Justia Alaska Supreme Court Opinion SummariesArticles Posted in Energy, Oil & Gas Law
Teck American, Inc., et al. v. Valhalla Mining, LLC, et al.
After a mining company abandoned its mining claims, the claims were located and recorded by a second mining company, which also abandoned the claims. After the second company abandoned the claims, the first company attempted to cure its earlier abandonment. The same year that the first company filed to cure its abandonment, a third mining company attempted to locate and record ownership of some of the same claims. The Alaska Department of Natural Resources (DNR) refused to issue permits to the third company, reasoning that the first one had validly cured its abandonment of its claims before the third company located the claims. After exhausting its administrative remedies, the third company appealed DNR’s decision. The superior court reversed DNR’s decision. Because DNR’s interpretation of the controlling statute was reasonable, the Alaska Supreme Court reversed the superior court decision and affirmed DNR’s decision. View "Teck American, Inc., et al. v. Valhalla Mining, LLC, et al." on Justia Law
AVCG, LLC v. Alaska Department of Natural Resources
Alaska Venture Capital Group, LLC (AVCG) owned interests in oil and gas leases on state lands. AVCG sought the State’s approval to create overriding royalty interests on the leases. The Alaska Department of Natural Resources, Division of Oil and Gas denied AVCG’s requests, explaining that the proposed royalty burdens jeopardized the State’s interest in sustained oil and gas development. AVCG appealed. Five years later the DNR Commissioner affirmed. The superior court then affirmed the Commissioner’s decisions. AVCG appealed to the Alaska Supreme Court, arguing primarily that the decisions improperly adopted a new regulation that did not undergo the rulemaking procedures of Alaska’s Administrative Procedure Act (APA). AVCG maintained that DNR’s reliance on specific factors - in particular, the fact that the proposed ORRIs would create a total royalty burden of over 20% on the leases - amounted to adopting a regulation. AVCG also argued that the decisions lacked a reasonable basis in fact and law and that, for some of its leases, no agency approval was required at all. The Supreme Court rejected these arguments, and rejected AVCG's constitutional claim: that delay and an "ad hoc" decision-making process violated its procedural due process rights. View "AVCG, LLC v. Alaska Department of Natural Resources" on Justia Law
In re Resource Development Council for Alaska, Inc., et al.
The issue this case presented for the Alaska Supreme Court's review centered on a challenge to the lieutenant governor’s decision that the sponsors of an initiative, “An Act changing the oil and gas production tax for certain fields, units, and nonunitized reservoirs on the North Slope,” had collected enough signatures to allow the initiative to appear on the ballot in the 2020 general election. Entities opposed to the initiative argued that signatures should not have been counted because the signature gatherers (the circulators) falsely certified that their compensation complied with Alaska election law. The statute governing circulator compensation allows them to be paid no more than “$1 a signature.” The superior court decided that this statute was unconstitutional because it imposed an unreasonable burden on core political speech — “interactive communication concerning political change.” It therefore concluded that the lieutenant governor properly counted the challenged signatures and properly certified the initiative petition for the ballot. The entities opposed to the initiative filed this appeal. The Supreme Court heard oral argument in August 2020, and on August 31 issued a summary order affirming the superior court’s judgment. This opinion explained the Court's decision. View "In re Resource Development Council for Alaska, Inc., et al." on Justia Law
French v. Alaska Oil & Gas Conservation Commission
The Alaska Oil & Gas Conservation Commission denied an individual’s request for a hearing regarding a reported natural gas leak and whether the leak constituted “waste” under Alaska law. The agency concluded it had no jurisdiction over the matter because it previously had investigated and had concluded the leak did not constitute “waste.” The individual appealed to the superior court, which affirmed the agency’s decision. The Alaska Supreme Court reversed, finding the individual's request for a hearing was improperly denied: "The Commission has jurisdiction over waste determinations, and substantial evidence does not support its assertion that it investigated and concluded this leak was not waste." View "French v. Alaska Oil & Gas Conservation Commission" on Justia Law
Fairbanks Gold Mining, Inc. vs. Fairbanks North Star Borough Assessor
A mining company appealed the borough assessor’s valuation of its mine to the borough board of equalization. At a hearing the company presented a detailed report arguing the borough had improperly included the value of “capitalized waste stripping”when calculating the tax-assessed value of the mine. The assessor maintained its position that waste stripping was taxable, but reduced its valuation of the mine to better reflect the remaining life of the mine. The board approved the assessor’s reduced valuation of the mine and the superior court affirmed the board’s decision. The mine owners argued that waste stripping fell within a statutory exemption from taxation. The Alaska Supreme Court construed municipal taxing power broadly, and read exceptions to that power narrowly. The Court found waste stripping was not a “natural resource,” but an improvement that made it easier for miners to access natural resources. The Court concluded that the value of this improvement, like that of other improvements at the mine site, was subject to tax by the borough. The Court therefore affirmed the superior court’s decision affirming the board’s valuation. View "Fairbanks Gold Mining, Inc. vs. Fairbanks North Star Borough Assessor" on Justia Law
Exxon Mobil Corporation v. Alaska, Department of Revenue
An oil producer challenged an Alaska Department of Revenue advisory bulletin interpreting the oil tax code, arguing that the bulletin violated the Alaska Administrative Procedure Act (APA) and seeking a declaratory judgment that the interpretation was contrary to law. The Alaska Supreme Court determined the advisory bulletin could not be challenged under the APA because it was not a regulation, and that a declaratory judgment was not available because the tax dispute between the parties was not ripe. View "Exxon Mobil Corporation v. Alaska, Department of Revenue" on Justia Law
PLC, LLC. v. Alaska, Department of Natural Resources
PLC, LLC and its co-party MH2, LLC (collectively PLC) held an overriding royalty interest in an Alaska oil and gas lease in the Ninilchik Unit. The unit operator applied to expand a subset of that unit called the Falls Creek Participating Area. After some back and forth over the extent of the expanded area, the Department of Natural Resources (DNR) approved the expansion. The lease area in which PLC held royalty interests was included in the original application by the unit operator, but it was left out of the approved application. PLC appealed the decision to DNR’s Commissioner (the Commissioner), who dismissed the appeal on the grounds that PLC lacked standing. PLC appealed to the superior court, which affirmed the Commissioner’s decision. Because PLC has a financial stake in DNR’s decision whether to approve the unit operator’s proposal for unit expansion to include the PLC-associated lease, the Alaska Supreme Court concluded PLC had standing, reversed the superior court decision, and remanded to the agency for further consideration. View "PLC, LLC. v. Alaska, Department of Natural Resources" on Justia Law
In re: Cook Inlet Energy, LLC, Gebhardt, v. Inman
Two federal district courts certified questions of law to the Alaska Supreme Court involving the state’s “mineral dump lien” statute. In 1910, the United States Congress passed Alaska’s first mineral dump lien statute, granting laborers a lien against a “dump or mass” of hard-rock minerals for their work creating the dump. The mineral dump lien statute remained substantively unchanged since, and rarely have issues involving the statute arisen. The Supreme Court accepted certified questions from both the United States District Court and the United States Bankruptcy Court regarding the scope of the mineral dump lien statute as applied to natural gas development. Cook Inlet Energy, LLC operated oil and gas wells in southcentral Alaska. In November 2014, Cook Inlet contracted with All American Oilfield, LLC to “drill, complete, engineer and/or explore three wells” on Cook Inlet’s oil and gas leaseholds. All American began work soon thereafter, including drilling rig operations, digging holes, casing, and completing the gas wells. When All American concluded its work the following summer, Cook Inlet was unable to pay. In June 2015 All American recorded liens against Cook Inlet, including a mine lien under AS 34.35.125 and a mineral dump lien under AS 34.35.140. In October, after its creditors filed an involuntary petition for relief, Cook Inlet consented to Chapter 11 bankruptcy proceedings. In January 2016 All American filed an adversary proceeding in the bankruptcy court “to determine the validity and priority of its secured claims.” The bankruptcy court found that All American has a valid mine lien against the three wells. But the court denied All American’s asserted mineral dump lien against unextracted gas remaining in natural reservoirs. The court also concluded that All American’s mine lien was subordinate to Cook Inlet’s secured creditors’ prior liens, which would have consumed all of Cook Inlet’s assets and leave All American with nothing. All American appealed to the federal district court, which, in turn, certified questions regarding the Alaska mineral dump lien statute. The Alaska Supreme Court concluded the statutory definition of “dump or mass” reflected that a mineral dump lien could extend only to gas extracted from its natural reservoir, that the lien may cover produced gas contained in a pipeline if certain conditions are met, and that to obtain a dump lien laborers must demonstrate that their work aided, broadly, in gas production. View "In re: Cook Inlet Energy, LLC, Gebhardt, v. Inman" on Justia Law
Kenai Landing, Inc. v Cook Inlet Natural Gas Storage, et al.
A public utility filed a condemnation action seeking the land use rights necessary to construct a natural gas storage facility in an underground formation of porous rock. The utility held some rights already by assignment from an oil and gas lessee. The superior court held that because of the oil and gas lease, the utility owned the rights to whatever producible gas remained in the underground formation and did not have to compensate the landowner for its use of the gas to help pressurize the storage facility. The court held a bench trial to determine the value of the storage space. The landowner appealed the resulting compensation award, arguing it retained ownership of the producible gas in place because the oil and gas lease authorized only production, not storage. It also argued it had the right to compensation for gas that was discovered after the date of taking. The landowner also challenged several findings related to the court’s valuation of the storage rights: that the proper basis of valuation was the storage facility’s maximum physical capacity rather than the capacity allowed by its permits; that the valuation should not have included buffer area at the same rate as area used for storage; and that an expert’s valuation methodology, which the superior court accepted, was flawed. The Alaska Supreme Court concluded the superior court did not err in ruling that the landowner’s only rights in the gas were reversionary rights that were unaffected by the utility’s non-consumptive use of the gas during the pendency of the lease. Furthermore, the Court concluded the trial court did not clearly err with regard to findings about valuation. View "Kenai Landing, Inc. v Cook Inlet Natural Gas Storage, et al." on Justia Law
Regulatory Commission of Alaska v. Matanuska Electric Association, Inc.
Electrical utilities entered into agreements for the purchase and transmission of energy from a hydroelectric project to utilities in distant service areas. Legislation exempted the agreements from the review or approval of the Regulatory Commission of Alaska (RCA); any disputes were to be resolved instead by a contractually established committee. A substation leased by Homer Electric Association (HEA) to Chugach Electric Association (Chugach) and used by Chugach for the transmission of the distant utilities’ electricity was along the transmission pathway. When the lease expired, HEA filed tariff applications with the RCA, seeking approval of rates for its own transmission of the other utilities’ energy. The other utilities objected to the RCA’s jurisdiction, citing their agreements and the legislation exempting the agreements from regulatory review. The RCA determined that it had the authority to consider the tariff applications. The affected utilities appealed to the superior court, which held that the RCA did not have that authority. HEA and the RCA petitioned the Alaska Supreme Court for review, challenging both the superior court’s appellate jurisdiction and the merits of its decision regarding the RCA’s authority. The Supreme Court rejected the challenges to the superior court’s jurisdiction, and concluded that the intent of the original agreements and of the governing statute was to exclude disputes like this one from the RCA’s jurisdiction. The Court therefore affirmed the decision of the superior court reversing the RCA’s order. View "Regulatory Commission of Alaska v. Matanuska Electric Association, Inc." on Justia Law