DD Oil Co. v. State

896 S.E.2d 456

DD OIL COMPANY, Appellant Below, Petitioner,

v.STATE of West Virginia, EX REL., Harold D. WARD, Cabinet Secretary, West Virginia Department of Environmental Protection, Defendant Below, Respondent.

No. 22-ICA-74

West Virginia Intermediate Court of Appeals.

Submitted: May 16, 2023

Filed: December 8, 2023

Appeal from West Virginia Environmental Quality Board

J. Morgan Leach, Vienna, West Virginia, Ryan J. Umina, Umma Legal, Morgantown, West Virginia, Counsel for Petitioner

Charles Scott Driver, West Virginia Department of Environmental Protection, Office of Legal Services, Charleston, West Virginia, Counsel for Respondent

SCARR, JUDGE:

Petitioner DD Oil Company ("DD Oil") appeals from the Final Order of the West Virginia Environmental Quality Board ("EQB") which dismissed its appeal from Order 2022-6 of the West Virginia Department of Environmental Protection ("WVDEP"). Order 2022-6 had declined to annul several Notices of Violations ("NOVs") for various wells owned by DD Oil.

EQB dismissed DD Oil’s appeal on the ground that it lacked subject matter jurisdiction because the contested Notices of Violation had been annulled and Order 2022-6 had been vacated shortly before the hearing on the appeal, allegedly making the matter moot.¹ First, as discussed below, we hold that the appeal was not moot because EQB could grant relief other than annulling the NOVs. For example, it had authority to modify DD Oil’s permits so as to extend their duration. Moreover, even if DD Oil’s appeal was technically moot, the EQB had jurisdiction to review the actions of the WVDEP because they presented issues of great public interest, and because they were "capable of repetition yet evading review."

I. FACTUAL AND PROCEDURAL BACKGROUND

DD Oil owns and operates a number of oil and gas wells in Ritchie County, West Virgi- nia, including three wells designated API #47-085-10399, API #47-085-10400, and API #47-085-10401. On March 26, 2020, DD Oil obtained work permits from the WVDEP to conduct drilling at these wells. Under W. Va. Code R. § 35-4-5.2.g, work must commence on a drilling site within two years from the date of issuance of the permit or the permit will expire. In this case, that meant that drilling would have to commence by March 26, 2022. There is no question that DD Oil commenced drilling within two years of when the permits were issued.

A question arose, however, as to whether DD Oil ceased operations at the well sites for a period of thirty continuous days. This is important because once drilling stops for thirty days,² the operator has six months to complete reclamation.³ At the end of that period, the permit expires. Whether these permits expired has been disputed by the parties, with WVDEP taking the position that the permits expired, and new ones were needed, and DD Oil arguing that the permits did not expire. According to WVDEP, drilling at the sites stopped on September 25, 2020, and the permits therefore expired on April 25, 2021. DD Oil, on the other hand, contends that their operations were ongoing until WVDEP stopped them, and, consequently, they should have had additional time to complete their work.

On May 17, 2021, WVDEP informed DD Oil that it did not have valid permits to perform hydraulic fracturing ("fracking") on the wells at issue. On June 14, 2021, WVDEP inspectors visited the well sites and observed equipment indicating that DD Oil was preparing to frack the wells. On July 16, 2021, WVDEP inspectors conducted an inspection of the well sites and concluded that DD Oil was engaging in fracking activities at API #47-085-10399 without a permit and intended to frack the other two wells. That same day, the WVDEP issued a Finding of Imminent Danger and Cease Operations Order to DD Oil.

Thereafter, the parties would spend more than a year litigating the validity of their permits in administrative proceedings and a civil action in the Circuit Court of Ritchie County, with DD Oil unable to continue operations at the subject properties. DD Oil contends that WVDEP deliberately dragged out these proceedings and then attempted to moot the dispute, mere days before a scheduled hearing with the EQB, by unilaterally annulling the NOVs and the contested order, to prevent DD Oil from obtaining a definitive resolution of the issue which might be unfavorable to WVDEP.

The Finding of Imminent Danger and Cease Operations Order stated that DD Oil was in violation of the state code and regulations for: "Fracking outside of allotted completion time. Fracking without a permit." DD Oil was "ordered to cease further operations until [it was] determined that the imminent danger [had] been abated." DD Oil was warned that it could be subject to civil penalties, misdemeanor charges, and injunctive relief.⁴ The Finding of Imminent Danger informed DD Oil that it had a right to apply for a formal hearing to contest the Finding of Imminent Danger within fifteen days.

Prior to the expiration of the fifteen days, however, on July 20, 2021, the WVDEP issued an NOV against DD Oil for unpermitted work on the subject wells. This NOV gave DD Oil seven days to abate the alleged violations. The NOV warned that: "Failure to abate the violation by that date will result in bond forfeiture and may result in assessment of civil penalties, filing of misdemeanor charges, and/or an action for injunctive relief."

On July 23, 2021, even before the time for abatement had passed, WVDEP filed its Application for Injunctive Relief against DD Oil in the Circuit Court of Ritchie County. On August 2, 2021, WVDEP filed a Motion for Temporary Restraining Order in that matter. By Order dated August 4, 2021, the circuit court entered an order granting the temporary restraining order and ordering DD Oil to comply with the Finding of Imminent Danger and Cease Operations Order. The order also scheduled an evidentiary hearing on the WVDEP’s preliminary injunction which was heard on August 11, 2021.

Following this hearing, the circuit court entered an order on August 27, 2021, denying the preliminary injunction and dissolving the temporary restraining order. The circuit court found that WVDEP did not establish that the work at the subject wells created a risk of irreparable harm that would justify an injunction. The circuit court declined to address the issue of whether the permits were valid, holding that the question of validity had to be resolved through the administrative process.⁵ The circuit court’s order did not set aside the Finding of Imminent Danger and Cease Operations Order or the NOV.

In August of 2021, WVDEP reached out to DD Oil’s well service providers and informed them that DD Oil did not have valid permits for the subject wells. As a result, the well service providers refused to perform work on the subject wells.⁶ In one instance, WVDEP contacted a service provider, Reliance Well Services, and told them not to frack after the circuit court had already ruled from the bench that it was going to deny the preliminary injunction and dissolve the temporary restraining order. This caused the service provider’s counsel (who also represented DD Oil) some concern. In an e-mail dated August 24, 2021, he informed WVDEP that he had been contacted by his client, Reliance Well Services, and they told him that they were scheduled to conduct fracking operations the next day, but WVDEP had instructed them not to do so. He went on to say:

Frankly, I think this is not at all what Judge Sweeney contemplated, and I think it gives DD Oil Company a successful claim against WVDEP. …. My current thinking is that WVDEP is in contempt of court and liable for punitive damages. Please call me. I need WVDEP to tell Reliance Well Services to go ahead with the frac tomorrow.

D.R. 52-3. Despite this e-mail, WVDEP did not tell the service providers that they could proceed with well related projects.

On September 9, 2021, the WVDEP issued a letter to DD Oil stating that certain forms, including Form WR-35, were outstanding on several wells, including the subject wells. Form WR-35, titled "Well Operator’s Report of Drilling, Fracturing and/or Stimulating or Physical Change," must be filed within ninety days after drilling has ceased for more than thirty days and the reclamation period of six months has expired. DD Oil asserted that Form WR-35s on the subject wells were not due and the WVDEP’s request was premature as well work had not been completed.

On February 1, 2022, WVDEP issued Notices of Violation (NOVs) 11778, 11779, 11780, and 11781 for violations of W. Va. Code R. § 35-4-12.2a., the regulation which requires certain forms, including Form WR-35, to be filed within ninety days after the completion of permitted well work.⁷ On February 14, 2022, WVDEP issued an Order to Cease Operations for Failure to Abate Violation.

On February 18, 2022, and February 25, 2022, DD Oil applied for an annulment of the NOVs, asserting that it had not "completed well work that would trigger the ninety (90)-day period for submitting form WR-35." On March 9, 2022, the WVDEP issued Order 2022-6 denying DD Oil’s application to annul the NOVs on the basis that the NOVs had been properly issued.

On March 23, 2022, DD Oil filed its appeal of Order 2022-6 to the EQB, asserting both procedural and substantive reasons for reversing the WVDEP. Among other things, its Appeal From Order and Annulment Review contested the findings in the order that it had ceased operations for a period of thirty days, contending that it had "engaged in continuous drilling operations from September 25, 2020 to July 16, 2021." It also asserted that WVDEP had failed to do a site inspection during its annulment review as required by statute. The Questions of Fact listed in this notice of appeal included "[w]hether or not drilling was complete on the Subject Wells." The relief requested specifically included the extension of its permits "to allow completion of the permitted well work" and a declaratory ruling as to whether the...