Oil and Gas - Legal Developments

In its unpublished June 28, 2011 decision in Angus Petroleum Company v. Luther, 2011 Cal. App. Unpub. LEXIS 4835 (2011), the California Court of Appeal for the Fourth Appellate District held that the new statutory administrative hearing procedures of the Division of Oil, Gas and Geothermal Resources of the California Department of Conservation (“DOGGR”) enacted by the Legislature in 2010 toaddress the constitutional criticisms of DOGGR’s prior appeal process by the same court in Termo Co. v. Luther, 169 Cal.App.4th 394; 86 Cal.Rptr.3d 687 (2008), required an oil and gas operator to first pursue its administrative appeal remedies before filing a lawsuit challenging an order by DOGGR.

The earlier case, Termo Co. v. Luther, addressed the enforceability of an order under Public Resources Code § 3237 by the DOGGR Supervisor to an operator to abandon 28 oil wells. The Court of Appeal held in that case that "the right to continue to operate existing oil wells and to extract oil is a fundamental right, of particular importance in the current economic climate" and that the right to continue oil production operations was constitutionally protected. In deciding that the operator was entitled to a review of the DOGGR's administrative decision under the  “independent judgment” standard, rather than the more deferential “substantial evidence” standard, the Court also held that the administrative review process set forth in the Public Resources Code for handling challenges to a DOGGR order did not satisfy constitutional due process requirements.