Alaskan Crude Corporation v. State, Alaska Oil and Gas Conservation Commission

309 P.3d 1249, 2013 WL 4633218, 2013 Alas. LEXIS 114
CourtAlaska Supreme Court
DecidedAugust 30, 2013
Docket6817 S-14148
StatusPublished
Cited by7 cases

This text of 309 P.3d 1249 (Alaskan Crude Corporation v. State, Alaska Oil and Gas Conservation Commission) is published on Counsel Stack Legal Research, covering Alaska Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Alaskan Crude Corporation v. State, Alaska Oil and Gas Conservation Commission, 309 P.3d 1249, 2013 WL 4633218, 2013 Alas. LEXIS 114 (Ala. 2013).

Opinion

OPINION

MAASSEN, Justice.

I. INTRODUCTION

Alaskan Crude Corporation submitted an application to the Alaska Oil and Gas Conservation Commission to reopen the Burglin 383-1 well, a suspended well on the North Slope, to explore for oil and gas. Arguing that it was highly unlikely that oil from the well would rise to the surface unassisted, Alaskan Crude made a series of requests to the Commission to be exempted from oil discharge response requirements or, in the alternative, to have the requirements reduced. The Commission made successive reductions to the technical flow-rate assessments and the response planning standards that it recommended to the Alaska Department of Environmental Conservation for use in setting Alaskan Crude's discharge response requirements. The Commission declined, however, to classify the Burglin 83-1 well as a gas facility, which would have exempted Alaskan Crude entirely from such requirements. Alaskan Crude appealed to the superior court, challenging the Commission's recommended response planning standards and its well classification. The superior court affirmed. Alaskan Crude appeals from the superior court's decision, including its award of attorney's fees to the Commission. We affirm.

II. FACTS AND PROCEEDINGS

A. Initial Application And Approval To Reopen The Burglin 33-1 Well

The Burglin 88-1 well, located on the North Slope, was drilled, tested, and then suspended in the 1980s. Alaskan Crude Corporation, a small operator, later initiated plans to reopen the well. In January 2006 Alaskan Crude submitted a sundry approvals application to the Alaska Oil and Gas Conservation Commission (the Commission) to reopen and test the Burglin 33-1 well. In February 2006 Alaskan Crude filed an application with the Department of Natural Resources (DNR) for a unified lease area, called the Arctic Fortitude Unit, that encompassed the Burglin 33-1 well. Alaskan Crude stated its intent to reenter the Burglin 33-1 well to test for "hydrocarbon bearing sandstones." In its applications and other communications with the Commission and DNR, Alaskan Crude indicated an interest in reentering geologic strata known as the Ugnu and West Sak formations. Both the sundry application and the Arctic Fortitude Unit application were approved.

B. Oil Discharge Prevention Requirements

Alaska Statute 46.04.080(b) provides that the operator of an oil exploration facility *1252 must hold an approved oil discharge prevention and contingency plan. The regulations governing such contingency plans 1 include 18 AAC 75,434, which lays out the oil discharge response requirements for oil exploration and production facilities. The regulation sets a response planning standard (RPS), which is the amount of oil that an operator must be equipped to contain or control and clean up in the event of a discharge 2 The regulation's stated RPS may be reduced if an operator demonstrates to the Commission and to the Alaska Department of Environmental Conservation (ADEC) that a reduction is appropriate. 3 ADEC is charged by regulation with deciding whether to reduce the RPS, but it may consult with the Commission in reaching its decision. 4

Alaska Statutes 46.04.050(c) and 81.05.030(F ) exempt certain exploration facilities from these oil discharge prevention requirements. A well is not eligible for exemption, however, unless it is a "natural gas exploration facility," 5 defined as "a platform, facility, or structure that ... is used solely for the exploration for natural gas. 6 Another prerequisite for exemption is a determination by the Commission "that evidence obtained through evaluation demonstrates with reasonable certainty that all of the wells at a natural gas facility will not penetrate a formation capable of flowing oil to the ground surface. 7

C. Alaskan Crude's Request For An RPS Reduction

In April 2007 Alaskan Crude asked ADEC for an 85% reduction in the default RPS for the Burglin 88-1 well, asserting that the flow of oil from the well was so limited that it could not reach the surface without mechanical assistance. ADEC consulted with the Commission. On June 26, 2007, the Commission determined that the Ugnu and West Sak formations "are highly unlikely to produce liquid hydrocarbons to the surface in amounts greater than 825 barrels of oil per day [bopd]" and noted that this was the maximum reduction to the RPS that could be allowed under ADEC regulations. On July 2, 2007, ADEC adopted this RPS recommendation and reduced the default RPS (16,500 barrels within 72 hours, or 5,500 bopd) by 85% to 825 bopd, as Alaskan Crude had requested.

In its June 26 decision, the Commission also rejected Alaskan Crude's request that the Burglin 388-1 well be classified as a gas facility, "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." The Commission further determined, however, that "in accordance with AS 31.05.030() ... it has been demonstrated with reasonable certainty that exploratory or development wells drilled in this area will not encounter liquid hydrocarbon bearing sands in the Ugnu or West Sak Formation{s]."

D. Alaskan Crude's Request For Reconsideration Of The June 26, 2007 Decision

Alaskan Crude asked the Commission to reconsider its determination that the Burglin 33-1 well could not be classified as a gas facility, arguing that it had only applied for a permit to drill and test a gas well and the RPS requirements therefore should not have been considered relevant. The Commission granted reconsideration. It sent Alaskan Crude notice of a rehearing scheduled for September 6, 2007, published notice of the hearing, and requested comments from the public.

*1253 ADEC submitted its own comments to the Commission in advance of the hearing. It offered a revised interpretation of 18 AAC 75.430(c), which provides that "in no case will the department reduce the response planning standard below an amount equal to (1) 15 percent of the response planning standard applicable to ... an exploration or production facility." ADEC had previously interpreted this provision "to mean that the lowest possible RPS volume for an exploration facility is 15 percent of 5,500 bopd, or 825 bopd." Now, however, the department interpreted the 15% limitation as applying only to any additional reductions granted after the RPS was set under 18 AAC 75.484(b). While this revised interpretation did not set a minimum RPS value, ADEC observed that as a general matter an RPS of zero would not be appropriate, since "routine spills" or other "emergency events, such as mechanical failures," could occur regardless of the likelihood of "a catastrophic well event," and an operator would be expected to be prepared for these other emergencies.

Alaskan Crude did not appear for the scheduled hearing.

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309 P.3d 1249, 2013 WL 4633218, 2013 Alas. LEXIS 114, Counsel Stack Legal Research, https://law.counselstack.com/opinion/alaskan-crude-corporation-v-state-alaska-oil-and-gas-conservation-alaska-2013.