STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HENDRY ENERGY SERVICES, LLC,

vs.

Petitioner,

Case No. 17-3253

DEPARTMENT OF ENVIRONMENTAL PROTECTION,

Respondent.

/

SUMMARY FINAL ORDER

Pursuant to notice, a final hearing was held in this case on January 23, 2018, in Tallahassee, Florida, before Garnett W. Chisenhall, a duly-designated Administrative Law Judge of the Division of Administrative Hearings (“DOAH”).

APPEARANCES

For Petitioner: Richard S. Brightman, Esquire

Robert C. Volpe, Esquire Hopping, Green and Sams, P.A. Post Office Box 6526 Tallahassee, Florida 32314

Timothy M. Riley, Esquire Hopping, Green and Sams, P.A. Suite 300

119 South Monroe Street Tallahassee, Florida 32301

For Respondent: Sean Timothy Desmond, Esquire

Department of Environmental Protection Mail Station 35

3900 Commonwealth Boulevard

Tallahassee, Florida 32399

STATEMENT OF THE ISSUE

Whether Petitioner, Hendry Energy Services, LLC (“Hendry Energy”), is entitled to issuance of an operating permit recertification of the Red Cattle Co. #27-4 well, and an Oil and Gas Drilling Permit, Permit No. OG 0904AH.

PRELIMINARY STATEMENT

On October 29, 2015, Hendry Energy submitted an application for operating permit recertification of the Red Cattle Co. #27-4 well (PA No. 304674-001; API No. 09-051-20076) (“RCC 27-4”).

On April 12, 2016, Hendry Energy submitted an application for a permit to establish a new, nonroutine drilling unit and reenter the RCC 27-4 well to drill a new horizontal well to a new bottom-hole location in the Mid-Felda Field in Hendry County, Florida (File No. 0904AH; PA No. 304674).

On December 13, 2016, the Department of Environmental Protection ("the Department”) issued a “Notice of Denial [of the] Oil and Gas Operating Permit Recertification” for

RCC 27-4. The Department stated as its principle reason for denial that every shut-in well must be retested for mechanical integrity prior to recertification of its operating permit.

Such retesting in the form of a pressure test has not been performed here.

On December 13, 2016, the Department also issued a “Notice of Denial [of the] Oil & Gas Drilling Application” for the application number 0904AH. The reason for denial was that “the application does not adequately demonstrate that the proposed non-routine drilling unit is necessary to protect correlative rights or to prevent waste as required by Rule 62C-26.004(6), F.A.C.”

Hendry Energy timely filed a “Combined Petition for Formal Administrative Hearing Challenging the Two Agency Decisions.” The Department dismissed the petition with leave to amend.

On May 10, 2017, Hendry Energy filed “Amended Combined Petitions for Formal Administrative Hearings Challenging Two Agency Decisions,” which were referred to DOAH on June 2, 2017.

The parties timely filed a “Joint Motion to Conduct Summary Hearing” in accordance with section 120.574, Florida Statutes (2016),1/ on June 22, 2017. The Administrative Law Judge previously assigned to this case granted the motion and set the hearing for July 31 and August 1, 2017.

On July 7, 2017, this case was transferred to the undersigned. The final hearing was subsequently rescheduled for January 23, 2018.

Hendry Energy and the Department resolved by stipulation the issues of fact and law related to the operating permit recertification. The Department agrees that the temporarily

abandoned RCC 27-4 well can be recertified if the order of recertification includes a specific condition requiring that the well be permanently plugged and abandoned if not returned to production via a new bottom-hole.

Hendry Energy is willing to accept recertification of the RCC 27-4 operating permit with the specific condition requiring the well be tested during reentry to determine whether the well is suitable for reuse and pressure tested before any production.

The stipulation to incorporate the specific condition into the operating permit recertification satisfies the requirements of Florida Administrative Code Chapters 62C-26, 62C-27, and 62C-29, regarding operating permit recertification. Hendry Energy and the Department do not contest the issuance of the recertification permit for RCC 27-4 subject to the specific condition.

Hendry Energy and the Department also resolved by stipulation the issues of fact and law related to whether the nonroutine unit, as proposed in the drilling application, was necessary to protect correlative rights. The Department recognized that, at the time of the final hearing, Hendry Energy controlled over 90 percent of the mineral interests in the proposed nonroutine unit, as compared to 52 percent at the time the application was denied, thus satisfying any factual issues regarding the protection of correlative rights.

Accordingly, the only issue in dispute concerns whether Hendry Energy has demonstrated that the proposed nonroutine drilling unit prevents waste as required by Florida Administrative Code Rule 62C-26.004(6).

The final hearing was held as scheduled on January 23, 2018. At the final hearing, the undersigned accepted Joint Exhibits 1 through 7 and Hendry Energy’s Exhibits 1 through 16 into evidence. Hendry Energy presented the

testimony of Cengiz Hancer, Michael Whitaker, and John Meyer. Mr. Whitaker was proffered and accepted as an expert in petroleum engineering. Mr. Meyer was proffered and accepted as an expert in petroleum geology. The Department offered no exhibits outside Joint Exhibits 1 through 7, and offered no witness testimony.

The Transcript of the final hearing was filed on February 15, 2018. Via an Order issued on February 23, 2018, the deadline for submitting proposed final orders was subsequently extended to March 8, 2018.

Hendry Energy and the Department filed timely Proposed Final Orders on March 8, 2018, and the aforementioned filings were considered in the preparation of this Final Order.

On March 13, 2018, Hendry Energy filed a “Response in Opposition to Respondent’s Proposed Final Order” (“the Response in Opposition”). Through the aforementioned pleading, Hendry

Energy asserts that the Department raised one or more issues in its Proposed Final Order that were not set forth as disputed issues in the Joint Pre-hearing Stipulation.

The undersigned construes the Response in Opposition as a Motion to Strike. After considering the Motion to Strike and the substance of the Department’s Proposed Final Order, the undersigned has elected to grant the Motion to Strike. As a result, the undersigned will disregard any issues in the Department’s Proposed Final Order that were not identified in the Joint Pre-hearing Stipulation. See Palm Beach Polo

Holdings, Inc. v. Broward Marine, Inc., 174 So. 3d 1037, 1038-39 (Fla. 4th DCA 2015)(stating that “[p]retrial stipulations prescribing the issues on which a case is to be

tried are binding upon the parties and the court, and should be strictly enforced.”); Delgado v. Ag. for Health Care Admin., 2018 Fla. App. LEXIS 1012, at *10 (stating that “the ALJ erred in failing to give full force and effect to AHCA’s agreement in the Joint Pre-Hearing Stipulation that Appellants had the right to contest the amount payable to AHCA pursuant to the formula set forth in section 409.910(11)(f), by filing their petition with DOAH under section 409.910(17)(b).”). Also, the undersigned will not consider any issues that are encompassed within any stipulations announced during the final hearing.

FINDINGS OF FACT

Parties

1. Hendry Energy is a Florida Limited Liability Company organized under the laws of the State of Florida. At all relevant times, Hendry Energy could lawfully conduct business in the State of Florida.

2. The Department is the state agency with the authority under chapter 377, part I, Florida Statutes, to issue permits for the drilling for, exploring for, or production of oil, gas or other petroleum products which are to be extracted from below the surface of the land.

   Background Regarding the Mid-Felda Oil Field

   
   

3. The Mid-Felda Field is an established oil field in Hendry County, Florida, discovered in 1977. The Mid-Felda Field generally exists within Sections 22, 23, 26, 27, 34,

   and 35 of Township 45 South, Range 28 East. The Mid-Felda Field includes three historically producing wells: RCC 27-4 (Permit No. 904), Red Cattle #27-1 (Permit No. 983), and Turner #26-3

   (Permit No. 949).

   
   

4. The RCC 27-4 was originally drilled and completed in 1977; the Turner #26-3 (“Turner 26-3”) was drilled and completed in 1979; and the Red Cattle #27-1 (“RC 27-1”) was drilled and completed in 1979.

   
   

5. All three wells were vertical completions, meaning that the wellbore is vertical or nearly vertical from the surface- hole to the bottom-hole location.

6. All three wells are located in routine drilling units.

   
   

   Routine drilling units are based on the U.S. Government Surveyed Township and Range system.

7. The RCC 27-4 routine unit consists of the southeast quarter section of Section 27, Township 45 South, Range 28 East. The Turner 26-3 routine unit consists of the southwest quarter section of Section 26, Township 45 South, Range 28 East. The RCC 27-1 routine unit consists of the northeast quarter section of Section 27, Township 45 South, Range 28 East.

8. RCC 27-4 is located approximately in the center of the southeast quarter section of Section 27. The true vertical depth of RCC 27-4 is approximately 11,686 feet.

9. Turner 26-3 is located approximately in the center of the southwest quarter section of Section 26. The true vertical depth of Turner 26-3 is approximately 11,518 feet.

10. Between 1978 and 2000, wells in the Mid-Felda Field produced nearly 1,500,000 barrels of oil. The RCC 27-4 and Turner 26-3 produced approximately 700,000 barrels each.

11. The RCC 27-1 and Turner 26-3 have been plugged and abandoned. The RCC 27-4 has been temporarily abandoned with a plug installed.

    
    

    Facts Regarding Geophysical and Geological Data Supporting the Proposed New Bottom-Hole Location

    
    

12. In 2013, Hendry Energy began engaging in production curve analysis of the existing wells in the Mid-Felda Field, conducted subsurface geological mapping of the Mid-Felda Field, and performed a 3D seismic survey of the Mid-Felda Field.

13. Mr. Whitaker, a petroleum engineer, analyzed the historic production of the Mid-Felda Field, specifically production from the RCC 27-4 and the Turner 26-3 wells.

    This analysis was to determine whether there is additional recoverable oil that can be exploited from the Mid-Felda Field.

14. Mr. Whitaker charted the field performance data as a graph of the production rate over time and the cumulative production versus the water to oil ratio. Using this analysis, he was able to determine that economically recoverable oil reserves likely remain in the Mid-Felda Field.

15. Petroleum geologist Barry Falkner analyzed the subsurface geological data and developed reservoir maps for the Lower Sunniland C reservoir in the Mid-Felda Field. These maps depict the Top of Porosity, Average Permeability, and the Net Oil Pay Isopach, collectively describing the reservoir quality.

16. Mr. Falkner also developed structural cross sections of the underground structure, on a north-south and east-west direction in the Mid-Felda Field.

    
    

17. A 3D seismic study was conducted and analyzed by Charles Morrison, a petroleum geophysicist.

18. The subsurface geological and geophysical seismic data revealed a structural high point at approximately 11,340 feet to 11,400 feet below ground level located on the section line between the southwest quarter of Section 26 (i.e., the routine drilling unit for the Turner 26-3 well, which was a producer) and the southeast quarter of Section 27 (i.e., the routine drilling unit for the RCC 27-4 well, which was a producer).

19. RCC 27-4 and Turner 26-3 were drilled to depths of 11,686 feet and 11,518 feet respectively. These completion depths are both below the identified structural high point.

20. As oil is produced, the water level in and around the well rises resulting in more water being produced and an

    increasing water-to-oil ratio. This phenomenon occurred in both RCC 27-4 and Turner 26-3 with the result that these wells are no longer economically productive. Accordingly, these two wells cannot extract oil reserves that may be present in the structure above their completion depths.

21. A high point in the reservoir structure indicates a location where the presence of oil is likely. The geological and geophysical data indicate that the identified high point and point of thickness in the Sunniland C structure is a “closed contour,” which also indicates a trap of oil in the reservoir.

    
    

    The oil located at the top of a reservoir structure and above the completion depths of adjacent wells is also known as “attic oil.” Furthermore, a review of the subsurface geological data revealed a point of thickness in the reservoir structure as depicted on the map of the seismic data presented with net pay isopach for the Sunniland C structure.

22. With the combined analysis of the field performance, the geophysical seismic interpretations, and the geological data, Hendry Energy identified the location of an optimal point in the subsurface structure from which Hendry Energy believes it can produce the most oil economically. This optimal point is located on the section line between the south halves of

    Section 26 and Section 27, between the existing RCC 27-4 and Turner 26-3 wells.

    Proposal to Reenter and Redrill Existing RCC 27-4 and Establish New Nonroutine Unit

    
    

23. Based on the optimal extraction point identified through Hendry Energy’s geophysical and geological analysis of the Mid-Felda Field, Hendry Energy proposed to establish a new, nonroutine unit (consisting of the eastern half of the southeast quarter of Section 27 and the western half of the southwest quarter of Section 26), reenter the existing RCC 27-4 well, and drill a new horizontal well to the identified target bottom-hole location.

    
    

24. Mr. Hancer, director of Hendry Petroleum, the parent company to Hendry Energy, testified that “[a]s a result of the studies that [Hendry Energy] conducted, the 3D seismic survey and the subsurface mapping and the production curve analysis, we discovered a structure that straddles the section lines between Sections 27 and 26, and we requested the establishment of a new drilling unit in order to be able to drill to that optimal bottom-hole location. And this application [Joint Exhibit 2] is a request for approval of that well.”

25. The optimal target bottom-hole location cannot be reached by a routine, or statutory, drilling unit because of the setback requirements from section lines applicable to the

    bottom-hole location in routine units. See Fla. Admin. Code R. 62C-26.004(4)(a). However, establishing a nonroutine unit would allow Hendry Energy to access the target bottom-hole location.

26. The proposed nonroutine unit is necessary to produce the “attic oil” that may exist at the proposed bottom-hole location. The identified optimal bottom-hole location is located approximately at the center of the proposed nonroutine unit, as required by section 377.25(3).

    Facts Regarding the Need to Horizontally Complete a New Bore to Access the Remaining Reserves from the Subsurface Structure

    
    

27. To recover the remaining attic oil, Hendry Energy must hit a bottom-hole location at the top of the identified

    
    

    structure. A horizontal entry and a lateral completion of

    
    

    the well are required to economically drain the remaining attic oil reserves identified at this location in the Mid-Felda Field.

28. The surface-hole location of the existing RCC 27-4 well is the optimal surface entry point to achieve a horizontal and lateral completion in the target bottom-hole location.

29. Mr. Whitaker testified that “27-4 offers several different advantages, and we looked at this real closely, because, again, we’re all into – part of the exploitation effort is efficiency and that means capital efficiency and recovery efficiency. . . . And when you look at the geometry of where the wells sit and with the desired completion method, with the entry angle and then the lateral, 27-4 became the optimal point.”

    Facts Regarding the Drilling Application

    
    

30. On April 12, 2016, Hendry Energy submitted an application for a permit to establish a new, nonroutine unit and drill a new horizontal well in the Mid-Felda Field in Hendry County, Florida (File No. 0904AH; PA No. 304674).

31. By stipulation, except for the issue of preventing waste, the parties agree that Hendry Energy’s Oil and Gas Drilling Permit Application satisfies the criteria of

    chapter 377 and chapters 62C-26 through 62C-30, with regards to drilling a new oil well.

    
    

    Facts Regarding the Establishment of a Nonroutine Unit and the Prevention of Waste

    
    

32. Rule 62C-26.004(6) provides: “The Department may grant drilling permits within shorter distances to adjacent drilling unit boundaries or on different drilling units than those prescribed in this rule whenever the Department determines that such steps are necessary to protect correlative rights or to prevent waste.”

33. The terms “waste” and “physical waste” are statutorily defined as:

    1. The inefficient, excessive, or improper use or dissipation of reservoir energy; and the locating, spacing, drilling, equipping, operating, or producing of any oil or gas well or wells in a manner that results, or tends to result, in reducing the quantity of oil or gas ultimately to be stored or recovered from any pool in this state.

       
       

    2. The inefficient storing of oil; and the locating, spacing, drilling, equipping, operating, or producing of any oil or gas well or wells in a manner that causes, or tends to cause, unnecessary or excessive surface loss or destruction of oil or gas.

       
       

    3. The producing of oil or gas in a manner that causes unnecessary water channeling or coning.

       
       

    4. The operation of any oil well or wells with an inefficient gas-oil ratio.

       
       

    5. The drowning with water of any stratum or part thereof capable of producing oil or gas.

       
       

    6. The underground waste, however caused and whether or not defined.

       
       

    7. The creation of unnecessary fire hazards.

       
       

    8. The escape into the open air, from a well producing both oil and gas, of gas in excess of the amount that is necessary in the efficient drilling or operation of the well.

       
       

    9. The use of gas for the manufacture of carbon black.

       
       

    10. Permitting gas produced from a gas well to escape into the air.

        
        

    11. The abuse of the correlative rights and opportunities of each owner of oil and gas in a common reservoir due to nonuniform, disproportionate, and unratable withdrawals, causing undue drainage between tracts of land.

        
        

        § 377.19(31), Fla. Stat.

        
        

34. The paragraphs of the definition specifically at issue were paragraphs (b), (f), and (k).

35. Hendry Energy performed extensive geophysical and geological due diligence in the Mid-Felda Field to identify and assess the likelihood of finding producible quantities of oil in the field. As a result, Hendry Energy identified an optimal location in the subsurface structure of the Mid-Felda Field for exploiting oil reserves remaining in the field. This optimal target straddles the Section 26 and 27, Township 45 South, Range

    28 East, section lines.

    
    

36. Hendry Energy’s oil and gas drilling application proposes the establishment of a nonroutine drilling unit, consisting of 160 acres straddling Section 26 and 27.

37. This proposed drilling unit consists of portions of two existing routine drilling units and wells, the RCC 27-4 and the Turner 26-3. Both wells previously produced oil in economic quantities until they were no longer economically viable.

38. Hendry Energy’s application locates the nonroutine unit and the proposed bottom-hole at the optimal location for extracting any remaining oil. This is verified by the geophysical and geological analysis conducted.

39. This target bottom-hole cannot be accessed from a routine drilling unit. As stated by Michael Whitaker, Hendry Energy’s expert in petroleum engineering, “[T]he statutory units as they exist today, even if we wanted to reactivate them, just physically don’t permit us to reach the target.”

40. The drilling permit application proposes using existing surface infrastructure of the RCC 27-4 well. Using the existing surface-hole location and surface infrastructure of the RCC 27-4 well is the most efficient manner of draining the remaining reserves. The existing RCC 27-4 surface-hole is in the optimal location and provides the proper geometry for a lateral completion in the target bottom-hole.

    
    

41. Not allowing the target bottom-hole location or attempting to drain the target point from another surface location would reduce the quantity of oil ultimately recovered and leave underground waste.

42. Specifically, failure to authorize the permit for the well as proposed by Hendry Energy will prevent recovering the oil and thus leaving the oil underground without benefit to Hendry Energy or the mineral owners and other stakeholders.

43. Mr. Hancer testified that a horizontal completion of the well allows the operator to more efficiently reach and drain oil from the underground structure. This increases the ultimate recovery and minimizes underground waste.

44. Increased recovery equates to increased royalty payments.

45. The remaining reserves are contained in an area that lies across the section lines of Section 26 and 27. The proposed nonroutine unit also lies across the section lines of Section 26 and 27. This proposed unit allows for a proportionate production of oil and therefore protects correlative rights.

46. The proposed horizontal completion penetrates the structure in a way that encompasses portions of both

    Section 26 and 27, and therefore implicates the mineral owners in both sections. The proposed well will be draining the

    
    

    minerals of both parties, and thus paying royalties to both parties, creating a fair and equitable arrangement.

47. Over 90 percent of the mineral rights in the proposed unit have been leased to Hendry Energy, evidencing the mineral owners’ desire to drain the reserves in the nonroutine unit.

48. The greater weight of evidence supports that the nonroutine unit is necessary to prevent waste.

    CONCLUSIONS OF LAW

    Jurisdiction

    
    

49. DOAH has jurisdiction over the parties to and the subject matter of this proceeding pursuant to sections 120.569 and 120.57(1), Florida Statutes.

50. The Department is authorized under chapter 377, part I, to issue permits for drilling, exploring, or producing

    oil, gas or other petroleum products, which are to be extracted from below the surface of the land.

51. The Department's authority includes adopting rules and entering orders necessary to implement and enforce the provisions of chapter 377. § 377.22, Fla. Stat. In particular,

    the Department has been given authority to regulate the drilling for oil and gas in Florida via sections 377.22(2)(a) through (y). Pursuant to this authority, the Department has promulgated chapters 62C-25 through 62C-30.

    
    

    Standing

    
    

52. As the applicant for the permits at issue,

    
    

    Hendry Energy has standing to challenge the denial of its applications, and is a “party” by operation of law because it is the specifically named person whose substantial interests are being determined by the Department's denial of the permit.

    § 120.52(13)(a), Fla. Stat.; Ft. Myers Real Estate Holdings, LLC

    
    

    v. Dep’t of Bus. & Prof’l Reg., 53 So. 3d 1158, 1162 (Fla. 1st

    
    

    DCA 2011;) W. Frank Wells Nursing Home v. Ag. for Health Care Admin., 27 So. 3d 73, 74 (Fla. 1st DCA 2009); Maverick Media

    Grp., Inc. v. Dep't of Transp., 791 So. 2d 491, 492 (Fla. 1st DCA 2001).

    Burden of Proof

    
    

53. As the party seeking to demonstrate entitlement to the permits, Hendry Energy bears the burden of proving, by

    a preponderance of the evidence, that it satisfied all of the requirements for issuance of the operating permit recertification and the Oil and Gas Drilling Permit, and was entitled to receive the permits. § 120.57(1)(j), Fla. Stat.; Dep't of Banking & Fin., Div. of Sec. & Inv. Prot. v. Osborne Stern & Co., 670 So. 2d 932, 934 (Fla. 1996); Fla. Dep't of

    Transp. v. J.W.C. Co., 396 So. 2d 778, 788 (Fla. 1st DCA 1981).

    
    

    Nature of the Proceeding

    
    

54. This is a de novo proceeding, intended to formulate final agency action and not to review action taken earlier and preliminarily. Young v. Dep’t of Cmty. Aff., 625 So. 2d 831, 833 (Fla. 1993); Hamilton Cnty. Bd. of Cnty. Comm'rs v. Dep't of

    Envtl. Reg., 587 So. 2d 1378, 1387 (Fla. 1st DCA 1991); McDonald v. Dep’t of Banking & Fin., 346 So. 2d 569, 584 (Fla. 1st DCA

    1977).

    
    

55. The only issue in dispute is whether the oil and gas drilling permit application should be approved based on the criteria of rule 62C-26.004(6).

56. The parties stipulated that the RCC 27-4 operating permit may be recertified with the addition of a specific condition requiring that the well be permanently plugged and abandoned, if not returned to production via a new bottom-hole.

57. Hendry Energy and the Department resolved all factual and legal disputes regarding the operating permit recertification in a manner consistent with the Department’s rules.

58. The Department has the statutory authority to establish or approve drilling units for oil and gas wells, which can be standardized or customized for a specific pool of oil or natural gas. Section 377.25(2) provides that:

    
    

    [f]or the prevention of waste and to avoid the augmenting and accumulation of risks arising from the drilling of an excessive number of wells, the board shall establish a drilling unit or units for each pool.

    A drilling unit, as contemplated herein, means the maximum area in a pool which may be efficiently and economically drained by one well, and such unit shall constitute a developed area as long as a well is located thereon which is capable of producing oil or gas in paying quantities.

    
    

59. Additionally, section 377.25(3) provides:

    
    

    Each well permitted to be drilled upon any drilling unit shall be drilled approximately in the center thereof, which such exception as may be reasonably

    necessary where the division finds that the unit is partly outside the pool or, for some other reason, a well approximately in the center of the unit would be nonproductive or where topographical conditions are such as to make the drilling approximately in the center of the unit unduly burdensome . . . .

    Wherever an exception is granted, the division shall take such action as will offset any advantage which the person securing the exception may have over other producers by reason of the drilling of the well as an exception, and so that drainage from developed units to the tract, with respect to which the exception is granted, will be prevented or minimized, and the producer of the well drilled, as an exception, will be allowed to produce no more than his or her just and equitable share of the oil and gas in the pool, as such share is set forth in this section.

    
    

60. “The Department may grant drilling permits within shorter distances to adjacent drilling unit boundaries or on different drilling units than those prescribed in this rule

    
    

    whenever the Department determines that such steps are necessary to protect correlative rights or to prevent waste.” Fla. Admin. Code R. 62C-26.004(6).

61. “The Department shall determine whether the nonroutine well or unit is necessary to prevent waste as defined in Section 377.19(10), F.S., or to protect correlative rights, and shall grant, deny or condition the permit on that basis.” Fla. Admin. Code R. 62C-26.004(6)(b).

62. The applicant must prove, by a preponderance of the evidence, that a nonroutine unit is necessary to protect correlative rights or prevent waste.

63. It is undisputed that Hendry Energy satisfied the applicable statutory requirements for oil and gas permitting in chapter 377, part I. It is also undisputed that Hendry Energy satisfied all applicable rule criteria for oil and gas permitting set forth in chapters 62C-25 through 62C-30, except as to the issue of preventing waste.

64. The parties resolved all factual and legal disputes regarding the issue of correlative rights.

65. Therefore as stipulated and by the greater weight of the evidence, the proposed nonroutine unit is necessary to protect correlative rights.

    
    

66. The only disputed issue is whether the proposed nonroutine unit is necessary to prevent waste as required by rule 62C-26.004(6).

67. Hendry Energy provided data and analysis demonstrating the use of the existing RCC 27-4 surface-hole and well bore will avoid the drilling of unnecessary wells and otherwise prevent waste.

68. Hendry Energy provided data and analysis demonstrating the proposed bottom-hole location in the nonroutine unit is likely to increase the ultimate recovery of oil and otherwise prevent waste.

69. As discussed above, the proposed nonroutine unit and horizontal well will effectively and efficiently extract remaining reserves; will increase the amount of oil ultimately recovered; will decrease the amount of underground waste; and will provide a fair and equitable distribution to mineral owners. The greater weight of the evidence demonstrates that

    the proposed nonroutine unit and drilling plan are necessary to prevent waste.

70. The preponderance of the evidence demonstrates that the proposed nonroutine unit is necessary to prevent waste. This case establishes no reasonable basis in fact or in law to deny the drilling application.

ORDER

Based on the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that:

1. Hendry Energy Services, LLC, is hereby granted the operating permit recertification, consistent with its

   application and this Order, for the Red Cattle Co. #27-4 well, Permit No. 904, with the condition(s) agreed upon and stipulated by Hendry Energy and the Department herein. Specifically, the temporarily abandoned RCC 27-4 well shall be permanently plugged and abandoned, if not returned to production via a new bottom- hole. Also, the RCC 27-4 well shall be tested during reentry to determine whether the well is suitable for reuse and pressure tested before any production.

2. Hendry Energy Services, LLC, consistent with its application and this Order, is hereby granted the oil and gas drilling permit and establishment of a nonroutine unit, Permit No. OG 904AH.

DONE AND ORDERED this 10th day of April, 2018, in Tallahassee, Leon County, Florida.

S

G. W. CHISENHALL Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 10th day of April, 2018.

ENDNOTE

1/ Unless stated otherwise, all statutory references are to the 2017 version of the Florida Statutes.

COPIES FURNISHED:

Richard S. Brightman, Esquire Hopping, Green and Sams

Post Office Box 6526 Tallahassee, Florida 32314 (eServed)

Sean Timothy Desmond, Esquire Department of Environmental Protection Mail Station 35

3900 Commonwealth Boulevard

Tallahassee, Florida 32399 (eServed)

Timothy Michael Riley, Esquire Hopping, Green and Sams, P.A. Suite 300

119 South Monroe Street Tallahassee, Florida 32301 (eServed)

Robert C. Volpe, Esquire Hopping, Green and Sams, P.A. Post Office Box 6526 Tallahassee, Florida 32314 (eServed)

Lea Crandall, Agency Clerk

Department of Environmental Protection Douglas Building, Mail Station 35

3900 Commonwealth Boulevard

Tallahassee, Florida 32399-3000 (eServed)

Robert A. Williams, General Counsel Department of Environmental Protection Legal Department, Suite 1051-J Douglas Building, Mail Station 35 3900 Commonwealth Boulevard

Tallahassee, Florida 32399-3000 (eServed)

Noah Valenstein, Secretary

Department of Environmental Protection Douglas Building

3900 Commonwealth Boulevard

Tallahassee, Florida 32399-3000 (eServed)

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled to judicial review pursuant to section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing the original notice of administrative appeal with the agency clerk of the Division of Administrative Hearings within

30 days of rendition of the order to be reviewed, and a copy of the notice, accompanied by any filing fees prescribed by law, with the clerk of the District Court of Appeal in the appellate district where the agency maintains its headquarters or where a party resides or as otherwise provided by law.

Docket for Case No: 17-003253

Orders for Case No: 17-003253