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Home My WebLink AboutO 137Other 137 Aurora Exploration vs AOGCC Appeal 1. November 27, 2017 2. November 28, 2017 3. November 28, 2017 4. December 7, 2017 5. December 13, 2017 6. January 3, 2018 7. 3AN-17-10705 CI Notice of Appeal List of Parties and Addresses and mailings Notice of Judicial Assignment Agency list of parties Status Report Stipulated Motion to Dismiss of Appeal Order Granting Motion for Dismissal of Appeal (i a (Yi M N map O _ m� 3 oo C7 J x° a z�v fj W � LL � � H zN C Q O rd z c <> M O n O t0 a3 C� z was F ~ k4' z N 60 I d William M. Bankston, Esq. Renee J. Sheyko, Esq. Bankston Gronning O'Hara, P.C. Attorneys for Appellant wbankston@bgolaw.pro rsheyko@bgolaw.pro R E C E I WEED FEB 2 7 2018 AOGCC IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE AURORA EXPLORATION, LLC, ) Appellant, ) V. ) ALASKA OIL & GAS CONSERVATION ) COMMISSION, ) Appellee. ) Case No. 3AN-17-10705CI ORDER GRANTING MOTION FOR DISMISSAL OF APPEAL Appellant has moved to dismiss the above -captioned appeal pursuant to Alaska R. App. P. 511(b), because the parties have settled the matter. This Court, finding the motion to be of merit, hereby DISMISSES this appeal, with prejudice, each side to bear its own costs and attorney's fees. The cost bond shall be exonerated and returni,to Ap ellan DATED: I certify that on V a aPY of the above was mail !faxed ha ed t0 each of the following: 0 D OPD O OPA 0 DOC A4860\2\PLEADINGS\ORDdismissal Page I of 2 U a; d x r 1 0 z z z O 94 Al z O F x z a I HEREBY CERTIFY that a true and correct copy of the foregoing (typed in Times New Roman 13) was mailed to the following on the 8ih day of January, 2018: Cathy Foerster, Commissioner Alaska Oil & Gas Conservation Commission 333 W. 7'h Avenue Anchorage, Alaska 99501 Jahna Lindemuth Attorney General of Alaska PO Box 110300 Juneau, A00s 99811-0300 Vozar A4 860\2\PLEA DINGS\ORDd ism issal Page 2 of 2 William M. Bankston, Esq. Renee J. Sheyko, Esq. Bankston Gronning O'Hara, P.C. Attorneys for Appellant wbankston@bgolaw.pro rsheyko@bgolaw.pro RECEIVE® JAN 0 9 2018 AOGCC IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE AURORA EXPLORATION, LLC, ) Appellant, ) V. ) ALASKA OIL & GAS CONSERVATION ) COMMISSION, ) ) Appellee. ) Case No. 3AN-17-10705CI ORDER GRANTING MOTION FOR DISMISSAL OF APPEAL Appellant has moved to dismiss the above -captioned appeal pursuant to Alaska R. App. P. 51 l(b), because the parties have settled the matter. This Court, finding the motion to be of merit, hereby DISMISSES this appeal, with prejudice, each side to bear its own costs and attorney's fees. The cost bond shall be exonerated and returned to Appellant. DATED: A4860\2\PLEADINGS\0R Dd ism i ssal MICHAEL L. WOLVERTON Superior Court Judge Page I of 2 U a: r:: I HEREBY CERTIFY that a true and correct copy of the foregoing (typed in Times New Roman 13) was mailed to the following on the 80' day of January, 2018: Cathy Foerster, Commissioner Alaska Oil & Gas Conservation Commission 333 W. 7th Avenue Anchorage, Alaska 99501 Jahna Lindemuth Attorney General of Alaska PO Box 110300 Juneau, A.00�99811-0300 x4860\2\PLEADINGS\0RDd ism issa1 Page 2 of 2 6 William M. Bankston, Esq. Renee J. Sheyko, Esq. Bankston Gronning O'Hara, P.C. Attorneys for Appellant wbankston@bgolaw.pro rsheyko(a,)bgo law. pro R,EcFl vE D gJAN By 2018 IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE AURORA EXPLORATION, LLC, ) Appellant, ) V. ) ALASKA OIL & GAS CONSERVATION ) COMMISSION, ) ) Appellee. ) Case No. 3AN-17-10705CI MOTION FOR DISMISSAL OF APPEAL Pursuant to Alaska R. App. P. 51 I(b), dismissal of an appeal may be requested by the appellant. The parties have settled the matter and appellant moves that the Court dismiss this appeal, with prejudice, each side to bear its own costs and attorney's fees. DATED at Anchorage, Alaska this 3`d day of.lanuary, 2018. A48600PL EA D I NGSMOTd ism issal BANKSTON, GRONNING, O'HARA, P.C. Attorneys for Appellant By: _ Oc William M. Bankston AK Bar No. 7111024 wbankston@,,bgolaw. pro By: �— enee J. Sheyko AK Bar No. 141 1 105 rsheyko(cilbgo law. pro Page I of 2 U a I HEREBY CERTIFY that a true and correct copy of the foregoing (typed in Times New Roman 13) was mailed to the following on the 3rd day of January, 2018: Cathy Foerster, Commissioner Alaska Oil & Gas Conservation Commission 333 W. 7" Avenue Anchorage, Alaska 99501 Jahna Lindemuth Attorney General of Alaska PO Box 110300 Juneau�l�ska99811-0300 r�----------- ' ar ew vozar A48600PLEA DI NGSWOTdism issal Page 2 of 2 U a d William M. Bankston, Esq. Renee J. Sheyko, Esq. Bankston Gronning O'Hara, P.C. Attorneys for Appellant wbankston@bgolaw.pro rsheyko@bgolaw.pro IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE AURORA EXPLORATION, LLC, ) Appellant, ) V. ) ALASKA OIL & GAS CONSERVATION ) COMMISSION, ) ) Appellee. ) Case No. 3AN-17-10705CI STATUS REPORT THE PARTIES have resolved their issues. The parties have executed a settlement agreement. The settlement agreement must be noticed by the U.S. Bankruptcy Court. Once the Bankruptcy Court approves the settlement and the agreement has been finalized through the Bankruptcy Court's procedures, Appellant will notify the Court and this matter may be dismissed with prejudice, each side to bear its own costs and attorney's fees. DATED at Anchorage, Alaska this 13° day of December, 2017. A4860\2\PLEADINGS\STATUSreport BANKSTON, GRONNING, O'HARA, P.C. Attorneys for Appellant By: )1 4 Z�4� William A Bankston AK Bar No. 7111024 wbankston@bgolaw.proj By:",, l/l�c r Renee J. Sheyko AK Bar No. 1411105 rsheyko@bgolaw.pro Page 1 of 2 U / a N co h x O3MON e C'S�mm°=a Y x Z �3ALLR <.0 z E O ` rK o 4o yy z F � F x z I HEREBY CERTIFY that a true and correct copy of the foregoing (typed in Times New Roman 13) was mailed to the following on the 13`x' day of December, 2017: Cathy Foerster, Commissioner Alaska Oil & Gas Conservation Commission Jahns Lindemuth AAtttorney General of Alaska A4860\2\PLEADI NGS\STATUSrepon Page 2 of 2 4 AGENCY'S LIST OF PARTIES & ATTORNEYS ON APPEAL Case Title Aurora Exploration, LLC vs. AK Oil and Gas Conservation Comm Appeal Case No. 3AN-17-10705 Cl Admin. Agency No. Other Order 125 Agency Name AOGCC Name and Address of Party Aurora Exploration, LLC c/o Trading Bay Oil and Gas 2440 East Tudor #230, Anch, AK 99503 AK Oil and Gas Conservation Comm 333 West 7th Avenue Anchorage, AK 99501 lz I-4 ( 1q Date Hearing Officer Name and Address of Attorney of Record Renee J. Sheyko, Bankston et. al. 601 West 5th Avenue, Suite 900 Anchorage, AK 99501 Thomas Ballantine, SOA, AGO 1031 West 4th Avenue, Suite 200 Anchorage, AK 99501 6bQ9z---� Signature of Agency Representative Hollis S. French, Chair, Commissioner Type or Print Name Instructions: Send this list to the superior court where the appeal is filed. AP -311 (1/05)(cs) AGENCY'S LIST OF PARTIES AND ATTORNEYS ON APPEAL App. R. 602(d)(2) 3 IN THE DISTRICT COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE Aurora Exploration, LLC, Appellant, vs. Alaska Oil & Gas Conservation Commission, Appellee. CASE NO: 3AN-17-10705CI ASSIGNMENT This case is assigned to the Honorable Judge Michael L Wolverton for all purposes including trial. 11/28/2017 By: LMcGowan Date Deputy Clerk I certify that on 11/28/17 a copy of this order was mailed or delivered to: William M Bankston Alaska Oil & Gas Conservation Commission Clerk: LMcGowan FILE COPY CIV210(cv) (2/04) Notice Of Judicial Assignment IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE Aurora Exploration, LLC, Appellant, vs. Alaska Oil & Gas Conservation Commission, Appellee. Appeal CASE NO: 3AN-17-10705CI NOTICE OF PREPARATION OF RECORD IN AN ADMINISTRATIVE APPEAL To: Alaska Oil & Gas Conservation Commission Attached is a copy of the notice of appeal filed on 11/27/2017 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 pro se 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 W 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 parties. The agency may require advance payment of the costs. Appellate Rule 604(b)(1)(B)(iv), CLERK OF COURT _ 11/28/2017 By: LMcGowan Date Deputy Clerk I certify that on 11/28/17 a copy of this order was mailed or delivered to: Willem M Bankston Alaska Oil & Gas Conservation Commisslon Clerk: LMcGowan FILE COPY AP -310 (9112) Notice For Preparation Of Record App. R. 604-607 U a z z O O F m x z :. William M. Bankston, Esq. Renee J. Sheyko, Esq. Bankston Gronning O'Hara, P.C. Attorneys for Appellant wbankston@bgolaw.pro rsheyko@bgolaw.pro RECEIVED NOV 3 0 2017 AOGCC IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE AURORA EXPLORATION, LLC, ) Appellant, ) V. ) ALASKA OIL & GAS CONSERVATION ) COMMISSION, ) ) Appellee. ) Case No. 3AN-17-10705 Cl LIST OF PARTIES AND ADDRESSES ON APPEAL Aurora Exploration, LLC Appellant 1400 W. Benson Blvd., Suite 410 Anchorage, Alaska 99503 State of Alaska, Alaska Oil & Appellee Gas Conservation Commission 333 W. 71h Avenue ' Anchorage, Alaska 99501 DATED at Anchorage, Alaska, this 28h day of November, 2017. BANKSTON, GRONNING, O'HARA, P.C. Attorneys for Appellant By: enee J. Sheyko AK Bar No. 1411105 rsheyko@bgolaw.pro 9urora Exploration, LLC v. State of Alaska, Alaska Oil & Gas Conservation Commission :ase No. 3AN-17-10705 C1 Page 1 of 2 A86MTLEADINGSTISTpar ies A' I HEREBY CERTIFY that a true and correct copy of the foregoing (typed in Times New Roman 13) was mailed to the following on the 28°i day of November, 2017: Cathy Foerster, Commissioner State of Alaska, Alaska Oil & Gas Conservation Commission 333 W. 7`" Avenue Anchorage, Alaska 99501 Vozar Jahna Lindemuth Attorney General of Alaska PO Box 110300 Juneau, Alaska 99811-0300 Aurora Exploration, LLC v. State of Alaska, Alaska Oil & Gas Conservation Commission Case No. 3AN-17-10705 CI Page 2 of 2 A4860\2\PLEAD] NGSU STparties William M. Bankston, Esq. Renee J. Sheyko, Esq. Bankston Gronning O'Hara, P.C. Attorneys for Appellant wbankston@bgolaw.pro rsheyko@bgolaw.pro RECEIVE® NOV 2 8 2017 d' OGCC IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE U a d m M N x MON O AURORA EXPLORATION, LLC, ) E Appellant, ) V. ) ALASKA OIL & GAS CONSERVATION ) COMMISSION, ) Appellee ) Case No. 3AN-17- Cl NOTICE OF APPEAL (from Administrative Agency to Superior Court) NOTICE IS HEREBY GIVEN that AURORA EXPLORATION, LLC appeals to the Superior Court the Decision and Order dated October 25, 2017 of the State of Alaska, Alaska Oil and Gas Conservation Commission (AOGCC). A copy of the AOGCC's October 25, 2017 Decision and Order titled "Other Order 125" is attached to this Notice (hereinafter referred to as the "Order"). Before stating the points on appeal, Aurora Exploration, LLC wants to clarify to the court the context within which this appeal is being filed. The proposed transaction that resulted in the Alaska Oil & Gas Conservation Commission issuing Other Order 125 was negotiated during a Chapter 11 bankruptcy proceeding. Aurora Gas, LLC is the debtor in possession. Aurora Exploration, LLC is a completely different company with no ties to Aurora Gas, LLC other than the fact that Aurora Exploration, LLC is attempting to purchase assets from the debtor. Aurora Exploration, LLC and Aurora Gas, LLC are NOTICE OF APPEAL OF ADMINISTRATIVE AGENCY DECISION Page] of 8 Aurora Exploration, LLC v. State of Alaska, Alaska Oil & Gas Conservation Commission A48600PLEADING S W O'rappeai Mom ON M O O CS�NY°�'a z��ALL� x z;da�& z `Q MN oot L�� a U N C z oaa E~ m x z W William M. Bankston, Esq. Renee J. Sheyko, Esq. Bankston Gronning O'Hara, P.C. Attorneys for Appellant wbankston@bgolaw.pro rsheyko@bgolaw.pro RECEIVE® NOV 2 8 2017 d' OGCC IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE U a d m M N x MON O AURORA EXPLORATION, LLC, ) E Appellant, ) V. ) ALASKA OIL & GAS CONSERVATION ) COMMISSION, ) Appellee ) Case No. 3AN-17- Cl NOTICE OF APPEAL (from Administrative Agency to Superior Court) NOTICE IS HEREBY GIVEN that AURORA EXPLORATION, LLC appeals to the Superior Court the Decision and Order dated October 25, 2017 of the State of Alaska, Alaska Oil and Gas Conservation Commission (AOGCC). A copy of the AOGCC's October 25, 2017 Decision and Order titled "Other Order 125" is attached to this Notice (hereinafter referred to as the "Order"). Before stating the points on appeal, Aurora Exploration, LLC wants to clarify to the court the context within which this appeal is being filed. The proposed transaction that resulted in the Alaska Oil & Gas Conservation Commission issuing Other Order 125 was negotiated during a Chapter 11 bankruptcy proceeding. Aurora Gas, LLC is the debtor in possession. Aurora Exploration, LLC is a completely different company with no ties to Aurora Gas, LLC other than the fact that Aurora Exploration, LLC is attempting to purchase assets from the debtor. Aurora Exploration, LLC and Aurora Gas, LLC are NOTICE OF APPEAL OF ADMINISTRATIVE AGENCY DECISION Page] of 8 Aurora Exploration, LLC v. State of Alaska, Alaska Oil & Gas Conservation Commission A48600PLEADING S W O'rappeai currently contesting Other Order 125 in the United States Bankruptcy Court. The bankruptcy court has jurisdiction to protect the creditors, the debtor in possession, and the purchaser of assets from discrimination. The reason Aurora Exploration, LLC is appealing Other Order 125 to the Alaska Superior Court is to protect Aurora Exploration, LLC's right to appeal in the state court system." employee, Mike Quick, at the October 9, 2017 hearing. Mr. Quick's testimony presented evidence that had nothing to do with the Nicolai Creek Unit wells. Therefore, the AOGCC's reliance on irrelevant evidence to decide the amount of the bond to impose upon Aurora Exploration, LLC is erroneous and unsupported by any reasonable basis. Furthermore, AOGCC's reliance on Mr. Quick's testimony demonstrates AOGCC's discriminatory intent to rely on its employee's testimony rather than the testimony of other experts and witnesses. This constitutes arbitrary and capricious decision making and NOTICE OF APPEAL OF ADMINISTRATIVE AGENCY DECISION Page 2 of 8 Aurora Exploration, LLC v. State of Alaska, Alaska Oil & Gas Conservation Commission A4860\2\PLEADINGS\N0Tappe I STATEMENT OF POINTS ON APPEAL 1. The AOGCC erred in issuing the Order when it held that, "AOGCC will not approve the change in operator unless Aurora Exploration posts a bond of $3,600,000" to Lj substitute itself for Aurora Gas, LLC as the operator of six producing gas wells in the p Nicolai Creek Gas Field (also known as the Nicolai Creek Unit) because it lacked substantial evidence for such decision. The AOGCC based the $3,600,000 bond on, x N cuo "AOGCC's estimate of the cost to plug and abandon the six wells ... is $600,000 per well" c7 o 3 a— y m a ti x 3 without any financial or operational evidence to support this number for the specific wells z ; d R " o at the Nicolai Creek Unit. Z 41>a os Lo C Q r N O iD 2. The AOGCC erred in ordering a bond amount that does not comport with oa S a evidence presented to the AOGCC by any expert at the hearing held on October 9, 2017. F None of the evidence presented about the Nicolai Creek Unit gas wells support a UD z 9 conclusion that plugging and abandoning these six wells would cost $3,600,000. 3. The AOGCC erred in relying upon evidence presented by the AOGCC's employee, Mike Quick, at the October 9, 2017 hearing. Mr. Quick's testimony presented evidence that had nothing to do with the Nicolai Creek Unit wells. Therefore, the AOGCC's reliance on irrelevant evidence to decide the amount of the bond to impose upon Aurora Exploration, LLC is erroneous and unsupported by any reasonable basis. Furthermore, AOGCC's reliance on Mr. Quick's testimony demonstrates AOGCC's discriminatory intent to rely on its employee's testimony rather than the testimony of other experts and witnesses. This constitutes arbitrary and capricious decision making and NOTICE OF APPEAL OF ADMINISTRATIVE AGENCY DECISION Page 2 of 8 Aurora Exploration, LLC v. State of Alaska, Alaska Oil & Gas Conservation Commission A4860\2\PLEADINGS\N0Tappe I prejudicial intent. The AOGCC's orders related to Aurora Exploration, LLC are irrational, discriminatory, and without foundation in law or fact. 4. The AOGCC erred in failing to follow its relevant regulations in regard to bonding. Regulation 20 AAC 25.025 (a) provides, "An operator proposing to drill a well for which a permit is required under 20 AAC 25.005 shall file a bond and, if required under (2) of this subsection, security to ensure that each well is drilled, operated, maintained, repaired, and abandoned and each location is cleared in accordance with this chapter." Regulation 20 AAC 25.025 (b) goes on to say, "A bond and, if required, security �j must be in the amount of not less than $100,000 to cover a single well or not less than $200,000 for a blanket bond covering all of the operator's wells in the state, except that the commission will allow an amount less than $100,000 to cover a single well if the operator x o�� demonstrates to the commission's satisfaction in the application for a Permit to Drill O3;a�°'ioo 0 j b. (Form 10-401) that the cost of well abandonment and location clearance will be less than a a k 3 z r da" 0 $100,000." There is no statutory or regulatory language that authorizes the AOGCC to F z° c order a field -specific operator bond or a unit -specific operator bond as was ordered by a 3 AOGCC in the Order. The AOGCC can only require a statewide blanket operator bond from a company applying to operate more than one well. AOGCC lacked any reasonable Z ~ basis for the type of bond required by the Order. 5. AOGCC erred in its application of relevant regulations. Regulation 20 AAC 25.025(a) specifically pertains to, "An operator proposing to drill a well..." The AOGCC erred in the Order to the extent that Aurora Exploration, LLC is not proposing to drill any wells. It is applying to be substituted as the operator for gas wells drilled and operated by a predecessor operator. When the AOGCC established the bond for the predecessor operator, just like all other operators in Alaska, the AOGCC required that company to post a $200,000 statewide blanket operator bond. The AOGCC has arbitrarily and capriciously decided that Aurora Exploration, LLC should post a unit -specific bond 1,800% higher than the statewide blanket bond required under 20 AAC 25.025. The bonding requirement in NOTICE OF APPEAL OF ADMINISTRATIVE AGENCY DECISION Page 3 of 8 Aurora Exploration, LLC v. State of Alaska, Alaska Oil & Gas Conservation Commission A4860\2\PLEADINGS\N0Tappea1 the Order is arbitrary and capricious, and discriminatory against Aurora Exploration, LLC because it is flagrantly inconsistent with the requirements of 20 AAC 20.025 and its application to any other operator in Alaska. 6. The AOGCC erred by discriminating against Aurora Exploration, LLC by using a method never that has never been used before or since by the AOGCC to establish a dollar amount for an operator's statewide blanket bond. Estimating the cost to plug and abandon a specific set of wells that a new operator has applied to operate is inconsistent with the requirements of the AOGCC's current bonding regulations that provide for a statewide blanket operator bond. Previous to issuing the Order, the AOGCC has universally and consistently applied the current regulations to any new operator applying to the AOGCC to operate two or more wells in Alaska by setting the new operator's statewide bond at $200,000. 7. The AOGCC erred by discriminating against Aurora Exploration, LLC in its first version of "Other Order 125" (attached) issued on August 31, 2017. AOGCC's discrimination against Aurora Exploration, LLC was confirmed in United States Bankruptcy Judge Gary Spraker's order dated September 26, 2017 that declared the August 31, 2017 Other Order 125 void. A copy of Judge Spraker's order is attached. Judge Spraker clarified his conclusion that Aurora Exploration, LLC was the target of the AOGCC's discrimination in his September 26, 2017 order in which he wrote that Other Order 125, "...violates not only § 362(a), but § 525 as well... Moreover, the court finds that given the direct impact upon AE [Aurora Exploration, LLC] as the buyer of the debtor's assets, and the target of the discrimination, AE had standing to raise § 525 as well." The AOGCC began discriminating against Aurora Exploration, LLC on August 31, 2017 when it issued the first version of Other Order 125, and continues to discriminate against Aurora Exploration in the revised Other Order 125 issued on October 25, 2017. 8. The AOGCC demonstrated prejudice against Aurora Exploration, LLC and other start-up companies who want to become operators in Alaska by referring to them as NOTICE OF APPEAL OF ADMINISTRATIVE AGENCY DECISION Page 4 of 8 Aurora Exploration, LLC v. State of Alaska, Alaska Oil & Gas Conservation Commission A4860\2\PLEADINGS\NOTappeal NOTICE OF APPEAL OF ADMINISTRATIVE AGENCY DECISION Page 5 of 8 Aurora Exploration, LLC v. State of Alaska, Alaska Oil & Gas Conservation Conmzission A4860\2\PLEADINGS\N0Tappeal "maggots" in a public venue. On February 8, 2017, the Chair of the AOGCC (Commissioner Cathy P. Foerster was Chair at that time) stated during her testimony to the State of Alaska Legislature's House Resources Committee, "But things are changing and as most mature oil fields, oil provinces experience... some of you have heard my Serengeti talk, as fields progress the lions and tigers come in first and they eat on the big gazelle, and then the littler... the hyenas and the jackals. I beg you guys not to incentivize so much that we end up getting the maggots here." AOGCC's prejudicial attitude toward new, small operators is clear and convincing as demonstrated by these remarks. The other two �j Commissioners who signed the Order were also present in the Legislature's hearing room p' 6 when then-Chair Foerster presented her prepared testimony including when she implored y the Committee "...not to incentivize so much that we end up getting the maggots." x ° N 9. The Order discriminates against Aurora Exploration, LLC because the Order 001 O O 0y 3 x Q X treats Aurora Exploration, LLC differently than other operators. All other operators drilling N Z a or operating more than one well in Alaska have been require to post a $200,000 blanket E a co z N c W bond for all wells operated in the state pursuant to 20 AAC 25.025(b). During a =A Z 3 N �aS Commissioner Foerster's testimony to the House Resources Committee on February 8, F = 2017 she stated, "An operator comes to the State of Alaska and wants to drill its first well, to 9 Wwe charge them a $100,000 bond. That operator says, `Oh now I want to drill more wells.' 14 We charge them another $100,000 and that's all. So, everything that BP operates is secured with $200,000. Everything that Conoco operates - $200,000. Everything that Hilcorp operates - $200,000." The regulations regarding bonding have not changed, and drilling permits are routinely issued to operators each month by the AOGCC without requiring anything more than the operator's one-time $200,000 statewide blanket bond. The Order's bonding requirement imposed upon Aurora Exploration, LLC is significantly greater than the fixed amount of $200,000 required from every other operator in Alaska is therefore arbitrary, capricious, and discriminatory. NOTICE OF APPEAL OF ADMINISTRATIVE AGENCY DECISION Page 5 of 8 Aurora Exploration, LLC v. State of Alaska, Alaska Oil & Gas Conservation Conmzission A4860\2\PLEADINGS\N0Tappeal acknowledging that the AOGCC had violated federal law in first version of Other Order 125 by discriminating against Aurora Exploration, LLC; without acknowledging that the first version of Other Order 125 had been declared void by Judge Spraker; and without following the requirements of the Alaska Administrative Procedures Act. 13. AOGCC erred in failing to properly apply its own regulations in regard to bonding requirements. Regulation 20 AAC 25.025(a) states that "An operator... shall file a bond ... to ensure that each well is drilled, operated, maintained, repaired, and abandoned and each location is cleared." The Order addresses only the term "abandoned" when it NOTICE OF APPEAL OF ADMINISTRATIVE AGENCY DECISION Page 6 of 8 Aurora Exploration, LLC v. State of Alaska, Alaska Oil & Gas Conservation Commission A4860\2\PLEADINGS\N01 appeal 10. The AOGCC erred by using an AGOCC Order to announce the bond required from Aurora Exploration, LLC before the AOGCC would agree to substitute Aurora Exploration, LLC as the operator of the gas wells at the Nicolai Creek Unit. An operator bond has always been established administratively without an order when a new operator applies to drill or operate two or more wells. The, AOGCC has used orders to impose enforcement bonds and fines on an existing operator when the operator has violated one or more AOGCC regulations. However, the AOGCC has never used any type of Order to establish a single -well operator bond or a statewide operator bond when a new Lj company applies to operate in Alaska. Using an order for this purpose on August 31, 2017 p' � and then again on October 25, 2017 to announce the AOGCC's decisions about Aurora 00 09 o Exploration, LLC's bonding requirement was erroneous, without precedent, and done in x m b Nviolation O 3m o of Aurora Exploration, LLC's due process rights and rights to equal protection. 0 0 jj 0 R = k z��R,.2 11. The AOGCC violated its own regulations when it issued the Order against za' a� Aurora Exploration, LLC in failing to follow its rule-making process required to change a O F: x - c I regulation rather than arbitrarily attempting to create a new class of operator bond (e.g., a a o z A unit -specific bond) through the adjudicatory process of issuing the Order. The AOGCC O used and relied upon criteria not adopted pursuant to the Administrative Procedures Act x z when it issues both Orders. !I 12. The AOGCC erred by holding a hearing on October 9, 2017 without acknowledging that the AOGCC had violated federal law in first version of Other Order 125 by discriminating against Aurora Exploration, LLC; without acknowledging that the first version of Other Order 125 had been declared void by Judge Spraker; and without following the requirements of the Alaska Administrative Procedures Act. 13. AOGCC erred in failing to properly apply its own regulations in regard to bonding requirements. Regulation 20 AAC 25.025(a) states that "An operator... shall file a bond ... to ensure that each well is drilled, operated, maintained, repaired, and abandoned and each location is cleared." The Order addresses only the term "abandoned" when it NOTICE OF APPEAL OF ADMINISTRATIVE AGENCY DECISION Page 6 of 8 Aurora Exploration, LLC v. State of Alaska, Alaska Oil & Gas Conservation Commission A4860\2\PLEADINGS\N01 appeal determined the bond amount, and ignored the four objectives per the regulation. The AOGCC's decision in the Order is erroneous because bonding is required to ensure the five activities contained in 20 AAC 25.025(a) are performed by the operator — not to actually pay for these five activities. Arbitrarily selecting one of the five activities as the foundation for bonding is erroneous and discriminatory against Aurora Exploration, LLC. 14. The Order violates Aurora Exploration, LLC's right to equal protection guaranteed by the Alaska Constitution and the United States Constitution because the bonding requirement treats Aurora Exploration, LLC differently from every other operator Z j in Alaska. p' d � 15. The Order erroneously implies that AOGCC is treating Aurora Exploration, LLC in a similar manner as other operators. The Order states "...AOGCC increased the x O 0)O bond amount required for that well to $800,000." The Order omits that the $800,000 bond 3 7 2 0 J rn A — a Y Z was required in an enforcement order issued by the AOGCC because an operator had ,dq„S Zd d R , m violated an AOGCC regulation, and omits the same operator has a $200,000 blanket Ea 01a w c m operator bond that was not affected by the enforcement bond. An enforcement bond a S a A amount is not equivalent to a blanket operator bond for Aurora Exploration, LLC. Aurora F F Exploration, LLC is not the subject of any enforcement order by the AOGCC. The x z AGOCC's attempt to equate an enforcement bond in another case with Aurora Exploration, LLC's application for substitution as an operator is a violation of equal protection and due process. 16. The AOGCC violated Aurora Exploration, LLC's rights to due process of law granted by the Alaska Constitution and the United States Constitution when it failed to follow its own regulations for establishing a different bond requirement for Aurora Exploration, LLC. 17. Aurora Exploration, LLC requests that this Court hold a trial de novo on the basis that the AOGCC has failed to provide due process to Aurora Exploration, LLC and has demonstrated that it cannot be fair and impartial to Aurora Exploration, LLC. A new NOTICE OF APPEAL OF ADMINISTRATIVE AGENCY DECISION Page 7 of 8 Aurora Exploration, LLC v. State of Alaska, Alaska Oil & Gas Conservation Commission A4860\2\PLEADING SWOTappeal RIJ 0 z z z 0 a A trial on the issue of Aurora Exploration, LLC's bonding requirement should be held by this Court in order to establish the relevant facts and application of the laws and regulations DATED at Anchorage, Alaska this 27th day of November, 2017. BANKSTON, GRONNING, O'HARA, P.C. Attorneys for Appellant 11 William M. Bankston (J AK Bar No. 7111024 wbankston@bgolaw.pro By: a W.(.{(JJI/III.<A Kenee J. Sheyko AK Bar No. 1411105 rsheyko@bgolaw.pro NOTICE OF APPEAL OF ADMINISTRATIVE AGENCY DECISION Page 8 of Aurora Exploration, LLC v. State of Alaska, Alaska Oil & Gas Conservation Commission A48600PLEADI NGS\NOTappeal STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue Anchorage, Alaska 99501 Re: Change of Operator Form (Form 10-411) Other Order 125 ) Docket Number: OTIJ-17-024 October 25, 2017 DECISION AND ORDER Aurora Gas, LLC (Aurora Gas) is the operator of record for six producing wells in the Nicolai Creek Gas Field: Nicolai Creek 09, Nicolai Creek Unit (NCU) 01-B, NCU 02, NCU 03, NCIJ 10 and NCU 11. Aurora Exploration, LLC (Aurora Exploration) filed a change of operator form (Form 10-411) seeking to substitute itself for Aurora Gas as operator of record for the Nicolai Creek Gas Field. With the change of operator form, Aurora Exploration filed a document captioned "Transactional Justification." The Transactional Justification seeks to have the Alaska Oil and Gas Conservation Commission (AOGCC) require a minimal $200,000 bond of Aurora Exploration as the new operator. Because the cost to properly plug and abandon the six NCU wells would be substantially more than $200,000, on August 31, 2017 AOGCC denied Aurora Exploration's request for a $200,000 bond. Aurora Exploration moved for reconsideration and requested a hearing be held on shortened time to allow it to present evidence. In support Aurora Exploration offered the affidavit of Edward Jones stating the costs to plug 10 nearby wells on land owned by Cook Inlet Region, Inc. (CIRI) was estimated to be between $100,000 and $250,000 per well. On September 19, 2017 AOGCC granted Aurora Exploration's request and set a public hearing for October 9. 2017. On the afternoon of October 5, 2017. Aurora Exploration filed a "Motion for Non -Adjudicatory Determination fol -Transfer of Operator's Agreement." The motion revised Jones' estimate of the costs to plug and abandon the CIRI wells to between $100,000 and $205,000. The motion also Proposed AOGCC require a $200,000 bond and enter a contract to set up a trust account whereby Aurora would begin funding the account in July 2019 in order to cover the projected costs of Other Order 125 October 25, 2017 Page 2 of Plugging and abandoning the six NCU wells. Aurora Exploration also withdrew its request for "any hearing, order, or decision by the AOGCC ..." AOGCC declined to vacate the hearing. At the October 9, 2017 hearing four witnesses testified: AOGCC Senior Petroleum Engineer Mike Quick and three witnesses offered by Aurora Exploration, Scott Pfoff, Paul Craig and Edward Jones, President of Aurora Gas. Mr. Pfoff and Mr. Craig neither testified as experts nor offered any material evidence regarding the estimated cost to the state if it was required to undertake to plug and abandon the six wells. Mr. Jones testified as an engineer. Mr. Jones' estimates of between $100,000 and $205,000 per well to plug and abandon the six wells were based on Mr. Jones' estimates of the costs to plug and abandon 10 wells on CIRI land. Mr. .Tones' estimates on the CIRI wells were based on a combination of cost estimates from contractors and his experience. Mr. Jones' underlying assumptions included one mobilization, one demobilization, everything going as planned and the work being performed in non -winter weather. The manner in which the CIRI wells will be plugged and abandoned is essentially to cement the wells back to the surface. Mr. ,cones stated his belief that the six wells at issue here are similar to the CIRI wells and that the cost to plug and abandon them should be roughly the same. None of the CIRI wells has yet been plugged and abandoned. Mr. Quick prepared an estimate of the cost to the state to plug and abandon the six wells based on his experience in plugging and abandoning wells in Alaska. The estimate was based on an approach Of setting a series of plugs in each well, then pressure testing each plug before moving up the well to the next plug. That estimate included logistics costs and a 20% contingency due to the uncertainty as to when the six wells would need to be plugged and the condition of those wells at that time. At the time of AOGCC's August 31, 2017 order Mr. Quick's estimate of the cost per well had been $960,000. In the interim another operator had successfully plugged and abandoned a comparable well for roughly $760,000.1 Shortly before that well was plugged and abandoned, AOGCC had increased the bond amount required for that wc11 to £800,000. The 5760,000 cost does not represent the final cost to plug and abandon that well. Other Order 125 October 25, 2017 Page 3 of Mr. Quick noted that Mr. Jones' method for the CIRI wells would comply with AOGCC regulations if it was successful, but that the method involved more risk of failure, an exponential increase in the cost to plug and abandon the wells if failure occurred and that AOGCC had recent experience with Mr. Jones' method failing. Mr. Jones agreed his approach involved greater risk than that proposed by Mr. Quick. By law, AOGCC has a duty to require a bond sufficient to "ensure that each well is drilled, operated, maintained, repaired, and abandoned and each location is cleared." Any bond is not used unless an operator walks away from its obligation to properly plug and abandon a well. As a result, the bond amount should reflect the cost to the state if it is required to plug and abandon the well. The AOGCC cannot, consistent with its statutory duties, accept a $200,000 blanket bond on all six wells. Nor will AOGCC accept Aurora's cost estimate, which is lower because it involves a greater risk of failure and also assumes there will be no issues with well tubing or casing integrity once P&A operations commence. Taking into account Mr. Jones' testimony regarding the good condition of the tubing combined with information received since entry of the August 31, 2017 Order, AOGCC has updated its estimate of the costs to properly plug and abandon the six wells. AOGCC's estimate of the cost to plug and abandon the six wells Aurora Exploration seeks to operate is $600,000 per well, for a total estimated cost of $3,600,000. AOGCC will not approve the change in operator unless Aurora Exploration posts a bond of $3,600,000. The bond may be posted over a three-year period.. $2.000,000 the first year, $1,000,000 the second year and $600,000 the third year. Done at Anchorage, Alaska and Dated October 25, 2017. Hollis S. French Cathy P. Poerster Daniel T. Seamount. ,h•. Commissioner Commissioner Commissioner Other Order 125 October 25, 2017 Page 4 of 4 nci.trrNbluLRATION AND APPEAL NOTI(.L Unless an application for reconsideration is tiled, this is the AOGCC's final order or decision and any appeal must be filed in superior court within 30 days of the date this order or decision is mailed or otherwise distributed. As provided in AS 31.05.080(a), within 20 days after written notice Or the entry of this order or decision, or such funher lime as the AOG('(' grants for good cause shown, a person affected by it may file with the AOGCC an application for reconsideration Of file matter determined by it. If file notice was mailed, then the period of (line shall be 23 days. An application fir reconsideration muss or decisset out the respect in which the order iat is believed to be erroneous. 'file AOGCC shall grant or reface the application I -or reconsideration in whole or in pan within 10 days after it is filed. failure to act on it is ithin 10 -Jays is a denial ofmconsidcratiow If the AOGCC denies reconsideration, upon denial, this order or decision mid the denial of reconsideration we FINAL and may be appealed to superior coon. the appeal MUST be riled within 33 days aver die date on which the ACX;CC mails OR 30 days if the AOGCC otherwise distributes, the order or decision denying reconsideration. UNLESS the denial isby inaction, in which appeal MAST be riled within 40 days after the date on which the application for reconsideration was filed. case the If [be 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 superiorcoun. I Ill, appeal \It;5'f be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, fife order or decision on reconsideration. In computing a period of time above, the dale of die event or defaultaRer 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 oats until 5:00 p.m. mi the nest day that does not fall on a weekend or state holiday. STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue Anchorage, Alaska 99501 Re: Change of Operator Form (Form 10-411) ) Other Order 125 Docket Number: OTH-1 7-024 August 31, 2017 DECISION AND ORDER Aurora Exploration, LLC (Aurora Exploration) filed a change of operator form (Form 10-411) seeking to substitute itself for Aurora Gas, LLC (Aurora Gas) as operator of record for the Nicolai Creek Gas Field. With the change of operator form, Aurora Exploration filed a document captioned "Transactional Justification." The Transactional Justification seeks to have the Alaska Oil and Gas Conservation Commission (AOGCC) require a minimal $200,000 bond of Aurora Exploration as the new operator. Aurora Gas is currently the operator of nine wells on state lands. Three of those wells are shut in and need to be plugged and abandoned: Three Mile Creek Unit (TMCU) 1, TMCU 2 and Three Mile Creek 3. The other six wells — Nicolai Creek 09, Nicolai Creek Unit (NCU) 01-B, NCU 02, NCU 03, NCU 10 and NCU 11 — are capable of production. Aurora Exploration's change of operator form only seeks to be named operator for the wells involved in production and excludes the wells which need to be plugged and abandoned. By law, AOGCC has a duty to require a bond sufficient to "ensure that each well is drilled, operated, maintained, repaired, and abandoned and each location is cleared." AOGCC's estimate of the cost to plug and abandon the six wells Aurora Exploration seeks to operate is $1,000,000 per well, roughly $6,000,000. Aurora Gas is bankrupt and will not plug and abandon the three Three Mile Creek wells. As a result, the cost of properly plugging and abandoning the wells will fall to the landowner, the Alaska Department of Natural Resources, which has no budget surplus from which to draw the necessary $6,000,000. Other Order 125 August 31, 2017 Page 2 of 2 The AOGCC cannot, consistent with its duty to require a bond sufficient to cover the estimated cost to plug and abandon the wells, accept a $200,000 blanket bond on all six wells. Aurora Exploration's request for a $200,000 blanket bond is denied. AOGCC will not approve the change in operator unless Aurora Exploration agrees to one of the following: 1) A bond in the amount of $200,000 and Aurora Exploration's agreement to plug and abandon the three Three Mile Creek wells within six months of AOGCC's approval of the change of operator form, or 2) A bond in the amount of $6,000,000, to be posted over a three-year period, $2,000,000 the first year, an additional $2,000,000 the second year, and an additional $2,000,000 the third year. Done at Anchorage, Alaska and Dated August 31, 2017 //signature on file// //signature on file// Cathy P. Foerster Daniel T. Seamount, Jr. Commissioner Commissioner TION AND APPEAL NOTICE Unless an application for reconsideration is filed, this is the AOGCC's final order or decision and any appeal must be filed in superior court within 30 days of the date this order or decision is mailed or otherwise distributed. 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, Oren 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 maybe 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 lire 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. Case 16-00130 Doc 322 Filed 09/26/17 Entered 09/26/17 16:09:16 Desc Main Document Page 1 of 1 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF ALASKA In re: Case No. A16 -00130 -GS AURORA GAS, LLC, Chapter 11 Debtor. ORDER GRANTING MOTION FOR ORDER RE: ALASKA OIL AND GAS CONSERVATION COMMISSION (AOGCC) BOND On September 21, 2017, at 1:30 p.m. this court held a hearing on Aurora Exploration, LLC's Motion for Order re: Alaska Oil and Gas Conservation Commission (AOGCC) Bond (ECF No. 29 1) (Motion). Appearances were as noted on the record. After considering the papers filed in support of and in opposition to the Motion, the argument of the parties on the record, for the reasons stated on the record and in this court's concurrently -entered memorandum decision on the Motion, with good cause appearing, IT IS HEREBY ORDERED that the Motion is granted, with relief limited to this court's finding that the Decision' is void. DATED: September 26, 2017. BY THE COURT /s/ Gary Suraker GARY SPRAKER United States Bankruptcy Judge Serve: D. Bundy, Esq. R. Crowther, Esq. C. Christianson, Esq. K. Perkins, Esq. E. LeRoy, Esq. ECF Participants per NEF 'Capitalized terms utilized but not defined herein have the meaning assigned to them in this court's concurrently -entered memorandum decision on the Motion. Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/17 16:00:42 Desc Main Document Page 1 of 14 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF ALASKA In re: Case No. A 16 -00130 -GS AURORA GAS, LLC, Chapter 1 I Debtor. MEMORANDUM ON MOTION FOR ORDER RE: ALASKA OIL & GAS CONSERVATION COMMISSION (AOGCC) BOND At the time it filed its petition, debtor Aurora Gas, LLC (Aurora Gas) operated 19 oil and gas wells in southcentral Alaska's Cook Inlet.' Aurora Gas leased ten wells from Cook Inlet Regional Inc. (CIRI),' and nine wells from the State of Alaska (State).' For purposes of this memorandum, the court will refer to the leases with CIRI collectively as the "CIRI leases." However, the wells leased from the State are separated into two distinct groups based upon their locations. Three of the State's leased wells are located in the Three Mile Creek unit' The remaining six wells leased from the State are located in the Nicolai Creek Unit.' The debtor's efforts to reorganize have not proceeded as originally hoped. During the bankruptcy it has incurred significant losses which effectively preclude it from reorganizing. On March 24, 2017, the United States Trustee (UST) filed a motion to dismiss or convertthe bankruptcy ' First Amended Disclosure Statement, ECF No. 179 at 5. z ECF No. 223. ' ECF No. 291-2. 4 Id. 5 id. Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/17 16:00:42 Desc Main Document Page 2 of 14 case.' In response to that motion the debtor attempted to sell its assets.' During this process, the debtor realized that it would not be able to sell its nonoperational wells, and began temporarily plugging those wells as it reduced its operations. This included all of the wells leased from CIRI except a disposal well, and the three Three Mile Creek wells leased from the State. Based upon its financial condition, however, the debtor has made it clear that it does not have the resources to permanently "plug and abandon" those wells as required under the leases. The parties have continued the hearing on the UST's motion to dismiss several times during this process, recognizing the benefit of having the debtor properly close its operations, while closely monitoring the debtor's progress and finances! As part of the process, Aurora Gas sought, and obtained court approval, to reject nine leases with CIRI, and the three leases with the State for the Three Mile Creek wells' While closing the non -operational wells, Aurora Gas continued its efforts to sell the operational wells in the Nicolai Creek unit. The Nicolai Creek wells remain operational, and continue to generate limited revenue for the debtor which has funded the closing of the non- operational wells. Aurora Gas has informed the court that upon resolution of the approved sale it will not oppose the UST's motion to dismiss or convert. The debtor procured an offer from Aurora Exploration, LLC (AE) to purchase five oil and gas leases with the State for wells in the Nicolai Creek Unit, and various personal property, free and clear of liens, for $100,000.10 On August 22, 2017, the court entered its Order Granting Motion for 6 ECF No. 170. ECF Nos. 178-179. $ ECF Nos. 191, 205, 209, 215, 226, 243, 261, 263, 281, 297. 9 ECF No. 298. 10 ECF No. 267. 2 Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/17 16:00:42 Desc Main Document Page 3 of 14 Authority to Assume and Assign Certain Mineral Leases and Sell Related Assets Free and Clear of Liens (Order) approving the sale," including assumption and assignment of the debtor's interests in the five Nicolai Creek oil and gas leases." The Order provides that the State must approve all transfers of the debtor's oil and gas leases, and for this reason the sale was expressly made "subject to approval of the State of Alaska."" In recognition of the State's authority over the leases, the Order further provides, "[t]he failure of the State of Alaska to approve assignment of the Mineral Leases on terns acceptable to AE shall nullify the Transaction and all parties shall be restored to their positions as of the date of the entry of this Order."" AE filed its change of operator form with the Alaska Oil and Gas Conservation Commission (AOGCC) to "substitute itself for Aurora Gas ... as operator of record for the Nicolai Creek Gas Field."15 Relevant to the matter before the court, the AOGCC is the state agency statutorily authorized to require "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.i16 AE requested that it be allowed to post a bond of $200,000 as security for the performance of the plug and abandonment obligations under the leases it was acquiring from Aurora Gas." " ECF No. 280. The leases are identified in Exhibit A to the Motion to Sell Leases and Related Assets Free and Clear of Liens (ECF No. 267-1). 13 ECF No. 280 at 2. 14 Id. 15 ECF No. 291-2 at 1. 16 AS 31.05.030(d)(4). 17 ECF No. 291-2. Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/17 16:00:42 Desc Main Document Page 4 of 14 On August 31, 2017, AOGCC entered its Decision and Order on AE's request that it be substituted for Aurora Gas on the Nicolai Creek Unit leases (Decision)." The Decision is short and to the point: Aurora Gas is currently the operator ofnine wells on state lands. Three of those wells are shut in and need to be plugged and abandoned: Three Mile Creek Unit (TMCU) 1, TMCU 2 and Three Mile Creek 3. The other six wells—Nicolai Creek 09, Nicolai Creek Unit (NCU) 01-B, NCU 02, NCU 03, NCU 10 and NCU 11 — are capable of production. Aurora Exploration's change of operator form only seeks to be named operator for the wells involved in production and excludes the wells which need to be plugged and abandoned. By law, AOGCC has a duty to require a bond sufficient to "ensure that each well is drilled, operated, maintained, repaired, and abandoned and each location is cleared." AOGCC's estimate of the cost to plug and abandon the six wells Aurora Exploration seeks to operate19 is $1,000,000 per well, roughly $6,000,000. Aurora Gas is bankrupt and will not plug and abandon the three Three Mile Creek wells. As a result, the cost of properly plugging and abandoning the wells will fall to the landowner, the Alaska Department of Natural Resources, which has no budget surplus from which to draw the necessary $6,000,000. The AOGCC cannot, consistent with its duty to require a bond sufficient to cover the estimated cost to plug and abandon the wells, accept a $200,000 blanket bond on all six wells. Aurora Exploration's request for a $200,000 blanket bond is denied. AOGCC will not approve the change in operator unless Aurora Exploration agrees to one of the following: 1) A bond in the amount of $200,000 and Aurora Exploration's agreement to plug and abandon the three Three Mile Creek wells within six months ofAOGCC's approval of the change of operator form, or 0 Id. " In the Decision, the AOGCC refers to six Nicolai Creek wells AE allegedly seeks to operate. This court's Order incorporated the list ofmineral leases attached to the sale motion as Exhibit A, which identified the five Nicolai Creek leases the debtor was assuming and assigning to AE with the sale: lease nos. ADL017585;ADLO17598;ADL063279;ADL391471;and ADL391472. SeeECFNo.267-1. Additionally, in its motion to reject certain leases, the debtor described the Nicolai Creek Unit as consisting of "five wells/leases." ECF No. 268 at 2. This court cannot be certain based on the evidence presented whether a discrepancy between the Decision and the sale order exists, because the Decision references individual wells while the sale motion addressed leases, which potentially could each include more than one well. For the purposes of the present Motion any discrepancy is not material. 4 Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/17 16:00:42 Desc Main Document Page 5 of 14 2) A bond in the amount of $6,000,000, to be posted over athree-year period, $2,000,OOOthe first year, an additional $2,000,000 the second year, and an additional $2,000,00020 Roughly a week later, AE filed its Motion for Order re: Alaska Oil & Gas Conservation Commission (AOGCC) Bond (Motion) in this court.2' AE charges that the AOGCC impermissibly discriminated against it based upon Aurora Gas' bankruptcy under § 525(a) of the Bankruptcy Code. Section 525(a) provides in relevant part: a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against ... a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title ... or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act." On September 15, 2017 AE filed a supplemental memorandum in support of its Motion (Supplement),23 in which it maintains that the AOGCC's Decision also violated the automatic stay.24 Specifically, it argues that the bond requirements constitute; (1) the commencement of a proceeding against the debtor to recover a claim, (2) an act to exercise control over property of the estate, and (3) an act to collect a prepetition claim 25 20 Id. 2' ECF No. 291. 22 11 U.S.C. § 525(a). 23 ECF No. 303. 24 11 U.S.C. § 362(a)(6). 21 11 U.S.C. § 362(a)(1), (3), and (6). Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/17 16:00:42 Desc Main Document Page 6 of 14 AE now asks that this court order the AOGCC to accept the transfer of the Nicolai Creek leases based upon the posting of $700,000 in bonds to secure the obligation to plug and abandon those wells upon termination .16 Aurora Gas has joined in the Motion 27 The State opposes the Motion on a number of grounds 28 First, it argues that this court lacks jurisdiction to decide the Motion. Second, it contends that the sale documents and Order preclude the relief AE now seeks. Third, it argues that AE has misstated the availability of Aurora Gas' pre-existing $200,000 bond 21 and the terms of the court -approved sale to AE, and thus AE's request for transfer of the debtor's pre-existing bond to AE must be denied. Fourth, it argues that § 525 cannot apply to the Decision because it was not made solely based upon Aurora Gas' bankruptcy, and the debt will not be discharged by the bankruptcy. Fifth, and finally, the State argues that § 525(a) protects the debtor, not AE, and relief is not available under § 525(a) for this reason either. The court set the hearing on the Motion on shortened time at AE's request based upon the debtor's precarious financial condition, and the importance of ensuring that Aurora Gas had the ability to properly close the remaining wells if the sale to AE does not close.30 This has created its own set of problems concerning the evidence to be presented. AE has submitted two affidavits in support of its Motion,' and issued several subpoenas to compel the attendance of 26 In its Supplement, AE committed to posting an additional $500,000 to bond the plug and abandonment liability for the five Nicolai Creek wells it seeks to acquire. ECF No. 303 at 11. 2' ECF No. 306. 2' ECF No. 309. 29 ECF No. 309 at 24-31. i0 ECF No. 295. " ECF Nos. 304-305. Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/17 16:00:42 Desc Main Document Page 7 of 14 representatives of the AOGCC to testify at the hearing, as well as one generically calling for presentation of the person most knowledgeable of the AOGCC's Decision and bond requirements.32 The State has moved to quash the subpoenas.33 AE opposed the State's motion to quash the subpoenas, citing the need to establish the basis of the AOGCC's Decision." At the hearing, however, AE released the three subpoenas served on commissioners of the AOGCC, but argued that the subpoena as to the person most knowledgeable should be enforced. AE also asked the court to admit the affidavits of Paul Craig35 and J. Edward Jones," and offered the witnesses for examination. The State objected to the admission of evidence at the hearing as being premature, and depriving it of the opportunity to conduct discovery." The court finds that the admission of further evidence is unnecessary. The Decision amply demonstrates that the AOGCC conditioned the transfer of the Nicolai Creek leases from Aurora Gas to AE upon AE's assumption of Aurora Gas' obligations to plug and abandon those wells on State leases that AE did not purchase. The Decision offers no reason for imposing such a condition apart for its statement that: Aurora Gas is bankrupt and will not plug and abandon the three Three Mile Creek wells. As a result, the cost of properly plugging and abandoning the wells will fall to the landowner, the Alaska " ECF Nos. 311-314. 33 ECF No. 310. 34 ECF No. 316. 35 ECF No. 304. 36 ECF No. 305. " The court has trouble understanding what discovery the State needed to understand its own Decision. Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/1716:00:42 Desc Main Document Page 8 of 14 Department of Natural Resources, which has no budget surplus from which to draw the necessary $6,000,000.38 Tellingly, the State does not deny that the Decision was an attempt to collect Aurora Gas' debt for the Three Mile Creek leases. Rather, it defends its action as necessary to provide for the plugging and abandonment of the wells which the debtor will not be able to accomplish. Whatever its motives, the AOGCC's Decision is an attempt to recover on the debtor's prepetition liability. AE has no interest in the Three Mile Creek wells, nor any obligations to the State as to those wells. The AOGCC's conditioning of its approval of the transfer of the Nicolai Creek leases to AE upon assumption of the debtor's pre-petition liability runs afoul of § 362(a)(3) and (6), as well as § 525(a). Section 362(a)(3) stays any act to exercise control over property of the estate." Section 362(x)(6) precludes any act to collect or recover prepetition claims against the debtor .40 The debtor's leasehold interests in the Nicolai Creek wells certainly constitute property of the bankruptcy estate subject to the automatic stay.41 Section 362(b)(4) excepts from the stay the commencement or continuation of a proceeding by a governmental unit to enforce its police and regulatory powers .41 While the AOGCC's evaluation of the transfer request did not violate the automatic stay, the conditioning of its approval of the transfer upon the assumption of the 38 ECF No. 291-2 at 1. 39 11 U.S.C. § 362(a)(3). 40 11 U.S.C. § 362(a)(6). 41 Pursuant to 1 I U.S.C. § 541(a), property of the estate is broadly defined to include all legal and equitable interests held by the debtor as of its petition date. d2 11 U.S.C. § 362(b)(4). Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/17 16:00:42 Desc Main Document Page 9 of 14 debtor's prepetition liabilities for wells AE was not purchasing constitutes an act to exercise control over the debtor's leases in an effort to collect upon Aurora Gas' prepetition liability. Traditionally, the automatic stay protects the debtor or the bankruptcy estate, and third parties may not complain about violations of the stay " While the stay is not intended to benefit AE, the debtor has joined in the Motion. The debtor certainly has standing to address the State's efforts to condition the sale of its Nicolai Creek wells upon payment of a prepetition liability in violation of § 362(a). Accordingly, the AOGCC's Decision violates § 362(a)(3) and (6), and is void.' Closely related to the stay violation, § 525 protects the debtor, or a person with whom the debtor has been associated, from governmental discrimination based upon the debtor's bankruptcy or the failure to pay a dischargeable debt. The protections afforded by § 525 should be read together with the protections afforded by the automatic stay in this instance to ensure the debtor receives the full benefits of its bankruptcy.05 The AOGCC effectively denied the debtor's transfer of five of its Nicolai Creek leases because it insists on recovering the debtor's Three Mile Creek plug and abandonment liability. ", Burkart v. Coleman (In re Tippett), 542 F.3d 684, 691 (9th Cir. 2008)("the automatic stay provision is designed to protect the debtor against his creditors"); see also In re Pax America Development, LLC, 2013 WL 6054744 at *I (Bankr. C.D. Cal. Nov. 15, 2013)(citing Tilly v. Vucurevich (In re Pecan Groves ofArizona), 951 F.2d 242, 245 (9th Cir. 199 ]))("Because the only legal beneficiaries ofthe automatic stay are the debtor and trustee, a creditor does not have standing to seek damages for violation of the automatic stay."). 44 In re Schwartz, 954 F.2d 569, 571 (9th Cir. 1992)("[V]iolations ofthe automatic stay are void, not voidable."). 45 4 Collier on Bankruptcy § 525.03 (16th ed. 2017). The discussion in Colliers focuses upon the close relationship between § 525(a) and the discharge injunction imposed under § 524. However, the court discerns no meaningful difference between the automatic stay imposed during the case and the discharge injunction imposed afterwards. G Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/17 16:00:42 Desc Main Document Page 10 of 14 The State defends the Decision on the basis that the AOGCC's desire to recover the Three Mile Creek debt was not the sole basis for its decision. However, the AOGCC's subjective intent is irrelevant under § 362(a) where it seeks to collect upon a prepetition debt owed by the debtor, and seeks to exercise control of its leases. Neither the debtor, nor AE, deny the AOGCC's right to impose a reasonable bond upon AE to secure its own plug and abandonment liability upon transfer of the five Nicolai Creek leases. But, by conditioning approval upon assumption of the debtor's liability for the Three Mile Creek leases it discriminated against the debtor based upon its bankruptcy and inability to pay that debt. The AOGCC's Decision holds the debtor's sale of assets to AE hostage subject to AE's assumption of the Three Mile Creek liability. This violates not only § 362(a), but § 525 as well. Given the impact upon the debtor's sale, and the debtor's joinder in the Motion, the court concludes that § 525(a) has been properly raised. Moreover, the court finds that given the direct impact upon AE as the buyer of the debtor's assets, and the target of the discrimination, AE had standing to raise § 525 as well. The State attempts to blunt the impact of the Decision by directing the court's attention away from the option to assume the debtor's Three Mile Creek liability, and focusing upon the payment of $6,000,000 as a bond. According to the State, the $6,000,000 bond was reasonably based upon the AOGCC's evaluation that it will take $1,000,000 to plug and abandon each of the six Nicolai Creek wells. The requirement to post a $6,000,000 bond to transfer the debtor's leases to AE may be a proper exercise of the agency's discretion in discharge of its statutory duties. However, AE and the debtor dispute that fact. The remainder of the Decision, including the other alternative for posting an acceptable bond, colors the State's position, as does the amount of the prior bonds required for the Three Mile and Nicolai Creek leases together - a total 10 Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/1716:00:42 Desc Main Document Page 11 of 14 of $700,000. There is nothing in the Decision to support the AOGCC's conclusion that it will cost $1,000,000 to plug and abandon each well. The court may not simply ignore the clear import of the AOGCC's Decision and efforts to condition the transfer of the debtor's leases to AE upon payment of the debtor's existing debts. Even without the benefit of additional evidence, which the State declines to provide or allow, the Decision itself evidences the State's efforts to compel AE to assume the debtor's obligations by "offering" as the only alternative a prohibitively high $1,000,000 per well bonding requirement. The severity of this bonding requirement is highlighted by the comparatively minuscule bankruptcy sale price of $100,000 for assignment of five of the Nicolai Creek leases. The State further argues that the AOGCC's Decision does not run afoul of § 525 because it was not solely motivated by a desire to collect the debtor's liability for the Three Mile Creek leases. Rather, it argues that the AOGCC was attempting to ensure sufficient funds will now be available for AE's plug and abandonment liability. The Supreme Court rejected such a narrow reading of § 525 in FCC v. NextWave Pers. Conamc'ns Inc., 537 U.S. 293, 301-302 (2003): When the statute refers to failure to pay a debt as the sole cause of cancellation ("solely because"), it cannot reasonably be understood to include, among the other causes whose presence can preclude application of the prohibition, the governmental unit's motive in effecting the cancellation. Such a reading would deprive § 525 of all force. It is hard to imagine a situation in which a governmental unit would not have some further motive behind the cancellation—assuring the financial solvency of the licensed entity, or punishing lawlessness, or even (quite simply) making itself financially whole. Section 525 means nothing more or less than that the failure to pay a dischargeable debt must alone be the proximate cause of the cancel lation—the act or event that triggers the agency's decision to cancel, whatever the agency's ultimate motive in pulling the trigger may be. Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/17 16:00:42 Desc Main Document Page 12 of 14 (Internal citations omitted, emphasis in original]. For these reasons, the inclusion of a second option to post a $6,000,000 bond does not change the fact that the debtor's bankruptcy, and specifically the outstanding Three Mile Creek liability, was the proximate cause for the Decision. The remainder of the State's arguments are also unavailing. The State argues that the debtor cannot establish that the Three Mile Creek liability will be discharged, rendering § 525(a) inapplicable. It reaches this conclusion based upon the debtor's admission that it will not be able to confirm a plan and continue its operations as required for a nonindvidual debtor to obtain a discharge of debts in chapter 11 ' However, § 525(a) requires only that the challenged governmental action apply to "a debt that is dischargeable." The State has not identified any exception within § 523(a) for the debtor's prepetition liability for plugging and abandoning the Three Mile Creek wells. Nothing within § 525(a) requires that the debtor actually obtain a discharge, only that the debt be dischargeable.47 The State also misconstrues the import of the agreement between the debtor and AE. The sale documents upon which the State relies govern AE's relationship with Aurora Gas, not the State. Similarly, the concerns regarding the effect of the prior bonds have been resolved and have no bearing on whether the Decision violated the Bankruptcy Code. Finally, the AOGCC's concerns regarding this court's jurisdiction are well taken, as bankruptcy courts are courts of limited jurisdiction.48 In the Motion, AE requested that this court 46 See 11 U.S.C. § 1141(d)(3). 4° FCC v. NextWave Pers. Conmw ns Inc., 537 U.S. at 303 ("A preconfinnation debt is dischargeable unless it falls within an express exception to discharge."). 48 Pursuant to I 1 U.S.C. § 106(a), sovereign immunity is abrogated as to governmental units with respect to § 362 and § 525. 12 Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/17 16:00:42 Desc Main Document Page 13 of 14 "order all the leases within the [Nicolai Creek Unit] in the operator position to be transferred to AE as they existed on the date of the Petition, including the operator status thereof. '49 This court has no jurisdiction to hear, or evaluate, applications to transfer oil and gas leases. It does, however, have jurisdiction over matters that arise under or in a bankruptcy case.50 This necessarily includes whether or not an action impermissibly discriminates against the debtor, or violates the automatic stay." The court finds that it has jurisdiction under 28 U.S.C. § 1334(b) to decide whether the AOGCC's Decision violates the Bankruptcy Code, but that is where the court's jurisdiction ends. The court further concludes that it does not have jurisdiction to substitute its judgment for that of the AOGCC; nor would it do so even if it did. For these reasons, the court finds that the AOGCC's Decision violated §§ 362(a) and 525(a) of the Bankruptcy Code. The court shall grant the Motion, but limit the relief to the determination that the Decision is void. The court will enter a separate order consistent with this memorandum. DATED: September 26, 2017. BY THE COURT /s/ Gary Soraker GARY SPRAKER United States Bankruptcy Judge 49 ECF No. 291 at 4. " 28 U.S.C. § 1334(b) "See Johnston Enrir. Corp. v. Knight (In re Goodman), 991 F.2d 613, 617 (9th Cir. 1993)(actions alleging violation of the automatic stay are "core proceedings"); Morron, v. Torrance Bank (In re Morrow), 189 B.R. 793, 796-797 (Bankr. C.D. Cal. 1995)(proceeding predicated upon section 525 of the Bankruptcy Code is a core proceeding under 28 U.S.C.A. § 157(b)); United Air Lines, Inc. v. The Cit), ofLos Angeles, 391 B.R. 791, 794-95 (Bankr. N.D. 111.2008)(proceedings involving violations of the stay under § 362(a), and to determine whether action was a discrimination under § 525(a) arise under the Code.) W, Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/17 16:00:42 Desc Main Document Page 14 of 14 Serve: D. Bundy, Esq. R. Crowther, Esq. E. LeRoy, Esq. C. Christianson, Esq. K. Perkins, Esq. ECF Participants per NEF 14 IN THE SUPERIOR COURT FOR THE STATE OF ALASKA AT ANCHORAGE AURORA EXPLORATION, LLC Appellant (person bringing appeal) vs. ALASKA OIL & GAS CONSERVATION COMMISSION Appellee APPEAL CASE NO. 3AN-17- 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. ❑ Cash deposit in the amount of $ 750.00 in lieu of a Cost Bond. I understand that this deposit will not result in a stay of execution of the judgment. ❑ 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. 9;014— November 17, 2017 Date Signature of Owner of Cash William M. Bankston 907-276-1711 601 W. 5th Ave., Ste 900, Anchorage AK 99501 Type or Print Name Telephone No. Mailing Address City State Zip ACKNOWLEDGMENT The fore oin inst) _ wa wledged before me this date, November 17 2017 , by t91In. n ash.-„ who personally appeared before me and acknowledged that he/s e5f, thpinB e : " e purposes stated ' a= CharSc„ w t=, t za (SEA ifCA rS!£ 2i4+dCtS mb ?SC�1{ s7� d Cl nF(nirt/ATnfary PiAlin I certify that on //- 2'7-1 -7 a copy of this form was 'El mailed ❑ personally delivered to (list names):, / 0-eP By: AN 0 (1/05)(cs) CASH DEPOSIT ON APPEAL My commission expires: _3�- Amt. Deposited $ Date Receipt No. Clerk App. R. 204(c), 602(g) Civil Rule 80(f) & (g) U a x O 0 z z z O z O F x z n M o W ' N 3 7 O O J N Y % 4 7 N LL A 0=4 , o `Q�n� os 0 ¢stn 3 ON Dao d William M. Bankston, Esq. Renee J. Sheyko, Esq. Bankston Gronning O'Hara, P.C. Attorneys for Appellant wbankston@bgolaw.pro rsheyko@bgolaw.pro IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE AURORA EXPLORATION, LLC, Appellant, ) V. ) ALASKA OIL & GAS CONSERVATION ) COMMISSION, ) ) Appellee. ) Case No.3AN-17- Cl CERTIFICATE OF SERVICE I, Charlene Vozar, hereby certify that: 1. I am employed by the law firm of Bankston Gronning O'Hara, P.C. 2. On the 27`h day of November, 2017, I mailed true and correct copies of the Notice of Appeal, Cash Deposit on Appeal, and this Certificate of Service to: Cathy Foerster, Commissioner Jahna Lindemuth State of Alaska, Alaska Oil & Attorney General of Alaska Gas Conservation Commission PO Box 110300 333 W. 7`h Avenue Juneau, Alaska 99811-0300 Anchorage, Alaska 99501 by depositing copies thereof in the United States mail at Anchorage, Alaska, enclosed in properly addressed, postage prepaid envelopes. DATED at Anchorage, Alaska, this 27`h day of November, 2017. Charlene ozar 'age 1 of I lurora Exploration, LLC v. State of Alaska, Alaska Oil & Gas Conservation Commission \4860\2\PL EADI NGS\CERTsem ice