-s
BEFORE THE CORPORATION COMMISSION
OF THE STATE OF OKLAHOMA
LORI WROTENBERY, DIRECTOR,
OIL AND GAS CONSERVATION
DIVISION, OKLAHOMA
CORPORATION COMMISSION
APPLICANT:
RESPONDENT:
BELPORT OIL CO.
RELIEF SOUGHT:
CONTEMPT/VIOLATION OF
COMMISSION RULES/VACATION
OF ORDERS
ILE
FAUG
05
2011
0
.OURT CLERKS OFFICE - TULSA
CORPORATION COMMISSION
OF OKLAHOMA
)
)
) CAUSE NO.
) EN 201100002-T
)
)
)
)
)
) ITN: 11-10586
)
REPORT OF THE ADMINISTRATIVE LAW JUDGE
This cause came on for hearing before Kathleen M. McKeown, Administrative Law Judge
(AU), in the Oklahoma Corporation Commission's (Commission) courtroom, Kerr Building,
Tulsa, Oklahoma, pursuant to notice given as required by law and the rules of the Commission
for the purpose of taking testimony and reporting to the Commissioners.
LEGAL DESCRIPTION
David Porter & Mary Porter Leases:
SE/4 Section 20, T26N, R16E,
Nowata County, Oklahoma
CASE SUMMARY
Belport Oil Co. (Belport) is the last operator of the David Porter and Mary Porter leases
(Porter leases). Belport pumped the leases from 2001 until 2006 with minimal
production. Currently there are 13 unplugged wells, electrical boxes and meters with
Belport signs on them as well as open pits and trash/debris on the well sites. After the
Commission filed this citation against Belport, a Motion to Add Third Party Respondents
was filed resulting in Order No. 585952 which added Joe H. Harper (Harper) and JH
Field Services, LLC (Field Services) as respondents. Belport now asserts that it assigned
all of its interest in the leases to Field Services on December 1, 2009 and, therefore,
Belport is not responsible for plugging the wells and cleaning up/restoring the weilsites.
RECOMMENDATIONS
Under the Commission rules addressing the duty to plug, time periods for plugging and
joint and several liability of owners and operators, any working interest owner and
operator shall be jointly and severally liable and responsible for plugging within, at the
most, one year after the production has ceased. Belport is the last bonded operator to
Report of the Administrative Law Judge
EN 201100002-T
Belport Oil Co., Respondent
work on the well; Harper was employed by Belport; there was never any assertion that
Harper or Field Services were operators of the leases or working interest owners when
the wells were being pumped between 2001 and 2006. Harper/Field Services removed
some of the equipment as compensation for plugging some of the wells on the Porter
leases; Harper, as representative of Field Services, finally assigned the Field Services
interest to a third party despite testimony that he never thought ownership was conveyed
by Belport under the 2009 assignment. Therefore, Belport, as last bonded operator and
owner of the leases, should be held liable for the plugging of the wells, removing all
equipment and restoring/remediating the welisites.
HEARING DATE
July 27, 2011
APPEARANCES
Commission, represented by Connie Moore;
J3elport, represented by Amanda L. Thrash;
Harper and Field Services, represented by Charles B. Davis
SUMMARY OF EVIDENCE
EN 201100002-T seeks compliance with Commission rules as to the plugging of the
wells and clean up/restoration of the Porter leases on the subject lands. It also reserves
the right to request the maximum amount of five thousand dollars ($5000.00) per
violation per day as authorized by law for failure to timely plug the wells and file
plugging records with the Commission.
2. Exhibits were marked and accepted into evidence as follows:
1. Settlement Agreement effective December 1, 2009
2. Assignment of Oil & Gas Leases and Leasehold effective December 1, 2009
3. Oil and Gas Lease and Equipment Mortgage dated March 4, 2010
4. Multi-Page packet of Commission 1073 Forms
5. Multi-Page packet of Field Inspector investigative work
6. Oil and Gas Assignment dated May 24, 2010
7. Oil and Gas Lease dated September 7, 1977
3. On behalf of the Commission testimony was presented through Billy Don Shufeldt,
Senior Oil and Gas Field Inspector; and George Davenport, geologist and president of
Belport.
A. The subject citation was initiated by a complaint from the surface owner who runs
cattle on the land and requested that the wells be plugged and the sites remediated in
order to facilitate his cattle operation. The Mary Porter lease has not reported
production since 2001 and the David Porter lease last reported production in 1995.
Belport, a bonded operator, took over both leases and pumped the wells from 2001 to
2006 but no production was reported. In addition to 13 unplugged wells, there are
currently Belport signs on the lease electric boxes and electric meters; several pump
2
Report of the Administrative Law Judge
EN 201100002-T
Belport Oil Co., Respondent
jacks and two full tanks are also present on the leases along with trash, debris and
open pits. Commission 1073 forms were filed and approved on September 22, 2010
for some of these wells listing a change of operator from Belport to Curtis L.
Chrisman; these will be vacated by the Commission because Curtis L. Chrisman is
not a bonded operator and the forms were erroneously approved.
B. Belport employed Harper until December 1, 2009 when a settlement agreement,
assignment and oil and gas lease, and an equipment mortgage were executed. Any
1073 forms executed by Harper, as an employee of Belport, after the December 1,
2009 date were not authorized by Belport. Belport never filed any Commission
changes of operator on any of the wells but feels that, based on the agreement,
assignment and mortgage, Harper and Field Services are now the parties responsible
for plugging the wells and remediating the leases. The average well depth is 1200';
surface equipment is between 20 to 30 years old; rods and tubing are 2 to 10 years
old; estimated cost to plug each well by a hired company is approximately $4500.
4. On behalf of Harper and Field Services testimony was presented through Joe Harper,
well service contractor and oil and gas producer.
A. Harper worked for Belport from late 1997 until December 2009 and handled all of the
field operations, including pumping, tank maintenance, etc.; he is currently co-owner
and manager of Field Services. Harper signed the settlement agreement, assignment
and oil and gas lease, and the equipment mortgage but understood that in these
documents he only agreed to plug any wells on the Porter leases that were equipped;
Harper believes the documents also gave him the right to the equipment on any wells
he plugged. It was noted that at the time Harper signed the papers there were no
exhibits attached and the documents presented as Exhibits #1, #2 and #3 in the
subject cause are not the same documents he signed; in addition, Exhibits #2 and #3
did not cover the Porter leases when he signed these papers.
B. Of the 13 wells on the leases, only 6 wells had equipment and Harper believed those
were the only wells he was to plug; when he began removing the equipment, some of
it fell apart. Once Harper realized the 2009 assignment and oil and gas lease executed
by Field Services and Belport had been filed at the courthouse, Harper assigned the
Field Services interest to a third party who designated Curtis Chrisman as bonded
operator. The 1073 forms were then executed by Harper but since operations had
never been changed from Belport to Field Services, Harper believed Belport was the
operator and Harper signed the forms as a representative of the lease owner, Field
Services.
RECOMMENDATIONS AND CONCLUSIONS
1. After taking into consideration all of the facts, circumstances, evidence and testimony
presented in the cause, it is the recommendation of the AU that the application in EN
201100002-1 be granted. Belport should be held liable for the plugging of all 13 wells
Report of the Administrative Law Judge
EN 201100002-T
Belport Oil Co., Respondent
on the Porter leases and restoration/remediation of all weilsites to include removal of all
oil and gas equipment remaining on the leases.
2. Belport was the last bonded operator to pump the wells in 2006; Harper was an employee
of Belport throughout the entire time the wells were being produced and up until the end
of 2009. According to 0CC 165:10-11-3(c), (d) and (e) the wells should have been
plugged (at the latest) a year after the production ended. For all intents and purposes,
nothing has changed as far as the wells are concerned. Belport tried to divest itself of
liability for plugging by assigning the leases, yet it is not clear if the original lease is even
valid at this point as the lease refers to the fact that it stays in effect "...as long thereafter
as oil or gas or either of them is produced...". For its part, Belport never attempted to
remove its name as operator of the Porter leases on Commission records and Belport now
states that Harper had no authority to file the 1073s changing operations from Belport to
Chrisman. Thus, the AU finds that Belport is still the operator as far as the Commission
is concerned regardless of the various assignments presented at the bearing.
3. Harper alleges that any documents he signed in December 2009 are not the same
documents accepted into evidence; the mortgage had no exhibits attached at the time of
execution and never should have included the Porter leases per his understanding.
Further, the only responsibility he believes he undertook (on behalf of Field Services)
was to plug the Porter lease wells that had equipment on them; he did not believe any
transfer of ownership occurred until he reviewed the December 2009 lease with exhibits
filed at the courthouse. At that point, as manager/co-owner of Field Services, Harper
attempted to assign the Field Services interest to a third party; he then filled out the 1073
forms. While Harper and Field Services did remove equipment from the leases, it was to
be in exchange for plugging the wells; not because ownership of the leases was being
asserted. While the Harper/Field Services testimony was not supported by any
corroborative witnesses or documents, the AU believes that there was a lack of
communication/understanding between and among the parties entering into the
documents which did nothing to help resolve the current surface situation on the Porter
leases.
4. The AU finds that there is no indication of a valid lease in place on the Porter leases due
to no production occurring since 2001. Thus, any assignment of Belport's lease interest
to Field Services would amount to a questionable interest being assigned because the
lease could very well have expired of its own terms leaving Belport with nothing to
assign. Belport was actively involved in pumping the leases from 2001 to 2006 but never
reported any production. Belport was, and still is, a bonded operator in the state of
Oklahoma who operated the wells; once the pumping operations were discontinued on
the wells, Belport failed to plug the wells, close the pits, remove the equipment and
restore/remediate the weilsites according to Commission rules and the original lease
which also states in part as follows:
"(C) lessee agrees that upon abandonment of this lease he will restore
the surface of this land to the same condition in which he found it,
usual wear and tear excepted".
Report of the Administrative Law Judge
EN 201100002-T
Belport Oil Co, Respondent
Harper/Field Services never operated the wells; no change of operator was ever attempted
by Belport to Field Services or any other party; neither Harper nor Field Services is a
bonded operator in Oklahoma. Harper/Field Services removed some equipment from the
leases under the impression that the equipment was payment for plugging the equipped
wells; although no wells have been plugged to date, and with only a highly questionable
interest, the position of Harper/Field Services becomes more akin to that of an
independent contractor being paid for plugging; if Belport believes there has been some
type of valid conveyance to Harper/Field Services, that should be determined in District
Court. This Commission will not let Belport escape its duty to plug and remediate these
leases by simply assigning away whatever interest it may hold.
Thus, in light of the aforementioned conclusions, it is the recommendation of the ALJ that the
application in EN 201100002-T be granted. Any order issuing out of the causes should contain
the recommendations set forth above.
Respectfully submitted this 5th day of August 2011,
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THLEEN M. MCKEOWN
Administrative Law Judge
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