurate records of the quantities of oil and gas produced, which shall be available for examination by the commission at all reasonable times; (8) the measuring and monitoring of oil and gas pool pressures; (9) the filing and approval of a plan of development and operation for a field or pool to prevent waste, ensure a greater ultimate recovery of oil and gas, and protect the correlative rights of persons owning interests in the tracts of land affected. (e) The commission may regulate (1) for conservation purposes and, to the extent not in conflict with regulation by the Department of Labor and Workforce Development or the Department of Environmental Conservation, for public health and safety purposes, (A) the drilling, producing, and plugging of wells; (B) the perforating, fracture stimulation, and chemical treatment of wells; (C) the spacing of wells; (D) the disposal of salt water, nonpotable water, and oil field wastes; (E) the contamination or waste of underground water; (F) the quantity and rate of the production of oil and gas from a well or property; this authority shall also apply to a well or property in a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.180(p); (G) the underground injection of gas for purposes of storage; (2) the disposal of drilling mud, cuttings, and nonhazardous drilling operation wastes in the annular space of a well for which a permit to drill has been issued by the commission; in this paragraph, a "nonhazardous drilling operation waste" v means a waste, other than a hazardous waste identified by the Environmental Protection Agency in 40 C.F.R., Part 261, 1 its regulation identifying and listing hazardous wastes, associated with the act of drilling a well for exploratory or production purposes. (f) The commission may classify a well or a specific portion of a well as an exploratory, development, service, or stratigraphic test well and may classify a development well as an oil or gas well for purposes material to the interpretation or enforcement of this chapter. (g) When the commission finds sufficient likelihood of an unexpected encounter of oil, gas, or other hazardous substance as a result of well drilling in an area of the state, the commission may, by regulation, designate the area and specify a depth in the area as one in which wells or any boring into the soil in excess of the specified depth but not otherwise subject to this chapter are subject to the regulations and requirements adopted under this section. The designation of an area or specification of a depth under this subsection does not constitute a certification that no hazardous substance will be encountered in another area or at a lesser depth, and the state is not liable for any damages arising from such an unexpected encounter of a hazardous substance. (h) The commission may take all actions necessary to allow the state to acquire primary enforcement responsibility under 42 U.S.C. 300h-1 and 42 U.S.C. 300h-4 (Safe Drinking Water Act of 1974, as amended, 42 U.S.C. 300f — 300j-26), for the control of underground injection related to the recovery and production of oil and natural gas and the control of underground injection in Class I wells, as defined in C.F.R. 144.6, as amended. (i) The commission shall accept written plans submitted by lessees for purposes of AS 38.05.180(f)(5). If a lessee submits a plan, the commission shall hold a public hearing on the plan and, within 45 days after receipt of the plan, grant approval of the plan if the plan contains a voluntary agreement by the lessee to use its best efforts to employ residents of this state, consistent with law, and to contract with firms in this state for work in connection with the development of the field, including the fabrication and installation of required facilities, whenever feasible. The decision of the commission to grant approval may not be appealed. 6) For exploration and development operations involving nonconventional gas, the commission (1) may not (A) issue a permit to drill under this chapter if the well would be used to produce gas from an aquifer that serves as a source of water for human consumption or agricultural purposes unless the commission determines that the well will not adversely affect the aquifer as a source of water for human consumption or agricultural purposes; or (B) allow injection of produced water except at depths below known sources of water for human consumption or agricultural purposes; (2) shall A (A) regulate hydraulic fracturing in nonconventional gas wells to ensure protection of drinking water quality; (B) regulate the disposal of wastes produced from the operations unless the disposal is otherwise subject to regulation by the Department of Environmental Conservation or the United States Environmental Protection Agency; (C) as a condition of approval of a permit to drill a well for regular production of coal bed methane, require the operator to design and implement a water well testing program to provide baseline data on water quality and quantity; the cormnission shall make the results of the water well testing program available to the public. (k) The commission shall certify to the Department of Natural Resources the volume of oil production from a field or platform for the purposes of AS 38.05.180(f)(6)(A), (C), (E), and (G). (0 For purposes of AS 46.04.050(c) and upon application by the operator, the commission shall evaluate the likelihood that a well at a natural gas exploration facility may penetrate a formation capable of flowing oil to the ground surface and issue a determination based on results of the evaluation. If the commission determines that evidence obtained through the evaluation demonstrates with reasonable certainty that a well will not penetrate a formation capable of flowing oil to the ground surface, it shall report its determination to the Department of Environmental Conservation. In this subsection, (1) "natural gas exploration facility" has the meaning given in AS 46.04.050 (c); (2) "oil" has the meaning given in AS 46.04.050(c (m) The commission has jurisdiction and authority over all persons and property, public and private, necessary to cant' out the purposes and intent of AS 41.06, except for provisions in AS 41.06 for which the Department of Natural Resources has jurisdiction. (n) Upon request of the commissioner of revenue, the commission shall determine the commencement of regular production from a lease or property for purposes of AS 43.55.160 (f) and (g) and 43.55.165(n) and (o). AS 31.05.060(a) The commission may act upon its own motion or upon the petition of an interested person. On the filing of a petition concerning a matter within the jurisdiction of the commission under this chapter, the commission shall promptly fix a date for the hearing, and shall cause notice of the hearing to be given. The hearing shall be held without undue delay after the filing of a petition. The commission shall enter its order within 30 days after the hearing. AS 31.05.070(a) The commission may summon witnesses, administer oaths, and require the production of records, books and documents for examination at a hearing or vii investigation conducted by it. A person may not be excused from attending or testifying, or from producing books, papers and records before the commission or a court or from obedience to the subpoena of the commission or a court, on the ground or for the reason that the testimony or evidence, documentary or otherwise, required of that person may tend to incriminate or subject that person to a penalty or forfeiture. This section does not require a person to produce books, papers or records, or to testify in response to an inquiry not pertinent to some question lawfully before the commission or court for determination. A natural person is not subject to criminal prosecution or to a penalty or forfeiture for or on account of any transaction, matter or thing concerning which, in spite of objection, that person may be required to testify or produce evidence, documentary or otherwise, before the commission or court, or in obedience to its subpoena. However, a person testifying is not exempt from prosecution and punishment for perjury committed in so testifying. AS 31.05.095. The waste of oil and gas in the state is prohibited. OTHERSTATESTATUTES Kansas K.S.A. § 55-701: Waste of Natural Gas Prohibited -- The production of natural gas in the state of Kansas in such a manner and under such conditions and for such purposes as to constitute waste is hereby prohibited. Oklahoma 52 Okla. Stat. § 236: "The production of natural gas in the state of Oklahoma in such manner, and under such conditions as to constitute waste, shall be unlawful." viii ARGUMENT I. AOGCC HAS A STATUTORY DUTY TO HOLD A HEARING. This case can be boiled down to one question: whether the gas leak in Cook Inlet constituted "a matter within the jurisdiction"' of the Alaska Oil and Gas Conservation Commission. Other Order 150 declared unequivocally that the agency was without jurisdiction: "Absent jurisdiction, there is no basis for a hearing."Z In Other Order 150 the agency mistakenly placed the limits to its power at the custody transfer meter.' The law is contrary to the agency's position. Consider again the relevant language of the two statutes which define the jurisdiction of the commission: 1. AS 31.05.027: "The authority of the commission applies to all land in the state lawfully subject to its police powers ...." 2. AS 31.05.030(a): "The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter." One of the "purposes" of chapter 31 is to prevent the waste of the oil and gas in Alaska. The legislature carefully spelled out this purpose in a statute, AS 31.05.095, which reads: "The waste of oil and gas in the state is prohibited." ' AS 31.05.060(a). z Exc.002. ' "Once oil or gas is metered and severed from the property, AOGCC's authority to make a waste determination is at an end." Exc. 002. 1 The statute is there to fulfill the purpose of protecting not some, but all of the state's most valuable natural resource from being wasted. Notice that the statute does not say that the waste of oil and gas on the lease is prohibited. The statute does not say that the waste of oil and gas upstream of the custody transfer meter is prohibited. The legislature was certainly capable of drafting a petroleum conservation law with a narrow scope. Alaska could have chosen to take the approach of Kansas and Oklahoma, which explicitly limit their petroleum conservation laws to production.' Alaska's legislature chose to draft its anti -waste statute more broadly. AOGCC's indifference to waste occurring downstream of the meter is unfortunate, but this indifference does not constitute a legitimate jurisdictional boundary, any more than a custody transfer meter does. The gas leak in question went on for months and caused a production platform to shut down.' As a result, oil production was lost.6 The gas leak sparked an investigation by the AOGCC.' The agency had a statutory duty to do so.' The powers that attend an AOGCC investigation are spelled out in statute: "[t]he commission may summon witnesses, administer oaths, and require the production of records, books and documents for examination at a hearing or investigation conducted ' K.S.A. § 55-701: "The production of natural gas in the state of Kansas in such a manner and under such conditions and for such purposes as to constitute waste is hereby prohibited." 52 Okla. Stat. § 236: "The production of natural gas in the state of Oklahoma in such manner, and under such conditions as to constitute waste, shall be unlawful." ' Exc.006. 6 Id. 7 Exc.002. 8 AS 31.05.030(b). 2 by it."' The hearing referred to may be held on the agency's own motion10 and must be held if the agency is petitioned to do so by "an interested person."" The statutory powers that allowed the agency to conduct an investigation assign to the agency the duty to hold a hearing if petitioned for one. To sum up: if the agency had jurisdiction to conduct an investigation, it had the statutory obligation to conduct a hearing if one was requested. Other Order 150 denied a hearing to Appellant. This Court should correct that error. II. AOGCC'S RATIONALES IN DEFENSE OF OTHER ORDER 150 FAIL. A. The dilemma faced by the agency caused it to misrepresent what Other Order 150 actually said. The agency is caught on the horns of a dilemma. If it had jurisdiction, it was compelled to grant Appellant a hearing. I I If it did not have jurisdiction, it had no authority to decide anything else.13 In trying to avoid this dilemma, the agency misrepresents what Other Order 150 actually said. The most glaring example is on page 6 of its brief, where the agency claims, in bold print, that Other Order 150 reflected "AOGCC's determination that the Hilcorp leak was not waste...."14 This is not accurate. 9 AS 31.05.070(a). 10 AS 31.05.060(a). 11 Id. 12 AS 31.05.060(a). 13 "Jurisdictional defects deprive the agency of power to adjudicate or regulate the subject matter." Far North Sanitation, Inc. v. Alaska Public Utilities Commission, 825 P.2d 867, 870 (Alaska 1992). 14 Appellee's Brief, p. 6. Other examples include Appellee's Brief at p. 1: "Whether AOGCC's determination that leaking commercial fuel gas was not waste within AOGCC's jurisdiction was reasonable." And see Appellee's Brief at p. 11: "French's claim that Other Order 150 did not make a waste determination cannot be reconciled with Other Order 150." 3 Other Order 150 stated repeatedly that the agency was incapable of making a waste determination: 1. "Once metered and severed from property AOGCC's authority to make a waste determination regarding use of the oil or gas is at an end." I 2. "AOGCC does not have waste jurisdiction over gas Hilcorp purchased from Harvest"16 Other Order 150 disclaimed jurisdiction over the gas leak — "Absent jurisdiction, there is no basis for a hearing."17 Other Order 150 did not make a determination that the gas leak was not waste, as Appellee's brief erroneously claims. The contradiction between Other Order 150 and the agency's brief on appeal regarding the central issue of this case cannot be reconciled in any legally coherent way. Appellee's brief, in trying to massage Other Order 150 into something it is not, throws confusion on the nature of jurisdiction. No statement captures this confusion better than this one: "[a]bsent waste, there is no waste jurisdiction."18 This does not reflect a sound understanding of the concept of jurisdiction. 15 Exc.002. 16 Id. 17 Id, 18 Appellee's Brief at 10. On the same page: "French's arguments fallaciously equate subject matter jurisdiction — a determination whether waste has occurred— with AOGCC's statewide geographic jurisdiction ifAOGCC determines waste has occurred." (emphasis in the original). Appellant expects that his disappointment in not having the difference between subject matter jurisdiction and geographic jurisdiction elucidated by Appellee is shared by the Court. And see Appellee's Brief at 21: "French was entitled to a hearing only if the leak was waste." 4 "Jurisdiction is authority to decide the case either way.s19 The esteemed author of the preceding sentence, Oliver Wendell Holmes, did not invent this formulation. Coke (one of the few common law jurists to try to define jurisdiction) stated that 'jurisdiction is the authority to decide or give judgment among parties concerning actions to be taken over people and property ... "I AOGCC's contention in its brief that there is no jurisdiction unless there is waste gets Holmes and Coke backwards. It puts the cart before the horse. Jurisdiction, understood correctly, concerns whether the agency had the power to decide this case. The purpose of this appeal is to find out whether the agency had jurisdiction over the leak of gas in Cook Inlet. If the agency had jurisdiction, it had the authority to decide whether the leaked gas constituted waste. This conception of jurisdiction is consistent with how this Court has described subject matter jurisdiction. Subject matter jurisdiction is 'the legal authority of a court to hear and decide a particular type of case.' The doctrine of subject matter jurisdiction applies to judicial and quasi-judicial bodies to ensure that they do not overreach their adjudicative powers. Subject matter jurisdiction is a prerequisite to a courts ability to decide a case: '[A] court which does not have subject matter jurisdiction is without power to decide a case.'21 19 The Fair v. Kohler Die & Specialty Co., 228 U.S. 22,25 (1913). 20 S. Dorsett & S. McVeigh, Jurisdiction (New York: Routledge, 2012), 4. 21 Northwest Medical Imaging, Inc. v. State, Dept. of Revenue, 151 P.3d 434, 438 (Alaska 2006)(intemal citations omitted); and see Robert J. Martineau, Subject Matter Jurisdiction on Appeal: Reining in an Unruly Horse, 1988 BYU L. Rev. 1, 3: "Courts and commentators have little difficulty in agreeing on an abstract definition of subject matter jurisdiction. There is a consensus that subject matter jurisdiction means the authority to adjudicate the type of controversy involved in an action." Having these precepts in mind reveals the flaw in AOGCC's formulation of the issue presented by this case. The agency incorrectly frames the issue this way: "Whether AOGCC's determination that the leaking commercial fuel gas was not waste within AOGCC's jurisdiction is reasonable."22 Again, Other Order 150 did not make a determination. Other Order 150 specifically denied the power to make a determination: "Once metered and severed from the property, AOGCC's authority to make a waste determination is at an end.1123 The agency on appeal attempts to rewrite Other Order 150: "The order cannot be read without understanding that downstream gas is not deemed waste by AOGCC.1124 Appellant begs to disagree. The order is consistent about a lack of jurisdiction; the agency in Other Order 150 is declaring itself "without power to decide.s25 The agency on appeal would prefer to have it both ways, and thus escape from its dilemma. It wants credit for having enough jurisdiction to make a determination about the leaked gas, but not so much jurisdiction as would require it to hold a hearing. This Court must rectify this error. The question for this Court is whether the AOGCC, "an independent quasi-judicial agency of the state,"26 had subject matter jurisdiction over the gas leak in Cook Inlet. A gas leak that went on for months. A gas leak that caused a producing oil platform to shut 22 Appellee's Brief at 1. 23 Exc.002. 24 Appellee's Brief at 11. 25 Northwest Medical Imaging, 151 Pad at 43S. 26 A.S.31.05.005(a). 2 down. If the Court finds that AOGCC did have jurisdiction, then the case should be remanded for a hearing before the agency. B. Appellant's petition was sufficient to trigger a hearing. AOGCC suggests in its brief that the petition filed in this case was somehow deficient.27 The agency seems to be hinting that, if only Appellant had framed his petition differently, his request for a hearing would have been granted. This Court should not countenance such charades. Both the federal and the state constitution protect Appellant's right to petition the government11 "Petition, as a word, a concept, and an essential safeguard of freedom, is of ancient significance in the English law and the Anglo-American legal tradition."'-9 The idea behind the right has been explained by scholars this way: The original design of the First Amendment petition clause — stemming from the right to petition local assemblies in colonial America, and forgotten today — included a governmental duty to consider petitioners' grievances.30 "Petitions to the government assume an added dimension when they seek to advance political, social, or other ideas of interest to the community as a whole."31 French's petition 27 "Since waste was the only jurisdictional basis claimed in French's petition, AOGCC entered Other Order 150, denying his demand for a hearing." Appellee's Brief, p. 2. "Because waste was the only matter within AOGCC's jurisdiction alleged in French's demand for a hearing, AOGCC denied his demand." Appellee's Brief, p. 5. 28 U.S. Const. amend. I; Alaska Const. Art. I § 6: "The right of the people peaceably to assemble, and to petition the government shall never be abridged." 29 Borough of Duryea, Pennsylvania, et. al. v. Guarnieri, 131 S. Ct. 2488, 2498 (2011). 30 Stephen A. Higgenson, A Short History of the Right to Petition Government for the Redress of Grievances, 96 Yale L. J. 142, 142-143(1986)(internal citations omitted)(emphasis supplied). 31 Borough of Duryea, 131 S. Ct. at 2498. 7 alleged that waste occurred as a result of a gas leak.32 The gas leak was a matter of public concern. The leak "garnered a tremendous amount of publicity."33 AOGCC cannot escape its duty to conduct a hearing by suggesting that it might have other forms of jurisdiction downstream of the custody transfer meter which, unfortunately, Appellant failed to invoke. The agency has a duty to consider Appellant's petition in a hearing. C. The Legislature's actions or inactions are irrelevant. `Spurious' barely describes the argument AOGCC advances in its brief regarding the actions of the Alaska Legislature. The agency claims French is ignoring "the Alaska Legislature's response to AOGCC's determination."34 The analysis here begins by asking exactly which determination AOGCC is referring to? The agency's first public pronouncement on this matter was Other Order 150, which was issued March 20, 2019 35 Appellant hopes that this is enough to eliminate the 2017 and 2018 Legislatures from consideration. Once Other Order 150 was decided, anyone, including legislators, would have been able to see that the commission's order was immediately appealed. Appellant could as legitimately assert that his confirmation as the public commissioner to the agency by the Legislature in 2017 was a ratification by the Legislature of his view of the scope of the agency's jurisdiction. Setter in this instance to heed the words of Justice Frankfurter, who wrote that "we walk on quicksand when we try to find in the absence of corrective legislation a controlling 32 Exc.001. 33 Appellee's Brief, p. 12. 34 Id. 35 Exe.002. f legal principle."36 Or heed the words of the commission itself, when it described legislative inaction as a "weak reed" upon which to rely.37 In any event, AOGCC's reliance on the Legislature is misplaced. D. CINGSA creates insuperable difficulties for AOGCC's position. CINGSA is an underground storehouse of gas located on the Kenai Peninsula. The facility stores natural gas collected from other sites by injecting it into a mostly depleted rock formation nearly a mile underground — the Sterling C Reservoir — so that it can be withdrawn in wintertime when the demand for natural gas exceeds what local production can immediately supply.38 In its own publication, AOGCC described the legislation that put CINGSA under its authority as having "clarified," not extended, its jurisdiction.39 Appellant raised this point in his opening brief in hopes that AOGCC would, in its brief, address its own words on this issue and explain where, under its theory of the case, it would draw the jurisdictional boundary into and out of CINGSA 40 AOGCC failed to do either. Instead, it offers the unsupported assertion that "AOGCC's jurisdiction to order CINGSA to rectify any issues with gas leaking from the storage reservoir... would not make any leaking gas owned by 36 Helvering v. Hallock, 309 U.S. 106, 121 (1940), and see William N. Eskridge, Jr., Interpreting Legislative Inaction, 87 Mich. L. R. 67, 90-95 ("Problems with Inferring Legislative Intent f o7n Legislative Inaction")(1988). 37 "The commission and ConocoPhillips respond that legislative inaction is a `weak reed' to lean on in construing a statute." Allen v. Alaska Oil and Gas Conservation Cwnmission, 154 P.3d 664, 669 (Alaska 2006). 38 Kenai Landing, Inc. v. Cooklnlet Nat. Gas Storage Alaska, LLC, 441 P.3d 954,957 (Alaska 2019). 39 "Other changes clarified the Commission's authority to regulate underground storage of natural gas." AOGCC, AOGCC, SO Years of Service to Alaska, p. 68 (rev 10/10/10), available at 333 W. 7" Ave., Anchorage, AK. 40 Appellant's Brief at 36 and 38. 0 CINGSA waste."41 The sentence comes without explanation or footnote. The agency is in full retreat from its responsibilities. The agency's willingness to abandon its central mission — to prevent waste — over a vital reserve of gas is inexcusable. Its inability to grapple with the legal problems that attend its misconceptions about jurisdiction should indicate to the Court that its position is unworkable. Moving a hydrocarbon from one reservoir to another is good engineering, as it leads to greater ultimate recovery for the state of Alaska as a whole. Whether the gas is ultimately used to fuel a turbine, or to heat homes in southcentral Alaska, everyone benefits. Yet the AOGCC's narrow conception of its jurisdiction removes itself from policing any leaks, no matter how large, that occur in the process, and thwarts its statutory mission to prevent waste. Physical waste is generally defined as `the loss of oil or gas that could have been recovered and put to use,' and further described to include the `failure to recover the maximum quantity [of oil or gas] which theoretically could be produced.' Accordingly, any circumstance that precludes recovery of all the oil or gas that would otherwise be economically recoverable from a given property may be said to cause physical waste of those hydrocarbon resources." The same analysis applies to the leak in this case. The unidentified reservoir or reservoirs that supplied gas to the fuel gas line running to Platform A lost energy unnecessarily, and the Middle Ground Shoal reservoir that relied on the gas to help it 41 Appellee's Brief at 18. 42 John W. Broomes, Waste Not, Want Not: the Marketable Product Rule Violates Public Policy Against Waste of Natural Gas Resources, 150 Kan. L. Rev. 149, 179 (2014)(citing to 8 Patrick H. Martin & Bruce M. Kramer, Williams & Meyers Oil and Gas Law at 765 and 1133 (2009)). 10 produce, lost production. No one benefited from this months -long release of gas to the atmosphere. There is nothing good about gas leaking directly to the atmosphere. The agency's focus on waste only upstream of the custody transfer meter blinds it to the negative effects of gas leaks to the state as a whole which occur downstream of the meter. The custody transfer meter is important, but it is not a jurisdictional boundary. Disclaiming jurisdiction over hydrocarbons at the custody transfer meter is bad policy. E. AOGCC ignores the public interest in preventing waste. The agency on appeal defines waste as narrowly as possible. It claims, without citation to any statutory language, that the definition of waste relates to "upstream drilling and production,"43 and that the "purpose of the prohibition against waste is to ensure the maximum ultimate recovery of the gas or oil from a reservoir or pool."44 This narrow view ignores the broader view of waste outlined in the previous section, and ignores over one hundred years of jurisprudence that recognizes the public interest in preventing waste. Here is an early formulation of this idea: Statutes prohibiting waste and regulating the taking of gas and oil from the soil are usually upheld as a valid exercise of the police power, because of the value of these commodities to the public." The agency's myopic view of waste is severely undercut once the value of the natural gas to the public is taken into account. The simplest hypothetical illustrates this. 43 Appellee's Brief at 7. 44 Appellee's Brief at 7-8. And see Appellee's Brief at 9: "Once metered and severed, the goal of maximizing recovery from a reservoir where it was produced is achieved." 45 H. H. Rumble, Limitations on the Use of Property by Its Owner, 5 Virginia L. Rev. 297, 304 n. 7 (1918)(citing to Townsend v. State, 147 Ind. 624, and Ohio Oil Co. v. Indiana, 177 U. S. 190)(emphasis supplied). 11 Imagine a gas leak just a few feet downstream of the custody transfer meter for a lease that vents any or all of the lease's gas production to the atmosphere. The reservoir is producing to its fullest, but the public interest is damaged. The public's interest in putting that gas to some beneficial use is reduced by the amount of the leak. Court decisions have recognized this interest. Referring to oil and gas, the Supreme Court of California in 1930 wrote: [b]ecause of their peculiar nature the public has a definite interest in their preservation from waste and destruction. This is true because of their character as natural resources and also because the public interest has attached by virtue of positive statutory law or by court judgment independent of statute.46 The preceding articulation of the public interest as being rooted in the inherent value of natural resources to the public would be ably summed up a few years later this way: The public has, however, an important interest in the deposits of oil and gas because of their vital character and their general use by the public and may, in its own behalf, control their capture by the lawful owners and also protect these owners as between themselves from any acts of their number which might result in waste or other similar prejudice to their common interest 47 These precepts found expression in Alaska's petroleum conservation statutes. The broad reach of the AOGCC's jurisdictional statutes combined with the blanket statewide prohibition against waste, and a definition of waste that is a wide or wider than any other state's definition,48 all point in the same direction, and to the same end. Alaska law 46 People v. Associated Oil Co., 211 Cal. 93, 102 (Cal. 1930). 47 Wm. E. Colby, The Law of Oil and Gas, 31 Cal. L. Rev. 357, 364 (1943). 46 Appellant's Brief at 26. 12 recognizes that there is a public interest in the conservation of natural resources49 and that the protection of state natural resources vindicates an important public interest.50 These values are not served by the truncated view of jurisdiction expressed in Other Order 150. CONCLUSION Appellant respectfully seeks an order from this Court reversing the court below, and remanding this case for a hearing before the AOGCC. LQ2�7 Hollis S. French AK Bar No. 9606033 Dated January 18, 2021 Typeface Certification I certify that the typeface in this document is 13-point Times New Roman. WT�-� Hollis S. French 49 Exxon Corp. v. State, 40 P.3d 786, 791 (Alaska 2001). 50 Cabana v. Kenai Peninsula Borough, 21 P.3d 833, 837, n. 16 (Alaska 2001). 13 IN THE SUPREME COURT OF THE STATE OF ALASKA HOLLIS S. FRENCH, Appellant, ) V. ) Supreme Court No. S-17822 ALASKA OIL AND GAS CONSERVATION ) COMMISSION, ) Superior Court No. Appellee. ) 3AN-19-06694 Cl APPEAL FROM THE SUPERIOR COURT THIRD JUDICIAL DISTRICT AT ANCHORAGE THE HONORABLE ERIC AARSETH, PRESIDING THE HONORABLE ADOLF ZEMAN, PRESIDING APPELLANT'S REPLY HOLLIS S. FRENCH AK Bar No. 9606033 2640 Telequana Dr. Anchorage, AK 99517 (907)244-7135 hsfrench@gmail.com Filed in the Supreme Court of the State of Alaska, this day of 12021 Clerk of the Appellate Court TABLE OF CONTENTS TABLE OF CONTENTS.......................................................... i TABLE OF AUTHORITIES...................................................... ii AUTHORITIES PRINCIPALLY RELIED UPON ................................. iv ARGUMENT....................................................................... 1 I. AOGCC Has a Statutory Duty to Hold a Hearing ...................... I I1. AOGCC's Rationales in Defense of Other Order 150 Fail........... 3 A. The Dilemma Faced by the Agency Caused it to Misrepresent What Other Order 150 Actually Said ............................... 3 B. Appellant's Petition Was Sufficient to Trigger a Hearing....... 7 C. The Legislature's Actions or Inactions are Irrelevant ............. 8 D. CINGSA Creates Insuperable Difficulties for AOGCC's Position................................................................. 9 E. AOGCC Ignores the Public Interest in Preventing Waste....... 11 CONCLUSION.................................................................... 13 TABLE OF AUTHORITIES FEDERAL CASES Borough of Duryea, Pennsylvania v. Guarnieri, 131 S. Ct. 2488 (2011)... 7 The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, (1913)............... 5 Helvering v. Hallock, 309 U.S. 106(1940).................................... 9 Ohio Oil Co. v. Indiana (No.1), 177 U.S. 190 (1900)........................ 11 ALASKA CASES Allen v. Alaska Oil and Gas Conservation Commission, 154 P.3d 664 (Alaska 2006)...................................................................... 9 Cabana v. Kenai Peninsula Borough, 21 P.3d 833 (Alaska 2001) ........ 13 Kenai Landing, Inc. v. Cook Inlet Nat. Gas Storage Alaska, LLC, 441 P.3d 954 (Alaska 2019).......................................................... 9 Exxon Corp. v. State, 40 P.3d 786 (Alaska 2001)............................ 13 Far North Sanitation, Inc. v. Alaska Public Utilities Commission, 825 P.2d 867 (Alaska 1992).......................................................... 3 Northwest Medical Imaging, Inc. v. State, Dept. of Revenue, 151 P.3d 434 (Alaska 2006)................................................................ 5,6 CASES FROM OTHER JURISDICTIONS People v. Associated Oil Co., 211 Cal. 93 (Cal. 1930)....................... 12 Townsend v. State, 147 Ind. 624 (Ind. 1897).................................. I 1 STATUTES AS 31.05.005(a)................................................................... 6 AS31.05.027...................................................................... 1 ii AS31.05.030...................................................................... 1,2 AS 31.05.060(a)................................................................... 1,3 AS 31.05.070(a)................................................................... 3 AS31.05.095...................................................................... 1 STATUTES FROM OTHER JURISDICTIONS Kansas: K.S.A. § 55-701....................................................... 2 Oklahoma: 52 Okla. Stat. § 236................................................ 2 OTHER AUTHORITIES AOGCC, AOGCC, 50 Years of Service to Alaska (rev 10/10/10).......... 9 John W. Broomes, Waste Not, Want Not: The Marketable Product Rule Violates Public Policy Against Waste of Natural Gas Resources, 150 Kan. L. Rev. 149 (2014)......................................................... 10 Wm. E. Colby, The Law of Oil and Gas, 31 Cal. L. Rev. 357 (1943)...... 12 S. Dorsett & S. McVeigh, Jurisdiction (New York: Routledge, 2012) .... 5 William N. Eskridge, Jr., Interpreting Legislative Inaction, 87 Mich. L. R. 67 (1988).................................................................... 9 Stephen A. Higgenson, A Short History of the Right to Petition Government for the Redress of Grievances, 96 Yale L. J. 142 (1986)..... 7 Robert J. Martineau, Subject Matter Jurisdiction on Appeal: Reining in an Unruly Horse, 1988 BYU L. Rev. 1(1988)............................ 5 8 Patrick H. Martin and Bruce Kramer Williams & Meyer Oil and Gas Law(2019)......................................................................... 10 H. H. Rumble, Limitations on the Use of Property by Its Owner, 5 Virginia L. Rev. 297 (1918).................................................. 11 iii AUTHORITIES PRINCIPALLY RELIED UPON ALASKA CONSTITUTION Article I § 6 The right of the people peaceably to assemble, and to petition the government shall never be abridged. ALASKA STATUTES AS 31.05.005(a) There is created as an independent quasi-judicial agency of the state the Alaska Oil and Gas Conservation Commission composed of three commissioners appointed by the governor and confirmed by the legislature in joint session. In making appointments to the commission under AS 31.05.009 and this subsection, the governor shall consider and give preference to a person who demonstrates experience in oil and gas operations in the state. AS 31.05.027 The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States. AS 31.05.030 (a) The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter. (b) The commission shall investigate to determine whether or not waste exists or is imminent, or whether or not other facts exist which justify or require action by it. (c) The commission shall adopt regulations and orders and take other appropriate action to carry out the purposes of this chapter. (d) The commission may require (1) identification of ownership of wells, producing leases, tanks, plants, and drilling structures; (2) the making and filing of reports, well logs, drilling logs, electric logs, lithologic logs, directional surveys, and all other subsurface information on a well for which a permit to drill has been issued by the commission, subject to the following: iv (A) the reports required to be filed by the commission under this paragraph shall be filed within 30 days after the completion, abandonment, or suspension of the well; and (B) the well logs, drilling logs, electric logs, lithologic logs, directional surveys, and all other information required to be filed by the commission under this paragraph shall be filed within 90 days after the completion, abandonment, or suspension of the well, unless extended by the commission on request; (3) the drilling, casing, and plugging of wells in a manner that will prevent the escape of oil or gas out of one stratum into another, the intrusion of water into an oil or gas stratum, the pollution of fresh water supplies by oil, gas, or salt water, and prevent blowouts, cavings, seepages, and fires; (4) the furnishing of a reasonable bond with sufficient surety conditions for the performance of the duty to plug each dry or abandoned well or the repair of wells causing waste; (5) the operation of wells with efficient gas -oil and water -oil ratios, and may fix these ratios; (6) the gauging or other measuring of oil and gas to determine the quality and quantity of oil and gas; (7) every person who produces oil or gas in the state to keep and maintain for a period of five years in the state complete and accurate records of the quantities of oil and gas produced, which shall be available for examination by the commission at all reasonable times; (8) the measuring and monitoring of oil and gas pool pressures; (9) the filing and approval of a plan of development and operation for a field or pool to prevent waste, ensure a greater ultimate recovery of oil and gas, and protect the correlative rights of persons owning interests in the tracts of land affected. (e) The commission may regulate (1) for conservation purposes and, to the extent not in conflict with regulation by the Department of Labor and Workforce Development or the Department of Environmental Conservation, for public health and safety purposes, (A) the drilling, producing, and plugging of wells; (B) the perforating, fracture stimulation, and chemical treatment of wells; (C) the spacing of wells; (D) the disposal of salt water, nonpotable water, and oil field wastes; (E) the contamination or waste of underground water; (F) the quantity and rate of the production of oil and gas from a well or property; this authority shall also apply to a well or property in a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.180(p); (G) the underground injection of gas for purposes of storage; (2) the disposal of drilling mud, cuttings, and nonhazardous drilling operation wastes in the annular space of a well for which a permit to drill has been issued by the commission; in this paragraph, a "nonhazardous drilling operation waste" v means a waste, other than a hazardous waste identified by the Environmental Protection Agency in 40 C.F.R., Part 261, 1 its regulation identifying and listing hazardous wastes, associated with the act of drilling a well for exploratory or production purposes. (f) The commission may classify a well or a specific portion of a well as an exploratory, development, service, or stratigraphic test well and may classify a development well as an oil or gas well for purposes material to the interpretation or enforcement of this chapter. (g) When the commission finds sufficient likelihood of an unexpected encounter of oil, gas, or other hazardous substance as a result of well drilling in an area of the state, the commission may, by regulation, designate the area and specify a depth in the area as one in which wells or any boring into the soil in excess of the specified depth but not otherwise subject to this chapter are subject to the regulations and requirements adopted under this section. The designation of an area or specification of a depth under this subsection does not constitute a certification that no hazardous substance will be encountered in another area or at a lesser depth, and the state is not liable for any damages arising from such an unexpected encounter of a hazardous substance. (h) The commission may take all actions necessary to allow the state to acquire primary enforcement responsibility under 42 U.S.C. 300h-1 and 42 U.S.C. 300h-4 (Safe Drinking Water Act of 1974, as amended, 42 U.S.C. 300f — 300j-26), for the control of underground injection related to the recovery and production of oil and natural gas and the control of underground injection in Class I wells, as defined in C.F.R. 144.6, as amended. (i) The commission shall accept written plans submitted by lessees for purposes of AS 38.05.180(f)(5). If a lessee submits a plan, the commission shall hold a public hearing on the plan and, within 45 days after receipt of the plan, grant approval of the plan if the plan contains a voluntary agreement by the lessee to use its best efforts to employ residents of this state, consistent with law, and to contract with firms in this state for work in connection with the development of the field, including the fabrication and installation of required facilities, whenever feasible. The decision of the commission to grant approval may not be appealed. 0) For exploration and development operations involving nonconventional gas, the commission (1) may not (A) issue a permit to drill under this chapter if the well would be used to produce gas from an aquifer that serves as a source of water for human consumption or agricultural purposes unless the commission determines that the well will not adversely affect the aquifer as a source of water for human consumption or agricultural purposes; or (B) allow injection of produced water except at depths below known sources of water for human consumption or agricultural purposes; (2) shall vi (A) regulate hydraulic fracturing in nonconventional gas wells to ensure protection of drinking water quality; (B) regulate the disposal of wastes produced from the operations unless the disposal is otherwise subject to regulation by the Department of Environmental Conservation or the United States Environmental Protection Agency; (C) as a condition of approval of a permit to drill a well for regular production of coal bed methane, require the operator to design and implement a water well testing program to provide baseline data on water quality and quantity; the commission shall make the results of the water well testing program available to the public. (k) The commission shall certify to the Department of Natural Resources the volume of oil production from a field or platform for the purposes of AS 38.05.180(f)(6)(A), (C), (E), and (G). (n For purposes of AS 46.04.050(c) and upon application by the operator, the commission shall evaluate the likelihood that a well at a natural gas exploration facility may penetrate a formation capable of flowing oil to the ground surface and issue a determination based on results of the evaluation. If the commission determines that evidence obtained through the evaluation demonstrates with reasonable certainty that a well will not penetrate a formation capable of flowing oil to the ground surface, it shall report its determination to the Department of Environmental Conservation. In this subsection, (1) "natural gas exploration facility" has the meaning given in AS 46.04.050 (c); (2) "oil" has the meaning given in AS 46.04.050(c (m) The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of AS 41.06, except for provisions in AS 41.06 for which the Department of Natural Resources has jurisdiction. (n) Upon request of the commissioner of revenue, the commission shall determine the commencement of regular production from a lease or property for purposes of AS 43.55.160 (f) and (g) and 43.55.165(n) and (o). AS 31.05.060(a) The commission may act upon its own motion or upon the petition of an interested person. On the filing of a petition concerning a matter within the jurisdiction of the commission under this chapter, the commission shall promptly fix a date for the hearing, and shall cause notice of the hearing to be given. The hearing shall be held without undue delay after the filing of a petition. The commission shall enter its order within 30 days after the hearing. AS 31.05.070(a) The commission may summon witnesses, administer oaths, and require the production of records, books and documents for examination at a hearing or vii investigation conducted by it. A person may not be excused from attending or testifying, or from producing books, papers and records before the commission or a court or from obedience to the subpoena of the commission or a court, on the ground or for the reason that the testimony or evidence, documentary or otherwise, required of that person may tend to incriminate or subject that person to a penalty or forfeiture. This section does not require a person to produce books, papers or records, or to testify in response to an inquiry not pertinent to some question lawfully before the commission or court for determination. A natural person is not subject to criminal prosecution or to a penalty or forfeiture for or on account of any transaction, matter or thing concerning which, in spite of objection, that person may be required to testify or produce evidence, documentary or otherwise, before the commission or court, or in obedience to its subpoena. However, a person testifying is not exempt from prosecution and punishment for perjury committed in so testifying. AS 31.05.095. The waste of oil and gas in the state is prohibited. OTHER STATE STATUTES Kansas K.S.A. § 55-701: Waste of Natural Gas Prohibited -- The production of natural gas in the state of Kansas in such a manner and under such conditions and for such purposes as to constitute waste is hereby prohibited. Oklahoma 52 Okla. Stat. § 236: "The production of natural gas in the state of Oklahoma in such manner, and under such conditions as to constitute waste, shall be unlawful. " viii ARGUMENT I. AOGCC HAS A STATUTORY DUTY TO HOLD A HEARING. This case can be boiled down to one question: whether the gas leak in Cook Inlet constituted "a matter within the jurisdiction" l of the Alaska Oil and Gas Conservation Commission. Other Order 150 declared unequivocally that the agency was without jurisdiction: "Absent jurisdiction, there is no basis for a hearing."' In Other Order 150 the agency mistakenly placed the limits to its power at the custody transfer meter.3 The law is contrary to the agency's position. Consider again the relevant language of the two statutes which define the jurisdiction of the commission: 1. AS 31.05.027: "The authority of the commission applies to all land in the state lawfully subject to its police powers ...." 2. AS 31.05.030(a): "The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter." One of the "purposes" of chapter 31 is to prevent the waste of the oil and gas in Alaska. The legislature carefully spelled out this purpose in a statute, AS 31.05.095, which reads: "The waste of oil and gas in the state is prohibited." AS 31.05.060(a). 2 Exc.002. 3 "Once oil or gas is metered and severed from the property, AOGCC's authority to make a waste determination is at an end." Exc. 002. 1 The statute is there to fulfill the purpose of protecting not some, but all of the state's most valuable natural resource from being wasted. Notice that the statute does not say that the waste of oil and gas on the lease is prohibited. The statute does not say that the waste of oil and gas upstream of the custody transfer meter is prohibited. The legislature was certainly capable of drafting a petroleum conservation law with a narrow scope. Alaska could have chosen to take the approach of Kansas and Oklahoma, which explicitly limit their petroleum conservation laws to production.' Alaska's legislature chose to draft its anti -waste statute more broadly. AOGCC's indifference to waste occurring downstream of the meter is unfortunate, but this indifference does not constitute a legitimate jurisdictional boundary, any more than a custody transfer meter does. The gas leak in question went on for months and caused a production platform to shut down.' As a result, oil production was lost.' The gas leak sparked an investigation by the AOGCC.' The agency had a statutory duty to do so.' The powers that attend an AOGCC investigation are spelled out in statute: "[t]he commission may summon witnesses, administer oaths, and require the production of records, books and documents for examination at a hearing or investigation conducted ' K.S.A. § 55-701: "The production of natural gas in the state of Kansas in such a manner and under such conditions and for such purposes as to constitute waste is hereby prohibited." 52 Okla. Stat. § 236: "The production of natural gas in the state of Oklahoma in such manner, and under such conditions as to constitute waste, shall be unlawful." ' Exc.006. 6 Id. 7 Exc.002. 8 AS 31.05.030(b). by ft."' The hearing referred to may be held on the agency's own motion10 and must be held if the agency is petitioned to do so by "an interested person."' 1 The statutory powers that allowed the agency to conduct an investigation assign to the agency the duty to hold a hearing if petitioned for one. To sum up: if the agency had jurisdiction to conduct an investigation, it had the statutory obligation to conduct a hearing if one was requested. Other Order 150 denied a hearing to Appellant. This Court should correct that error. II. AOGCC'S RATIONALES IN DEFENSE OF OTHER ORDER 150 FAIL. A. The dilemma faced by the agency caused it to misrepresent what Other Order 150 actually said. The agency is caught on the horns of a dilemma. If it had jurisdiction, it was compelled to grant Appellant a hearing.12 If it did not have jurisdiction, it had no authority to decide anything else.13 In trying to avoid this dilemma, the agency misrepresents what Other Order 150 actually said. The most glaring example is on page 6 of its brief, where the agency claims, in bold print, that Other Order 150 reflected "AOGCC's determination that the Hilcorp leak was not waste...."14 This is not accurate. 9 AS 31.05.070(a). 10 AS 31.05.060(a). 11 Id. 12 AS 31.05.060(a). 13 "Jurisdictional defects deprive the agency of power to adjudicate or regulate the subject matter." Far North Sanitation, Inc. v. Alaska Public Utilities Commission, 825 P.2d 867, 870 (Alaska 1992). 14 Appellee's Brief, p. 6. Other examples include Appellee's Brief at p. 1: "Whether AOGCC's determination that leaking commercial fuel gas was not waste within AOGCC's jurisdiction was reasonable." And see Appellee's Brief at p. 11: "French's claim that Other Order 150 did not make a waste determination cannot be reconciled with Other Order 150." 3 Other Order 150 stated repeatedly that the agency was incapable of making a waste determination: 1. "Once metered and severed from property AOGCC's authority to make a waste determination regarding use of the oil or gas is at an end."u 2. "AOGCC does not have waste jurisdiction over gas Hilcorp purchased from Harvest."16 Other Order 150 disclaimed jurisdiction over the gas leak — "Absent jurisdiction, there is no basis for a hearing."17 Other Order 150 did not make a determination that the gas leak was not waste, as Appellee's brief erroneously claims. The contradiction between Other Order 150 and the agency's brief on appeal regarding the central issue of this case cannot be reconciled in any legally coherent way. Appellee's brief, in trying to massage Other Order 150 into something it is not, throws confusion on the nature of jurisdiction. No statement captures this confusion better than this one: "[a]bsent waste, there is no waste jurisdiction."18 This does not reflect a sound understanding of the concept of jurisdiction. 15 Exc.002. 16 Id. 17 Id. i8 Appellee's Brief at 10. On the same page: "French's arguments fallaciously equate subject matter jurisdiction — a determination whether waste has occurred — with AOGCC's statewide geographic jurisdiction if AOGCC determines waste has occurred." (emphasis in the original). Appellant expects that his disappointment in not having the difference between subject matter jurisdiction and geographic jurisdiction elucidated by Appellee is shared by the Court. And see Appellee's Brief at 21: "French was entitled to a hearing only if the leak was waste." 4 "Jurisdiction is authority to decide the case either way."19 The esteemed author of the preceding sentence, Oliver Wendell Holmes, did not invent this formulation. Coke (one of the few common law jurists to try to define jurisdiction) stated that `jurisdiction is the authority to decide or give judgment among parties concerning actions to be taken over people and property ... "I AOGCC's contention in its brief that there is no jurisdiction unless there is waste gets Holmes and Coke backwards. It puts the cart before the horse. Jurisdiction, understood correctly, concerns whether the agency had the power to decide this case. The purpose of this appeal is to find out whether the agency had jurisdiction over the leak of gas in Cook Inlet. If the agency had jurisdiction, it had the authority to decide whether the leaked gas constituted waste. This conception of jurisdiction is consistent with how this Court has described subject matter jurisdiction. Subject matter jurisdiction is `the legal authority of a court to hear and decide a particular type of case.' The doctrine of subject matter jurisdiction applies to judicial and quasi-judicial bodies to ensure that they do not overreach their adjudicative powers. Subject matter jurisdiction is a prerequisite to a court's ability to decide a case: `[A] court which does not have subject matter jurisdiction is without power to decide a case."' 19 The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25 (1913). 20 S. Dorsett & S. McVeigh, Jurisdiction (New York: Routledge, 2012), 4. 21 Northwest Medical Imaging, Inc. v. State, Dept. of Revenue, 151 P.3d 434, 438 (Alaska 2006)(internal citations omitted); and see Robert J. Martineau, Subject Matter Jurisdiction on Appeal: Reining in an Unruly Horse, 1988 BYU L. Rev. 1, 3: "Courts and commentators have little difficulty in agreeing on an abstract definition of subject matter jurisdiction. There is a consensus that subject matter jurisdiction means the authority to adjudicate the type of controversy involved in an action." Having these precepts in mind reveals the flaw in AOGCC's formulation of the issue presented by this case. The agency incorrectly frames the issue this way: "Whether AOGCC's determination that the leaking commercial fuel gas was not waste within AOGCC's jurisdiction is reasonable."22 Again, Other Order 150 did not make a determination. Other Order 150 specifically denied the power to make a determination: "Once metered and severed from the property, AOGCC's authority to make a waste determination is at an end."23 The agency on appeal attempts to rewrite Other Order 150: "The order cannot be read without understanding that downstream gas is not deemed waste by AOGCC."24 Appellant begs to disagree. The order is consistent about a lack of jurisdiction; the agency in Other Order 150 is declaring itself "without power to decide."25 The agency on appeal would prefer to have it both ways, and thus escape from its dilemma. It wants credit for having enough jurisdiction to make a determination about the leaked gas, but not so much jurisdiction as would require it to hold a hearing. This Court must rectify this error. The question for this Court is whether the AOGCC, "an independent quasi-judicial agency of the state,"26 had subject matter jurisdiction over the gas leak in Cook Inlet. A gas leak that went on for months. A gas leak that caused a producing oil platform to shut 22 Appellee's Brief at 1. 23 Exc.002. 24 Appellee's Brief at 11. 25 Northwest Medical Imaging, 151 Pad at 438. 26 A.S.31.05.005(a). 0 down. If the Court finds that AOGCC did have jurisdiction, then the case should be remanded for a hearing before the agency. B. Appellant's petition was sufficient to trigger a hearing. AOGCC suggests in its brief that the petition filed in this case was somehow deficient.27 The agency seems to be hinting that, if only Appellant had framed his petition differently, his request for a hearing would have been granted. This Court should not countenance such charades. Both the federal and the state constitution protect Appellant's right to petition the government 28 "Petition, as a word, a concept, and an essential safeguard of freedom, is of ancient significance in the English law and the Anglo-American legal tradition."" The idea behind the right has been explained by scholars this way: The original design of the First Amendment petition clause — stemming from the right to petition local assemblies in colonial America, and forgotten today — included a governmental duty to consider petitioners' grievances.3o "Petitions to the government assume an added dimension when they seek to advance political, social, or other ideas of interest to the community as a whole."31 French's petition 27 "Since waste was the only jurisdictional basis claimed in French's petition, AOGCC entered Other Order 150, denying his demand for a hearing." Appellee's Brief, p. 2. "Because waste was the only matter within AOGCC's jurisdiction alleged in French's demand for a hearing, AOGCC denied his demand." Appellee's Brief, p. 5. 28 U.S. Const. amend. I; Alaska Const. Art. I § 6: "The right of the people peaceably to assemble, and to petition the government shall never be abridged." 29 Borough of Duryea, Pennsylvania, et. al. v. Guarnieri, 131 S. Ct. 2488, 2498 (2011). 30 Stephen A. Higgenson, A Short History of the Right to Petition Government for the Redress of Grievances, 96 Yale L. J. 142, 142-143(1986)(internal citations omitted)(emphasis supplied). 31 Borough of Duryea, 131 S. Ct. at 2498. FA alleged that waste occurred as a result of a gas leak.32 The gas leak was a matter of public concern. The leak "garnered a tremendous amount of publicity."33 AOGCC cannot escape its duty to conduct a hearing by suggesting that it might have other forms of jurisdiction downstream of the custody transfer meter which, unfortunately, Appellant failed to invoke. The agency has a duty to consider Appellant's petition in a hearing. C. The Legislature's actions or inactions are irrelevant. `Spurious' barely describes the argument AOGCC advances in its brief regarding the actions of the Alaska Legislature. The agency claims French is ignoring "the Alaska Legislature's response to AOGCC's determination."34 The analysis here begins by asking exactly which determination AOGCC is referring to? The agency's first public pronouncement on this matter was Other Order 150, which was issued March 20, 2019.35 Appellant hopes that this is enough to eliminate the 2017 and 2018 Legislatures from consideration. Once Other Order 150 was decided, anyone, including legislators, would have been able to see that the commission's order was immediately appealed. Appellant could as legitimately assert that his confirmation as the public commissioner to the agency by the Legislature in 2017 was a ratification by the Legislature of his view of the scope of the agency's jurisdiction. Better in this instance to heed the words of Justice Frankfurter, who wrote that "we walk on quicksand when we try to find in the absence of corrective legislation a controlling 32 Exc.001. 33 Appellee's Brief, p. 12. 34 Id. 35 EXc.002. 3 legal principle.1136 Or heed the words of the commission itself, when it described legislative inaction as a "weak reed" upon which to rely37 In any event, AOGCC's reliance on the Legislature is misplaced. D. CINGSA creates insuperable difficulties for AOGCC's position. CINGSA is an underground storehouse of gas located on the Kenai Peninsula. The facility stores natural gas collected from other sites by injecting it into a mostly depleted rock formation nearly a mile underground — the Sterling C Reservoir — so that it can be withdrawn in wintertime when the demand for natural gas exceeds what local production can immediately supply.38 In its own publication, AOGCC described the legislation that put CINGSA under its authority as having "clarified," not extended, its jurisdiction.39 Appellant raised this point in his opening brief in hopes that AOGCC would, in its brief, address its own words on this issue and explain where, under its theory of the case, it would draw the jurisdictional boundary into and out of CINGSA.40 AOGCC failed to do either. Instead, it offers the unsupported assertion that "AOGCC's jurisdiction to order CINGSA to rectify any issues with gas leaking from the storage reservoir... would not make any leaking gas owned by 36 Helvering v. Hallock, 309 U.S. 106, 121 (1940), and see William N. Eskridge, Jr., Interpreting Legislative Inaction, 87 Mich. L. R. 67, 90-95 ("Problems with Inferring Legislative Intent from Legislative Inaction")(1988). 37 "The commission and ConocoPhillips respond that legislative inaction is a `weak reed' to lean on in construing a statute." Allen v. Alaska Oil and Gas Conservation Commission, 154 P.3d 664, 669 (Alaska 2006). 38 Kenai Landing, Inc. v. Cook Inlet Nat. Gas Storage Alaska, LLC, 441 P.3d 954, 957 (Alaska 2019). 39 "Other changes clarified the Commission's authority to regulate underground storage of natural gas." AOGCC, AOGCC, 50 Years of Service to Alaska, p. 68 (rev 10/10/10), available at 333 W. 71 Ave., Anchorage, AK. 40 Appellant's Brief at 36 and 38. CINGSA waste."41 The sentence comes without explanation or footnote. The agency is in full retreat from its responsibilities. The agency's willingness to abandon its central mission — to prevent waste — over a vital reserve of gas is inexcusable. Its inability to grapple with the legal problems that attend its misconceptions about jurisdiction should indicate to the Court that its position is unworkable. Moving a hydrocarbon from one reservoir to another is good engineering, as it leads to greater ultimate recovery for the state of Alaska as a whole. Whether the gas is ultimately used to fuel a turbine, or to heat homes in southcentral Alaska, everyone benefits. Yet the AOGCC's narrow conception of its jurisdiction removes itself from policing any leaks, no matter how large, that occur in the process, and thwarts its statutory mission to prevent waste. Physical waste is generally defined as `the loss of oil or gas that could have been recovered and put to use,' and further described to include the `failure to recover the maximum quantity [of oil or gas] which theoretically could be produced.' Accordingly, any circumstance that precludes recovery of all the oil or gas that would otherwise be economically recoverable from a given property may be said to cause physical waste of those hydrocarbon resources. 42 The same analysis applies to the leak in this case. The unidentified reservoir or reservoirs that supplied gas to the fuel gas line punning to Platform A lost energy unnecessarily, and the Middle Ground Shoal reservoir that relied on the gas to help it 41 Appellee's Brief at 18. 42 John W. Broomes, Waste Not, Want Not: The Marketable Product Rule Violates Public Policy Against Waste of Natural Gas Resources, 150 Kan. L. Rev. 149, 179 (2014)(citing to 8 Patrick H. Martin & Bruce M. Kramer, Williams & Meyers Oil and Gas Law at 765 and 1133 (2009)). 10 produce, lost production. No one benefited from this months -long release of gas to the atmosphere. There is nothing good about gas leaking directly to the atmosphere. The agency's focus on waste only upstream of the custody transfer meter blinds it to the negative effects of gas leaks to the state as a whole which occur downstream of the meter. The custody transfer meter is important, but it is not a jurisdictional boundary. Disclaiming jurisdiction over hydrocarbons at the custody transfer meter is bad policy. E. AOGCC ignores the public interest in preventing waste. The agency on appeal defines waste as narrowly as possible. It claims, without citation to any statutory language, that the definition of waste relates to "upstream drilling and production,"43 and that the "purpose of the prohibition against waste is to ensure the maximum ultimate recovery of the gas or oil from a reservoir or pool.1144 This narrow view ignores the broader view of waste outlined in the previous section, and ignores over one hundred years of jurisprudence that recognizes the public interest in preventing waste. Here is an early formulation of this idea: Statutes prohibiting waste and regulating the taking of gas and oil from the soil are usually upheld as a valid exercise of the police power, because of the value of these commodities to the public 45 The agency's myopic view of waste is severely undercut once the value of the natural gas to the public is taken into account. The simplest hypothetical illustrates this. 43 Appellee's Brief at 7. 44 Appellee's Brief at 7-8. And see Appellee's Brief at 9: "Once metered and severed, the goal of maximizing recovery from a reservoir where it was produced is achieved." 45 H. H. Rumble, Limitations on the Use of Property by Its Owner, 5 Virginia L. Rev. 297, 304 n. 7 (1918)(citing to Townsend v. State, 147 Ind. 624, and Ohio Oil Co. v. Indiana, 177 U. S. 190)(emphasis supplied). 11 Imagine a gas leak just a few feet downstream of the custody transfer meter for a lease that vents any or all of the lease's gas production to the atmosphere. The reservoir is producing to its fullest, but the public interest is damaged. The public's interest in putting that gas to some beneficial use is reduced by the amount of the leak. Court decisions have recognized this interest. Referring to oil and gas, the Supreme Court of California in 1930 wrote: [b]ecause of their peculiar nature the public has a definite interest in their preservation from waste and destruction. This is true because of their character as natural resources and also because the public interest has attached by virtue of positive statutory law or by court judgment independent of statute. 46 The preceding articulation of the public interest as being rooted in the inherent value of natural resources to the public would be ably summed up a few years later this way: The public has, however, an important interest in the deposits of oil and gas because of their vital character and their general use by the public and may, in its own behalf, control their capture by the lawful owners and also protect these owners as between themselves from any acts of their number which might result in waste or other similar prejudice to their common interest.47 These precepts found expression in Alaska's petroleum conservation statutes. The broad reach of the AOGCC's jurisdictional statutes combined with the blanket statewide prohibition against waste, and a definition of waste that is a wide or wider than any other state's defmition,48 all point in the same direction, and to the same end. Alaska law 46 People v. Associated Oil Co., 211 Cal. 93, 102 (Cal. 1930). 47 Wm. E. Colby, The Law of Oil and Gas, 31 Cal. L. Rev. 357,364 (1943). 48 Appellant's Brief at 26. 12 recognizes that there is a public interest in the conservation of natural resources49 and that the protection of state natural resources vindicates an important public interest.50 These values are not served by the truncated view of jurisdiction expressed in Other Order 150. CONCLUSION Appellant respectfully seeks an order from this Court reversing the court below, and remanding this case for a hearing before the AOGCC. kKQT_�� Hollis S. French AK Bar No. 9606033 Dated January 18, 2021 Typeface Certification I certify that the typeface in this document is 13-point Times New Roman. Hollis S. French 49 Exxon Corp. v. State, 40 P.3d 786, 791 (Alaska 2001). so Cabana v. Kenai Peninsula Borough, 21 P.3d 833, 837, n. 16 (Alaska 2001). 13 Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER. Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email corrections@akcourts.gov. THE SUPREME COURT OF THE STATE OF ALASKA HOLLIS S. FRENCH, Appellant, V. ALASKA OIL & GAS CONSERVATION COMMISSION, Appellee. Supreme Court No. S-17822 Superior Court No. 3AN-19-06694 CI OPINION No. 7553 — September 3, 2021 Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, Eric A. Aarseth and Adolf V. Zeman, Judges. Appearances: Hollis S. French, Anchorage, Appellant. Thomas A. Ballantine, Senior Assistant Attorney General, Anchorage, and Clyde "Ed" Sniffen, Jr., Attorney General, Juneau, for Appellee. Before: Winfree, Maassen, and Carney, Justices. [Bolger, Chief Justice, and Borghesan, Justice, not participating.] WINFREE, Justice. I. INTRODUCTION An agency denied an individual's request for a hearing regarding a reported natural gas leak and whether the leak constituted "waste" under Alaska law. The agency concluded it had no jurisdiction over the matter because it previously had investigated and had concluded the leak did not constitute "waste." The individual appealed to the superior court, which affirmed the agency's decision. We reverse. II. FACTS AND PROCEEDINGS The Alaska Oil and Gas Conservation Commission is a quasi-judicial agency charged with investigating waste of oil and gas resources.' The parties agree that in early 2017 a gas line operated by Hilcorp Alaska, LLC leaked gas into Cook Inlet. In February 2019 Hollis French petitioned the Commission "for a hearing on a complaint of waste." French alleged: "The waste occurred from a[n] 8 [inch] line carrying fuel gas to Platform A in Cook Inlet, which is operated by Hilcorp. The line leaked gas to the atmosphere for approximately three months in the winter and spring of 2017." French noted that at the hearing he would "be urging the [C]ommission to take action upon [his] complaint." The Commission responded in March 2019, stating that it had "investigated the leak at the time it occurred" and that it had concluded "the leaking gas had been purchased by Hilcorp from a third -party provider ... and was being shipped back to Platform A." The Commission stated it had already concluded that, because the leaking gas had been "metered and severed from the property," the leaking gas could not be waste and the Commission therefore had no `waste jurisdiction over [the] gas." AS 31.05.005(a) (describing Commission as "independent quasi-judicial agency of the state ... composed of three Commissioners appointed by the governor and confirmed by the legislature in joint session"); AS 31.05.030(b) (requiring Commission to "investigate to determine whether ... waste exists or is imminent, or whether ... facts exist which justify or require action by it"); see also AS 31.05.170(15) (defining waste). See AS 31.05.060(a) (noting that "[C]ommission may act upon ... the petition of an interested person" and that "[o]n the filing of a petition concerning a matter within the jurisdiction of the [C]ommission .... the [C]ommission shall promptly fix a date for a hearing[] and shall cause notice of the hearing to be given"). -2- 7553 According to the Commission, "[a]bsent jurisdiction, there [was] no basis for ahearing." French requested reconsideration, which was denied by operation of law.' French appealed to the superior court, which affirmed the Commission's decision. The court applied rational basis review and concluded the Commission's determination, that gas once metered and severed from a property could not be waste, was reasonable. French moved for reconsideration, arguing that the superior court failed to address the agency's conclusion regarding its jurisdiction over the gas leak. The court denied French's motion for reconsideration. At the Commission's request, the superior court awarded the Commission $6,270 in attorney's fees.' French appeals. III. STANDARD OF REVIEW "When the superior court is acting as an intermediate court of appeal in an administrative matter, we independently review the merits of the agency or administrative board's decision."5 "We exercise our independent judgment on [any] issue concerning the scope of an agency's authority [because] it involves statutory interpretation, or analysis of legal relationships, about which courts have specialized knowledge and expertise."' We review an agency's factual findings "to determine ' See AS 31.05.080(a) (providing that failure to grant or refuse application for reconsideration within ten days of filing "is a refusal of [the application] and a final disposition of the application"). ` See Alaska R. App. P. 508(e). 5 Shea v. State, Dep't ofAdmin., Div. of Ret. & Benefits, 267 P.3d 624, 630 (Alaska 2011). 6 Regulatory Comm'n of Alaska v. Matanuska Elec. Assn., 436 P.3d 1015, 1025 (Alaska 2019) (first alteration original) (quoting Far N. Sanitation, Inc. v. Alaska Pub. Utils. Comm'n, 825 P.2d 867, 871 n.6 (Alaska 1992)). -3- 7553 whether they are supported by substantial evidence," meaning "such relevant evidence as a reasonable mind might accept as adequate to support [the agency's] conclusion." IV. DISCUSSION "The [C]ommission may act upon its own motion[] or upon the petition of an interested person. On the filing of a petition concerning a matter within [its] jurisdiction ... , the [C]ommission shall promptly fix a date for a hearing, and shall cause notice of the hearing to be givens' French filed a petition alleging that the Cook h- let gas leak constituted waste. The parties appear to assume that French is an interested person. The only issue thus is whether French's petition contained a matter within the Commission's broad jurisdiction. "The [C]ommission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter."' French argues that because the Commission is required to "investigate whether waste exists," the text of the statute gives the Commission jurisdiction over waste determinations.1" French also presents several policy arguments why the jurisdiction statute should be read broadly. The Commission concedes that it "has statewide jurisdiction over waste" but argues that it was required to determine whether the leak was waste before it could exercise jurisdiction because "[a]bsent waste, there is no waste jurisdiction." Shea, 267 P.3d at 630 (quoting Lopez v. Adm'r, Pub. Emps. ' Ret. Sys., 20 P.3d 568, 570 (Alaska 2001)). 8 AS 31.05.060(a). 9 AS 31.05.030(a). 10 See AS 31.05.030(a)-(b). -4- 7553 The Commission's jurisdiction argument puts the cart before the horse. The Commission's mission is investigating and identifying oil and gas waste," and it therefore has jurisdiction over "all persons and property, public and private, necessary to" investigate and identify oil and gas waste." The Commission thus had jurisdiction over the leak at issue. If we accepted the Commission's understanding of jurisdiction, the Commission could always undermine AS 31.05.060(a)'s hearing requirement by deciding the substantive issue behind closed doors and then disclaiming jurisdiction. The Commission argues that it properly denied French's request for a hearing because it already had investigated the leak and made a waste determination. But even assuming the Commission can deny a hearing because it previously investigated and decided a matter, the factual assertion that it has done so must be supported by substantial evidence." The Commission's statements about having investigated whether the leak was waste are wholly unsupported. The Commission's dismissal order contains several factual statements about the alleged investigation and waste determination, but there is no supporting evidence in the administrative record. French's request for a hearing therefore was improperly denied. The Commission has jurisdiction over waste determinations, and substantial evidence does not support its assertion that it investigated and concluded this leak was not waste. 11 AS 31.05.030(b) ("The [C]ommission shall investigate to determine whether or not waste exists or is imminent, or whether or not other facts exist which justify or require action by it.'). 12 See AS 31.05.030(a). 13 See supra note 7 and accompanying text. -5- 7553 V. CONCLUSION The superior court's decision is REVERSED, its attorney's fees award is VACATED, and this matter is REMANDED to the Commission for further proceedings consistent with this opinion. -6- 7553 7 February 7, 2022 AOGCC 333 W. Seventh Avenue Anchorage, AK 99501 RE: Other Order 191 Dear Commission, Teddy Roosevelt would not be impressed. You should reconsider Other Order 191. Your "investigation" failed to quantify the amount of gas that leaked to the air, and failed to quantify the amount of oil production lost from Platform A, and failed to account for CINGSA. The failure to do any of these three critical steps is indicative of the agency's weak powers of thought. Most damning of all, however, was the Commission's failure to articulate a legal basis for its decision. The Lost Oil and Gas. The agency concedes there was a gas leak. The commission never bothered to try to quantify the amount of gas lost to the leak. Was it an MCF? A BCF? A TCF? Is the Commission even interested, if only on an intellectual level? Wouldn't the size of a leak be something a "conservation" agency would look into? More embarrassing to the agency is that it makes not one mention of the lost oil production from Platform A. This is a shocking oversight for an agency that claims to be the king of "everything downhole." The oil wells on Platform A died and stopped producing as a direct result of the leak. If an AOGCC commissioner had been on Platform A the day the oil wells were shut in, and asked the operator why that action was being taken, the operator would have answered, "Because of the gas leak, dumbass."l It is shocking that the agency could write, in Other Order 191, that "[tihe primary purpose behind the prohibition against 'waste' is to maximize ultimate resource recovery." Was the state of Alaska's "ultimate resource recovery" maximized because of the leak? No, it was not. In fact, it was diminished. Exhibit A, attached, is the letter sent by DNR to Hilcorp on October 25, 2018, which outlines in detail the loss of production due to the shutdown caused by the leak. The agency has had this letter in its possession since this litigation began. It has utterly failed to offer the slightest evidence to the contrary. Don't be offended. This is just how operators talk. Monthly production data for the Middle Ground Shoal in 2017 shows the following: Month Barrels March 41,791 April 72 May 55 June 0 July 0 August 0 September 19,564 As any person of ordinary intelligence can readily observe, shutting down the platforms reduced the oil production from them dramatically. The platforms were shut down because of the gas leak. The gas leak caused the reduction in oil barrels produced. In other words, resource recovery was impaired due to the wasted gas. When oil production is lost because of a gas leak, that is wasteful. Even Hilcorp would admit to that, if you had the courage to ask them. Here's how, after reconsideration, the agency should re -write Other Order 191 to account for its weakling position: "A gas leak caused the loss of oil production from Platform A. The gas leak was, to the best of our engineering ability, calculated at mcf. The loss of oil production caused by the leak amounted to barrels. We are totally 100% OK with that and don't see any problems. If a similar situation happens in the future, that's just too bad. We can't do anything about it. Because, custody transfer meter. Signed, AOGCC " CINGSA. The agency cannot seem to understand that CINGSA is a vital part of the gas distribution system in Southcentral Alaska. It did not mention the word "CINGSA" in its Order. It did not indicate whether CINGSA was importing gas during the time of the leak, or whether, as is more likely given the winter months involved, that CINGSA was exporting gas. The agency has failed to make jurisdictional sense of CINGSA. It has yet to indicate why it wrote, in its own publication, that the legislation that created CINGSA, "clarified"' its jurisdiction, rather than "extended" or "expanded" its jurisdiction. The agency has never indicated where, under its 2 "Other changes clarified the Commission's authority to regulate underground storage of natural gas." AOGCC, AOGCC, 50 Years of Service to Alaska, inside cover (rev. 10/10/10), available at 333 W. 7th Ave. Anchorage, AK (still several boxes of these in storage, last time I looked]. cramped notion of jurisdiction, it regains jurisdiction of gas that is stored in CINGSA. It has never indicated where it loses jurisdiction over the gas that leaves CINGSA. CINGSA is a black hole of inconsistencies for the agency. The Law. The agency makes some severely inaccurate claims about waste and about its own enabling act in Other Order 191.1 To make sure we are all on the same page, Exhibit B, attached, is a copy of the statutes that make up the agency's enabling act. (If you believe I've left one out, please bring that to my attention.) Let's begin with the first and foremost of the agency's misstatements, which claims that oil or gas downstream of a custody transfer meter "can no longer be the basis of a waste determination under the Act." Please point out the statute in the Act that says so. Write it here: One of the statutes must say what you claim it says. Just point it out. It must be a marvelous statute that undercuts this one, which the Alaska Supreme Court took note of: "The (Cjommission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter." This is statute is generally identified as AS 31.05.030(a). See? It's not hard to specifically identify a statute. The Alaska Supreme Court did it. You can tool There must be some law that says something like: "These powers only extend to the custody transfer meter." Where is it? You may find it difficult to locate the statute. The first problem is that the words "custody transfer meter" do not appear in the agency's enabling act. At least, that's what I think. So, if you do locate those words — "custody transfer meter" -- in a statute in your enabling act, well, you will have made a fool out of me. I looked and looked and looked. I never could find them. If you locate the pivotal statute, the one you claim exists, you will be a greater reader of statutes than I am, by far. Here's your big chance! The second and third examples are a lot like the first one, and subject to the same problem. And they are directly contradicted by ..... (not me) ....... the Alaska Supreme Court. Look right here: 3 Examples: (1) "The custody transfer meter — where volumes of oil and gas are measured, royalties and taxes determined, and ownership of the oil or gas is transferred — is the point at which AOGCC has always deemed oil and gas resources to have been recovered. It is at this point that gas or oil can no longer be the basis for a waste determination under the Act" and (2) "The AOGCC does not have authority under the Alaska Oil and Gas Conservation Act (the Act) to make a determination related to post -production use of commercially sold gas" and (3) "Nothing in the AOGCC's enabling act or its legislative history suggests that the Alaska Legislature intended to expand the AOGCC's authority to regulate wasteful uses of oil or gas after it has been produced and purchased." "The Commission's mission is investigating and identifying oil and gas waste, and it therefore has jurisdiction over `all persons and property, public and private, necessary to' investigate and identify oil and gas waste. The Commission thus had jurisdiction over the leak at issue."" See the contradiction? The agency is AGAIN5 claiming that it does not have the "authority" to make a determination about waste downstream of the meter. But .... AS 31.05.030(a), [THE LAW] and the Alaska Supreme Court [HIGHEST STATE COURT] say the opposite, that AOGCC has JURISDICTION and AUTHORITY over ALL PERSONS and PROPERTY, PUBLIC and PRIVATE. Let's stop and think for just one second. What is a custody transfer meter? Is it a person or is it property? Let's go with property. Now, is it public property or private? Let's go with private. The statute says AOGCC has AUTHORITY over that piece of equipment and the pipes that lead up to it, and lead away from it. Amazing, don't you agree? The agency also has AUTHORITY over the gas inside the pipes, even if it is.....private property! Wow! The magic of the law. Here's the next thing you might want to think about: "Jurisdiction is authority to decide the case either way.116 If you don't understand the preceding sentence, hire an attorney who can explain it to you. You have the ability to do so — but don't take my word for it. Read AS 31.05.021(b). The agency has painted itself into a corner. It wants Alaskans to believe that the law somehow stops it from declaring that the gas that went to the atmosphere for several months was waste. But, poor thing, it can't cite the specific statute to support its belief. What is a weak little agency to do? All you have to do to get out of this jam is cough up the statute. Write it up there, in that blank spot. French v. AOGCC, No. 7553, September 3, 2021, p. 5. See also p. 6: "The Commission has jurisdiction over waste determinations." Black letter law. s See Other Order 150. e The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25 (1913). Justice Holmes, writing for the Court_ Mark the Flanges. If the agency decides to continue its present course it should at least perform the duty of marking its boundaries, that is, should mark the places beyond which it no longer will perform its statutory duties. The public has a right to know where its governmental agencies have power, and where they (supposedly) don't. Generally, one can only assume, this boundary will be within some proximity of the "custody transfer meter." The agency should begin on the Kenai Peninsula, marking the all the flanges or other demarcation point it chooses to uses. Be careful around CINGSA! When you finish that job, do the North Slope. Flammability. Flammable' is gas On both sides of the meter. Try It. Try it. Fine Hilcorp. $1 for the gas leak. See if they pay the fine, or if they object that the agency doesn't have the power to act under its statutes. Ha! Irene Ryan and Teddy Roosevelt. Do you think that Irene Ryan knew the difference between a lease and a state? Do you think she knew that gas was flammable? The law is only as powerful as the public servants who administer it. Isn't it a pity that the agency can't find one - not one - within its ranks with any sense of public spirit? Does the public gain anything by a gas leak? What the hell do you think Teddy Roosevelt would do with the laws you have in your hands? What a bunch of wimps. Sincerely yours, Hollis S. French ' See AS 31.05.170(15)(G): "the creation of unnecessary fire hazards". This is from the definition of "waste." The Legislature said in plain English that creating an unnecessary fire hazard with natural gas is wasteful anywhere it happens in the state. Why is this so difficult for you to understand? e xk, b',+ A THE STATE 01ALASKA GOVERNOR BILL WALKER October 25, 2018 Michael W. Schoetz Hilcorp Alaska, LLC PO Box 244027 Anchorage, AK 99524-4027 Department of Natural Resources DIVISION OU Oil S, 6AS Su) w 7' A%OWC. Sure 1 106 AwMMagr. AK �Ni$01.3ci�, Rlam 907 21-9 88114 f ax. 907.269 x939 CERTIFIED MAIL RETURN SERVICE REQUESTED Re: Middle Ground Shoal A Platform Royalty Reduction Decision Dear Mr. Schoetz: The Department of Natural Resources (DNR) received your September 21, 2018 letter requesting a royalty reduction pursuant to AS 38.05.180(f)(6)(C). On the Commissioner's behalf, Division staff requested additional information via email from Hilcorp Alaska, LLC (Hilcorp) staff on October 15, and received a reply on October 19. Based on this information and publicly available data concerning production from the Middle Ground Shoal A Platform, formerly known as XTO A, the Commissioner denies your request. AS 38.05.180(f)(6)(1) states that royalty may only be reduced if production from the platform drops below 975 barrels of oil per day (BOPD), but is: Not the result of short-term production declines due to mechanical or other choke -back factors, temporary shutdowws or decreased production due to environmental orfacility constraints, or market conditions. The Middle Ground Shoal A Platform was temporarily shut down in 2017 due to a leaking fuel gas pipeline. The leak posed a risk to the environment, thus the shutdown to address the teak was due to environmental constraints. The leak itself was also the result of mechanical issues with the pipeline, so the shutdown was also due to mechanical factors. Production information demonstrates that current production has dropped below 975 BOPD because of the shutdown. Prior to this shutdown, production was approximately 1,150 BOPD. Production returned at approximately 1,000 BOPD, and has since declined below 975 BOPD. Production in general from this platform had been in decline, but a decline curve analysis of oil production prior to the shutdown shows that production would not have declined to 1000 BOPD by the date production returned. Importantly, the decline curve shows that without the 2017 shutdown production would currently be above 975 BOPD. Instead, the shutdown appears to have impacted flow capacity of the existing wells, which in turn caused production to return at a lower rate than the reservoir is capable of. This fifteen percent decline following the temporary shutdown was thus the result of the mechanical factors and environmental constraints that led to the temporary shutdown. If not for the shutdown and the sharp production drop it caused upon Middle Ground) Shoal A Platform Royalty Reduction Decision Page 2 of 2 startup, current production would not be less than the statutory benchmark of 975 BOPD required to trigger royalty reduction. Therefore, current oil production of less than 975 BOPD was the result of a short-term production decline due to a temporary shutdown. Because your application does not meet the requirements of the statute, the request for royalty reduction is denied. An eligible person affected by this decision may request reconsideration of it in accordance with 11 AAC 02. Any request for reconsideration must be received within 20 calendar days after the date of "issuance" of this decision, as defined in 1 I AAC 02.040(c) and (d), and may be mailed or delivered to Andrew T. Mack, Commissioner, Department of Natural Resources, 550 W 7th Avenue, Suite 1400, Anchorage, Alaska 99501; faxed to 1-907-269-8918; or sent by electronic mail to dnr.appeals@alaska.gov. This decision takes effect immediately. An eligible person must first request reconsideration of this decision in accordance with l 1 AAC 02 before appealing this decision to Superior Court. If the Commissioner does not act on a request for reconsideration within 30 days after issuance of this decision, the request for reconsideration is considered denied and this decision becomes a final administrative order and decision on the 31 st day after issuance for the purposes of an appeal to Superior Court. A copy of I 1 AAC 02 may be twined from any regional information office of the Department of Natural Resources. Sinc e , A164 Andrew T. Mack Commissioner CC: Chantal Walsh, Director, Division of Oil & Gas Alaska Statutes Title 31. Oil and Gas. Chapter 05. Alaska Oil and Gas Conser- vation Act. § 31.05.005. Alaska Oil and Gas Conser- vation Commission created. (a) There is created as an independent quasi-judicial agency of the state the Alaska Oil and Gas Conservation Commission, composed of three commissioners appointed by the governor and confirmed by the legislature in joint session. In making appointments to the commission under AS 31.05.009 and this subsection, the governor shall consider and give preference to a person who demonstrates experience in oil and gas operations in the state. (b) The governor shall designate one member of the commission as chair of the commission. This member shall serve as chair for a term of four years, but may not be appointed for successive terms as chair of the commission. § 31.05.007. Term of office; vacancy; removal. (a) The term of office of each member is six years. A commissioner, upon the expiration of a term, shall continue to hold office until a successor is appointed and qualified. (b) A vacancy arising in the office of a commissioner shall be filled by appointment by the governor and confirmed by the legislature in joint session, and, except as provided in AS 39.05.080f4 , an appointee selected to fill a vacancy shall hold office for the balance of the full term for which the predecessor on the commission was appointed. (c) A vacancy in the commission does not impair the authority of a quorum of commissioners to exercise all the powers and perform all the duties of the commission. (d) The governor may remove a commissioner from office for cause including but not limited to incompetence, neglect of duty or misconduct in office. A commissioner, to be removed for cause, shall be given a copy of the charges and afforded an opportunity to be publicly heard in person or by counsel in the commissioner's own defense upon not less than 10 days' notice. If a commissioner is removed for cause, the governor shall file with the lieutenant governor a complete statement of all charges made against the commissioner and the governor's finding based on the charges, together with a complete record of the proceedings. § 31.05.009. Qualifications of members. Members shall be qualified as follows: (1) one member shall be a petroleum engineer who (A) holds a certificate of registration as an engineer under AS 08.48 and, under regulations adopted to implement that chapter, has qualified as a petroleum engineer; or (B) has earned a degree from a university in the field of engineering and has at least 10 years of professional subsurface experience in the oil and gas industry in drilling, well operations, production process operations, reservoir engineering, or a combination thereof; for the purposes of this subparagraph, a person meets the requirement of earning a degree in the field of engineering if the person obtains an undergraduate or graduate degree in engineering that meets the requirements for program accreditation by the Engineering Accreditation Commission of the Accreditation Board for Engineering and Technology and the person completes university or industry training specific to petroleum engineering that illustrates application of engineering principles to the problems encountered and methods used in the petroleum industry, including drilling, production, reservoir engineering, fluid flow through subsurface formations, and hydrocarbon transportation; (2) one member shall be a geologist who (A) holds a certification as a professional geologist under AS 08.0 .0U and has professional experience in the field of petroleum geology; or (B) has earned a degree in the field of geology from a university accredited in the field of geology and has a minimum of 10 years professional experience in the field of petroleum geology; and (3) one member who shall have training or experience that gives the person a fundamental understanding of the oil and gas industry in the state. § 31.05.011. Quorum. Two members of the commission constitute a quorum for the transaction of business, for the performance of a duty, or for the exercise of a power of the commission. § 31.05.013. Oath of office. Each commissioner, before entering upon the duties of office, shall take and subscribe to the oath prescribed for principal officers of the state. § 31.05.015. Compensation of members of the commission. Members of the commission are in the exempt service and shall receive an annual salary. § 31.05.017. Principal office; seal. (a) The commission shall establish a principal office and branch offices necessary to discharge its business efficiently. For the convenience of the public or of parties to a proceeding the commission may hold meetings, hearings, or other proceedings at other locations. (b) The commission shall have an official seal. § 31.05.021. Legal counsel. (a) The Department of Law shall provide full-time legal counsel to the commission. The legal counsel provided by the Department of Law is subject to the approval of the commission. (b) The commission may, subject to the approval of the attorney general, contract for the services of additional specialized legal counsel or legal consultants. § 31.05.023. Commission staff. (a) The commission shall employ such staff as it considers necessary to carry out its responsibilities. (b) The professional staff of the commission and the personal secretary of each commissioner are in the exempt service under AS a9�.25.110 . (c) The secretarial and clerical staff of the commission, except the personal secretary of each commissioner, are in the classified service. (d) In addition to its staff of regular employees, the commission may contract for and engage the services of consultants and experts the commission considers necessary. § 31.05.025. Conflict of interest. (a) Members and employees of the commission, except clerical and secretarial staff, are subject to AS 39.50. (b) A member of the commission is disqualified from voting upon any matter before the commission in which the member has a conflict of interest. § 31.05.026. Relationship to Department of Natural Resources. a) The Department of Natural Resources shall have standing before the commission to raise all issues relating to state-owned land without regard to the type of proprietary interest held by the state in that land. (b) With respect to federal land from which the state or any subdivision of the state is entitled under federal law to receive a share of the federal royalty interest, the Department of Natural Resources shall have the same standing before the commission as if it were the holder of the equivalent royalty interest. (c) When both the Department of Natural Resources and the commission have the authority to require, and do require, the submission of substantially the same information from persons subject to this chapter, the commission, in order to alleviate the administrative burdens placed on those persons, may by regulation enter into an agreement with the Department of Natural Resources whereby either the commission or the Department of Natural Resources shall have the responsibility to collect the information lawfully required by both. (d) For budget and audit procedures and considerations, the commission shall have the same standing as any other major state agency. Whenever practicable the commission may enter into state interagency agreements concerning administrative, employee relations, and fiscal duties. (e) The Department of Natural Resources shall have the same standing (no more or less) before the commission as granted by law to any other proprietary interest. § 31.05.027. Land subject to commission's authority. The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States. The authority of the commission further applies to all land included in a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.180 § 31.05.030. Powers and duties of commission. (a) The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter. (b) The commission shall investigate to determine whether or not waste exists or is imminent, or whether or not other facts exist which justify or require action by it. (c) The commission shall adopt regulations and orders and take other appropriate action to carry out the purposes of this chapter. (d) The commission may require (1) identification of ownership of wells, producing leases, tanks, plants, and drilling structures; (2) the making and filing of reports, well logs, drilling logs, electric logs, lithologic logs, directional surveys, and all other subsurface information on a well for which a permit to drill has been issued by the commission, subject to the following: (A) the reports required to be filed by the commission under this paragraph shall be filed within 30 days after the completion, abandonment, or suspension of the well; and (B) the well logs, drilling logs, electric logs, lithologic logs, directional surveys, and all other information required to be filed by the commission under this paragraph shall be filed within 90 days after the completion, abandonment, or suspension of the well, unless extended by the commission on request; (3) the drilling, casing, and plugging of wells in a manner that will prevent the escape of oil or gas out of one stratum into another, the intrusion of water into an oil or gas stratum, the pollution of fresh water supplies by oil, gas, or salt water, and prevent blowouts, cavings, seepages, and fires; (4) the furnishing of a reasonable bond with sufficient surety conditions for the performance of the duty to plug each dry or abandoned well or the repair of wells causing waste; (5) the operation of wells with efficient gas -oil and water -oil ratios, and may fix these ratios; (6) the gauging or other measuring of oil and gas to determine the quality and quantity of oil and gas; (7) every person who produces oil or gas in the state to keep and maintain for a period of five years in the state complete and accurate records of the quantities of oil and gas produced, which shall be available for examination by the commission at all reasonable times; (8) the measuring and monitoring of oil and gas pool pressures; (9) the filing and approval of a plan of development and operation for a field or pool to prevent waste, ensure a greater ultimate recovery of oil and gas, and protect the correlative rights of persons owning interests in the tracts of land affected. (e) The commission may regulate (1) for conservation purposes and, to the extent not in conflict with regulation by the Department of Labor and Workforce Development or the Department of Environmental Conservation, for public health and safety purposes, (A) the drilling, producing, and plugging of wells; (B) the perforating, fracture stimulation, and chemical treatment of wells; (C) the spacing of wells; (D) the disposal of salt water, nonpotable water, and oil field wastes; (E) the contamination or waste of underground water; (F) the quantity and rate of the production of oil and gas from a well or property; this authority shall also apply to a well or property in a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.180(n) ; (G) the underground injection of gas for purposes of storage; (2) the disposal of drilling mud, cuttings, and nonhazardous drilling operation wastes in the annular space of a well for which a permit to drill has been issued by the commission; in this paragraph, a "nonhazardous drilling operation waste" means a waste, other than a hazardous waste identified by the Environmental Protection Agency in 40 C.F.R., Part 261, , its regulation identifying and listing hazardous wastes, associated with the act of drilling a well for exploratory or production purposes. (f) The commission may classify a well or a specific portion of a well as an exploratory, development, service, or stratigraphic test well and may classify a development well as an oil or gas well for purposes material to the interpretation or enforcement of this chapter. (g) When the commission finds sufficient likelihood of an unexpected encounter of oil, gas, or other hazardous substance as a result of well drilling in an area of the state, the commission may, by regulation, designate the area and specify a depth in the area as one in which wells or any boring into the soil in excess of the specified depth but not otherwise subject to this chapter are subject to the regulations and requirements adopted under this section. The designation of an area or specification of a depth under this subsection does not constitute a certification that no hazardous substance will be encountered in another area or at a lesser depth, and the state is not liable for any damages arising from such an unexpected encounter of a hazardous substance. (h) The commission may take all actions necessary to allow the state to acquire primary enforcement responsibility under 42 U.S.C. 3OOh-1 and 42 U.S.C. 300h-4 (Safe Drinking Water Act of 1974, as amended, 42 U.S.C.S.030Of — 3001-26 ), for the control of underground injection related to the recovery and production of oil and natural gas and the control of underground injection in Class I wells, as defined in 40 C.F.R _144.6 , as amended. (i) The commission shall accept written plans submitted by lessees for purposes of, 38.05.180(f 5) . If a lessee submits a plan, the commission shall hold a public hearing on the plan and, within 45 days after receipt of the plan, grant approval of the plan if the plan contains a voluntary agreement by the lessee to use its best efforts to employ residents of this state, consistent with law, and to contract with firms in this state for work in connection with the development of the field, including the fabrication and installation of required facilities, whenever feasible. The decision of the commission to grant approval may not be appealed. 0) For exploration and development operations involving nonconventional gas, the commission (1) may not (A) issue a permit to drill under this chapter if the well would be used to produce gas from an aquifer that serves as a source of water for human consumption or agricultural purposes unless the commission determines that the well will not adversely affect the aquifer as a source of water for human consumption or agricultural purposes; or (B) allow injection of produced water except at depths below known sources of water for human consumption or agricultural purposes; (2) shall (A) regulate hydraulic fracturing in nonconventional gas wells to ensure protection of drinking water quality; (B) regulate the disposal of wastes produced from the operations unless the disposal is otherwise subject to regulation by the Department of Environmental Conservation or the United States Environmental Protection Agency; (C) as a condition of approval of a permit to drill a well for regular production of coal bed methane, require the operator to design and implement a water well testing program to provide baseline data on water quality and quantity; the commission shall make the results of the water well testing program available to the public. (k) The commission shall certify to the Department of Natural Resources the volume of oil production from a field or platform for the purposes of AS 38.05.180(f)(6)(A). (C). . and G . (I) For purposes of AS 46.04.050(c) and upon application by the operator, the commission shall evaluate the likelihood that a well at a natural gas exploration facility may penetrate a formation capable of flowing oil to the ground surface and issue a determination based on results of the evaluation. If the commission determines that evidence obtained through the evaluation demonstrates with reasonable certainty that a well will not penetrate a formation capable of flowing oil to the ground surface, it shall report its determination to the Department of Environmental Conservation. In this subsection, (1) "natural gas exploration facility" has the meaning given in AS 46.04JcJ ; (2) "oil" has the meaning given in A_S 46.04.0..5 . (m) The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of AS 41.06, except for provisions in AS 41.06 for which the Department of Natural Resources has jurisdiction. (n) Upon request of the commissioner of revenue, the commission shall determine the commencement of regular production from a lease or property for purposes of AS 4 5 160 t) and and 43.55.165(n) and Lo). § 31.05.032. Certification of gas storage capacity. (a) An owner of a gas storage facility that seeks an exemption under AS 38.05 180Lu) or a credit under AS 43.20,046 shall apply to the commission for certification of the facility's working gas storage capacity and certification of the facility's gas withdrawal capability. The application shall be on a form prescribed by the commission. (b) Within six months after receiving an application under (a) of this section, the commission shall determine and certify (1) the working gas storage capacity of the facility on the date the facility commences commercial operation rounded to the nearest 500,000,000 cubic feet; (2) whether the gas storage facility is capable of withdrawing a minimum of 10,000,000 cubic feet of gas a day; and (3) that the facility qualifies as a gas storage facility for the purposes of this section. (c) The commission shall provide a copy of the certifications required by (b) of this section to the owner of the gas storage facility that requested the certification, the commissioner of natural resources, and the commissioner of revenue. (d) If a gas storage facility ceases commercial operation, an owner of the gas storage facility shall give written notice to the commission that commercial operation has ceased. The notice must be filed with the commission before April 1 of the year immediately following the year in which the gas storage facility ceases commercial operation. (e) In this section, (1) "ceases commercial operation" means that the gas storage facility fails to inject or withdraw more than 100,000,000 cubic feet of gas during a calendar year following the year in which a gas storage facility commences commercial operation; (2) "commences commercial operation" means the first injection of non-native gas into a gas storage facility for purposes other than testing; (3) "cushion gas" means native and non-native gas in a gas storage facility that is needed to pressurize the facility and that allows the facility to function; (4) "gas storage facility" means a tank or a depleted or nearly depleted reservoir or pool in the state that is available for the storage of gas; (5) "native gas" means gas in a gas storage facility that was not injected-, (6) "non-native gas" means gas that is produced elsewhere and injected into a gas storage facility; (7) "pool" has the meaning given in A 1,Q5,170 ; (8) "working gas storage capacity" means the maximum volume of non-native gas a gas storage facility may safely contain without creating or causing waste; the maximum volume of non-native gas does not include the volume of cushion gas present or the volume required for proper functioning of the gas storage facility at the working gas storage capacity certified under (b) of this section. § 31.05.035. Confidential reports. (a) For all wells for which a permit to drill has been issued by the commission, the commission may require (1) the making and filing of reports, well logs, drilling logs, electric logs, lithoiogic logs, directional surveys, and all other subsurface information on a well for which a permit to drill has been issued by the commission; (2) the filing of flow test information and all logs, except experimental logs and velocity surveys run on a well and not required by (1) of this subsection; and (3) the operator to make available for copying the digitized log information, if it is available, on any log required to be filed under (1) or (2) of this subsection. (b) Reports and information required under (a)(1) and (2) of this section shall be filed within 30 days after the completion, abandonment, or suspension of a well. However, under (a)(1) of this section, the commission may not require the making of a log on a well completed, abandoned or suspended before June 19, 1970. (c) The reports and information required in (a) of this section that relate to an exploratory or stratigraphic test well and those portions of an application for a permit to drill an exploratory or stratigraphic test well that the commission determines contain proprietary engineering or geotechnical information shall be kept confidential for 24 months following the 30-day filing period unless the owner of the well gives written permission to release the application and reports and information at an earlier date. If the commissioner of natural resources finds that the required reports and information contain significant information relating to the valuation of unleased land in the same vicinity, the commissioner shall keep the reports and information confidential for a reasonable time after the disposition of all affected unleased land, unless the owner of the well gives written permission to release the reports and information at an earlier date. Well surface and bottom hole locations, well depth, well status, production data, and production reports required by the commission to be filed subsequent to the 30-day filing period shall be considered public information and may not be classified confidential. Production data, as used in this subsection, means volume, gravity, and gas -oil ratio of all production of oil or gas after the well begins regular production. (d) Engineering, geological, and other information not required by (a) of this section but voluntarily filed with the commission shall be kept confidential if the person filing the information so requests. (e) Notwithstanding (c) of this section, claims of confidentiality will be denied for information disclosed to the commission under AS 31.05.030 h that is required to be disclosed under 42U.S.C. 300h-4 . (f) Confidentiality under (d) of this section is not applicable to information submitted with or as part of a petition for a commission order or to information submitted for or as part of a hearing before the commission. § 31.05.040. Regulations and orders. (a) The commission shall adopt regulations governing practice and procedure before it under this chapter. (b) All orders issued by the commission shall be in writing, shall be entered in full and indexed in books kept by the commission for that purpose, and shall be public records open for inspection at all times during reasonable office hours. A copy of an order certified by the commission, under its seal, shall be received in evidence in all courts of the state with the same effect as the original. § 31.05.050. Notice. (a) A notice required by this chapter shall be given in accordance with AS 44.62 (Administrative Procedure Act). (b) Procedures to be followed under (a) of this section do not apply if the nature of the notice is not of a statewide or general application but is concerned only with operations on a single well or within a single field and the modification of procedure is within the authority delegated to the commission under AS 31.05.Q Q . A notice required by this chapter shall be given by one publication in a newspaper published in the borough in which the hearing is to be held, or if none is published in the borough, in a newspaper published in this state and circulating within the borough, and posted in at least one public place within the borough, at least 10 days before the date of the hearing. The notice shall be issued in the name of the state, shall be signed by the commission, and shall specify the style and number of the proceeding, the time and place of the hearing, and shall briefly state the purpose of the proceeding. The commission may also give, or require the giving of, additional notice in a proceeding, or class of proceeding, which it considers necessary or desirable. § 31.05.060. Action by commission. (a) The commission may act upon its own motion, or upon the petition of an interested person. On the filing of a petition concerning a matter within the jurisdiction of the commission under this chapter, the commission shall promptly fix a date for a hearing, and shall cause notice of the hearing to be given. The hearing shall be held without undue delay after the filing of the petition. The commission shall enter its order within 30 days after the hearing. (b) Except as provided in this subsection, any action by the commission under this chapter that has statewide or general application shall be performed in accordance with AS 44.62 (Administrative Procedure Act). Any action by the commission under this chapter that has application to a single well or single field need not comply with the provisions of AS 44.62.330 - 44.62.634 , but shall be performed in accordance with regulations of the commission designed to afford persons affected by the action notice and an opportunity to be heard. (c) Notwithstanding the requirements of (a) and (b) of this section that relate to fixing a date for a hearing and causing notice of the hearing to be given, for an action under this chapter that involves the exploration for or development of nonconventional gas and that has application to a single well or a single field, upon the request of a lessee or operator, the commission may, where operations might be unduly delayed, approve a variance from the commission's regulations that apply to the well or field without providing notice and opportunity to be heard. In the exercise of its authority to issue the variance, (1) the commission may approve the variance if (A) the approval provides at least an equally effective means of accomplishing the requirement set out in the commission's regulation; or (B) the commission determines that the request is more appropriate to the proposed operation than compliance with the requirement of the regulation; and (2) the terms of the approval of the variance may include exempting the lessee or operator from a requirement of a regulation if the commission determines that the requirement is not necessary or not suited to the well or fie-ld taking into consideration (A) the nature of the operation involved; (B) the characteristics of the well or field for which the variance is sought; and (C) the reasonably anticipated risks of the exemption from the requirement to human safety and the environment. (d) The provisions of (c) of this section do not apply to authorize approval of a variance from the commission's regulations that relate to underground injection. § 31.05.070. Attendance and testimony of witnesses. (a) The commission may summon witnesses, administer oaths, and require the production of records, books and documents for examination at a hearing or investigation conducted by it. A person may not be excused from attending and testifying, or from producing books, papers and records before the commission or a court, or from obedience to the subpoena of the commission or a court, on the ground or for the reason that the testimony or evidence, documentary or otherwise, required of that person may tend to incriminate or subject that person to a penalty or forfeiture. This section does not require a person to produce books, papers or records, or to testify in response to an inquiry not pertinent to some question lawfully before the commission or court for determination. A natural person is not subject to criminal prosecution or to a penalty or forfeiture for or on account of any transaction, matter or thing concerning which, in spite of objection, that person may be required to testify or produce evidence, documentary or otherwise, before the commission or court, or in obedience to its subpoena. However, a person testifying is not exempt from prosecution and punishment for perjury committed in so testifying. (b) If a person fails or refuses to comply with the subpoena issued by the commission, or refuses to testify as to any matter regarding which the person may be interrogated, any court of record in the state, upon application of the commission, may issue an attachment for the person and compel that person to comply with the subpoena, and attend before the commission and produce the records, books, and documents for examination, and give testimony. The court may punish for contempt as in the case of disobedience to a subpoena issued by the court, or for refusal to testify in court. § 31.05.080. Reconsiderations. (a) Within 20 days after written notice of the entry of an order or decision of the commission, or such further time as the commission grants for good cause shown, a person affected by it may file with the commission an application for reconsideration of the matter determined by the order or decision, setting out the respect in which the order or decision is believed to be erroneous. The commission shall grant or refuse the application in whole or in part within 10 days after it is filed, and failure to act on it within this period is a refusal of it and a final disposition of the application. If reconsideration is granted, the commission may enter a new order or decision after reconsideration as may be required under the circumstances. (b) Repealed by SLA 2009,_ch. 41, § 82, eff, ,tune 1. 2009 . (c) Repealed by SLA 2007, ch. 54.1.$ 15. eff. July 1 .2007 . (d) Repealed by SLA 2Q07. ch. 54. 15. eff. July 1 .2007 . § 31.05.085. Expenses of investigation or hearing. (a) During a hearing or investigation held under this chapter, the commission may allocate the costs of the hearing or investigation among the parties, including the commission, as is just under the circumstances. In allocating costs, the commission shall consider the regulatory cost charge paid by a person under AS 31.05 093 and may consider the results, evidence of good faith, other relevant factors, and mitigating circumstances. The costs allocated may include (1) the costs of any time devoted to the investigation or hearing by hired consultants, whether or not the consultants appear as witnesses or participants; (2) any out-of-pocket expenses incurred by the commission in the particular proceeding; and (3) when the investigation or hearing relates to a violation of a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, orterm of a permit issued by the commission, the costs of any time devoted to the investigation or hearing by the commission staff. (b) The commission shall provide an opportunity for any person objectng to an allocation to be heard before the allocation becomes final. § 31.05.090. Permits to drill wells. (a) A person shall apply for and receive a permit from the commission before drilling (1) a well in search of oil or gas; (2) a well in support of the recovery or production of oil or gas; (3) an underground injection well for the purpose of gas storage; or (4) an underground injection well for which the state has acquired primary enforcement responsibility under AS 31.05.030fh . (b) A person must submit a separate permit application for each well_ The permit application must be in the form required by the commission and include all information required by the commission- (c) After receiving an application under (b) of this section, the commission shall promptly approve or deny the application for a permit to drill. (d) In making a determination under (c) of this section, the commission shall consider whether the (1) proposed well is contrary to law, a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, or term of a permit issued by the commission; or (2) applicant is in violation of a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, or term of a permit issued by the commission and the magnitude of such violation. § 31.05.093. Regulated well regulatory cost charge. (a) Every person that on the first day of a state fiscal year is the operator of a well for which a permit to drill has been issued under AS 31.05.090 and that has not, before that day, been plugged and abandoned and reported as abandoned in accordance with regulations of the commission shall pay to the commission an annual regulatory cost charge for that fiscal year. A regulatory cost charge may not be collected from a person unless the operation for which the person is responsible is within the jurisdiction of the commission. (b) The commission shall annually determine regulatory cost charges under this section. The regulatory cost charge to be paid by a person for a state fiscal year must be based on the total volume during the most recently concluded calendar year for the wells described in (a) of this section of which the person was the operator on the first day of the fiscal year as a percentage of the total volume during the same calendar year for all wells described in (a) of this section. For purposes of this subsection, "total volume" means the sum of the volume of all oil and gas produced from a well and all oil, gas, water, and other fluids, including waste slurry, injected into the well. For purposes of determining volume under this subsection, 6,000 cubic feet of gas has a volume that is the equivalent of one barrel of oil. (c) The commission shall determine the regulatory cost charges levied under this section so that the total amount to be collected approximately equals the appropriations made for the operating costs of the commission under this chapter for the fiscal year. (d) The commission shall administer the collection of the regulatory cost charges imposed under this section. The Department of Administration shall identify the amount of the appropriations made for the operating costs of the commission under this chapter that lapses into the general fund each year. The legislature may appropriate to the commission for its operating costs under this chapter for the next fiscal year an amount that is at least equal to the lapsed amount. If the legislature makes an appropriation to the commission under this subsection that is at least equal to the lapsed amount, the commission shall reduce the total regulatory cost charge collected for that fiscal year by a comparable amount. (e) The commission may adopt regulations under AS 44.62 (Administrative Procedure Act) necessary to administer this section, including regulations for investigation of the accuracy of reported information and for collecting required payments. § 31.05.095. Waste prohibited. The waste of oil and gas in the state is prohibited. § 31.05.100. Establishment of drilling units for pools. (a) For the prevention of waste, to protect and enforce the correlative rights of lessees in a pool, and to avoid the augmenting and accumulation of risks arising from the drilling of an excessive number of wells, or the reduced recovery which might result from too small a number of wells, the commission shall, after a hearing, establish a drilling unit or units for each pool. The establishment of a unit for gas shall be limited to the production of gas. (b) Each well permitted to be drilled on a drilling unit shall be drilled under the rules and regulations and in accordance with the spacing pattern as the commission prescribes for the pool in which the well is located. Exceptions to the rules and spacing pattern may be granted where it is shown, after notice and hearing, that the unit is partly outside the pool, or for some other reason a well so located on the unit would be nonproductive, or topographical conditions are such as to make the drilling at such a location unduly burdensome. If an exception is granted, the commission shall take such action as will offset any advantage which the person securing the exception may have over other producers by reason of the drilling of the well as an exception, and so that drainage from developed units to the tract with respect to which the exception is granted will be prevented or minimized, and the producer of the well drilled as an exception will be allowed to produce no more than a just and equitable share of the oil and gas in the pool. (c) When two or more separately owned tracts of land are embraced within an established drilling unit, persons owning the drilling rights in it and the right to share in the production from it may agree to pool their interests and develop their lands as a drilling unit. If the persons do not agree to pool their interests, the commission may enter an order pooling and integrating their interests for the development of their lands as a drilling unit for the prevention of waste, for the protection of correlative rights, or to avoid the drilling of unnecessary wells. Orders effectuating such pooling shall be made after notice and hearing, and shall be upon terms and conditions which will afford to the owner of each tract the opportunity to recover or receive the owner's just and equitable share of the oil and gas in the pool without unnecessary expense. Operations incident to the drilling of a well upon a portion of a unit covered by a pooling order shall be considered for all purposes to be the conduct of the operation upon each separately owned tract in the unit by the several lessees of it. The portion of the production allocated to the lessee of each tract included in a drilling unit formed by a pooling order shall, when produced, be considered as if it had been produced from the tract by a well drilled on it. If pooling is effectuated, the cost of development and operation of the pooled unit chargeable by the operator to the other interested lessee is limited to the actual and reasonable expenditures for this purpose, including a reasonable charge for supervision. As to lessees who refuse to agree upon pooling, the order shall provide for reimbursement for costs chargeable to each lessee out of, and only out of, production from the unit belonging to such lessee. In the event of a dispute relative to the costs, the commission shall determine the proper costs upon notice to all interested parties and hearing. Appeals may be taken from the determination as from any other order of the commission. If a lessee drills and operates, or pays the expense of drilling and operating the well for the benefit of others, then in addition to any other right conferred by the pooling order, the lessee drilling or operating has a lien on the share of production from the unit accruing to the interest of each of the other lessees for the payment of the proportionate share of such expenses. All the oil and gas subject to the lien, or so much of the oil and gas subject to the lien as is necessary shall be marketed and sold by the creditor, and the proceeds applied in payment of the expenses secured by the lien, with the balance, if any, payable to the debtor. (d) The commission shall, in all instances where a unit has been formed out of lands or areas of more than one ownership, require the operator, upon request of a lessee, but subject to the right of the operator to market production and collect the proceeds with respect to a lessee in default, as provided in (c) of this section, to deliver to the lessee or assigns the lessee's proportionate share of the production from the well common to the drilling unit. The lessee receiving a share shall provide at the lessee's own expense proper receptacles for the receipt and storage of it. (e) If persons owning the drilling or other rights in separate tracts embraced within a drilling unit fail to agree upon the pooling of the tracts and the drilling of the well on the unit, and if the commission is without authority to require pooling as provided by this section, then, subject to all other applicable provisions of this chapter, the lessee of each tract embraced within the drilling unit may drill on the lessee's tract, but the allowable production from the tract shall be the proportion of the allowable production for the full drilling unit as the area of the separately owned tract bears to the full drilling unit. Oil and Gas § 31.05.110. Unitization and unitized operation of pools and integration of interests by agreement. (a) To prevent, or to assist in preventing waste, to insure a greater ultimate recovery of oil and gas, and to protect the correlative rights of persons owning interests in the tracts of land affected, these persons may validly integrate their interests to provide for the unitized management, development, and operation of such tracts of land as a unit. Where, however, they have not agreed to integrate their interests, the commission, upon proper petition, after notice and hearing, has jurisdiction, power and authority, and it is its duty to make and enforce orders and do the things necessary or proper to carry out the purposes of this section. (b) If upon the filing of a petition by or with the commission and after notice and hearing, all in the form and manner and in accordance with the procedure and requirements provided in this section, the commission finds that (1) the unitized management, operation and further development of a pool or portion of a pool is reasonably necessary in order to effectively carry on pressure control, pressure -maintenance or repressuring operations, cycling operations, water flooding operations, or any combination of these, or any other form of joint effort calculated to substantially increase the ultimate recovery of oil and gas from the pool; (2) one or more of the unitized methods of operation as applied to the pool or portion of it is feasible, and will prevent waste and will with reasonable probability result in the increased recovery of substantially more oil and gas from the pool than would otherwise be recovered; (3) the estimated additional cost, if any, of conducting such operations will not exceed the value of the additional oil and gas so recovered; and (4) the unitization and adoption of one or more of the unitized methods of operation is for the common good, it shall make a finding to that effect and make an order creating the unit and providing for the unitization and unitized operation of the pool or portion of it described in the order, upon the terms and conditions, as may be shown by the evidence to be fair, reasonable, equitable, and which are necessary or proper to protect, safeguard and adjust the respective rights and obligations of the several persons affected, including royalty owner, owners of overriding royalties, oil and gas payments, carried interests, mortgages, lien claimants and others, as well as the lessees. The petition shall set out a description of the proposed unit area with a map or plat of it attached, shall allege the existence of the facts required to be found by the commission as provided in this subsection and shall have attached to it a recommended plan of unitization applicable to the proposed unit area and which the petitioner considers to be fair, reasonable and equitable. (c) The order of the commission shall define the boundary of the area to be included within the unit area and prescribe with reasonable detail the plan of unitization applicable to it. Each unit and unit area may be limited to all or a portion of a single pool. Only so much of a pool or pools as has been defined and determined to be product've on the basis of information available to the commission may be so included within the unit area. A unit may be created to embrace less than the whole of a pool only where it is shown by the evidence that the area to be so included within the unit area is of a size and shape as may be reasonably required for the successful and efficient conduct of the unitized method of operation for which the unit is created, and that the conduct of it will have no material adverse effect upon the remainder of the pool. The plan of unitization for each unit and unit area shall be one suited to the needs and requirements of the particular unit dependent upon the facts and conditions found to exist with respect to it. In addition to other terms, provisions, conditions and requirements found by the commission to be reasonably necessary or proper to carry out the purpose of this chapter, and subject to the further requirements of this section, each plan of unitization shall contain fair, reasonable and equitable provisions for (1) the efficient unitized management or control of the further development and operation of the unit area for the recovery of oil and gas from the pool affected; under such a plan the actual operations within the unit area may be carried on in whole or in part by the unit itself, or by one or more of the lessees within the unit area as the unit operator subject to the supervision and direction of the unit, dependent upon what is most beneficial or expedient; the designation of the unit operator shall be by vote of the lessees in the unit in a manner provided in the plan of unitization and not by the commission; (2) the division of interest or formula for the apportionment and allocation of the unit production, among and to the several separately owned tracts within the unit area such as will reasonably permit persons otherwise entitled to share in or benefit by the production from such separately owned tracts to produce and receive, instead thereof, their fair, equitable and reasonable share of the unit production or other benefits of it; a separately owned tract's fair, equitable, and reasonable share of the unit production shall be measured by the value of each such tract for oil and gas purposes and its contributing value to the unit in relation to like values of other tracts in the unit, taking into account acreage, the quantity of oil and gas recoverable from it, location on the structure, its probable productivity of oil and gas in the absence of unit operations, the burden of operations to which the tract will or is likely to be subjected, or so many of these factors, or such other pertinent engineering, geological or operating factors as may be reasonably susceptible of determination; "unit production" as thatterm is used in this chapter means all oil and gas produced from a unit area from the effective date of the order of the commission creating the unit regardless of the well or tract within the unit area from which the same is produced; (3) the manner in which the unit and the further development and operation of the unit area shall or may be financed and the basis, terms and conditions on which the cost and expense of it shall be apportioned among and assessed against the tracts and interests made chargeable with it, including a detailed accounting procedure governing all charges and credits incident to such operations; upon terms and conditions as to time and rate of interest as may be fair to all concerned, reasonable provision shall be made in the plan of unitization for carrying or otherwise financing lessees who are unable to promptly meet their financial obligations in connection with the unit; (4) the procedure and basis upon which wells, equipment, and other properties of the several lessees within the unit area are to be taken over and used for unit operations, including the method of arriving at the compensation for it, or of otherwise proportionately equalizing or adjusting the investment of the several lessees in the project as of the effective date of unit operation; (5) the creation of an operating committee to have general overall management and control of the unit and the conduct of its business and affairs and the operations carried on by it, together with the creation or designation of other subcommittees, boards or officers to function under the authority of the operating committee as may be necessary, proper or convenient in the efficient management of the unit, defining the powers and duties of all the committees, boards and officers, and prescribing their tenure and time and method for their selection; (6) the time when the plan of unitization becomes effective; (7) the time when and the conditions under which and the method by which the unit shall or may be dissolved and its affairs wound up. (d) Repealed. (e) Except as otherwise expressly provided in this section, all proceedings held under this chapter, including the filing of petitions, the giving of notices, the conduct of hearings and other action taken by the commission shall be in the form and manner and in accordance with the procedure provided in AS 31.0.5 Q40 - 31_05#060 . Additional notice shall be given as the commission requires. (f) From the effective date of an order of the commission creating a unit and prescribing the plan of unitization applicable to it, the operation of a well producing from the pool or portion of it within the unit area defined in the order by persons other than the unit or persons acting under its authority or except in the manner and to the extent provided in the plan of unitization is unlawful and is prohibited. (g) The obligation or liability of the lessees or other owners of the oil and gas rights in the several separately owned tracts for the payment of unit expense shall at all times be several and not joint or collective and in no event shall a lessee or other owner of the oil and gas rights in the separately owned tract be chargeable with, obligated or liable, directly or indirectly, for more than the amount apportioned, assessed or otherwise charged to that lessee's or owner's interest in the separately owned tract under the plan of unitization and then only to the extent of the lien provided for in this chapter. (h) Subject to such reasonable limitations as may be set out in the plan of unitization, the unit has a first and prior lien upon the leasehold estate and all other oil and gas rights (exclusive of a landowners` royalty interest) in and to each separately owned tract, the interest of the owners in and to the unit production and all equipment in the possession of the unit, to secure the payment of the amount of the unit expense charged to and assessed against such separately owned tract. The interest of the lessee or other persons who by lease, contract, or otherwise are obligated or responsible for the cost and expense of developing and operating a separately owned tract for oil and gas in the absence of unitization shall, however, be primarily responsible for and charged with any assessment for unit expense made against the tract and resort may be had to overriding royalties, oil and gas payments, or other interests, except royalty interests, which otherwise are not chargeable with these costs, only in the event the owner of interest primarily responsible fails to pay the assessment of the production to the credit thereof, or production is insufficient for that purpose. If the owner of any royalty interest, overriding royalty, oil or gas payment, or any other interest which under the plan of unitization is not primarily responsible for it pays in whole or in part the amount of an assessment for unit expense for the purpose of protecting such interest, or the amount of the assessment in whole or in part is deducted from the unit production to the credit of such interest, the owner of it is to the extent of the payment or deduction subrogated to all the rights of the unit with respect to the interest or interests primarily responsible for the assessment. The landowners' royalty share of the unit production allocated to each separately owned tract shall be regarded as royalty to be distributed to and among, or the proceeds of it paid to, the landowners, free and clear of all unit expense and free of any lien for it. (i) Property rights, leases, contracts, and all other rights and obligations shall be regarded as amended and modified to the extent necessary to conform to the provisions and requirements of this chapter, and to any valid and applicable plan of unitization or order of the commission made and adopted under this chapter, but otherwise remain in effect. 0) Nothing contained in this chapter shall be construed to require a transfer to or vesting in the unit of title to the separately owned tracts or leases on them within the unit area, other than the right to use and operate them to the extent set out in the plan of unitization; nor shall the unit be regarded as owning the unit production. The unit production and the proceeds from the sale of it shall be owned by the several persons to whom it is allocated under the plan of unitization. All property, whether real or personal, which the unit may in any way acquire, hold, or possess, may not be acquired, held, or possessed by the unit for its own account but shall be acquired, held, and possessed by the unit for the account and as agent of the several lessees and shall be the property of the lessees as their interests appear under the plan of unitization, subject, however, to the right of the unit to the possession, management, use, or disposal of the same in the proper conduct of its affairs, and subject to any lien the unit may have on it to secure the payment of unit expense. Neither the unit production or proceeds of the sale of it, nor the other receipts shall be treated, regarded, or taxed as income or profits of the unit; but instead, all such receipts shall be the income of the several persons to whom or to whose credit the same are payable under the plan of unitization. To the extent the unit may receive or disburse the receipts it shall only do so as a common administrative agent of the persons to whom the receipts are payable. (k) The amount of the unit production allocated to each separately owned tract within the unit, and only that amount, regardless of the well or wells in the unit area from which it may be produced and regardless of whether it is more or less than the amount of the production from the well or wells, if any, on any such separately owned tract, shall for all intents, uses and purposes be regarded and considered as production from the separately owned tract, and, except as may be otherwise authorized in this chapter, or in the plan of unitization approved by the commission, shall be distributed among or the proceeds of it paid to the persons entitled to share in the production from the separately owned tract in the same manner, in the same proportions, and upon the same condition that they would have participated and shared in the production or proceeds of it from such separately owned tract had not the unit been organized, and with the same legal effect. If adequate provisions are made for the receipt of it, the share of the unit production allocated to each separately owned tract shall be delivered in kind to the persons entitled to it by virtue of ownership of oil and gas rights in it or by purchase from the owners subject to the rights of the unit to withhold and sell the same in payment of unit expense under the plan of unitization, and subject further to the call of the unit on such portions of the gas for operating purposes as may be provided in the plan of unitization. (1) An agreement or plan for the development and operation of a field or pool of oil or gas as a unit, if approved by the commission for the purpose of conserving oil or gas, does not violate a statute of the state prohibiting monopolies or acts, arrangements, agreements, contracts, combinations, or conspiracies in restraint of trade or commerce. (m) Operations carried on under and in accordance with the plan of unitization shall be regarded and considered as a fulfillment of a compliance with all of the provisions, covenants and conditions, express or implied, of the several oil and gas leases upon lands included within the unit area, or other contracts pertaining to the development of it insofar as the leases or other contracts may relate to the pool or portion of it included in the unit area. Wells drilled or operated on any part of the unit area no matter where located shall for all purposes be regarded as wells drilled on each separately owned tract within the unit area. (n) Nothing in this section or in any plan of unitization shall be construed as increasing or decreasing the implied covenants of a lease in respect to a common source of supply or lands not included within the unit area of a unit. (o) The unit area of a unit may be enlarged to include adjoining portions of the same pool, including the unit area of another unit, and a new unit created for the unitized management, operation and further development of the enlarged unit area, or the plan of unitization may be otherwise amended, or the unit area contracted, all in the same manner, upon the same conditions and subject to the same limitations as provided with respect to the creation of a unit in the first instance. (p) An aliquot of unit production may be underlifted or overlifted from a unit established under this chapter or AS 38.05.18M only when it does not create waste, except the commissioner may permit underlifting or overlifting for temporary periods for the purpose of accommodating extraordinary disruptions to an interest owner's production disposal system. Underlifted oil may be recovered by an interest owner at a daily rate not to exceed 10 percent of the owner's working or royalty interest share of daily production at the time of underlift recovery. This subsection applies to all units created after June 30, 1978. (q) This section applies to all involuntary units formed in the state. Subsections (a) and (g) - (p) of this section apply to all voluntary units formed in the state and to a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.06.18DW . § 31.05.120. Use of gas from well to manufacture carbon products without permit is prima facie waste. The use of gas from a well producing gas only, or from a well which is primarily a gas well for the manufacture of carbon black or similar products predominantly carbon is declared to constitute waste prima facie, and the gas well may not be used for this purpose unless it is clearly shown at a public hearing held by the commission, on application of the person desiring to use the gas, that waste would not take place by the use of the gas for the purpose applied for, and that gas which would otherwise be lost is now available for such purpose, and that the gas to be used cannot be used for a more beneficial purpose, such as for light or fuel purposes, except at prohibitive cost, and that it would be in the public interest to grant the permit. if the commission finds that the applicant has clearly shown a right to use the gas for the purpose applied for, it shall issue a permit upon terms and conditions it finds necessary in order to permit the use of the gas and at the same time require compliance with the intent of this section. § 31.05.150. Penalties. (a) In addition to the penalties in (b)--(e) of this section, a person who violates a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, or term of a permit issued by the commission is liable for a civil penalty of not more than $100,000 for the initial violation and not more than $10,000 for each day thereafter on which the violation continues. (b) A person who knowingly commits an act specified in AS 1 1.4.630(a) for the purpose of evading a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, or term of a permit issued by the commission is guilty of a class A misdemeanor. (c) A person who knowingly aids or abets another person in the violation of a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, or term of a permit issued by the commission is subject to the same penalty as that prescribed in this chapter for the violation by the other person. (d) In addition to the penalties in (a)--(c) and (e) of this section, the commission may impose a civil penalty for each 1,000 cubic feet of natural gas flared, vented, or otherwise determined to be waste as defined in AS 31,05,170 . The penalty shall be twice the fair market value of the natural gas at the point of waste. (e) A person who knowingly violates a provision of this chapter, a regulation adopted under this chapter, or an order, stipulation, or term of a permit issued by the commission is guilty of a misdemeanor punishable by a fine of not more than $10,000 a day for each day of violation. (f) The commission may assess the civil penalties provided in this section, and, if not paid, the penalties are recoverable by suit filed by the attorney general in the name and on behalf of the commission in the superior court. The payment of a penalty does not relieve a person on whom the penalty is imposed from liability to any other person for damages arising out of the violation. (g) In determining the amount of a penalty assessed under (a) of this section, the commission shall consider (1) the extent to which the person committing the violation was acting in good faith in attempting to comply; (2) the extent to which the person committing the violation acted in a wilful or knowing manner; (3) the extent and seriousness of the violation and the actual or potential threat to public health or the environment; (4) the injury to the public resulting from the violation; (5) the benefits derived by the person committing the violation from the violation; (6) the history of compliance or noncompliance by the person committing the violation with the provisions of this chapter, the regulations adopted under this chapter, and the orders, stipulations, or terms of permits issued by the commission; (7) the need to deter similar behavior by the person committing the violation and others similarly situated at the time of the violation or in the future; (8) the effort made by the person committing the violation to correct the violation and prevent future violations; and (9) other factors considered relevant to the assessment that are adopted by the commission in regulation. § 31.05.160. Injunctive relief. (a) Whenever it appears that a person is violating or threatening to violate any provision of this chapter, or any regulation or order of the commission, the commission shall bring suit against that person in the superior court of the judicial district where the violation occurs or is threatened, to restrain the person from continuing the violation or from carrying out the threat of violation. In the suit, the court shall have jurisdiction to grant to the commission, without bond or otherwise undertaking, such prohibitory and mandatory injunctions as the facts warrant. (b) If the commission fails to bring suit to enjoin a violation or threatened violation within 10 days after receipt of written request to do so by a person who is or will be adversely affected by the violation, the person making the request may bring suit to restrain the violation or threatened violation in the court in which the commission may bring suit. If the court finds that injunctive relief should be granted, the commission shall be made a party and shall be substituted for the person who brought the suit, and the injunction shall be issued as if the commission had at all times been the plaintiff. § 31.05.170. Definitions. In this chapter, unless the context otherwise requires (1) "and" includes "or" and "or" includes "and"; (2) "commission" means the Alaska Oil and Gas Conservation Commission; (3) "correlative rights" mean the opportunity afforded, so far as it is practicable to do so, to the owner of each property in a pool to produce without waste the owner's just and equitable share of the oil or gas, or both, in the pool; being an amount, so far as can be practically determined, and so far as can practicably be obtained without waste, substantially in the proportion that the quantity of recoverable oil or gas, or both under the property bears to the total recoverable oil or gas or both in the pool, and for such purposes to use the owner's just and equitable share of the reservoir energy; (4) "cubic foot" of natural gas means the volume of gas contained in one cubic foot of space measured at a pressure base of 14.65 pounds per square inch absolute and a temperature base of 60 degrees Fahrenheit; (5) "field" means a general area which is underlain or appears to be underlain by at least one pool, and includes the underground reservoir containing oil or gas; and the words "pool" and "field" mean the same thing when only one underground reservoir is involved, but "field" unlike "pool" may relate to two or more pools; (6) "gas" includes all natural gas and all hydrocarbons produced at the wellhead not defined as oil; (7) "landowner" means the owner of the subsurface estate of the tract affected; (8) "nonconventional gas" has the meaning given in As 38,05,965 ; (9) "oil" includes crude petroleum oil and other hydrocarbons regardless of gravity which are produced at the wellhead in liquid form and the liquid hydrocarbons known as distillate or condensate recovered or extracted from gas, other than gas produced in association with oil and commonly known as casinghead gas; (10) "owner" means the person who has the right to drill into and produce from a pool and to appropriate the oil and gas the person produces from a pool for that person and others; (11) "person" includes a natural person, corporation, association, partnership, receiver, trustee, executor, administrator, guardian, fiduciary or other representative of any kind, and includes a department, agency or instrumentality of the state or a governmental subdivision of the state; (12) "pool" means an underground reservoir containing, or appearing to contain, a common accumulation of oil or gas; each zone of a general structure which is completely separated from any other zone in the structure is covered by the term "pool"; (13) "producer" means the owner of a well or wells capable of producing oil or gas or both; (14) "regular production" means continuing production of oil or gas from a well into production facilities and transportation to market, but does not include short term testing, evaluation, or experimental pilot production activities that have been approved by permit or order of the commission; (15) "waste" means, in addition to its ordinary meaning, "physical waste" and includes (A) the inefficient, excessive, or improper use of, or unnecessary dissipation of, reservoir energy; and the locating, spacing, drilling, equipping, operating or producing of any oil or gas well in a manner which results or tends to result in reducing the quantity of oil or gas to be recovered from a pool in this state under operations conducted in accordance with good oil field engineering practices; (B) the inefficient above -ground storage of oil; and the locating, spacing, drilling, equipping, operating or producing of an oil or gas well in a manner causing, or tending to cause, unnecessary or excessive surface loss or destruction of oil or gas; (C) producing oil or gas in a manner causing unnecessary water channeling or coning; (D) the operation of an oil well with an inefficient gas -oil ratio; (E) the drowning with water of a pool or part of a pool capable of producing oil or gas, except insofar as and to the extent authorized by the commission; (F) underground waste; (G) the creation of unnecessary fire hazards; (H) the release, burning, or escape into the open air of gas, from a well producing oil or gas, except to the extent authorized by the commission; (1) the use of gas for the manufacture of carbon black, except as provided in this chapter; (J) the drilling of wells unnecessary to carry out the purpose or intent of this chapter. The End. CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. From:Salazar, Grace (OGC) To:"Hollis French" Subject:RE: transcript request Date:Tuesday, December 21, 2021 1:14:00 PM Attachments:AOGCC HEARING 12.15.21.pdf Available upon request; see attached. Thanks. Grace ____________________________________ Respectfully, M. Grace Salazar, Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 Direct: (907) 793-1221 Email: grace.salazar@alaska.gov https://www.commerce.alaska.gov/web/aogcc/ From: Hollis French <hsfrench@gmail.com> Sent: Tuesday, December 21, 2021 1:13 PM To: Salazar, Grace (OGC) <grace.salazar@alaska.gov> Subject: transcript request Grace, I did not seem to get the transcript. Can you please resend it? thanks Hollis CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. From:Salazar, Grace (OGC) To:Harold Heinze; Hollis French Subject:RE: Hearing transcript Date:Tuesday, December 21, 2021 12:45:00 PM Noted and will notify the court reporter. Grace From: Harold Heinze <heinze.harold@gmail.com> Sent: Tuesday, December 21, 2021 12:44 PM To: Salazar, Grace (OGC) <grace.salazar@alaska.gov>; Harold Heinze <heinze.harold@gmail.com>; Hollis French <hsfrench@gmail.com> Subject: Re: Hearing transcript Thank you for copying me on the hearing transcript I have reviewed the transcription of my remarks and believe it sufficiently reflects the points I was trying to make I would ask that you correct the spelling of my name throughout the transcript. My name is not "Hines" -- My name is "Harold Heinze" Thank you. As an order is issued from this hearing I would like to be copied. Harold Heinze 1336 Staubbach Circle Anchorage, AK 99508 907 903 3623 On Mon, Dec 20, 2021 at 10:32 AM Salazar, Grace (OGC) <grace.salazar@alaska.gov> wrote: See attached. Grace ____________________________________ Respectfully, M. Grace Salazar, Special Assistant Alaska Oil and Gas Conservation Commission th CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. From:Hollis French To:Salazar, Grace (OGC) Subject:Re: AOGCC Public Hearing: Supreme Court S-17822 Hollis French Date:Wednesday, December 15, 2021 8:54:09 AM peggypepperfrench@gmail.com, thanks! Hollis On Wed, Dec 15, 2021 at 8:47 AM Salazar, Grace (OGC) <grace.salazar@alaska.gov> wrote: I would need to add her. What’s her email address? Grace From: Hollis French <hsfrench@gmail.com> Sent: Wednesday, December 15, 2021 8:27 AM To: Salazar, Grace (OGC) <grace.salazar@alaska.gov> Subject: Re: AOGCC Public Hearing: Supreme Court S-17822 Hollis French Grace, Is this link shareable? My wife wants to watch the presentation today. Can she use this link? thanks Hollis On Tue, Dec 14, 2021 at 4:06 PM Salazar, Grace (OGC) <grace.salazar@alaska.gov> wrote: IMPORTANT MS TEAMS HEARING INSTRUCTIONS: -Please mute your phone/connection when not speaking. -Please do NOT place your line on hold as this puts the conference on hold, and all the hearing participants may hear music. If you have to take another call, please end your connection with our hearing before taking another phone call. -If you use a phone for audio, please turn the volume on your computer down and mute it as well to avoid creating a disruptive static noise. -Lastly, the court reporter (or the AOGCC Chairman) will start a roll call approximately five minutes before the public hearing begins. ________________________________________________________________________ ________ Microsoft Teams meeting Join on your computer or mobile app Click here to join the meeting Join with a video conferencing device 260748889@t.plcm.vc Video Conference ID: 113 156 347 4 Alternate VTC instructions Or call in (audio only) +1 907-202-7104,,614664490# United States, Anchorage Phone Conference ID: 614 664 490# Find a local number | Reset PIN Learn More | Meeting options ________________________________________________________________________ ________ CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. From:Hollis French To:Salazar, Grace (OGC) Subject:Re: Materials for next week"s hearing Date:Monday, December 13, 2021 11:33:06 AM I will watch for it. On Mon, Dec 13, 2021 at 11:02 AM Salazar, Grace (OGC) <grace.salazar@alaska.gov> wrote: Thank you. Also, I will be sending you the MS Teams link for the December 15th hearing before close of business today. Grace From: Hollis French <hsfrench@gmail.com> Sent: Monday, December 13, 2021 10:43 AM To: Salazar, Grace (OGC) <grace.salazar@alaska.gov> Subject: Re: Materials for next week's hearing Yes please, thank you. On Mon, Dec 13, 2021 at 9:53 AM Salazar, Grace (OGC) <grace.salazar@alaska.gov> wrote: There’s also a timesheet record for Michael Twain (one page), the rest are your timesheets. Do you want us to remove Twain’s timesheet from our record? Grace CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. From: Hollis French <hsfrench@gmail.com> Sent: Monday, December 13, 2021 9:40 AM To: Salazar, Grace (OGC) <grace.salazar@alaska.gov> Subject: Re: Materials for next week's hearing Thank you Grace. Sent from my iPhone On Dec 13, 2021, at 9:06 AM, Salazar, Grace (OGC) <grace.salazar@alaska.gov> wrote: Good morning, Hollis We noticed that the performance evaluation reports you provided in the packet last week contain your social security numbers. We are redacting the SSN from the scanned copies. Please let us know if there’s any other personal identifiable information in your filings that need to be redacted. Grace ____________________________________ Respectfully, M. Grace Salazar, Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. Direct: (907) 793-1221 Email: grace.salazar@alaska.gov https://www.commerce.alaska.gov/web/aogcc/ From: Hollis French <hsfrench@gmail.com> Sent: Wednesday, December 8, 2021 3:45 PM To: Salazar, Grace (OGC) <grace.salazar@alaska.gov> Subject: Re: Materials for next week's hearing Yes, please. On Wed, Dec 8, 2021 at 3:26 PM Salazar, Grace (OGC) <grace.salazar@alaska.gov> wrote: Did you want the materials to be part of the record? Just double checking. Grace From: Hollis French <hsfrench@gmail.com> Sent: Wednesday, December 8, 2021 10:59 AM To: Salazar, Grace (OGC) <grace.salazar@alaska.gov> Subject: Re: Materials for next week's hearing Great, thanks! CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. On Wed, Dec 8, 2021 at 10:58 AM Salazar, Grace (OGC) <grace.salazar@alaska.gov> wrote: Anytime; I’m here til 4. Grace From: Hollis French <hsfrench@gmail.com> Sent: Wednesday, December 8, 2021 10:45 AM To: Salazar, Grace (OGC) <grace.salazar@alaska.gov> Subject: Materials for next week's hearing Grace, I'd like to drop off some materials today for the commissioners to review before next week's hearing. Is there a time that's best for you? thanks Hollis French AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 ALASKA OIL AND GAS CONSERVATION COMMISSION In the Matter of ) ) HOLLIS FRENCH ) ___________________________________) Docket No. U19-002 PUBLIC HEARING December 15, 2021 10:00 a.m. BEFORE: Jeremy Price, Chairman Jessie Chmielowski, Commissioner Daniel T. Seamount, Commissioner AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 2 1 TABLE OF CONTENTS 2 Opening remarks by Chairman Price 03 3 Testimony by Hollis French 06 4 Testimony by Jim Regg 24 5 Testimony by Lois Epstein 30 6 Testimony by Harold Hines 32 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 3 1 P R O C E E D I N G S 2 (On record - 10:00 a.m.) 3 CHAIRMAN PRICE: Good morning, we are now on 4 record. It is approximately 10:00 a.m., Wednesday, 5 December 15th, 2021. This is a public hearing on Docket 6 U19-002 to consider Mr. Hollis French's complaint from 7 February 2019 claiming that the gas leak in the winter 8 of 2017 from a Hilcorp transmission line to Platform A 9 of the Middle Ground shoal in Cook Inlet constitutes 10 waste. At the time the AOGCC concluded they had no 11 jurisdiction over the matter because it previously had 12 investigated and had concluded the leak did not 13 constitute waste. Mr. French appealed to the superior 14 court which affirmed that the AOGCC's decision. On 15 September 3rd, 2021 the Alaska Supreme Court in Opinion 16 S17822 reversed that superior court decision and 17 remanded the waste petition of Hollis French to the 18 Alaska Oil and Gas Conservation Commission for further 19 proceedings. 20 This is Jeremy Price, Chair and Commissioner 21 and with me today are Commissioner Dan Seamount and 22 Commissioner Jessie Chmielowski. For those of you who 23 are on the phone, since you can't see who's in the room 24 I'll also note that we have some administrative Staff 25 here in the room with us, Ms. Grace Salazar, who will AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 4 1 be running the Microsoft Teams. Abby Bell is here 2 also. She is here if anyone wishes to submit questions 3 send them to Abby Bell, abby.bell@alaska.gov. Also in 4 the room are other AOGCC Staff, Jim Regg, Dave Roby and 5 Tad Balentine from the Department of Law. 6 As I mentioned, today's hearing is being held 7 telephonically and via Microsoft Teams. Please be 8 mindful of any background noise and make sure you are 9 muted when you are not testifying or addressing the 10 Commission. If you require any other special 11 accommodations please contact Grace Salazar. She can 12 be reached at 793-1221 or send her a message through 13 the Microsoft Teams chat icon and she will do her best 14 to accommodate you. 15 As you may have heard this hearing is being 16 recorded and will be transcribed and will be available 17 through Computer Matrix. 18 This hearing is being held in accordance with 19 Alaska Statute 44.62 and 20 AAC 25.540 of the Alaska 20 Administrative Code. A notice of this hearing was 21 published on the State of Alaska online notices website 22 as well as the AOGCC's website and was sent through the 23 AOGCC email Listservice on October 28th, 2021. AOGCC 24 also published a notice in the Anchorage Daily News on 25 October 31st, 2021. To-date, the AOGCC has not AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 5 1 received any public comment on the matter. If anyone 2 part -- again, if anyone participating in the hearing 3 today would like to ask a question please send that by 4 email to Abby Bell, that's abby.bell@alaska.gov. 5 Towards the end of the hearing I will provide that 6 email address again and give another opportunity for 7 those questions to be submitted. If we feel it is 8 appropriate to be asked we will ask that towards the 9 end of the hearing -- ask those questions of the 10 witnesses towards the end of the hearing. 11 Before asking Mr. French to provide his 12 presentation, do any of the Commissioners have 13 questions. Commissioner Chmielowski. 14 COMMISSIONER CHMIELOWSKI: No questions, thank 15 you. 16 CHAIRMAN PRICE: Commissioner Seamount. 17 COMMISSIONER SEAMOUNT: I do not, Mr. Chair. 18 CHAIRMAN PRICE: Mr. French, as the applicant, 19 you'll be testifying first. Before we swear you in, 20 the Commission notes you've requested to be recognized 21 as an expert in two fields, production operations and 22 what you've characterized as the public interest in the 23 administration of Alaskans Petroleum laws. The 24 Commission has the production operations and declines 25 to recognize you as an expert in either field, but with AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 6 1 regard to production operations, we will keep in your 2 mind your experience working on wells in the industry 3 30 to 40 years ago. If you are ready for your 4 presentation I will swear you in now. 5 We're working to -- hold on a second, Mr. 6 French..... 7 (Technical difficulty) 8 CHAIRMAN PRICE: So Mr. French we've unmuted 9 you on our end, are you unmuted on your end? 10 (No comments) 11 CHAIRMAN PRICE: I can't hear you. 12 MR. FRENCH: How about that? 13 CHAIRMAN PRICE: That works, yep, we hear you 14 now. I'll swear you in if you're ready. Thank you. 15 Please state your name for the record. 16 MR. FRENCH: My name is Hollis French. 17 (Oath administered) 18 MR. FRENCH: I do. 19 CHAIRMAN PRICE: Thank you, Sir. Please 20 proceed with your presentation. 21 HOLLIS FRENCH 22 testified as follows, under oath: 23 MR. FRENCH: Can the Commission see the slide 24 that's on the screen? 25 CHAIRMAN PRICE: Yes, Sir, we've got it up on AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 7 1 our screen. 2 MR. HINES: Can't hear. Can't hear at all. No 3 sound. 4 MR. FRENCH: Someone is complaining about a 5 lack of sound but that's not me. 6 CHAIRMAN PRICE: Yeah, we hear you fine. I 7 heard that complaint, Mr. Hines, I'm not sure what's 8 going on, maybe try the volume on your end. Our volume 9 is good on our end and I think Mr. French hears us 10 okay. 11 MR. FRENCH: I do. 12 CHAIRMAN PRICE: So please check your system. 13 Mr. Hines, just check your system and make sure volume 14 is up. Are you hearing me, Mr. Hines? 15 (No comments) 16 CHAIRMAN PRICE: Mr. Hines, Grace is attempting 17 to communicate with you by chat to work out your 18 issues. Okay, Mr. French, please go ahead. 19 MR. FRENCH: Thank you, Mr. Chairman and 20 members of the Commission. No fortune can hold out 21 against waste. Flaubert wrote that in Madame Bovary 22 some time ago, and what was true in his era is just as 23 true today. 24 I want to begin by thanking the attorneys who 25 consulted with me on this case, Eric Graffy, Eric AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 8 1 Croft, (Indiscernible) Taylor, Rob Mintz, Mark 2 Worcester, John Norman, Susan Orlansky, Jeff Feldman, 3 John Katcher, Pat Galvin, Steve Constantino, Don 4 Mitchell. I'd also like to thank Professor John 5 Mouracade at the University of Alaska and Professor 6 John C. Perry at the Fletcher School of International 7 Law and Diplomacy of Tufts. Finally, most of all, and 8 most warmly I'd like to thank Vic Fischer. 9 Since conservation is the main topic today it's 10 natural to begin in with Teddy Roosevelt. Over 100 11 years ago Roosevelt gave a speech in the poetically 12 named city of Osawatomie, Kansas, in which he said; 13 conservation means development as much as it means 14 protection. I recognize the right and duty of this 15 generation to develop and use the natural resources of 16 this land but I do not recognize the right to waste 17 them or to rob, by wasteful use, the generations that 18 come after. Allowing waste robs the generations that 19 come after. Once a hydrocarbon is gone, it's gone 20 forever. Anyone can see that natural gas escaping into 21 the air is gas that will never be used for heating a 22 home, will never be used to generate electricity, it 23 will perform no work at all. Since the earliest days of 24 the oil industry gas leading into the air has been 25 recognized as waste. It's simple, common sense. AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 9 1 I submitted three cases to the Commission to 2 consider before this hearing. The first two, Ohio Oil 3 Company versus Indiana and People versus Superior Oil 4 Company firmly established that oil and gas were 5 natural resources whose waste should be prevented 6 because they are valuable to the community as a whole. 7 The third case, Texas Railroad Commission versus Shell 8 decided in 1947 involved the Texas definition of waste, 9 which the Court found was meant to be very broad. 10 Alaska's definition of waste was written eight years 11 later and is even broader than Texas' this is a common 12 theme in the development of the law, that one 13 jurisdiction learns from another and improves upon the 14 earlier efforts. Unlike Texas, Alaska's definition of 15 waste specifically includes the originary meaning of 16 the word. The ordinary meaning of waste, to fail to 17 take advantage of, or fail to use for profit. 18 With this history in mind we can now turn to 19 the facts of this case. 20 An undersea gas pipeline in Cook Inlet sprung a 21 leak sometime in the winter of 2016, 2017. By February 22 2017 it was bubbling up strongly enough to attract the 23 attention of overhead flights. The leak went on for 24 months. I worked at the Commission during this time. 25 I suggested we do something about the leak. It seemed AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 10 1 very obvious to me that the leaking gas was waste 2 according to the common dictionary meaning of the word, 3 yet, the Commission declined to act and told me that we 4 did not have jurisdiction over this leak. The reason 5 given for our lack of jurisdiction was that the gas was 6 not coming from the platform and going to shore, it was 7 going out to the platform and had, therefore, been 8 metered and severed from the lease where it was 9 produced, presumably somewhere on the Kenai Peninsula. 10 I know the Commissioners to know this, but I want the 11 public to follow along so we have to go over some oil 12 field basics. 13 This is a picture of wellheads. The brown ones 14 produce oil, and the green one is a water injector. 15 Wells in Alaska are drilled from land that is leased 16 from the State. Oil and gas come up together out of 17 the ground and need to be separated. Here is a picture 18 of a typical separator. Oil and gas from the well come 19 in together on the left and by simple gravity gas goes 20 to the top of the separator and oil goes to the bottom. 21 Gas removed from the top of the separator is ready to 22 be measured or metered and sent off to a distribution 23 system. The meter, or the sales gas meter, or the 24 custody transfer..... 25 CHAIRMAN PRICE: Mr. French. AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 11 1 MR. FRENCH: Yes. 2 CHAIRMAN PRICE: Mr. French. Can you pause for 3 a moment, I think we're having some technical issues, 4 it sounds like some folks aren't able to hear your 5 voice. Can you hold on while we work something out. 6 MR. FRENCH: I'll wait right here. 7 CHAIRMAN PRICE: All right, my apologies for 8 the delay, just a moment. 9 (Pause) 10 CHAIRMAN PRICE: Okay, Mr. French, sorry about 11 that. We've got it worked out and we think we're good 12 to go. Go ahead, please -- please proceed. 13 MR. FRENCH: Okay, thanks so much, Mr. 14 Chairman. I think I was saying that the meter or sales 15 gas meter or custody transfer meter can be very simple, 16 as simple as an orifice plate and a device that 17 measures the pressure drop across the pipe as the -- as 18 the -- it's a device that measures the pressure drop 19 across the orifice plate as gas moves through a pipe. 20 There's a schematic there on your screen now. But 21 whether it is a simple orifice meter or more complex, 22 like this one that's pictured here on the Kenai 23 Peninsula, I think this is an ultrasound meter, the 24 point is, is that the other two Commissioners were 25 adamant that our jurisdiction ended exactly at this AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 12 1 point of metering and severing. Under their 2 interpretation up stream of the meter we had 3 jurisdiction, but down stream we did not. 4 Now, jurisdiction is an attribute of 5 sovereignty. And one thing you should know is that 6 jurisdiction operates very much like a light switch, as 7 one judge explained, it's either one, and he said it in 8 all caps, or it's off, in all caps. If the AOGCC has 9 jurisdiction and it has all its powers at its disposal. 10 If it does not have jurisdiction, the agency is 11 powerless. There is no sliding scale in jurisdiction. 12 You can't have a little bit of jurisdiction. Under the 13 rule that the other two Commissioners were going by, 14 once gas moves across the meter it's free of all 15 regulation by the agency. It's like a light switch 16 going off. That made no sense to me for several 17 reasons. One, is my experience working in the oil 18 industry and, specifically, around meters; we'll talk 19 about that more a bit later. But the other and more 20 fundamental reason is that the plain black and white 21 law was contrary to their position. Alaska law on 22 petroleum conservation was written in 1955 when Alaska 23 was a territory. The person who wrote our petroleum 24 conservation laws was named Irene Ryan, she's a 25 fascinating character and worthy of study. When I AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 13 1 consulted with Vic Fischer about Irene Ryan he really 2 lit up. Here's some interesting things about her. She 3 was the first female to solo an airplane in Alaska. 4 She held an engineering degree. She was a successful 5 real estate investor. She was a member of the 6 Territorial House, the Territorial Senate. She was the 7 mother of two. And after statehood, she was appointed 8 by Governor Bill Egan to his cabinet. So what rules 9 did she and the other legislators lay down? Well, 10 here's the first one, and by that I mean it is, in 11 fact, the first one they wrote down on a piece of 12 paper; Section 1 of the original act from 1955 says:, 13 and I quote, the waste of oil and gas is prohibited in 14 the territory of Alaska. This law was in place and in 15 effect before the first oil well was ever drilled on 16 the Kenai at Swanson River, a discovery that's credited 17 with helping spur on statehood. At statehood the law 18 had to be slightly modified so that it now reads, the 19 waste of oil and gas in the state is prohibited. I 20 think you have to stop and respect and admire the 21 economy of words there. I asked a professor friend of 22 mine who teaches logic at UAA, I said, under the logic 23 of this law, where, in the state of Alaska can you 24 waste oil or gas; and my logic professor friend said, 25 nowhere. AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 14 1 But under the rule that the other Commissioners 2 were using you could waste lots and lots of oil and gas 3 in Alaska as long as that happened up stream of the 4 meter. Under their rule, the rule that down stream of 5 the meter AOGCC has no power, a gas leak from a 6 pipeline anywhere in the state is a leak the agency 7 would be powerless to do anything about. For example, 8 on the Kenai Peninsula there are three gas pipelines 9 that cross the Kenai River, any amount of gas leaking 10 from one of those pipelines into the Kenai River would 11 be wasteful and should be something that would move an 12 agency that's called the State of Alaska Oil and Gas 13 Conservation Commission into action, but their position 14 that metered gas is beyond their control would not 15 allow them to do anything. Their position modified the 16 sweeping law that Irene Ryan and the other Territorial 17 Legislators put on the books many years ago. Their 18 position inserted new words into the law, words that 19 were never debated or voted on by state lawmakers. 20 Their rule would read something like this, the waste of 21 oil and gas up stream of the meter is prohibited, or 22 the waste of oil and gas on the lease is prohibited. 23 They were basically making themselves into legislators 24 and, well, that's just not right. 25 Now, I'm lucky, I've held both positions, AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 15 1 legislator and administrator. The duty of an 2 administrative agency is to administer the laws as the 3 legislators write them down. I know this because I took 4 a class in administrative law when I was in law school. 5 In this case the laws, as they exist, are very clear, 6 notice how it was not difficult for the Alaska Supreme 7 Court to decide this case. The Court simply recited 8 the laws as they exist on the books, and the law says 9 the agency has jurisdiction and authority over all 10 persons and property, public and private. These are 11 not difficult words to understand. The plain truth is 12 that the agency's position on this gas leak and its own 13 jurisdiction has been contrary to a plain reading of 14 the law from the beginning of this case. Bedsides 15 being contrary to the law, the agency's position was 16 harmful to the public and to the public interests. 17 Here's a picture I used to keep in my office at AOGCC 18 to help me remember who I was there to serve, the 19 public. I held the public seat on the Commission. To 20 me that meant I had a special responsibility to 21 consider the public interest in all of my actions. 22 Now, let's go back to the cases we discussed a 23 few minutes ago, the cases that declared that 24 conserving oil and gas works for the prosperity of the 25 whole community. Gas shooting up out of a pipeline in AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 16 1 Cook Inlet or anywhere else in the state does not work 2 for the prosperity of the whole community. It does not 3 matter to the public which side of the meter the leak 4 happens on, the public just sees a leak, it sees gas 5 shooting up into the air, it sees gas being wasted. 6 The leak in question is a good example. Platform A had 7 to shutdown because of the leak, the State lost oil 8 production as a result. No good came from this Cook 9 Inlet leak. In fact the pipeline leaked again recently 10 and the platform was shut down again. Leaks cause harm 11 inside and outside of the oil industry. 12 Let me offer a couple of different ways with 13 thinking about this case. Let's start with what I call 14 the Island Hypothetical. Imagine an island in Alaska. 15 On the island there's a gas well on the north end and a 16 village at the south end, a pipeline connects the gas 17 well to the village. In this example, I've used a real 18 island in Alaska, St. Paul Island in the Pribilofs. It 19 doesn't have any gas wells on it that I'm aware of, 20 this is still a hypothetical case. Now imagine there's 21 a custody transfer meter close to the gas well, when 22 the gas goes through the meter it's been metered and 23 severed from the lease. If the line leaks down stream 24 of the meter closer to the village, AOGCC can do 25 nothing, it is powerless. The line could catch on AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 17 1 fire, none of the benefit of the gas gets to the 2 village, the public is harmed, the public interest is 3 harmed, the gas is being wasted. A so-called 4 conservation commission should spring into action. 5 Remember the statute, the agency has jurisdiction and 6 authority over all persons and property, public and 7 private. Those powers apply to St. Paul Island. They 8 apply to the upper Cook Inlet where Platform A is, and 9 they apply to the Kenai River. They apply to the 10 pipeline that moves gas between Prudhoe Bay and Kuparuk 11 and all other movements of gas between reservoirs. 12 Here's another way of thinking about this case, 13 imagine you are driving into Alaska on the Alcan, 14 shortly after going through customs you see a sign 15 welcoming you to Alaska. Then you pass a sign that 16 says, littering prohibited, $1,000 fine. Littering is 17 a good way to think about waste, there are a lot of 18 similarities. Littering is never a good idea. Our 19 anti-waste law is supposed to work like our anti-litter 20 law, it is a statewide blanket prohibition on something 21 that we all know is bad. You could draw an analogy to 22 hunting and fishing, you have to use the animals that 23 you take. Throwing away the meat is wasteful. I've 24 listened to the other Commissioners complain that this 25 concept, a statewide ban on waste is too expensive to AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 18 1 enforce and/or it is someone else's job. First, this 2 agency is paid for by the regulated community, so 3 whatever the agency spends is recouped straight from 4 oil and gas producers, there is no cost to the public. 5 Full stop. Second, there's a concept the agency seems 6 unfamiliar with and that's prosecutorial discretion. 7 We may not choose to act on the smallest of leaks but 8 you want to keep your power and hold on to it to invoke 9 in serious cases. Third, whether any other agencies 10 have jurisdiction is not a question this group at AOGCC 11 has any expertise on. They fundamentally understood 12 their own jurisdiction, what makes you think they're 13 right about someone else's. And even if there are 14 other agencies to address a leak or a spill, I would 15 hope that AOGCC would remember, they are regulating the 16 oil industry which, while mostly good, is also capable 17 of making small errors like leaving a safety valve in 18 the wrong position, and large errors like putting a 19 drunk in command of an oil tanker. The agency should 20 always stand ready to do its job as commanded by the 21 statutes and not worry about anyone else. 22 Finally, in the same year this leak happened, a 23 Commissioner told Congress in submitted testimony; 24 quote, Alaska statutes give AOGCC responsibility to 25 exert jurisdiction on all lands within the state of AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 19 1 Alaska and all State waters. This is testimony to 2 Congress. At the same time they were fighting me on 3 this case. What do you call it when you say one thing 4 and do another? 5 I'll point out here that the statute of 6 limitations on a common law complaint of oil field 7 waste is six years, so we are still well within that 8 time period. 9 The last major point I'd like to make is about 10 the physical reality of gas leaks. I've worked inside 11 and outside of production plants. I've worked around 12 meters. I've changed out meters, I've approved meters, 13 I've checked the seals on the safety valves for meter 14 skids and meter runs. Meters are important but they're 15 not that important. I've been two fire schools during 16 my years in the oil industry. One on the Kenai 17 Peninsula and the other in Reno, Nevada. Being up 18 close to a gas leak is really scary, gas -- screaming 19 gas is powerful and its dangerous. Leaks can kill. 20 This is a picture taken from my days in the oil 21 industry. As a young man I went to work on a platform 22 in Cook Inlet, Platform A as a matter of fact, and as 23 it happens this man, John Brainard, died the year 24 before from a gas leak that had H2S in it. This made a 25 very powerful impression on me as a young man, I can AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 20 1 promise you. Leaks can happen on either side of the 2 meter. The agency's powers not only must apply to both 3 sides, they do apply to both sides. Don't take my word 4 for it, that's exactly what the Supreme Court of the 5 State of Alaska said. 6 So where do we go from here? 7 I'll remind the Commission that when it 8 originally denied my petition, it also promised that if 9 the gas in this case were an AOGCC regulated resource 10 it would institute an enforcement action against the 11 operator. The Alaska Supreme Court unequivocally 12 stated the agency had jurisdiction over this leak so 13 I'll make two suggestions. It's a truism in the 14 industry that a well constructed, well maintained 15 pipeline will last indefinitely. That means that the 16 converse is true, pipelines that burst and leak are 17 either not well constructed or not well maintained. I 18 could be totally wrong about this but I'll make a guess 19 that looking at the maintenance records of this 20 pipeline will reveal that the operator was cutting 21 costs, that seems to be their business model. The 22 agency should issue a subpoena for the maintenance of 23 this troubled pipeline. If the agency finds the 24 operator was in the wrong I wouldn't bother to fine 25 them for the wasted gas, instead, I really would ask AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 21 1 them to work with UAA engineering students to build a 2 mock up of the pipeline leak, using compressed air, of 3 course, instead of natural gas, bring that mock up to 4 the Park Strip so the public and the Commissioners can 5 get a feel for the volume and noise a pipeline leak 6 makes. 7 This case cost me my job at the AOGCC but it 8 was worth it. What I saw the agency doing was 9 surrendering its power at the first point of sale. It 10 shocked me. Getting oil and gas to the custody 11 transfer meter is only half the job. The agency was 12 giving away its power to the oil industry in exchange 13 for nothing. It was ignoring the plain words of its 14 own laws. It was making, what I call, a root error, a 15 fundamental error, an error that strikes at the heart 16 of what a conservation commission should be doing and 17 it was happening on my watch. It fell to me to correct 18 it. 19 I will be a little blunt here and say to AOGCC 20 it is not stately to surrender your power at the first 21 orifice. 22 I'll close where I began by citing to Teddy 23 Roosevelt, speak softly and carry a big stick, he said. 24 AOGCC has a big stick, powerful laws written by 25 Alaska's pioneers. The agency is empowered to AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 22 1 prosecute cases of waste anywhere they happen in the 2 state, large or small. Please do your job. 3 Thank you. 4 CHAIRMAN PRICE: Thank you for that Mr. French. 5 At this time we're going to take a 20 minute break and 6 you're welcome to stay on the line. If you need to, 7 you know, turn off your camera, whatever you need to 8 do, that's fine. If we will be any longer, Ms. 9 Salazar's monitoring the Teams and she'll let folks 10 know if we're going to take any longer than 15 to 20 11 minutes. 12 So at this time we will be back in -- what time 13 is it now, it's 10:30, so we'll be back at 10:45, 14 10:50, okay, Mr. French. 15 MR. FRENCH: I'll be right here, thank you. 16 CHAIRMAN PRICE: Thank you, Sir. 17 (Off record) 18 (On record) 19 CHAIRMAN PRICE: Okay, we are back on record, 20 the time is 10:55 a.m. This is Jeremy Price. Mr. 21 French, we appreciate your presentation. At this time 22 the Commission does not have questions for you. Please 23 standby though, we're going to have an additional 24 witness provide testimony here today. At this time 25 we're going to have Mr. Jim Regg come to testify. Mr. AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 23 1 Regg will you provide your name for the record and give 2 your qualifications, work experience, et cetera. 3 MR. REGG: Good morning, Chairman Price, 4 Commissioner Chmielowski and Commissioner Seamount. 5 For the record my name is Jim Regg and I serve as the 6 AOGCC inspection program supervisor. (Cuts out) been 7 in my current position since March of 2003. I received 8 a bachelor's degree from Petroleum and Natural Gas 9 Engineering from Penn State University and in Natural 10 Science from Edinburgh State University both in 1983. 11 Prior to coming to the AOGCC I worked for the U.S. 12 Department of Interior Minerals Management Service, now 13 Bureau of Safety and Environmental Enforcement in both 14 Alaska and Gulf of Mexico regions. My work history 15 includes technical assessment project management, 16 regulatory development, inspections and regulatory 17 enforcements for oil and gas operations offshore and 18 onshore. 19 CHAIRMAN PRICE: Thank you, Mr. Regg. At this 20 time I'll swear you in, please raise your right hand. 21 (Oath administered) 22 MR. REGG: I do. 23 CHAIRMAN PRICE: Thank you, Sir. Please 24 proceed with your presentation. 25 JIM REGG AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 24 1 testified as follows, under oath: 2 MR. REGG: The purpose of my testimony is to 3 describe AOGCC's work regarding the 2017 Middle Ground 4 Shoal fuel gas pipeline leak and the results of AOGCC's 5 investigation. 6 AOGCC investigated the leak at the time (cuts 7 out) passed through a custody transfer meter and then 8 severed from the property. In investigating the leak 9 we did the following. Reviewed AOGCC field files, 10 inspection files and Cook Inlet oil and gas pipeline 11 infrastructure. Included was a review of custody 12 transfer measurement points for produced natural 13 gas..... 14 CHAIRMAN PRICE: Mr. Regg, hold on just one 15 moment, I'm sorry, folks let me make sure we're -- 16 everyone is hearing us just fine. 17 Mr. French, are you hearing Mr. Regg's 18 testimony all right? 19 MR. FRENCH: I am, yes, thank you. I've been 20 on mute but I -- yes, I can hear it. 21 CHAIRMAN PRICE: Okay, great, thank you. Okay, 22 please proceed Mr. Regg. 23 MR. REGG: In review -- in investigating the 24 leak we did the following, reviewed AOGCC's field 25 files, inspection files and Cook Inlet oil and gas AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 25 1 pipeline infrastructure. Included was a review of the 2 custody transfer measurement points for produced 3 natural gas within the offshore and onshore Cook Inlet 4 region comparing information from produced natural gas 5 flow schematics with AOGCC records to confirm gas 6 custody transfer measurement points. We gathered and 7 reviewed information about the source of natural gas in 8 the MGSA pipeline, the line from MGS onshore facility 9 to MGS Platform A. When I used the phrase MGS I mean 10 Middle Ground Shoal. We also gathered and reviewed 11 volumes of natural gas produced, sold, purchased and 12 used for operating the MGS field facilities, that being 13 fuel, gas, artificial (cuts out) natural gas pipeline 14 leaks and how those were handled, and we reviewed 15 information from FMSA, ADEC, and Hilcorp relating to 16 the leaking pipeline. 17 Finding from that review, AOGCC concluded the 18 following: The leaking natural gas is from an eight 19 inch subsea pipeline extending between the Middle 20 Ground Shoal onshore facilities and MGS Platform A, 21 originally serving as a produced fluid flow line from 22 the Platform A to the onshore processing facility, the 23 line was converted in 2005 to transport natural gas 24 from the offshore -- the onshore facility to the Middle 25 Ground Shoal platform. Casing head gas is separated AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 26 1 from the produced fluid stream on the platform used as 2 fuel for heat, lights, and power and for artificial 3 lift. Two prior gas leaks on this line, in 2014, were 4 reported to then operator -- were reported by then 5 operator XTO Energy, AOGCC determined in discussions 6 with XTO that the gas pipeline in question was a 7 utility fuel gas pipeline transmitting by-back gas. 8 The source of gas in the 2014 leaking pipeline was 9 purchased from a common carrier East Cook Inlet Gas 10 Gathering System, which received produced natural gas 11 from -- which produced from Furie Cook Inlet Energy and 12 Hilcorp. 13 To confirm nothing had changed in the Middle 14 Ground Shoal produced flow -- fluid flow path since 15 2014, AOGCC obtained a current gas flow schematic 16 identifying all produced natural gas from the Cook 17 Inlet region field (cuts out) I believe that schematic 18 is on the screen. AOGCC reviewed -- confirmed the 19 custody transfer meter locations matched AOGCC's 20 records. Regarding production data, there are four 21 offshore platforms within the Middle Ground Shoal field 22 A, C, Baker and Dillon. At the time of 2017 leak, 23 Baker and Dillon platforms were in a long-term shut-in 24 status, there was zero production since 2003. 25 Production records filed in accordance with 20 AAC AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 27 1 25.230 and gas (indiscernible) reports filed in 2 accordance with 20 AAC 25.25 -- 235 provide volumes of 3 natural gas produced, sold, purchased and used for 4 operating the MGS field facilities. In February 2017 5 approximately 40.5 million cubic feet of gas was 6 necessary to operate the Middle Ground Shoal platforms. 7 The platforms were able to produce slightly more than 8 15 million cubic feet of gas, therefore, Middle Ground 9 Shoal is gas deficient, meaning they must buy natural 10 gas from outside the field to operate. 11 Current regulations clarify the measurement 12 point for custody transfer include a custody transfer 13 measurement application process and add reference to 14 industry standards recognized as best practices for 15 measurement equipment and techniques. 16 To summarize, AOGCC investigated the potential 17 for waste resulting from Middle Ground Shoal gas 18 pipeline carrying gas from onshore to the offshore 19 platforms. The Middle Ground Shoal oil and gas field 20 is gas deficient and requires the purchase of third- 21 party natural gas to operate the production facilities. 22 The law requires that produced natural gas must be 23 measured before removal from the lease in (cuts out) 24 property where produced. This is the point at which 25 AOGCC has always deemed the resource, gas or oil, to AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 28 1 have been produced. The source of gas purchased for 2 Middle Ground Shoal was from the East Cook Inlet Gas 3 Gathering System, a third-party common carrier pipeline 4 on the Kenai Peninsula that transports natural gas 5 produced by several operating companies and was 6 measured before entering the common carrier line. 7 AOGCC has always interpreted the purpose of the 8 prohibition against waste to be the maximum -- to 9 maximize the recovery of oil and gas. Because gas 10 leaking from the Middle Ground Shoal pipeline had been 11 purchased by Hilcorp from the East Cook Inlet Gas 12 Gathering System, common carrier line, AOGCC deemed it 13 recovered or produced and, in turn, not susceptible to 14 being deemed waste. 15 Thank you. I would be happy to address any 16 questions you may have about our investigation. 17 CHAIRMAN PRICE: Any questions from 18 Commissioners. Thank you, Mr. Regg. 19 COMMISSIONER SEAMOUNT: None for me, thank you. 20 COMMISSIONER CHMIELOWSKI: None, thank you. 21 CHAIRMAN PRICE: At this time we invite the 22 public, if there is anyone that would like to testify 23 at this time from the public, please make it known. 24 Take yourself off mute. 25 (No comments) AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 29 1 CHAIRMAN PRICE: Or you can, in the chat box, 2 let Grace Salazar know that you wish to provide public 3 comment. 4 MS. SALAZAR: Someone would like to speak. 5 CHAIRMAN PRICE: I see Lois Epstein, I see your 6 comment in the chat box that you would like to testify. 7 If you can take yourself off mute you should be able to 8 speak and we can hear you. Go ahead, let me see if we 9 can hear you. 10 (No comments) 11 CHAIRMAN PRICE: I can't hear you yet Ms. 12 Epstein. 13 (No comments) 14 CHAIRMAN PRICE: I still can't hear you, Ms. 15 Epstein, hold on a moment and let's see if we can work 16 this out on our end. 17 (Pause) 18 CHAIRMAN PRICE: Ms. Epstein try speaking 19 again. 20 (No comments) 21 CHAIRMAN PRICE: We still can't hear you, 22 you're off mute on our end. 23 MS. EPSTEIN: Hello, can anyone hear me? 24 CHAIRMAN PRICE: We can hear you now. You're 25 getting a little bit of an echo so if you've got two AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 30 1 devices on you'll need to..... 2 MS. EPSTEIN: Yep. I just got rid of one, 3 how's that? 4 CHAIRMAN PRICE: Perfect. Perfect. Okay, if 5 you could state your name for the record and provide 6 your comment, that would be great, thank you. 7 TETIMONY 8 MS. EPSTEIN: Yes, of course. Lois Epstein. I 9 am a licensed engineer here in Alaska. And I apologize 10 for you not hearing me and taking some time, but thank 11 you for this opportunity to raise a couple of points 12 that are based on what I heard today from Mr. French 13 and Mr. Regg. 14 So I believe from what we've all heard that the 15 facts are pretty clear about where the leak happened 16 and what AOGCC believes its jurisdiction was and Mr. 17 French argues that it has a more expansive 18 jurisdiction, so I didn't hear anything from Mr. Regg 19 that said otherwise. So we have two different 20 positions. And as a member of the public I'm kind of 21 wondering what this all means because we have the State 22 Supreme Court arguing that there is jurisdiction and 23 AOGCC saying there is not. And then I thought another 24 point that Mr. French made that was important was his 25 analysis that Hilcorp can't actually produce the oil AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 31 1 without the pipeline's gas so it's actually part of the 2 production system. And I was wondering if someone 3 could speak to that, and I don't if this is a unique 4 situation in Alaska but it seems to me that without 5 that gas there would be no production and, therefore, 6 it's part of the production system. 7 And I also just wanted to comment that I 8 thought it was a good point Mr. French made about, 9 while there -- this does open up and expand the 10 jurisdiction quite a bit there's always prosecutorial 11 discretion, and in this case given that it was a long, 12 ongoing leak, that actually made the State of Alaska 13 look bad nationally, because there was national 14 coverage, it seems like this might be something AOGCC 15 might want to take on, if there's a similar situation 16 in the future. 17 So I hope the Commission can respond to some of 18 that, thank you. 19 CHAIRMAN PRICE: Thank you for your comments, 20 Ms. Epstein, appreciate that. If you've got a specific 21 question that you'd like to ask, please send it in 22 writing and we'll consider it with the rest of any 23 questions that are submitted by the public. Again, 24 that's -- shoot a note to Abby Bell, 25 abby.bell@alaska.gov, and we'll review those questions AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 32 1 and ask them, if appropriate, at the end of the 2 hearing. Thank you. 3 Does any other member of the public wish to 4 testify at this time. 5 (Teams interference - Screeching) 6 CHAIRMAN PRICE: Yeah, Mr. Hines, you got to 7 make sure one of your devices is off, if you have two, 8 because otherwise we get an echo. Did you wish..... 9 MR. HINES: Can you -- can you hear me okay? 10 CHAIRMAN PRICE: I can, Sir. Go ahead and 11 state your name for the record and proceed with your 12 comments. 13 TESTIMONY 14 MR. HINES: My name is Harold Hines. I am an 15 over 50 year resident of Alaska. I have been involved 16 in Prudhoe Bay since 1969 and along the way touched 17 Cook Inlet a few times. 18 My interest today in what Mr. French had to say 19 and how you, ultimately, respond to it in terms of 20 whatever order or decision you issue, relates to the 21 basic idea of waste and how AOGCC sees its 22 responsibilities in cases where there is a potential of 23 waste. 24 I, almost 10 years ago, had the experience to 25 be before AOGCC in a fairly difficult position of, it AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 33 1 was me against BP and the Prudhoe Bay unit and, at 2 times, felt like the world, and it was over an issue 3 that I felt the lack of production of propane 4 constituted waste and we went through a hearing process 5 that took over six or seven months and ultimately there 6 was a conclusion reached and everything that there was 7 not waste. And I bring that up because I think the 8 issue as it's defined today is, has been stated by Ms. 9 Epstein, how broad is the duties and responsibilities 10 of AOGCC. And I've dealt with the agency, again, for 11 50 years roughly and I think you are, in that entire 12 history, to be commended for your stance and conduct in 13 a regulatory sense, you've done a wonderful job, and 14 very frankly I think you've done a very wonderful job 15 on the technical side of the reservoir and production 16 and development and all those things. Where I find the 17 difficulty is that AOGCC, in many cases, is the only 18 entity right now responsible in many of the could be 19 potential, maybe happen in the future, waste situations 20 related to oil and gas, they are the only group that 21 can, at least, see their role in the potential of a 22 little broader sense of their specified mission to 23 protect the public interest. And, again, that term 24 takes on a lot of different meanings and I wouldn't 25 attempt to even start to define it, but it is a term of AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 34 1 art that you, as Commissioners, I believe are bound by. 2 As Commissioners of the State of Alaska, you have a 3 responsibility to see to the public interest. And 4 that's important in the waste considerations because 5 sometimes that public interest might be reflected in 6 how much royalty is paid the state, it may reflect on 7 the fact that -- that there may be use of off take for 8 use within the state, and so on. There is a very great 9 opportunity for AOGCC in its considerations to reach 10 beyond, and I'm not talking way beyond, I'm talking at 11 the edge of the technical analysis and consider what I 12 would consider to be public interest type evaluation. 13 If waste is to be limited to entirely the economics of 14 the producer then it's not very much of a protection 15 that you're supposed to be providing. Where the public 16 interest starts in that regard is certainly open to 17 consideration. And when you're faced with some member 18 of the public, frankly coming before you, you might 19 ought to listen to them a little bit because it is an 20 act of almost defiance to stand up and say there is -- 21 some of these operators and producers are committed 22 potentially waste -- in this case, one of the reasons I 23 even bring this up is, very frankly, I see the addition 24 of Hilcorp as an operator on the North Slope as a good 25 thing and, frankly, if 10 or 11 years ago if they had AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 35 1 been the operator on the North Slope I think my case 2 might have been heard in a very different light (cuts 3 out) understood and it's very positive and might have 4 found it was a little more receptive audience to ideas 5 of how the public might benefit from additional propane 6 production and those kind of things. 7 And so I think the Commission needs to be very 8 mindful of when you're faced with somebody with the 9 courage of Mr. French coming before you, that, you 10 know, you need to kind of see if there's some way to 11 set the stage for the future. Even if right now the 12 incident in this case is well over, and it's gone, and 13 I don't think anybody expects anything to happen much 14 different, but I agree with him that conceding too 15 quickly your authority in the broad reach of waste, it 16 -- it would be a mistake, frankly. You know, it -- it 17 is -- it is one of those issues that if -- if nothing 18 else, I'll just put it in simple terms so the public 19 understands, it could affect your dividend, okay, let's 20 try it that way. And if that isn't public (cuts out) 21 then what is. 22 So, again, even though you have very definite 23 responsibilities and I, again, would be applauding of 24 those accomplishments, you also have a responsibility, 25 and you may be the only ones who can, reach out there AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 36 1 as a Commissioner of the State of Alaska and look to 2 the public interest in the broadest since of that term 3 and try to protect it through those things that are 4 definitely on your agenda. 5 So I thank you for the opportunity to offer 6 these comments. I offer them in the most constructive 7 of modes and, again, I applaud that this hearing is 8 being held and the way it's been conducted and 9 everything about it, but I really ask that you take to 10 mind that some serious things are being said to you 11 and, again, it is within your power to set your own 12 boundaries and I think you ought to use that ability to 13 the advantage, not only of the industry and of Alaska, 14 but the people of Alaska as folks who have a direct 15 interest in this. 16 So I thank you for the opportunity to speak. 17 CHAIRMAN PRICE: Thank you, Mr. Hines, 18 appreciate those comments. Does anyone else wish to 19 testify at this time. 20 (No comments) 21 CHAIRMAN PRICE: Okay, folks, we're going to 22 take a break for 10 minutes and let the -- anyone who 23 wishes to -- wishes to submit questions of the 24 witnesses to do it at this time. I think I've said it 25 a few times but just in case anyone didn't hear it, AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 37 1 please send your questions to abby.bell, A-B-B-Y.B-E-L- 2 L@alaska.gov, and we'll take a 10 minute break and see 3 if any questions come in. 4 Thank you. 5 We'll be back, the time is 11:22 so we'll be 6 back at 11:32. 7 (Off record) 8 (On record) 9 CHAIRMAN PRICE: We are back on record. At 10 this time we have not received any written questions. 11 There were some questions raised during the public 12 testimony portion, we will take that into consideration 13 when the order is written as well as the rest of the 14 testimony that was provided today. 15 I'll provide one last opportunity for the 16 public to testify if they wish. Does anybody wish to 17 provide comment at this time that didn't get a chance 18 to before. 19 (No comments) 20 CHAIRMAN PRICE: Any questions or comments from 21 Commissioners. 22 Commissioner Chmielowski. 23 COMMISSIONER CHMIELOWSKI: No questions, thank 24 you. 25 CHAIRMAN PRICE: Commissioner Seamount. AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 38 1 COMMISSIONER SEAMOUNT: None, Mr. Chair. 2 CHAIRMAN PRICE: Then thank you for your 3 participation in this hearing, the public, Mr. French, 4 Mr. Regg, we will stand adjourned at this time, the 5 time is 11:34. 6 Thank you. 7 (Recessed - 11:34) 8 (END OF PROCEEDINGS) 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 AOGCC HEARING 12/15/2021 ITMO: HOLLIS FRENCH Docket No. U19-002 329 F Street, Ste. 222., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Computer Matrix, LLC Phone: 907-227-5312 Page 39 1 TRANSCRIBER'S CERTIFICATE 2 I, Salena A. Hile, hereby certify that the 3 foregoing pages numbered 02 through 39 are a true, 4 accurate, and complete transcript of proceedings in 5 Docket No. U19-002, transcribed under my direction from 6 a copy of an electronic sound recording to the best of 7 our knowledge and ability. 8 9 _______________ _______________________________ 10 DATE SALENA A. HILE, (Transcriber) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. From:Hollis French To:Salazar, Grace (OGC) Subject:Powerpoint Date:Tuesday, December 14, 2021 10:05:45 AM Attachments:AOGCC.pptx Grace, Here are the slides I intend to show tomorrow. I plan to try to use my Prezi program, as it allows me to control the screen and the images (it's probably possible to do this as well in Powerpoint, but I don't know how!). If we get in a bind, though, this is a good back-up, and can serve as the record of my presentation. Thanks again for all your help. Hollis Check Valve Ball Valve Regulating Valve Back Pressure Valve Gas Well Positive Displacement Meter Mass Flow Meter Production Facility , Labeled (Heaters, Dehydrators, ect.) Turbine Meter Annubar Meter Orifice Meter Desc. Horizontal Vessel Cannery Loop #1 303 301 Scrubber EFM 402 / 1599 EFM 414 EFM 202 Scrubber 16 " Buyback GPP PLC EFM 865 From GPP, Bruce, Anna Buyback Bruce, Anna PLC EFM 863 PLC EFM 866 Spurr and Spark EFM 6105A EFM 6413EFM 6411 3101 From Steelhead Fuel To MGS Production from MGS 208 403 201 204 10 " 10 "20 " Kenai Nikiski Pipeline40016 " High Pressure CIGGS412 404 207 407 408 209 EFM 8100 EFM 8102 EFM 8101 20 " Enstar To Anchorage Lewis River EFM 1570 189 168A/BPretty Creek EFM 601WEFM 600W Stump LakeIvan River EFM 6105B Scrubber 4 " 4 " N.O. N.O. T EFM 603 Ultrasonic Meter 12" Kenai Kachemak PipelineU EFM 601 EFM 600 KKPL to Enstar KKPL to KNPL 413 Operator Legend Aurora Nikolai EFM 6103 Aurora Moquawkie-Kaloa 700 701 502 Storage Wells IN EFM 1581, 1590, 1599, 2501330004 OUT EFM 1569, 1589, 1598, 2501330003 EFM 101 401 EFM 211 210T 406 EFM 220 EFM 420 (1501330001) U T U T T T EFM EFM 106 NC NC U U EFM 602 U EFM 604 U EFM 1504/1606 U Sample Point Storage Well N.C. EFM 8105 EFM 8007 T EFM 8104 O Aurora Lone Creek Scrubber To MediumPressure System NC NC OEFM 8106/6108CIGGS to/from Beluga EFM 605 U Cook Inlet Energy to CIGGS EFM 6106 16 " NO NO U U O EFM 520 (1501330002) 411-2 U U 612-A PD 611 EFM 410 U Meter Legend 170A BRU to Enstar 170B BRU to Enstar 168A/B Lewis River 189 Enstar to/from Pretty Creek 106 High Pressure to HEA 201 CIGGS to MGS 202 Low Pressure to HEA 204 MGS to HEA (LP) 207 CIGGS to Tesoro 208 CIGGS to ConocoPhillips (Not in Service) 209 Enstar Royalty Line 210 Enstar Royalty Line 211 SRU to/from CIGGS 301 Cannery Loop #1 303 Cannery Loop #3 400 Kenai Gas Field 401 Harvest KBPL Compressor 402/1599 SRU to HEA 403 KGF to Phillips 404 Kenai Enstar City Gate 406 SRU to/from Enstar 407 KGF to Tesoro 408 Tesoro Inlet 413 North Kenai Enstar 414 KGF to HEA 500 Enstar Kenai-Anchorage 502 Enstar Kenai-Anchorage 600W Stump Lake 601W Ivan River 600 KKPL to KNPL 601 KKPL to Enstar 602 Go Pad to KKPL 603 Falls Creek to KKPL 604 Susan Dionne to KKPL 700 Enstar Beluga 701 Enstar Beluga 863 GPTF to CIGGS 865 Fuel to GPP 866 Fuel to Anna & Bruce 1504/1606 Happy Valley to KKPL 6105A/B Steelhead to CIGGS 6411 Steelhead to CIE (Not in Service) 6413 Steelhead to TBU Fuel Header 6415 Emergency Buyback From CIGGS 8100 Chugach Power Plant 8101 Enstar Beluga 8102 Enstar Beluga 101 CIGGS to HEA 220 Enstar to HEA 412 Kenai Enstar 420 KNPL to/from SRU 3101 Spurr & Spark to CIGGS 6103 Aurora Nikolai to CIGGS 1570 To/from Swanson River 8007 ConocoPhillips/HEA Inter tie 8104 Aurora Lone Creek to CIGGS 8105 Aurora Moquawkie-Kaloa to CIGGS 1100 Beaver Creek to Enstar 8106/6108 CIGGS to/from Beluga 606 State to KKPL 6106 CIE to CIGGS 520 Hilcorp to Enstar 411-1/2 KNPL to Enstar 405 BP GTL Pilot (Not in Service) 410 Tyonek Platform (Operated by HAK) 611 Kasilof Sales 612 A/B Ninilchik Sales K687 CINGSA GAS STORAGE 415 415 CINGSA Gas Storage Enstar Gudenrath Compression EFM 607 U Royalty Line2200 X 1100 O XXXX O KGSF #1KGSF #742x-542y-59100 O 1570A (FWD) 1570B (REV) 415A 415B (To COGEN) (MS) Emergency Use Only (MS) Emergency Use Only Baker Sales 1101 EFM 606 U 520A 520B 211A (REV) 211B (FWD) AEEC (HEA)401B401A420B (REV)420A (FWD) 614 U Anchor Point Pipeline 614A 614B 400A 400B 189A 189B Storage U 600WA 600WB 168A 168B 8106 6108 U EFM 8108 U EFM 8107 * * (MS) EMERGENCY USE ONLY. * * * 500 U Cook Inlet EnergyEFM 609 MLP Plant Potter Marsh Enstar K-Beach Compression Tyonek 10 " LowPressure CIGGSFurie Kitchen Lights Compressor U 8108 BPL Terminus 609 Bart Pad to KKPL U (NIS) CEA U U PHASE II PHASE III O O CEA 2 SALES CEA 1 CHECK 110 170B 170A SALES Hilcorp Prod. Harvest Enstar HEA Conoco ML&P Other 304 302 Cannery Loop #3 302 CLU #1 LP Gas to KGF 304 CLU #3 Fuel from KNPL 417 416 Royalty Line 215-1 215-1/2 Kitchen Lights Unit 416 AIX Kenai Loop Unit (KLU) (KBPL Tariff) 417 Tyonek Platform (Custody/non KBPL Tariff) MLV2 MP15 MLV1 EFM 6415 *Kaloa Cook Inlet Crossing(NIS) (NIS) (NIS) = Not in Service 405 PD (NIS) (NIS) 600A 600B U 411-1 U 612-B PD (NIS)M PD 404 PD 416 U U (SE CIGGS)215-2 605 Paxton to KKPL 416 Tyonek Platform (Custody/non KBPL Tariff) 1001 CompressorFuel Gas504Compressors A, B, C E CIGGS (NIS) Spark 861-1 Spurr 861-2 T T 862-2 Fuel Gas to Spur 862-1 Fuel Gas to Spark 6106B 6106A U (NIS)(NIS) U 16" Beluga Pipeline (NIS) 614 KKPL / APPL Junction 607 Kasilof Pad to KKPL 9100 Enstar Sterling 2200 Enstar West Fork 1001 KPL Compressor A, B, C Fuel Gas 8107 Enstar (CEA Mtr 201) displacement To: AOGCC Commissioners From: Hollis S. French Date: December 13, 2021 Re: Gas movements between reservoirs I drafted the following paragraphs and then removed them from my Reply Brief to the Supreme Court so as to not run afoul of the rules. Additionally, as a Production Operator, Drill Site Operator, and Board Operator at CPF-1 at Kuparuk during some of this time – 1984-1992 -- I have personal knowledge of the operation of the Oliktok Pipeline. “The problems created by AOGCC’s narrow interpretation of its jurisdiction are not limited to the Kenai Peninsula. Consider the back-and-forth gas movements between the Kuparuk and Prudhoe Bay oil fields. The Oliktok pipeline is a 16” line originally built to carry crude oil from Kuparuk to the Trans-Alaska Pipeline.1 The subsequent installation of a 24” line to carry the crude allowed the 16” line to be repurposed to move gas from Kuparuk to Prudhoe for use as fuel gas beginning in 1985.2 In 1995 the line began moving natural gas liquids (NGL) in the other direction, from Prudhoe to Kuparuk, for injection into the Kuparuk reservoir to help recover more oil there.3 The practice, with some stops4 1 Regulatory Commission of Alaska, Order P-84-003(1) at 1, available at RCAWeb/Orders/OrderDetails.aspx?id=1d36ba7f-3bcb-49f7-8515-c7598cbbce3a. 2 Id. at (unnumbered) 2. 3 Regulatory Commission of Alaska, Tariff Advice Letter No.TL46-334, July 17, 2018, p.3, available at static.conocophillips.com/files/resources/rca-opc-tar-tl46-334.pdf. 4 “Because Prudhoe Bay Unit (PBU) gas contains levels of carbon dioxide contributing to corrosion in KRU wells and facilities, CPAI stopped importing NGLs (natural gas liquid) from the PBU for use in the KRU in 2014 and began importing only fuel gas from PBU to maximize use of the remaining formation gas.” Department of and starts5 continues to this day. There are custody transfer meters on both ends of the Oliktok pipeline.6 Moving a hydrocarbon from one reservoir to another is good engineering, as it leads to greater ultimate recovery for the state of Alaska as a whole. Whether the gas is being used to fuel a turbine, or to help sweep oil from a reservoir, everyone benefits. Yet the AOGCC’s narrow conception of its jurisdiction would remove itself from policing any leaks, no matter how large, that occurred in the process. If the Oliktok pipeline were to leak gas, the supplying reservoir energy would be unnecessarily dissipated, and the receiving reservoir would not enjoy the benefit of the productive work that the gas could have supplied.7 A leak of gas from the Oliktok pipeline would result in waste.” Natural Resources, Approval of 2017 Kuparuk River Unit Plans of Development, p.1-2, July 27, 2017, available at dog.dnr.alaska. gov/Documents/Units/2017/ 20170727_KU_POD_2017_Approved.pdf. 5 “Proposed 2018 Activities…Import of NGLs from Prudhoe Bay expected to recommence after being stopped in 2014.” Department of Natural Resources, Approval of 2018 Kuparuk River Unit Plans of Development, p. 4, July 31, 2018, available at dog.dnr.alaska.gov/Documents/Units/2018/20180731_KU_POD_2018_Approved.pdf. 6 ConocoPhillips Alaska, Oliktok Pipeline Fuel Gas Conversion Project Basis of Design, pgs. 4, 6, 7, available at aws.state.ak.us/OnlinePublicNotices/Attachment.aspx ?id=92811. 7 And what about the question of the agency’s jurisdiction over the hydrocarbons that go into the other reservoir. Is jurisdiction regained once the hydrocarbon moves underground? Notice of Public Hearing and Comment Period STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION RE: Docket No. OTH-19-002 On September 3, 2021, the Alaska Supreme Court, in Opinion S-17822, remanded the waste petition of Hollis French to the Alaska Oil and Gas Conservation Commission (AOGCC) for further proceedings. In his petition, French claims that gas which leaked in winter of 2017 from a Hilcorp transmission line in Cook Inlet constitutes waste. A copy of French’s petition may be obtained by contacting the AOGCC’s Special Assistant, Grace Salazar, at (907) 793-1221 or grace.salazar@alaska.gov. The AOGCC will hold a public hearing on Wednesday, December 15, 2021, at 10:00 a.m. Due to ongoing concerns from the Covid-19 virus, the hearing will be held via MS Teams. The audio call-in information is (907) 202-7104, conference ID no. 614 664 490#. Anyone who wishes to participate remotely using MS Teams video conference should contact Ms. Salazar at least two business days before the scheduled public hearing to request an invitation for the MS Teams. If you wish to comment on this matter, please file your written comments by 4:30 p.m., December 8, 2021, at the AOGCC address: 333 West 7th Avenue, Anchorage, Alaska 99501, or via: Email: aogcc.customer.svc@alaska.gov Fax: (907) 276-7542 Online: State of Alaska Public Notices System (use the “comment” link). Individuals or groups of people with disabilities who require special accommodations to comment or attend the hearing should contact Ms. Salazar at (907) 793-1221, no later than December 10, 2021. Jeremy M. Price Chair, Commissioner Jeremy Price Digitally signed by Jeremy Price Date: 2021.10.28 10:36:49 -08'00' From:Salazar, Grace (CED) To:AOGCC_Public_Notices Subject:[AOGCC_Public_Notices] AOGCC Notice of Public Hearing & Comment Period (Hollis French/Alaska Supreme Court Opinion S-17822) Date:Thursday, October 28, 2021 12:17:58 PM Attachments:10-28-21 Notice of Public Hearing.pdf Please see attached Notice of Public Hearing and Comment Period. A copy of the Alaska Supreme Court Opinion (S-17822) and the 2019 Hollis French Petition can be downloaded from the Alaska Oil and Gas Conservation Commission’s Events webpage. Grace ____________________________________ Respectfully, M. Grace Salazar, Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 Direct: (907) 793-1221 Email: grace.salazar@alaska.gov https://www.commerce.alaska.gov/web/aogcc/ __________________________________ List Name: AOGCC_Public_Notices@list.state.ak.us You subscribed as: grace.salazar@alaska.gov Unsubscribe at: https://list.state.ak.us/mailman/options/aogcc_public_notices/grace.salazar%40alaska.gov S-17822 3AN-19-06694 Cl AGENCY RECORD Hollis S. French vs. AOGCC 3AN-19-06694 Cl • •• TRANSMITTAL OF AGENCY RECORD TO: Superior Court Clerk 825 W 4th Ave Date: May 20, 2019 -----------'(Court Address)·--------------Ftt£e-irrtheTRIA~eOttRTS------ Anchorage, AK 99501 STATE OF ALASKA, nllRD DISTRICT FROM: SOA, AOGCC (Name of Agency) Jody J. Colombie (Name of Person at Agency) 333 West Seventh Avenue (Address) Anchorage, AK 99501 RE: Case Name: Hollis S. French vs. AOGCC MAY 2 2 2019 Clerk of th<! Trial Courts By Deputy Appeal Case Number: _3_A_N_-1_9_-_06_6_9_4 _______ C~I Agency Case Number: _O_th_e_r_O_r_d_e_r _1 _50 ______ _ Pagination of the agency file has been completed. In accordance with Appellate Rule 604(b )(1 )(B)(ii) and (iii), the following items are being forwarded to you: 1 0 -0 volumes of agency file (a copy) The file is numbered from page 1 to _7 __ _ volumes of transcript (original) volumes of depositions (copies) 0 0 0 list of exhibits being forwarded (List only those not included in the agency file.) envelopes/boxes containing exhibits list of exhibits retained by agency other: ------------ If the court needs any of the exhibits being retained by the agency, the court must contact the following person: Name: Jody J. Colombie Title: Special Assistant to the AOGCC Phone No. 907-793-1221 May 22, 2019 /(___ Date AP-312 (3/0l)(cs) TRANSMIIT AL OF AGENCY RECORD April 8, 2019 2640 Telequana Drive Anchorage, AK 99517 AOGCC RECEIVEt:l 333 W. 7th Avenue Anchorage, AK 99501 RE: Docket Number OTH-19-002 To whom it may concern, APR 0 B 2019 AOGCC It is a little frustrating dealing with a so-called conservation commission that refuses to see what is directly in front of it. Here's what happened in Cook Inlet two winters ago: a gas line burst and spewed gas to the atmosphere for several months. That is waste. The lack of gas led to the platform shutting down, which resulted in a loss of oil pro- duction. That is bad. The waste led to a loss of production. ls everyone following along here? These are matters that should pose a call to action to someone who is paid a handsome salary to 'protect the public interest in Alaska's valuable oif and gas resources.' Instead, the agency spends a lot of energy looking for ways to avoid doing its job. It is disheartening watching the commission run away from its responsibilities. Undersigned moves the Commission to reconsider its order of March 20, 2019, denying my petition for a hearing on a complaint of waste from an 8" fuel gas line in Cook Inlet. The Commission's order claims that the agency does not have jurisdiction over the leak in question. The agency's position is based upon this rationale: "Once oil or gas is metered and severed from the property, AOGCC's authority to make a waste determination regarding use of the oil or gas is at an end." The main flaw in the Commission's position is that it is not supported by Alaska law; indeed, the agency's position is contrary to the law. The law says that the agency's authority extends statewide. 000001 Consider these two statutes: 1. "The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States." AS 31.05.027. 2. "The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter." AS 31.05.030(a). The two statutes clearly and unambiguously give the commission the authority to act on an oil field gas line leak that causes a loss of production. Auc.Jitionally, consider this testimony given to Congress by a former commissioner: "Alaska statutes give AOGCC responsibility to exert jurisdiction on all lands within the state of Alaska (except Denali National Park) and all state waters." (Written testimony of Cathy Foerster, Commissioner, AOGCC, addressed to the House Committee on Natural Resources, Subcommittee on Energy and Mineral Resources, October 13, 2017.) Given the statutes, and the agency's testimony to Congress, it is hard to understand why the commission is so reluctant to do its job. If the Legislature had wanted the agency's jurisdiction to end at the meter, it would have said so in a statute. The Legislature did not say anything of the kind. The agency's interpretation of its own statute short-changes the public, by cutting off the agency's power far short of what the Legislature enacted. The order goes on say that the "primary purposP. behind the prohibition against waste is to maximize resource recovery." If that is so, the commission should be exerting jurisdiction over this fuel gas leak, as it without question led to lesser recovery of the resource. The letter proving this point is attached. See letter dated October 25, 2018, from then-DNR Commissioner Andy Mack to Hilcorp Alaska, LLC. The agency should reconsider its position and do its job by holding a hearing on the waste of a public resource that took place in Cook Inlet. Hollis French 000002 .e THE STATE 01ALASKA Department of Natural H.csourccs J>IVISI<>~ 01· OJI. & (i,\S tiOVERNOR BILI. \VAi.KER ~~U \\' 7•:. t\H·1111r. Su1h: I lhf1 Am:h••IJtl". AK •r1~t'1 I -.\.1t1,,, M.rin '>('7 ~11 1 1.J\)\frlJ I at.:. 907.2h') li\1JJ 1l October 25, 2018 Michael W. Schoetz Hilcorp Alaska, LLC PO Box 244027 Anchorage, AK 99524-4027 CERTIFIED MAIL RETURN SERVICE REQUESTED Re: Miclclle Ground Shoal A Platforn1 Royalty Reduction Decision Dear Mr. Schoetz: The Department of Natural Resources (DNR) received your September 21, 2018 letter requesting a royalty reduction pursuant to AS 38.05. I 80(f)(6)(C). On the Commissioner's behalf, Division staff requested additional information via email from Hilcorp Alaska, LLC (Hilcorp} staff on October 15, and received a reply on October 19. Based on this information and publicly available data concerning production from the Middle Ground Shoal A Platform, formerly known as XTO A, the Commissioner denies your request. AS 38.05. I 80(f)(6)(1) states that royalty may only be reduced if production from the platform drops below 975 barrels of oil per day (BOPD), but is: Not the result of short-term producrion declines due lo mcc/1anical or other clzoke-backfacrors, lemporary shutdowns or decreased prod11clion due to em•ironmental or facility constraints, or marker condirions. The Middle Ground Shoal A Platform was temporarily shut down in 2017 due to a leaking fuel gas pipeline. The leak posed a risk to the environment, thus the shutdown to address the leak was due to environmental constraints. The leak itself was also the result of mechanical issues with the pipeline, so the shutdown was also due to mechanical factors. Production information demonstrates that current production has dropped below 975 BOPD because of the shutdown. Prior to this shutdown, production was approximately 1, 150 BOPD. Production returned at approximately 1,000 BOPD, and has since declined below 975 BOPD. Production in general from this platform had been in decline, but a decline curve analysis of oil production prior to the shutdown shows that production would not have declined to I 000 BOPD by the date production returned. Importantly, the decline curve shows that without the 2017 shutdown production would currently be above 975 BOPD. Instead, the shutdown appears to have impacted flow capacity of the existing wells, which in tum caused produclion to return at a lower rate than the reservoir is capable of. This fifteen percent decline following the temporary shutdown was thus the result of the mechanical factors and environmental constraints that led to the temporary shutdown. lfnot for the shutdown and the sharp production drop it caused upon 000003 Middle Ground Shoal A Platfonn Royalty Reduclion Decision Page 2of2 startup, current production would not be less than the statutory benchmark of975 BOPD required to trigger royalty reduction. Therefore, current oil production of less than 975 BOPD was the result of a short-term production decline due to a temporary shutdown. Because your application does not meet the requirements of the statute, the request for royalty reduction is denied. An eligible person affected by this decision may request reconsideration of it in accordance with 11 AAC 02. Any request for reconsideration must be received within 20 calendar days after the date of"issuance" of this decision, as defined in 11 AAC 02.040(c) and (d), and may be mailed or delivered to Andrew T. Mack, Commissioner, Department of Natural Resources, 550 W 7th A venue, Suite 1400, Anchorage, Alaska 9950 I; faxed to 1-907-269-8918; or sent by electronir. mail to dnr.appeals@alaska.guv. This decision takes effect immediately. An eligible person must first request reconsideration of this decision in accordance with 11 AAC 02 before appealing this decision to Superior Court. If the Commissioner does not act on a requesl for reconsideration within 30 days after issuance of this decision, the request for reconsideration is considered denied and this decision becomes a final administrative order and decision on the 31st day after issuance for the purposes of an appeal to Superior Court. A copy of 11 AAC 02 may be taincd from any regional infonnation office of the Department of Natural Resources. Andrew T. Mack Commissioner CC: Chantal Walsh, Director, Division of Oil & Gas 000004 ST A TE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue Anchorage, Alaska 99501 Re: Petition for a Hearing on a Complaint ) Other Order 150 ofWaste. AS 3 I .05.60(a) ) Docket Number: OTH-19-002 ) ) March 20, 2019 ) ) On March I, 2019, the Alaska Oil and Gas Conservation Commission (AOGCC) received a. "petition for a hearing on a complaint of waste," dated February 28, 2019, from Hollis S. French (French). French alleges "waste occurred from an 8" line carrying fuel gas to Platform A in Cook Inlet, which is operated by Hilcorp." According to French, "the line leaked gas to the atmosphere for approximately three months in the winter of 2017, at a rate of approximately 300,000 scf per day." French demands a hearing to be allowed to urge AOGCC to take action upon his complaint. AOGCC investigated the leak at the time it occurred. AOGCC initially believed the source of the leak was upstream gas, i.e., gas which remained an AOGCC-regulated resource and had not been metered and severed from the property. Had that proven to be the case, the gas leak would have constituted waste and AOGCC would have instituted an enforcement action against Hilcorp. However, AOGCC's investigation ultimately revealed the leaking gas had been purchased by Hilcorp from a third-party provider, Harvest Pipeline (Harvest), and was being shipped back to Platform A. The primary purpose behind the prohibition against waste is to maximize resource recovery. Consequently, like every other state's oil and gas conservation regulatory authority, AOGCC regulates waste occurring upstream (occurring before oil or gas is metered and severed from the property) in connection with drilling, exploration, and production activities. Neither AOGCC nor any of its counterparts in other states has ever attempted to extend its jurisdiction over waste to gas which has been sold by a vendor. Once oil or gas is metered and severed from the property, AOGCC's authority to make a waste determination regarding use of the oil or gas is at an end. The gas involved in the Hilcorp leak had been sold by Harvest to Hilcorp. AOGCC does not have waste jurisdiction over gas Hilcorp purchased from Harvest. Absent jurisdiction, there is no basis for a hearing. French's request for a hearing is DENIED. ~ount,Jr. J~:~ Commissioner Commissioner Other Order 150 March 20, 2019 Page 2 of2 RECONSIDERATION AND APPEAL NOTICE As provided in AS 3 l .U5.08U(a), within 20 days a fl er written notice of the entry of this order or decision, or such further time as the AOGCC grants for good cause shown, u person affected hy it may file with the AOGCC an application for rl'COnsidcralion of the malt er detcnnincd by it. If the notice was mailed, then the period of lime shall be 23 days. An application for reconsideration must set oul the respect in which the order or decision is hclicved 10 be LTioneous. The AOGCC shall granl or refuse the application for rcclinsideralion in whole or in part within I 0 days after it is filed. failure to act on it within I U-days is a dL-nial of reconsideration. If the AOGCC denies reconsideration, upon denial, this ordl7 or decision and the denial of reconsideration are FINAL and may he appe<1lcd lo superior court. The appeal MUST be filed wilhin 33 days afier the date on which the AOGCC mails. OR 30 days if the AOGCC otl1erwise distributes. the order or decision denying reconsideration. UNLESS the denial is by inaction, in which case lhe appeal MUST be filed within 40 days aficr the dale on which the application for reconsideration was filed. If the AOGCC grants an application for reconsidcralion, this order or decision does not become final. RalhL7. the order or decision on reconsideration will be the FINAL order or decision of the AOGCC, and it may be appealed lo superior court. Thal appeal MUST he filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distribules, lhe order or decision on rl'Consideration. In computing a period of lime above, the date of the even! or default after which the designated period begins to run is nol included in the period; the last day of the period is included, wiless it falls on a weekend or state holiday, in which event the period runs until 5:00 t>.m. on the next dav that does not fall on a weekend or stale holiday. 000006 February 28, 20 I 9 Ms. Megan McPhee c/o AOGCC 333 W. ?1h Avenue Anchorage, AK 99501 Dear Megan, 2640 Telequana Drive Anchorage, AK 9951 7 This document is a petition for a hearing on a complaint of waste. AS 3 l.05.060(a). The waste occurred from a 8" line carrying fuel gas to Platform A in Cook Inlet, which is operated by Hilcorp. The line leaked gas to the atmosphere for approximately three months in the winter and spring of 20 I 7, at a rate of approximately 300,000 scf per day. Please open a docket for this petition, and inform me of the date of the hearing. At the hearing, I will be urging the commission to take action upon this complaint. Sincerely yours, Hollis S. French MAH 0 1 20i9 AOGt-;C 000007 S-17822 3AN-19-06694 CI VOLUME 1 000008 • • AGENCY'S LIST OF PARTIES & ATTORNEYS ON APPEAL Case Title Hollis S. French Appeal Case No. 3AN-19-06694 Agency Name Jody Colombie Name and Address of Party Hollis S. French 2640 Telequana Drive Anchorage, AK 99517 Alaska Oil and Gas Conservation Commission 333 West Seventh Avenue Anchorage, AK 99501 May 2, 2019 Date vs. AK Oil & Gas Conservation Commissior Cl Admin. Agency No. Other Order 150 Hearing Officer __________ _ Name and Address of Attorney of Re&d .,:; r- "" ~~~~~~ :,:~~~~i~eepartment of ~ Assistant Attorney General 1031 W. 4th Avenue, Suite 200 Anchorage, AK 99501 Jody J. Colombie Type or Print Name --_ .. ---.-........ Instructions: Send this list to the superior court where the appeal is filed. AP-311 (1/0S)(cs) AGENCY'S LIST OF PARTIES AND ATTORNEYS ON APPEAL App. R. 602(d)(2) 000009 • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE HOLLIS S. FRENCH, Appellant, V. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee. 3AN-19-6694 CI Order Re: I. Appeal From The Alaska Oil and Gas Conservation Commission Appellant Hollis French (French) requests this Court reverse Other Order 150 on the grounds that the Alaska Oil and Gas Conservation Commission (AOGCC) improperly found that it did not have jurisdiction over a gas leak in Cook Inlet in 2017. 1 French further asks this Court to rule that AOGCC did in fact have jurisdiction over the gas leak and require AOGCC to assert that jurisdiction over the gas leak as provided by statute.2 French requests this Court independently review the merits of the AOGCC's decision and rule that the Cook Inlet gas leak constituted "waste" under AS § 31.07.170(15) and therefore was under the agency's jurisdiction. Appellee AOGCC requests this Court apply the rational basis standard to review its' determination that the gas leak did not constitute "waste" and affirm Other Order 150. 1 See Mun. of Anchorage, Police and Fire Ret. Bd. v. Coffey, 893 P.2d 722 (Alaska 1995), (reversal of an administrative determination is appropriate when there is not substantial evidence to justify the board's determination; whereas, remand is appropriate when the board failed to make factual findings). 2 AS § 44.62.560(e) states "The superior court may enjoin agency action in excess of constitutional or statutory authority at any stage of an agency proceeding. If agency action is unlawfully withheld or reasonably withheld, the superior court may compel the agency to initiate action." 1 000010 • • Background In February 2017, Hilcorp discovered a leak in a pipeline transporting gas from shore to Cook Inlet. AOGCC determined that the leaking gas was purchased by Hilcorp and passed through a custody transfer meter.3 French was an AOGCC commissioner at the time. Shortly after French's removal from AOGCC, he filed a petition requesting a hearing on the gas leak. French alleged that the gas leak constituted waste and therefore AOGCC had jurisdiction based on its duty to prevent waste pursuant to AS § 31.05.027. AOGCC responded by denying a hearing on the matter and instead entering Other Order 150. Other Order 150 stated that the investigation at the time of the gas leak did not constitute "waste" because the gas passed through a custody transfer meter and was metered and severed from the property. Once gas is metered and severed, it is no longer a recoverable natural resource. The decision states: AOGCC investigated the leak at the time it occurred. AOGCC initially believed the source of the leak was upstream gas, i.e., gas which remained an AOGCC- regulated resource and had not been metered and severed from the property. Had that proven to be the case, the gas leak would have constituted waste and AOGCC would have instituted an enforcement action against Hilcorp. However, AOGCC's investigation ultimately revealed the leaking gas had been purchased by 3 The custody transfer meter is the point at which the gas is recovered and, according to the AOGCC, no longer an AOGCC-regulated resource. 2 000011 • • Hilcorp from a third-party provider, Harvest Pipeline (Harvest), and was being shipped back to Platform A. The primary purpose behind the prohibition against waste is to maximize resource recovery. Consequently, like every other state's oil and gas conservation regulatory authority, AOGCC regulates waste occurring upstream (occurring before oil or gas is metered and severed from the property) in connection with drilling, exploration, and production activities. Neither AOGCC nor any of its counterparts in other states has ever attempted to extend its jurisdiction over waste to gas which has been sold by a vendor. Once oil or gas is metered and severed from the property, AOGCC's authority to make a waste determination regarding use of the oil or gas is at an end. French timely appealed the decision to AOGCC, but was denied. French subsequently appealed the denial to this Court pursuant to AS§§ 44.62.560(a), 22.10.020(d), and Ak. R. App. P. 60l(b).4 Both parties submitted briefs on the issue and oral arguments were heard on February 18, 2020. Legal Standards The Alaska Supreme Court uses one of two standards to review agency interpretations of statutes -reasonable basis review or independent judgment review - and the parties disagree as to which standard applies. 4 AS § 44.62.560 pennits judicial review of a final administrative order. Other Order 150 became final when AOGCC denied reconsideration of the order. 3 000012 • • 1. Rational Basis Review When the interpretation at issue implicates agency expertise or the determination of fundamental policies within the scope of the agency's statutory functions, Alaska courts apply the rational basis standard, where the Court gives deference to the agency's interpretation so long as it is reasonable. 5 The Alaska Supreme Court gives more deference to agency interpretations that are "longstanding and continuous. "6 The rational basis standard is appropriate when an agency's interpretation of a regulated party's claim "requires resolution of policy questions which lie within the agency's area of expertise and are inseparable from the facts underlying the agency's decision."7 The Alaska Supreme Court has applied the rational basis test to "determin[ e] questions of whether proper procedures were observed. "8 In Marathon Oil Co. v. State, Department of Natural Resources, the Alaska Supreme Court concluded that the Department's interpretation of a statute governing the method for calculating royalties for oil and gas leases implicated the agency's special expertise.9 The Court reasoned that it is the Department's job to manage the State's resources and collect royalties from gas leases, and the Department possesses expert knowledge of the State's royalty and audit system.10 The Court also concluded that the Department's 5 Alaska Crude Corp. v. State. Alaska Oil & Gas Conservation Comm 'n, 309 P.3d 1249 (Alaska 2013); Marathon Oil Co., v. State, Dep't of Nat. Res., 254 P.3d I 078, I 082 (Alaska 2011 ). 6 Marathon, 254 P.3d at 1082. 7 Id.; Earth Res. Co. v. State. Dep't of Revenue, 665 P.2d 960, 964 (Alaska 1983). 8 State v. Aleut Com. et al., 541 P.2d 730 (Alaska 1975). 9 Id. io Id. 4 000013 • • interpretation of the statute in issue was longstanding and reasonable and thus the Court would defer to it.11 2. Independent Judgment Review A reviewing court applies the independent judgment standard "where the agency's specialized knowledge and expertise would not be particularly probative on the meaning of the statute."12 In Union Oil Co. of California v. Department of Revenue, a case relied upon by French, the issue was whether two statutes were consistent with one another and which standard the court should apply.13 The Alaska Supreme Court found that "the issues to be resolved tum[ ed] on statutory interpretation" rather than policy considerations and "the knowledge and expertise of the agency is not conclusive of the intent of the legislature in passing a statute."11 Therefore, the Court used its independent judgment to review the Department's statutory interpretation. Applicable Law AS§ 31.05.027 Land subject to commission's authority The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States. 11 Id. at I 085-86. 12 Union Oil Co. of Cal. v. Dep't of Revenue, 560 P.2d 21, 23 (Alaska 1977). 13 Union Oil, 560 P.2d 21 (Alaska 1977). 14 Compare Union Oil at 23 with Pan American Petroleum Com. v. Shell Oil Co., 455 P.2d 12, 20-22 (Alaska 1969) (applying the reasonable basis standard to review questions of oil discovery evaluations), and Swindel v. Kelly, 499 P.2d 291, 298-99 (Alaska 1972) (applying the reasonable basis standard to review procedures adopted for competitive bidding for oil and gas leases). 5 000014 • • AS § 31.05.030 Powers and duties of commission (a) The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter. (b) The commission shall investigate to determine whether or not waste exists or is imminent, or whether or not other facts exist which justify or require action by it. ( c) The commission shall adopt regulations and orders and take other appropriate action to carry out the purposes of this chapter. AS§ 31.05.060 Action by commission (a) The commission may act upon its own motion, or upon the petition of an interested person. On the filing of a petition concerning a matter within the jurisdiction of the commission under this chapter, the commission shall promptly fix a date for a hearing, and shall cause notice of the hearing to be given. The hearing shall be held without undue delay after the filing of the petition. The commission shall enter its order within 30 days after the hearing. AS§ 31.05.095 Waste prohibited The waste of oil and gas in the state is prohibited. AS§ 31.05.170 Definitions In this chapter, unless the context otherwise requires ( 15) "waste" means, in addition to its ordinary meaning, "physical waste" and includes (A) the inefficient, excessive, or improper use of, or unnecessary dissipation of, -reservoir energy; and the locating, spacing, drilling, equipping, operating or producing of any oil or gas well in a manner which results or tends to result in reducing the quantity of oil or gas to be recovered from a pool in this state under operations conducted in accordance with good oil field engineering practices; (G) the creation of unnecessary fire hazards; (H) the release, burning, or escape into the open air of gas, from a well producing oil or gas, except to the extent authorized by the commission; 6 000015 • Discussion 1. Rational basis review If the determination of waste is within AOGCC's expertise, the Court must defer to AOGCC's determination, if it is reasonable. a. Agency expertise AOGCC oversees oil and gas drilling and the development and production of natural resources.15 AOGCC makes waste determinations pursuant to AS § 31.05.030(b ).16 AOGCC argues that because its duties include the obligation to determine whether or not waste exists, a waste determination is squarely within its expertise. 17 French argues that AOGCC's expertise is "directed towards questions of well engineering and geology."18 French argues that because this case concerns the extent of AOGCC's jurisdiction, "the knowledge and experience of AOGCC 'affords little guidance' on this question."19 French does not further specify how AOGCC does not have direct expertise to make a waste determination. This Court agrees with AOGCC that a waste determination is within its expertise. AOGCC complied with the statute by investigating the gas leak and determining the leak did not constitute "waste" under the statute. Therefore, this Court will defer to AOGCC's waste determination if it is reasonable pursuant to the rational basis standard. 15 See Appellee's Briefat 3. 16 Appellee's Brief at 3. 17 Appellee's Brief at 3-6. AOGCC is comprised of three commissioners: a petroleum engineer, a petroleum geologist, and a member of the public; the agency is also supported by a staff of petroleum engineers and petroleum geologists; see also AS § 3 l .05.030(b) ("The commission shall investigate to determine whether or not waste exists or is imminent, or whether or not other facts exist which justify or require action by it.") (emphasis added). 18 Appellant's Reply at 20. 19 Appellant's Reply at 20. 7 000016 • • b. Reasonableness The next step in the rational basis review is to determine whether AOGCC's determination was reasonable. An agency's statutory interpretation is reasonable if it is consistent with the plain language of the statute and relevant statutory definitions. 20 AOGCC states that oil and gas "upstream" of the custody transfer meter is a recoverable natural resource.21 Recoverable natural resources constitute "waste" when they are lost, "i.e., during production the operator damages the interest of another gas."22 However, once a natural resource passes through the custody transfer meter, it is deemed "produced" and no longer a recoverable natural resource. 23 Therefore, AOGCC contends that "[a] waste determination requires a recoverable resource. Metered and severed gas is no longer a recoverable natural resource."24 French argues that AOGCC does not provide a legal basis to support these assertions. Here, AOGCC's interpretation of "waste" is consistent with AS § 31.05.170(15). The statute begins, "In this chapter, unless the context otherwise requires ... " presupposes situations where "waste" may have different meanings in different contexts. Further, this language provides a reasonable construction that the legislature intended to give AOGCC broad authority to employ its expertise and determine what constitutes waste. AOGCC's interpretation of "waste" is objectively reasonable because the statute defines "waste" to include ... "the locating, spacing, drilling, equipping, operating or 20 Alyeska Pipeline Serv. Co. v. State, 288 P.3d 736, 740 (Alaska 2012). 21 Appellee's Brief at 5-6. 22 Id. 23 Id. 24 Id. at 8. 8 000017 • • producing of any oil or gas well in a manner which results or tends to result in reducing the quantity of oil or gas to be recovered from apool ... ".25 "Pool" as defined, "means an underground reservoir containing, or appearing to contain, a common accumulation of oil or gas."26 AOGCC determined that the gas leak in Cook Inlet originated after the gas was metered and severed, meaning after it was severed from the property or unit where it was produced. 27 AOGCC states that waste can only occur prior to metering and severing.28 The gas, at this point, was severed from the pool, and could not reduce the quantity of oil or gas to be recovered. AOGCC's determination that the Cook Inlet gas leak did not constitute "waste" is reasonable under AS § 31.05.170(15). The Alaska Supreme Court affords more deference to agency interpretations that are "longstanding and continuous."29 The agency's finding it lacked jurisdiction because there was no waste in this particular case is consistent with its past regulation of waste "upstream (occurring before oil or gas is metered and severed from the property) in connection with drilling, exploration, and production activities."30 The Alaska Supreme Court has applied the reasonable basis test to "determin[ e] questions of whether proper procedures were observed. "31 Other Order 150 complies with AOGCC's waste determination duty. AS§ 31.05.030(b) requires the commission to 25 AS § 31.05.170( I 5)(a). 26 AS§ 31.05.170(12). 27 Appellee's Brief at 6. French concedes the gas in the Hilcorp transmission line was metered and severed for custody transfer purposes and severed from the lease where it was produced. 28 Appellee's Brief at 6. 29 Marathon, 254 P.3d at I 082. 30 Other Order 150. 31 State v. Aluet Com. et al., 541 P.2d 730 (Alaska 1975). 9 000018 • • determine whether or not waste exists and whether or not action is required or justified.32 AOGCC investigated the leak at the time it occurred and determined it did not constitute waste, as required by statute.33 Because the leak was not "waste," the commission did not have jurisdiction and action was not required.34 2. Independent judgment review French argues that the definition of "waste" is a question of statutory construction, and therefore the Court should analyze the statute independent of the agency's interpretation, as set out in Union Oil Co. of California v. Department of Revenue.35 French's reliance upon Union Oil Co. of California v. Department of Revenue is misplaced. The facts in this case are distinguishable from Union, where the issue was whether two statutes were consistent with one another. The Court reviewed the two statutes under the independent judgment review because "none of the policy judgments argued in this case is the type of specialized agency judgment which has caused us to apply the reasonable basis test in the past."36 This case does not present this situation. Instead, we are presented with reviewing AOGCC's investigation and determination of whether or not waste existed. A waste determination requires specialized agency judgment, and thus the independent judgment standard is inapplicable.37 32 AS§ 3 l.05.030(b). 33 Other Order 150. 34 AS § 31.05.060 Action by commission. 35 Appellant's Brief at 14. 36 Union at 23-24. 37 French relies on two other instances where the Alaska Supreme Court applied the independent judgment review. Reply at 18. In State v. Aleut Com. et al., 541 P.2d 730 (Alaska 1975) the Court applied the independent judgment standard to review an agency's interpretation of a statute relating to public land auction procedures. The agency's interpretation did not require expertise because the term at issue was not technical, therefore the statutory interpretation required the special competency of the courts. In Mukluk Freight Lines. Inc. v. Nabors Alaska 10 000019 • • Conclusion It is within the Alaska Oil and Gas Conservation Commission's expertise to determine whether waste exists pursuant to AS § 3 l.05.030(b ). AOGCC's interpretation is reasonable and therefore this Court must defer to it. AOGCC's Other Order 150 is AFFIRMED. IT IS SO ORDERED. q-th DATED at Anchorage, Alaska this_ day of June, 2020. I certify that on qfh June, 2020, a copy was mailed to: ti. fyenc,h j -r. l?Cc.1\W'ltill~ Emily Elisabeth Rhea, law Clerk Superior Court Judge Drilling, Inc., 516 P.2d 408 (Alaska 1973) the court applied the independent judgment review to determine whether the administrative procedures at issue complied with due process. Our facts do not present a constitutional interpretation requiring the special competency of the courts. 11 000020 \. I .. • • J ~THE SUPERIOR COURT FOR THE STATE OF~ In the T~IAL C . . THIRD' JUDICIAL DISTRICT AT ANCHORAGE · ALASKA, THIRD 00~Rrs -I , . . · 1STR1cr Hollis S. French, ) MAY 0·1 2019 A 11 t ). Cle'* of ,,, .. "''· · , · · ppe an , ) Sy ~·e. Trial Co~rts .. v. ) --------Oep~ty ) Agency Case: OTH-19-002 Alaska Oil and Gas Conservation ) } --------Commission, .. --/ ·----+-----~:.; Appellee. ) J - _______________ ) Appeal Case: NOTICE OF APPEAL In conformity.with the provisions of Rule of Appellate Procedure 602(c)(1) undersigned submits the following: 1. Party taking. the appeal: 2. Agency decision appealed 1 from: 3. Court to which appeal is taken: DATED: April 30, 2Ch9 ~·· Hollis S. French Bar No. 9606933 Hollis S. French 2640 Telequana Drive Anchorage, AK'99 517 Alaska Oil and Gas Conservatfon Commission order OTH-19-002 \ Third Judicial District at Anchorage / . , ) " / . \ ,· i I 000021 • • I i ' ' ' ~ fiftp}i ' IN THE SUPERIOR COURT FOR THE ST ATE OF ~M~~~te:t~a\t _ . . THIRD JUDICIAL DISTRICT AT ANCHORAGE At~~«~ .• r~I~~ . . ~ , U.w.,:r.ocr Hollis s. French, ) eifJF/4 fJf 'AY fl I 2019 . Appellant, ) IJp~ the tr181 OOoi ) ~"rts v. ) . o'°"t.v )t Agency Case: OTH-19-002 ALASKA OIL AND GAS CONSERVATION ) COMMISSION,__ _ / ) --- Appellee. ) ---------------.) Appeal Case: STATEMENT OF POINTS ON APPEAL Undersigned appellant respectfully submits that the Alaska Oil and Gas Conservation Commission erred by: :i 1. Ruling that AOGCC had no jurisdiction over gas sold by a veridor. 2. Ruling that AOGCC had no jurisdiction over gas metered and , I severed from a property. · 3. Ruling that AOGCC had no jurisdiction over gas Hilcorp purchased from Harvest Pipeline. DATED: April 30,.2019 Hollis S. French Bar No. 9606933 . I '. ' 000022 -/ • • ( ' IN THE SUPERIOR COURT FOR THE STATE ~F ALAS~~ . . T~ JUDICIAL DISTRICT AT ANCHORAGE s7r(rf:'JW.'/ptlhP~11!iL~fJ: . , ~ · ~.11;1;t1~»' Ok'ts Hollis S. French, . ) . : _ IM . ' · /,QiSi'tQJi:,. .Appellant, ) · _ ~' ,.f,4y fJ -I ~ · ' '4:.illf/f ' 4 fllfg ~ . , ~~"'•rr1a1oeuru; v. ALASKA OIL AND GAS CONSERVATION COMMISSION, · ) Agency Case: OTH-19-002~0~ty ) ) Appellee. I ) ________________ ) Appeal Case: '. AGENCY DECISION FROM WHICH APPEAL IS TAKEN . In conformity with Rule of Appellate Prm;edure 602(c)(l)(D), a copy of \ the agency decision from which this appeal is taken is attached . / .. DATED: April 30, 2019 'I -.n ~L-- Hollis S. French ~Bar No. 9606933 /' ·' .J / 000023 • • STATE OF ALASKA ALASKA OIL ANU GAS CONSERVATION COMMISSION 333 West Seventh Avenue Anchorage, Alaska 99501 Re: Petition for a Hearing on a Complaint ) Other Order 150 of Waste. AS 3 l.05.60(a) ) Docket Number: OTH-19-002 ) ) March 20, 2019 ) ) On March 1, 2019, the Alaska Oil and Gas Conservation Commission (AOGCC) received a "petition for a hearing on a complaint of waste," dated February 28, 2019, from Hollis S. French (French). French alleges "waste occurred from an 8" line carrying fuel gas to Platform A in Cook Inlet, which is operated by Hilcorp." According to French, ''the line leaked gas to the atmosphere for approximately three months in the winter of 2017, at a rate of approximately 300,000 scf per day." French demands a hearing to be allowed to, urge AOGCC to take action upon his complaint. AOGCC investigated the leak at the time it occurred. AOGCC initially believed the source of the leak was upstream gas, i.e., gas which remained an AOGCC-regulated resource and had not been metered and severed from the property. Had that proven to be the case, the gas leak would have constituted waste and AOGCC would have instituted an enforcement action against Hilcorp. However, AOGCC's investigation ultimately revealed the leaking gas had been purchased by Hilcorp from a third-party provider, Harvest Pipeline (Harvest), and was being shipped back to Platform A. The primary purpose behind the prohibition against waste is to maximize resource recovery. Consequently, like every other state's oil and gas conservation regulatory authority, AOGCC regulates waste occurring upstream (occurring before oii or gas is metered and severed from the property) in connection with drilling, exploration, and production activities. Neither AOGCC nor any of its counterparts in other states has ever attempted to extend its jurisdiction over waste to gas which has been sold by a vendor. Once oil or gas is metered and severed from the property, AOGCC's authority to make a waste determination regarding use of the oil or gas is at an end. The gas involved in the Hilcorp leak had been sold by Harvest to Hilcorp. AOGCC does not have waste jurisdiction over gas Hilcorp purchased from Harvest. Absent jurisdiction, there is no basis for a hearing. French's request for a hearing is DENIED. ~ ~~cb-.___ Daniel T. Seamount, Jr. Jdsie L. Chmielowski Commissioner Commissioner 000024 \ ' ./ • Other Order 150 March 20; 2019 · Page 2 of2 -, _,, RECONSIDERATION AND APPEAL NOTICE As provided in AS 31.05.0SO(a}, within 20 days after written notice of the entry of this order or decision, or such further time as the AOGCC gnu}ts for good cause shown; a person affected by it may file with the AOGCC an application for reconsideration of the matter : determined by it. If the notice was mai!Cd, then the period of time shall be 23 days. An applicatimi for reconsideration must set out the respect in which the order or decision is believed to be erroneous. ,..... '- The AOGCC shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed. Failure to act on it within 10-days is a demal of reconsideration. If the AOGCC denies reconsideration, upon denial, this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST be filed within 33 days after the date on which the AOGCC .iriilils, OR 30 days if the AOGCC otherwi~e distributes, the order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed within 40 days after the date on which the application for, reconsideration Was filed. · ' . If the AOGCC Vcmls ~ ;ppli~tio~ f~; ~~idel'llti~. -this-~rd~-~r-d;£~i~~ d~~~m~ final.. -~fuer, the order or decision on· reconsideration will be the FINAL order or decision of the AOGCC, and it may be appealed to superior court. That appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision on reconsideration. · "' · In computing a period of time above, the date of the event or default after which the desigliated period begins to run is not included in the period; the last day of the period is included, unless it fulls on a weekend or state holiday, in which event the period runs until 5:00. p.m. on the next dav that does not fall on a weekend or state holidav. ( \_ 000025 • • LOG NOTES BACKING CARD Case Name: f<ench V$. (+Of:JCC. Case No. JRN -.fq-Oft?fo94C/ DEPOSITIONS EXHIBITS TRANSCRIPTS -· "" Pr'2. 517.J r~llP I VDI u~ ()f flaRt1Cv ~curd Sh.DI~ fo/a/,Uq aQ t -~ I I ' ~ CONFIDENTIAL INFORMATION Psychiatric Examination: Date Ordered: ----Date Filed: Presentence Report: Date Ordered: ----Date Filed: --- Grand Jury Transcript: Date Filed: ----- In-Camera Hearing Held: Date: ____ _ Judge=~-------- Custody Report: GAL Report: Home Studies: TF-22 7 (10 I 8 7) (buff cdsk) LOG NOTES BACKING CARD 000026 • • ' J. • • TRANSMITl'AL OF AGENCY RECORD TO: Superior Court Clerk 825 W4th Ave (Court Address) Anchorage, AK 99501 FROM: SOA, AOGCC (Name of Agency) Jody J. Colombie (Name of Person at Agency) 333 West Seventh Avenue (Address) Anchorage, AK 99501 RE: Case Name: Hollis S. French vs. AOGCC Date: May 20, 2019 Ff LED in the TRIAL COURTS STATE OF ALASKA, nt1RD DISTRICT MAY 2 2 2019 Clerk of th" Trial Courts By Deputy Appeal Case Number: _3_A_N_-1_9_-_06_6_9_4 ______ ----'C=I Agency Case Number: _O_th_e_r_O_r_d_e_r _1 _50 ______ _ Pagination of the agency file has been completed. In accordance with Appellate Rule 604(b )(1 )(B)(ii) and (iii), the following items are being forwarded to you: 1 0 -u volumes of agency file (a copy) The file is numbered from page 1 to _7 __ volumes of transcript (original) volumes of depositions (copies) 0 0 0 list of exhibits being forwarded (List only those not included in the agency file.) envelopes/boxes containing exhibits list of exhibits retained by agency other: ------------ If the court needs any of the exhibits being retained by the agency, the court must contact the following person: Name: Jody J. Colombie Title: Special Assistant to the AOGCC Phone No. 907-793-1221 May 22, 2019 Ck) Date u A ency~B,_epresentative " Location: Anchorage, Alaska AP-312 (3/0l)(cs) TRANSMITTAL OF AGENCY RECORD 000027 •• • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE HOLLIS S. FRENCH, Appellant, v. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee. 3AN-19-6694 CI Order Re: I. Motion and Memorandum for Reconsideration The matter before the Court is Hollis French's (Appellant) Motion and Memorandum for Reconsideration of the June 9, 2020 Order affirming Other Order 150. The Court has reviewed the basis for the motion and concludes the Court did not overlook a material question, material fact, or proposition of law. Upon consideration, the Motion is DENIED. IT IS SO ORDERED. ...., .. ~ DATED at Anchorage, Alaska this-~-daavy , of June, 2020. Emily Elisabeth Rhea, Law Clerk 000028 ' You must use black .to fill out this form. • Your Name: French Hollis _____________ _ Mailing Address: 2640 Telequana Dr _________ _ Anchorage. Alaska 99517 Telephone: ______ Message phone: ______ _ Email: ____________________ _ NOTE: If for any reason you do not wish the other party to know your physical address, you must provide a mailing address so that the court and the other party can serve you by mail. • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA AT Anchorage City or Town where Court is located French Hollis ------------App e 11 ant vs. AOGCC Appellee YourCase No. 3AN-19-06694CI ____ _ ORDER ON iZI Appellant's 0 DEFENDANT'S MOTION FOR * ___ _ _ Reconsideration _______________ _ *Name of Motion that goes with this Order Having considered the D Plaintiff's D Defendant's Motion and any Opposition filed, and good cause being found, the Court ORDERS: Date I certify that on a copy of the above was mailed to each of the following: D Plaintiff 0 Defendant at their addresses of record. D CSSD/ AG D Cl ORDER ON MOTION Judge_~n_o:+_u s_e_a_ Page 1 of 1 SHC-1302 (1/16) 000029 ' • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE HOLLIS S. FRENCH, Appellant, v. ALASKA OIL AND GAS CONSERVATION COMMISSION, ) ) ) ) ) Agency Case: OTH-19-002 ) ) Appellee. ) _______________ ) Appeal Case: 3AN-19-6694 CERTIFICATE OF SERVICE I certify that on this date a true and correct copy of Appellant's Motion and Memorandum for Reconsideration was served via U.S. Mail on the following: Tab Ballantine State of Alaska, Department of Law Assistant Attorney General 1031 W. 4th Avenue, Suite 200 Anchorage, AK 99501 DATED: June 16, 2020 Hollis S. French Bar No. 9606933 000030 IN THE SUPERIOR COURT FOR THE STATE~f.5M.f1SKA.-. THIRD JUDICIAL DISTRICT AT ANCHORAGE 0 f-?1 Li. 18 Cf_·[.;·:11 ~ .. ~· ii!E: n!.\~ CGUi~Ts HOLLIS S. FRENCH, Appellant, V. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee. ) 8'( --) DEPUTY CLER~\ ) ) ) Agency Case: OTH-19-002 ) ) ) Appeal Case: 3AN-19-6694 CI MOTION and MEMORANDUM FOR RECONSIDERATION Appellant moves this Court to reconsider its June 9, 2020 order, pursuant to Alaska Rule of Appellate Procedure 503(h). Appellant asserts two independent grounds for reconsideration. I. The Court has overlooked a material question in the case.1 Appellant challenged three specific jurisdictional rulings in Other Order 150.2 Yet the Court's order did not address the issue of jurisdiction. The Court's order addressed a very different issue: the agency's determination regarding the wasted gas. 3 The Court went on to mle lhal it must defer to the agency's determination.4 No part of the Court's ruling dealt with the crucial question of jurisdiction. 1 Alaska Rule of Civil Procedure 77(k)(l )(iii). 2 Appellant's Brief, p. 1: "Specifically, did the agency err by ruling that: I. It does not have jurisdiction over gas sold by a vendor; 2. It does not have jurisdiction over gas metered and severed from a property, and; 3. It does not have jurisdiction over gas Hilcorp purchased from Harvest Pipeline." 3 Order Re: (June 9, 2020), p. 7. 4 Id. at 11. 1 000031 • • This case began when Appellant submitted a petition to the AOGCC for a hearing upon a complaint of waste.5 AOGCC's ruling on that request is summed up in the final two sentences of Other Order 150: "Absent jurisdiction, there is no basis for a hearing. French's request for a hearing is DENIED." As noted above, Appellant specifically listed the jurisdictional rulings in Other Order 150 as the basis for his appeal. Likewise, in offering a resolution to the case, Appellant tried to make clear that it was the jurisdictional rulings of Other Order 150 from which he sought relief: "Appellant seeks an order from this Court that could be as narrow as this: the agency would not be exceeding its powers to assert jurisdiction over the gas leak in Cook Inlet."6 Had the Court addressed the issue of jurisdiction, specifically the extent of the agency's jurisdiction under AS 31.05.027 7 and AS 31.05.030(a)8, it would have been necessary to employ the more exacting independent judgment standard of review, instead of the more deferential rational basis standard used by the Court. Because the Court did not take up the questions of jurisdiction posed by Appellant, reconsideration is in order. II. The Court has overlooked a material fact or proposition of the law.9 5 Record at 00007. 6 Appellant's Reply at 20. 7 "The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States." 0 "The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter." 9 Alaska Rule of Civil Procedure 77(k)(l)(ii). 2 000032 • • Appellant's original petition to the agency requested a hearing on a complaint of waste. The petition stated: "This document is a petition for a hearing on a complaint of waste. AS 3 l.05.060(a)."10 As noted above, Other Order 150 states emphatically that "French's request for a hearing is DENIED." The denial of Appellant's petition for a hearing is a material fact overlooked by the Court. The statute cited in Appellant's petition to AOGCC, AS 31.05.060(a), reads as follows: The commission may act upon its own motion or upon the petition of an interested person. On the filing of a petition concerning a matter within the jurisdiction of the commission under this chapter, the commission shall promptly fix a date for the hearing, and shall cause notice of the hearing to be given. The hearing shall be held without undue delay after the filing of the petition. The commission shall enter its order within 30 days after the hearing. This statutory promise of a hearing was not complied with, based upon the Commission's mistaken belief that it did not have jurisdiction. Appellant asserts this denial of a hearing affected his due process rights. (Appellant would invite the Court to solicit further briefing from the agency on this point. Appellant must alert the Court that this issue, the denial of a hearing before the AOGCC on a complaint of a major gas leak -different from the gas leak in this case, was resolved in his favor in 3AN-19-653 I CI, while this case was pending.) The Alaska Supreme Court has held that: 10 Record at 00007. 3 000033 • • Although [holding a hearing] is normally one of the basic components of due process, it is subject, at least in the area of administrative law, to the exception that one need not hold a hearing if there is nothing to hold a hearing about; or, more precisely, 'there is no requirement, constitutional or otherwise, that there be a hearing in the absence of substantial and material issues crucial to [the] determination.' 11 Footnote 11 below cites two cases. In Estate of Miner, the Court used this example to demonstrate when no hearing would be required: Thus, if an application is rejected because it is outside valid time limits and this lateness is apparent on the face of the application and is not contested by the applicant, then there would be no substantial and material issue which could be resolved at a hearing, and thus no need to hold the hearing at all. 12 By contrast, in White the Court found factual disputes that required a hearing.13 The case before this Court is more akin to White. The facts of the gas leak in Cook Inlet have not been established: the date the leak began and the amount of gas that leaked are two obvious examples. Therefore, the AOGCC was in error to deny Appellant's request for a hearing. Thus, reconsideration is in order. CONCLUSION If Appellant had filed a complaint about a gas leak that took place in Canada, the AOGCC would have been well within its rights to reject the complaint and deny a hearing, according to the dictates of common sense and the holding in Estate of Miner. However, the gas leak in this case happened in upper Cook Inlet, which, as 11 White v. State, Dept. of Natural Resources, 984 P .2d 1122, 1126 (Alaska 1999) (citing Estate of Miner v. CFEC, 635 P.2d 827, 829 (Alaska 1981)). 12 635 P. 2d at 834. 13 984 P.2d at 1127-28. 4 000034 • • the United States Supreme Court has noted, is "inland waters subject to Alaska's sovereignty." 14 AOGCC's jurisdictional rulings in Other Order 150 squarely conflict with the language of AS 31.05.027 and AS 31.05.030(a). Appellant seeks judicial review of AOGCC's jurisdictional rulings. Simple logic also compels reconsideration. On the one hand, in Other Order 150 AOGCC discJaimed jurisdiction -three times --over the gas that leaked from the pipeline in Cook Inlet. If the agency had no jurisdiction over the gas, it had no authority to act. Yet the Court, in its June 9, 2020, order, credits the agency with the expertise to know whether the gas that leaked from a pipeline in Cook Inlet, a place well beyond its self-described jurisdictional boundary, constituted waste under the relevant statutes. On the other hand, if the agency did have jurisdiction, then it was compelled by statute to grant Appellant's petition for a hearing. In summation, Appellant seeks an order from the Court which could be as narrow as this: AOGCC would not be exceeding its powers by scheduling a hearing on Appellant's complaint of waste. For the foregoing reasons, Appellant moves the Court to reconsider its June 9, 2020 order. DATED: June 16, 2020 Hollis S. French Bar No. 9606933 14 United States v. Alaska, 422 U.S. 184, 185 (1975). 5 000035 • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE Hollis French, vs. AOGCC, Appellant, Appellee. Appeal Case No. 3AN-19-06694CI l;gj Administrative Appeal D District Court Case No. NOTICE ON APPEAL BOND A cost bond in the amount of $750 was posted in the above case. A decision on appeal was rendered on 06/09/2020. Unless an objection showing good cause is filed by 06/~9/2020, the cash deposit in lieu of bond will be returned to the posting party. 6/10/2020 Date I certify that on 6/10/2020 a copy of this notice was sent to: Appellant: Hollis French Appellee: _A_O_G_C_C ____ _ Agency: Clerk: LMcGowan FILE COPY AP-340A(cv) (3/01) Notice on Appeal Bond CLERK OF COURT By: LMcGowan Deputy Clerk 000036 • • APPLICATION FOR PHOTOGRAPHING, FILMING, RECORDING, OR STREAMING A COURT PROCEEDING case Name: _______,,....--_IJ'--,. '---/ !.....,....> -~--d-,,.--=-(./_J' _ __,c__A_,_-_v~&_c__;<:=------ case Number: fr/fl o / 1 ·-0 2 h /g V c:;::' Judge: __________ _ Requesting Individual or Organization: . r4;Jg .>c-jle_ ~~ Names of fill individuals who may attend the proceeding: 1£;:_efo<;--_~-a:~ ,._ Type of Coverage/Device: (Check all that apply) D TV Camera D Video D Still Camera D Audio System D Cell phone D Tablet D Laptop D Sketching D Internet Broadcast ~e Electronic Recording D Other: ---------------- Proceeding to be Covered:--------------------- {Trial, Motion, Appellate Argument, Oral Argument, Evidentiary Hearings, Other Hearings, etc. If coverage of activity during recesses is requested, include ''rec~s. '? Location of Coverage: (lobby, courtroom, etc.) c:.../ktf G' <J y Dates of Requested Coverage: ____ 2--_· _-_____ ) _'!_, _____ ! _____________ _ I request permission to cover the above proceeding under Administrative Rule 50. I understand and agree to abide by the provisions of that rule and Administrative Bulletin No. 45. If consent of an individual is required under Administrative Rule 50(a)(3), the consent is attach)d/ //> !-----~ _ lj\ /J/J 1 dlf LY m-e;G U<:. I I I/) /2 /3 ;1 /V 2' ;g 1'7 RJ(uestor's Signature !J Print Name and3~e-~ _ Date Mailing Address ~ ~ 7 c City 71"te' '::;) ZIP ~ e ,-{---A Lru VJ h-, Phone Email* *D I authorize the court to email me the signed Approval By Court. APPROVAL BY COURT Permission for the coverage requested above is: Reason for denial or special restrictions imposed: ~GRANTED D DENIED rts Distribution: (1) Media File; (2) Court File (if applicable); (3) Requestor with a copy of Administrative Bulletin No. 45 TF-945 (5/19)(cs) APPLICATION/APPROVAL-CAMERAS AND ELECTRONIC DEVICES Administrative Rule 50 Administrative Bulletin No. 45 c.z_. 000037 • • IN THE DISTRICT/SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE Hollis French, Appellant, CASE NO: 3AN-19-06694CI vs. AOGCC, Appellee. CALENDARING NOTICE This case is scheduled for: 1 hour hearing. 2/13/2020 Date I certify that on Date: February 18, 2020 Time: 12:00 pm Event: Oral Argument Judge: Eric A Aarseth Location: Courtroom 604, Nesbett Courthouse Court: 825 W 4th Ave Anchorage, Alaska 99501 NMcKewin Calendaring Clerk a copy of this notice was mailed or delivered to: File Copy Hollis French Thomas A Ballantine Clerk: NMcKewin FILE COPY CIV-102 (3/04) Hearing/Event information for this case is also available online at http://www.courtrecords.alaska.gov/. Calendaring Notice by Clerk 000038 Motion Routing Sheet 3AN-19-06694CI French, Hollis vs. AOGCC Motion: Appellant's Brief Attorney: Self-Represented (0100001) Hollis French (Appellant); Case Motion #1 • Ripe Date: 11/21/2019 Referred Date: 11/21/2019 Judge: Aarseth, Eric A ......... ·-.. --·· ... _________ Referred by: _ lgille~p_i~ __ _ Filed by: Appellant -Hollis French Filed Date: 07/15/2019 Service: Mailed on 7 /15/2019 ............ --· ... ·-. Opposition: Due on: 9/11/2019 Filed on: 10/23/2019 by Appellee AOGCC Service: Mailed on 10/23/2019 Reply: Due on: 11/18/2019 Filed on: 11/20/2019 Service: Mailed on 11 /20/2019 Oral Argument: Requested Not Set ()ral_ ,Argu111ent [)at~: _ Stay Information: None Additional Briefing: None Master: Not Assigned Linked Dockets 07/15/2019 914409349 Docket ID 09/12/2019 .... Docket ID 10 Appellant's Brief Attorney: Self-Represented (0100001) Hollis French (Appellant); _ Filing Party: French, Hollis Case Motion #1 14 Appellee's Brief Attorney: Ballantine, Thomas A (880n122) AOGCC (Appellee); __ (;a_s~ _IVl()ti()n #11: ,l\ppe_llant'_s _ (3ri~f _ 10/23/2019 20 Appellee's Brief · 467405427 ' Attorney: Ballantine, Thomas A (8806122) Docket ID AOGCC (Appellee); ________ (;as~ IVle>ti()n_ #11_ :_ ,l\ppe_llant's _ (3rief _ 11 /20/2019 23 Appellant's Reply Brief 286126263-Attorney: French, Hollis S (9606033) Docket ID Hollis French (Appellant); ________ (;a_s~ _IVl()ti()n #11: ,l\ppellant'_s (3rief 11 /20/2019 24 Request for Oral Argument -917092309 • Attorney: French, Hollis S (9606033) Docket ID Hollis French (Appellant); _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _______ (;as~ IVle>ti()n #11: ,l\ppellant's (3rief _ End of Routing Sheet-3AN-19-06694CI Motion 1 000039 ·- 0 • IN THE SUPERIOR COURT FOR THE STATE OF ALASJfA.'1r: THIRD JUDICIAL DISTRICT AT ANCHORAGE ~ \6 HOLLIS S. FRENCH, Appellant, v. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee. ~ ~~ ~ ~-; ) ~ A-"Y. ~ "1: • -e?, ~ ~~ ) g.. -"F' ·~,, ) "~ ~ -.::, ~~· -1.. <? ·,r.. 'n, ) _,\ -d ~ -o ">= ~ 0. ~ ) Agency Case: OT -1 ~i_QOY ·~1>.·~ ) o. ?. ~ '".A ) a ~ ) ~<a ---------------~ Appeal Case: 3AN-19-6694 REQUEST FOR ORAL ARGUMENT Pursuant to Rule of Appellate Procedure 605.5, Appellant requests oral argument in this case. DATED: November 20, 2019 Hollis S. French Bar No. 9606933 I certify that on this date a true and correct copy of Appellant's Request for Oral Argument was served via U.S. Mail on the following: Tab Ballantine State of Alaska, Department of Law Assistant Attorney General 1031 W. 4th A venue, Suite 200 Anchorage, AK 99501 000040 DATED: November 20, 2019 (~ Hollis S. French Bar No. 9606933 • 000041 IN THE DISTRICT/SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE Hollis French, Appellant, vs. AOGCC, Appellee. This case is scheduled for: Date: February 12, 2020 Time: 3:00 pm Event: Oral Argument Judge: Eric A Aarseth CASE NO: 3AN-19-06694CI CALENDARING NOTICE Location: Courtroom 604, Nesbett Courthouse Court: 825 W 4th Ave Anchorage, Alaska 99501 Oral Argument on Administrative Appeal for 1 hour. 20 minutes argument for each . party. 11/21/2019 Date I certify that on 11/21/19 a copy of this notice was mailed or delivered to: File Copy Hollis French Thomas A Ballantine Clerk: AarsethlawClerk AarsethLawClerk Calendaring Clerk Hearing/Event information for this case is also available online at http://www.courtrecords.alaska.gov/. FILE COPY CIV-102 (3/04) Calendaring Notice by Clerk 000042 -· -.. • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE HOLLIS S. FRENCH, Appellant, v. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee. ) ) ) ) ) ) ) ) ) ) ) ~~~~~~~~~~~~~~-) Case No. 3AN-l 9-06694 CI ORDER GRANTING LATE-FILED MOTION FOR NON-ROUTINE THIRTY DAY EXTENSION OF TIME 1\-L-\ For the reasons set forth in the Late-Filed Motion for Non-Routine Thirty Day Extension of.Time filed by Appellee Alaska Oil and Gas Conservation Commission, the motion is hereby GRANTED. The brief of Appellee Alaska Oil and Gas Conservation Commission is hereby due on or before October 21, 2019. I certify that on ;~3fj_ 9 a copy of the following was mailecl/ernailecl to each MJ~Z Administrative Assistant The Honorable Eric A. Aarseth Superior Court Judge ska. 000043 6) .. --.. ··e • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE HOLLIS S. FRENCH, Appellant, V. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee. ) ) ) ) ) ) ) ) ) ) Case No. 3AN-19-06694 CI ) ~~~~~~~~~~~~~~~) ORDER GRANTING MOTION TO ACCEPT LATE-FILED MOTION FOR . NON-ROUTINE EXTENSION OF TIME1f3 For the reasons set forth in the Motion To Accept Late-Filed Motion for Non- Routine Extension of Time, filed by Appellee Alaska Oil and Gas Conservation Commission, the mdtion is GRANTED. DATED __ /_~~11....:..-7--____ , 20/f. at~laska. lce11ifythat.on/06/f2_ __ aco 1 ~~ of the followiriq wls~1led/emailed to e, of the fallowing at their <:Jddresses o~r ~1· . , S · c rt J d . ·· · · ·· upenor ou u ge \ ___ _l~ · inistrative As'={/;j'fnt ·- 000044 • • IN THE SUPERIOR COURT FOR THE ST ATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE HOLLIS FRENCH, ) ) ) ) ) ) ) ) ) Appellant, vs. AOGCC, Appeal Case No.: 3AN-l 9-06694CI Appellee, ~~~~~~~~~) ORDER GRANTING APPELLEE ADDITIONAL TIME TO FILE BRIEF -rz_, The Court, having considered the Notice of Routine Extension of Time, filed by Appellee Alaska Oil and Gas Conservation Commission, IT IS HEREBY ORDERED that Appellee shall have until September 11, 2019 in which to file its brief. Dated this :;2 K~ August, 2019 at Anchorage, Alaska. I certify that on _!zd2_a copy of the following wa~~-k-~ailed to each rn; A. Aarsdh Superior Court Judge of the following at thei~ad resses ~ ----~~~-- Administrative Ass· 'tant 000045 II c \\_[ll ... 11 t· -'~ \1 C f\.\ .. ;:•. :)_~ ·: r·. ~-.. \ f,. \ \ 1..,_, ~ • ... ~· .• 1 I \ \.._ f11...l.,,, l.~ .-, ·1~'.;. ·' •\ ~·,,.- IN THE DISTRICT/SUPERIOR COURT FOR THE STATE OF ALASKAJ f\\\~'···_: v _; ' .. THIRD JUDICIAL DISTRICT AT ANCHORAGE ' 0 ~\~ \ \ ~ '2.li1 1.~\q SE~ -.J Hollis French, Appellant, CASE NO: 3AN-19-06694CI Bi~·--vs. AOGCC, Appellee. E-mail Distribution by Court ELECTRONIC DELIVERY OF CASE DOCUMENTS [gl I represent myself in the court case noted above. I request that the Al;3ska Court System e-mail ccurt documents issued in this case to the e-mail address prm/.Jed below. D I no longer wish to receive court distribution by e-mail. Consent to Service by Fax or E-mail from Other Parties I){] I consent to accept service by D fax at _______ or ~ e-mail at the e-mail address provided below. D I withdraw my consent to accept service by fax or e-mail from other parties. E-mail Address Update D The e-mail address I provided before has changed. My new address is provided below. Please use this address for e-mail distribution from the court and/or for e-mail service by other parties. I certify that I have served a copy of this document on the other parties in this case. Date Print Name 2(pLl D ~e. \ e_ a V 0.""' o. Dr. Mailing Address t AV\ c .. ~ or o. °JQ.. State Zip E-mail address e ~vV\°'. \ ( C\ o-=t \ L. t.l '-\. • • • Court Use Onl • • • °' rd Telephone Number TF-820 (12/15) Civil Rule 5.l{c)(3) and Civil Rule 5.3(b){4) Electronic Delivery Of Case Documents 000046 •• • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE ~ '~ 0 -HOLLIS S. FRENCH, Appellant, ) 0 :;:. ~ V. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee. ) 9.. <2. ) ~ 'g y._') ) _, c:;J -:l· ~ ) ~ ~ ) Agency Case: OTH-19-002 %. l:s:> ) a ij') ) i _______________ _, Appeal Case: 3AN-19-6694CI.'! APPEAL FROM THE ALASKA OIL AND GAS CONSERVATION COMMISSION APPELLANT'S REPLY Hollis S. French 2640 Telequana Drive Anchorage, Alaska 99517 (907) 244-7135 AK Bar No. 9606033 Filed on the day of 2019 Anchorage Superior Court Clerk of the Superior Court By Deputy Clerk 000047 • • TABLE OF CONTENTS TABLE OF CONTENTS ......................................................... . TABLE OF AUTHORITIES...................................................... m STATUTES PRINCIPALLY RELIED UPON................................. v ARGUMENT....................................................................... 1 I. AOGCC's Rationales For Its Belief That It Lacks Jurisdiction Over The Cook Inlet Gas Leak Are Not Supported By Any Relevant Statute or Case ......................................... . A. What does 'waste' mean within the context of B. l . ? petro eum conservation ....................................... . AOGCC's flawed rationales: ................................ . 1. 2. "Waste occurs when recoverable hydrocarbons are lost." ................................................ . "Once metered and severed, the gas has been produced, and ceases to be a recoverable natural resource." .................................... . 3. "The combined effect of custody transfer and severance from the lease is that the resource has been produced, and in tum there is no longer a natural resource subject to a waste 1 2 8 8 11 determination." . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 II. AOGCC's Flawed Understanding Oflts Jurisdiction Fails To Protect The Public Interest In The Conservation Of Alaska's Oil And Gas Resources Over Vast Parts Of The State............................................................ 14 III. The Appropriate Standard Of Review Is The Independent Judgment Standard................................. 16 000048 • • CONCLUSION.................................................................. 20 ii 000049 • • TABLE OF AUTHORITIES FEDERAL CASES Ohio Oil Co. v. Indiana (No.I), 177 U.S. 190 (1900)...................... 13 ALASKA CASES Alaska Crude Corp. v. State, 261P.3d412 (Alaska 2011).................. 15 City of Kenai v. CINGSA, 373 P.3d 473 (Alaska 2016). .. .. .. . . ........ .. 7 Exxon Corp. v. State, 40 P.3d 786 (Alaska 2001). ...... .. . . ....... .. . . . . ... 14 McKibben v. Mohawk Oil Co., 667 P.2d 1223 (Alaska 1983)............. 9 Mukluk Freight Lines, Inc. v. Nabors Drilling, Inc., 516 P.2d 408 (Alaska 1973)..................................................................... 19-20 Sprucewood Inv. Corp. v. Alaska Housing Finance Corp., 33 P.3d 1156 (Alaska 2001)....... .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 8 State of Alaska v. BP Exploration, Alaska, Trial Motion, 2009 WL 7274134........................................................................... 14 Union Oil Co. of Cal. v. Dept. of Revenue, 560 P.2d 21(Alaska1977) 17-18 CASES FROM OTHER JURISDICTIONS Jamieson v. Indiana Natural Gas & Oil Company, 128 Tndiam1 555 (1891)............................................................................. 13 Mobil Oil Corp. v. State Corporation Commission, 608 P.2d 1325 (Kansas 1980)................................................................... 16 Osborn v. Texas Oil & Gas Corp., 661 P.2d 71, 76 0. & G.R. 101 (Ok. Ct. App. 1983)............................................................ 16 Railroad Commission v. Shell Oil Co., 206 S.W.2d 235 (Texas 1947).... 3-7, 16 iii 000050 • STATUTES AS 31.05.027 ..................................................................... . 1, 8 AS 31.05.095 ..................................................................... . 1, 5, 8 AS 31.05.170(15) .............................................................. . 1-3, 10 OTHER AUTHORITIES American Heritage Dictionary, 5th Edition, 2016.... .... .... ... .. .. ...... .. 7 AOGCC Other Order 150..... ....... ... . . . ...... .. .. .. .. .. . ..... .. . . .......... 1, 8 Evan D. Johnson, Anchorage, We Have A Problem: The Cold, Harsh Truth About The Alaska Oil And Gas Conservation Commission's Ability To Regulate Gas-Cap Production {A Texas Perspective), 44 Houston Law Review 1455 (2007).................. .. . . . . . . . . . . . . . . . .. . . . . . 6 Patrick H. Martin, The Jurisdiction of State Oil and Gas Commission, 18A RMMLF-INST 3 (1985).......................................... 16 8 Patrick H. Martin and Bruce Kramer Williams & Meyer Oil and Gas Law, Manual ofTerms (2019)............................................... 2, 15 iv 000051 • • STATUTES PRINCIPALLY RELIED UPON ALASKA STATUTE 31.05.027 The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States. ALASKA STATUTE 31.05.095 The waste of oil and gas in the state is prohibited. ALASKA STATUTE 31.05.170(15) (15) "waste" means, in addition to its ordinary meaning, "physical waste" and includes (A) the inefficient, excessive, or improper use of, or unnecessary dissipation of, reservoir energy; and the locating, spacing, drilling, equipping, operating or producing of any oil or gas well in a manner which results or tends to result in reducing the quantity of oil or gas to be recovered from a pool in this state under operations conducted in accordance with good oil field engineering practices; (B) the inefficient above-ground storage of oil; and the locating, spacing, drilling, equipping, operating or producing of an oil or gas well in a manner causing, or tending to cause, unnecessary or excessive surface loss or destruction of oil or gas; (C) producing oil or gas in a manner causing unnecessary water channeling or comng; (D) the operation of an oil well with an inefficient gas-oil ratio; (E) the drowning with water of a pool or part of a pool capable of producing oil or gas, except insofar as and to the extent authorized by the commission; (F) underground waste; (G) the creation of unnecessary fire hazards; (H) the release, burning, or escape into the open air of gas, from a well producing oil or gas, except to the extent authorized by the commission; v 000052 • • (I) the use of gas for the manufacture of carbon black, except as provided in this chapter; (J) the drilling of wells unnecessary to carry out the purpose or intent of this chapter. vi 000053 • • ARGUMENT Appellant's opening brief set out a simple, statute-based case showing that AOGCC's Other Order 150 erroneously disclaimed jurisdiction over a major leak of gas in Cook Inlet. Appellant's proof rests on three statutory legs: I) the waste of oil and gas in the state is prohibited 1; 2) the authority of the commission applies to all land in the state subject to its police powers 2 ; and 3) gas escaping into the air is waste.3 AOGCC responded. Appellant addresses AOGCC's arguments below. I. AOGCC's Rationales For Its Belief That It Lacks Jurisdiction Over the Cook Inlet Gas Leak Are Not Supported By Any Relevant Statute Or Case. AOGCC has failed to cite a legal basis for declining jurisdiction over the gas leak in Cook Inlet. Instead, AOGCC's brief creates confusion around the concept of waste and makes several unsupported assertions about waste that do not appear in Other Order 150 and that it failed to buttress with citations to relevant statutes or cases from Alaska, or anywhere else. The Court should view these unsupported rationales for what they are -mere assertions. Appellant will begin by defining and discussing the concept of waste, and then will analyze each flawed rationale the agency has put forward. 1 AS 31.05.095. 2 AS 31.05.027. 3 AS 31.05.170(15). 1 000054 A. What does 'waste' mean within the context of petroleum conservation law? A leading treatise on oil and gas law begins its treatment of the concept of waste this way: The term is too broad and has too many meanings for a one-or two-sentence definition. In the oil industry, it suggests the ultimate loss of oil or gas. The prevention of waste is conservation. The term is best understood when broken down. There is physical waste (q.v.) and economic waste (q.v.). Physical waste is the loss of oil or gas that could have been recovered and put to use. Such waste can occur on the surface or underground. . .. [T]he reader is directed to the specific statutes of the states for the precise meaning of the term in that state. "4 The treatise advises us to now turn to Alaska's definition of waste, found at AS 31.05.170( 15).5 The first thing to note about Alaska's definition of waste is that there is no reference to economic waste therein. The case before this court, however, is about the physical waste of gas. The relevant portions of Alaska's definition of waste are: ( 15) "waste" means, in addition to its ordinary meanmg, "physical waste" and includes (A) the inefficient, excessive, or improper use of, or unnecessary dissipation of, reservoir energy; ..... (G) the creation of unnecessary fire hazards; 4 8 Patrick H. Martin & Bruce M. Kramer, Williams & Meyers Oil and Gas Law, Manual of Oil and Gas Terms (2019) at 1131 (emphasis supplied). 5 The full definition is set out under Statutes Principally Relied Upon, at p. v. There are ten specific examples of waste in the full definition. 2 000055 • (H) the release, burning, or escape into the open air of gas, from a well producing oil or gas, except to the extent authorized by the comm1ss1on. Each of the lettered definitions arguably pertain to this case of gas escaping to the atmosphere from an 8" line running to Platform A. For example, taking the definition at (A): the gas that vented to the atmosphere had the effect of unnecessarily dissipating the energy of the reservoir from which it originated. Regarding (G): the gas that vented to the atmosphere created an unnecessary fire hazard. And as to (H): the gas escaped to the atmosphere.6 The lettered definitions describe some, but not all, of the forms that waste can take under Alaska law. The introductory phrase to the lettered examples is far broader than the specific examples in the lettered definitions. Alaska's definition of waste begins this way: "'waste' means, in addition to its ordinary meaning, 'physical waste' and includes ..... "7 The phrase "in addition to its ordinary meaning ... and includes" is not to be lightly passt:u uvt:r. A 194 7 case decided by the Texas Supreme Court8 turned on 6 Appellant assures the Court, contrary to the assertions made by AOGCC in its brief on p. 7, that he has read this definition to the end on numerous occasions. To the point raised by AOGCC on p. 7 of its brief, that the definition "explicitly requires [the gas escaping into the air] to be gas 'from a well producing oil or gas,"' Appellant would simply respond: gas in Alaska comes from wells, and nowhere else. 7 AS 3 l.05.l 70(15)(in part)( emphasis supplied). 8 Railroad Commission v. Shell Oil Co., 206 S.W.2d 235 (Texas 1947). 3 000056 • a similar phrase in that state's petroleum conservation laws. The Texas statute combined into one law a statewide prohibition on waste9 and then defined waste, as Alaska does today, by reference to ten specific examples, and prefaced its list with the phrase "[t[he term 'waste' among other things shall specifically . I d . ,,10 me u e ..... The Texas statute, wrote the Texas Supreme Court, significantly prefaces an enumeration of ten specific wasteful practices with the declaration that waste among other things should spec(fically include the practices there interdicted. That language must have been deliberately selected to avoid narrowing the sweeping language in the first sentence of the article, by which all waste in the handling of oil and gas was declared unlawful and prohibited, as well as to preserve the wide scope of [the statute], which was aimed with the utmost generality at the prevention ofwaste.11 The analysis of the Texas court is equally applicable to the similar phrase in Alaska's definition of waste. The idea common to both preambles is that there are many forms of waste, and the lettered examples are not exhaustive of them. Before going further it is instructional to compare side-by-side the Texas law prohibiting waste and its Alaska counterpart. 9 "The production, storage or transportation of crude petroleum oil or of natural gas in such a manner, in such amount, or under such conditions as to constitute waste is hereby declared to be unlawful and is prohibited. The term 'waste' among other things shall specifically include:" Id. at 239. 10 Id. 11 Id. (emphasis in the original). 4 000057 • Texas: The production, storage or transportation of crude petroleum oil or of natural gas in such a manner, in such amount, or under such conditions as to constitute waste is hereby declared to be unlawful and is prohibited.12 Alaska: The waste of oil and gas in the state is prohibited.13 In Railroad Commission v. Shell, quoted above, the Texas anti-waste statute is described as "sweeping" and having a "wide scope." As the Court can see, the Alaska statute, written eight years after the Texas case was decided, is written in more general terms. It would be a fair inference for the Court to draw that our Alaska Territorial legislators, working in 1955, decided to improve upon the Texas statute preventing waste, making it more sweeping and giving it an even wider scope. In Railroad Commission v. Shell, the Texas Court finished its analysis this way: 12 Jd. The term waste has an ordinary and generally accepted meaning. Whatever the dictates of reason, fairness and good judgment under all the facts would lead one to conclude is a wasteful practice in the production, storage, or transportation of oil and gas, must be held to have been denounced by the legislature as unlawful. The Constitution had vested in the lawmaking body the duty of preventing waste, not of part but of all the natural resources of this State, and it must not be considered that the legislature meant by its enactments to discharge less than the full duty which was thus entrusted to it.14 13 AS 31.05.095. 14 206 S.W.2d at 239. 5 000058 • This 1947 Texas case is important for two reasons. First, it is hdpful i11 that it provides the Court with some context for our Alaskan laws on petroleum conservation. Texas wrote its petroleum conservations laws beginning in 1919. Alaska did not take up the same task until 1955. As one writer explains it: Alaska, on the other hand, has enjoyed the luxury of more hindsight in its regulation of the oil and gas industry, benefiting not only from Texas's mistakes but also from technological advances in drilling and recovery methods over the last fifty years. As custodian to one of the last abundant reserves of U.S. domestic oil supply, Alaska has shown a keen awareness of its prominent role in maintaining the delicate balance between politics and economics that dictates oil and gas regulation. Accordingly, the Alaska legislature has given its regulatory agency in charge qf oil conservation-the Alaska Oil and Gas Conservation Commission (AOGCC)-far greater authority to regulate waste and correlative rights than Texas bestowed upon its agency, the Texas Railroad Commission (RRC).15 The analysis above supports an inference from which this Court could conclude that the authority of AOGCC to act in this case, to assert jurisdiction, should be construed broadly. The Texas case is equally important because it sheds light on how we are to understand the phrase "in addition to its ordinary meaning ... and includes" in Alaska's definition of waste. We can presume that the phrase was "deliberately selected to avoid narrowing the sweeping language" of our statewide prohibition on waste. We can presume that it was "deliberately selected" to "preserve the 15 Evan D. Johnson, Anchorage, We Have A Problem: The Cold, Harsh Truth About The Alaska Oil And Gas Conservation Commission's Ability To Regulate Gas-Cap Production (A Texas Perspective), 44 Houston Law Review 1455, 1457 (2007)(footnotes omitted)( emphasis supplied). 6 000059 • • wide scope" of our statewide prohibition against waste. We can presume that the Territorial legislature meant to prevent the waste "not of a part but of all of the natural resources of this State." This analysis is consistent with Alaska law regarding the interpretation of statutes: "[ w ]e presume that the legislature intended every word, sentence, or provision of a statute to have some purpose, force, and effect, and that no words or provisions are superfluous."16 Alaska's definition of waste includes the "ordinary meaning" of waste. What, then, is the ordinary meaning of waste? Let's start with the dictionary. The dictionary meaning of 'waste,' is "to fail to take advantage of or use for profit; lose: waste an opportunity. "17 With the foregoing in mind, consider the gas that leaked for several months directly to the atmosphere from the 8" line running towards Platform A. Was that gas lost? Yes. Was it put to use? No. Was it used for profit? Again, no. That gas was wasted, or, in other words, it was not conserved. The gas that leaked to atmosphere was waste according to the ordinary meaning of the term. In sum, Appellant believes, as a leading treatise attests, that the prevention of waste is conservation. Yet the Alaska Oil and Gas Conservation Commission, 16 City of Kenai v. CJNGSA, 373 P.3d 473, 480 (Alaska 2016)(internal citations omitted). 17 The American Heritage Dictionary of the English Language, Fifth Edition (2016) at 1955 (emphasis in the original). 7 000060 • • whose central statutory mission is to prevent waste of oil and gas in the state 18 , and told explicitly in statute that it has statewide authority 19 to do its job can't see that it has jurisdiction to act in this instance of a long term release of gas to the atmosphere, in the middle of Cook Inlet, from a pipeline running straight to an oil production platform. The reasons AOGCC offered in its brief for failing to do its job are all flawed, as the following analysis demonstrates. B. AOGCC's flawed rationales: 1. "Waste occurs when recoverable hydrocarbons are lost."20 AOGCC's brief cites no law, no definition and no case in support of this sentence. The Court should view the unsupported assertion at I.B. l with suspicion. AOGCC had more than three months to research and to write its brief.21 It failed during that time to find a case, statute, law review article or treatise to support the sentence quoted above. Alaska law does not define "recoverable hydrocarbon." Other Order 150 certainly did not rely on this term. Other Order 150 makes no mention of "recoverable hydrocarbons." The agency on appeal has inserted a 18 "The waste of oil and gas in the state is prohibited." AS 31.05.095. 19 "The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States." AS 31.05 .027. 20 Brief of Appellee, p. 3. 21 Appellant filed his brief in this appeal on July 15, 2019. AOGCC filed its brief on October 21, 2019. 8 000061 • concept foreign to both the Order it issued, and to petroleum conservation -that waste only occurs when a "recoverable" hydrocarbon is lost -to cobble together a rationale for its decision that it lacked jurisdiction. Invented terms are a weak foundation upon which to build. A longer variant of the sentence quoted m 1.8. l appears on p. 5 of AOGCC's brief. There, the agency asserts that In oil and gas conservation, waste occurs when recoverable natural resources -here gas -are lost, i.e., during production the operator damages the interest of another in the gas. This sentence does come with a footnote, number 12 in Appellee's brief. The footnote does not direct the reader to Alaska's statutory definition of waste. Instead, the footnote cites three cases, not one of which touches even remotely upon petroleum conservation law. The first cited case is Sprucewood Inv. Corp. v. Alaska Housing Finance Corp. 22 If the names of the parties suggests that this case might not be relevant, a brief review of the facts of that case confirms it. The case is not about oil and gas conservation. It does not discuss recoverable hydrocarbons, or any kind of hydrocarbon. The first sentence of the case informs us that "[t]he main question presented in this case is how to interpret a 'demolition' contract."23 There is a reference to waste in Sprucewood, but it is waste as that term pertains to real 22 33 P.3d 1156 (Alaska 2001). 23 Id. 9 000062 •• estate.24 If the Court is puzzled by the agency's selection of a case about a real estate dispute to make a point about how waste is to be understood in the world of oil and gas conservation, so is Appellant. The second case is McKibben v. Mohawk Oil Co. 25 That case concerned a business dispute over a mine near Fairbanks.26 There are no hydrocarbons present in McKibben. As in the Sprucewood case, the waste referred to in McKibben is not oil and gas waste, but waste within the context of real estate law. The Court in McKibben cited directly to treatises on real estate when it wrote that: Waste occurs when the owner of a possessory estate engages in unreasonable conduct that results in physical damage to the land and substantial diminution in the value of estates owned by others in the same land. See W. Burby, Real Property § 12 (3d ed. 1965); 2 H. Tiffany, Real Property§ 630 (3d ed. 1939).27 AOGCC's citation to a real estate definition of waste should trouble the Court. In any event, neither Sprucewood nor McKibben is on point. Neither case cites to the oil and gas law definition of waste found at 3 l.05. l 70(H). The final case cited in footnote 12 of AOGCC's brief simply informs us that McKibben was 24 Id. at 1165. 2s 667 P.2d 1223 (Alaska 1983). 26 "[T]he complaint alleges that defendants breached the lease; committed waste and conversion; engaged in unworkmanlike mining; and intentionally diluted the ore." Id. 21 Id. at 1228. 10 000063 • overruled on different grounds by another case. In short, none of the cases cited by AOGCC in footnote 12 are about oil and gas conservation law. 2. "Once metered and severed, the gas has been produced, and ceases to be a recoverable natural resource."28 This concept is related to the one listed in LB. I above, and equally foreign to petroleum conservation theory and law. AOGCC cites no law, no definition, and no case to support the statement quoted in I.B.2. The agency repeats the assertion in a slightly altered way three more times in its brief. It claims that "[t]he gas had been produced, was [sic] no longer a recoverable natural resource; "29 and that "[ m ]etered and severed gas is no longer a recoverable resource;"30 and that "[b ]ecause the leaking gas had passed through a custody transfer meter and been severed, it was no longer a recoverable natural resource, and therefore not waste."31 This invented concept is no more legitimate having been rephrased in different ways. 28 Brief of Appellee, p. 6. 29 Brief of Appellee, p. 6. 30 Brief of Appellee, p. 8. 31 Brief of Appellee, p. 2. 11 000064 • In general, it is difficult to prove a negative. However, Appellant can confidently assert that no Alaskan case refers to a "recoverable natural resource."32 AOGCC had a duty to provide a legal basis for its assertions. It failed. It appears as if the agency has created this term out of thin air. 3. "The combined effect of custody transfer and severance from the lease is that the resource has been produced, and in turn there is no longer a natural resource subject to a waste determination."33 AOGCC now takes a tum into uncharted waters. The sentence in I.B.3 comes without a footnote pointing the Court to a statute, a court decision, a law review article, or a treatise, to substantiate it. In I.B.2 above, metering and severing of the natural gas in question supposedly rendered that natural gas no longer 'recoverable.' Now, in I.B.3, the gas in question becomes no longer a natural resource.34 Appellant is at a loss here. The position put forward in I.B.3 is shocking. How does natural gas stop being a natural resource? More importantly, what Alaskan statute says that? None. As noted above, the agency had three months to 32 A WESTLA W search of phrase "recoverable natural resource" in the Alaska database conducted November 12, 2019, returned zero cases. A Google Scholar search of the same term within the Alaska courts database conducted November 14, 2019, returned zero cases. 33 Brief of Appellee, p. 10. 34 AOGCC makes this same point in a slightly different way at the bottom of page 7 of its brief. The sentence is a bit convoluted, but the gist of it is that gas is no longer a natural resource after it is produced and custody and ownership of the gas has transferred to the operator. 12 000065 • • prepare its brief. It apparently could not find a case or a passage in a textbook or even one of its own regulations that explains the magic it claims that happens by flowing gas through a custody transfer meter; magic that somehow changed the natural gas from one of the Kenai Peninsula's oil and gas reservoirs into ..... ? Not a natural resource? What is it then? Contrary to AOGCC's novel argument, the natural gas is still natural gas, it is still flammable, and it is still one of Alaska's most valuable natural resources. The agency appears to have created this rationale out of thin air. Before leaving this point, Appellant would remind the Court of the cases cited in Appellant's Brief at pp. 23-25. The first, Jamieson v. Indiana Natural Gas & Oil Company 35 involved natural gas in transmission lines, much like the transmission line running to Platform A in this case. The case was later analyzed by the US Supreme Court in Ohio Oil Co. v. Indiana (No. I), 36 wherein the Court noted that the pipeline statute at issue in Jamieson was upheld on the ground that "the dangerous nature of the product, its susceptibility to explosion and the consequent hazard to life and property which might arise from movement through pipes, made the act of transmitting it a fit subject for police regulation."37 The Court could reasonably rely on Jamieson for the proposition that gas in 35 128 Indiana 555 (1891). 36 177 U.S. 190 (1900)(emphasis supplied). 37 Id. at 206. 13 000066 • • transmission lines is subject to Alaska's police power and therefore subject to the jurisdiction of AOGCC. The second case, State of Alaska v. BP Exploration, 38 involved oil in transmission lines. In the latter case, BP did not question the authority of AOGCC to adjudicate a case of waste of a natural resource that was severed from its lease and had been passed through a custody transfer. Indeed, BP wrote that AOGCC "h<=1s pl~m1ry power to adjudicate issues of waste and to require actions to address waste." AOGCC failed to discuss, much less distinguish, these two cases in its brief. In sum, not one of AOGCC's rationales for its position on its jurisdiction is supported by Alaska law. II. AOGCC's Flawed Understanding Of Its Jurisdiction Fails To Protect The Public Interest In The Conservation Of Alaska's Oil And Gas Resources Over Vast Parts Of The State. There is a public interest in the conservation of Alaska's natural resources.39 AOGCC's brief does not discuss this vital aspect of its mission. The words "public interest" do not appear in its brief. The agency's description of its role in the state, offered at several points in its brief, focuses on drilling and 38 State of Alaska v. BP Exploration, Alaska, Trial Motion, 2009 WL 7274134 at 9. 39 Exxon Corp. v. State, 40 P.3d 786, 791 (Alaska 2001). 14 000067 • •• wells.'1° While those descriptions are not inaccurate, they are incomplete. This Court should be aware that the Alaska Supreme Court takes a broader view of the agency's mission than does the agency itself: AOGCC is an 'independent quasi-:iudicial agency of the state' created by the Alaska Oil and Gas Conservation Act. AS 3 l .05.005(a). AOGCC, which has authority over all land subject to the state's police power, regulates to prevent waste, insure greater recovery, protect correlative rights and underground water, and further public health and safety .41 The agency's first mission is to prevent waste, according to the Alaska Supreme Court. As noted in.a leading oil and gas law treatise, "[s]uch waste can occur on the surface or underground. "42 Yet the agency disclaims jurisdiction over waste occurring on the surface but past the point of metering and severing. Aboveground waste of Alaska's most precious natural resource occurring downstream of the point of metering and severing is waste over which the Alaska Oil and Gas Conservation Commission is powerless, according to the agency's rationales in Other Order 150. 40 "The AOGCC is the regulatory and enforcement authority over wells and drilling operations involving the production of hydrocarbon natural resources." Brief of Appellee at p. 3; "AOGCC is the regulatory and enforcement authority over drilling and well operations for production of hydrocarbon natural resources, often referred to by the shorthand of 'everything downhole. "' Brief of Appellee at p. 4. 41 Alaska Crude Corp. v. State, 261P.3d412, 414 (fn. 3)(Alaska 2011). 42 See fn. 4, p 2. 15 000068 • The legal question before the Court is simple: does the agency's jurisdiction extend past the point of metering and severing? Packed within that question is a significant impact on the public interest in protecting Alaska's natural resources. A ruling in favor of the agency would render vast portions of the state beyond AOGCC's reach. Such a ruling would be contrary to Alaska's petroleum conservation laws, which Appellant asserts were designed to be all-encompassing as to waste. In other words, if petroleum conservation laws in Texas protect "not ... part but ... all the natural resources"43 of that state, Alaska deserves no less. The situation before the court is not unheard of in the law. Oil and gas commissions do not always appreciate the full extent of their powers. "In some instances we find a commission asserting that it lacks certain authority, but a court concluding otherwise." 44 This Court should protect the public interest in preventing waste by correcting the agency's flawed understanding of its own jurisdiction. III. The Appropriate Standard Of Review Is The Independent Judgment Standard. The issue before the Court is one of statutory construction. The general rule for statutory construction cases is set out in Union Oil Co. of Cal. v. Dept. of 43 Railroad Commission v. Shell, 206 S. Wat 239. 44 Patrick H. Martin, The Jurisdiction of State Oil and Gas Commission, 18A RMMLF-INST 3 at 7 (1985)(citing Mobil Oil Corp. v. State Corporation Commission, 608 P.2d 1325 (Kan. 1980) and Osborn v. Texas Oil & Gas Corp., 661 P.2d 71, 76 0. & G.R. 101 (Ok. Ct. App. 1983)). 16 000069 • • •• Revenue: "[W]here, as here, the issues to be resolved tum on statutory interpretation, the knowledge and expertise of the agency is not conclusive of the intent of the legislature in passing a statute. Statutory construction is within the scope of the court's special competency, and it is our duty to consider the statute independently. "45 The Union Oil case concerned the appropriate interpretation to be given a provision of an oil and gas production tax law enacted by the Legislature and a regulation interpreting the statute promulgated by the Department of Revenue. The Department urged the Court to adopt the reasonable basis standard of review. The Court's discussion of the issue is helpful: 45 46 In support of a reasonable basis standard of review, the Department argues that its interpretation made '... all the complicated variables of the tax calculation fit together in an efficient and workable manner ... ' and was based upon ' ... the department's expertise in administering tax calculations, taxpayer notifications and payment procedures' .... These considerations do not warrant application of the reasonable basis test. While tax structure and collection procedures do involve certain policy considerations which we consider in independently interpreting this statute, none of the policy judgments argued in this case is the type of specialized agency judgment which has caused us to apply the reasonable basis test in the past.46 560 P.2d 21, 23 (Alaska 1977)(footnote omitted). Id. at 24 (footnote omitted). 17 000070 ' • The Court ruled that the independent judgment standard was the correct one to be applied.47 A comparison between two sets of precedents cited by the Court in Union Oil and the standard of review applied in each case reveals the weakness of the agency's position on this point. Here are issues the Union Oil Court found to be properly reviewed through the reasonable basis test: • questions of oil discovery evaluation and prediction of future well productivity; • procedures adopted for competitive bidding for oil and gas leases and criteria for qualified applicants for such leases; • decisions regarding initiation of a rate investigation pursuant to charges of discrimination; and • conclusions relating to the desirability of creating a borough.48 Compare that list of issues to this one, to which the Court has applied the independent judgment standard of review: • interpretation of a statute relating to public land auction procedures; • a determination whether administrative procedures were consistent . h d 49 wit ue process. 47 Id. 4 s Id at 25, fn. 6 (internal citations omitted). 4 9 Id at 25, fn. 7 (internal citations omitted). 18 000071 () • • The last example comes from Mukluk Freight Lines, Inc. v. Nabors Drilling, Inc. 50 The case is instructive. Mukluk involved the transfer of a trucking company's authority to operate. Several trucking competitors challenged the transfer. The matter went before the Alaska Transportation Commission. It announced that it intended to hold an evidentiary hearing in the matter.51 The Transportation Commission then issued an order cancelling the evidentiary hearing. "In the place of an evidentiary hearing, the Commission announced that it would employ a 'modified procedure. "'52 That order was appealed to superior court, which ruled that in "transfer proceedings the Commission had discretionary authority to either grant or deny evidentiary hearings." An appeal to the Alaska Supreme Court followed. The first question the Court had to decide was the proper standard of review. The Court noted that the reasonable basis standard applies to cases in which the "particularized experience and knowledge of the administrative personnel goes into the determination. "53 50 51 52 53 The Court set out the test for the independent judgment standard: The other kind of case presents questions of law in which knowledge and experience in the industry affords little guidance 516 P.2d 408 (Alaska 1973). Id. at 408-409. Id. Id. 19 000072 • • • • toward a proper consideration of the legal issues. These cases usually concern statutory interpretation or other analysis of legal relationships about which courts have specialized knowledge and experience. Consequently, courts are at least as capable of deciding this kind of question as an administrative agency.54 The question in this case concerns the extent of the AOGCC's jurisdiction. This is a classic question of law. To use the words of the Mukluk Court: the knowledge and experience of AOGCC 'affords little guidance' on this question. The knowledge and experience of AOGCC is directed towards questions of well engineering and geology. For the foregoing reasons, in reviewing this case, the Court must apply its independent judgment. CONCLUSION The laws of the state of Alaska give to the Alaska Oil and Gas Conservation Commission statewide jurisdiction over waste. Appellant seeks an order from this Court that could be as narrow as this: the agency would not be exceeding its powers to assert jurisdiction over the gas leak in Cook Inlet. AOGCC has taken a position at odds with the law, at odds with the historical place Alaska occupies in the development of petroleum conservation doctrines, and at odds with good public policy. The agency has taken the position that, as far as its authority goes, this leak of Alaskan natural gas might as well have happened in Canada, or in Venezuela. The agency has taken the position s4 Jd. 20 000073 .. • • that, even if the leak wen: lwit:e as voluminous and still going on today, it would be powerless to act. The agency is mistaken. For the foregoing reasons, the court should reverse the decision below, rule that AOGCC had, and indeed, still has, jurisdiction over this case, and require that AOGCC comply with the law enacted by the legislature defining its jurisdiction. DATED: November 20, 2019 Hollis S. French Bar No. 9606933 Pursuant to Ak. R. App. P. 513.5 ( c) (2), I hereby certify that Appellant's Reply is in 13 point Times New Roman. Hollis S. French 21 000074 D ocr 2 3 ·-·ZOtg IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE HOLLIS FRENCH, Appellant, v. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee, ) ) ) ) ) ) ) ) ) ) ) Appeal Case No. 3AN-19-06694 CI ~~~~~~~~~~~~-) APPEAL FROM THE ALASKA OIL AND GAS CONSERVATION COMMISSION Filed in the Superior Court of the State of Alaska on October _, 201 9 By: Deputy Clerk APPELLEE'S BRIEF ~ Thomas A. Ballantine (8806122) Senior Assistant Attorney General Department of Law 1031 West Fourth Avenue, Suite 200 Anchorage, AK 99501 (907) 269-5255 000075 TABLE OF CONTENTS TABLE OF AUTHORITIES .............................................................................................. ii AUTHORITIES PRINCIPALLY RELIED UPON ........................................................... iii JURISDICTIONAL STATEMENT .................................................................................... 1 ISSUES PRESENTED FOR REVIEW ............................................................................... 1 STATEMENT OF THE CASE ............................................................................................ 2 STANDARDS OF REVIEW ............................................................................................... 3 ARGUMENT ....................................................................................................................... 3 I. Summary ........................................................................................................ 3 II. AOGCC correctly determined the Hilcorp leak was not the basis for a waste determination, and in turn that French had not requested a hearing on a matter within AOGCC's jurisdiction ............................................................ 4 III. French's arguments are utterly irrelevant to the issue presented to the court .............................................................................................................. 7 CONCLUSION .................................................................................................................. 11 000076 TABLE OF AUTHORITIES Cases Alaska Crude Corp. v. State, Alaska Oil and Gas Commission, 309 P.3d 1249, 1254 (Alaska 2013) .......................................................................... 3 Sprucewood Inv. Corp. v. Alaska Housing Finance Corp., 33 P.3d 1156, 1165 (Alaska 2001) ............................................................................ 5 McKibben v. Mohawk Oil Co., Ltd., 667 P.2d 1223, 1228 (Alaska 1983) ...................................................................... 5-6 Wien Air Alaska v. Bubbel, 723 P.2d 627, 631 n.4 (Alaska 1986) ........................................................................ 6 Alaska Statutes AS 22.10.020(d) ................................................................................................................... 1 AS 31.05.170( l 5)(H) ........................................................................................................... 7 AS 31.05.030 .................................................................................................................... 3-5 AS 31.05.060 .................................................................................................................... 1-2 AS 31.05.090 ........................................................................................................................ 5 AS 44.62.330 -44.62.630 .................................................................................................... 1 AS 44.62.560(a) ................................................................................................................... 1 Alaska Court Rules Ak.R.App.P. 60l(b) ............................................................................................................. 1 Misc 20 AAC 25.200 .................................................................................................................... 5 20 AAC 25 .215 .................................................................................................................... 5 20 AAC 25.228 .................................................................................................................... 6 20 AAC 25.235 .................................................................................................................... 5 11 000077 e AUTHORITIES PRINCIPALLY RELIED UPON Alaska Statutes: AS 31.05.030. Powers and duties of commission. (a) The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter. (b) The commission shall investigate to determine whether or not waste exists or is imminent, or whether or not other facts exist which justify or require action by it. ( c) The commission shall adopt regulations and orders and take other appropriate action to carry out the purposes of this chapter. (d) The commission may require ( l) identification of ownership of wells, producing leases, tanks, plants, and drilling structures; (2) the making and filing of reports, well logs, drilling logs, electric logs, lithologic logs, directional surveys, and all other subsurface information on a well for which a permit to drill has been issued by the commission, subject to the following: (A) the reports required to be filed by the commission under this paragraph shall be filed within 30 days after the completion, abandonment, or suspension of the well; and (B) the well logs, drilling logs, electric logs, lithologic logs, directional surveys, and all other information required to be filed by the commission under this paragraph shall be filed within 90 days after the completion, abandonment, or suspension of the well, unless extended by the commission on request; (3) the drilling, casing, and plugging of wells in a manner that will prevent the escape of oil or gas out of one stratum into another, the intrusion of water into an oil or gas stratum, the pollution of fresh water supplies by oil, gas, or salt water, and prevent blowouts, cavings, seepages, and fires; (4) the furnishing of a reasuuable bond with sufficient surety conditions for the performance of the duty to plug each dry or abandoned well or the repair of wells causing waste; (5) the operation of wells with efficient gas-oil and water-oil ratios, and may fix these ratios; (6) the gauging or other measuring of oil and gas to determine the quality and quantity of oil and gas; (7) every person who produces oil or gas in the state to keep and maintain for a period of five years in the state complete and accurate records of the quantities of oil and gas produced, which shall be available for examination by the commission at all reasonable times; (8) the measuring and monitoring of oil and gas pool pressures; lll 000078 (9) the filing and approval of a plan of development and operation for a field or pool to prevent waste, ensure a greater ultimate recovery of oil and gas, and protect the correlative rights of persons owning interests in the tracts of land affected. ( e) The commission may regulate (1) for conservation purposes and, to the extent not in conflict with regulation by the Department of Labor and Workforce Development or the Department of Environmental Conservation, for public health and safety purposes, (A) the drilling, producing, and plugging of wells; (B) the perforating, fracture stimulation, and chemical treatment of wells; (C) the spacing of wells; (D) the disposal of salt water, nonpotable water, and oil field wastes; (E) the contamination or waste of underground water; (F) the quantity and rate of the production of oil and gas from a well or property; this authority shall also apply to a well or property in a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.l SO(p); (G) the underground injection of gas for purposes of storage; (2) the disposal of drilling mud, cuttings, and nonhazardous drilling operation wastes in the annular space of a well for which a permit to drill has been issued by the commission; in this paragraph, a "nonhazardous drilling operation waste" means a waste, other than a hazardous waste identified by the Environmental Protection Agency in 40 C.F.R., Part 261, its regulation identifying and listing hazardous wastes, associated with the act of drilling a well for exploratory or production purposes. (f) The commission may classify a well or a specific portion of a well as an exploratory, development, service, or stratigraphic test well and may classify a development well as an oil or gas well for purposes material to the interpretation or enforcement of this chapter. (g) When the commission finds sufficient likelihood of an unexpected encounter of oil, gas, or other hazardous substance as a result of well drilling in an area of the state, the commission may, by regulation, designate the area and specify a depth in the area as one in which wells or any boring into the soil in excess of the specified depth but not otherwise subject to this chapter are subject to the regulations and requirements adopted under this section. The designation of an area or specification of a depth under this subsection does not constitute a certification that no hazardous substance will be encountered in another area or at a lesser depth, and the state is not liable for any damages arising from such an unexpected encounter of a hazardous substance. (h) The commission may take all actions necessary to allow the state to acquire primary enforcement responsibility under 42 U.S.C. 300h-1 and 42 U.S.C. 300h-4 (Safe Drinking Water Act of 1974, as amended, 42 U.S.C. 300f-300j-26), for the control of underground injection related to the recovery and production of oil and natural gas and the control of underground injection in Class I wells, as defined in 40 C.F.R. 144.6, as amended. (i) The commission shalJ accept written plans submitted by lessees for purposes of AS 38.05. l 80(f)(5). If a lessee submits a plan, the commission shall hold a public hearing on iv 000079 the plan and, within 45 days after receipt of the plan, grant approval of the plan if the plan contains a voluntary agreement by the lessee to use its best efforts to employ residents of this state, consistent with law, and to contract with firms in this state for work in connection with the development of the field, including the fabrication and installation of required facilities, whenever feasible. The decision of the commission to grant approval may not be appealed. (j) For exploration and development operations involving nonconventional gas, the commission (1) may not (A) issue a permit to drill under this chapter if the well would be used to produce gas from an aquifer that serves as a source of water for human consumption or agricultural purposes unless the commission determines that the well will not adversely affect the aquifer as a source of water for human consumption or agricultural purposes; or (B) allow injection of produced water except at depths below known sources of water for human consumption or agricultural purposes; (2) shall (A) regulate hydraulic fracturing in nonconventional gas wells to ensure protection of drinking water quality; (B) regulate the disposal of wastes produced from the operations unless the disposal is otherwise subject to regulation by the Department of Environmental Conservation or the United States Environmental Protection Agency; (C) as a condition of approval of a permit to drill a well for regular production of coal bed methane, require the operator to design and implement a water well testing program to provide baseline data on water quality and quantity; the commission shall make the results of the water well testing program available to the public. (k) The commission shall certify to the Department of Natural Resources the volume of oil production from a field or platform for the purposes of AS 38.05. l 80(f)(6)(A), (C), (E), and (G). (I) For purposes of AS 46.04.050(c) and upon application by the operator, the commission shall evaluate the likelihood that a well at a natural gas exploration facility may penetrate a formation capable of flowing oil to the ground surf ace and issue a determination based on results of the evaluation. If the commission determines that evidence obtained through the evaluation demonstrates with reasonable certainty that a well will not penetrate a formation capable of flowing oil to the ground surface, it shall report its determination to the Department of Environmental Conservation. In this subsection, (1) "natural gas exploration facility" has the meaning given in AS 46.04.050(c); (2) "oil" has the meaning given in AS 46.04.050(c). (m) The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of AS 41.06, except for provisions in AS 41.06 for which the Department of Natural Resources has jurisdiction. v 000080 (n) Upon request of the commissioner of revenue, the commission shall determine the commencement of regular production from a lease or property for purposes of AS 43.55.160(t) and (g) and 43.55.165(n) and (o). 20 AAC 25.228. Production measurement equipment for custody transfer (a) Hydrocarbon production must be measured in accordance with this section before severance from the property or unit where produced. Crude oil sample collection, handling, and analysis in connection with production measurement must be performed in conformance with relevant parts of the API Manual of Petroleum Measurement Standards, as revised as of November 30, 1998. vi 000081 JURISDICTIONAL STATEMENT Hollis S. French (French) appeals the entry of Other Order 150 by the Alaska Oil and Gas Conservation Commission (AOGCC) on March 20, 2019. Other Order 150 denied French a hearing on his "petition ... on a complaint of waste" he alleges occurred when, in winter 2017, a line carrying gas out to Platform A leaked gas into Cook Inlet.1 Platform A is operated by Hilcorp Alaska, LLC. Waste occurs when recoverable natural resources are lost. Because the gas being shipped to Platform A had been metered and severed prior to its purchase by Hilcorp, it was no longer a recoverable natural resource and could not form the basis for a waste determination. AOGCC denied French's request. Other Order 150 is a final administrative decision and disposes of the substantive issue raised, i.e., whether French was entitled to a hearing. This court has jurisdiction pursuant to AS 22.10.020(d) and Ak.R.App.P. 60l(b).2 ISSUE PRESENTED FOR REVIEW Whether AOGCC's determination that the leaked gas did not constitute waste - a matter squarely within its expertise -is reasonable. The only matter within the jurisdiction of the AOGCC alleged by French was waste. 2 French claims AS 44.62.560(a) as a basis for the court's jurisdiction. The section of the AOGCC's enabling act relied upon by French to demand a hearing, AS 31.05.060, expressly exempts AOGCC from 44.62.560(a). AS 31.05.060(b)("Any action by the commission ... that has application to a single well or a single field need not comply with the provisions of AS 44.62.330-44.62.630 ... "). In addition, AS 44.62.560(a) applies only to the boards, agencies and commissions listed in AS 44.62.330(a)(l)-(45). AOGCC is not one of the enumerated agencies. 1 000082 STATEMENT OF THE CASE In February 2017, Hilcorp discovered a leak in a pipeline transporting gas from shore out to Platform A in Cook Inlet for use in operating Platform A.3 AOGCC determined the leaking gas was being supplied from shore to Platform A after it had been purchased by Hilcorp. Waste requires loss of a recoverable natural resource. By definition, the purchased gas being supplied from shore to the Cook Inlet platforms had gone through a custody transfer meter. The custody transfer meter is the point at which the gas has been recovered. Consequently, there had been no loss of a recoverable natural resource and there was no basis for a claim of waste. French, an AOGCC commissioner at the time, was aware of AOGCC' s actions and the reason for them. Two years later, shortly after his removal from AOGCC, French filed a petition demanding AOGCC schedule a hearing, claiming the 2017 Hilcorp leak constituted waste. By law, AOGCC has an obligation to schedule a hearing on "a matter within the jurisdiction of the commission ... "4 Because the leaking gas had passed through a custody transfer meter and been severed, it was no longer a recoverable natural resource, and therefore not waste. Since waste was the only jurisdictional basis claimed in French's petition, AOGCC entered Other Order 150, denying his demand for a hearing. On April 8, 2019, French filed a request for reconsideration. French did not dispute that the gas had been metered and severed. Nor did French dispute that it was being shipped back to Platform A. French simply declared "that is waste," then asserted 3 The gas supply line also provided gas to the Baker, Dillon and C platforms in Cook Inlet. 4 AS 3 l .05.060(a)(emphasis supplied). 2 000083 AOGCC has jurisdiction over all gas until such time as it is used. His request was denied by operation of law on April 18, 2019. This appeal followed. STANDARD OF REVIEW Questions of law involving an agency's expertise or a determination of fundamental policies within the agency's statutory functions require the court to apply the rational basis standard of review. Under the rational basis standard, the court must defer to the agency's interpretation as long as it is reasonable.5 A waste determination is a matter squarely within the AOGCC's technical expertise.6 The reasonable basis standard applies to the court's review of Other Order 150. ARGUMENT I. Summary. The AOGCC is the regulatory and enforcement authority over wells and drilling operations involving the production of hydrocarbon natural resources. One of AOGCC's duties is to prevent waste. Waste occurs when recoverable hydrocarbons are lost. Once gas has been produced, by law it must pass through a custody transfer meter prior to being severed from the lease from which it was produced. The purpose of the custody transfer meter is exactly as the words state: transfer exclusive custody and ownership of the produced gas to the operator. Once gas has been metered and severed it is no longer a recoverable natural resource; it is the property of the operator. Alaska Crude Corp. v. State, Alaska Oil and Gas Conservation Commission, 309 P.3d 1249, 1254 (Alaska 2013). 6 AS 31.05.030(b). 3 000084 The 2017 Hilcorp leak involved gas which had been metered and severed. Whatever other remedies may have been available to the state regarding the leak, the gas could not be the basis of a waste determination. Because waste was the only jurisdictional basis alleged in French's demand for a hearing, AOGCC denied his demand. Other Order 150 does not deny AOGCC's jurisdiction over waste or its general police powers. It simply declares that after metering and severance, the gas has been recovered and is not a natural resource. Lacking any comprehension of what waste is, French appeals. Rather than address the concept of waste, French just declares it exists, then attempts to torture AOGCC's order into a referendum on states' police powers, and essentially urges the court to order the AOGCC to change its determination. To do so, the court will need to substitute its judgement for AOGCC's as to what constitutes waste of natural gas, and usurp the authority of the legislature and judicially amend the AOGCC's enabling act to grant it powers far greater than those .. necessary to carry out the purposes and intent of this chapter,"7 i.e., regulation of oil and gas production operations. II. AOGCC correctly determined the Hilcorp leak was not the basis for a waste determination, and in turn that French had not requested a hearing on a matter within AOGCC's jurisdiction. AOGCC is the regulatory and enforcement authority over drilling and well operations for production of hydrocarbon natural resources, often referred to by the shorthand of "everything downhole." AOGCC acts by a quorum of its three commissioners (a petroleum engineer, a petroleum geologist and a member of the public), 7 AS 3 l.05.030(a). 4 000085 supported by a staff of petroleum engineers and petroleum geologists. Among other matters, AOGCC issues drilling permits, approves developmental and operational plans for fields and I or pools to ensure greater ultimate recovery, monitors oil and gas reservoir pressures, requires the operation of wells and reservoirs with efficient gas-oil and water- oil ratios, regulates well spacing, and certifies to the Department of Revenue when "regular production" begins from a lease or property. 8 AOGCC also requires the filing of well logs, drilling logs, directional surveys, gas disposition reports, and other subsurface information, along with regulating production equipment, the comingling of production, and the underground storage of produced gas.9 AOGCC's authority extends to all persons and property in the state to the extent "necessary to carry out the purposes and intent of this chapter."10 Because AOGCC' s duties include the obligation to determine if waste exists, a waste determination is a matter squarely within AOGCC's expertise. 11 In oil and gas conservation, waste occurs when recoverable natural resources -here gas -are lost, i.e., during production the operator damages the interest of another in the gas.12 The purpose 8 See, e.g., AS 31.05.090 (permits to drill)030(d)(2) and (3)(require drilling logs, all other subsurface information; drilling, casing and plugging of wells to preserve reservoir integrity and subsurface fresh water), (5)(require efficient gas-oil and water-oil ratios), (8)(require measuring I monitoring of oil and gas pool pressures); ([)(authority to classify wells as oil or gas and exploratory, development, service or stratigraphic); (g)(authority to regulate non-hydrocarbon wells if substantial likelihood of an encounter oil, gas or other hazardous substance). 9 10 II AS 31.05.030(d); 20 AAC 25.200, 20 AAC 25.215, 20 AAC 25.235. AS 31.05.030(a)(emphasis supplied). AS 3 l .05.030(b ). 12 See, e.g., Sprucewood Inv. Corp. v. Alaska Housing Finance Corp., 33 P.3d 1156, 1165 (Alaska 200l)(emphasis supplied) citing McKibben v. Mohawk Oil Co., Ltd., 667 5 000086 of the prohibition against waste is to ensure the maximum ultimate recovery of the gas. By law, after extraction all oil and gas must pass through a custody transfer meter before it is severed from the property or unit where it is produced. 13 The custody transfer meter measures the oil or gas, which determines the amount of royalty or other compensation due the landowner. Custody transfer is exactly that: the point at which custody and ownership of the gas transfers exclusively to the operator. Once metered and severed, the gas has been produced, and ceases to be a recoverable natural resource. AOGCC has statewide jurisdiction over all persons and land necessary to carry out the purposes and intent of its enabling act: regulation of drilling operations to ensure the maximum production of oil and gas. French concedes the gas in the Hilcorp transmission line had been metered for custody transfer purposes and severed from the lease where it was produced. 14 This concession is fatal to his claim that AOGCC erred when it failed to grant him a hearing. The gas had been produced, was no longer a recoverable natural resource. AOGCC' s determination regarding the Hilcorp leak was squarely within its expertise and is more than reasonable, it is correct. Other Order 150 must be affirmed. P.2d 1223, 1228 (Alaska 1983), overruled on other grounds by Wien Air Alaska v. Bubbel, 723 P.2d 627, 631 n.4 (Alaska 1986) "Waste occurs with 'the owner of a possessory estate engages in unreasonable conduct that results in physical damage to the [property] and substantial diminution in the value of estates owned by others in the same [property]. "')(emphasis supplied). 13 20 AAC 25.228, Brief of Appellant, p. 3, fn. 4. 14 Appellant's Brief, pp. 1-2 (The source of the leak was gas "from an 8" line carrying fuel gas to Platform A ... ")(emphasis supplied); p. 3 n.4 (Downstream of the custody transfer meter, gas joins a ... "distribution system that brings the gas ... to its end users, whether homes, power generation plants, or, in this case, an 8" line that supplies fuel gas to Platform A's generators and turbines."); p. 23 ("Gas in transmission lines has been metered and severed from the lease.") 6 000087 Ill. French,s arguments are utterly irrelevant to the issue presented to the court. Lacking even a rudimentary grasp of what constitutes waste for oil and gas conservation purposes, French refuses to discuss, analyze or even acknowledge the basis for AOGCC' s denial of his request for a hearing -that the leak did not and could not constitute waste, and therefore the AOGCC lacked jurisdiction -and premises his entire brief on the artifice of his bald assertion that the gas leak is waste "ipso facto."15 The only support offered by French for his edict is AS 31.05.170(15)(H). French apparently read no further than the first few words. For gas escaping to the air to be waste, AS 31.05.170( 15)(H) explicitly requires it to be gas "from a well producing oil or gas .... "Apart from his puzzling reliance on a statute that underscores the validity of AOGCC's decision, French cites no authority from any oil and gas producing jurisdiction in America that has ever agreed with his fiat. He cites none because there is none. French's spurious arguments are addressed seriatim. French's entire first argument-that the waste of oil and gas in the state is prohibited -is addresseci in AOGCC's argument above. There is no dispute that waste is prohibited or that AOGCC has statewide jurisdiction. French's arguments are premised solely upon his own fallacious declaration equating "waste" with "wasted" and his unspoken, unacknowledged premise that even after gas has been produced and custody and ownership of the gas has transferred to the operator, the gas remains a natural resource. Nothing is cited in support of either proposition. Neither is true. As noted, the 15 Appellant's Brief, p. 26. 7 000088 custody transfer meter is the point at which the resource has been produced and ownership transferred to the operator. A waste determination requires a recoverable resource. Metered and severed gas is no longer a recoverable natural resource. French's arguments ignore what waste is, and require the court l) to declare gas and oil are forever natural resources, 2) to substantially modify AOGCC's enabling act to delete the language "necessary to carry out the purposes and intent of this chapter," and 3) to judicially extend AOGCC's authority well beyond what it was intended to be: regulation of drilling operations until the point where the gas is deemed produced.16 17 French's second argument is a ten page screed on the origins and scope of states' police powers, including that the police power overrides contract rights and that the police power survives the custody transfer and severance of produced gas. These arguments confuse a waste determination with the broad scope of any state's police 16 French's brief is often as significant for what it does not address as for what it does. French's first argument claims AOGCC construed its enabling act in a way never intended by the legislature. Like all his arguments, his claim is supported by nothing. The leak was discovered very early in the 2017 legislative session. As French notes, the leak garnered a great deal of publicity and public attention. AOGCC quickly made its determination that the leak was not waste. The 2017 legislature did not correct the "error" French claims in AOGCC's interpretation of its enabling act. Two successive legislative sessions have come and gone since. There has been no indication that the legislature believed AOGCC had incorrectly interpreted either waste or the scope of its jurisdiction. 17 At page 10, French veers into questioning whether and where metering and severance occurred, but asserts on the following page, "the location of the metering is not germane." French's concession that the leaking gas had been metered and severed (Appellant's Brief, pp. 1-2 (The source of the leak was gas "from an 8" line carrying fuel gas to Platform A ... ")(emphasis supplied); p. 3 n.4 (Downstream of the custody transfer meter, gas joins a ... "distribution system that brings the gas ... to its end users, whether homes, power generation plants, or, in this case, an 8" line that supplies fuel gas to Platform A's generators and turbines."); p. 23 ("Gas in transmission lines has been metered and severed from the lease.")) render his comments irrelevant and somewhat odd. 8 000089 powers and are irrelevant. As with all of French's arguments, they ignore the meaning of waste and the scope of AOGCC's enabling act. There is no question that the state has the police power to regulate gas in transmission lines. AOGCC has never intimated to the contrary. However, the authority to regulate does not convert the leak into waste. Likewise, AOGCC has never claimed police powers do not override contract rights. The significance of Other Order 150's statement that the gas had been purchased by Hilcorp has nothing to do with any contract; it simply underscores that the gas -whatever circumstances, terms and conditions attended its acquisition -had to have been metered and severed, facts French admits. Similarly, although the state's police power may survive metering and severing, that police power does not convert the leak to waste. French -who concedes the gas passed through a custody transfer meter 18 -professes confusion about the significance of metering and severance and faults AOGCC for not explaining what happened when the gas was metered and severed. 19 A more succinct explanation of the significance of what happened than the title of the metering -custody transfer -is difficult to imagine. Custody transfer means exactly that: the post-production transfer of exclusive custody and ownership of the gas to the operator. Severance also means exactly what it says, that 18 According to French "at some point" the gas goes through a custody transfer meter and it is "typically" at this point that the state or other landowner would claim its royalty share and levy any applicable production tax. Appellant's Brief, p. 3, n.4. The gas does not go through a meter "at some point," by law it gas goes through the custody transfer meter "before severance from the property or unit where produced." 20 AAC 25.228(a). That is the point at which the landowner receives whatever royalty or taxes it is due. The reason that is the location is because once severed from the property, the resource has been recovered and custody has been transferred entirely to the operator. 19 Appellant's Brief, p. 22. 9 000090 the gas has been produced and severed from the property. The combined effect of custody transfer and severance from the lease is that the resource has been produced, and in turn there is no longer a natural resource subject to a waste determination. The state's police power I authority -over pipelines, the contents of pipelines, people, land and water -does not alter that fact or convert the leaked gas into waste. French's final arguments are that losing gas to the atmosphere does not maximize resource recovery, that production was reduced due to the shut-in of Platform A while the leak was repaired, and that longer term production losses are attributable to the leak. As a preliminary matter, these arguments are irrelevant to the waste issue raised by French. Indeed, he specifically admits "the reduction in oil production is not defined as waste itself."2° Consequently his arguments in this regard are completely irrelevant to whether the AOGCC erred when it determined there was no basis upon which to make a waste determination. Equally problematic for French, his arguments in this regard are baseless, serve at best to demonstrate his lack of comprehension of the difference between maximum resource recovery and the daily rate of production. The only bases for his arguments are, yet again, his bald assertions that it is so.21 All French cites in support of his arguments is the drop in the barrel per day recovery after the gas transmission line was repaired. French does not understand the difference between maximum recovery (ultimate recovery over time) and the per day rate 20 Appellant's Brief, p. 29. 21 Appellant's Brief, p. 26 ("It is self-evident that losing gas to the atmosphere does not maximize resource recovery."); p. 29 ("Nevertheless the conclusion that there was oil production lost due to wasted gas is inescapable."). 10 000091 of production. Maximum recovery refers to the life of the field, pool or reservoir, not the daily rate of recovery. Put another way, to the extent it might even hypothetically be possible to determine the gas leak's impact on maximum recovery, such could only occur at the end of field life. French's arguments in this regard are little more than a last-gasp attempt to deceive the court into equating a drop in daily production with waste. CONCLUSION AOGCC' s determination that the Hilcorp gas leak did not constitute waste was made on a matter squarely within its expertise, and was more than reasonable, it was correct. French's arguments are utterly bereft of merit. Because AOGCC correctly determined the leak was not waste, it likewise correctly determined French had not alleged a matter within AOGCC's jurisdiction and denied his demand for a hearing. Other Order 150 must be affirmed. 11 000092 • • IN THE SUPERIOR COURT FOR THE STATE OF J!A~et THIRD JUDICIAL DISTRICT AT ANCHORA"'etfEOFALAslCA:~~L CouRts IRO OISTRtcr HOT J JS S. FRENCH, ) ,.. JUL I 5 2019 Appellant, ) -.. Clert Of th 11 v. ALASKA OIL AND GAS CONSERVATION COMMISSION, ) .... , ________ e r/a/ Co"rts ) -------Oft/Ju~ ) ) Agency Case: OTH-19-002 ) Appellee. ) ______________ _; Appeal Case: 3AN-19-6694CI APPEAL FROM THE ALASKA OIL AND GAS CONSERVATION COMMISSION APPELLANT'S BRIEF Hollis S. French 2640 Telequana Drive Anchorage, Alaska 99517 (907) 244-713 5 AK Bar No. 9606033 Filed on the day of 2019 Anchorage Superior Court Clerk of the Superior Court By Deputy Clerk 000093 • • TABLE OF CONTENTS TABLE OF CONTENTS ......................................................... . TABLE OF AUTHORITIES...................................................... 11 STATUTES PRINCIPALLY RELIED UPON............................. v JURISDICTIONAL STATEMENT............................................. 1 ISSUES PRESENTED FOR REVIEW.......................................... 1 STATEMENT OF THE CASE................................................... 1 STANDARD OF REVIEW....................................................... 6 ARGUMENT ....................................................................... 7 I. The waste of oil and gas in the state is prohibited... . . . . . . . . . . . . . . . . . . 7 II. The police power of the state applies to private sales of oil and gas and to both sides of the meter... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 A. The police power overrides private contract rights ......... . 18 B. The police power survives metering and severing .......... . 21 III. The primary purpose behind the prohibition against waste is to max1m1ze resource recovery............................................ 25 A. Losing gas to the atmosphere does not maximize resource recovery........................................................... 25 B. Oil production was immediately reduced by the gas leak in Cook Inlet. ................................................... . 27 C. Longer term production losses are attributable to the leak. 28 CONCLUSION............................................................ 30 000094 • • TABLE OF AUTHORITIES FEDERAL CASES Brown v. Maryland, 25 U.S. (12 Wheat.) 419 (1827) ----------------------15 License Cases, 46 U.S. (5 How.) 504 (1847)--------------------------------15, 17 New York v. Miln, 36 U.S. 102 (1837) ---------------------------------------16 Ohio Oil Company v. Indiana (No. 1), 177 U.S. 190 (1900) --------------23, 26 Union Dry Goods v. Georgia Public Service Corp., 248 U.S. 372 (1919) 18, 19 United States v. Alaska, 422 U.S. 184 (1975) -------------------------------11, 13 United States v. Lopez, 514 U.S. 549 (1995) --------------------------------16 ALASKA CASES Alaska Crude Corp. v. State, DNR, 261P.3d412 (Alaska 2011)--------8, 13 Alyeska Pipeline Service Co. v. State, 288 P.3d 736 (Alaska 2012)-----6 Cabana v. Kenai Peninsula Borough, 21 P.3d 833 (Alaska 2001)-----8 Exxon Corp. v. State, 40 P.3d 786 (Alaska 2001) -------------------------8 Shephard v. State Dept. of Fish and Game, 897 P.2d 33 (Alaska 1995) 8 State, DNR v. Greenpeace, 96 P.2d 1056 (Alaska 2000) -----------------8 Tesoro Alaska Petroleum v. Kenai Pipeline, 746 P.2d 896 (Alaska 1987) ------------------------------------------------------------------13 Union Oil Co. of Cal. v. Dept. of Revenue, 560 P.2d 21 (Alasla 1977) ------------------------------------------------------------------6, 14 ii 000095 • • CASES PROM OTHER JURISDICTIONS Bel Oil Co. v. Roland, 137 So. 308 (Louisiana 1962) ------------------3 Jamieson v. Indiana Natural Gas & Oil Company, 128 Indiana 555, 28 N.E. 76 (Indiana 1891) -------------------------------------------------23 STATUTES AS 31. 0 5. 02 7 ------------------------------------------------------------------4, 11, 14 AS 31.05 .030 -------------------------------------------------------------------7' 11 AS 31.05 .095 -------------------------------------------------------------------7,26 AS 31.07.170(15) -------------------------------------------------------------25 OTHER AUTHORITIES Alex DeMarban, Hi/corp Agrees To Temporarily Shut Down Oil Production To Fight Cook Inlet Gas Leak, March 25, 2017 ------------28 Dan Carpenter, Investigation Finds Hi/corp Gas Leak Poses Risks & Started Earlier Than First Reported, March 7, 2017 -----------------27 ConocoPhillips, Inc., Prudhoe Bay Unit Facility Information ---------25 Cathy Foerster, Written Testimony to the House Subcommittee on Energy and Mineral Resources, October 13, 201 7 -----------------------12 Forbes, #745 Jeffrey Hildebrand--------------------------------------------20 Harvest Midstream, Our Affilliates -----------------------------------------20 Norman J. Hyne, Nontechnical Guide to Petroleum Geology, Exploration, Drilling and Production 2nd Ed. (2001) -----------------------------------2, 23 Dan Joling, Alaska Underwater Gas Leak Continues, 2nd Group to Sue, March 1, 201 7 ------------------------------------------------------------------26 Linkedin, Hi/corp Company Profile----------------------------------------20 iii 000096 • • James Madison, The Federalist Paper No. 45 ----------------------------- Leslie Moses, The Constitutional, Legislative and Judicial Growth of Oil and Gas Conservation Statutes, 13 Miss. L.J. 353 (1941) ----------- Regulatory Commission of Alaska, Natural Gas Rates------------------- Bernard Schwartz, A History of the Supreme Court (Oxford University Press) 1993 ------------------------------------------------------------------- State of Alaska v. BP Exploration, Alaska, Trial Motion, 2009 WL 72 7 4134 ------------------------------------------------------------------------ State of Alaska, Department of Environmental Conservation, Hi/corp Natural Gas Leak From 8" Pipeline --------------------------------------- U.S. Energy Information Administration, Frequently Asked Questions H. Williams & C. Meyer, Oil and Gas Law, Volume 8 (2018)--------- Wikipedia, Prudhoe Bay Oil Spill----------------------------------------- Gordon S. Wood, The Creation of the American Republic 1776 -1787 ( 1 969) --------------------------------------------------------------------------- iv 15 17,24 25 16, 17 24 26 25 3 24 8 000097 • • STATUTES PRINCIPALLY RELIED UPON ALASKA STATUTE 31.05.027 The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States. The authority of the commission further applies to all land included in a voluntary cooperative or unit plan of development or operation entered into in accordance with AS 38.05.180(p ). ALASKA STATUTE 31.05.030(a) The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter. ALASKA STATUTE 31.05.095. The waste of oil and gas in the state is prohibited. ALASKA STATUTE 31.05.170(15) "waste" means, in addition to its ordinary meaning, "physical waste" and includes (A) the inefficient, excessive, or improper use of, or unnecessary dissipation of, reservoir energy; and the locating, spacing, drilling, equipping, operating or producing of any oil or gas well in a manner which results or tends to result in reducing the quantity of oil or gas to be recovered from a pool in this state under operations conducted in accordance with good oil field engineering practices; (B) the inefficient above-ground storage of oil; and the locating, spacing, drilling, equipping, operating or producing of an oil or gas well in a manner causing, or tending to cause, unnecessary or excessive surface loss or destruction of oil or gas; (C) producing oil or gas in a manner causing unnecessary water channeling or con mg; (D) the operation of an oil well with an inefficient gas-oil ratio; (E) the drowning with water of a pool or part of a pool capable of producing oil or gas, except insofar as and to the extent authorized by the commission; (F) underground waste; (G) the creation of unnecessary fire hazards; (H) the release, burning, or escape into the open air of gas, from a well producing oil or gas, except to the extent authorized by the commission; v 000098 • •• JURISDICTIONAL STATEMENT This is an appeal from a final administrative decision by the Alaska Oil and Gas Conservation Commission ("AOGCC"), designated as Other Order 150 and issued March 20, 2019. Appellant timely filed an application for reconsideration April 8, 2019, to which the AOGCC did not respond. The application for reconsideration was deemed denied ten days later, or April 18, 2019. This appeal was timely, filed on May 1, 2019. This Court has jurisdiction pursuant to AS 44.62.560(a); AS 22.10.020(d); and Ak. R. App. P. 601(b). ISSUES PRESENTED FOR REVIEW Were AOGCC's rulings regarding its jurisdiction contrary to the governing law. Specifically, did the agency err by ruling that: 1. It does not have jurisdiction over gas sold by a vendor; 2. It does not have jurisdiction over gas metered and severed from a property, and; 3. It does not have jurisdiction over gas Hilcorp purchased from Harvest Pipeline. STATEMENT OF THE CASE Appellant filed a petition for a hearing on a complaint of waste with the Alaska Oil and Gas Conservation Commission on February 28, 2019. The petition identified the source of the waste as gas that leaked to the atmosphere 1 000099 • • from an 8" line carrymg fud gas to Platform A in Cook Inlet, operated by Hilcorp. The petition noted that the gas leaked from the pipeline at a rate of approximately 300,000 standard cubic feet per day, and did so for approximately three months in the winter and spring of 2017. In denying appellant's petition for a hearing, AOGCC issued Other Order 150 in which the agency did not dispute the underlying facts asserted in the petition, but incorrectly stated that "( o ]nee oil or gas is metered and severed from the property, AOGCC's authority to make a waste determination regarding use of the oil or gas is at an end." Other Order 150 does not identify the location of the lease where the gas was "metered and severed," though it must have happened in Southcentral Alaska, as there is no gas import facility in the state and no pipeline carrying gas off the North Slope. Neither "metered" nor "severed" is defined in Alaska law. Gas metering generally refers to measurement. 1 Severance is defined as "separation of a mineral or royalty interest from other interests in the land by 1 "Gas volume is measured by a gas meter on the flowline. An orifice gas meter is commonly used. It measures the difference in gas pressures on gas flowing through an orifice (a round hole in a plate) on both sides of the orifice. The higher the flow rate, the greater the pressure drop across the orifice .... The gas velocity has been calibrated to gas volume by a meter prover. Meter provers are used for both gas and liquid meters. They compare the volume of fluid flowing through the accurately calibrated meter prover with the same volume of fluid flowing through the meter being tested ... [The gas meter] is used to determine gas payments to the operator." Norman J. Hyne, Nontechnical Guide to Petroleum Geology, Exploration, Drilling and Production 2'1d Ed., p. 373-74 (2001). 2 000100 • • grant or reservation. "2 Severed also can mean "the point at which natural resources are severed from the surface of the earth. "3 Other Order 150 did not explain the legal significance of metering and severing with respect to the . , agency's jurisdiction. The Order simply asserted that metering and severing puts an end to the agency's authority to act. This misconception of the agency's jurisdiction underlies two other rulings included in Other Order 150: (1) that the agency does not have jurisdiction over gas which has been sold by a vendor, and (2) that the agency does not have jurisdiction over gas sold by one company to another. In relevant part the order states that: AOGCC investigated the leak at the time it occurred. AOGCC initially believed the source of the gas was upstream 4 gas, i.e., gas which remained an AOGCC-regulated resource and had not been metered and severed from the property. Had that proven to be the case, the gas leak would have constituted waste and AOGCC would have instituted an enforcement action against Hilcorp. However, AOGCC's investigation ultimately revealed the leaking gas had been purchased by Hilcorp from a third-party provider, Harvest Pipeline (Harvest), and was being shipped back to Platform A. 2 H. Williams & C. Meyer, Oil and Gas Law, Volume 8, p. 960 (2018). 3 Bel Oil Corp. v. Roland, 137 So.2d 308, 310 (Louisiana 1962) 4 The terms 'upstream' and 'downstream' generally mean the same in the oil industry as they do in the rest of the world. They simply refer to a direction of flow. In this case the gas well would be the beginning of the flow. Steel pipe carries the gas away from the well --downstream. At some point the gas goes through a custody transfer meter, where it is measured, and it is typically at this point that the state would claim its royalty share of the production, and would levy its production tax, if any. Downstream of the meter the gas joins a interconnected distribution system that brings the gas either to an underground storage well, or to its end users, whether homes, power generation plants, or, in this case, an 8" line that supplies fuel gas to Platform A's generators and turbines. 3 000101 • • The primary purpose behind the prohibition against waste is to maximize resource recovery. Consequently, like every other state's oil and gas conservation regulatory authority, AOGCC regulates waste occurring upstream (occurring before oil or gas is metered and severed from the property) in connection with drilling, exploration, and production activities. Neither AOGCC nor any of its counterparts in other states has ever attempted to extend its juris- diction over waste to gas which has been sold by a vendor. Once oil or gas is metered and severed from the property, AOGCC's authority to make a waste determination is at an end. The gas involved in the Hilcorp leak had been sold by Harvest to Hilcorp. AOGCC does not have waste jurisdiction over gas Hilcorp purchased from Harvest. Absent jurisdiction, there is no basis for a hearing.5 Appellant timely filed for reconsideration of Other Order 150, pointing out that AS 31.05.027 6 gives the agency statewide jurisdiction over waste. Appellant pointed out that if the Legislature had wanted the agency's jurisdiction to terminate at the meter, it would have said so. Appellant summarized the gas leak this way: Here's what happened in Cook Inlet two winters ago: a gas line burst and spewed gas to the atmosphere for several months. That is waste. The lack of gas led to the platform shutting down, which resulted in a loss of production. That is bad. The waste led to a loss of production. 7 s Record at 0005. 6 "The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States." 7 Record at 0001. 4 000102 • • In seeking reconsideration, Appdlanl also alerted the AOGCC that: • An AOGCC commissioner had testified to Congress that "Alaska statutes give AOGCC responsibility to exert jurisdiction on all lands within the state of Alaska (except Denali National Park) and all state waters." • The Commissioner of the Department of Natural Resources determined that the leak of gas led to a reduction in Platform A's oil production. 8 • The loss in oil production from Platform A provided an additional basis, besides the waste of the gas, for AOGCC to exert jurisdiction, as it was in alignment with the commission's own position, in Other Order 150, that the "primary purpose behind the prohibition against waste is to maximize resource recovery." The commission did not respond to the application for reconsideration. 8 "The Middle Ground Shoal A Platform was temporarily shut down in 2017 due to a leaking fuel gas pipeline .... Production information demonstrates that current production has dropped below 975 BOPD because of the shutdown. Prior to this shutdown, production was approximately 1, 150 BOPD. Production returned at approximately 1,000 BOPD, and has since declined below 975 BOPD. Production in general from this platform has been in decline, but a decline curve analysis of oil production prior to the shutdown shows that production would not have declined to 1000 BOPD by the date that production returned. Importantly, the decline curve shows that without the 2017 shutdown production would currently be above 975 BOPD. "Record at 0003 (emphasis supplied). 5 000103 • • STANDARD OF REVIEW The issue before this court is one of statutory construction. "When reviewing an agency's interpretation of a statute, we apply the reasonable basis standard when the interpretation implicates agency expertise or a determination of fundamental policies within the scope of the agency's statutory functions. We apply the independent judgment standard when 'the agency's specialized knowledge and experience would not be particularly probative on the meaning of the statute. "'9 Deciding the limits of the agency's jurisdiction does not implicate the expertise of the AOGCC.10 Thus the independent judgment standard applies. 9 Alyeska Pipeline Service Co. v. State, 288 P.3d 736, 740 (Alaska 2012)(footnotes omitted). 10 "[W]here, as here, the issues to be resolved tum on statutory interpretation, the knowledge and expertise of the agency is not conclusive of the intent of the legislature in passing a statute. Statutory interpretation is within the scope of the court's special competency, and it is our duty to consider the statute independently." Union Oil Co. of Cal. v. Dept. of Revenue, 560 P.2d 21, 23 (Alaska 1977)(footnote omitted). 6 000104 • • ARGUMENT I. "THE WASTE OF OIL AND GAS IN THE STATE IS PROHIBITED."11 The words quoted above are the law. They are also the fundamental rule of petroleum conservation. AOGCC's rulings on its jurisdiction set out in Other Order 150 fail to take into account the sweeping and powerful nature of this basic conservation statute. The statute, which predates statehood and has not been amended since, declares with logical simplicity that there is no place in all of Alaska where it is lawful to waste oil or gas. The statute is a model of clarity. AOGCC's rulings on its jurisdiction would have the effect of amending the statute by replacing the words "in the state" with the words "upstream of the meter." The Legislature was certainly capable of drafting and passing such a narrow law, but it did not. AOGCC's rulings on its jurisdiction circumscribe its own powers, to the benefit of the oil industry, and to the detriment of the public il purports to serve. The comprehensive nature of the statute is in keeping with the vital place that natural resources, particularly oil and gas, occupy in the state. Our state's jurisprudence is replete with recognitions that there is a public interest in the 11 AS 31.05 .095. 7 000105 • • conservation uf Alaska's natural resources.12 Consider these examples, all from significant natural resource cases that came before the Alaska Supreme Court: "Natural resources are of prime importance to the public."13 "[T]he protection of state natural resources vindicates an important public . "14 mterest. "That the natural resources of the state belong to the state, which controls them as trustee for the people of the state, is explicit in the Alaska Constitution."15 The public's interest in conserving Alaska's vital natural resources can only be defended by state agencies. Or, as historian Gordon Wood put it, "Since the people obviously could not 'exercise the powers of government personal1y,' they must 'trust to agents. "'16 The AOGCC is the state agent charged with protecting the public's interest in oil and gas conservation. 17 Its failure to understand the proper limits of its own jurisdiction must be corrected, otherwise 12 Exxon Corp. v. State, 40 P.3d 786, 791 (Alaska 2001). 13 State, DNR v. Greenpeace, 96 P.2d 1056, 1062 (Alaska 2004). 14 Cabana v. Kenai Peninsula Borough, 21 P.3d 833, 837 fn.16 (Alaska 2001). 15 Shephard v. State Dept. of Fish and Game, 897 P.2d 33, 40 (Alaska 1995). 16 Gordon S. Wood, The Creation of the American Republic 1776-1787, p. 546 (1969). 17 "AOGCC is an 'independent quasi-judicial agency of the state' created by the Alaska Oil and Gas Conservation Act. AS 3 l.05.005(a). AOGCC, which has authority over all land subject to the state's police power, regulates to prevent waste, insure greater recovery, protect correlative rights and underground water, and further public health and safety. See AS 31.05.027; AS 31.05.095; AS 31.05.100; AS 31.05.110; AS 31.05.030." Alaska Crude Corp. v. State, Depart- ment of Natural Resources, 261 P.3d 412, 414 fn.3 (2011). 8 000106 • • the public's inten.:sl iu pn.:vt.:nling the waste of a precious natural resource will not be protected across vast parts of the state. The factual case before the court could not be better drafted to illustrate these principles. As appellant pointed out to the AOGCC on reconsideration: Here's what happened in Cook Inlet two winters ago: a gas line burst and spewed gas to the atmosphere for several months. That is waste. The lack of gas led to the platform shutting down, which resulted in a loss of production. That is bad. The waste led to a loss of production.18 Note that the AOGCC does not dispute any of the facts in the preceding sentences. The agency does not dispute that a large volume of natural gas spewed directly to the atmosphere. The agency does not dispute that oil production was reduced as a result. Other Order 150 concedes that, but for the metering and severing of the gas, "the gas leak would have constituted waste and AOGCC would have instituted an enforcement action against Hilcorp."19 This is an important concession, as it sharpens the legal question presented in this case. The agency's analysis essentially creates an absolute barrier to the exercise of AOGCC jurisdiction at the place where the natural gas was metered and severed from the lease where it was produced. In other words, Other Order 150 asserts that, downstream of the meter, AOGCC's authority is non-existent. 18 Record at 0001. 19 Record at 0005. 9 000107 • • Other Onlt:r 150 <lut:s nul specify where exactly the metering and severing it refers to took place. While the order declares that "AOGCC investigated the leak at the time it occurred,"20 the agency submitted no documentation of its own, none at all, to substantiate this aspect of the case when it filed its record as required by Appellate Rule 604(b )( 1 ). This is a point worth a moment's consideration. While it may be something of a relief for this court to not face a voluminous record, as is so often the case in administrative appeals, the lack of any documentation to flesh out the parameters of this so-called investigation reveals the lackluster effort put forth by the AOGCC in this case. Apparently, not a single piece of paper in the agency's files can be found that documents this investigation. No field notes from an agency inspector. No letter from AOGCC to Hilcorp demanding pertinent information. No public hearing on the matter. Appellant would be happy to allow the agency some extra time to supplement the record, if it has something to add, however unlikely that may be. Perhaps a future AOGCC hearing will flesh out the details of which well or wells on which lease supplied the gas to the 8" fuel gas line going to Platform A that burst sometime in the winter of 2017. As a practical matter, the gas must· have come from a well in Southcentral Alaska. There is no pipeline carrying gas away from the North Slope. There is no natural gas import facility in the state. Whatever the source of the gas, it came from an Alaskan well. Appellant points 20 Record at 0005. 10 000108 • • these facts oul only lo prevenl red herrings from cropping up. For the legal issues to be resolved in this case, however, the location of the metering is not germane. Again, there is no dispute that gas from an Alaskan well spewed from the broken 8" fuel gas line running to Platform A. And there is no dispute that the leak took place in Alaskan waters.21 There is no better legal answer to the agency's flawed position on its own jurisdiction than the text of the relevant statutes. The first statute states: The authority of the commission applies to all land in the state lawfully subject to its police powers, including land of the United States and land subject to the jurisdiction of the United States.22 And the second says this: The commission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter.23 If you wanted to establish a robust watchdog agency, these are the words you would choose. Imagine for a moment that a law enforcement agency was given these powers. What portion of the state would lie beyond its reach? 21 The dividing line between state and federal waters in this portion of the state runs along a line across Cook Inlet at Kalgin Island. All oil development infrastructure in Cook Inlet is north of the line. In a case involving a proposed oil lease sale in Kachemak Bay, which is south of Kalgin Island, the US Supreme Court noted that "[t]he upper, or inner portion, of the inlet is not in dispute, for that part is conceded to be inland waters subject to Alaska's sovereignty." United States v. Alaska, 422 U.S. 184, 185 (1975). 22 AS 31.05 .027 (emphasis added). 23 AS 3 l.05.030(a) (emphasis added). 11 000109 • • The narrow position the agency has adopted regarding its jurisdiction over a major leak of gas in Cook Inlet squarely conflicts with the plain language of both statutes. According to the agency, the authority of the commission does not apply to all land in the state; it only applies to land in the state that is upstream of the place where gas is metered. According to the agency, the commission does not have jurisdiction and authority over all persons and property, public and private; it only has that power upstream of the meter. Both conclusions are seriously incorrect. Moreover, the agency's position on its jurisdiction conflicts with sworn testimony it has given to Congress. Then-commissioner Cathy Foerster submitted testimony to encourage the federal government to allow states to assume more control over oil and gas development. She stated "Alaska statutes give AOGCC responsibility to exert jurisdiction on all lands within the state of Alaska (except Denali National Park) and all state waters."24 The agency's current position on its jurisdiction cannot be harmonized with Commissioner Foerster's sworn testimony. This is remarkable. The agency promised to Congress that it would assert jurisdiction on all lands within the state and on all state waters, without any qualification or limitation. Yet, according to Other Order 150, the agency does not have the duty or the obligation to exert jurisdiction on a gas line that runs through Cook Inlet. 24 Written testimony of Cathy Foerster to the House Committee on Natural Resources: Subcommittee on Energy and Mineral Resources, October 13, 2017. 12 000110 • • Remember these are state waters, waters the United States Supreme Court has specifically identified as "inland waters subject to Alaska's sovereignty."25 Holding strong cards, in the form of statutes and court decisions, and having boasted to Congress of its plenary powers, the agency's feeble response to this leak is difficult to understand. The position the agency has adopted in Other Order 150 regarding its jurisdiction is at odds with the plain language of the relevant law and a sworn statement it submitted to Congress. Additionally it is at odds with the Alaska Supreme Court's understanding of the agency's jurisdiction.26 The agency's position must be corrected by this court. The "goal of statutory construction is to give effect to the legislature's intent" and the l:ourl must do so using the common meaning of the words in the law, unless those words have acquired a peculiar meaning. 27 The Alaska Territorial legislature declared with great precision and economy that "the waste of oil and gas in the state is prohibited." Not one of those words is ambiguous or difficult to understand. The legislature has declared that the agency's authority 25 United States v. Alaska, 422 U.S. 184, 185 (1975). 26 "AOGCC ... has authority over all land subject to the state's police power." Alaska Crude Corp. v. State, Department of Natural Resources, 261P.3d412, 414 fn.3 (2011). 27 "The goal of statutory construction is to give effect to the legislature's intent, with due regard for the meaning the statutory language conveys to others. In this respect, we have repeatedly stated that unless words have acquired a peculiar meaning, by virtue of statutory definition or judicial construction, they are to be construed in accordance with their common usage." Tesoro Alaska Petroleum v. Kenai Pipeline, 746 P.2d 896, 905 (Alaska 1987)(intemal citation omitted). 13 000111 • • applies to "all land in lht: slale law fully subject to its police powers" and to "'all persons and property, public and private." Despite these sweeping words, the AOGCC has, without justification and without a statutory basis of support, taken the position that a major gas leak that went on for months in an oilfield just south of Anchorage, a gas leak that caused an oil production platform to shut down and to lose production, is beyond its power. The agency's position diminishes the value of Alaska's nonrenewable oil and gas resources, and does so by abdicating its responsibility to defend the public interest in preventing waste. The agency's interpretation of its own jurisdiction is not entitled to any deference from this court.28 This court must exercise its independent judgment. The court should heed the plain language of the statutes and in doing so should find that the agency may use its powers in this case. II. THE POLICE POWER OF THE STATE APPLIES TO PRIVATE SALES OF OIL AND GAS AND TO BOTH SIDES OF THE METER. The agency's interpretation of its jurisdiction is contrary to law for another independent reason. It does not account for the police powers of the state. AS 31.05.027 provides that "the authority of the commission applies to all land in the state lawfully subject to its police powers." It is not simple to define the exact boundary of a state's police powers, but as the following history demonstrates, they most certainly are sufficient to give the commission the authority to act in this case. 28 Union Oil Co. of Cal. v. Dept. of Revenue, 560 P.2d 21, 23 (Alaska 1977). 14 000112 • • Thal a slate would be armed with a general sovereign power was first posited during our nation's founding. The concept's origins can be traced to the theory of federalism embodied in the Constitution. James Madison, writing in the Federalist Papers, described the distinction between the powers of the proposed national government and those of the states this way: The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.29 The 'powers reserved to the several States' gradually became known as police powers. The term was first coined by Justice Marshall in Brown v. Marylanct3° in 1827. Twenty years later, in 184 7, the idea was articulated in this fashion: [W]hat are the police powers of a state? They are nothing more or less than the powers of government inherent in every sovereignty to the extent of its dominions. And whether a State passes a quarantine law, or a law to punish offenses, or to establish courts of justice, or requiring certain instruments to be recorded, or to regulate com- merce within its own limits, in every case it exercises the same power; that is to say, the power to govern men and things within the limits of its dominion. It is by virtue of this power that it legislates 31 29 James Madison, Federalist Paper No. 45. 30 25 U.S. (12 Wheat.) 419, 442-43 (1827). 31 License Cases, 46 U.S. (5 How.) 504, 583 (1847). 15 000113 • • Tht: License Cases, from which the above quote is taken, confirmed the power of the states to regulate the sale of liquor imported from abroad. The decision was in accord with a case from ten years earlier, New York v. Miln, 32 that upheld a New York law requiring shipmasters to submit to the city a list of passengers landing from abroad and to post security for them, which was attacked as violating the Commerce Clause. Miln and the License Cases were crucial to the development and articulation of the police power concept.33 While these cases from long ago may seem a bit dusty and obscure, Madison's concept of federalism, based on a national government of enumerated powers, and state governments armed with general police powers, retains its vitality in the modem day: We start with first principles. The Constitution creates a Federal Government of enumerated powers. See Art. I, § 8. As James Madison wrote: 'The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite.' The Constitution mandates this ... by withholding from Congress a plenary police power that would authorize enactment of every type of legislation. To uphold the Government's contentions here, we would have to pile inference upon inference in a manner that would convert congressional authority under the Commerce Clause to a general police power of the sort retained by the States. "34 32 36 U.S. 102 (1837). 33 See Bernard Schwartz, A History of the Supreme Court, p. 78-81, ( 1993 ). 34 United States v. Lopez, 514 US 549, 552 (1995). 16 000114 • • As the quoted material above from Lopez makes clear, the Court was concerned about granting to the federal government a "general police power of the sort retained by the States." By contrast, the Court takes for granted that state governments possess '"numerous and indefinite"' powers to order affairs within their borders. Indeed, it is the police power that undergirds each state's oil and gas conservation statutes. 35 Appellant makes these points to impress upon the court that the Territorial Legislature, acting in 1955, was guided by and referencing over one hundred years of jurisprudence when it declared that the "authority of the commission [ AOGCC] applies to all land in the state lawfully subject to its police powers." As shown, a state's police powers are "nothing more or less than the powers of government inherent in every sovereignty to the extent of its dominions."36 The police power essentially represents the limits of a state's sovereignty.37 This power, as will be demonstrated in the following sections, overwhelms the thin rationales for inaction adopted by the AOGCC in Other Order 150. 35 "The State's power to legislate for the protection of its natural resources .. .is based essentially upon its police power." Leslie Moses, The Constitutional, Legislative and Judicial Growth of Oil and Gas Conservation Statutes, 13 Miss. L.J. 353, 363 (1941). 36 License Cases, supra n.3 1. 37 See Schwartz, supra at n. 33, "In [this] conception, police powers and sovereign powers are the same." 17 000115 • • A. The police power overrides private contract rights. Other Order 150 claims that the AOGCC may not act in this case because its investigation revealed that "the leaking gas had been purchased by Hilcorp from a third-party provider, Harvest Pipeline (Harvest) and was being shipped back to Platform A."38 Without explaining why, the agency simply asserts that "AOGCC does not have waste jurisdiction over gas Hilcorp purchased from Harvest."39 The agency claims further that never in history has the agency or its counterparts in other states "ever attempted to extend its jurisdiction over waste to gas which has been sold by a vendor."40 Other Order 150 attempts to suggest that the private sale of gas defeats the state's power to regulate. The problem for the agency is that this line of reasoning was thoroughly rejected by the United States Supreme Court one hundred years ago. In Union Dry Goods v. Georgia Public Service Corp. 41 the Court was presented with a dispute over rates for electricity set by the Railroad Commission of Georgia, and a claim that the rates impaired a contract between the plaintiff and the defendant. The Court began its analysis by noting that electric light and power is a subject in which "the public has an interest which justifies rate regulation by the State in the exercise of its police power."42 The Court was just warming up, however, and it would go on to articulate a 38 Record at 0005. 39 Id. 4o Id. 41 248 U.S. 372 (1919). 42 d Ii . at 375. 18 000116 • • comprehensive series of legal principles governing what should occur when the right to contract conflicts with the public good: That private contract rights must yield to the public welfare, where the latter is appropriately declared and defined and the two conflict, has often been decided by this court. One whose rights, such as they are, are subject to state restriction, cannot remove them from the power of the State by making a contract around them. The contract will carry the infirmity of the subject matter. There is no absolute freedom to do as one wills or to contract as one chooses. The guaranty of liberty does not withdraw from legislative supervision that wide department of activity which consists in the making of contracts, or deny to government the power to provide restrictive safeguards. Liberty implies the absence of arbitrary restraint, not immunity from reasonable regulations and prohibitions imposed in the interests ofthe community. This court has so often affirmed the right of the State in the exercise of its police power to place reasonable restraints like that here involved, upon the freedom of contract that we need only refer to some of the cases in passing.43 The legal principles set forth above should end the debate on this point. The Union Dry Goods case obliterates the idea, as set out by the AOGCC in Other Order 150, that the sale of natural gas by one party to another puts that gas beyond the police power of the state. The AOGCC's elevation of Hilcorp's contract rights over the public interest in managing Alaska's invaluable oil and gas resources is embarrassing to the agency, or it should be. Whether the agency 43 Id. at 375-76 (internal citations omitted). 19 000117 • • is embarrassed or nul, lht: raliunalt:s it has offered should be rejected by this court. One more point. The agency stated that in the course of its investigation it learned that the gas that leaked from the fuel gas line running to Platform A had been purchased by Hilcorp from a company the order identifies as "Harvest Pipeline (Harvest)."44 The court should know a few more facts about this transaction. Hilcorp is privately owned. Its website claims that it is "the largest privately owned oil and natural gas company in the country."45 Its sole owner is reported to be a man named Jeff Hildebrand, 46 though, as with any private company, that is subject to change without notice to the public. Harvest, which identifies itself as "Harvest Midstream" on its website, 47 is a pipeline company. The relationship between Hilcorp and Harvest is simple: they both belong to the same person. Or as Harvest's website puts it: "Harvest's and Hilcorp's affiliation begins with common ownership."48 With these facts in mind, reconsider the assertion in Other Order 150 that the gas that leaked to the atmosphere from the 8" fuel gas line running towards 44 Record at 0005. 45 Linkedin, Hi/corp Company Profile, www.linkedin.com/company/hilcorp (last visited June 29, 2019). 46 Forbes, #745 Jeffrey Hildebrand, www.forbes.com/profile/jeffrey-hildebrand/ #197812b133b (last accessed June 30, 2019). 47 Harvest Midstream, Our Affilliates, www.harvestmidstream.com/our-affilliates (last accessed June 29, 2019). 48 Id. 20 000118 • • Platform A was gas that had been "purchased by Hilcorp from a third-party provider." The statement, we can now see, is very likely to be false. Harvest and Hilcorp share "common ownership." When Hilcorp and Harvest engage in commercial transactions, there is no third party to the deal. If the agency had conducted a hearing on this matter, these facts, which are not hard to ascertain, might have come to light. To reiterate: In Other Order 150 the AOGCC is of the view that the months' long leak of gas in Cook Inlet was rendered absolutely beyond the reach of the state's oil and gas conservation watchdog by having undergone a sale that passed it from one comer of Mr. Hildebrand's pocket to another comer. To allow this commercial arrangement to defeat the police power of the state would represent a triumph for corporatism and would render the public interest an orphan. This court should rule that the AOGCC's rationales on this point are flawed, inconsistent with the language of the statute and the legal precedents cited, and should be rejected. B. The police power survives metering and severing. Finally, Other Order 150 takes the position that "[ o ]nee oil or gas is metered and severed from the property, AOGCC's authority to make a waste determination regarding use of the oil or gas is at an end."49 The analysis here begins by noticing that the agency cites no statute to support its position. There is 49 Record at 000 5. 21 000119 • • none. Lacking a legal basis for its position, AOGCC should have at least supplied a rationale for the order. Other Order 150 does not attempt to supply a rationale, either. At this point it seems worth asking the question: What is so special about metering and severing? How does metering and severing bring the authority of the AOGCC, which the law says extends to "all land in the state lawfully subject to its police powers," to an end? As described previously, the natural gas in this case came up from an Alaskan reservoir through a wellhead located in Alaska. Steel pipe carried it away from the well. The metering and severing Other Order 150 refers to probably took place on the lease where the well sits. It certainly took place somewhere i11 Suullu.:enlral Alaska. Metering is accomplished for gas by passing it through a measuring device. Once metered for custody transfer purposes, the gas is then considered to be severed from the lease. The order does not explain what happened when the gas was metered and severed such that the jurisdiction of the AOGCC was totally defeated. While the mechanical layout of the metering shed where the metering took place might be of some interest, for the legal purposes of this case, however, the exact details are irrelevant. Unless the gas was metered immediately prior to its export from the state, which, since the shuttering ofKenai's LNG export facility in 2011, does not happen anywhere in Alaska, the gas was crossing Alaskan soil when it entered the meter, and was still crossing Alaskan soil when it exited the meter, and was 22 000120 • • headt:<l for somewhere in Alaska. It was subject to the police power of the state at all moments. Two cases should help guide the court on this point. The first is from the nineteenth century. When the state of Indiana passed a law in 1891 prohibiting gas pipelines from operating at a pressure greater than 300 pounds, it was attacked by on the grounds that the enforcement of the law by the state impaired interstate commerce.50 The case was analyzed by the US Supreme Court in the seminal case of Ohio Oil Company v. Indiana (No. I), 51 wherein the Court noted that the pipeline statute at issue in Jamieson was upheld on the grounds that "the dangerous nature of the product, its susceptibility to explosion and the consequent hazard to life and property which might arise from movement through pipes, made the act of transmitting it a fit su~ject for police regulation."52 The relevance of this old case to the Cook Inlet leak is that gas transmission lines are generally referred to as 'downstream. '53 Gas in transmission lines has been metered and severed from the lease. Thus, the AOGCC's claim in Other Order 150 that "[n]either AOGCC nor any of its counterparts in other states has ever attempted to extend its jurisdiction over waste to gas which has been sold by a vendor" should be viewed with skepticism, given that gas in transmission lines is 50 Jamieson v. Indiana Natural Gas & Oil Company, 128 Indiana 555 (1891). 51 177 U.S. 190 (1900). 52 Id. at 206. 53 See Hyne, supra at fu. 1, p. 543, defining 'upstream' as petroleum exploration, drilling and production, and 'downstream' as pertaining to transportation, refining and marketing. 23 000121 • • subject tu the;: police power of a state, and it is by and through the police power that conservation commissions do their job.s4 The other case is from the twenty-first century, and from Alaska. In March of 2006, a very large oil spill was discovered at Prudhoe Bay. The spill was traced to a hole in a pipeline operated by BP Exploration, Alaska.ss The pipeline was a 'transit line' carrying processed oil. BP faced significant legal consequences, which included a lawsuit filed by the State of Alaska. Two of the counts of the State's complaint made allegations of waste. BP moved the trial judge to stay the waste counts. The argument it made for doing so rested on its view that the "AOGCC ... has primary jurisdiction to investigate and determine whether waste of oil or gas occurred."s 6 The brief presents a concise summation of the agency's powers: The AOGCC, by statute and by operation of the leases between BPXA and the state, has primary jurisdiction to investigate and determine whether waste of oil or gas occurred. The AOGCC has comprehensive jurisdiction to regulate oil and gas conservation in general and to make determinations concerning waste in particular. The governing statute expressly directs the AOGCC to investigate waste. The AOGCC has adopted specific regulations prohibiting waste. It has plenary power to adjudicate issues of d . . d'd 57 waste an to require actions to a ress waste. 54 Moses, supra at fn. 35. 55 Wikipedia, Prudhoe Bay Oil Spill, en.wikipedia.org/wiki/Prudhoe_Bay _oil_ spill. 56 State of Alaska v. BP Exploration, Alaska, Trial Motion, 2009 WL 7274134 at 9. s7 Id. (footnotes omitted)(emphasis supplied). 24 000122 • • The BP spill l:ase is rdevant here for two reasons. First, the oil that spilJed had been metered for allocation purposes. 58 It had been severed from whatever specific Prudhoe Bay lease it had been produced from. It was downstream oil. Second, note that BP considers AOGCC's powers to prevent waste to be not only "plenary," but primary compared to those of the State Department of Law. While Appellant readily concedes that BP's view of AOGCC's jurisdiction is not dispositive, the court reasonably would conclude that its argument in this instance . . is persuasive. In sum, there is nothing in the metering and severing of oil and gas from the leases that renders it beyond the police power of the state, and that claim by the AOGCC as a basis for declining to exercise jurisdiction is fatally flawed. III. THE PRIMARY PURPOSE BEHIND THE PROHIBITION AGAINST WASTE IS TO MAXIMIZE RESOURCE RECOVERY. The heading above appears in Other Order 150. Appellant agrees with the agency that maximizing resource recovery is one of the purposes of the prohibition against waste. The Order does not explain, however, the application of the principle to the Cook Inlet gas leak. Appellant will now attempt to do so. 58 Prudhoe Bay Unit Facility Information, http://www.fairbanks pipeline company .com/pdf/CGF-CCP _Facility_ Description.pdf 25 000123 • • A. Losing gas to the atmosphere does not maximize resource recovery. Gas venting directly to the atmosphere is waste. 59 Ipso facto. While this is a rule of petroleum conservation today, in the early days of the petroleum industry, before the nature of oil reservoirs was understood, it was believed that allowing the gas from a reservoir to vent to atmosphere was a necessary first step to getting oil out of the ground. As reservoir engineering developed, however, the crucial place that gas holds in increasing oil production from a reservoir became clear. Many of the first petroleum conservation laws were directed at ending the wasteful practice of venting gas. Indeed, the statute at issue in Ohio Oil Company v. Indiana (No. 1)6° forbade the venting of gas from a well for longer than two days. The oil company argued that the state legislature had, "by making it unlawful to allow the gas to escape made it practically impossible to profitably extract the oil."61 The argument was rejected. The gas venting of times past was intentional. The gas leak here was an accident, hut the impact on resource recovery is the same. It is self·evident that losing gas to the atmosphere does not maximize resource recovery. The facts of this case bear out that rule. The gas leak in Cook Inlet was not small. The volume of gas that was emitted from the leaking fuel gas line running to Platform A was estimated at between 200,000 and 300,000 scf per 59 AS 31.05.l 70(15)(H). 60 177 U.S. 190 (1900). 61 Id. at 211. 26 000124 • • <lay. 67. The leak was first discovered on February 7, 2017, and was not repaired until a clamp was put on the line by divers on April 13, 2017.63 While it is not possible to know precisely how much gas was lost, given the uncertainty that surrounds exactly when the leak began,64 even a few days ofleaking at that rate is substantial. Consider that, as of 2014, the average home in Anchorage uses about 13 7 ccf of gas per month.65 A 'ccf equals 100 scf.66 Thus, even using the lower estimate of 200,000 scf of lost gas per day, enough gas was leaking every day to heat a home in Anchorage for over a year.67 The gas was lost permanently to the atmosphere. It was not recovered. It was wasted. The AOGCC exists to prevent waste. It had the authority to act in this case. IL should have. But it didn't. B. Oil production was immediately reduced by the gas leak in Cook Inlet. 62 Dan Joling, Alaska Underwater Gas Leak Continues, 2nd Group to Sue, March 1, 2017, www.cbc.ca/news/canada/north/alaska-gas-leak-cook-inlet-lawsuit- l .4005024 63 Hi/corp Natural Gas Leak From 8" Pipeline, http://dec.alaska.gov /spar/ppr/spill-information/response/2017 /04-hilcorp/ 64 Dan Carpenter, Investigation Finds Hi/corp Gas Leak Poses Risks & Started Earlier Than First Reported, March 7, 2017, www.ktuu.com/content/news/ Investigation-finds-Hilcorp-gas-leak-poses-risks--starter-earlier-than-first- reported-415636093 .html 65 Natural Gas Rates, Regulatory Commission of Alaska, http://rca.alaska.gov/ RCA W eh/Documents/ Reports/20 l 4Gas. pdf 66 Frequently Asked Questions, www.eia.gov/tools/faqs/faq.php?id=45&t=8 67 Each home uses 137 ccf per month. 137 times 100 equals 13,700 scf. 200,000 scf of lost gas per day divided by 13,700 (gas usage each month) equals 14.6 months. Appellant cautions the court that he is not an engineer. 27 000125 • • More detrimental to resource recovery was the etlect of the gas leak on oil production. Platform A is situated in what's known as the Middle Ground Shoal. 68 It is one of two remaining Middle Ground Shoal platforms still producing oil. Fixing the gas leak required Hilcorp to shut down oil production from the Middle Ground Shoal field. 69 Monthly production data from the AOGCC for the Middle Ground Shoal in 2017 shows the following: Month Barrels March 41,791 April 72 May 55 June 0 July 0 August 0 September 19,564 As the court can readily observe, shutting down the platforms reduced the oil production from them to zero for three months. The platforms were shut down because of the gas leak. The gas leak caused the reduction in oil barrels produced. In other words, resource recovery was impaired due to the wasted gas. 68 Record at 0003. 69 Alex DeMarban, Hi/corp Agrees To Temporarily Shut Down Oil Production To Fight Cook Inlet Gas Leak, March 25, 2017, www.adn.com/business- economy /energy /2017 /03/25/following-talks-with-govemor-about-cook-inlet-gas- leak-hilcorp-agrees-to-temporarily-shut-down-oi l-production/ 28 000126 • • The reduction in oil production should have prompted the AOGCC to assert jurisdiction in this case. C. Longer term production losses are attributable to the leak. Other production losses are attributable to the leak besides the production lost during the months listed above. Production from the field before the leak was about 1150 barrels of oil per day. 70 When production was returned however, it was about 150 barrels a day less. Production soon declined below 975 barrels of oil per day. Hilcorp, relying on production going below 975 barrels of oil a day, applied to the state for a reduction in the royalties it owed to the state, based upon a state law allowing the same. The royalty relief request was sent to the Department of Natural Resources. Then-Commissioner Andy Mack rejected the request, citing the leak as the reason for the reduction.71 These lost barrels do not represent a maximization of recovery. To be clear, the reduction in oil production is not defined as waste itself. Nevertheless the conclusion that there was oil production lost due to wasted gas is inescapable. Thus, by the terms of its own cardinal rule, the reduction in resource recovery ought to have spurred the AOGCC to action. But it did not move. 70 Record at 0003. 71 Record at 0003. 29 000127 • • CONCLUSION The agency's inaction in the face of the Cook Inlet gas leak is to the detriment of the public it serves. The agency is failing to protect the abiding public interest in Alaska's most valuable natural resource. Oil and gas built Alaska, and will sustain Alaska into the future, if the resource is wisely managed. There is a public interest in the conservation of natural resources. The public interest in the lost gas, a natural resource of the state, is considerable. One need only recall the critical place that natural resources occupy in Alaska, as set out by appellant on page eight of this brief, to see how this case must be decided. The court should reverse the decision below, rule that the AOGCC had, and indeed, still has, jurisdiction over this case, and require that AOGCC comply with the law enacted by the legislature defining its jurisdiction. DATED: July 15, 2019 fd~ Hollis S. French Alaska Bar No. 9606933 30 000128 • • IN THE SUPERIOR COURT FOR l'HJE STATE (}f, t\lLASKA TH][RD JUDICIAL DISTRICT AT ANC~~~~ TRIAL COURTs KA, THIRD DISJ'R1cr HOLLIS S. FRENCH, ) JUL 1 Appellant, ) C .5 2019 v. ALASKA OIL AND GAS CONSERVATION COMMISSION, ) '''"°''L ) By_ ure Trial COfJrta ) Agency Case: OTH-19-00Z-0 E!Put;v ) ) Appellee. ) _______________ ) Appeal Case: 3AN-19-6694CI CER.TllFICATE OF SERVICIE I certify that I caused the Appellant's Brief on Appeal to be served upon: 1. Thomas Ballantine State of Alaska, Department of Law Assistant Attorney General 1031 W. 4th Avenue Anchorage, AK 99501 By placing a true copy in First Class Mail to the address above. DATED: July 15, 2019 1d2cf-1 Hollis S. French '=-- Bar No. 9606933 000129 ) • • In the Superior Court at Anchorage Alaska Courtroom: 604 Judge: E. Aarseth Date: Tuesday, February 18, 2020 Case No: 3AN-19-06694CI Clerk: J. De La Vega Case Title: French, Hollis Type of Proceeding: Oral Argument Counsel Present: Vs. AOGCC Plaintiff: Pro Se-Present Defendant: Thomas Ballantine-Present Other Parties Present: Alex Demarbon with Anchorage Daily News-Present Court Orders: >-Court will take the issue under Advisement Summary of Proceedings: 12:10:14 PM On record Court identifies case and parties 12:10:37 PM COURT: Time set for oral argument Originally set for last week, we had a fire drill and all had to evacuate the building and never got to come back in Oral argument was rescheduled for today Mr. French -I have a demonstrative aid COURT: Mr. French is appealing a decision 12:12:11 PM Mr. French -What does it take to get a governmental agency to do its jo -Gas leak and a commission that doesn't want to do anything about it -Great big gas leak in cook inlet that went tor three months a few years ago -It is a state natural resource and a dangerous commodity -Leaking natural gas to the atmosphere is a bad thing to do -Wastes the gas, with respect to oil and gas it is against the loss -Territorial legislature said in 1955 -Status for a model of clarity, unamended since it was in law 65 years ago -AS3105.95 -Leaking gas straight to the atmosphere creates a hazard of an explosion -State agency armed with police power and law against was could exert jurisdiction -Alaska oil and gas -Legislature wrote commission has jurisdiction -Over all person and property -Authority applies to all laws of land -Hard to think of a place in Alaska that is not subject to the Alaska State troopers to make an arrest -Gas leak happened in AK, cook inlet -Know it is subject to Alaska's Sovereignty -Gas leak was wasteful then the ordinary meaning of the term 3AN-19-06694CI 2-18-20 Oral argument Page 1 of 4 000130 • • -Why won't this independent watch dog of an agency take action -Center on the idea of metering and severing -Gas metering refers to measurement through an Orpheus plate -Flow the gas through the pipe, can calculate a flow reading 12:17:35 PM -Done all over the world, known as metering -Agency declares metering and severing is out of their jurisdiction -Why does this end the agencies powers -Implied the gas had changed hands -Gas had been purchased by a third party provider -Facts were never established in any kind of hearing -Commission is armed with a law that says it has jurisdiction and authority on all persons and property public and private -Ownership of gas cannot be moved around ... 12:22:59 PM -Once it is meter and severed, there is no natural resource subject to waste -Created a legal barrier for the exercise of its powers COURT: Your appeal is limited in terms of the legal ruling made by the commission that it did not have jurisdiction Mr. French -They had the legal power to act -According to the agency this ring defeats the power to act -Agency has extreme and ill considered -The agency says they are powerless no matter how long lasting the leak is -They said it might as well have happened in Canada, that is how powerless they are -1 don't think the oil company would have the nerve to make the same argument as the state -BP argued the agency has plenty power to adjust waste -Does the agency have jurisdiction of this gas leak, yes -Moreover it is a far different to decline jurisdiction or exercise it -There is a public interest in the conservation of Alaska's natural resource -Appellate seeks an order to reverse the decision 12:27:47 PM Mr. Ballentine -Argument is .... of a Steve martin comedy -I can teach you to be a millionaire and never pay taxes -The jurisdiction he invoked was based on waste -He doesn't understand the concept on waste or custody transfer -It was transferred -At some point they are recovered -No significance to the contact -Passed through a custody transfer meter -Commission never said it didn't have police power -The leaks is not waste -Well drilling and production practices -The end of the ability of the commission to make a waste determination -People come here to make money ... -Can't be subject of a waste determination COURT: If a company contract this oil, what if the process affects the market and there is a Can't be a pipeline because it is not being captured 12:33:57 PM Mr. Ballentine -Making sure this is recovered -Not involved in royalty rates or taxes -Commission has no interest in anything else -Into the fourth legislative event 3AN-19-06694CI 2-18-20 Oral argument Page 2 of 4 000131 • -COURT: Custody transfer meter is having the right to .... Mr. Ballentine -We measure it and then it goes ... -Term waste is a term of art -Means resource that hasn't been recovered • -Once it is recovered it can be a lot of things but you cannot call it waste 12:37:41 PM Mr. French -true some states focuses their conversation efforts on the production of oil and gas -Alaska did no such thing >Reads Case Law COURT: Are they being inconsistent or done this differently in the past Legislature will create the laws and hand it off to a department, they will create their own interpretation As long as they don't go outside of the guide Legislature knows about it and hasn't said that they are wrong Mr. French Difficult to know what kind of conclusion comes from that COURT: Legislative created this and the commission takes the lead and doesn't what it wants to do Unless there is an inconsistency with the constitution which is not the argument here You are saying they are doing it wrong and telling the judicial branch to tell the executive branch you need to do more Mr. French -The state is saying they are powerless -The legislature made one law -Any agency that thinks they don't have the power is mistaken -It could be that the commission does not care about the leak -Is the agency powerless or will they be going beyond their powers to be heard on this complaint 12:45:07 PM Mr. Ballentine -Asked for a hearing on waste -We made the determination there was no waste -We would have to have waste to have a hearing COURT: You have to decide what the facts are And have you decided that it does not fit into the definition of waste you have I am not taking any facts Mr. Ballentine -Misrepresentations have been made COURT: Commission needs to determine whether or not has been waste Mr. Ballentine -He does not dispute the facts that there was a custody transfer -Commission has said waste has not occurred, not enough to have a hearing -Went through he meter, belongs to someone else -It is not waste 12:50:55 PM Mr. French -With regard to the a facts, there was no question there wasn't hearing -Agency would have submitted a record that conducted an investigation that said they tracked down every molecule -Agency needs to hold a hearing 12:52:22 PM 3AN-19-06694CI 2-18-20 Oral argument Page 3 of 4 000132 • COURT: Matter will be taken under advisement 12:52:33 PM Off record 3AN-19-06694CI 2-18-20 Oral argument • Page 4 of 4 000133 • • IN THE SUPERIOR COURT FOR THE STATE OF 4P.J'A THIRD JUDICIAL DISTRICT AT ANCHORAGB<'o \~~-:;.(\ >;> ~ "'?, (~\\) HOLLIS S. FRENCH, ) ='-'t'7f ~~ "?Uf-9 "'~~' Appellant, ) op < · ~,,,,, ?"1 v. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee. ) ~ cP r/) ''Q @ -~ '<:>,,' <, ) .... ;,_ ~~ .,._i,.-;f} ... ~ v "'p iS'l' ) Agency Case: Tit.·a_9-002 1;.:~ ) ~ ~ <fi, ) -~ '"'·~· ) ~~ _______________ __, Appeal Case: 3AN-19-6694 CERTIFICATE OF SERVICE I certify that on this date a true and correct copy of Appellant's Reply was served via U.S. Mail on the following: Tab Ballantine State of Alaska, Department of Law Assistant Attorney General 1031W.4th Avenue, Suite 200 Anchorage, AK 99501 DATED: November 20, 2019 Hollis S. French Bar No. 9606933 000134 I ~ ·~ i·/· .. T~ UF t~Lr.s~·: .. , IN THE SUPERIOR COURT FOR THE STATE OF ALASKAi ;-;:i\l.J UIS-i f\IC i' THIRD JUDICIAL DISTRICT AT ANCHORAGE 2019 NOV -5 AM 10: on Hollis S. French, Appellant, v. ) ) ) ) [)'(: ___ , ________ ·--- D[r1UTY (:i · :. ) Agency Case: OTH-19-002 Alaska Oil and Gas Conservation Commission, ) ) Appellee. ) ________________ ) Appeal Case: 3AN-19-6694CI NOTICE OF ROUTINE EXTENSION OF TIME Pursuant to Rule of Appellate Procedure 503.S(b), Appellant gives notice of a routine extension of time for the filing of the reply brief in this case. Appellee's brief was filed October 21, 2019. Allowing one day for service, and adding twenty days to that would make the original due date for the reply brief November 11, 2019. Appellant seeks a fifteen day extension, making the new due date for the reply brief November 26, 2019. Hollis S. French Bar No. 9606933 I certify that I caused this notice to be served upon: 1. Thomas Ballantine State of Alaska; Department of Law Assistant Attorney General 1031 W. 4th Avenue, Suite 200 Anchorage, AK 99501 000135 By placing a true copy in First Class Mail to the address above. DATED: November 2, 2019 Hollis S. French Bar No. 9606933 000136 • NOTICE OF FILE PREPARATION AND DEL.IVERY OF RECORD Case Caption: Kelly Tshibaka v. Retired Public Employees of Alaska Trial Court Case No.: 3AN-l6-04537CI ~~~~~~-------- App e 11 ate Court Case No.: =-S-'""'1~7~53*~"1-1.,..__ ______ _ Th i II e o owinq 1 ems are enc ose d II d or e ettronica 1y transmitte : Enclosed Electronic Items (#of Vol./ Env.) (# of Paqes) !Zl Trial Court Files 3 IZI Confidential Documents -Ex-zos I 1 0 Sealed Documents 0 Transcripts I I Aqencv Record 0 Supplement(s) ~ Exhibit(s): deft exhibits 2000-2050 I pltff 3 exhibits 1000-1030 I I D Pagination (Comoleted bv ACRO) to to to to to to to ---- to to All documentary exhibits in this case are to be sent to the Appellate Court Records Office. All envelopes should be properly marked. 09/26/2019 Date . ' ' Trial Court Clerk Receiptpt~~~~s is acknowledged, and any exception to the items has been noted. 18 Pom Date SEP 26 2619 . Ap ellate Court RecordS:efflte TRANSCRIPT DIVISION Items fo~~rds Management Services on: -------------- The pagination of the trial court file has been completed with page numbers noted. Copies distributed to the parties of record by: 0 Email 0 ZendTo 0 C.D. Date Appellate Court Records Office D The original trial court record is being retained for storage ih RMS {except exhibits or sealed envelopes). 0 Receipt of the enclosure(s) is acknowledged. Date Appellate Court Deputy Clerk AP·<i2D (t:l/19) N·:JtKe ()i F1h~ Prep<H<it1on And DciiVf.'ty Of P.0mrc! 000137 • ,.:>.)I IN THE SUPERIOR COURT FOR THE STATE OF ALAS~," THIRD JUDICIAL DISTRICT AT ANCHORAGE/.:, '"'/-:,::i . v ·}•.,, /~ .. I. I/ . ~ .. o,. u Hollis S. French, Appellant, v. Alaska Oil and Gas Conservation Commission, Appellee. ) ) ) ) ) ) ) ) ) ) ) I .. '· ~~~~~~~~~~~~~~) Case No. 3AN-19-06694 CI CERTIFICATE OF SERVICE l certify that on this date true and correct copies of the Notice of Refiling of Appellee's Brief with Corrected Case Number, Appellee's Brief and this Certificate of Service were served via U.S. Mail and Email on the following: Hollis French 2640 Telequana Drive Anchorage, AK 99517 hsfrench@gmail.com Leilani J. Tufaga Law Office Assistant II 000138 IN THE SUPERIOR COURT FOR THE STAT~;.Qf ALASKA THIRD JUDICIAL DISTRICT AT ANCHCJAAGE r ~ / < ~·1 Hollis S. French, Appellant, V. Alaska Oil and Gas Conservation Commission, Appellee. ) ) ) ) ) ) ) ) ) ) ) ' ( :"~ . v P. /' I '"·c,. . , . v: Os ~~~~~~~~~-) Case No. 3AN-19-06694 Cl NOTICE OF REFILING OF APPELLEE'S BRIEF WITH CORRECTED CASE NUMBER Appellee Alaska Oil and Gas Conservation Commission (AOGCC) hereby notifies the court and the appellant of the refiling of AOGCC's brief in this matter. Appellant Hollis S. French (French) has two superior court appeals pending against AOGCC. On October 21, 2019 AOGCC filed and served on French its Appellee's Brief in this matter. However, the undersigned failed to notice the cover page of the brief and Lhe cerlilicale of service had the case number of French's other appeal. This refiling corrects that error. AOGCC regrets the oversight. DATED October 23, 2019. Thomas A. Ballantine .•... Senior Assistant Attorney General Alaska Bar No. 8806122 000139 • • s (; T ::-I~:;~:..-:,:-°/-<., ' ' ' IN THE SUPERIOR COURT FOR THE STATE OF ALASKAi .YIF:o Di's:rihi_:.'/' TIDRD JUDICIAL DISTRICT AT ANCHORAGE 2019SEP 26 ~H IO: I! Hollis S. French, Appellant, v. Alaska Oil and Gas Conservation Commission, ) ) ) ) ) ) ) Appellee. ) _______________ ) Appeal Case: 3AN-19-6694CI NON-OPPOSITION TO MOTION TO ACCEPT LA TE-FILED MOTION FOR NON-ROUTINE EXTENSION OF TIME AND NON-OPPOSITION TO MOTION FOR A NON-ROUTINE EXTENSION OF TIME Appellant does not oppose Appellee's motion to accept a late-filed motion for a non-routine extension of time. Neither does Appellant oppose Appellee's underlying late-filed motion for a non-routine extension of thirty days' time. Hollis S. French Bar No. 9606933 I certify that I caused this document to be served upon: 1. Thomas Ballantine State of Alaska, Department of Law Assistant Attorney General 1031 W. 4th Avenue, Suite 200 Anchorage, AK 99501 000140 #' • • By placing a true copy in First Class Mail to the address above. DATED: September 23, 2019 Hollis S. French Bar No. 9606933 000141 • , IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGfo 19 SEP I 9 HOLLIS S. FRENCH, Appellant, v. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee. ) ) ) ) ) ) ) ) ) ) ~~~~~~~~~~~~~~~> Case No. 3AN-l 9-06694 CI 11-l-\ CERTIFICATE OF SERVICE~~ PM 3: 51 I certify that on this date true and correct copies of the Motion to Accept Late- Filed Motion for Non-Routine Extension of Time, Late-Filed Motion for Non- Routine Thirty Day Extension of Time, !Proposed) Order Granting Motion to Accept Late-Filed Motion for Non-Routine Extension of Time, !Proposed] Order Granting Late-Filed Motion for Non-Routine Thirty Day Extension of Time, and this Certificate of Service were served via U.S. Mail and e-mail on the following: Hollis S. French 2640 Telequana Drive Anchorage, AK 99 5 I 7 hsfrench@gmaiI.com Leilani J. Tufaga Law Office Assistant II 000142 . :····. -·'•I'' IN THE SUPERIOR COURT FOR THE STATE OF ALASKA ,,-.: THIRD JUDICIAL DISTRICT AT ANCHORAG~O/g SEP / g PM 3: SI Hollis S. French, Appellant, v. Alaska Oil and Gas Conservation Commission, Appellee. ) ) ) ) ) ) ) ) ) ) ) ~~~~~~~~~-) Case No. 3AN-l 9-06694 Cl MOTION TO ACCEPT LATE-FILED MOTION FOR NON-ROUTINE EXTENSION OF TIME t:, Appellee Alaska Oil and Gas Conservation Commission (AOGCC), by and through counsel, hereby moves this court to accept its late-filed motion for a non- routine extension of time until October 2 I, 2019 in which to file its brief in this matter. As grounds for this motion, AOGCC states as follows: 1. This an administrative appeal filed by Hollis S. French (French) of Other Order 150 entered by AOGCC on March 20, 2019. This appeal involves the actions of Hilcorp (Hilcorp appeal). 2. At approximately the same time, French filed an administrative appeal of Other Order 151, also entered by AOGCC on March 20, 2019. That appeal is 3AN-l 9- 0653 1 CI and involves the actions of British Petroleum Exploration Alaska, Inc. (BPXA appeal). 000143 3. Because of different dates of service, AOGCC's brief in the BPXA appeal of Other Order 151 was originally due August 12, 2019, one week before the August 19, 2019 due date for its brief in this matter, the Hilcorp appeal involving Other Order 150. 4. Due to an error at the Department of Law, the case numbers were transposed in the tracking system, i.e., each appeal was given the other's superior court number. 5. AOGCC filed notices of routine thirty day extensions of time in both appeals. However, because of the error in the case number tracking system, AOGCC effectively noticed a routine extension one week less in this matter than it was entitled to under Rule 503.5(b). As a result of this error, AOGCC calendared September 18, 2019 as the due date for its brief in this case. 6. AOGCC filed its brief in the BPXA appeal on September 11, 2019. The following day, AOGCC realized the numbering error in the tracking system and refiled its BPXA brief in case number 3AN-l 9..:0653 l CI. The numbering error has been rectified. For the reasons set forth above, AOGCC respectfully requests this court grant its motion to accept late-filed motion for non-routine extension of time. DATED: September 18, 2019. Hollis S. French v. AOGCC Motion to Accept Late-Filed Motion for Non-Routine Extension of Time KEVIN G. CL').R.KSON ATTORNEfGENERAL By: ()~a f;v·,~-1------ Thomas A. Ballantine · Senior Assistant Attorney General Alaska Bar No. 8806122 Court Case No. 3AN-I 9-06694 Cl Page 2of2 000144 IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE HOLLIS S. FRENCH, Appellant, V. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee. ) ) ) ) ) ) ) ) ) ) ) ) Case No. 3AN-l 9-06694 CI ~~~~~~~~~~~~~~~ LATE-FILED MOTION FOR NON-ROUTINE THIRTY DAY EXTENSION OF TIME-ltl-\ Pursuant to Rule 503.5(c)(l), Ak.R.App.Proc., Appellee Alaska Oil and Gas Conservation Commission (AOGCC), by and through counsel, hereby moves for a thirty day extension of time until October 21, 2019 in which to file its brief in this matter. As grounds for this motion, AOGCC states as follows: 1. This matter -3AN-l 9-06694 CI -is an administrative appeal filed by Hollis S. French (French) of Other Order 150 entered by AOGCC on March 20, 2019. This appeal involves Hilcorp Alaska, LLC (Hilcorp appeal). 2. At approximately the same time, French filed an administrative appeal of Other Order 151, also entered by AOGCC on March 20, 2019. That appeal is 3AN-l 9- 06531 CI and involves British Petroleum Exploration Alaska, Inc. (BPXA appeal). 000145 3. Because of different dates of service, AOGCC's brief in the BPXA appeal of Other Order 151 was originally due August 12, 2019, one week before the August 19, 2019 due date for its brief in this matter, the Hilcorp appeal involving Other Order 150. 4. Due to an error at the Department of Law, the case numbers were transposed in the tracking system, i.e., each appeal was given the other's superior court number. 5. AOGCC filed notices of routine thirty day extensions of time in both appeals. However, because of the error in the case number tracking system, AOGCC effectively noticed an extension of one week less in this matter than it was entitled to under Rule 503 .5(b ). As a result of this error, AOGCC calendared September 1 8, 20 I 9 as the due date for its brief in this case. 6. AOGCC filed its brief in the BPXA appeal on September 11, 2019. The following day, AOGCC realized the numbering error in the tracking system and refiled its BPXA brief in case number 3AN-l 9-0653 l CI. The numbering error has been rectified. 7. Although under Rule 503.5(b) AOGCC would have been entitled to a routine extension of time until September 18, 2019, because of the error it only sought until September 11, 2019. As a result, the motion for non-routine extension of time is technically late-filed. Hollis S. French v. AOGCC Late-Filed Motion for Non-Routine Thirty-Day Extension of Time Court Case No. 3AN-I 9-06694 CJ Page 2of3 000146 8. AOGCC is seeking thirty days from September 18, 2019. Because October 18, 2019 is a state holiday, the brief would be due the following Monday, October 21, 2019. 9. This extension is necessitate by the undersigned's drafting of the brief in the aforementioned BPXA appeal, unforeseen work arising from AOGCC's recent enactment of regulations increasing the bonding amounts required for wells, problems arising from a matter involving an application for pool rules by BlueCrest and confidential matters. 10. This motion is filed in good faith and not filed for purposes of harassment or delay. DATED: September 18, 2019. Hollis S. French v. AOGCC Late-Filed Motion for Non-Routine Thirty-Day Extension of Time KEVIN G. CLARKSON ATTO~/ENE By: if ivy a Thomas A. Ballantine Senior Assistant Attorney General Alaska Bar No. 8806122 Court Case No. 3AN-l 9-06694 CI Page 3of3 000147 r~! :_-r, ~;~,.:\ ~,p~~ >:_r. :::\/\ IN THE SUPERIOR COURT FOR THE STATE OF ALASKA ''· :,:.; t,,::: 1 ,: ;;; THIRD JUDICIAL DISTRICT AT ANCHORAGE ~.~·;s s:~:[) I/ t'f.,· '). l ,.... - ' I .J· ~0 HOLLIS FRENCH, Appellant, v. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee, ,''. .. -) --·-·'·; c . .:-! ::::: i:li,~L CCUiU:.:, ) !3 y-:::-::-::----- ) DE.?Ury CLEllK-- ) ) ) ) ) ) ) ) Appeal Case No. 3AN-l 9-06694 CI ~~~~~~~~~) APPEAL FROM THE ALASKA OIL AND GAS CONSERVATION COMMISSION Filed in the Superior Court of the State of Alaska on September_, 2019 By: Deputy Clerk APPELLEE'S BRIEF I\\ KEVIN G. CLARKSON A,,,T?NE GENE (f ~ t2 ~~-+---. Thomas A. Ballantine (8806122) Senior Assistant Attorney General Department of Law 1031 West Fourth Avenue, Suite 200 Anchorage, AK 99501 (907) 269-5255 000148 TABLE OF CONTENTS TABLE OF AUTHORITIES .............................................................................................. ii AUTHORITIES PRINCIPALLY RELIED UPON ........................................................... iii JURISDICTIONAL STATEMENT .................................................................................... 1 ISSUES PRESENTED FOR REVIEW .............................................................................. 1 ST A TEMENT OF THE CASE ........................................................................................... 2 1. Sum1nary ....................................................................................................... 2 2. Facts .............................................................................................................. 3 STANDARDS OF REVIEW .............................................................................................. 6 ARGUMENT ...................................................................................................................... 7 A. The reasonable basis standard of review applies .......................................... 7 B. The language of AS 3 l .05.060(a) is directory, not mandatory ..................... 8 C. French's analysis is contrary to law, contradicted by the record and deeply flawed .......................................................................................................... 12 CONCLUSION ................................................................................................................. 15 000149 ) TABLE OF AUTHORITIES Cases Alyeska Pipeline Serv. Co. v. State, 288 P.3d 736, 740 (Alaska 2012) ......................................................................... 6, 7 City of Yakutat v. Ryman, 654 P.2d 785, 789-91 (Alaska 1982) ....................................................................... 9 Copper River Sch. Dist. v. State, 702 P.2d 625, 627 (Alaska 1985) ............................................................................. 9 Davis Wright Tremaine LLP v. State, Dept. of Adm/n., 324 P.3d 293, 299 (Alaska 2014) ......................................................................... 6, 7 Jn re Reinstatement of Wiederholt, 24 P.3d 1219, 1233 (Alaska 2001) ........................................................................... 9 Marathon Oil Co. v. State, Dept. of Nat. Res., Div. Oil & Gas, 254 P.3d 1078, 1082 (Alaska 2011) ..................................................................... 6, 7 South Anchorage Concerned Coalition, Inc. v. Municipality of Anchorage, 172 P.3d 768, 771-72 (Alaska 2007) ....................................................................... 9 State, Dep 't of Commerce & Econ. Dev., Div. of Ins. v. Schnell, 8 P .3d 3 51, 3 5 7 (Alaska 2000) ................................................................................. 9 Tesoro Alaska Petroleum Co. v. Kenai Pipe line Co., 746 P.2d 896, 903 (Alaska 1987) ............................................................................. 7 Alaska Statutes AS 22.10.020( d) .................................................................................................................. 1 AS 3 l .05 .060 .............................................................................................................. passim AS 3 l .05. l 50(d) ............................................................................................ ; ................... 11 AS 44.62.330 -44.62.630 ................................................................................................... l AS 44. 6 2. 5 60( a) . .. . . . . . .. .. .. . .. . . . .. . .. . . . . .. . . . .. . . . . . . . . . .. . . . . . .. . . .. .. . . . . .. . .. . . . . . . .. . . . . .. . . . . . . . .. . . . . . . .. . . . .. . . .. . . . . . 1 Alaska Court Rules Ak.R.App.P. 60 l (b ) ............................................................................................................. 1 11 000150 AUTHORITIES PRINCIPALLY RELIED UPON Alaska Statutes: AS 31.05.060: Action by Commission. (a) The commission may act upon its own motion, or upon the petition of an interested person. On the filing of a petition concerning a matter within the jurisdiction of the commission under this chapter, the commission shall promptly fix a date for a hearing, and shall cause notice of the hearing to be given. The hearing shall be held without undue delay after the filing of the petition. The commission shall enter its order within 30 days after the hearing. (b) Except as provided in this subsection, any action by the commission under this chapter that has statewide or general application shall be performed in accordance with AS 44.62 (Administrative Procedure Act). Any action by the commission under this chapter that has application to a single well or single field need not comply with the provisions of AS 44.62.330 -44.62.630, but shall be performed in accordance with regulations of the commission designed to afford persons affected by the action notice and an opportunity to be heard. (c) Notwithstanding the requirements of (a) and (b) of this section that relate to fixing a date for a hearing and causing notice of the hearing to be given, for an action under this chapter that involves the exploration for or development of nonconventional gas and that has application to a single well or a single field, upon the request of a lessee or operator, the commission may, where operations might be unduly delayed, approve a variance from the commission's regulations that apply to the well or field without providing notice and opportunity to be heard. In the exercise of its authority to issue the variance, (1) the commission may approve the variance if (A) the approval provides at least an equally effective means of accomplishing the requirement set out in the commission's regulation; or (B) the commission determines that the request is more appropriate to the proposed operation than compliance with the requirement of the regulation; and (2) the terms of the approval of the variance may include exempting the lessee or operator from a requirement of a regulation if the commission determines that the requirement is not necessary or not suited to the well or field taking into consideration (A) the nature of the operation involved; (B) the characteristics of the well or field for which the variance is sought; and (C) the reasonably anticipated risks of the exemption from the requirement to human safety and the environment. (d) The provisions of (c) of this section do not apply to authorize approval of a variance from the commission's regulations that relate to underground injection. ll1 000151 Alaska Rules: Ak.R.App.P. 601(b): Scope of Part Six. (b) An appeal may be taken to the superior court from a final judgment entered by the district court, in the circumstances specified in AS 22.15.240, or from a final decision of an administrative agency, except that appeals from decisions of the Alaska Workers' Compensation Appeals Commission shall be taken to the supreme court under AS 23.30.129 and are governed by parts Two and Five of these rules. IV 000152 • JURISDICTIONAL STATEMENT Hollis S. French (French) appeals the entry of Other Order 151 by the Alaska Oil and Gas Conservation Commission (AOGCC) on March 20, 2019. French had requested a hearing on "waste" he claims occurred when gas escaped as a result of the well failure at the OS 02-038 well (OS 02-038) in April, 2017. OS 02-038 is operated by British Petroleum Exploration Alaska Inc. (BPXA). Any waste assessment requires a determination of causation. AOGCC denied French's request for a hearing because AOGCC is still investigating the cause of the well failure. Other Order 151 is a final administrative decision, but does not dispose of the substantive issue raised, i.e., whether waste occurred during the April, 2017 OS 02-038 failure. This court has jurisdiction pursuant to AS 22.10.020(d) and Ak.R.App.P. 601(b).1 ISSUES PRESENTED FOR REVIEW 1. Whether the requirement of AS 31.05.060(a) that AOGCC hold a hearing is directory or mandatory. 2. Whether AOGCC, a regulatory enforcement agency, can be required to hold a hearing on a matter under investigation prior to the completion of its investigation. 1 French claims AS 44.62.560(a) as a basis for the court's jurisdiction. The section of the AOGCC's enabling act relied upon by French to demand a hearing, AS 31.05.060, expressly exempts AOGCC from 44.62.560(a). AS 31.05.060(b)("Any action by the commission ... that has application to a single well or a single field need not comply with the provisions of AS 44.62.330-44.62.630 ... "). In addition, AS 44.62.560(a) applies only to the boards, agencies and commissions listed in AS 44.62.330(a)(l)-(45). AOGCC is not one of the enumerated agencies. 000153 STATEMENT OF THE CASE 1. Summary. In April, 2017, BPXA experienced a sudden failure on DS 02-03B. After conferring with BPXA, AOGCC took no further enforcement action. French was an AOGCC commissioner at the time. Approximately 18 months later, BPXA experienced an identical failure on DS 02-02A. Because the failures were identical, AOGCC convened a hearing on both of the wells to determine what was causing the failures. After the hearing, on February 28, 2019, AOGCC entered Other Order 149. 2 Other Order 149 determined that BPXA's modeling was inadequate and that BPXA's understanding of the failures was incomplete. BPXA was ordered to retrieve parts of at least two wells and to provide additional information to AOGCC. The retrievals were ordered to be completed by the end of 2019. AOGCC also rescinded certain previously- granted approvals until such time as it had reviewed the information BPXA was to provide. The same date Other Order 149 entered, French filed a request for a hearing on "waste" he claims occurred as a result of the DS 02-03B failure. Because AOGCC's investigation into the failures has not been completed, AOGCC denied French's request. This appeal ensued. 2 Once entered, AOGCC's Orders are available to the public on its website. Other Order 149 is found at http://aogweb.state.ak.us/ogc/orders/oo/data/otherl49.pdf. French has cited and relied upon Other Order 149 in his brief. Brief of Appellant, p. 7. AOGCC has no objection to the court's consideration of the matters set forth in Other Order 149. 2 000154 2. Facts. In April, 2017, BPXA experienced a sudden failure on DS 02-038.3 The well head rose abruptly, impacted the well house, and permanently damaged the surface casing and flow tree assembly.4 DS 02-03B was in production when it failed.5 The failure resulted in a release of well bore fluids at the surface.6 Shortly after the DS 02-03B failure, BPXA conducted an investigation into its cause and what could be done to prevent additional failures.7 BPXA concluded the sudden wellhead rise was caused by permafrost subsidence loading effects on the surface casing string and that the potential for such failures was limited to wells with DS 02- 03B's 3-casing-string design and a casing shoe set in the permafrost.8 BPXA further concluded that 3 string wells which were shut in were less likely to fail.9 In December, 2018, BPXA's DS 02-02A well (DS 02-02A) failed in a fashion identical to 02-038.10 At the time, DS 02-02A had been shut in for over twelve years.11 Due to the second failure, AOGCC ordered BPXA to begin the process of abandonment 3 Other Order 149, p.1. 4 Other Order 149, p. 1. 5 Other Order 149, p. 2, paragraph 3. 6 Other Order 149, p.1. 7 Other Order 149, p. 1. 8 Other Order 149, p. 2, paragraph 5. 9 Other Order 149, p. 3, paragraph 4. 10 Other Order 149, p. 2, paragraph 8. 11 Other Order 149, p. 2, paragraph 8. 3 000155 for 14 3-casing-string wells with shoes set in the permafrost. 12 From January 9 to February 8, 2019, AOGCC approved abandonment procedures on 13 of the 14 wells.13 AOGCC also scheduled a hearing. Because the failures were identical, the scope of the hearing included a reexamination of the April, 2017, DS 02-038 failure.14 At the February 13, 2019 hearing, BPXA continued to posit that permafrost subsidence combined with the 3-casing-string design with shoes set in the permafrost was the cause of both incidents. BPXA advised that it had no evidence to suggest that permafrost subsidence could cause a sudden catastrophic failure in any 2-casing-string design wells.15 BPXA stated it was undertaking both its own studies and an independent geotechnical study to gain additional understanding of the failures.16 On February 28, 2019, AOGCC entered Other Order 149. AOGCC noted BPXA's conclusions rested on untested assumed hypotheses and unevaluated potential impacts.17 Although BPXA had no evidence that subsidence would cause a catastrophic failure in 2- casing-string wells, AOGCC placed greater significance on the absence of any evidence to prove it would not cause a failure.18 AOGCC determined both that 1) the inadequacy of BPXA's modeling was demonstrated by the second failure in DS 02-02A after BPXA 12 Other Order 149, p. 2, Findings, paragraph 1. 13 Other Order 149, p. 2, Findings, paragraph I. 14 Other Order, 149. 15 Other Order 149, p. 3, Conclusions paragraph 2. 16 Other Order 149, pp. 2-3, Findings paragraph 4. 17 Other Order 149, p. 3, Conclusions paragraph 3. 18 Other Order 149, p. 3, Conclusions paragraph 2. 4 000156 had concluded shut in wells were less likely to fail and 2) BPXA's understanding of the failures was incomplete.19 As a result, AOGCC wanted additional evidence to determine the cause of the failures. AOGCC ordered BPXA to recover the production tubing, production casing, outer casing, surface casing, and conductors on at least two of the 3-casing-string wells, leaving open the possibility that if that did not provide sufficient evidence as to the cause, it might require BPXA to pull casing string on additional wells.20 These operations along with BPXA's analysis of what pulling the strings revealed, are required to be completed by the end of 2019.21 BPXA was also ordered to provide its geotechnical review upon completion.22 Recognizing that abandonment of the wells would preclude the ability to recover potential evidence as to causation, 23 AOGCC rescinded its 13 approvals of abandonment procedures, noting abandonment operations would be considered after AOGCC reviewed the results of the required actions on the 3-casing-string wells.24 Other Order 149 requiring those additional actions by, and information from, BPXA was entered February 28, 2019, the same date French filed his petition for hearing 19 Other Order 149, p. 3, Conclusions, paragraphs 4 and 5. 20 Other Order 149, p. 4, paragraph l. If AOGCC decides to require additional wells undergo rig interventions, the exact wells with be determined by AOGCC in consultation with BPXA. Other Order 149, p. 4, paragraph l. 21 Other Order 149, p. 4, paragraph 1. 22 Other Order 149, p. 4, paragraph 4. 23 Other Order 149, p. 3, paragraph 5. 24 Other Order 149, p. 4, paragraph 8. 5 000157 on a complaint of waste as to the DS 02-03B well failure. On March 20, 2019, having just ordered BPXA to pull casing strings and provide additional information regarding the cause of the well failures, AOGCC denied French's petition because AOGCC's investigation into the 02-03B failure was ongoing. French moved for reconsideration. The motion was denied by operation of law on April l 8, 2019. French appeals, claiming that 1) AOGCC was obligated to give him a hearing as soon as he requested it because "shall means shall," 2) "the directory I mandatory distinction does not apply in this case" because AOGCC denied him a hearing "altogether," and 3) because AOGCC's reasons for denying French a hearing are untrue,25 to uphold AOGCC's order would "eviscerate" AS 31.05.060(a). French's arguments are contrary to law and contradicted by the record. Other Order 151, denying French a hearing prior to the conclusion of AOGCC's investigation into the DS 02-038 well failure, should be affirmed. STANDARDS OF REVIEW Two standards apply to an agency's interpretation of the law. The reasonable basis test applies to questions of law involving "agency expertise or the determination of fundamental policies within the scope of the agency's statutory functions."26 Under the 25 French concedes AOGCC was investigating the DS 02-038 failure, but claims Other Order 149 closed the investigation. Brief of Appellant, p. 7 (AOGCC was conducting a review of the mechanical integrity of Prudhoe Bay wells, including DS 02-03B)(AOGCC "issued an order closing out that investigation" citing Other Order 149). 26 Alyeska Pipeline Serv. Co. v. State, 288 P.3d 736, 740 (Alaska 2012)(emphasis supplied) citing Marathon Oil Co. v. State, Dept. of Nat. Res., Div. of Oil & Gas, 254 P.3d 1078, 1082 (Alaska 2011 )(additional citation omitted); Davis Wright Tremaine LLP 6 000158 reasonable basis test, the court must determine whether the agency's decision is supported by the facts and has a reasonable basis in law, even if the court may not agree with the agency's ultimate determination.27 When questions oflaw do not involve agency expertise or the determination of fundamental policies within the scope of the agency's statutory functions, the court applies the independent judgment standard.28 ARGUMENT A. The reasonable basis standard of review applies. French correctly cites the applicable standards of review set forth above, then simply declares "deciding whether to grant a hearing does not implicate the expertise of the AOGCC. "29 French, who offers nothing by way of analysis in support of his assertion, is mistaken. AOGCC is the permitting and regulatory enforcement authority over hydrocarbon wells in Alaska. Few matters more clearly require a determination of the fundamental policies within the scope of AOGCC's regulatory enforcement authority than AOGCC's control over the scope and timing of both its investigations and the scheduling of hearings on matters touching on those investigations. As a result, v. State, Dept. of Admin., 324 P.3d 293, 299 (Alaska 2014) citing Marathon Oil Co. v. State, Dept. of Nat. Res., Div. of Oil & Gas, 254 P.3d 1078, I 082 (Alaska 2011 )(additional citation omitted). 27 Davis Wright Tremaine LLP v. State, Dept. of Admin., 324 P.3d 293, 299 (Alaska 2014) citing Tesoro Alaska Petroleum Co. v. Kenai Pipe Line Co., 746 P.2d 896, 903 (Alaska 1987)(additional citation omitted). 28 Alyeska Pipeline Serv. Co. v. State, 288 P.3d 736, 740 (Alaska 2012)(independent judgment standard applies if "the agency's specialized knowledge and would not be particularly probative on the meaning of the statute.")( citation omitted). 29 Brief of Appellant, p.3. 7 000159 interpretation of AS 31.05.060(a) clearly involves the determination of fundamental policies within the scope of AOGCC's functions. French seeks a hearing on waste he alleges occurred as a result of the DS 02-03 B well failure. A waste determination cannot be made without a determination as to causation. Because AOGCC's investigation into ·the cause of the well failure has not concluded, French is seeking an order of the court 1) amending Other Order 151, 2) directing AOGCC as to how an investigation into a matter squarely within the AOGCC's expertise must be conducted, and 3) requiring AOGCC to hold a hearing prior to the conclusion of its investigation. The reasonable basis standard of review applies to this appeal. AOGCC's actions are supported by fact and have a reasonable basis in the law. Other Order 151 denying French a hearing must be affirmed. Application of the independent judgment standard does not alter that result. As set forth below, the language of AS 3 I .05.060(a) is directory not mandatory. AOGCC's interpretation of AS 3 I .05.060 is the correct interpretation. Other Order I 5 I must be affirmed. B. The language of AS 31.05.060(a) is directory, not mandatory. AS 31.05.060(a) states: The commission may act upon its own motion, or upon the petition of an interested person. On the filing of a petition concerning a matter within the jurisdiction of the commission under this chapter, the commission shall promptly fix a date for a hearing, and shall cause notice of the hearing to be given. The hearing shall be held without undue delay after the filing of the petition. The commission shall enter its order within 30 days of the hearing. 8 000160 Under Alaska law, whether the failure to adhere to time limits set forth entitles a party to relief turns on whether the language of the law is mandatory or directory.30 In the absence of a penalty for failure to comply with the statute and significant prejudice to the other party, "shall" denotes simple futurity rather than a command and substantial compliance is acceptable.31 A statute is considered directory if three criteria are met: ( 1) its wording is affirmative rather than prohibitive; (2) the legislative intent was to create "guidelines for the orderly conduct of public business"; and (3) "serious, practical consequences" would result if it were considered mandatory. 32 As to the first criterion, the wording of AS 3 l.05.060(a) is affirmative, not prohibitive. The statute says the AOGCC "shall" promptly fix a date for a hearing but contains no language of prohibition, does not speak to what AOGCC can or should not do,33 does not prohibit it from doing otherwise, 34 and does not impose a penalty for failure to comply. The first criterion is met. 30 In re Reinstatement of Wiederholt, 24 P.3d 1219, 1233 (Alaska 2001) citing Copper River Sch. Dist. v. State, 702 P.2d 625, 627 (Alaska 1985); South Anchorage Concerned Coalition, Inc. v. Municipality ofAnchorage, 172 P.Jd 768, 7'71-72 (Alaska 2007) citing In re Reinstatement of Wiederholt, 24 P .3d 1219, 1233 (Alaska 2001 ); State, Dep 't of Commerce & Econ. Dev., Div. of Ins. v. Schnell, 8 P.3d 351, 357 (Alaska 2000). 31 South Anchorage Concerned Coalition, Inc. v. Municipality of Anchorage, 172 P.3d 768, 772 (Alaska 2007) citing Jn re Reinstatement of Wiederholt, 24 P.3d 1219, 1233 (Alaska 2001 )(citation omitted). 32 South Anchorage Concerned Coalition, inc. v. Municipality of Anchorage, 172 P.3d 768, 772 (Alaska 2007) citing In re Reinstatement of Wiederholt, 24 P .3d 1219, 1233 (Alaska 200l)(quoting City of Yakutat v. Ryman, 654 P.2d 785, 789-91 (Alaska 1982)). 33 South Anchorage Concerned Coalition, Inc. v. Municipality of Anchorage, 172 P.3d 768, 772 (Alaska 2007)( emphasis in original). 34 In re Reinstatement of Wiederholt, 24 P.3d 1219, 1233 (Alaska 2001 ). 9 000161 The language of the statute makes equally clear that the legislative intent was to create "guidelines for the orderly conduct of public business." Both the legislature's use of "promptly" and "without undue delay" rather than specific time constraints within which the AOGCC must schedule its hearings are language of futurity rather than command. The legislature's lack of any prohibitive language speaking to what AOGCC can not do is acknowledgement that the scheduling of hearings in general, and enforcement hearings in particular, is a fundamental policy determination to be made by AOGCC. The second criterion is met. AOGCC will suffer serious practical consequences if the language of AS 3 l .05.060(a) is deemed mandatory. Such an interpretation would fail to account for the common exigencies and contingencies inherent in the AOGCC's regulatory enforcement duties and seriously constrain AOGCC's abilities to obtain all the information it believes necessary prior to convening a hearing, as well as its ability to enforce its regulations. French's petition is an example. The escape of gas that French claims constituted waste occurred from the April, 2017 DS 02-03B failure. After an initial review shortly afterwards, AOGCC took no enforcement action on the failure.35 However, new information -the identical DS 02-02A failure in late 2018 -caused AOGCC to reexamine the DS 02-03B failure, to rescind its approvals to plug and 35 French was an AOGCC commissioner at the time AOGCC took no action. IO 000162 abandon similar wells in order to preserve potential evidence and to demand additional actions be taken, and additional information be provided, by BPXA.36 Any waste determination requires both an operator to hold accountable and a determination as to causation. An immediate hearing on French's waste allegations would require notice to BPXA, an opportunity for BPXA to be heard, and a ruling prior to conclusion of AOGCC's inquiry into the well failure, effectively precluding AOGCC from holding a hearing on the issues of waste and I or causation should the investigation ultimately reveal such was warranted. 37 The potential for such an outcome seriously prejudices AOGCC in its regulatory enforcement role. Conversely, French does not, and cannot, claim any prejudice, let alone the "significant prejudice to the other party" required by law, resulting from the AOGCC's refusal to convene a hearing prior to the end of its investigation. The third criterion is met. The language of AS 31.05.060(a) is directory, not mandatory. On matters of regulatory enforcement, the AOGCC has neither the luxury of, nor any affinity for, French's "ready ... fire ... aim!" approach to regulatory enforcement or scheduling hearings on matters under investigation. Other Order 151 refusing to schedule a hearing while the investigation is still pending must be affirmed. 36 Other Order I 49. 37 If French can prove his waste claim, AOGCC may impose a penalty for every 1000 cubic feet ( 1 MCF) of gas. AS 3 I .05. I 50( d). The penalty is twice the fair market value of the gas at the point of waste. AS 31.05 .150( d). The DS 02-038 failure released 1, 187 MCF of gas. DOR set the 2017 second quarter value of the gas at $2.356 I MCF. The total value of the gas was $2,796.57; the authorized penalty would be $5,593.14. 11 000163 • C. French's analysis is contrary to law, contradicted by the record and deeply flawed. Unable to address the applicable law or the wording of Other Order I 5 I, French takes a different tact. First, he declares that the directory I mandatory analysis does not apply in this case because AOGCC "denied [French] a hearing altogether," and that as a result "the distinction is moot."38 Second, French claims affirmance of Other Order 151 would "eviscerate" AS 31.05.060(a) because AOGCC has "closed" its investigation and, in turn, is essentially lying when it says its investigation into the well failures has not concluded. Specifically, French asserts "that the 'on-going investigation' explanation doesn't hold water, because the agency had already issued an order closing out that investigation on February 28."39 Not only are these statements supported by nothing apart from French's say-so, his statements are flatly contradicted by the record and Other Order 149. French's arguments all hang on a single fallacy: that he has been denied a hearing altogether. The reason for French's utilization of this stratagem is obvious. When the court gives meaning to the terms of Other Order 151 as written, both the record and the applicable law reveal French's appeal as utterly meritless. By the express language of Other Order I 5 I, French has been denied a hearing until AOGCC's investigation has finished: "A hearing prior to the conclusion of that investigation would be premature."40 38 Brief of Appellant, p. 6. 39 Brief of Appellant, p. 7. 40 Other Order I 5 I, Record, p. 0002. 12 000164 Rather than offer argument or an explanation of how the court should address the clear language of Other Order 151, French proceeds as though this sentence has been removed from the order. Acceptance of this meritless claim requires the court to override AOGCC's clearly expressed intent and judicially amend Other Order 151 to delete that sentence. Although French concedes the failure of the DS 02-03B well was being investigated,41 his next claim is that affinning Other Order 151 would eviscerate the hearing requirement of AS 3 l.05.060(a). Basically French asserts AOGCC was lying when it stated its investigation into the DS 02-03B failure is ongoing.42 This argument relies entirely on French's declaration that AOGCC "closed" its investigation into the OS 02-03B well failure when it entered Other Order 149. French offers no evidence to support his bald assertion that entry of Other Order 149 "closed" the investigation. Nor could he. There is literally nothing in Other Order 149 that states or even implies the investigation into the well failure is closed. To the contrary, Other Order 149's language makes clear that AOGCC has not concluded its inquiry into the cause of the OS 02-03B failure. AOGCC found the modeling underlying BPXA's explanation for the failures to be inadequate.43 Because BPXA had no casing 41 Appellant's Brief, p. 7 (" ... the [AOGCC] was conducting a review of the mechanical integrity of Prudhoe Bay wells, including the well DS 02-03B ... "). 42 " ... the 'ongoing investigation' explanation doesn't hold water because the [ AOGCC] has already issued an order closing out that investigation on February 28, prior to the filing of a petition for a hearing ... "Appellant's Brief, p. 7. 43 Other Order 149, p. 3, Conclusion 4. 13 000165 recovery plans to identify and analyze casing issues, AUUCC required rig interventions to recover production tubing, production casing, out casing, surface casing, and conductor are required on at least two of the 3-casing-string-wells.44 The rig interventions must be completed by the end of2019.45 The purpose of the rig interventions is to gather information to assist in understanding the cause of the failures.46 BPXA must also provide the geotechnical review when it is completed.47 No further abandonment operations may be conducted until AOGCC completes its review of the rig intervention operations. 48 French's lack of any factual basis for claiming the investigation is closed coupled with the plain wording of Other Order 149 make his arguments in this regard border on frivolous.49 50 Other Order 151 must be affirmed. 44 Other Order 149, p. 4, paragraph 1. 45 Other Order 149, p. 4, paragraph I. 46 Other Order 149, p. 3, paragraph 5. 47 Other Order 149, p. 4, paragraph 4. 48 Other Order 149, p. 4, paragraph 8. 49 French apparently concedes that if the investigation is ongoing he is not entitled to demand a hearing until it is concluded. All he offers on this topic is a single sentence: "Moreover, there is nothing inconsistent with granting a hearing on appellant's petition while a related investigation is ongoing." Brief of Appellant, p. 8. As a preliminary matter, this one sentence argument is raised in such cursory fashion that it must be deemed waived. Even if the court does not deem the argument waived, the investigation is not merely "related." As previously set forth, the investigation encompasses the OS 02- 038 failure that French alleges resulted in "waste." Not only is a hearing before that investigation concludes inconsistent, it would be highly prejudicial to AOGCC. 5° French raises a similar argument regarding the docket numbering system that AOGCC uses to track various matters: "the docket OTH-18-064 was closed with an order ... signed February 28, 2019." Appellant's brief, p. 7. French's brief is unclear whether he intends this as a second argument regarding the investigation being closed or if it is duplicative of his assertions regarding Other Order 149. Because docket numbers are 14 000166 CONCLUSION AOGCC's denial of French's demand for a hearing was based upon its determination of fundamental policies clearly within the ambit of AOGCC's statutory functions as the regulatory authority over hydroear-ben-wells. AOGCC's interpretation of AS 3 l .05.060(a) as not requiring it to schedule a hearing while its investigation into the cause of the DS 02-03B failure is pending is supported by the facts and has a reasonable basis in the law. French's assertions are at best unsupported proclamations and at worst directly contradicted by the record. Other Order 151 denying French a hearing while the AOGCC's investigation is continuing must be affirmed. DA TED: September 11, 2019. KEVIN G. CLARKSON ::TTaEJ Thomas A. Ballantine Senior Assistant Attorney General Alaska Bar No. 8806122 simply a tracking mechanism at AOGCC, even if the court were to deem the docket number "closed," it would not mean AOGCC's investigation was closed. 15 000167 • r1· .... , '~ T ,··~ ?~~ ... , I,.~ .... :;:· .L;. . ... t, \,, I I '· r [ u J-}~ f l_j \ ~.:. f- •-. -· .. ".' I -I IN THE SUPERIOR COURT FOR THE STATE OF ALAS.KIA~! i.1 :sr:;~·:r THIRD JUDICIAL DISTRICT AT ANCHORAqS!9 ~[? I 2 r-';1 J: ~.[3 HOLLIS FRENCH, ) . ___ ,,;·; G:~ T::.: .j :\i:\~ c1::..:1-:T~ Appellant, V. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee. ) ) ) ) ) ) ) ) ) BY "·~".JUTY ----Lit.; CLEl\1\ ) Case No. 3AN-19-06694 CI ~~~~~~~~~~~~~~~- CERTIFICATE OF SERVICEt1 I certify that on this date true and correct copies of the Appellee's Brief and this Certificate of Service were served via U.S. Mail and e-mail on the following: Hollis French 2640 Telequana Drive Anchorage, AK 99517 hs french@gmai I .com c;1~aUA-SI~ Leilani J. Tufaga ~ Law Office Assistant II 1/uh1 'DAte 000168 • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE HOLLIS FRENCH, ) ) ) ) ) ) ) ) ) Appellant, vs. AOGCC, Appeal Case No.: 3AN-l 9-06694Cl Appellee, ~~~~~~~~~~~~~) CERTIFICATE OF SERVICE 111.... I certify that on this date true and correct copies of the Appellee Alaska Oil and Gas Conservation Commission's Notice of Routine Extension of Time (with Proposed Order) and this Certificate of Service were served via U.S. Mail on the following: Hollis S. French 2640 Telequana Drive Anchorage, AK 99 5 l 7 d/: Leilani J. Tufaga Law Office Assistant II 000169 • -f 'L r:·n STATE U°F ;~lw(: Cl.I!\ ~ ti .• ,.Jf\h IN THE SUPERIOR COURT FOR THE ST AT}if@(f.) ~iA!SKA THIRD JUDICIAL DISTRICT AT A;_~F3Wl~~G~1 3: 44 HOLLIS FRENCH, ) ) ) ) ) LL.Lilri GF ; Ht: li\l/\l COUHTS Appellant, vs. AOGCC, Appel lee, ) ) ) ) BY-;:::-=:-~---OEPUTY CLERK Appeal Case No.: 3AN-l 9-06694CI ~~~~~~~~~~~~~~) APPELLEE ALASKA OIL AND GAS CONSERVATION COMMISSION'S NOTICE OF ROUTINE EXTENSION OF TIME *1,..- Pursuant to Alaska R. App. P. 503.5, Appellee Alaska Oil and Gas Conservation Commission (AOGCC) provides notice that it is seeking a routine thirty-day extension of time in which to file its brief. The original due date for AOGCC's brief was August 12, 2019.1 The new due date for AOGCC's brief will be September 11, 2019. A proposed Order is tendered with this Notice. DATED August 12, 2019. KEVIN G. CLAAASGN / ATTO~G~E~L .. I! _,/ By: (/~~-V\,..~- Thomas. A. Ballantine Senior Assistant Attorney General ABA No.: 8806122 Appellant's brief was served via mail on the State on July 10, 2019. Therefore, AOGCC has thirty-three days in which to file its brief. 000170 • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE Hollis French Appellant, vs. AOGCC Appeal CASE NO: 3AN-19-06694CI NOTICE SETTING APPEAL PROCEDURE (Administrative Appeals) Appellee. The agency record is available for review in the superior court at Anchorage, Alaska. The appeal is assigned to Judge Eric A Aarseth. The following procedures will govern this appeal: 1. BRIEFS: The following time schedule applies to the filing of briefs on appeal, unless an extension is granted. If appellant fails to file a brief, the appeal may be dismissed. Failure to timely file appellee's brief or appellant's reply brief will waive the filing of same. APPELLANT: within 30 days after service of this notice APPELLEE: within 30 days after service of appellant's brief APPELLANT'S REPLY BRIEF: within 20 days after service of appellee's brief Add 10 days if there are multiple appellants or appellees filing separate briefs and a single excerpt. See appellate Rule 212(a)(1) and 210(c)(1)(B). 2. EXCERPT OF RECORD: Briefs must be accompanied by excerpts of record as provided in Appellate Rule 210(c) unless a written agreement by the parties waiving preparation of excerpts has been filed. 3. ORAL ARGUMENT: Either party may serve and file a written request for oral argument no later than 10 days after the date on which appellant's reply brief is due. If no appellee's brief is filed, the appellant's request for oral argument must be filed within 10 days after the due date of the appellee's brief was due. 4. fylO_JJO~~: Appellate Rule 612 applies to any request for court action not otherwise covered above, including motions to extend time for filing memoranda and motions to accept late briefs. 6/13/2019 By: Date I certify that on 6/13/19 a copy of this order was mailed or delivered to: Hollis French AOGCC Clerk: LMcGowan FILE COPY AP307(cv) (3/01) CLERK OF COURT LMcGowan Deputy Clerk App. R. 210, 212, 604, 605(a), 605.5 & 612 Notice Setting Appeal Procedure (Administrative Appeals) 000171 • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE Hollis French, Appellant, vs. AOGCC, Appeal CASE NO: 3AN-19-06694CI NOTICE OF PREPARATION OF RECORD IN AN Appel lee. ADMINISTRATIVE APPEAL To: AOGCC Attached is a copy of the notice of appeal filed on 05/01/2019 from an order or decision of your agency. Pursuant to the Appellate Rules: 3. Within 10 days of service of this notice, the agency must file with this court a list of names and addresses of all counsel and prose parties who appeared in the matter before the agency. Please use the enclosed form AP-311. Appellate Rule 602(d)(2). 2. The agency must number the pages of the agency file consecutively throughout all volumes. The agency shall forward the following to the superior court within 40 days from the date of service of this notice. a. A copy of the numbered agency file. b. The transcript of proceedings before the agency, unless cassettes are authorized by Appellate Rule 604(b)(1 )(A) or court order. c. All documentary and photographic exhibits no larger than 8 Yi" X 14" which are not filed in the agency case file and a list of the exhibits being transmitted. d. A list of all exhibits retained by the agency. e. A copy of all depositions filed with the agency. f. A Transmittal of Agency Record. Please use the enclosed form AP-312. Appellate Rule 604(b). 3. The appellant must arrange and pay for preparation of a transcript unless cassettes are authorized by Appellate Rule 604(b )( 1 )(A) or by court order. The appellant must also pay all reasonable costs incurred by the agency to prepare the court's copy of the agency file, unless otherwise ordered by the court or agreed to by the prirties. The agency may require advance payment of the costs. Appellate Rule 604(b)(1 )(B)(iv). 6/13/2019 Date I certify that on 6/13/19 a copy of this order was mailed or delivered to: Hollis French AOGCC Clerk: LMcGowan FILE COPY AP-310 (9/12) Notice For Preparation Of Record CLERK OF COURT By: LMcGowan Deputy Clerk App. R. 604-607 000172 • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE Hollis French, vs. AOGCC, Appellant, Appellee. CASE NO: 3AN-19-06694CI NOTICE OF JUDICIAL ASSIGNMENT This case is assigned to the Honorable Judge Eric A Aarseth for all purposes including trial. 6/13/2019 By: LMcGowan Date Deputy Clerk I certify that on 6/13/19 a copy of this order was mailed or delivered to: Hollis French AOGCC Clerk: LMcGowan FILE COPY CIV210(cv) (2/04) Notice Of Judicial Assignment 000173 • • IN THE SUPERIOR COURT FOR TI-IE STATE OF ALASKA AT ~~I./\ c...\/\or-.::._~£.::- nlEO In tha I RIAVCoURTS Appellant (person bringing appeal) vs. AOGl_L Appellee ) STATE OF ALASKA, THIRD DiSTR!CT ) ) ) ) ) ) ) ) ) MAY 0 1 2019 Clerk of the Trial Courts By Deputy APPEAL CASE NO. ~1(.l-fif[fc!I ---------------~) CASH DEPOSIT ON APPEAL I am depositing cash in lieu of a bond as described below. I understand that if the appeal is dismissed or if the judgment/decision is affirmed or modified, the court may order that part or all of this cash deposit be paid to the appellee to cover appeal costs, and if the cash deposit is in lieu of a supersedeas bond the court may also order that it be paid to the appellee to pay the judgment, post-judgment costs and interest. If the court reverses the judgment/decision, the money I am depositing will be returned to me without interest. ...,J gj Cash deposit in the amount of$ 1-S D -in lieu of a Cost Bond. I understand that this deposit will not result in a stay of execution of the judgment. 0 Cash deposit in the amount of$ in lieu of a Supersedeas Bond. I understand that this deposit will stay execution of the judgment. I am the owner of the cash deposited. I submit myself to the jurisdiction of the court and irrevocably appoint the clerk of court as my agent upon whom any papers affecting this deposit may be served. I agree that it is not necessary for an independent action to be filed in order for this deposit to be used as described above. s I 1 I I~ Date Signature of Owner of Cash Ht> l \ .. :s -~Av\..-Dr, A~ D.,K__ 9.. <\ '3 \~ °\.u-=l 2'-IL\ ".\\'.,S° 'Z.(,L\..t> ~\-e.51..1<1--.._ Telephone No. Mailing Address Typc or Print Name City State Zip ACKNOWLEDGMENT The. f'mP\·ng instrument was acknowledged before me this date, tv\At± \ , 2o_L1, by _flUL_.J ~ fg.e&r\cb , who personally ~pp.eared before ~d acknowledged that hi;:tslii:\executeq.the mstrument for the purposes stated m it. /:;., <:, ',, ",, · .• ' · · . 'Y ~~ ; 1 ,, ""' ' ' . .. 1·' t f. ." ~ . -, . ·.·,.~ ~ i ~.·~s. E.AL) · ~· : ,.,; ·~ I ( ~·-··-·:: :> ~ '~r·:~:x~~rt·._ :f th t ·' ;:,S ' 1 ct. ~c~ , 1 y a on.~.-.------a>cqi{y of this foin1 was fSJ"mailed 0 personally delivered to (list names): L. l-\i.... .l . f A"!,...,._'-1 2. A .\4.,,.~ (:,'t "u-... \ \ By: C~::;? AP-110 (l/05)(cs) CASH DEPOSIT ON APPEAL Clerk of Court/Notary P · My commission expires: ------=---=--=~- Date Amt. Deposited $ ---------Receipt No. ____ _ Clerk ----- App. R. 204(c), 602(g) Civil Rule 80(t) & (g) 000174 ( 'I -· • r---- IN THE SUPERIOR COURT FOR THE STATE O~j&~RKAe TRIAL COURT ' THIRD JUDICIAL DISTRICT AT ANCHoRtt!f OF,~LASKA, THIRD DISTR~r Hollis S. French, / ) MAY 0 f 2019 Appellant, · ) Clerk of the Tri~I Courts ) By ) ------Deputy , ' v. ) Agency Cas~: OTH-19-002 ALASKA OIL AND GAS CONSERVATION COMMISSION, : Appellee.· l ). ) ' ---------------.) Appeal Case: ' - CERTIFICATE OF SERVICE I certify that I caused the Notice of Appeal to be served upon: 1. Head of the Agency AOGCC 333 W. 7th Avenue Anchorage, AK 99501. 2. Attorney General Kevin Clarkson 1031W4th Avenue #200 Juneau, AK 99801 By placing a true copy in First Class Mail to the addresses above. DATED: April 3Q, 2019 . Hollis S. French Bar No. 9606933 · / 000175 S-17822 3AN=19=06694 CI SUPPLEMENT 000176 I .. • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE HOLLIS S. FRENCH, Appellant, v. ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellee. 3AN-l 9-06694 CI ORDER GRANTING MOTION FOR RULE 508(e) ATTORNEY FEES Appellee Alaska Oil and Gas Conservation Commission (AOGCC) timely moves for attorney fees as prevailing party in this matter, asserting it is entitled to 20% of its actual attorney fees under Alaska Rule of Appellate Procedure 508( e ). 1 Appellant Hollis French (French) opposes the motion arguing AOGCC's demand for attorney fees is onerous under Alaska Rule of Appellate Procedure 508(e)(4)(B).2 AOGCC filed its reply to French's opposition on July 8, 2020.3 Background On June 9, 2020, this Court affirmed Other Order 150 issued by AOGCC on March 20, 2019. French subsequently filed a Motion for Reconsideration which was denied. 1 Mot. for Rule 508(c) Attorney's Fees, June 19, 2020. 2 Opp. to Mot. for Attorney's Fees, June 29, 2020. 3 Reply to Opp. to Mot. for Attorney's Fees, July 8, 2020. I 000177 • • Applicable Law Alaska Rule of Appellate Procedure 508(e), Costs and Fees (e) Attorney's Fees. Attorney's fees shall not be awarded unless: ( 4) the appeal was taken under Rule 601, in which case the court shall award the prevailing party 20% of its actual attorney's fees that were necessarily incurred, except in cases where (A) paragraphs (1), (2), or (3) apply; or (B) the court determines that an award of fees would be so onerous to the non-prevailing party that it would deter similarly situated litigants from the voluntary use of the courts if not reduced. Rule 508( e) permits an award of attorney fees purs~ant to administrative appeals before Superior Courts. Appellate courts have discretion to award attorney fees and can look to Alaska Rule of Civil Procedure 82 for guidance on a "reasonable" award.4 In determining a reasonable fee, trial courts can consider whether the award is so great that it imposes an intolerable burden on a losing litigant which, in effect, denies the litigant's right of access to the courts. 5 The "prevailing party" is "the one who successfully prosecutes the action or successfully defends against it, prevailing on the main issue, even though not to the 4 Stalnaker v. Williams, 960 P.2d 590, 597 (Alaska 1998). 5 Malva v. J.C. Penny Co., 512 P.2d 575, 587-88 (Alaska 1973). 2 000178 r • • extent of the original contention. He is the one whose favor the decision or verdict is rendered and judgment entered."6 Discussion This Court finds that AOGCC is entitled to a Rule 508( e) attorney fee award. AOGCC successfully defended against French's administrative appeal and this Court decided in its favor. AOGCC is the prevailing party without trial, entitling it to 20% of its actual attorney fees, or $6,270. AOGCC's counsel calculated its hourly fees based on market rates and provided a comprehensive billing report detailing the hours spent defending the appeal. 7 This Court finds that the hourly rate and number of hours spent were reasonable. French relies on Gold Country v. Fairbanks North Star Borough,8 arguing that an award to AOGCC of attorney fees under Rule 508 "would work to dissuade similarly situated litigants."9 The plaintiffs in Gold Country alleged the Borough violated the Open Meetings Act; however, the Superior Court entered judgment in favor of the Borough but denied the Borough's request for attorney fees.1° French argues that like the unsuccessful litigants in Gold Country, this Court should not award AOGCC attorney fees because French did not seek money damages, had no economic incentive to file suit, and did not litigate in bad faith.11 However, that court denied the Borough attorney fees 6 Buza v. Columbia lumber Co., 395 P.2d 511, 514 (Alaska 1964). 7 Mot. for Rule 508(e) Attorney's Fees, Ex. 1. Counsel is a senior attorney entitled to a $300 hourly rate. 8 Gold Country v. Fairbanks North Star Borough, 270 P.3d 787 (Alaska 2012). 9 Opp. to Mot. for Attorney's Fees at 3, June 29, 2020. 10 Gold Country at 799. 11 Opp. to Mot. for Attorney's Fees at 3, June 29, 2020. 3 000179 ..... • • for the above reasons under Rule 68, which applies to offers of judgment.12 French has not shown, under the applicable rules, why he should not be responsible for AOGCC's attorney fees. Nor does French explain how the requested fees in this case impose an "intolerable burden" on him. Additionally, this Court does not find that the fees are "so onerous" as to deter access to the courts. Conclusion AOGCC's Motion for Rule 508(e) Attorney Fees is GRANTED. lT lS SO ORDERED. DATED at Anchorage, Alaska this .Jv1"-1day of August, 2020. I certify that on f 0 August, 2020, a copy was mailed to: H-Fr<n(.hJ T.12<.cllwtfinl- Emily Elisabeth Rhea, Law Clerk ~0---- Superior Court Judge 12 See Gold Country, 270 P.3d at 799 (affirming the lower court's denial of the prevailing party's attorney fees under Rule 68 because Gold Country did not request monetary damages and litigated in good faith). The Gold Country court interpreted Rule 82, which similar to Rule 508, permits a trial court to vary a fee award to "the extent to which a given fee award may be so onerous to the non-prevlliline pllrty thllt it would deter similarly situated litigants from the voluntary use of the courts." 4 000180 IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE Hollis S. French, Appellant, v. Alaska Oil and Gas Conservation Commission, Appellee. ) ) ) ) ) ) ) ) ) ) ) FfLEO In the Trial Courts State of Alaska Thlrd·Dl•trict JUL 0 8 2020 ~~~~~~~~~~~~~) Case No. 3AN-19-06694 CI {:'\ REPLY TO OPPOSITION TO MOTION FOR ATTORNEY FEES The Alaska Oil and Gas Conservation Commission (AOGCC) moved for 20% of its attorney's fees, $6,270, after prevailing in Hollis French's (French) meritless administrative appeal. French claims that I) the imposition of fees would be so onerous as to deter use of the courts, and 2) the fees are unreasonable. His claims are based only on his bald assertions. French's arguments are rooted in the premise that his position is the same as the losing party in Gold Country v. Fairbanks North Star Borough' because he sought no monetary damages, had no incentive to litigate, did not litigate in bad faith, and sought a hearing on a claim of waste.2 His contentions do not withstand cursory scrutiny. That French sought no damages is irrelevant; damages are unavailable in an administrative appeal. While French may have had no economic incentive to bring this 2 270 P.3d 787 (Alaska 20120. Opposition, p. 3. 000181 • . i .. ' action, his claim that he litigated as a member of the public and the implication that he had no other incentive is insincere at best. For two years French refused to accept AOGCC's decision not to extend AOGCC's jurisdiction far beyond any realm authorized or even contemplated by its enabling act. His demand for a hearing was filed within 48 hours of his removal from the AOGCC, a removal he publicly blamed on the other commissioners. Dislike of the other commissioners is but one reason to doubt his good faith. A waste determination -squarely within AOGCC's expertise -was the basis for his demand for a hearing, but French then denied AOGCC's expertise on waste.3 He offered nothing to suggest any jurisdiction ever exerted a waste claim over produced and severed gas. Pressed by the court at argument, he admitted nothing in AOGCC's prior actions supported his position. He relied substantially on 191h century cases having no bearing on the issue raised. He equated allocation metering with custody transfer metering and daily rate of production with greater ultimate recovery~ both assertions were false. He offered nothing to rebut AOGCC's explanation of the meaning of custody transfer. His position not that of the losing party in Gold Country. French offers nothing as to how the imposition of $6,270 is even onerous, let alone "so onerous" as to deter access to the courts. When French was a commissioner, AOGCC prevailed in PLC, LLC v. AOGCC, 3KN-17-00649CI. As here, PLC's claims required an unprecedented expansion of AOGCC's jurisdiction. PLC cited no legal 3 "French does not ... specify how AOGCC does not have direct expertise to make a waste determination." June 9, 2020 Order, p. 7. Reply to Opposition to Motion for Attorney Fees French v. A OGCC Case No. 3AN-l 9-06694 Cl Page 2of3 000182 • ... . ... ' authority for its claim. AOGCC was awarded attorney's fees of $6,930. French's knowledge of the PLC award and his filing of this matter proves the fees requested here are not even onerous, let alone "so onerous" as to deter access to the courts. French's final argument is a bizarre statement purporting to divide AOGCC's total hours by the number of lines in its brief. Presumably French is complaining about the amount of time expended. A losing party that interposes irrelevant, meritless and I or misleading arguments cannot be heard to complain about the time expended by the prevailing party exposing the merit less nature of those arguments. DATED July 8, 2020. KEVIN G. CLARKSON ATTORNEY GENERAL By: Isl Thomas A. Ballantine Thomas A. Ballantine Senior Assistant Attorney General Alaska Bar No. 8806122 Reply to Opposition to Motion for Attorney Fees French v. A OGCC Case No. 3AN-19-06694 CI Page 3 of3 000183 Brandi Alexander From: Sent: To: Cc: Subject: Attachments: Tufaga, Leilani J (LAW) <leilani.tufaga@alaska.gov> Wednesday, July 08, 2020 4:18 PM ANC Civil Ballantine, Tab A (LAW); hsfrench@gmail.com 3AN-19-06694CI -Reply to Opposition to Motion for Attorney Fees Reply to Opposition to Motion for Attorney Fees.pdf Attached please find my Reply to Opposition to Motion for Attorney Fees • Name: Thomas A. Ballantine, Sr. AAG tab.ballantine@alaska.gov (907) 269-5232 • Attached are 2 PDF documents • The 2 documents are: Reply to Opposition to Motion for Attorney Fees and Certificate of Service • The 2 documents are a total of 4 pages All parties are included in this e-mail filing, as indicated in the attached Certificate of Service. Thank you, Leilani J. Tufaga Law Office Assistant 11 Natural Resources, Oil & Gas, & Transportation Sections Alaska Department of Law 1031 W. 4th Avenue, Suite 200 Anchorage, AK 99501 907-269-5401 000184 IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE Hollis S. French, Appellant, v. Alaska Oil and Gas Conservation Commission, Appellee. ) ) ) ) ) ) ) ) ) ) ) FILED in the Trial Courts state of Alaska Third District JUL 0 8 2020 Cter1c of the Trial Courts By --------O.ooty ~~~~~~~~~~~~~-> Case No. 3AN-19-06694 CI CERTIFICATE OF SERVICE I certify that on this date true and correct copies of the Reply to Opposition to Motion for Attorney Fees and this Certificate of Service were served via U.S. Mail and email on the following: Hollis French 2640 Telequana Drive Anchorage, AK 99517 hsfrench@gmail.com ~;:[./~ Leilani J. Tufaga Law Office Assistant II r / 'l I a-o;;-o date 000185 .. • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA. THIRD JUDICIAL DISTRICT AT ANCHORAGE Hollis S. French, Appellant, v. Alaska Oil and Gas Conservation Commission, ) ) ) ) ) ) ) Appellee. ) --------------.) 3AN-19-6694 CI OPPOSITION TO MOTION l"UH. ATTORNEY'S FEES Appellant hereby opposes Appellee's motion for attorney's fees. Appellee's demand for attorney's fees should be reduced or eliminated by the Court under Alaska Rule of Appellate Procedure 508(e)(4)(B). Rule 508 was amended by SCO 1843, effective April 15, 2015. The amendment gives the Court discretion to modify an award where "the court determines that an award of fees would be so onerous to the non-prevailing party that it would deter similarly situated litigants from the voluntary use of the courts if not reduced."1 This language parallels the wording of Civil Rule 82(b )(3)(1), which allows an adjustment in attorney's fees awards if a court determines that a variation is warranted, taking into consideration "the extent to which a given 1 Ak.R.App.Proc. 508(e)(4)(B). 1 •. ,'-'•t ; ,, ,• 000186 • • fee award may be so onerous to the non-prevailing party that it would deter similarly situated litigants from the voluntary use of the courts."2 In Gold Country v. Fairbanks North Star Borough 3 the Alaska Supreme Court upheld a trial court's denial of an award of attorney's fees, citing the public policy implications behind the rule: This rule provision embodies the concern expressed by Justice Matthews in his dissenting opinion in Bozarth v. Atlantic Richfield Oil Co., where he cautioned: 'If the superior court is to serve its constitutional purpose as a forum available to all the people, superior court judges must consider whether an award of attorney's fees will impair the constitutional right of access to the courts.' In State v. Native Village of Nunapitchuk, we expressly stated that Rule 82(b)(3)(1) 'continues to apply to all cases,' including "those intended to effectuate public policies." We further observed that '[t]rial courts remain free to reduce awards that would otherwise be so onerous to the losing party as to deter similarly situated litigants -including litigants that would have previously been identified as public interest litigants -from accessing the courts.' .... Here, the superior court determined that an award of fees against Gold Country would chill further suits seeking review of the government's actions under its own processes. 4 2 Ak.R.Civ .Proc. 82(b )(3 )(I). 3 270 P.3d 787 (Alaska 2012). 4 /d. at 800 (internal citations and footnotes omitted). 2 000187 • • The underlying claims in Gold Country were alleged violations of the Open Meetings Acts There was no money judgment sought in the case.6 While unsuccessful on the merits, the superior court found no bad faith on the part of the litigants.7 This Court should look to the same factors herein. Appellant sought no money damages in this case. Appellant had no economic incentive to file the complaint. Appellant did not litigate in bad faith. Appellant sought a hearing on a claim of waste of the state's natural resources. To award attorney's fees against Appellant would work to dissuade similarly situated litigants from seeking voluntary use of the courts. Additionally, Appellant will point out that Appellee filed an eleven-page brief in this case. Appellee's claimed attorney's fees thus amount to nearly $3000 per double-spaced page of legal writing. This Court should find that Appellee's fees are unreasonable, and thus not "necessarily incurred" as required by Rule 508(e)(4). For the foregoing reasons, this Court should reduce or deny Appellee's demand for attorney's fees. DATED: June 29, 2020 s/d. at 790. 6/d. at 799. 7 Id. 3 000188 Hollis S. French Bar No. 9606933 • • 4 000189 • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE Hollis S. French, ) Appellant, ) 2D2ll ,.JUN 29 .o:,,. 1_ I l'/ ..,: 08 ) v. ) ) ALASKA OIL AND GAS CONSERVATION ) COMMISSION, ) Appellee. ) 3AN-19-6694 CI CERTIFICATE OF SERVICE I certify that I caused Appellant's Opposition to Motion for Attorney's Fees to be served upon: 1. Thomas Ballantine State of Alaska, Department of Law Assistant Attorney General 1031 W. 4th Avenue, Suite 200 Anchorage, AK 99501 By placing a true copy in First Class Mail to the address above. DATED: June 29, 2020 Hollis S. French Bar No. 9606933 000190 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE Hollis S. French, Appellant, V. Alaska Oil and Gas Conservation Commission, Appellee. ) ) ) ) ) ) ) ) ) ) ) ~~~~~~~~~~~~~~) Filed in the Trial Courts State of Alaska Third District JUN 19 2020 Clerk of the Trial Courts By Deputy Case No. 3AN-19-06694 CI MOTION FOR RULE 508(e) ATTORNEY'S FEES Pursuant to Rule 508( e) of the Alaska Rules of Appellate Procedure ("Appellate Rules"), the appellee, Alaska Oil and Gas Conservation Commission (AOGCC), as the prevailing party in the above-captioned appeal, hereby moves the court for Rule 508(e) Attorney's Fees in the amount of $6,270. On June 9th, 2020, the court affirmed Other Order 150 issued by AOGCC on March 20, 2019. The Court's Order was electronically transmitted to the parties on June 9, 2020. Alaska Appellate Rule 508( e )( 4) provides that the court shall award the prevailing party 20% of its actual attorney's fees reasonably incurred in an appeal taken under Rule 601, Ak,R.App.Proc. Therefore, as the prevailing patty, the AOGCC requests an award of 20% of its actual attorney's fees. As set out in the affidavit of counsel and itemization tendered contemporaneously with this motion, actual attorney's fees in the amount of $31,350 were reasonably and necessarily incurred in litigating this Motion for Rule 508(e) Attorney's Fees French v. AOGCC Case No. 3AN-19-06694CI Page 1 of 2 000191 2 3 4 5 6 7 8 9 10 11 < ~ 12 r.r.i < ...J < 0" 13 "'-o"' N °' 0 WJ -f-....'.. w500 14 fo-'c/l ~ 0 ~wi°'~ !---::i <"' 15 r.r.iz~~ r.W,J <-...J>_i,_ ~<<~ 16 ;i: ui UJ W~oz Zr-<0 (,;,JCl'lO:::t 17 C,;) WJ 0 c.. ~ :i: >--u W"'Z 18 z::: < CZ:: 0 !---19 !---< 20 21 22 23 24 25 26 • • appeal. Accordingly, the AOGCC requests an attorney's fees award of 20% of this amount, or $6,270. DA TED June 19, 2020. Motion for Rule 508(e) Attorney's Fees French v. A OGCC KEVIN G. CLARKSON ATTORNEY GENERAL By: Isl Thomas A. Ballantine Thomas A. Ballantine Senior Assistant Attorney General Alaska Bar No. 8806122 Case No. 3AN-19-06694CI Page 2of2 000192 2 3 4 5 6 7 8 9 JO 11 12 • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE Hollis S. French, Appellant, V. Alaska Oil and Gas Conservation Commission, Appellee. ) ) ) ) ) ) ) ) ) ) ) Case No. 3AN-l 9-06694 CI AFFIDAVIT OF THOMAS A. BALLANTINE IN SUPPORT OF MOTION FOR ATTORNEY'S FEES ST ATE OF ALASKA ) 13 THIRD JUDICIAL DlSTRlCT ) SS. ) 14 I. I am the attorney for the Alaska Oil and Gas Conservation Commission. 15 2. The attached billing report accurately reflects my hours worked and the 16 applicable market billing rate for those hours. I am the only person from the 17 18 Department of Law who worked on this matter. 19 3. I have been advised that the Attorney General has approved hourly 20 market rates of $150 for entry-level attorneys (Attorney I classification), $200 for 21 junior attorneys (Attorney II classification), $250 for journey-level attorneys (Attorney 22 23 24 25 26 III and IV classifications), and $300 for the most senior and supervisory attorneys (Attorneys V and Vl classifications). 4. I have been further advised that the Attorney General determined the French v. AOGCC Affidavit of Counsel Case No. 3AN-I 9-06694CI Page 1of3 000193 2 3 4 5 6 7 8 9 IO 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 • • above rates are fair market rates based on the recommendations of a working group tasked with assessing the Department of Law's policy on attorney's fees requests. The working group periodically reviewed attorney billing rates statewide, including the rates charged by other governmental agencies, the fees paid by the State of Alaska to experienced private practitioners who provide legal services to the State, and the hourly rates charged by private practitioners in Alaska. 5. In accordance with Alaska Jaw, my fees have been calculated based on market rates. See, e.g., Thomas v. State, 377 P.3d 939, 951 n.41 (Alaska 2016); Atl. Richfield Co. v. State, 723 P.2d 1249, 1251-52 (Alaska 1996). 6. I have practiced law approximately 37 years and I am an Attorney V. My fees have been calculated at $300 per hour. 7. Using the above market rates, the total amount of legal fees for defense of this case is $31,350. 8. The information presented in the attached billing report (Exhibit 1) is correct. The time listed was actually and reasonably incurred in AOGCC's successful litigation of this matter. I do not believe that any of the work reflected in the attached report was unnecessary or duplicative. I believe that the total amount of time and money expended on behalf of the Alaska Oil and Gas Conservation Commission is reasonable. French v. AOGCC Affidavit of Counsel Case No. 3AN-19-06694CI Page 2 of 3 000194 2 3 4 5 6 7 8 9 10 II < ::ii: 12 cn < ...J < 8 ... 13 ~ r1 g: ou.:-.... ..:. ~-~ 14 ~ ::> . i: ~ °'.:::::: <:.r..:"'"'· ~ ::> ;2 ~ 15 en z v: r1 ..s ~ :5 r:: <<<~ 16 CZ:: ::: ui;; ~ t; 0 z z 1--<( 0 ~"'"':z: 17 ~ u.: c Q. >~0 ~ ~.z 18 z=:< CZ:: 0 !::: 19 < 20 21 22 23 24 25 26 • DATE June 19, 2020. • KEVIN G. CLARKSON ATTORNEY GENERAL By: Isl Thomas A. Ballantine Thomas A. Ballantine Senior Assistant Attorney General Alaska Bar No. 8806122 Attorney for AOGCC . ~'"'~ SUBSCRIBED AND SWORN to before me this \v I day of :}U,.\l\e,. , 2020, at Anchorage, Alaska. French v. AOGCC Affidavit of Counsel Notar~laska Case No. 3AN-l 9-06694CI Page 3 of 3 000195 cl of Suit for Matter-'All Inclusive' • 2019101810 French (v. AOGCC) (Hilcorp) 020803 DCCED -AOGCC (AOGCC) Report Date 06-10-2020 Timekeeper · · 1oate· · ··•· !"'""'Hours.. .. ... --· ""FeeslDescription· " ... ,,....... · • - Thomas A. Ballantine Review French brief, confer with Seamount, legal 9/13/2019 4.0 $1,200.00 research. 9/16/2019 6.0 $l,800.00 Legal research, review documents, review French brief. 9/17/2019 5.5 $1,650 .00 Legal research, review French brief, draft brief. 9/18/2019 1.0 $300 _00 Legal research. Legal research, review documents, review responses 9/19/2019 5.0 $1,500.00 from Regg, confer with Seamount, review emails, review Draft brief. 9/23/2019 6.0 $1,800.00 9/24/2019 5.5 $1,650 .00 Draft brief, confer with Chmielowski & Seamount. 9/25/2019 3.0 $900 _00 Draft and edit brief. 9/26/2019 3.5 $l,050.00 Draft brief, review French brief, legal research Review emails forwarded by Seamount, confer with 9/27/2019 4.0 $1,200.00 Seamount, draft brief, legal research. Draft brief, confer with Alloway, confer with Birnbaum, legal research, review French brief. 9/30/2019 3.5 $1,050.00 10/11/2019 6.0 $l,800.00 Draft brief, legal research, confer with AOGCC. 10/14/2019 7.0 $2,lOO.OO Draft and edit brief. Draft brief, review appellant's brief, confer with AOGCC. 10/15/2019 6.0 $1,800.00 10/16/2019 4.5 $1,3 50.00 Legal research, draft brief. 10/17/2019 4.0 $l,200.00 Draft brief. 10/18/2019 4.5 $l,350 _00 Draft and edit brief. 10/19/2019 3.5 $l,050.00 Draft and edit brief. 10/21/2019 3.0 $900 _00 Draft and finalize brief. 2/10/2020 4.0 $l,2oo.oo Review briefing, prep for oral argument. 2/11/2020 6.0 $l,8 oo.oo Prep for oral argument. Review briefs. Legal research. 2/12/2020 4.0 $l,2oo.oo Review briefing, prep for argument. 2/17/2020 2.0 $600 _00 Prep for oral argument. 2/18/2020 3.0 $900 .00 Prep for and attend oral argument. Thomas A. Ballantine 104.5 $31,350.00 Total Fees 104.5 $31,350.00 Costs Date I I Amount! Description Total Costs Total Fees and Costs $31,350.00 Exhibit 1 Page 1of1 000196 < ;::&::: rn < ..l < o.,,. .... 0 °' "' °' 0 UJ -I-..! tii;l-o f.-~~~ < "°'"' f.-~<d, rn;z~~ ~ UJ < ~ ..l>...J" ;;2<<~ ti!Ji=u.i~ z "~ 6 tiiJ 1;; on: CJUJQC.. ::: :c ;;..._u tiiJ "' ;z z:: < a:: 0 f.- f.-< 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE Hollis S. French, Appellant, v. Alaska Oil and Gas Conservation Commission, Appellee. ) ) ) ) ) ) ) ) ) ) ) Case No. 3AN-l 9-06694 CI ~-------------~ [PROPOSED] ORDER GRANTING MOTION FOR AW ARD OF ATTORNEY'S FEES After review of the Motion for Award for Attorney's Fees and the supporting documents and exhibits filed by defendant Alaska Oil and Gas Conservation Commission (AOGCC), the Court finds as follows: 1. AOGCC is the prevailing party in this action and is entitled to an award of 20 percent of its attorney's fees under Rule 508(e)(4), Ak,R.App.Proc. 2. The attorney's fees set forth in support of AOGCC's motion are reasonable and were necessarily incurred. Therefore, it is ORDERED that AOGCC is awarded attorney's fees in the 21 amount of$ -------- 22 23 24 25 26 DATED , 2020. ------- Hon. Eric A. Aarseth Superior Court Judge 000197 2 3 4 5 6 7 8 9 10 11 ;:2 12 rn < ...J < 0.,,. 13 ~ o"' N °' 0 WJ -E-~ ...i500 14 fo-tll~o <!!'. '"';;; E--~<d-15 rnz~~ .-UJ<(- ...J >--lb c;2<<°' 16 J: ui ;:; ...it;: u z z E-< 0 ...i t/l ~ :r: 17 c.:i WJ 0 c.. >~o lo.l"'z z :: < 18 a: 0 E--19 E--< 20 21 22 23 24 25 26 • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE Hollis S. French, Appellant, V. Alaska Oil and Gas Conservation Commission, Appellee. ~~~~~~~~~~~~~~~ ) ) ) ) ) ) ) ) ) ) ) Case No. 3AN-19-06694 CI CERTIFICATE OF SERVICE I certify that on this date true and correct copies of the Motion for Rule 508( e) Attorney's Fees, Affidavit of Thomas A. Ballantine In Support of Motion for Attorney's Fees (wlattached Exhibit 1), [Proposed) Order and this Certificate of Service were served via U.S. Mail and Email on the following: Hollis French 2640 Telequana Drive Anchorage, AK 99517 hsfrench@gmail.com French v. A OGCC Affidavit of Counsel Isl Leilani J. Tufaga 0611912020 Leilani J. Tufaga Date Law Office Assistant II Case No. 3AN-l 9-06694CI Page 1of1 000198 • • Brandi Alexander From: Sent: Tufaga, Leilani J (LAW) <leilani.tufaga@alaska.gov> Friday, June 19, 2020 3:02 PM To: Cc: Subject: Attachments: ANC Civil Ballantine, Tab A (LAW); 'hsfrench@gmail.com' 3AN-19-06694CI -Motion for Rule 508(e) Attorney's Fees Motion for Rule 508(e) Attorney's Fees.pdf Attached for filing are the Motion for Rule 508(e) Attorney's Fees. Name: Thomas A. Ballantine, Sr. AAG tab.ballantine@alaska.gov. (907) 269-5232. The attached is (1) PDF document containing (5) documents The documents are: • Motion for Rule 508(e) Attorney's Fees; • Affidavit of Counsel; • Exhibit 1 (accompanies the Affidavit); • [Proposed) Order; & • Certificate of Service The (1) PDF are a total of 8 pages *All parties are included in this e-mail filing, as indicated in the attached Certificate of Service* Respectfully, Leilani J. Tufaga Law Office Assistant 11 Natural Resources, Oil & Gas, & Transportation Sections Alaska Department of Law 1031 W. 4th Avenue, Suite 200 Anchorage, AK 99501 907-269-5401 000199 Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER. Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email corrections@akcourts.gov. THE SUPREME COURT OF THE STATE OF ALASKA HOLLIS S. FRENCH, Appellant, v. ALASKA OIL & GAS CONSERVATION COMMISSION, Appellee. ) ) Supreme Court No. S-17822 Superior Court No. 3AN-19-06694 CI O P I N I O N No. 7553 – September 3, 2021 ) ) ) ) ) ) ) ) ) Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, Eric A. Aarseth and Adolf V. Zeman, Judges. Appearances: Hollis S. French, Anchorage, Appellant. Thomas A. Ballantine, Senior Assistant Attorney General, Anchorage, and Clyde “Ed” Sniffen, Jr., Attorney General, Juneau, for Appellee. Before: Winfree, Maassen, and Carney, Justices. [Bolger, Chief Justice, and Borghesan, Justice, not participating.] WINFREE, Justice. I. INTRODUCTION Anagency denied an individual’srequestfor a hearing regarding areported natural gas leak and whether the leak constituted “waste” under Alaska law. The agency concluded it had no jurisdiction over the matter because it previously had investigated and had concluded the leak did not constitute “waste.” The individual appealed to the superior court, which affirmed the agency’s decision. We reverse. II. FACTS AND PROCEEDINGS The Alaska Oil and Gas Conservation Commission is a quasi-judicial agency charged with investigating waste of oil and gas resources.1 The parties agree that in early 2017 a gas line operated by Hilcorp Alaska, LLC leaked gas into Cook Inlet. In February 2019 Hollis French petitioned the Commission “for a hearing on a complaint of waste.”2 French alleged: “The waste occurred from a[n] 8 [inch] line carrying fuel gas to Platform A in Cook Inlet, which is operated by Hilcorp. The line leaked gas to the atmosphere for approximately three months in the winter and spring of 2017.” French noted that at the hearing he would “be urging the [C]ommission to take action upon [his] complaint.” TheCommission respondedinMarch2019,statingthatithad“investigated the leak at the time it occurred” and that it had concluded “the leaking gas had been purchased by Hilcorp from a third-party provider . . . and was being shipped back to Platform A.” The Commission stated it had already concluded that, because the leaking gas had been “metered and severed from the property,” the leaking gas could not be waste and the Commission therefore had no “waste jurisdiction over [the] gas.” 1 AS 31.05.005(a) (describing Commission as “independent quasi-judicial agency of the state . . . composed of three Commissioners appointed by the governor and confirmed by the legislature in joint session”); AS 31.05.030(b) (requiring Commission to “investigate to determine whether . . . waste exists or is imminent, or whether . . . facts exist which justify or require action by it”); see also AS 31.05.170(15) (defining waste). 2 See AS 31.05.060(a) (noting that “[C]ommission may act upon . . . the petition of an interested person” and that “[o]n the filing of a petition concerning a matter within the jurisdiction of the [C]ommission . . . , the [C]ommission shall promptly fix a date for a hearing[] and shall cause notice of the hearing to be given”). -2-7553 According to the Commission, “[a]bsent jurisdiction, there [was] no basis for a hearing.” French requested reconsideration, which was denied by operation of law.3 French appealed to the superior court, which affirmed the Commission’s decision. The court applied rational basis review and concluded the Commission’s determination, that gas once metered and severed from a property could not be waste, was reasonable. French moved for reconsideration, arguing that the superior court failed to address the agency’s conclusion regarding its jurisdiction over the gas leak. The court denied French’s motion for reconsideration. At the Commission’s request, the superior court awarded the Commission $6,270 in attorney’s fees.4 French appeals. III. STANDARD OF REVIEW “When the superior court is acting as an intermediate court of appeal in an administrative matter, we independently review the merits of the agency or administrative board’s decision.”5 “We exercise our independent judgment on [any] issue concerning the scope of an agency’s authority [because] it involves statutory interpretation, or analysis of legal relationships, about which courts have specialized knowledge and expertise.”6 We review an agency’s factual findings “to determine 3 See AS 31.05.080(a) (providing that failure to grant or refuse application for reconsideration within ten days of filing “is a refusal of [the application] and a final disposition of the application”). 4 See Alaska R. App. P. 508(e). 5 Shea v. State, Dep’t of Admin., Div. of Ret. & Benefits, 267 P.3d 624, 630 (Alaska 2011). 6 Regulatory Comm’n of Alaska v. Matanuska Elec. Ass’n., 436 P.3d 1015, 1025 (Alaska 2019) (first alteration original) (quoting Far N. Sanitation, Inc. v. Alaska Pub. Utils. Comm’n, 825 P.2d 867, 871 n.6 (Alaska 1992)). -3-7553 whether they are supported by substantial evidence,” meaning “such relevant evidence as a reasonable mind might accept as adequate to support [the agency’s] conclusion.”7 IV. DISCUSSION “The [C]ommission may act upon its own motion[] or upon the petition of an interested person. On the filing of a petition concerning a matter within [its] jurisdiction . . . , the [C]ommission shall promptly fix a date for a hearing, and shall cause notice of the hearing to be given.”8 French filed a petition alleging that the Cook Inlet gas leak constituted waste. The parties appear to assume that French is an interested person. The only issue thus is whether French’s petition contained a matter within the Commission’s broad jurisdiction. “The [C]ommission has jurisdiction and authority over all persons and property, public and private, necessary to carry out the purposes and intent of this chapter.”9 French argues that because the Commission is required to “investigate whether waste exists,” the text of the statute gives the Commission jurisdiction over waste determinations.10 French also presents several policy arguments why the jurisdiction statute should be read broadly. The Commission concedes that it “has statewide jurisdiction over waste” but argues that it was required to determine whether the leak was waste before it could exercise jurisdiction because “[a]bsent waste, there is no waste jurisdiction.” 7 Shea, 267 P.3d at 630 (quoting Lopez v. Adm’r, Pub. Emps.’ Ret. Sys., 20 P.3d 568, 570 (Alaska 2001)). 8 AS 31.05.060(a). 9 AS 31.05.030(a). 10 See AS 31.05.030(a)-(b). -4-7553 TheCommission’sjurisdictionargumentputsthecartbeforethehorse. The Commission’s mission is investigating and identifying oil and gas waste,11 and it therefore has jurisdiction over “all persons and property, public and private, necessary to” investigate and identify oil and gas waste.12 The Commission thus had jurisdiction over the leak at issue. If we accepted the Commission’s understanding of jurisdiction, the Commission could always undermine AS 31.05.060(a)’s hearing requirement by deciding the substantive issue behind closed doors and then disclaiming jurisdiction. The Commission argues that it properly denied French’s request for a hearing because it already had investigated the leak and made a waste determination. But even assuming the Commission can deny a hearing because it previously investigated and decided a matter, the factual assertion that it has done so must be supported by substantial evidence.13 The Commission’s statements about having investigated whether the leak was waste are wholly unsupported. The Commission’s dismissal order contains several factual statements about the alleged investigation and waste determination, but there is no supporting evidence in the administrative record. French’s request for a hearing therefore was improperly denied. The Commission has jurisdiction over waste determinations, and substantial evidence does not support its assertion that it investigated and concluded this leak was not waste. 11 AS 31.05.030(b) (“The [C]ommission shall investigate to determine whether or not waste exists or is imminent, or whether or not other facts exist which justify or require action by it.”). 12 See AS 31.05.030(a). 13 See supra note 7 and accompanying text. -5-7553 V. CONCLUSION The superior court’s decision is REVERSED, its attorney’s fees award is VACATED, and this matter is REMANDED to the Commission for further proceedings consistent with this opinion. -6-7553