Case Title: ANR Production Co. v. Wyoming Oil and Gas Conservation Com'n

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1990-10-31T00:00:00Z

Document:
ANR Production Co. v. Wyoming Oil and Gas Conservation Com'n1990 WY 121800 P.2d 492Case Number: 89-276, 89-277Decided: 10/31/1990Supreme Court of Wyoming
ANR PRODUCTION COMPANY, A 
DELAWARE CORPORATION,

 PETITIONER 
(PETITIONER/APPELLANT),

v.

THE WYOMING OIL AND GAS 
CONSERVATION COMMISSION,

 RESPONDENT (RESPONDENT/APPELLEE), 

and 

WOODS PETROLEUM 
CORPORATION, 

INTERVENOR 
(INTERVENOR/APPELLEE).

 

ANR PRODUCTION COMPANY, A 
DELAWARE CORPORATION,

 APPELLANT 
(PETITIONER/APPELLANT),

v.

THE WYOMING OIL AND GAS 
CONSERVATION COMMISSION, 

APPELLEE 
(RESPONDENT/APPELLEE), 

and 

WOODS PETROLEUM 
CORPORATION, 

APPELLEE 
(INTERVENOR/APPELLEE/RESPONDENT).

Appeal from the District 
Court, Converse County, William A. Taylor, J.

 

William T. 
Schwartz and J. Scott Burnworth of Schwartz, Bon, McCrary & Walker, Casper 
and Don C. Nelson, ANR Production Co., Houston, Tex., for ANR Production 
Co.

Joseph B. Meyer, 
Atty. Gen., Joe Scott, Senior Asst. Atty. Gen., Casper, for Wyoming Oil and 
Gas Conservation Com'n.

Craig Newman and 
Morris R. Massey of Brown & Drew, Casper, for Woods Petroleum 
Corp.

Before 
CARDINE, C.J.,* and THOMAS, URBIGKIT, 
MACY and GOLDEN, JJ.

* Chief Justice at time of 
oral argument.

URBIGKIT, Chief 
Justice.

[¶1]      ANR Production 
Company (ANR) appeals a district court order that certified to this court a 
petition by ANR for the district court to review a determination made by the 
Wyoming Oil and Gas Conservation Commission (Commission). ANR petitioned the 
district court to review the Commission's determination to shut in an ANR well 
to prevent waste and protect correlative rights. This court consolidated the 
appeal and petition for review.

[¶2]      We 
affirm.

ISSUES

[¶3]      The issues raised 
by ANR with respect to the appeal from the district court are:

1. Did the district court 
err in certifying the Petition for Review prior to and without hearing on the 
Motion of ANR Production Company ("ANR") for leave to present additional 
evidence under W.R.A.P. 12.08?

2. Did the district court 
err in certifying the Petition for Review directly to the Supreme Court under 
W.R.A.P. 12.09 over the objection of ANR?

[¶4]      The issues raised 
by ANR with respect to the Commission's determination are:

1. Is the decision of the 
Commission arbitrary, capricious and contrary to law for failure to set forth 
the basis by which one set of experts' views [were] chosen over an opposing set 
of experts' views, and that the acceptance of Woods' evidence and the rejection 
of ANR's evidence, was made on a reasonable and proper basis?

2. Is the decision of the 
Commission arbitrary, capricious and contrary to law for failure to contain 
adequate findings of basic facts on material issues to support the ultimate 
facts and conclusions contained within the decision?

3. Is the decision of the 
Commission contrary to law and invalid since it does not constitute the actions 
of a disinterested quorum of the Commission?

FACTS

[¶5]      In 1983, the 
Commission approved formation of the Powell Pressure Maintenance Unit (PPMU). 
PPMU produces oil and associated hydrocarbons from a subterranean level called 
the First Bench which underlies a portion of Converse County, Wyoming. Woods 
Petroleum (Woods) is the operator of the PPMU with a working interest in the 
unit. The PPMU is expected ultimately to produce sixteen million barrels of oil, 
6.4 million barrels of natural gas liquids, forty-five billion cubic feet of 
natural gas and 23.5 billion cubic feet of make-up gas. Fifty feet below the 
PPMU is another subterranean level called the Second Bench which produces gas 
and hydrocarbons.

[¶6]      In August 1988, 
Woods applied for an emergency hearing by the Commission regarding problems 
which Woods alleged were caused by an ANR well. ANR owns the South Powell 
Federal No. 2-1 well (South Powell well) located beneath the PPMU at the Second 
Bench level. Woods claimed ANR had caused the Benches to exchange their fluids 
(communicate).

[¶7]      After hearing 
evidence from experts employed both by Woods and ANR, the Commission found ANR's 
fracture treatment of the South Powell well was causing communication because 
the fractures united the two Benches. On April 24, 1989, the Commission ordered 
the South Powell well shut in to protect the correlative rights of the First 
Bench producers and to prevent waste by protecting the secondary recovery 
operations. The Commission's report was signed by a Commissioner who had 
disqualified himself for a conflict of interest but who never voted on the 
determinations that affected ANR.

[¶8]      On May 19, 1989, 
ANR petitioned the district court for review of the Commission's determination. 
On June 5, Woods moved for permission to intervene, which was given on July 14. 
Four days later, Woods requested the district court certify ANR's petition for 
review to this court under W.R.A.P. 12.09.1 The memorandum in support of that 
request advanced the rationale of appellate expediency and judicial efficiency 
pursuant to Safety Medical Services, Inc. v. Employment Sec. Com'n of Wyoming, 
724 P.2d 468, 470 (Wyo. 1986).

[¶9]      On August 4, ANR 
objected to the request for certification. ANR argued it intended to ask the 
district court to order the Commission to take additional evidence pursuant to 
W.R.A.P. 12.08. On that same day, Woods requested a hearing date be set on its 
request for certification. That hearing was set for September 1. On August 22, 
that hearing was rescheduled for October 25. On September 1, 1989, ANR retained 
new counsel.

[¶10]   On October 25, the day of the 
scheduled hearing, ANR filed the motion to present additional evidence. Without 
granting ANR's motion to present additional evidence, the district court 
certified ANR's petition to this court for review, to which ANR objected and 
timely appealed.

STANDARDS OF REVIEW AND 
APPLICATION

[T]he applicable standard 
of review depends upon whether the determination called into question in the 
appellate courts falls within one of three categories: [1] "review of the 
sufficiency of the evidence to meet the required burden of persuasion at the 
trial [fact-finding] level; [2] review of the exercise of discretion; and [3] 
plenary review of the choice, interpretation, [construction2], and application of the 
controlling legal precepts."

Byer, Judge 
Aldisert's Contribution to Appellate Methodology: Emphasizing and Defining 
Standards of Review, 48 U.Pitt.L.Rev. xvi, xx (preceding p. 963) (1987) (quoting 
Aldisert, The Appellate Bar: Professional Responsibility and Professional 
Competence - A View from the Jaundiced Eye of One Appellate Judge, 11 
Cap.U.L.Rev. 445, 467 (1982)).

A. Appeal from 
Certification with no W.R.A.P. 12.08 Hearing

[¶11]   The first issue advanced by ANR 
claims the district court erred in certifying the petition for review without an 
actual hearing on ANR's motion to present additional evidence under W.R.A.P. 
12.08. ANR claims correctly that the appropriate standard of review for this 
issue requires an interpretation and construction of W.R.A.P. 12.08.

[¶12]   Although this court, and not the 
legislature, generates procedural rules to govern judicial review of agency 
determinations in Wyoming,3 the principles generally used to 
interpret and construe constitutional and statutory provisions are applied to 
interpret and construe procedural rules created by this court. "We follow the 
rule that, if the language of the [rule] is clear and unambiguous, we must 
accept and apply the plain meaning of that language." State v. Denhardt, 760 P.2d 988, 990 (Wyo. 1988).

[¶13]   W.R.A.P. 12.08 provides in 
pertinent part:

If, before the date 
set for hearing, application is made to the court for leave to present 
additional evidence, and it is shown to the satisfaction of the court that the 
additional evidence is material, and there was good reason for failure to 
present it in the proceeding before the agency, the court in contested cases 
shall order that the additional evidence be taken before the agency upon 
conditions determined by the court.

(Emphasis 
added.)

[¶14]   The "plain meaning" principle of 
interpretation requires us to interpret the phrase "before the date set 
for hearing" in W.R.A.P. 12.08 to mean a motion for additional evidence must be 
presented before the hearing date.

[¶15]   By applying what appears to be the 
plain meaning of W.R.A.P. 12.08 to the record, this court is led to one 
conclusion. On August 22, a hearing was set for October 25. ANR could have moved 
to present additional evidence at any time from the 22nd of August until the end 
of the day on October 24th. But when ANR moved for leave to present additional 
evidence on the date of the hearing, it did not move "before the date set for 
hearing" as required by W.R.A.P. 12.08.

[¶16]   The untimely motion under W.R.A.P. 
12.08 precludes ANR from relying on that rule on appeal. The contrary claim of 
ANR fails.

B. Certification of 
Petition for Review

[¶17]   The second issue advanced by ANR 
claims the district court erred by certifying the petition for review directly 
to the Supreme Court under W.R.A.P. 12.09 over the objection of ANR. This issue 
asks that we review a determination which resulted from an exercise of 
discretion by the district court because the standard of review for 
certification under W.R.A.P. 12.09 is "abuse of discretion." See Wyoming State 
Engineer v. Willadsen, 792 P.2d 1376 (Wyo. 1990).

[¶18]   In Willadsen, 792 P.2d  at 1378, we 
indicated "the district court's decision to certify a case [pursuant to W.R.A.P. 
12.09] to this Court is discretional." A discretional decision by a district 
court will only be reversed upon a showing of abuse of discretion. "[A]buse of 
discretion has as its anchor point the query of `whether the court could 
reasonably conclude as it did.'" Oien v. State, 797 P.2d 544, 549 (Wyo. 1990) 
(quoting Noetzelmann v. State, 721 P.2d 579, 583 (Wyo. 1986)). See Seaton v. 
State of Wyo. Highway Com'n, Dist. No. 1, 784 P.2d 197, 202 (Wyo. 1989) and 
Grabill v. State, 621 P.2d 802, 814 (Wyo. 1980).

[¶19]   Because we indicated in Safety 
Medical Services, Inc., 724 P.2d  at 471 that "appellate expediency and judicial 
efficiency" are factors for the decision by a district court to certify and 
because the district court based the rationale for certification on judicial 
efficiency, we hold the district court could reasonably conclude the 
certification of ANR's petition for review was proper. We therefore find no 
abuse of discretion.

C. Failure to Set Forth 
Reasons for Determination

[¶20]   The third issue advanced by ANR 
claims the Commission's determination was arbitrary, capricious and contrary to 
law for failure to set forth the basis by which one set of experts' views were 
chosen over an opposing set of experts' views. Our initial task then is to 
locate the appropriate standard of review.

[¶21]   ANR formidably argues W.S. 
16-3-114(c)(ii)(A) was violated according to our holding in Mountain Fuel Supply 
Co. v. Public Service Com'n of Wyoming, 662 P.2d 878, 887-88 (Wyo. 1983). 
Mountain Fuel Supply Co. requires an agency determination "reflect the reasons 
why one expert's view [of the facts] was chosen over the other expert's view [of 
the facts]." Id. at 888. In other words, "an agency must cogently explain why it 
has exercised its discretion in a given manner, * * *." Motor Vehicle Mfrs. 
Ass'n. of U.S., Inc. v. State Farm Mut. Auto Ins. Co., 463 U.S. 29, 48, 103 S. Ct. 2856, 2869, 77 L. Ed. 2d 443 (1983). The Mountain Fuel Supply Co. 
requirement has been revisited and reinforced in subsequent holdings by this 
court.4 See Jackson v. State ex rel. 
Wyoming Workers' Compensation Div., 786 P.2d 874, 878 (Wyo. 1990) and FMC v. 
Lane, 773 P.2d 163, 165 (Wyo. 1989). Failure to comply with this requirement 
subjects an agency determination to "attack as being arbitrary, capricious, and 
contrary to law." Mountain Fuel Supply Co., 662 P.2d  at 888. This basic Wyoming 
rule defining requirement for adequate finding and conclusion was first 
explicitly stated in Pan Am. Petroleum Corp. v. Wyoming Oil and Gas Conservation 
Commission, 446 P.2d 550 (Wyo. 1968).

[¶22]   This Pan Am. Petroleum Corp., 
Mountain Fuel Supply Co. and Jackson approach is similar to the emerging 
standard of review of federal agency determinations under Motor Vehicle Mfrs. 
Ass'n., 463 U.S.  at 43 n. 9, 103 S. Ct.  at 2866 n. 9 and Bowen v. American Hosp. 
Ass'n., 476 U.S. 610, 626-27, 106 S. Ct. 2101, 2112, 90 L. Ed. 2d 584 (1986). "Our 
recognition of Congress' need to vest administrative agencies with ample power 
to assist in the difficult task of governing a vast and complex industrial 
Nation carries with it the correlative responsibility of the agency to explain 
the rationale and factual basis for its decision." Id. at 627, 106 S. Ct.  at 2112 
(emphasis added).

[¶23]   Because this court must determine 
whether the record is sufficient to "permit a court to follow the agency's 
reasoning from the evidentiary facts on record to its eventual legal 
conclusions," Jackson, 786 P.2d  at 878, we apply the requirements of Mountain 
Fuel Supply Co., 662 P.2d  at 887-88. Our analysis addresses whether the 
Commission's "order * * * reflect[s] the ways in which the testimony of the 
[ANR] expert[s] did not satisfy accepted criteria of the Commission, * * *, and 
in the same regard the basis for its conclusion that the testimony offered by 
[the Woods' experts] accords with acceptable criteria * * *." Id., at 
887-88.

[¶24]   While the Commission's 
determination accepts as true most of the testimony offered by the experts 
testifying for Woods over the testimony offered by the experts testifying for 
ANR, the record satisfies this court that the findings reflect the rationale for 
acceptance of the Woods testimony over that of ANR. In Finding of Fact 7, the 
Commission understood the primary issue is whether and to what extent there is 
communication between the Benches. In Finding of Fact 8, the Commission finds 
there is communication to a substantial extent. Looking to Findings of Fact 
9-20, the decision shows why Finding of Fact 8 was resolved adverse to the 
position of ANR. Woods had argued there was communication because the second 
bench South Powell well behaved like a first bench well. ANR had argued the 
South Powell well behaved like a second bench well. The Commission agreed with 
Woods and the criteria needed to make this determination are reflected in 
Findings of Fact 11-13.5 

[¶25]   In Finding of Fact 11, the 
Commission found the Flowing Tube Pressure (FTP) and the Shut In Bottom Hole 
Pressure (SIBHP) of the South Powell well were in the range of First Bench 
wells, not Second Bench wells; the production was in the range of First Bench 
wells; and the gas oil ratio fluctuation of the South Powell well was like that 
of a First Bench well. This was, in part, the rationale for the finding that the 
South Powell well behaved like a First Bench well, which was the approach 
adopted throughout the Commission's determination. In doing so, the Commission 
articulated both the basic facts and their underlying rationale to establish 
objective criteria - permeability, pressure, reservoir pressure, production, 
area drained by a well, etc. We therefore find compliance by the Commission with 
the requirements articulated in Mountain Fuel Supply Co.

D. Are the Basic Facts 
Adequate to Support Ultimate Facts?

[¶26]   The fourth issue advanced by ANR 
claims the Commission's determination was arbitrary, capricious and contrary to 
law for failure to contain adequate findings of basic facts on material issues 
to support the ultimate facts and conclusions. Initial review requires 
establishing the appropriate standard of review to determine whether the "basic 
facts" are adequate to support "ultimate facts" from which the administrative 
agency decision was made.

[¶27]   It is necessary to isolate the 
legal difference between "basic facts" and "ultimate facts" before determining 
what is adequate support for the particular "ultimate facts" being challenged. 
Three "concepts - basic facts, inferred facts, and ultimate facts - are 
fundamental to the anatomy of fact finding in the judicial process." Universal 
Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 102 (3rd Cir. 
1981).

Basic 
facts 
are the historical and narrative events elicited from the evidence presented at 
trial, admitted by stipulation, or not denied, where required, in responsive 
pleadings. Inferred factual conclusions are drawn from basic facts and are 
permitted only when, and to the extent that, logic and human experience indicate 
a probability that certain consequences can and do follow from the basic facts. 
* * * No legal precept is implicated in drawing permissible factual inferences. 
But an inferred fact must be distinguished from a concept described in a 
term of art as an "ultimate fact." So conceived, an ultimate fact is a 
mixture of fact and legal precept[.]

Id. at 102 
(emphasis added).

[¶28]   While ANR's fourth issue appears at 
first glance to require that "we separate the distinct factual and legal 
elements of the [Commission's] determination * * * and apply the appropriate 
standard to each component," Universal Minerals, Inc., 669 F.2d  at 103, the 
issue posed is a sufficiency of the evidence issue. Pan Am. Petroleum Corp., 446 P.2d  at 557. "When reviewing a claim that an agency determination is arbitrary, 
capricious, and an abuse of discretion because the findings of facts are not 
supported by substantial evidence, this court determines if there is `such 
relevant evidence as reasonable minds would accept as adequate to support a 
conclusion.'" Employment Sec. Com'n. of Wyoming v. Western Gas Processors, Ltd., 
786 P.2d 866, 870 (Wyo. 1990) (quoting Southwest Wyoming Rehabilitation Center 
v. Emp. Sec. Com'n of Wyoming, 781 P.2d 918, 921 (Wyo. 1989)). As was made clear 
in discussing the prior issue, we necessarily found "`such relevant evidence as 
reasonable minds would accept as adequate to support a conclusion'", Western Gas 
Processors, Ltd., 786 P.2d  at 870, which basic facts were the result of 
acceptable criteria used by the Commission in making the decision. "Using 
judicial reliance upon and deference to agency expertise in its weighing of the 
evidence, a reviewing court will not disturb the agency determination unless it 
is `clearly contrary to the overwhelming weight of the evidence on record.'" Id. 
at 871 (quoting Southwest Rehabilitation Center, 781 P.2d at 921). A sufficient 
factual basis to support the finding and the decision exists. 

E. Is the Determination 
Invalid by Lack of a Disinterested Quorum?

[¶29]   The last issue advanced by ANR 
claims the Commission's determination is contrary to law and invalid because it 
did not constitute the actions of a disinterested quorum. This issue requires 
review to ascertain the choice and construction of the due process requirements 
of impartiality by fact-finders and W.S. 30-5-103(c).6

[¶30]   ANR is correct in contention that 
all administrative hearings should be conducted and decided in a fair and 
impartial manner. "Constitutional concepts of due process which require a fair 
hearing before an impartial tribunal have been held to apply to administrative 
agencies which adjudicate as well as to courts." Ririe v. Board of Trustees of 
School Dist. No. One, Crook County, Wyo., 674 P.2d 214, 221 (Wyo. 1983) (accord 
Gibson v. Berryhill, 411 U.S. 564, 579, 93 S. Ct. 1689, 1698, 36 L. Ed. 2d 488 
(1973) and Fallon v. Wyoming State Bd. of Medical Examiners, 441 P.2d 322, 327, 
reh'g denied 443 P.2d 135 (Wyo. 1968)). See also W.S. 16-3-112, which provides, 
in pertinent part, that "[t]he functions of all those presiding in contested 
cases shall be conducted in an impartial manner." (Emphasis added.) ANR also 
correctly argues W.S. 30-5-103(c) requires three members of the board be present 
for a hearing.

[¶31]   At the September 13, 1988 hearing, 
Acting Chairman Gary Glass (Glass) and Commission members Howard M. Schrinar 
(Schrinar), Eddie Moore (Moore), and Gene George (George) were present. At that 
hearing, Commissioner Moore stated:

Mr. Chairman, just for 
the record, I would have to declare a conflict on this one. I can't vote on it 
because my family has an interest in it. So it's near to our hearts and our 
pocketbook, too. I already have my mind made up. I am not going to 
vote.

Moore abstained 
from voting while Schrinar, George and Glass voted to shut in the South Powell 
well for a month while a noise test was conducted. On the December 13, 1988 
hearing, again only Glass, Schrinar and George voted. In the final hearing on 
March 14, 1989, Moore again abstained and only George, Schrinar and Glass 
voted.

[¶32]   Three members of the Commission, 
other than Moore, were present at all hearings which satisfies W.S. 30-5-103(c). 
During the session, Moore never cast a vote, which satisfies a due process 
guarantee of impartiality by fact-finding. Admittedly, Moore signed the 
determination but that fact in itself carries no legal consequence when it 
occurred as a ministerial act for entry of the decision made by the actual 
participants.

[¶33]   Review of the record indicates 
proper compliance with due process and W.S. 30-5-103(c) to justify appeal 
rejection.

CONCLUSION

[¶34]   For these reasons, the actions by 
the district court and the Commission are affirmed.

FOOTNOTES

1 W.R.A.P. 12.09 provides 
in pertinent part:

If after such review [by 
the district court and limited to the matters specified in W.S. § 16-3-114(c)], 
the district court concludes the matter to be appropriate for determination by 
the Supreme Court, the district court may certify the case to the Supreme 
Court.

2 Interpretation and 
construction do different work. While "interpretation" "is concerned only with 
ascertaining the sense and meaning of the subject-matter, [construction] may 
also be directed to explaining the legal effects and consequences of the 
instrument in question. Hence interpretation precedes construction, but stops at 
the written text. Interpretation and construction of the written instruments are 
not the same." Black's Law Dictionary 734 (5th ed. 1979).

3 See W.S. 16-3-114(a) and 
(b).

4 See Shapiro and Levy, 
Heightened Scrutiny of the Fourth Branch: Separation of Powers and the 
Requirement of Adequate Reasons for Agency Decisions, 1987 Duke L.J. 387 
(1987).

5 Findings of Fact 11, 12, 
and 13 provide:

11. The South Powell No. 
2-1 well "behaves" like a First Bench well[.] In other words, the pressure of 
the well, both FTP and SIBHP, is in the range of other First Bench wells, not 
other Second Bench wells. Production is in the range of First Bench wells, 
rather than Second Bench wells. Gas Oil Ratio behavior of the No. 2-1 well has 
been like that of a PPMU well, rather than Second Bench wells, Woods Exhibit 
Nos. 2 and 3.

12. A pulse test and 
interference test, conducted in August and November 1988, in the First Bench 
yielded responses in the Second Bench in the South Powell No. 2-1 well, see 
Woods Exhibit 7, Docket No. 282-88 and Woods Exhibit No. 17. Sulfur hexafloride 
(SF6) was injected into the First Bench in a tracer test conducted in December 
1988, through January 1989. SF6 then appeared in produced gas in the South 
Powell No. 2-1 well, as shown in Woods Exhibit Nos. 14 and 15.

13. The area being 
drained by the South Powell No. 2-1 well, based on ususal [sic] engineering 
calculations, is far greater than what would be the case if it was producing 
only from the Second Bench. See Woods Exhibit Nos. 5 and 6.

6 W.S. 30-5-103(c) 
provides, in pertinent part, that "[t]hree (3) members of the board shall 
constitute a quorum."