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Home My WebLink AboutO 051 - APP -11 -01• Image Project Order File Cover Page XHVZE This page identifies those items that were not scanned during the initial production scanning phase. They are available in the original file, may be scanned during a special rescan activity or are viewable by direct inspection of the file. 0 11- 01 Order File Identifier Organizing (done) RESCAN ❑ Color Items: ❑ Greyscale Items: ❑ Poor Quality Originals: ❑ Other: NOTES: BY: / Maria Project Proofing BY: Maria Scanning Preparation BY: Mai ria 1 F-i.wo-s,ad iiiiumiumiui DIGITAL DATA ❑ Diskettes, No. ❑ Other, No/Type: Date: Date: _x30= Date: I I f 0 a,scanN„aed 111111111111111111 OVERSIZED (Scannable) ❑ Maps: ❑ Other Items Scannable by a Large Scanner OVERSIZED (Non -Scannable) ❑ Logs of various kinds: ❑ Other:: /s/ N P /s/ uuiliWiiuiiiu �Kp + = TOTAL PAGES (Count does not include cover sheet) /s/ Production Scanning III IIIIIIIIIII IIIII Stage 1 Page Count from Scanned File: (Count does include co er sheet) Pa a Count Matches Number in Scanning Preparation: YES NO BY: (: Maria Date: F 7/I'g— /s/ If Stage 1 If NO in stage 1, page(s) discrepancies were found: YES NO BY: Maria Date: /s/ Scanning is complete at this point unless rescanning is required. II I II II II I II II I I III ReScanned III IIIIIIIIIII IIIII BY: Maria Date: /s/ Comments about this file: Quality Checked 1111111111111111111 1/17/2012 Orders File Cover Page.doc IN THE SUP COURT (for court system use) OF THE STATE OF ALASKA DOCKETING STATEMENT A L' For Use in Appeals Under Appellate Rule 204 and 218 - ' $ alt ttlulU , ra r ,ref roar f' z r yO Vii*, ,,, N'" ,V. . : � k4 c y. � tl�:.. f. . . t p� x - f ',. lt! . r F T . M` t '", t"*g. 7 ' _`., „+� iT�o-v°K+a. �S`nf�F 8 ,. 1425' F1� '''z'NN" .i Q`' 1f TYPE OF APPEAL a. Q General Civil Rule Appeal (App. b. ® Appeal in Child Custody Case Rule 204) (App. Rule 218) No. 2. PARTY FILING APPEAL (Appellant) a. Name b. Status in the Trial Court Alaskan Crude Corp. and James W. White El Plaintiff ❑ Defendant c. Party mailing address (not attorney's address) ® ether, Specify: Appellants 4614 Bohiil City State Zip Code d. Telephone San Antonio TX 78217 210.651.0777 3. APPELLANT'S ATTORNEY a. Name b. Bar Number Brian J. Stibitz 106043 c. Attorney mailing address d. Telephone e. Fax 500 L Street, Suite 300 907.222,7100 _ 907.222.7199 City State Zip Code f. Firm/Agency Anchorage AK 99501 Reeves Amodio LLC 4. PARTY APPEALED AGAINST (Appellee) IAII parties in the trial court when the final order /judgment were entered are appellees and muss be listed if they did not file a notice of appeal. AR 204(b)11) & (g).) a. Name b. Status in the Trial Court State of Alaska, Alaska Oland Gas Consrvation Comm. El plaintiff 0 Defendant c. Party mailing address ® Other. Specify: Appellees 333 W. 7th Ave. Ste. 100 City State Zip Code d. Telephone Anchorage AK 99501 907.279.1433 5. APPELLEE'S ATTORNEY a. Name b. Bt Number Thomas A. Ballentine 111 8806122 c. Attorney mailing address d. Telephone e. Fax 1031 W. 4th Avenue, Ste. 200 907.269.5255 907.279.8644 City State Zip Code f. Firm/Agency Anchorage AK 99501 _ Office of the Attorney General 6. SUPERIOR COURT PROCEEDING a. Case No. h. Superior Court Judge c. gate Judgment t)iqmhuted 3AN_07- 11471C1 John Suddock 12/08/10 d. lost- Jud'mcnt Motions: List all ost.'ud_ement motions that affect time for filin t a >eal. See A •ellate Rule 204 (a)(3). DATE OF FILING Type of post - Judgment Motion DATE ORDER pima Month Day Year Month , 1)ay Year 7. CONSTITUTIONAL ISSUES Is the constitutionality of a state statute or regulation at issue in this appeal? ® Yes EJ No If yes, cite statute or regulation: SCT -A (rev. 6/05) 8. FINALITY OF JUDGMEN R ORDER BEING APPEALED • a. © Thc judgment or order being appealed is final and disposes of ALL claims by ALL panics. (Thc judgment or order is final under City and Borough of Juneau v. Thiboudeau 595 P,2d 626 (AK 1979).) b. ❑ The judgment or order being appealed does not dispose of all claims by all parties but is final under Civil Rule 54(b). (The trial court's Civil Rule 54(b) order must be attached.) c. ❑ The judgment or order being appealed is not final. The authority fur this appeal is 9. ATTACHMENTS The following items are submitted with this form (except that cross - appellants need not submit item a,): a. ® A copy of the final order or judgment from which the appeal is taken. b. © A statement of points on appeal. c. ® A $150 filing fee of ❑ a motion to appeal at public expense (financial statement affidavit form must be included). ❑ a motion to waive filing fee (if basis for motion is inability to pay, financial statement affidavit form must be included). ❑ an application for exemption from filing fee under AS 9.19.010. 0 no filing fee is required becuse appellant is ❑ represented by court - appointed counsel. and AS 9.19.010 does not apply. O the state or an agency thereof. ❑ an employee appealing denial of benefits under AS 23.20 d. ® A $750 cost bond or deposit or (Employment Security Act). ID copy of a superior court order approving appellant's supersedeas bond or a copy of appellent's motion to the superior court for approval of a supersedeas bond. ❑ a motion to waive cost bond (if basis for motion is inability to pay, financial statement affidavit form must be included). ❑ motion to appeal at public expense (financial statement affidavit form mu %t be included). ❑ no cost bond is required because appellant is ❑ represented by court- appointed counsel, ❑ a state agency, municipality, or state or municipal officer, ❑ an employee appealing denial of compensation by Alaska Workers' Compensation Board or denial of benefits under AS 2120 (Employment Security Act). e, Designation of transcript ❑submitted ❑not submitted (no transcript being requested) Emotion to extend submitted - • ` • Date Signature Of Appellant or Appellant's Attorney CERTIFICATE OF SERVICE 1 certify that on 01/10/11 a copy of the notice of appeal, this docketing FILING INSTRUCTIONS statement, and all attachments (except filing fee and cost bond) were File original docketing mailed delivered to All Parties (listed) statement and notice of ❑ Gregory Mecallef appeal with all ❑ Clifford C. Burglin attachments listed in #9 ❑ Thomas A. BaAentine III and ONE copy of ALL O ❑ except filing fee and cost O 0 bond. Signature: SCT -A -2 (rev, 6/05) • SEAN PARNELL, GOVERNOR DEPARTMENT OF LAW 1031 WEST 4 A I 'ME. SUM: 21)0 ANCHORAGE ALASK,4 99501-1994 OFFICE OF THE AITORNEY GENERAL P11ONL (907)269-5100 FAX (907)276-3697 December 16, 2011 VIA EMAIL & U.S. MAIL Ms. Heather Gardner Shorten Gardner LLC 425 G Street, Suite 714 Anchorage, Alaska 99501 heather@shorte I I gardner.com Re: White global settlement Dear Ms. Gardner: We are responding to your November 21, 2011 counteroffer regarding: 1) the disposition of Arctic Fortitude Unit (AFU) (See Superior Court Case No. 3AN-08-09865 C1; Supreme Court Case No. S-13708); 2) a settlement of the Alaska Oil and Gas Conservation Commission (AOGCC) appeal (Superior Court Case No. 3AN-07-11471 0; Supreme Court Case No. S-14148); and 3) a settlement of the Moose Point lease appeal (Superior Court Case No. 3AN-10-04671 C1). The parties have referred to the previous discussions on these matters as a "global settlement." You know the history of these cases, but we are briefly recounting it here for the record. The AFU default appeal with the Department of Natural Resources (DNR) commenced on February 26, 2008 when Mr. White asked the agency to toll his AFU Plan of Exploration (P)E) work obligations. The DNR Commissioner issued a final. appealable decision denying Mr. White's request and defaulting the AFU on July 16, 2008. Mr. White appealed that decision to the Superior Court. which upheld the Commissioner's default decision on October 27, 2009 and awarded the State $4,020.90 in attorneys' fees (offset by the delivery of the $750.00 appeal bond to the State for a total due of $3,270.90). As you know, the Supreme Court affirmed the Superior Court decision on October 7, 2011 and awarded the State $1,500.00 in attorneys' kes. Mr. White has not paid the $2.535.72 record preparation costs, which the State will pursue if the parties cannot reach a global settlement of all these matters. The total costs and fees for these appeals are $7,306.62. Over the course of these appeals, from February 26, 2008 to date, Mr. White paid DNR $76,356.00 in lease rentals and a $60,000.00 POE payment—totaling $136,356.00. The next step in this process is for DNR to issue an AFU termination notice. And, as you know. Mr. White has the right to appeal any termination decision. • • !leather Gardner December 16, 2011 Page 2 The AOGCC response planning standard appeal is pending in the Supreme Court; the Superior Court having upheld the AOGCC's Other Order 51 and the agency's decision denying reconsideration of that ordcr and awarding thc State $10,000.00 in attorney's fees. See December 8, 2010 Opinion, Superior Court Case No. 3AN-07-11471 CI. Mr. White has also not paid the $3,454.12 record preparation costs for this appeal. As you know, the parties filed a motion to stay thc briefing in this appeal to accommodate these global settlement discussions. The Moose Point lease termination appeal has been briefed and is awaiting oral argument before the Superior Court. Mr. White made one $14,400.00 lease rental payment in 2009. The parties have stayed the scheduled settlement conference in this appeal to accommodate these global settlement discussions. As Mr. Landry previously discussed with you by telephone. DNR was prepared to forego its costs and its attorneys' fees in the AFU appeals if Mr. White agreed to immediate termination of the AFU and surrender of its three leases. You responded that Mr. White would want refunded all the money he had paid to DNR since the inception of the AFU litigation, Le., from February 2008. Those discussions evolved into these global settlement discussions and resulted in the State's $33,489.00 offer, which represents refunds to Mr. Whitc of his 2011 AFU lease rentals ($19, 089.00), which he paid after the AFU would have automatically terminated under 11 AAC 83.336(a), and of his 2009 Moose Point lease rental ($14,400.00). Based on the foregoing, the State (DNR and the AOGCC) respond to your counteroffer as follows: 1. DNR shall forego its record preparation costs ($2,535.72) and attorneys' fees ($4,770.90) in the AFU appeals. 2. The AOGCC shall forego its record preparations costs ($3,454.12) and attorney's fees ($10,000.00) awarded by the Superior Court in the AOGCC appeal. 3. DNR shall refund $93,489.00 to Mr. White, which represents the original $33,489.00 offer, plus another $60,000.00, which represents Mr. White's post- appeal, 2008 AFU POE payment. 4. Mr. White shall voluntarily terminate the AFU and immediately surrender the three AFU leases to DNR. 5. Mr. White and the State shall enter into a stipulation dismissing the AOGCC Supreme Court appeal, with prejudice, with each sidc bearing its own fees and costs. 6. Mr. White and DNR shall enter into a stipulation dismissing the Moose Point Superior Court appeal, with prejudice, with each side bearing its own fees and costs, • • lleather Gardner December 16, 2011 Page 3 7. If Mr. White agrees to terminate the AFU and surrender the three State oil and gas leases, ADLs 389177, 389178, and 389179, that agreement will not discharge his obligations under AOGCC regulations to properly plug and abandon all wells and clear the onshore well locations. DNR will not require Mr. White to remove the gravel pads located on these leases. 8. With respect to the Moose Point No. 1 well on ADI. 389922, Mr. White shall also comply with the AOGCC regulations rcgarding well plugging and abandonment, and onshore location clearance. We note that the private surface owner may authorize a different disposition of the location than that required under 20 AAC 25.170(a)(2). 9. This global settlement would be entered into by and between DNR, the AOGCC, and Mr. White. It is not intended to affect or settle any other State agency claims against Mr. White. The facts and statements made in this letter are for settlement purposes only. We look forward to hearing from you at your earliest convenience. If you have any questions about this response you may contact Mr. Landry at 269-5267. Sincerely, JOHN J. BURNS ATI'ORNEY GENERAL By: I- Jeffr y 1) . an dry Senior Assistant Attorney General Alaska Bar No. 9009058 By: Thomas A. Ballantine Senior Assistant Attorney General Alaska Bar No. 8806122 By: tr Marti chultz Senior Assistant Attorney General Alaska Bar No. 9306048 JDL/jde cc: Cammy Taylor, DNR Dan Seamount, AOGCC • • 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@appellate.courts.state.ak.us. THE SUPREME COURT OF THE STATE OF ALASKA ALASKAN CRUDE ) CORPORATION and JAMES W. ) Supreme Court No. S -13708 WHITE, ) ) Superior Court No. 3AN -08 -09865 CI Appellants, ) ) OPINION v. ) ) No. 6606 — October 7, 2011 STATE OF ALASKA, ) DEPARTMENT OF NATURAL ) RESOURCES, DIVISION OF OIL ) AND GAS, ) ) Appellee. ) ) Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, William F. Morse, Judge. Appearances: Brian J. Stibitz, Reeves Amodio LLC, Anchorage, and Heather L. Gardner, Shortell Gardner LLC, Anchorage, for Appellants. Jeffrey D. Landry, Senior Assistant Attorney General, Anchorage, and Daniel S. Sullivan, Attorney General, Juneau, for Appellee. Before: Carpeneti, Chief Justice, Fabe, Winfree, Christen, and Stowers, Justices. FABE, Justice. I. INTRODUCTION Appellant Alaskan Crude Corporation operates an oil and gas unit near Deadhorse known as the Arctic Fortitude Unit. Appellant James W. White is the president of Alaskan Crude and a leaseholder of an oil and gas lease that is part of the Arctic Fortitude Unit. Alaskan Crude's unit agreement with the Department of Natural Resources set work obligation deadlines that Alaskan Crude was required to meet to continue operating the Arctic Fortitude Unit. In July 2008 the Department of Natural Resources Commissioner found that Alaskan Crude had failed to meet its work obligations, gave notice that Alaskan Crude was in default under its unit agreement, and specified that the Arctic Fortitude Unit would be terminated if Alaskan Crude did not cure the default by a new set of deadlines. Alaskan Crude appealed the Commissioner's decision to the superior court, arguing that a pending judicial decision in a separate appeal qualified as a force majeure under the unit agreement, preventing Alaskan Crude from meeting its work obligations. It also argued that the Commissioner's proposed default cure was an improper unilateral amendment of Alaskan Crude's unit agreement. The superior court affirmed the Commissioner's findings and decision and Alaskan Crude appealed. We conclude that (1) the pending judicial decision in Alaskan Crude's separate appeal did not trigger the force majeure clause of the unit agreement; and (2) the Commissioner's proposed default cure was not a unilateral amendment of Alaskan Crude's unit agreement. We thus affirm the decision of the superior court upholding the decision of the Commissioner. II. FACTS AND PROCEEDINGS In June 2006 the Department of Natural Resources (DNR), Oil and Gas Division approved the formation of the Arctic Fortitude Unit (the Unit), an oil and gas -2- 6606 • unit made up of three individual leases located near Deadhorse.' Alaskan Crude Corporation is the operator of the Unit, and James W. White is one of the leaseholders as well as the president of Alaskan Crude. One of the leases included in the Unit contains a pre- existing well known as Burglin 33 -1. Since the formation of the Unit, Alaskan Crude has been involved in two separate but closely related disputes with several state agencies. The first dispute, with the Department of Environmental Conservation (DEC) and the Alaska Oil and Gas Conservation Commission (AOGCC), concerns whether an oil spill contingency plan is required for the Burglin 33 -1 well. That dispute is the subject of a separate appeal before this court. The second dispute, which involves the DNR Oil and Gas Division (the Division) and is the subject of this appeal, concerns Alaskan Crude's work obligations under its unit agreement and whether the pending appeal in the first dispute created a force majeure preventing Alaskan Crude from meeting those obligations. A discussion of both disputes is necessary to understand the issues underlying this appeal. A. The Dispute Concerning Alaskan Crude's Oil Spill Contingency Plan The operator of an oil exploration facility must develop a contingency plan in case of an oil spill and obtain approval of that plan from DEC in consultation with AOGCC. The contingency plan requirements are based primarily on the number of 1 See generally Gottstein v. State, Dep't of Natural Res., 223 P.3d 609, 611 11.4 (Alaska 2010) (noting regulations defining "unit" and "unit agreement "). 2 We refer to the appellants collectively as "Alaskan Crude." 3 AS 46.04.030(b). 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; (continued...) -3- 6606 • barrels of oil per day that the exploration facility should be prepared to contain in the event of a spill; that number is known as the response planning standard. Gas -only wells, however, are exempt from these requirements.' When the Unit was formed, Alaskan Crude seemed to suggest that it intended to use the Burglin 33 -1 well to explore for both oil and gas. Almost one year after the Unit's formation, Alaskan Crude requested an 85% reduction in the response planning standard for the Burglin 33 -1 well, neither requesting a declaration that the well was a "natural gas exploration facility" nor mentioning the rules exempting gas -only wells. DEC approved the reduction on AOGCC's recommendation but also noted AOGCC's determination that it would be inappropriate to classify the well as a gas -only well. Alaskan Crude requested reconsideration, citing the statutory exemptions for gas - only wells and arguing that the 85% reduction was insufficient. After a hearing (which the parties did not attend), AOGCC reaffirmed its earlier determination that Burglin 33 -1 was not a gas -only well and further reduced the response planning standard based upon new computer modeling of the well's potential flow rate. Alaskan Crude then indicated that it was now planning to test the well at a shallower depth than it had previously intended — a depth which would not be "capable of unassisted flow to the surface" — and requested that AOGCC reconsider its decision on this basis. AOGCC treated Alaskan Crude's request as a new application for a recommended response planning standard based upon the shallower depth and further 3 (...continued) AS 31.05.110; AS 31.05.030. 4 18 Alaska Administrative Code (AAC) 75.434 (2004). ' AS 46.04.050(c). -4- 6606 • • reduced the response planning standard to 115 barrels of oil per day. Alaskan Crude did not seek agency rehearing of this determination; instead, it appealed to the superior court pursuant to AS 22.10.020(d), arguing that the well is gas -only and is exempt from oil spill contingency planning. The superior court upheld AOGCC's determination on December 8, 2010.' That decision is the subject of a separate appeal to this court. B. The Dispute Concerning Alaskan Crude's Work Obligation Deadlines And The Force Majeure Clause While Alaskan Crude was disputing whether it was exempt from an oil spill contingency plan, it was also having difficulty meeting the work obligations outlined in its plan of exploration. DNR regulations provide that to form an oil and gas unit, lessees must propose a unit agreement and a plan of exploration. Failure to comply with the terms of the approved unit agreement or the plan of exploration is a default under the unit agreement. When a default occurs the DNR Commissioner must provide notice to the unit operator and a demand to cure the default by a specific date. If the default is not cured by the specified date the Commissioner has discretion to terminate the unit agreement." 6 Alaskan Crude Corp. v. State, Alaska Oil & Gas Conservation Comm 'n, No. 3AN -07 -11471 CI (Alaska Super., Dec. 8, 2010). Id. 8 1 1 AAC 83.306 (requiring a proposed unit agreement as part of an application for DNR approval of an oil and gas unit); 11 AAC 83.341 (requiring a unit plan of exploration to be filed as an exhibit to the proposed unit agreement). 9 11 AAC 83.374(a). '° 11 AAC 83.374(b). " 11 AAC 83.374(c) -(d). - 6606 . . Under Article 20 of Alaskan Crude's unit agreement, failure to comply with the terms of the unit agreement or the plan of exploration because of "force majeure" is not a default. Force majeure is defined by DNR regulations as "war, riots, acts of God, unusually severe weather, or any other cause beyond the unit operator's reasonable ability to foresee or control and includes operational failure to existing transportation facilities and delays caused by judicial decisions or lack of them. " White's oil and gas lease also provided that "[i]f the state determines that the lessee has been prevented by force majeure, after efforts made in good faith, from performing any act that would extend the lease beyond the primary term, this lease will not expire during the period of force majeure." The language defining force majeure in the lease is identical to the DNR regulations. The initial plan of exploration for the Unit contained several work obligation deadlines. The deadlines at issue in this appeal are the "Stage 2 work obligations "; specifically, that Alaskan Crude move a drilling rig onto the Burglin 33 -1 well pad and re -drill the wel1. The initial plan of exploration required Alaskan Crude to complete the Stage 2 work obligations by October 1, 2007. The plan of exploration also provided that if Alaskan Crude missed its work obligation deadlines the Unit would automatically terminate. On June 26, 2007, a year after the initial plan of exploration was approved, Alaskan Crude sent a letter to the Division requesting a modification of the Stage 2 work obligations. The letter alleged that although Alaskan Crude had "diligently pursued 12 11 AAC 83.395(3). 13 At the time the Unit was formed, the Burglin 33 -1 well was "suspended," meaning plugged with the option to later re -enter and re -drill the well. See 20 AAC 25.990(70) (defining suspended well); 20 AAC 25.110 (outlining the procedures for suspending a well). -6- 6606 • • permits and required authorizations," "winter tundra travel equipment shortages and summer tundra travel restrictions" made it impossible to meet the work obligations by October 1, 2007. Alaskan Crude requested that the deadline for these obligations be changed to October 1, 2008. The Division denied this request on June 28, 2007. The Division explained that Alaskan Crude's summer tundra travel plans had been delayed because Alaskan Crude had not submitted the proper permit application or requested a permitted contractor and that Alaskan Crude had been given sufficient time to schedule winter equipment deliveries. The Division reminded Alaskan Crude that the Unit would automatically terminate if the work obligations were not met and notified Alaskan Crude of its right to appeal the decision to the DNR Commissioner. Alaskan Crude appealed the denial of its modification request on July 17, 2007 and requested a hearing. The hearing was held on September 28, 2007, but Alaskan Crude did not attend. On November 6, 2007, Alaskan Crude and the Division settled the appeal by agreeing to an amended plan of exploration. The amended plan of exploration changed the deadlines for the Stage 2 work obligations, requiring Alaskan Crude to deliver the necessary drilling equipment to the Burglin 33 -1 well pad by May 15, 2008 and to re -drill the well by October 1, 2008. In January 2008 Alaskan Crude sent an email to the Division stating that Alaskan Crude was unable to communicate with AOGCC regarding the development of a contingency plan and that this inability was "delaying [its] ability to obtain a [contingency plan] and forcing work into a force majeure situation." The email asked for the Division's advice. The Division responded on January 16 that Alaskan Crude's claim was "incorrect," that Alaskan Crude was "in control of the process," and that the -7- 6606 • I Division saw no cause for delays in the work obligations. On February 2, Alaskan Crude sent a letter notifying the Director of the Division that it was "appealing" the decision made in the January 16 email to deny Alaskan Crude's request "to have the Arctic Fortitude Unit contract and associated plan of exploration obligations be placed in force majeure status due to the unforeseen delay in the ability of [Alaskan Crude] to permit the re -entry of the Burglin 33 -1 well." Alaskan Crude repeated its assertion that AOGCC was refusing to communicate with Alaskan Crude about its contingency plan. The Division Director responded on February 15, 2008. The Division Director informed Alaskan Crude that it could not process the letter as an "appeal" because the January 16 email was simply informal advice and not a decision capable of appeal under DNR regulations. But the Division Director also said that he would consider the letter an original request to toll Alaskan Crude's work obligations so long as Alaskan Crude provided further information within seven days about "the specific nature of the alleged force majeure and whether it is ongoing" and "which work commitments [Alaskan Crude] want[s] tolled and for how long." Eleven days later, on February 26, Alaskan Crude sent a fax to the Division Director purporting to provide the requested information. The fax stated that Alaskan Crude "asks again for a declaration of force majeure for an extension of the ... work 14 Due to the appeal to the superior court regarding the response planning standard, see supra Part II.A, AOGCC had determined that counsel needed to be present during any discussions with Alaskan Crude or its consultants. The Division of Oil and Gas described this not as a refusal of AOGCC to communicate with Alaskan Crude, but instead as "reasonable procedural guidelines under which those discussions could take place." 15 See 11 AAC 02.900(4) (defining "decision" as "a written discretionary or factual determination by the department specifying the details of the action to be allowed or taken "). - 6606 • commitment deadlines commensurate with the period of the force majeure caused by AOGCC actions." It alleged that "[t]he period of force majeure has been 90 days so far and is still continuing.... The AOGCC is holding [Alaskan Crude] hostage in this matter because of [a] pending appeal [Alaskan Crude] has with the AOGCC on [an] entirely separate and unrelated matter." On March 24 the Division denied Alaskan Crude's request to invoke the force majeure clause and toll its work obligations. The Division Director stated that there was "no evidence" that AOGCC had delayed Alaskan Crude's ability to prepare and submit a contingency plan and that "AOGCC did not refuse to discuss matters involving the well with [Alaskan Crude] or its consultant." The Division Director found that Alaskan Crude "is requesting to delay its ... work commitments solely because it is dissatisfied with the AOGCC's determination that the Burglin 33 -1 well is not a gas - only well" and that AOGCC's determination and Alaskan Crude's subsequent appeal were "not force majeure events" because they were not beyond Alaskan Crude's "reasonable ability to foresee or control. " The Division Director observed that AOGCC had granted Alaskan Crude's original request for a reduction in the response planning standard and that "the appeal of the gas -only determination is entirely within [Alaskan Crude's] control; you can't create your own force majeure through litigation." Finally, the Division Director also found that "the dispute and litigation with the AOGCC" was not preventing Alaskan Crude from meeting its work obligations because Alaskan Crude was not required to have an approved contingency plan to move a drilling rig to the well pad. 16 See 11 AAC 83.395(3) (" [F]orce majeure' means war, riots, acts of God, unusually severe weather, or any other cause beyond the unit operator's reasonable ability to foresee or control and includes operational failure to existing transportation facilities and delays caused by judicial decisions or lack of them. "). -9- 6606 I On April 10, 2008, Alaskan Crude appealed the Division's decision to the DNR Commissioner. Alaskan Crude asserted that "from the beginning" it had intended to explore Burglin 33 -1 as a gas -only well, that AOGCC's determination was thus "clearly unanticipated" and "out of [Alaskan Crude's] ability to control," and that Alaskan Crude had been "forced" to file a superior court action "to obtain the necessary determination." The appeal concluded that the pending judicial action regarding the gas - only exemption was a force majeure because it "will directly affect [Alaskan Crude's] proposed actions" and "it is not prudent to execute the work obligations ... until this issue is decided." While the appeal to the DNR Commissioner was pending, DNR reminded Alaskan Crude that its work obligations remained in place. Alaskan Crude then made two additional requests to the Director of the Division, on April 24 and May 5, to amend the plan of exploration and push back the work obligation deadlines. Alaskan Crude suggested new deadlines of March 31, 2009, for moving a drilling rig to the Burglin 33 -1 well, and October 1, 2009, for re- drilling the well. These requests were not acted upon, and on May 15, 2008, Alaskan Crude defaulted on its work obligation to deliver a drilling rig to the Burglin 33 -1 well. On July 16, 2008, the DNR Commissioner issued findings and a decision regarding the force majeure appeal. The Commissioner made several factual findings, a d in g J pP including that Alaskan Crude had agreed to the amended plan of exploration and the May 15 deadline after AOGCC had determined that Burglin 33 -1 was not a gas -only well." The Commissioner also decided that there was "no basis to determine a force majeure exists" under either the Unit's oil and gas leases or the unit agreement. The 17 Alaskan Crude does not appear to have challenged the Commissioner's factual findings in either the superior court or this appeal. -10- 6606 • Commissioner cited the same reasons provided by the Division Director: that Alaskan Crude's litigation with AOGCC was not beyond its ability to foresee or control because Alaskan Crude agreed to the amended deadlines after receiving AOGCC 's initial determination; and that the litigation did not prevent Alaskan Crude from meeting its work obligations because contingency plan approval was not required to move a drilling rig to the well platform. The Commissioner also gave notice that Alaskan Crude was in default under its unit agreement because it had failed to move a drilling rig to the well by May 15, 2008. The Commissioner set out a default cure demand that required Alaskan Crude to move a drilling rig to the well by March 31, 2009 and re -drill the well by October 1, 2009; this default cure had "the practical effect of granting [Alaskan Crude's] requests to delay its work obligations" under the amended plan of exploration. Alaskan Crude appealed the Commissioner's findings and decision to the superior court, arguing that the Commissioner erred in determining that there was no basis to invoke the force majeure clause and that the Commissioner's proposed default cure was an impermissible unilateral amendment of the plan of exploration. The superior court affirmed the Commissioner's decision that Alaskan Crude could not invoke the force majeure clause but used slightly different reasoning. The Division, and the DNR Commissioner, analyzed Alaskan Crude's "dispute and litigation with the AOGCC" as a single event and concluded that it was not a force majeure because it was within 18 See 11 AAC 83.374(a) ( "Failure to comply with any of the terms of an approved unit agreement, including any plans of exploration ... is a default under the unit agreement. "); 11 AAC 83.374(b) ( "The commissioner will give notice to the unit operator and defaulting party ... of the default. "). 19 See 11 AAC 83.374(b) ( "The notice will state the nature of the default and include a demand to cure the default by a specific date, which ... will be a date not less than 90 days after the date of the commissioner's notice of default. "). -11- 6606 • S Alaskan Crude's ability to foresee or control and did not prevent Alaskan Crude from fulfilling its work obligations. The superior court analyzed AOGCC 's determination and the lack of a decision on the appeal from that determination as separate events. First, the superior court concluded that the AOGCC determination itself was not a "judicial decision" covered by the force majeure clause because AOGCC "is a quasi - judicial, as opposed to judicial, body." Second, the superior court concluded that although the lack of a judicial decision on appeal from the AOGCC determination could fall within the clause, it had not prevented Alaskan Crude from fulfilling its work obligations — it only made those obligations more expensive than Alaskan Crude had hoped. The superior court did not specifically address whether the lack of a judicial decision was within Alaskan Crude's ability to foresee or control, but it did comment that when Alaskan Crude entered the amended unit agreement, it knew that "the lack of exemption [as a gas - only well] was a certainty, at least pending the outcome of a lengthy appeal." The superior court also held that the DNR Commissioner's proposed default cure did not unilaterally amend Alaskan Crude's unit agreement because the unit agreement "itself sets out the procedure for issuing demands to cure. " The superior court therefore affirmed the DNR Commissioner's findings and decision on October 27, 2009. Alaskan Crude appeals. 20 Article 20 of Alaskan Crude's unit agreement sets out the same procedures for default, notice of default, and cure of the default that are contained in DNR regulations. See 11 AAC 83.374. 21 The superior court also held that DNR had not interfered with Alaskan Crude's performance under its lease and unit agreement. Alaskan Crude does not appeal this part of the decision. -12- 6606 • S III. STANDARD OF REVIEW "When the superior court acts as an intermediate appellate court in an administrative matter, we independently review the merits of the administrative decision.s We have "recognized four principal standards of review for administrative decisions: (1) the substantial evidence standard applies to questions of fact; (2) the reasonable basis standard applies to questions of law involving agency expertise; (3) the substitution of judgment standard applies to questions of law where no expertise is involved; and (4) the reasonable and not arbitrary standard applies to review of administrative regulations.i We apply the reasonable basis standard "[w]hen reviewing an agency's interpretation of its own regulation.i Under this standard, we "defer to the agency unless its interpretation is plainly erroneous and inconsistent with the regulation. " "Questions of contract interpretation generally raise questions of law that we review de novo. " The parties dispute the proper standard of review because they dispute which force majeure clause — the clause contained in White's oil and gas lease or the 22 Button v. Haines Borough, 208 P.3d 194, 200 (Alaska 2009) (citing Lakloey, Inc. v. Univ. of Alaska, 157 P.3d 1041, 1045 (Alaska 2007); Gunter v. Kathy -O- Estates, 87 P.3d 65, 68 (Alaska 2004)). 23 Pasternak v. State, Commercial Fisheries Entry Comm 'n, 166 P.3d 904, 907 (Alaska 2007) (citing Handley v. State, Dep't of Revenue, 838 P.2d 1231, 1233 (Alaska 1992)). 24 Id. (citing Simpson v. State, Commercial Fisheries Entry Comm 'n, 101 P.3d 605, 607 (Alaska 2004)). 25 Id. (internal citations and quotation marks omitted). 26 Beal v. McGuire, 216 P.3d 1154, 1162 (Alaska 2009) (citing Norville v. Carr - Gottstein Foods Co., 84 P.3d 996, 1000 n.1 (Alaska 2004)). -13- 6606 i S clause contained in the unit agreement — applies to Alaskan Crude's work obligations. Alaskan Crude argues that the applicable clause is contained in the oil and gas lease and thus should be reviewed de novo as a matter of contract interpretation. DNR responds that the applicable clause is contained in the unit agreement, with the definition of force majeure provided by DNR regulations, and thus DNR's decision that a force majeure did not exist in this case was an interpretation of its own regulations that should be given deference. We conclude that DNR is correct. When Alaskan Crude missed the May 15, 2008 deadline for its work obligations, it defaulted on the unit agreement. But the default itself had no consequences for the individual oil and gas leases. By entering the unit agreement, the original terms of the individual leases were automatically extended for the duration of the unit's existence. Therefore, only termination of the unit — not default — could lead to expiration of White's lease term and create the need to save the lease from expiration by invoking the lease's force majeure clause. Thus, the failure to meet work obligations under the unit agreement due to a force majeure is governed by Article 20 of Alaskan Crude's unit agreement, which simply states that the "failure to comply [with the unit agreement] because of force majeure is not a default." The definition of force majeure for purposes of the unit agreement is contained in DNR regulations. The DNR Commissioner's decision that a force majeure did not exist was thus an interpretation of the agency's own regulations and the deferential reasonable basis standard applies. 27 Default will not lead to termination if the unit operator cures the default by the date demanded by DNR. See 11 AAC 83.374(b). Even if the default is not cured, DNR must provide notice and an opportunity to be heard before terminating the unit. See 11 AAC 83.374(c). 28 11 AAC 83.395(3). -14- 6606 • IV. DISCUSSION Alaskan Crude appeals the same aspects of the DNR Commissioner's decision that it challenged in the superior court. First, Alaskan Crude argues that the AOGCC's determination that Burglin 33 -1 was not a gas -only well, and the pending appeal of that determination, were force majeure events that prevented Alaskan Crude from meeting its work obligations. Second, Alaskan Crude argues that the Commissioner's proposed default cure was a unilateral amendment of its unit agreement. A. Alaskan Crude's Pending Appeal Of The AOGCC Decision Was Not A Force Majeure. The definition of force majeure that applies to Alaskan Crude's unit agreement requires the alleged force majeure to be "beyond the unit operator's reasonable ability to foresee or control.i The DNR Commissioner concluded that Alaskan Crude's dispute with AOGCC was not a force majeure because Alaskan Crude had agreed to the May 15, 2008 deadline after it received AOGCC's final determination that Burglin 33 -1 was not a gas -only well. We agree with this conclusion and hold that AOGCC's decision and Alaskan Crude's appeal of that decision were not force majeure events because they were not beyond Alaskan Crude's reasonable ability to foresee or control. The requirement that a force majeure event be unforeseeable is a common characteristic of force majeure clauses in oil and gas leases. "Force majeure clauses extend [mineral] leases only when the nonperformance is `caused by circumstances beyond the reasonable control of the lessee or by an event which is unforeseeable at the time the parties entered into the contract.' " This rule remains applicable when the 29 Id. 30 Goldstein v. Lindner, 648 N.W.2d 892, 899 (Wis. App. 2002) (quoting (continued...) -15- 6606 • 1 10 alleged force majeure is a decision made by a governmental body: "A government order g majeure Y g Y g predating the lease execution has never been held to be a force majeure event. " And in this case, the government action that Alaskan Crude claims created a force majeure — AOGCC's decision that Burglin 33 -1 was not a gas -only well — predated the amended plan of exploration that set the deadlines at issue in this case. Alaskan Crude received Other Order No. 51, AOGCC's final decision that Burglin 33 -1 was not a gas -only well, on October 1, 2007. Alaskan Crude requested reconsideration of the order on October 11, and AOGCC denied reconsideration on October 24. On November 6, 2007, Alaskan Crude then agreed to an amended plan of exploration that included the deadlines of May 15, 2008, for moving drilling equipment to the well pad, and October 1, 2008, for re- drilling the well. After agreeing to those deadlines, Alaskan Crude filed an appeal of AOGCC's decision in superior court on November 19, 2007, without seeking expedited review. AOGCC's decision was thus incapable of being an unforeseeable force majeure because Alaskan Crude already knew of the decision when it agreed to the 30( continued) Atkinson Gas Co. v. Albrecht, 878 S.W.2d 236, 241 (Tex. App. 1994)); see also Joan Teshima, Annotation, Gas and Oil Lease Force Majeure Provisions: Construction and E f f e c t , 46 A.L.R. 4th 976 § 2(a) (1986) ( "A force majeure clause ... does not excuse a lessee's nonperformance where the condition alleged to constitute force majeure either was within the lessee's actual or presumed knowledge or was reasonably expectable by the lessee. "). 31 Teshima, supra note 30; see also Erickson v. Dart Oil & Gas Corp., 474 N.W.2d 150, 155 (Mich. App. 1991) (citing Hughes v. Cantwell, 540 S.W.2d 742, 745 (Tex. Civ. App. 1976)) ( "Where governmental action is alleged to be the cause of delay, the parties to the lease are presumed to have contracted with knowledge of any preexisting law that could have caused delay. "). -16- 6606 • amended deadlines. It was also reasonably foreseeable at the time Alaskan Crude agreed to the amended deadlines that if Alaskan Crude chose to appeal AOGCC's decision, that appeal would not be resolved before the deadlines arrived. Alaskan Crude filed its notice of appeal to the superior court less than six months before the May 15, 2008 deadline and did not seek expedited review. The DNR Commissioner's decision that a force majeure did not exist was therefore not plainly erroneous or inconsistent with the regulation defining force majeure, and we affirm the superior court's decision upholding the Commissioner's decision. Moreover, policy considerations support the conclusion that the AOGCC decision and Alaskan Crude's appeal of that decision did not create a force majeure. Unit agreements and plans of exploration for oil and gas development will often result in disagreements between unit operators and regulatory agencies. If a unit operator could toll its work obligations simply by appealing any unfavorable decision from the 32 The superior court held that AOGCC's decision could not trigger the force majeure clause because it was not a "judicial decision" but rather the decision of a quasi - judicial administrative body. We need not decide today whether the decision of a quasi - judicial body can be a force majeure as defined in DNR regulations. We simply conclude that even if such a decision could be a force majeure as a general matter, it is not one in the present case. 33 Ultimately, Alaskan Crude's opening brief in that appeal was not filed until January 15, 2009 — eight months after the May 15, 2008 deadline had lapsed. 34 See, e.g., Exxon Corp. v. State, 40 P.3d 786 (Alaska 2001) (appealing the denial of a request to DNR to expand the area covered by a unit agreement); Conoco, Inc. v. State, Dep't ofNatural Res., Mem Op. & J. No. 668, 1993 WL 13563632 (Alaska, June 9, 1993) (appealing the denial of a request to DNR to reduce the royalty rate contained in a unit agreement); Gottstein v. State, Dep't of Natural Res., 223 P.3d 609 (Alaska 2010) (third -party appeal of DNR's approval of a plan for development); White v. State, Dep't of Natural Res., 984 P.2d 1122 (Alaska 1999) (appealing the denial of a request to DNR to assign a state land lease). -17- 6606 • • State, however minor or foreseeable, and claiming that the appeal was a force majeure, development could be stalled indefinitely over routine disagreements. This does not diminish the right to appeal an unfavorable decision; if a unit operator wishes to appeal, it can always request that the superior court stay any intervening deadlines during the pendency of the appeal. Indeed, if Alaskan Crude believed that it could not complete its work obligations until the appeal of the AOGCC decision was resolved, it had several other options available rather than invoking the force majeure clause. The most obvious course of action would have been for Alaskan Crude, after learning of the AOGCC decision, to attempt to negotiate different deadlines for the amended plan of exploration that would accommodate the appeal. But even after agreeing to the new deadlines, Alaskan Crude could have requested that DNR amend the plan of exploration once again after the notice of appeal had been filed. Finally, it could have requested a stay from the superior court until the appeal was decided. Although there is no guarantee that these requests would have been granted, they would have been subject to the regular administrative review and appeal process and could have addressed Alaskan Crude's concerns without relying on the force majeure clause. Because we affirm the superior court's decision upholding the DNR Commissioner's decision on the ground that the delay in resolving the appeal was 35 AS 44.62.570(f). 36 Alaskan Crude did eventually make two such requests, but not until April 24 and May 5, 2008, while the DNR Commissioner's decision regarding the force majeure clause was pending. 37 AS 44.62.570(f). 38 See, e.g., Exxon Corp., 40 P.3d 786; Conoco, Inc., Mem. Op. & J. No. 668, 1993 WL 13563632. -18- 6606 • • foreseeable, we need not address whether the unresolved appeal actually prevented Alaskan Crude from meeting its work obligations. B. The DNR Commissioner's Proposed Default Cure Did Not Unilaterally Amend Alaskan Crude's Unit Agreement. a appeals the default cure proposed b Alaskan Crude also pp p p by the DNR Commissioner, arguing that it constitutes an improper unilateral amendment of the unit agreement. The superior court rejected this argument, observing that "the Unit Agreement itself sets out the procedure for issuing demands to cure and minimum cure periods" and that the DNR Commissioner had complied with those procedures. We agree with the superior court and conclude that the proposed default cure was in accordance with the terms of the unit agreement and was not an improper unilateral amendment. Article 20.02 of the unit agreement specifies that in the event of a default: The Commissioner will give notice to the Unit Operator and the Working Interest Owners of the default. The notice will describe the default, and include a demand to cure the default by a certain date. The cure period shall be at least thirty days for a failure to pay rentals or royalties and ninety days for any other default. The DNR Commissioner found that Alaskan Crude was in default and provided notice of that default on July 16, 2008. The Commissioner included a demand to cure the default by moving a drilling rig to the well by March 31, 2009 and re- drilling the well by October 1, 2009. This cure period was significantly longer than the 90 -day minimum required by the unit agreement; in fact, the dates demanded by the DNR Commissioner were the same dates proposed by Alaskan Crude in its additional requests to amend the 39 Similar default and cure provisions are also contained in DNR's regulations. 11 AAC 83.374(b). -19- 6606 • • plan of exploration on April 24 and May 5, 2008. We conclude that the default cure was in accordance with the unit agreement and had the practical effect of granting Alaskan ' amendment of the agreement It was not a unilateral reement and the a e Crude's own requ g decision of the superior court is affirmed. V. CONCLUSION For the foregoing reasons, we AFFIRM the decision of the superior court upholding the decision of the DNR Commissioner. -20- 6606 S IN THE SUPREME COURT OF THE STATE OF ALASKA ALASKA CRUDE CORPORATION, and JAMES W. WHITE, Appellants, vs. STATE OF ALASKA, DEPARTMENT OF NATURAL RESOURCES, Appellee. Supreme Court Case No. S Trial Court Case No. 3AN-08-09865 CI MOTION TO CONSOLIDATE RELATED CASES FOR ORAL ARGUMENT AND CONSIDERATION COMES NOW Appellant, through undersigned counsel, and moves the court to consolidate the above captioned matter with a recently filed Alaska Supiemc Court appeal, Alaskan Crude Corporation and James W. White v. State of Alaska, Alaska Oil and Gas Conservation Commission, Supreme Court Case No. S (Superior Court Case No. 3AN-07-11471 CI.) The two cases involve a controversy involving the same well, the same property interests, and involve related facts and issues that arc suitable for consideration on a consolidated basis. Moreover, a risk of inconsistent results presents if the two cases are considered separately. Supplemental points on appeal in the matter of S-14148 were filed on February 24, 2011. No briefing schedule has been ordered as of the date of this motion. Briefing is -1 - ALASKA CRUDE CORP. PI' AL V. STAlE DEPT. OF NAI L/11A1 RESOURCES Summr COURT CASE NO.: S-13708 MO 11ON TO CONS'OLIDA11: RELATE!) CASES FOR ORAl„ ARGUMENT ANU CoNJlJ i I It • • complete in the matter of Case No. S-13708 and the case has been tentatively scheduled for oral argument in April 2011. Counsel has filed a separate motion to reset the oral arguments in Case No. S-13708 due to scheduling conflicts. However, if the court grants the motion to consolidate, it should vacate the scheduled oral argument in Case No. S- 13708, and hold the argument and consideration of the case until the related Case No. S- 14148 is ready for oral argument in order to consider both cases at the same time. Therefore, Appellant respectfully moves the court for consolidation of the two cases and to vacate and reset the oral argument in Case No. S-13708 for such time as the related case is ready for oral argument and submission for the court's consideration. DATED March 14, 2011 at Anchorage, Alaska. SHORTELL GARDNER LLC Attorney 'or ppellant By: dr& HeathtK 'ardner #0 1'11079 SHORT .,, ,L GARDNER LLC 645 G Street Suite 100-807 Anchorage, Alaska 99501 Telephone: (907) 375-8776 Facsimile: (888) 526-6608 (.7ertificate of Service !certify that a copy of the foregoing was mailed via First Class U.S. Mail on 2011 to the Collowtrig: Jeffrey Landry, AAG Brian Stibitz, Esq. 1031 W. 4 Avenue Suite 200 Reeves Amodio LIE Anchorage, AK 99501 500 L t. Suite 300 Anc )rage AK 99501 Thomas Ballantine, AAG 1031 W. 4' Avenue Suite 200 Obi Anchorage, AK 99501 H. ,th, Gardner -2- AlAtik A CRUDE CORP. LT AI- V. STA1E Den'. On NATURAL RL'SOURCES SUPREME COURT CASE No,: S-13708 MOTION TO CONSOLIDATE KEI ATED CASES MR ORAL ARUUMENT AND CONSIDERATION • • IN THE SUPREME COURT OF THE STATE OF ALASKA ALASKA CRUDE CORPORATION, and JAMES W. WHITE, Appellants, vs. STATE OF ALASKA, DEPARTMENT OF NATURAL RESOURCES, Appellee. Supreme Court Case No. S-13708 Trial Court Case No. 3AN-08-09865 Cl ORDER ON APPELLANT'S MOTION TO CONSOLIDATE RELATED CASES FOR ORAL ARGUMENT AND CONSIDERATION Appellant's Motion to Consolidate Related Cases for Oral Argument and Consideration is granted. Supreme Court Case Nos. S-13708 and S-14148 are hereby consolidated for purposes of oral argument and consideration by the court. All normal briefing schedules apply to each case. The oral argument currently set for April 20, 2011 in Case No. S-13708 is VACATED and continued until such time as S-14148 is ripe for oral argument. DATED , 2011 at Anchorage, Alaska. Justice of the Alaska Supreme Court -1- AlASKA CRAW CO M', Li Al V. S TA FE DEPT. OF NATURAL RLSOURCI S Sam*. Couia CASE. No.: S-13708 Motif( ON Aerili Ara' S M11011UN TO Ct/NSOLIDATE RELATED CASES FOR ORAL ARGUMENT ANI) CONSIDI i{ Al ION 1110 • Brian J.Stibitz REEVES AMODIO LLC 500 L Street, Suite 300 Anchorage, Alaska 99501-1990 Telephone: (907) 222-7100 Facsimile: (907) 222-7199 Counsel for Appellants IN THE SUPREME COURT FOR THE STATE OF ALASKA ALASKAN CRUDE CORPORATION and JAMES W. WHITE, Appellants, vs. STATE OF ALASKA, ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellees. Supreme Court Case No. Superior Court Case No. 3AN-07-I 1471CI NOTICE OF APPEAL Alaskan Crude Corporation and James W. White, by and through counsel, pursuant to Appellate Rule 204, hereby appeal the December 8, 2010 Opinion the Superior Court, Third Judicial District of Alaska, in Case No. 3AN-0711471 CI.' The mailing address for Alaskan Crude Corporation and James W. White, Appellants, is 4614 Bohill, San Antonio, Texas 78217. See, Exhibit A. Notice of Appeal Superior Court Case No.: 3AN-07-11471C1 DATED at Anchorage, Alaska this 10 day ofJanuary, 2011. REEVES AMODIO LLC Attorney for Appellant 4 1 By: , Brian J. Stibitz ABA # 0106043 2 Notice of Appeal Superior Court Case No,: 3AN-07-11471C1 Brian J.Stibitz REEVES AMODIO LLC 500 L Street, Suite 300 Anchorage, Alaska 99501-1990 Telephone: (907) 222-7100 Facsimile: (907) 222-7199 Counsel for Appellants IN TIIE SUPREME COURT FOR 'HIE STATE OF ALASKA ALASKAN CRUDE CORPORATION and JAMES W. WHITE, Appellants, vs. STATE OF ALASKA, ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellees. Supreme Court Case No. Superior Court Case No. 3AN-07-11471C1 STATEMENT OF POINTS ON APPEAL Alaskan Crude Corporation and James W. White, by and through counsel, pursuant to Appellate Rule 204(e), hereby submit their statement of points on appeal. Appellants are appealing the December 8, 20W Opinion the Superior Court. Third Judicial District of Alaska, in Case No, 3AN-0711471 CI. Appellants intend to rely on the following points on appeal. 1. The Superior Court erred in affirming in its entirety the Alaska Oil and Gas Conservation Commission's (AOGCC's) Other Order 51, dated October 1, 2007. 1 Statement Points on Appeal Superior Court Case No.: 3AN-07-1147ICI • 2. The Superior Court erred in affirming AOGCC's denial of Appellants' request for a rehearing, dated October 24, 2007. 3. Thc Superior Court erred in not finding that the AOGCC abused its discretion in failing to apply its own regulation, 20 AAC 25.990(70), that permits White to reenter the Burg lin 33-1 well as a gas well. 4. The Superior Court erred in not finding the AOGCC failed to resolve a material issue of fact regarding whether Appellants had the option under 20 AAC 25.990(70) to re-enter the duly suspended Burg lin 33-1 well as either an oil well, gas well, or service well. 5. The Superior Court erred when it failed to find that AOGCC erred when the AOGCC did not find that the existing approved standard type 4 acre exploratory gravel drilling pad containing the existing "suspended" Burg lin 33-1 well and its 9- 5/8" casing is mechanically suitable to be reentered, have the well's cement plugs drilled out and explored as either an oil well, gas well or service well. 6. The Superior Court erred in lending wcight to and affirming AOGCC's position that Appellants sought to deviate from the sundry application by entering the West Sak formation, when AOGCC's position was not supported by the evidence or by the sundry application. 2 Statement Points on Appeal Superior Court Case No.: 3AN-07-11471C1 7. The Superior Court erred in not finding that AOGCC failed to resolve a material issue of fact regarding whether the Burg lin 33-1 well logs, along with fIalliburton industry standard well flow tests proved no oil was capable of flowing to the surface from the Ugnu formation at 4300'-4345'. 8. The Superior Court erred in not finding that White substantially prevailed on the substantive issues of his complaint when the ADEC and AOGCC determined, in response to Appellant's Superior Court appeal, that the agency has the discretion to set the Response Plan Standard (RPS) storage requirement, previously set at a minimum of 82,500 barrels of spill storage capacity at the Burg lin 33-1 drill site to as low as no storage at all. 9. The Superior Court erred in not finding that the AOGCC's Order 51 failed to prevent waste, as required by AS 31.05.030. 10. The Superior Court failed to find that AOGCC Order 51 was arbitrary and capricious and/or an abuse of agency discretion and violated White's right to procedural and substantive due process under the United States and Alaska Constitutions. DA FED at Anchorage, Alaska this 10 day of January, 2011. REEVES AMODIO LLC Attorney for Appellants By: Brian J. Stibitz ABA # 0106043 3 Statement Points on Appeal Superior Court Case No,: 3AN-07-11471C1 • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE ALASKAN CRUDE CORPORATION, ) ) Appellant, ) v. ) ) STATE OF ALASKA, ALASKA OIL ) AND GAS CONSERVATION ) COMMISSION, ) ) Appellee. ) ) Case No. 3AN-07-11471 CI OPINION I. INTRODUCTION Appellant Alaskan Crude Corporation (Alaskan Crude) applied to the State of Alaska, Alaska Oil and Gas Conservation Commission (the "AOGCC") to re-explore a previously drilled well. The AOGCC ruled the project ineligible for treatment as a "gas-only" well, and estimated a per-day oil flow for spill- response planning purposes. Alaskan Crude sought a rehearing at which it failed to appear. The AOGCC affirmed its prior ruling, but lowered the well's flow estimate. Alaskan Crude now appeals to the superior court. Was the AOGCC's decision on rehearing based on substantial evidence? II. FACTS AND PROCEEDINGS In 1984, Alaskan Crude drilled an unproductive well—the Burglin 33-1 well—to a depth of nearly ten thousand feet.' Much later, in February 2006, Exc. 30 & 124. Opinion on Appeal Alaskan Crude v. SOA 3AN-O7-11471 CI Page 1 of 14 • Alaskan Crude applied to the Alaskan Division of Oil and Gas, Department of Natural Resources to modify three oil and gas lease holdings encompassing 6,363 acres. Alaskan Crude sought to modify so that it could operate the holdings as a unit, rather than on an individual lease basis. This development included the Burg lin 33-1 well. In addition, Alaskan Crude filed a Plan of Exploration stating its intent to explore for both oil and gas. In June of 2006, the director of the Department of Natural Resources issued a decision approving the plan, to be known as the Arctic Fortitude Unit (AFU). The decision was agnostic about the prospects for recoverable reservoirs: While there was evidence of hydrocarbons in the Burg lin 33-1 well, the limited geological information supplied by [Alaskan Crude] and otherwise available to the Division neither clearly proves nor clearly disproves the existence of a potential hydrocarbon accumulation or reservoir within the proposed AFU. . . . Exploration of oil and gas is not an exact science. Well re-entry operations and drilling, using modern completion and drilling techniques, may confirm previously bypassed oil and gas. "Surprises" do happen where oil and gas is discovered in unlikely or previously unidentified formations. Alaskan Crude's initial plans indicated its intent to move a drilling rig onto the Burg lin 33-1 well, and to attempt production of oil or gas from geologic strata identified as the West Sak, Ugnu, Sag River, and Ivishak formations. In addition, a summary of planned rig operations dated December 2 Exc. 9. 3 Exc. 3. 1 Exc. 7. s Exc. 18. Opinion on Appeal Alaskan Crude v, SOA 3AN.07-11471 CI Page 2 of 14 • 1, 2005, revealed Alaskan Crude's intent to drill out the well to an initial depth of 6,196 feet. Alaskan Crude would then perforate the highest geologic stratum of interest at varied points. If these Ugnu sands proved unproductive, Alaskan Crude would then re-seal them with pressurized cement, drill out additional cement plugs, and serially repeat the procedure at two deeper intervals. Multiple agencies manage such an enterprise. The Department of Natural Resources is the lessor and general overseer. The Alaska Department of Environmental Conservation decrees an oil-spill response capacity, which is based upon an assumed flow of barrels of oil per day (BOPD) and other factors. To establish a hypothetical BOPD, the Department of Environmental Conservation seeks technical advice from the AOGCC. In April of 2007, Alaskan Crude applied to Department of Environmental Conservation for such a determination. It requested a presumed flow rate of 825 BOPD, an 85% reduction from the default standard. Alaskan Crude justified this reduction with an assertion, inter alia, that the strata to be tested were likely to contain high viscosity oil, which is impliedly incapable of unassisted flow to the surface. On June 26, 2007, the AOGCC declared that flow to the surface from the proposed West Sak and Ugnu perforations merited the use of the 825 BOPD standard: ' Exc. 28-29, 7 Exc. 37-38. Opinion on Appeal Alaskan Crude v, SOA 3AN-07-1147I CI Page 3 of 14 The strata of the Ugnu and West Sak Formations in the Burg lin 33-1 exploratory well, above a maximum depth of 6,196 feet measured depth . . . are highly unlikely to produce liquid hydrocarbons to the surface in amounts greater that 825 barrels of oil per day (BOPD). This is an 85% reduction of the [response- planning standard] of 5,500 BOPD. The AOGCC also opined that the Burg lin 33-1 well did not qualify for a complete oil-spill response exemption that may be accorded to "gas-only" exploratory wells: Given that in prior testing oil did not flow from the subject formations, reducing the [response-planning standard) volume for this well is appropriate. However, because there are signs of oil in the cores and the Ugnu and West Sak Formations are known to contain movable oil elsewhere on the North Slope, it is inappropriate to classify this exploratory well as a gas wel1. Accordingly, the Department of Environmental Conservation set an 825 BOPD response-planning standard. It deferred to the AOGCC's conclusion that Burg lin 33-1 well was not a "gas-only" well, and noted that the 825 BOPD figure was the maximum reduction contemplated by the Alaska Administrative Code. On July 26, 2007, Alaskan Crude requested reconsideration of the AOGCC and Department of Environmental Conservation decisions. Alaskan Crude had consistently announced its intent to explore for both oil and gas. It points to no document in which it explicitly sought "gas-only" well status for the Burg lin 33-1 well. Indeed, Alaskan Crude's request for an 85% reduction 8 Exc. 39. 9 AS 46.04.050(c). 10 Exc. 40. Exc. 42 (citing Alaska Admin. Code tit. 18, § 75.430(c)(2007)). 12 Exc. 43-47. Opinion on Appeal Alaskan Crude v SOA 3AN-07-11471 CI Page 4 of 14 410 1 from the default flow rate was inconsistent with a "gas-only" well. But Alaskan Crude contended on rehearing that the AOGCC's decision to classify the Burg lin 33-1 well as an "oil well" was arbitrary and capricious, especially in light of the AOGCC's conclusion suggesting that both the Ugnu and West Sak formations were incapable of flowing oil to the surface. The AOGCC granted Alaskan Crude's request for rehearing, and scheduled a hearing for September 6, 2007. Alaskan Crude failed to appear for the hearing, which went forward nonetheless.' On October 1, 2007, the AOGCC issued post-hearing Order 51 reversing its prior determination that the Burg lin 33-.1 well could not flow oil to the surface from the Ugnu and West Sak formations. More specifically, the AOGCC observed that the adjacent Prudhoe Bay Unit and elsewhere on the North Slope . . . the West Sak Formation is productive in multiple individual reservoirs throughout a several hundred foot thick accumulation," It also noted that while the West Sak formation is 570 feet thick, only the bottom 34 feet had been tested in 1986. The AOGCC, therefore, concluded that the West Sak formation is "indisputably capable of flowing oil to the ground surface," both distant from and proximate to the Arctic Fortitude Unit, including the Burg lin 33-1 well." 13 Exc. 201-202. 14 Exc. 54. 15 Exc. 52-57. 16 Exc. 54-55. 17 Exc. 54-55. Opinion on Appeal Alaskan Crude v. SOA 3AN-07.11471 CI Page 5 of 14 • • As a second ground to deny relief, the AOGCC found that the Burg lin 33- I well was not a "natural gas exploration facility" within the meaning of the statute exempting "gas-only" wells from the requirement of a spill-recovery capacity. That statute defines such a facility as "a platform, facility, or structure that . . . is used solely for exploration for natural gas." The AOGCC additionally noted that the stated intent of Alaskan Crude was to mechanically lift relatively high-viscosity oil to the surface, and affirmed its prior denial of "gas-only" status on that basis. Finally, the AOGCC elaborated the technical parameters it entered into computer software to generate its flow-potential analysis. Its analysis indicated that 600 BOPD was the reasonable, maximum unassisted flow rate for the Burglin 33-1 well. Since the Department of Environmental Conservation had shortly before reversed its stance that the applicable administrative code provisions set the minimum presumed flow rate at 825 BOPD, the AOGCC ordered its flow estimate to the computer-generated 600 BOPD. Although Alaskan Crude nominally requested that the AOGCC clarify Order 51, it more specifically requested that the AOGCC estimate a flow rate based on an Ugnu-only scenario, not including the West Sak strata analysis. Alaskan Crude promised to amend its application forthwith to so limit its venture. While the AOGCC denied this request for reconsideration, it agreed /8 AS 46.04.050(c)(emphasis added). /9 Exc. 55. 28 Exc. 58. Opuuon on Appeal Alaskan Crude v. SOA 3AN-07-11471 CI Page 6 of 14 • • to open a distinct Ugnu-only proceeding and forward its findings to the Department of Environmental Conservation. It subsequently provided an unassisted Ugnu-only flow rate of 115 BOPD. Alaskan Crude did not seek agency rehearing as to 115 BOPD flow rate, but rather appealed to the superior court pursuant to AS 22.10.020(d). It appeared through Brian Stibitz of Reeves Amodio LLC. The AOGCC appeared through assistant attorneys general Alan Birnbaum and Breck Tostevin. On appeal, Alaskan Crude raises for the first time that the failure of the Alaska Legislature to exempt low-volume oil wells from statutory oil-spill response capacity and bonding requirements, violates Article VIII section 1 of Alaska's Constitution. That provision encourages "the development of [Alaska's] resources by making them available for maximum use consistent with the public interest." Alaskan Crude created no record on this issue beyond its own conclusory pleading to the Department of Natural Resources regarding its Plan of Exploration. III. ISSUES 1. Does the court lack appellate jurisdiction due to alleged procedural defaults by Alaskan Crude? 2. Did the AOGCC err in determining that the Burg lin 33-1 well failed to meet statutory criteria for a "gas-only" well? Exc. 60. 22 Exc. 61-63. 23 Alaska Const. Art. VIII, § 1. 24 Exc. 180. Opinion on Appeal Alaskan Crude v SOA 3AN-07-11471 CI Page 7 of 14 • • 3. Did the AOGCC err in failing to set a zero BOPD response-planning standard in its advice to the Department of Environmental Conservation? 4. Does Alaskan Crude's constitutional claim merit consideration by this court on the present record? IV. APPLICABLE LAW In this administrative appeal, the superior court reviews the AOGCC's factual findings under a "substantial evidence" standard. Such findings should be upheld if supported by relevant evidence that a reasonable person might accept as adequate to support them. If the evidence is in conflict, the court will not reweigh it and substitute its own judgment. An administrative agency may make a reasonable decision even though the available information is limited; complete certainty is not required. As to questions of law not implicating the AOGCC's special expertise, this court substitutes its own judgment. If AOGCC employs specialized expertise in a legal determination, the court applies a rational basis standard; the AOGCC's interpretation prevails over any conflicting judicial interpretation, so long as it is reasonable. The deferential "reasonable basis" standard also applies to fundamental policy decisions or other questions implicating special agency expertise. But 25 Alyeska Pipeline Serv. Co. v. DeShong, 77 P.3d 1227, 1231 (Alaska 2003). Raad v. Alaska State Commin for Human Rights, 86 P.3d 899, 903-904 (Alaska 2004) (citing Alaska State Cornmin for Human Rights v. Yellow Cab, 611 P.2d 487, 490 (Alaska 1980)). 27 State v. Kenaitze Indian Tribe, 83 P.3d 1060, 1068 (Alaska 2004). 28 Id, 29 White v. State, Dept of Natural Res., 984 P.2d 1122, 1125 (Alaska 1999). Opinion on Appeal Alaskan Crude v. SOA 3AN-07-11471 CI Page 8 of 14 • a failure to consider an important factor can undermine the reasonableness of an agency's policy decision. Also, an unexplained failure to follow agency precedent can erode the deference due. A reviewing court generally does not decide issues not presented to an agency. But it may do so if such arguments do not raise new facts and are sufficiently related to an argument presented below that they could have been "gleaned" from the pleadings. Exception may also be made for issues not raised, but which the agency did not have the power or jurisdiction to decide. But when a constitutional claim is first raised in the superior court in a broad and vague fashion that would leave the court to speculate, the claim is waived. Waiver can also occur by failure to create a record regarding important issues. AS 46.04.050(c) exempts a "natural gas exploration facility" from the statutory requirements of an oil-spill capacity or proof of financial responsibility, and relevantly provides: The provisions of AS 46.04.030 and 46.04.040 do not apply to a natural gas exploration facility if the Alaska Oil and Gas Conservation Commission has determined under AS 31.05.030(1) that evidence obtained through evaluation demonstrates with reasonable certainty that all of the wells at a natural gas exploration facility will not penetrate a formation capable of flowing 30 Ninitchik Trad'l Council v. Noah, 928 P.2d 1206, 1217 (Alaska 1996). • Toternoff v. State, 905 P.2d 954, 967-68 (Alaska 1995). 3 2 Palmer u. Muni. of Anchorage, Police & Fire Ret. Bd., 65 P.3d 832, 839 n.16 (Alaska 2003). 33 Weiler v. United States, 364 F. Supp. 2d 1057, 1063 (D. Alaska 2005). 3 4 See Dominish v. State, Commercial Fisheries Entry Comm'n, 907 P.2d 487(Alaska 1995). 35 See State, Depl of Revenue v. Gazaway, 793 P.2d 1025, 1027 (Alaska 1990). ' 6 See AS 46.04.030. 37 See AS 46.04.040. Opinion on Appeal Alaskan Crude v. SOA 3AN-07-11471 CI Page 9 of 14 • • oil to the ground surface. . . . For purposes of this subsection, "natural gas exploration facility" means a platform, facility, or structure that, except for storage of refined petroleum products in a quantity that does not exceed 10,000 barrels, is used solely for the exploration for natural gas. V. DISCUSSION The AOGCC argues that Alaskan Crude initially sought an 85% reduction of the default BOPD standard otherwise applicable to a multi-strata exploratory well. More specifically, the AOGCC asserts that Alaskan Crude lost its appellate rights because the typical lineal course of agency adjudication was not followed due to Alaskan Crude's request for either: (1) a gas-only determination; (2) a zero BOPD response standard; or (3) an Ugnu-only evaluation. Admittedly, this case is convoluted; but real-world requests for agency action do not always unfold within the bright-line parameters of a court proceeding. Order 51, taken together with the AOGCC's subsequent recommendation of a 115 BOPD response-planning standard (for Ugnu-only perforations), constitutes an overarching finding that the Burg lin 33-1 well is capable of surface flow from relevant strata. In addition, with the exception of Alaskan Crude's constitutional argument, this court finds that Alaskan Crude raised its issues below with sufficient clarity and procedural coherence that its successive requests for rehearing suffice to preserve its right to judicial review. Whether a well can be termed a "gas-only" well is a matter of statutory interpretation involving fundamental policy considerations that implicate Opinion on Appeal Alaskan Crude v SOA 3AN-07-11471 CI Page 10 of 14 • agency expertise. This is especially true where a well is intended to produce non-flowing oil, and shows signs of the presence of oil in core samples. The reasonable-basis standard therefore applies. But while questions regarding oil flow to the surface or the appropriate BOPD response-planning standard also appear to implicate agency expertise, the AOGCC suggests that these are routine factual determinations meriting the application of the substantial evidence test. The court will therefore apply that higher standard of review to those issues. As noted above, AS 46.04.050(c) exempts a "natural gas exploration facility" from the statutory requirements of an oil-spill capacity or proof of financial responsibility. But such is true only if the AOGCC has also determined that the well will not penetrate a formation capable of flowing oil to the ground surface. Furthermore, to qualify for the exemption, the well must be used "solely for the exploration for natural gas."' Order 51 finds that the Burg lin 33-1 well was not a "gas-only" well because there were signs of oil in the drilling cores. It also notes that the West Sak and Ugnu formations contain moveable oil elsewhere on the North Slope. Order 51 further observes that only thin elevations of the West Sak and Ugnu formations were flow tested. Finally, the Order specifies that Alaskan Crude's April 26, 2007 application confirms Alaskan Crude's plans to produce oil: "Lthe 38 Appellee Br. 18. 39 See AS 46.04.030, 4 ° See AS 46.04.040. 4 1 AS 46.04.050(c), 42 Exc. 54. Opinion on Appeal Alaskan Crude v. SOA 3AN•07-11471 CI Page 11 of 14 1 • Burg lin 33-1 well] zones to be tested are likely charged with relatively high viscosity oil similar to the nearby West Sak and Ugnu oil pools . . operator assumes the well will not flow to surface and intends to mobilize equipment to pump or mechanically lift fluids to the surface." Based on that evidence, the AOGCC affirmed its initial determination that the Burg lin 33-1 well was not solely a "gas-well" within the meaning of AS 46.04.050(c). Implicitly, the AOGCC determined that it was charged by statute to conclude whether the well was a natural-gas exploratory facility in the first instance, prior to turning to the issue of whether the well was capable of flowing oil to the surface. But Alaskan Crude argues that the AOGCC lacks explicit authority under its enabling statute—AS 31.05.030—to reach this conclusion. Whether a well is "gas-only" must turn on the subjective, standardless, and unreviewable intent of Alaskan Crude. But this assertion is untenable. AS 31.05.030 sets forth the entire scope of the AOGCC's powers and duties. Both AS 31.05.030(1) and AS 46.04.050(c) task the AOGCC with making exemption determinations. AS 31.05.030(1)(1) explicitly adopts the definition of "natural gas exploration facility" provided by AS 46.04.050(c). Definitively, the AOGCC must first decide whether the well is a "natural gas exploration facility" before it determines whether the well will penetrate stratum capable of flowing oil to the surface. By way of analogy, if a statute requires an agency to determine whether a store is selling apples, and 43 Exc. 55. 44 Appellant Br. 23. Opinion on Appeal Alaskan Crude v. SOA 3AN -07 - 1147 I C1 Page 12 of 14 • defines "store," the statute impliedly authorizes the agency to decide whether a vendor is a "store." Alaskan Crude's interpretation that the legislature intended to leave the "gas-only" determination to the whim of the self- interested explorer, and not to the AOGCC's objective data, is unreasonable. Minimally, the AOGCC had a rational basis to hold as it did, and this court would conclude the same on de novo review. This holding moots the question of whether the well is capable of flowing gas to the surface. But the court notes that AS 46.04.050(c) effectively puts the burden of proof on the driller to show that the well will not flow oil to the surface. Alaskan Crude presented no evidence on the topic beyond the fact that the well was a dry hole when initially drilled. When offered an opportunity to make its case, Alaskan Crude failed to appear. Furthermore, Order 51 found that the well was "undeniably" capable of flow to the surface under conceivable circumstances. It cited evidence that the court is in no position to independently evaluate, including a computer simulation of the West Sak data. Presumably, once Alaskan Crude tardily requested an Ugnu-only determination, the same program predicted a 115 BOPD flow. There is no evidence in the record to rebut the data upon which the commission relied, either as to the fact or the amount of flow. Since Alaskan Crude declined its invitation to present expert testimony, it failed to mect its burden of proof by controverting the facially sufficient data upon which the AOGCC relied. Opinion on Appeal Alaskan Crude v. SOA 3AN-07-11471 CI Page 13 of 14 • This flaw similarly dooms Alaskan Crude's constitutional argument. It has created no factual record to support its contention that small-volume oil reservoirs present so scant a spill risk that Alaska's legislature may not constitutionally require a remediation capacity and bonding. Furthermore, such an argument is in no sense so integrally related to issues actually litigated that this court should now overlook Alaskan Crude's failure to raise the issue below. In any event, the AOGCC has narrowly defined technical responsibilities not touching the full ambit of such constitutional questions. If Alaskan Crude desires to contest the constitutionality of oil spill and financial responsibility statutes, presumably it should do so in the superior court in an original action for injunctive relief. VI. ORDER The court affirms the AOGCC's Order 51 and its subsequent associated Ugnu-only response planning determination. 1- ENTERED at Anchorage, Alaska this b say of December, 2010. A Lit Oh Fl uddock Su • erior Court Judge , I certify that on fr: copy of the above was mailed to each of the followirtg at their addresses of record: Brian Stibitz Alan Birnbaum • , e ; Mary Brault . Judicial Assistant Opinion on Appeal Alaskan Crude v. SOA 3AN-07-11471 CI Page 14 of 14 • Brian J.Stibitz REEVES AMODIO LLC 500 L Street, Suite 300 Anchorage, Alaska 99501 -1990 Telephone: (907) 222 -7100 Facsimile: (907) 222 -7199 Counsel for Appellants IN THE SUPREME COURT FOR THE STATE OF ALASKA ALASKAN CRUDE CORPORATION and JAMES W. WHITE, Appellants, vs. STATE OF ALASKA, ALASKA OIL AND GAS CONSERVATION COMMISSION, Appellees. Supreme Court Case No. Superior Court Case No. 3AN- 07- 11471CI CERTIFICATE OF SERVICE I certify that on the 10th day of January, 2011, a true and correct copy of the following documents were served via U.S. Mail to the following: 1. Docketing Statement A; 2. Notice of Appeal; and 3. Statement of Points on Appeal. Gregory Micallef Conquest Energy Corporation 1420 North Atlantic Avenue, Apt. 302 Daytona Beach, Florida 32118 -3560 Page 1 Certificate of Service Superior Court Case No,: 3AN- 07.114110