[co-author: Matthew Gibson]*

As oil and natural gas are produced, brine and other wastewater are brought to the surface. This waste is then disposed of by Class II injection wells, categorized into three subclasses: saltwater disposal wells, enhanced oil recovery, and liquid hydrocarbon storage wells. In Ohio, the majority of Class II injection wells are saltwater injection wells. Due to their potential impact on the environment, these wells are regulated by the Ohio Department of Natural Resources, Division of Oil and Gas Resources Management (the “Division”). The Division regulates these wells by limiting the maximum allowable injection pressure (“MAIP”).

Case Overview: Omni Energy Grp., LLC v. Vendel

Recently, Omni Energy Group, LLC (“Omni”) was granted a small win by the Ohio Tenth District Court of Appeals against the Division (the “Appellate Court”), as it relates to one of their injection wells, in the case of Omni Energy Grp., LLC v. Vendel.[1] The facts underlying the decision are discussed below.

In December 2021, the Division applied the formula set forth in the Ohio Administrative Code to calculate a permissible MAIP for Omni’s injection well (the “well”). Upon calculation of the formula, the Division concluded that the well was permitted to operate at a MAIP of 1120 psi.[2] Omni appealed this pressure limitation to the Oil and Gas Commission (the “Commission”), seeking a higher limitation.[3] During this appeal, instead of relying on the formula set forth in the Ohio Administrative Code, the Commission employed a petroleum engineer, who concluded that the originally permitted MAIP would open existing fractures in the relevant geologic formations.[4] Additionally, the expert concluded that if the Commission approved an increased MAIP, new fractures would begin to form.[5] In reliance of the expert’s conclusions, the Chief of the Division, Eric Vendel, issued two separate orders.[6] Order 2022-124 revoked the well’s initial permit, while Order 2022-125 issued a new permit allowing the well to operate at an MAIP of 960 psi.[7]

Before the orders were finalized, Omni voluntarily dismissed its appeal with the Commission and filed suit in the Franklin County Court of Common Pleas (the “Trial Court”).[8] Of the five counts raised in the suit, three of the counts were dismissed, and two were decided in favor of the Commission.[9] Following this decision, Omni filed an appeal asserting three assignments of error: (1) “[t]he revocation of Chief’s Order 2021-179, and the issuance of Chief’s Orders 2022-124 and 2022-125, are unlawful, as they violate The Safe Drinking Water Act and R.C. 1509.22(D)(5);” (2) “[t]he reviewing court erred by applying the wrong standard of review;” and (3) “the reviewing court erred and violated appellant’s due process rights by refusing to conduct a hearing and/or include evidence sufficient to determine the rights of the parties.”[10]

Appellate Court Decision and Implications

The Appellate Court began its analysis with the second assignment of error, as it was dispositive in this case. Pursuant to §1509.03 of the Ohio Revised Code, an order by the Chief of the Division is to be considered an adjudication for the purposes of Chapter 119 of the Revised Code, Administrative Procedure.[11] Within Chapter 119, §119.12 clarifies that the standard of review the common pleas court shall apply is whether reliable, probative, and substantial evidence supports the agency’s order and whether the order is in accordance with the law.[12] In the case at issue, the Trial Court willfully ignored the proper standard of review and instead chose to apply the “lawful and reasonable” standard, as set forth in §1509.37.[13] Since the Trial Court did not apply the correct legal standard, the order was reversed and remanded back to the Trial Court for an adjudication with the correct standard of review.[14]

The Appellate Court next addressed the third assignment of error, which asserted that Omni’s due process rights were violated. Natoli v. Ohio State Dental Bd[15] states that “[a] fundamental requirement of due process is the opportunity to be heard “at a meaningful time and in a meaningful manner.” However, here Omni had been given no opportunity to present evidence in opposition to the Chief orders.[16] The Appellate Court found that additional evidence was mandated by due process requirements in this case.[17] As a result, Omni was denied the minimum requirements of due process in this case and the assignment of error was sustained.[18] Finally, the Appellate Court addressed the first assignment of error and rendered it moot, as a result of the previously discussed assignments of error.[19]

In short, the judgment of the Trial Court was reversed and remanded for further proceedings in accordance with the proper standard of review. It remains to be seen whether the Chief’s orders will hold up under the reliable, probative, and substantial standard. Please stay tuned for further updates regarding this case.

*Law Clerk

References

[1] 2024-Ohio-2439

[2] Id. at 2.

[3] Id.

[4] Id.

[5] Id.

[6] Omni Energy Grp., at 2.

[7] Id.

[8] Id.

[9] Id. at 3.

[10] Id. at 3-4.

[11] Ohio Rev. Code § 1509.03.

[12] Ohio Rev. Code § 119.12.

[13] Omni Energy Grp., at 6.

[14] Id. at 7.

[15] 10th Dist. No. 08AP-81, 2008-Ohio-4068, ¶ 18, citing Mathews v. Eldridge, 424 U.S. 319 (1976).

[16] Omni Energy Grp., at 9.

[17] Id.

[18] Id. at 9-10.

[19] Id. at 10.