Black Diamond Energy of Del., Inc. v. Wyo. Oil & Gas Conservation Comm'n

460 P.3d 740

BLACK DIAMOND ENERGY OF DELAWARE, INC., a foreign corporation, Appellant (Plaintiff),

v.WYOMING OIL AND GAS CONSERVATION COMMISSION, Appellee (Defendant).

Black Diamond Energy of Delaware, Inc., a foreign corporation, Appellant (Plaintiff),

v.Wyoming Oil and Gas Conservation Commission and Wyoming Office of State Lands and Investments, Appellees (Defendants).

S-19-0018

S-19-0128

Supreme Court of Wyoming.

April 2, 2020

Representing Appellant: Nick A. Swartzendruber and Rin Karns of Poulson, Odell & Peterson, LLC, Denver, Colorado. Argument by Mr. Swartzendruber.

Representing Appellees: Bridget Hill, Wyoming Attorney General; Brandi Monger, Deputy Attorney General; Megan L. Pope, Senior Assistant Attorney General; Eric A. Easton, Senior Assistant Attorney General; Micah A. Christensen, Assistant Attorney General. Argument by Ms. Monger and Mr. Christensen.

Before DAVIS, C.J., and FOX, KAUTZ, BOOMGAARDEN, and GRAY, JJ.

KAUTZ, Justice.

[¶1] Black Diamond Energy of Delaware, Inc. (BDED) and Black Diamond Energy, Inc. (BDI), separate companies, each operated wells on separate state oil and gas leases. They each posted required bonds with the Wyoming Oil and Gas Conservation Commission (Commission) and/or the Wyoming Office of State Lands and Investments (WOSLI). After the Commission ordered the bonds forfeited, BDED did not seek administrative review under the Wyoming Administrative Procedures Act, Wyo. Stat. Ann. §§ 16-3-101 to 16-3-115 (LexisNexis 2019) (WAPA), and Wyoming Rule of Appellate Procedure 12, but instead filed two lawsuits in Johnson County in an attempt to challenge the forfeiture (Case Nos. 2017-0074 and 2018-0011). It claimed certain statutes, Wyo. Stat. Ann. § 30-5-113(a) (LexisNexis 2019) from the Wyoming Oil and Gas Conservation Act (Conservation Act), and the Wyoming Governmental Claims Act ( Wyo. Stat. Ann. §§ 1-39-101 to 1-39-120 ) (LexisNexis 2019) (Claims Act) authorized such direct action. The district court dismissed both lawsuits because BDED had failed to comply with WAPA. BDED appealed from both dismissals, and we consolidated the appeals. We affirm the dismissals but for reasons different than those provided by the district court. However, we remand Case No. 2018-0011 to the district court to clarify the dismissal is without prejudice.

ISSUES

[¶2] We restate the issues as follows:

1. Was BDED’s complaint against the Commission in Case No. 2017-0074 properly brought pursuant to § 30-5-113(a) ?

2. Did BDED bring its Claims Act complaint in Case No. 2018-0011 in the proper venue?

FACTS

[¶3] BDED is a Delaware corporation with its principal place of business in Buffalo, Wyoming. BDI is a Wyoming corporation. Both are oil and gas exploration companies. Despite the similarities in their names, they claim they are separately owned and managed. The problems in this case allegedly arose when the Commission and WOSLI treated them as the same entity.

[¶4] In 2007, BDED purchased a State of Wyoming oil and gas lease. The lease had a producing well known as the Castle Creek Well. To secure the lease, BDED posted bonds totaling $181,670 with WOSLI (the WOSLI bonds). Of that amount, $171,670 was allocated to secure plugging the well at the end of production. BDED also posted a $75,000 blanket bond with the Commission to ensure BDED’s compliance with the Conservation Act and the Commission’s rules and orders. See Oil & Gas Conservation Comm’n Rules, Ch. 3, § 4(a)(i), (ii), (b)(i). The Castle Creek Well lease is the only lease BDED operated. BDI, on the other hand, operated numerous wells on both state and fee lands in Wyoming and posted its own separate bonds with the Commission or WOSLI. First Interstate Bank held both BDED’s and BDI’s bonds.

[¶5] In October 2011, WOSLI terminated one of BDI’s leases. Shortly thereafter, WOSLI sent a letter to First Interstate Bank stating it was "calling the bonds" and instructing the bank to forward all money to the Commission. The bank allegedly sent BDI’s bonds and BDED’s WOSLI bonds to the Commission. Almost three years later, in 2014, the Commission held a contested case hearing and foreclosed BDI’s bonds. BDED was not a party to those proceedings.

[¶6] On June 30, 2016, the Commission required a mechanical integrity test (MIT) on the Castle Creek Well. Back in 2011, when WOSLI terminated BDI’s lease, WOSLI allegedly told both Black Diamond entities that they could not enter onto any WOSLI land. In its lawsuits BDED claimed: "[I]n light of WOSLI’s treatment of BDED and BDI as one and the same entity, and its threats concerning trespass, BDED did not feel that it was in a position to enter onto WOSLI’s property to conduct an MIT." Its attempts to obtain WOSLI’s permission to enter the land and to "explain the situation to Commission staff" were unsuccessful. As a result, BDED hired a contractor to conduct the test. The Commission decided the contractor’s test was unsatisfactory and, on December 5, 2016, ordered BDED to show cause at a hearing why its $75,000 blanket bond should not be forfeited for failing to satisfactorily perform the MIT. BDED requested cancellation of the hearing and an accounting of the WOSLI bonds. The Wyoming Attorney General’s office informed BDED the WOSLI bonds had been forfeited by the 2014 Commission order relating to BDI’s bonds and the funds had been used to plug BDI’s wells. On July 11, 2017, after a hearing, the Commission entered an order forfeiting the blanket bond and authorizing its staff to plug and abandon the Castle Creek Well.

[¶7] Eighty-seven days later, on October 6, 2017, BDED filed a lawsuit against the Commission under § 30-5-113(a) of the Conservation Act, challenging the validity of the July 2017 order forfeiting the blanket bond (Case No. 2017-0074). The Commission moved to dismiss under Wyoming Rule of Civil Procedure 12(b)(1), arguing the district court was without jurisdiction because BDED had brought its complaint under § 30-5-113 of the Conservation Act, which it claimed was repealed by Section 17 of the original WAPA legislation and by § 16-3-114(b). According to the Commission, BDED’s only avenue of relief to challenge the Commission’s order was to file a petition for review with the district court within 30 days of the order under Wyoming Rule of Appellate Procedure12.04(a). Because it did not do so, the Commission argued the district court lacked subject matter jurisdiction. The district court granted the Commission’s motion to dismiss. It agreed with the Commission that it lacked jurisdiction over BDED’s complaint because § 30-5-113 had been repealed in favor of WAPA. However, it relied on § 30-5-107 as the basis for repeal, rather than Section 17 or § 16-3-114(b).

[¶8] While Case No. 2017-0074 was pending, BDED filed a second lawsuit against the Commission and WOSLI, this time under the Claims Act (Case No. 2018-0011). BDED alleged conversion and breach of contract relating to both the WOSLI bonds and the blanket bond and sought declaratory relief and an accounting. The Commission and WOSLI moved to dismiss the lawsuit for, among other things, improper venue. The district court granted the motion for the same reasons it dismissed Case No. 2017-0074.

[¶9] BDED appealed from both dismissals. We consolidated the appeals.

DISCUSSION

1. Was BDED’s complaint against the Commission in Case No. 2017-0074 properly brought pursuant to § 30-5-113(a) ?

[¶10] The district court dismissed Case No. 2017-0074 for lack of subject matter jurisdiction under W.R.C.P. 12(b)(1). Our review is de novo. Allred v. Bebout , 2018 WY 8, ¶ 29, 409 P.3d 260, 268 (Wyo. 2018). In conducting our review, " ‘we accept the facts alleged in the complaint ... as true and view them in the light most favorable to the non-moving party.’ " Id . (quoting Moose Hollow Holdings, LLC v. Teton Cty. Bd. of Cty. Comm’rs , 2017 WY 74, ¶ 20, 396 P.3d 1027, 1033 (Wyo. 2017) ). We also review de novo a district court’s interpretation of a statute. Sheridan Newspapers, Inc. v. Bd. of Trs. of Sheridan Cty. Sch. Dist. # 2 , 2015 WY 70, ¶ 7, 350 P.3d 266, 268 (Wyo. 2015) (citing Horning v. Penrose Plumbing & Heating, Inc. , 2014 WY 133, ¶ 10, 336 P.3d 151, 153 (Wyo. 2014) ).

[¶11] Section 30-5-113 provides in relevant part:

(a) Any person adversely affected by and dissatisfied with any rule, regulation, or order made or issued hereunder, may within ninety (90) days after the entry thereof bring a civil suit or action against the commission or the state oil and gas supervisor or both in the district court of Laramie county, or in the district court of the county in which the complaining person resides, or in the U.S. district court for Wyoming, (if it otherwise has jurisdiction) and not elsewhere, to test the validity of any provision of this act, or rule, regulation, or order, and to secure an injunction and other appropriate relief, including all rights to appeal under applicable rules of civil procedure. Any case on appeal shall have precedence over any other case then pending in such court.

(b) In addition to the foregoing, any person who may feel himself aggrieved by any rule, regulation, order or decision of the commission may have an appeal as provided by law, with respect to appeals from decisions of the board of land commissioners. All proceedings on appeal, except as herein otherwise provided, shall be under the provisions of the code of civil procedure as in other civil cases.

* * * *

(e) A suit or an appeal involving a test of the validity of any provision of this act, or a rule, regulation, or order shall be advanced for trial and be determined as expeditiously as feasible, and no postponement or continuance thereof shall be granted unless deemed imperative by the court. The court shall consider all the evidence, shall not be bound by any finding of fact or conclusion of law made by the commission, shall hold a trial de novo, shall pass on the credibility of witnesses and the weight to be given to their testimony, and shall determine independently all

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