BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA REPORT OF THE ADMINISTRATIVE LAW JUDGE IN RESPONSE TO THE MOTION FOR POST-ORDER RELIEF

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1 BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA APPLICANT: EXCO RESOURCES, INC. RELIEF REQUESTED: APPROVAL OF A PLAN FOR REMEDIAL OPERATIONS ON EXCO RESOURCES, INC.'S PREVIOUSLY OWNED NORGE MARCHAND UNIT ON THE JOE BOB NELSON AND NICONA NELSON PROPERTY LEGAL DESCRIPTION: SECTION 10, TOWNSHIP 7 NORTH, RANGE 8 WEST, GRADY COUNTY, OKLAHOMA 771:) Q1OOolf CAUS1 N1 t E DEC COURT CLERK'S OFFICE OKC CORPORATION COMMISSION OF OKLAHOMA REPORT OF THE ADMINISTRATIVE LAW JUDGE IN RESPONSE TO THE MOTION FOR POST-ORDER RELIEF CAUSE SUMMAR The Applicant, ("EXCO") is a former operator of the Norge Marchand Unit, an enhanced recovery project covering the Marchand Sand common source of supply, that includes the above described property. In 2009, Mr. Joe Bob Nelson and Mrs. Nicona Nelson, two of the Respondents named in the Application, believed that areas on their property located in the Norge Marchand Unit in Grady County, Oklahoma were contaminated by spills of saltwater and other deleterious substances from oil and gas operations. That same year they hired Jerry Black, an environmental and remediation consultant, to determine the extent of the contamination. Mr. Black installed monitoring wells on the Nelson property and completed his evaluation. The Nelsons later filed a lawsuit in the District Court of Grady County' alleging that releases of saltwater and oil from the operations of EXCO had harmed their property. In August 2010, the Nelsons appeared for a deposition and testified that they wanted any soil and water on their property that was affected by such releases cleaned up. EXCO subsequently hired a remediation expert and an expert hydrologist to investigate and evaluate the property for the purpose of identifying areas of soil and water pollution caused by releases from Norge Marchand No Well and its associated flowlines and for the purpose of proposing methods to for clean up the land. The remediation expert and the hydrologist prepared a plan of remediation after evaluating the site. The hydrologist also recommended additional testing to determine the impact of saltrelated constituents on the soil and in the water existing in the soil. The experts concluded that the existing monitoring wells that were installed and constructed by Mr. Black be plugged and 1 See Nelson, et ux, v. EXCO Resources,Inc., Case No. CJ , District Court of Grady County, Oklahoma, where the plaintiff asserted private rights claims against EXCO, sounding in nuisance and trespass. The basis of these claims were the allegation that the oil and saltwater released during the EXCO pipeline leaks harmed the Nelsons' property. The Nelsons sought an award of money damages to compensate for EXCO's actions.

2 abandoned and replaced by a new, permanent monitoring well. They made this recommendation because they believed that these existing wells increased the likelihood of cross-contamination between the substances in the soil and in the water, and because these wells had to be removed to properly remediate the site. EXCO subsequently commenced this proceeding before the Commission seeking approval of a remediation plan for Nelson's land. The lawsuit in Grady County District Court was later settled and as part of the settlement the Nelsons allegedly agreed that they would not oppose in any way any action proposed by EXCO in the proceeding before the Commission, including, without limitation, dismissal of the action or proposed closure by no further action. On February 1St and 8th of 2012, the matter was heard by the Administrative Law Judge ("AU"). The Nelsons did not appear allegedly because of the contractual provision which they believed barred them from opposing EXCO's proposed closure plan. Mr. Black did not appear at the hearing because he was not a party and had no notice of the hearing. EXCO presented its argument and evidence unopposed with no objection from the Pollution and Abatement Division of the Commission. After hearing all of the evidence and testimony, the ALJ recommended that the Commission approve EXCO's remediation plan that included remediation of the area near the Norge Marchand No Well and flowline, including additional testing, soil remediation, removal of existing monitoring wells and the construction of a new, permanent monitoring well. On February 28, 2012, the Commission issued Order No that approved EXCO's proposed remediation plan and agreed that the described remediation work was accomplished and carried out by EXCO according to the plan of remediation. The Commission also held that the operation of the Norge Marchand No Well and its associated flowlines were in full compliance with the rules and regulations of the Commission and posed no threat to the health, safety and welfare of the Respondents and citizens of the State of Oklahoma. This Order became a final order of the Commission on March 30, 2012 and cannot be appealed to the Oklahoma Supreme Court after this date. 2 Sometime after Order No was issued, Mr. Black took exception to some of the language in the Order, alleging that during the hearing certain false and inaccurate evidence was presented regarding the monitoring wells installed by him. On March 9, 2012, Mr. Black through his attorney, Wes Johnston, filed a Motion for Post-Order Relief under OAC 165: seeking modification of Order No to remove the references to the information 2 See Oklahoma Supreme Court Rules, Title 12, Appendix 1, Article Part IV (b), Section Rule Mode and Time of Appeal from the Corporation Commission which states "(a) Time to Appeal from Order in Exercise of Powers Pursuant to Oil and Gas Conservation Act and Preparation of the Record. Any party desiring to procure review of a decision of the Corporation Commission rendered in the exercise of its regulatory powers under the Oil and Gas Conservation Act may commence an appeal therefrom in compliance with the rules in Part IV(a) and IV(b) by filing a petition in error within thirty (30) days of the date the decision sought to be reviewed is rendered. A petition in error will be deemed filed on date of mailing when mailed in accordance with Rule 1.4(c). 2

3 he deemed incorrect or for a rehearing so that evidence he deemed accurate regarding the installation of the wells could be presented to the Commission and admitted to the record. 3 Mr. Black didn't have a hearing with respect to his Motion or provide any evidence to the Commission in support of the allegations in his Motion within the thirty-day time period in which Order No became a final order. Mr. Black also didn't file an appeal in the form of a petition in error with the Oklahoma Supreme Court concerning the Order within thirty (30) days of the date the Order was issued by the Commission. Over the next several months the hearing on the Motion was scheduled with the Commission but subsequently continued several times because Mr. Black was unable to attend the hearings or was unable to provide his affidavit attesting to the inaccuracies that were allegedly found in the Order. Finally on October 8, 2012 Mr. Black filed his Supplement to Motion for Post-Order Relief that included his affidavit with the attached evidence in support of his allegations with the Commission for review by the AU in consideration of his Motion. EXCO subsequently filed its Response to Mr. Black's Motion for Post-Order Relief, arguing that the Commission must dismiss the Motion because the Commission didn't modify or set aside the Order within thirty days from the date that the Order was issued, citing the holding of the Oklahoma Supreme Court in Turpen v. Okla. Corp. Comm., 1988 OK 126, 769 P.2d 1309, and because Mr. Black didn't file an appeal of the Order with the Oklahoma Supreme Court within that same thirty-day time period as required by the rules of the Supreme Court. EXCO argued that Commission orders must be modified or revised or appealed to the Supreme Court within thirty days after being issued by the Commission or the orders automatically become final orders, and any attempt to revise, amend or modify such a final order after the thirty-day time period is an impermissible collateral attack upon the order. RECOMMENDATIONS After taking into consideration the Movant's affidavit and the arguments of counsel, it is the recommendation of the ALJ that the Movant's Motion for Post-Order Relief be dismissed as being out-of-time in that the related affidavit and evidence were presented to the Commission for review more than five months after Order No became a final order on March 30, The affidavit and evidence submitted by the Movant also do not touch upon substantial issues See OAC 165: which states that "(a) Within ten (10) days after an order of the Commission is entered, any person may file a motion for rehearing, or a motion to set aside or to modify the order, or for any other form of relief from the order. However, a motion to reopen the record after an order has been entered shall not be considered a proper motion to seek relief from the order. The motion shall specifically state: (1) The parts or provisions of the order sought to be set aside or modified or from which relief is sought. (2) The specific modifications or other relief sought by the motion. (3) The specific grounds relied upon for relief. (b) Such motion shall be set for hearing before the Commission, unless referred. A copy of the motion, including notice of the date set for hearing, shall be served by the movant on each party of record by regular mail, facsimile, electronic mail or in person. If any motion filed pursuant to this Section is placed on the emergency or regular docket for hearing, the movant shall give at least five (5) days written notice to all respondents listed on the affidavit of mailing and all parties of record.

4 that would affect or change the recommendation of the ALJ in his report to the Commission following the hearing on the merits that EXCO's proposed remediation plan be approved. APPEARANCES Wes Johnston, Attorney at Law, appeared for the Movant, Jerry Black; Eric King, Attorney at Law, appeared for EXCO; and Sally Shipley, Deputy General Counsel, Oil and Gas Conservation Division, appeared on behalf of the Commission. JURISDICTION The Commission has jurisdiction over the subject matter and notice has been given in all respects as required by law and the rules of the Commission. CONCLUSIONS OF LAW 52 O.S. 112 provides that anyone affected by a Commission order, including non mineral interest owners, has standing before the Commission to seek relief. Marshal Oil Corporation V. Adams, at 688 P.2d 37 (Okl. 1983). 52 O.S. 112 provides: Any person affected by any legislative or administrative order of the Commission shall have the right at any time to apply to the Commission to repeal, amend, modify, or supplement the same. Such application shall be in writing and shall be heard as expeditiously as possible after notice of the hearing thereon shall have been given in the manner provided by Section 14 of this act. As stated by the Supreme Court in Forest Oil Corporation v. Corporation Commission, 807 P.2d 774 (Okl. 1990): Under Section 112, any person affected by a Corporation Commission order has standing to apply to the Commission for relief. Although Section 112 appears to state that such an application for relief can be made "at any time" the rules of the Commission and holdings of the Oklahoma Supreme Court provide defined time-periods in which such applications for relief must be made. OAC 165: provides that a motion for rehearing, or a motion to set aside or to modify an order, or for any other form of relief from the order must be made within ten (10) days after an order of the Commission is entered. Such a motion to reopen the record after an order has been entered shall not be considered a proper motion to seek relief from the order but can be used to modify the language of the order. (See Footnote 3 herein). OAC 165: provides that when more that 10 days have passed since the issuance of an order, the order can only be modified by an application to vacate or modify the order in a

5 separate cause of action. 4 In the alternative, orders of the Commission can be appealed to the Oklahoma Supreme Court by filing a proper petition in error only within 30 days after the issuance of the order. Orders that aren't appealed within the 30-day period are final orders that cannot be appealed. (See Footnote 2 herein). The requirement of timeliness as applied to those seeking post-order relief from Commission orders is further emphasized by the Supreme Court in its holding in the Turpen case. Here the Court held that Commission orders that are not appealed within 30 days after their issue date become final orders that cannot be appealed, and that motions for post-order relief that seek to modify or correct the language of a Commission order but not affect the relief granted under the order must be made by the movant and have action taken in response by the Commission within that same thirty-day time period in which an appeal must be made. In other words, a motion to modify an order does not extend the time in which that order becomes a final order that cannot be modified by a motion. 5 See OAC 165: which states "(a) At any time subsequent to ten (10) days after entry of an order of the Commission, an application to vacate or modify the order, or for any other form of relief from the order, filed by any person, whether or not a party of record in the original cause, shall be treated as a separate cause, and shall be governed by rules applicable to the commencement of a cause. The application shall: (1) Identify the order sought to be modified or vacated. (2) State specifically the parts or provisions sought to be modified or vacated. (3) State specifically the modifications or vacations sought. (4) State specifically the grounds upon which such relief is sought. (b) Notice of hearing of the application shall be served and published as required upon the commencement of the cause. The application shall be set for hearing before the Commission or Administrative Law Judge or Public Utility Referee, as provided in this Chapter as to the commencement of a cause." See Turpen v. Okla. Corp. Comm., 1988 OK 126, 769 P.2d 1309 which states in part: Oklahoma jurisprudence treats a motion to modify a Commission order differently from that of a district court. Commission orders automatically become final after 30 days. Once an order has become final, its vacation is beyond that agency's power. The Commission is without authority even to review and modify the order unless statutory notice of a hearing concerning the proposed modification is given to all interested parties. Even during the 30 day-period before an order becomes "final"--in the sense of passing beyond the reach of appellate review--the Commission may act upon a motion to rehear, modify or reconsider its order but is not required to do so. It is well established that the Commission has no power to entertain a rehearing or reconsideration request of a decision after an appeal from it has been made to this court. Extant case law compels us to hold that, insofar as Rule 24 (currently OAC 165: ) may be construed to empower the Commission to entertain a request to modify an appealable order after the lapse of 30 days from that order's issuance, its provisions plainly conflict with 12 O.S (a) and are hence unauthorized by law. There are two primary reasons for according a different procedural consequence to a motion to modify a Commission order and a motion to modify a district court judgment. The first reason is the difference between an appeal from a district court judgment and one from a Commission order. Although Art. 9 20, OkI. Const., provides that an appeal from the Commission shall be taken "directly to the Supreme Court in the manner and in the same time in which appeals may be taken to the Supreme Court from the District Courts," this means only that appeals from the Commission are the same as appeals from the district court unless the law provides differently. Otherwise, this language conflicts with other parts of 20 which state that an appeal from the Commission to the Supreme Court "shall be of right" and "directly to the Supreme Court" and "shall be to the Supreme Court only." These provisions assure that an appellant will have the opportunity to be heard in this court and gain access for immediate review of the Commission's order. The second reason is that the terms of 12 O.S.Supp (a)--which provide that if a motion for a new trial is filed in the district court no appeal may be taken to this court until the trial court rules on the

6 In this present cause, the Movant timely filed his Motion for Post-Order Relief within the 10- day deadline set forth in OAC 165: but failed to bring the matter before the Commission to present his evidence and testimony in a hearing or to file affidavits and evidence in support of his Motion with the Commission within the 30-day time period required by the Supreme Court. The Movant filed his supporting affidavit and evidence more than six months after Order No became a final order and there was thus nothing that the Commission could review or respond to with respect to his Motion before the Order became final. As noted by EXCO in its analysis of the Turpin case, OAC 165: provides the grounds upon which Mr. Black can file such a motion but does not empower the Commission to consider his request to modify an appealable order after the lapse of 30 days from that order's issuance. EXCO correctly concludes that the Commission is without jurisdiction to consider the his Motion for Post-Order Relief. After taking into consideration the Movant's affidavit and the arguments of counsel, it is the recommendation of the ALJ that the Movant's Motion for Post-Order Relief be dismissed as being out-of-time in that the related affidavit and evidence were presented to the Commission for review more than six months after Order No became a final order on March 30, The affidavit and evidence submitted by the Movant also do not touch upon substantial issues that would affect or change the recommendation of the ALJ in his report to the Commission following the hearing on the merits that EXCO's proposed remediation plan be approved. RESPECTFULLY SUBMITTED this 26th day of December, DAVID LEAVITT ADMINISTRATIVE LAW JUDGE xc: Wes Johnston Eric King Sally Shipley Michael Decker Oil Law Records Commission Files motion--do not apply to appeals from Commission orders. (Footnotes in the cited passage deleted for brevity).