13-004254 Thomas G. Mosher And Matthew Schwartz vs. Dan A. Hughes Company, L.P., And Department Of Environmental Protection Status: Closed Recommended Order on Tuesday, June 3, 2014.

Summary: A balancing of three factors in section 377.241 supports issurance of permit to drill an exploratory oil well in Collier County.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

THOMAS G. MOSHER AND MATTHEW

SCHWARTZ,

Petitioners,

and

PRESERVE OUR PARADISE, INC.,

Intervenor,

vs. Case Nos. 13 - 4254

13 - 4920

DAN A. HUGHES COMPANY, L.P., AND

DEPARTMENT OF ENVIRONMENTAL

PROTECTION,

Resp ondents.

_______________________________/

RECOMMENDED ORDER

T his matter was heard before the Division of Administrative

Hearings (DOAH) by its assigned Administrative Law Judge, D . R.

Alexander, on Februar y 25 - 2 7 , 201 4 , in Fort Myers, Florida.

APPEARANCES

For Petitioner : Ralf G. Brookes , Esquire

( Mosher and Ralf Brookes Attorney

Intervenor ) Suite 107

1217 East Cape Coral Parkway

Cape Coral , F lorida 33904 - 9604

For Petitioner : Matthew R . Schwartz, pro se

( Schwartz ) Post Office Box 460234

Fort Lauderdale, Florida 33346 - 0234

For Respondent: Timothy M. Riley, Esquire

(Dan A. Hughes) H. French B rown , IV, Esquire

H opping, Green & Sams, P.A.

Post Office Box 6526

Tallahassee, Florida 32314 - 6526

For Respondent: Jeffrey Brown, Esquire

(Department) D e partment of Environme ntal Protection

Mail Stop 35

3900 Commonwealth Boulevard

Tallahassee, Florida 32399 - 3000

STATEMENT OF THE ISSUE

The issue is whether to approve an application by

Respondent, Dan R. Hughe s Company, L.P. (applicant or Hughes) ,

for an oil well drilling permit authorizing the drilling of an

exploratory oil well in Collier County, Florida.

PRELIMINARY STATEMENT

On September 20, 2013, the D epartment of Environmental

Protection (Department) issu ed Oil & Gas Well Drilling Permit No.

1353H authorizing Hughes to drill an exploratory oil well in the

Camp Keais Strand Agricultural Development (Camp Keais) in

Collier County. Petitioner Thomas G. Mosher (Mosher) and

Intervenor Preserve Our Paradise, In c. (Preserve) , timely filed

their Petition for Formal Administrative Hearing & Verified

Motion to Intervene challenging the proposed agency action. The

matter was referred by the Department to DOAH to conduct a formal

hearing and was assigned Case No. 13 - 4254 . After the initial

pleading was dismissed , a First Amended Petition for

Administrative Hearing & Verified Motion to Intervene was filed.

On November 15, 2013, Petitioner Matthew Schwartz

(Schwartz) , with the assistance of unnamed counsel, filed his

Second Amended Petition for Administrative Hearing with the

Department challenging the same agency action . 1 His filing was

referred to DOAH, assigned Case No. 13 - 4920, and consolidated

with the Mosher/Preserve case.

Shortly before the final hearing, Pe titioners and Intervenor

were authorized to file amended p etitions , which added an

allegation that the application was not reviewed by the Big

Cypress Swamp Advisory Committee ( Committee ) pursuant to

section 37 7 .42(2) , Florida Statutes (2013) . 2

Based o n the foregoing ruling, a t the beginning of the

hearing, argument was heard on the Department 's request to

bifurcate the proceeding , allow the Committee to conduct a

meeting at a later date, and if appropriate, allow the parties to

supplement the record wi th exhibits or testimony relative to the

Committee's recommendation. The request was granted, and

Committee meeting s were convened on March 11 and 31 , 2014. At

the second meeting, by a majority v ote, the five - member Committee

recommended that the applica tion be denied. On April 14, 2014, a

one and one - half page memorandum was issued memorializing that

decision. That memorandum has been received in evidence as Joint

Exhibit 1. After reviewing the Committee's recommendation, the

Department advised that i ts original proposed agency action would

not be modified . Accordingly, except for the admission of the

committee report, n o further supplementation of the record was

determined to be appropriate.

The disposition of numerous pre - and post - hearing discove ry

and procedural issues is found on the case docket sheet. In the

spirit of cooperation, four separate pre - hearing unilateral

statements were filed by the parties.

A t the final hearing, Mosher testified on his own behalf and

Mosher/Preserve jointly prese nted the testimony of Don ald Loritz,

Preserve 's registered agent and director ; Gab or H. Tischler, an

Emergency Management Specialist for the Florida Catholic

Conference and Catholic Charities of Florida and accepted as an

expert; Dr. Ronald E. Bishop, a ce rtified Chemical Hygiene

Officer and accepted as an expert; and Paul Rubin, a

hydrogeologist with Hydroquest, an environmental consulting firm,

and accepted as an expert. Mosher Exhibit 3 was received in

evidence. Schwartz testified on his own behalf and Schwartz

Exhibits 1 0, 11, 13, 14 - 18, 2 0 - 23, 27, 29, 31, 35, 42, 48, 51,

55 - 59, 66 - 73, 82, 85, 87, 89, 90 - 92, 97, 98 , 101, 102, 104 - 114,

118, 119, 122, 129 , 132, 134, and 139 were admitted in evidence.

Hughes presented the testimony of J. Henry "Hank" Kre mers, C hief

O perating O fficer/ V ice - P resident of L and and accepted as an

expert ; Jeffr e y R. Il seng, Operations Manager and accepted as an

expert ; Kenneth C. Passarella, P resident and P rincipal E cologist

o f Pasarella & Associates, Inc. , and accepted as an ex pert;

William R. Cox, S enior E cologist with Passarella & Associates,

Inc., and accepted as an expert; James M. Kerr, Jr., Senior

Principal Geologist with Stantec, Inc., and accepted as an

expert; and Dr. John Walker, S enior A ssociate and S enior P roject

M an ager with Stantec, Inc. , and accepted as an expert. Hughes

Exhibits 1 - 3, 5 - 13, 16, 19 - 25, 27, and 28 were admitted in

evidence. The Department presented the testimony of Ste phen M.

Spencer, a registered professional geologist and accepted as an

expert; a nd Dr. Owete Owete, a professional engineer and accepted

as an expert. Department Exhibits 1 0, 1 5 - 18, 23, 25, and 27 were

admitted in evidence. Joint Exhibit 1 was also received.

Finally, Mosher's request to take official recognition of two

reports issu ed by the United States Environmental Protection

Agency in October 1993 and June 2003 was granted . (These items

were pre - marked as Preserve Exhibits 10 and 41).

A four - volume T ranscript of the hearing has been prepared .

Each party filed a P roposed R ecomm ended O rder, which ha s been

considered in the preparation of this Recommended Order.

FINDINGS OF FACT

A. The Parties

1. Mosher resides on a three - acre lot at 4695 26th Avenue

Southeast, Naples, Florida . His residence is around 2,500 feet

west of the p roposed wellsite , but Mosher says that the eastern

edge of his lot "might be 2,000 feet " from the drilling site. He

has not, however, measured t he actual distance to confirm this

assertion .

2. Preserve is a Florida non - profit corporation whose

purpose is to educate the public on issues affecting the

preservation and protection of the environment, particularly the

environment of s outh and s outhwest Florida. It was formed in

response to Hughes' intention to drill for oil in the area. The

corporation is no t a membership organization ; rather, it has

a round 25 non - member , active volunteers, six member directors ,

and an unknown number of donors . Excluding Mosher, the other

member directors live between three and ten miles away from the

proposed wellsite . The record does not show where the 25

volunteers reside. T he corporate representative testified that

f our directors , including Mosher, regularly use the Florida

Panther National Wildlife Refuge (Refuge) to observe wildlife and

habitat . However, the public a ccess point to the Refuge appears

to be at least several miles from the wellsite. Based upon a n

email survey, h e stated that a "substantial number [around 36] of

donors and volunteers utilize the panther refuge , " but he was

unaware of when, or how often, this occurred. About every six

weeks, meetings are conducted at Mosher's home, w hich are

attended by some, but not all, of the directors and volunteers.

3. Schwartz 's primary residence is in Lake Worth (Palm

Beach County) where he serves as the unpaid ex ecutive director of

the South Florida Wildlands Association. 3 He sometimes provides

paid tours in the Everglades and Big Cypress Swamp and has led

"numerous" free hikes into panther habitat to look for signs of

panthers. These hikes are limited to the hi king trails in the

southeast corner of the Refuge , which is the only area that can

be accessed by the public. He represented himself as an advocate

for the protection of wildlife habitat in the greater Everglades,

with a particular interest in the Flori da panther.

4. Hughes is a Texas limited partnership engaged in the

business of oil and gas exploration, which is registered to do

business in the State of Florida. Hughes has applied for a

permit to drill an exploratory well for oil in Collier County.

If the well is commercially viable, Hughes must apply for an

operating permit at a later time.

5 . The Department has jurisdiction to issue permits for the

drilling and exploring for , or production of , oil under p art I,

c hapter 377. Pursuant to that autho rity, the Department reviewed

the oil and gas well drilling permit application.

B. The Application and Project

6. After the application was deemed complete by the

Department , it was distributed for comment to a number of local,

state, and federal agencie s. While some commented on the

application, no agency had any unresolved concerns at the end of

the application process. Hughes met all rule requirements for

performance bonds or securities, and it provided all information

required by rule.

7. The propo sed site is located on the southeast corner of

an active farm field in the Big Cypress Swamp watershed , just

north of a speedway now used as a test track . Surface holes for

oil wells are commonly located on farm land, and farm fields are

compatible with o il wells. Based upon a mineral lease between

Hughes and the owner of the land, Collier Land Holdings, Ltd.,

Hughes has the right to locate and drill the well at the proposed

surface hole location.

8. The Refuge was established by Congress in 1989 to

prot ect the Florida panther and its habitat and is located

approximately 20 miles east of Naples. Around 98 percent of the

Refuge is closed to any public activity. The project is

consistent with the comprehensive conservation plan for the

Refuge prepared by the United States Fish and Wildlife Service

(USFWS), in that the plan recommends "slant drilling" off of the

Refuge.

9. Although Mosher and Preserve a rgue that the drill hole

should be moved further east into wetlands , and Schwartz contends

that it shou ld be moved further west away from the Refuge, the

proposed location of the drill ing pad and project site is

reasonable with respect to the nature, appearance, and location

of the proposed drilling site. Likewise, the location is

reasonable with respect t o the type, nature, and extent of

Hughes' ownership.

10 . The proposed activity can be st be characterized as a

"resource play," where an operator drills toward a known

resource. This is distinguished from a wildcat operation, where

the operator is drillin g in an unproven area. Hughes proposes to

target the rubble zone (i.e., the lower zone) within the lower

Sunniland formation , a geologic formation thousands of feet below

the ground surface that runs through southwest Florida . Hughes

will first drill a v ertical pilot hole and then drill

horizontally from the hole bottom in a southeast direction toward

a formerly drilled oil well known as the Tribal Well. In order

to increase the probability of locating commercially available

petroleum, Hughes plans to pr oceed from west to east in order to

arrive at a perpendicular direction of existing limestone

fractures as the drilling approaches the Tribal Well. When that

well was drilled vertically into the rubble zone in the 1970s,

oil rose to the ground surface. T hus, the indicated presence of

oil is sufficient to warrant and justif y the exploration for oil

at this location.

11 . The proposed depth of the pilot hole is 13,900 feet

measured depth (MD/13,900 feet true vertical depth (TVD) ) , which

will allow assessmen t of the u pper Sunniland, l ower Sunniland,

and Pumpkin Bay Formation s . If the evaluation determines that

the well will likely be commercially productive, Hughes will

comp l ete a 4,100 - foot horizontal leg in the l ower Sunniland

rubble zone with a landing de pth at 12,500 feet MD/12,064 TVD and

a total depth of 16,600 feet MD/12,064 feet TVD.

1 2 . The footprint for the drilling pad will be 225 feet by

295 feet, or 2.6 acres, with a two - foot earthen berm around the

perimeter of the operating area to contain all water on the site.

A secondary containment area within the perimeter of the site

will be covered by high - density polyethylene to contain and

collect any accidental spills. A drilling rig, generators, and

other drilling equipment will be on the pad durin g drilling

operations. A maximum of 20 persons will be at the site , and

then only for one day of operations. At all other times, Hughes

anticipates there will be a five - person drill crew plus support

personnel on site. After drilling, Hughes will remove its

equipment.

1 3 . Once the access road is built and the equipment put in

place, t he drilling activities will take place 24 hours per day,

seven days per week, and will be completed in approximately 60 to

70 days. The on - site diesel generators will run simultaneously

24 hours per day while drilling is taking place. The pad will be

illuminated at night with lights on the drilling derrick and

throughout the pad. Construction of the drilling pad will

require trucking around 12,000 to 14,000 cubic yards of fill to

the drilling location. Additional traffic for bringing in fill,

piping, and related equipment will occur, but the exact amount of

traffic is unknown.

1 4 . The South Florida Water Management District (SFWMD)

previously approved an environmental resource permit (ERP) to

allow the construction and operation of a surface water

management system on Camp Keais. The United States Army Corps of

Engineers (USACE) also permitted the same system under the Clean

Water Act. The latter permit require s mitig ation for wetlands

and Florida panther habitat compensation. Based on the proposed

wellsite, the SFWMD modified the ERP to allow a culvert and

access to the proposed wellsite. In addition to the oil drilling

permit application, Hughes has applied for two water

well drilling permits from the SFWMD, and an injection well

drilling permit.

C. Petitioners and Intervenor's Objections

15. The challengers have raised a number of objections that

they assert require denial of the application. Conflicting

testim ony was presented on the se issues , which has been resolved

in Respondents' favor as being the more credible and persuasive

testimony .

a. Mosher and Preserve

1 6 . Mo sher and Preserve raise two broad objections. First,

they contend that hydrogen sulfide ga s (H2S) is likely to be

encountered in the drilling of the proposed well. They further

contend that the H2S contingency plan submitted by Hughes is not

sufficient to evacuate the public in the event of an incident

where H2S is uncontrollably released unde r pressure. Second,

they contend that the Committee did not review the application

under the process contemplated by section 377.42(2). Except for

these two objections, they agree that no other issues remain.

See TR., Vol. I, p. 33.

1 7 . Within the pe troleum industry, drilling operators

create H2S plans when there is reason to believe that the

operator may encounter H2S while drilling. This practice is

codified in Florida Administrative Code Rule 62C - 27.001(7), which

requires a contingency plan only w hen H2S is "likely" to be

encountered while drilling . The plan must "meet generally

accepted industry standards and practices , " and it must contain

measures "for notifying authorities and evacuating civilians in

the event of an accident." Id. See also r ule 62C - 26.003(3),

which requires a contingency plan "if appropriate." The plan is

prepared for two main users: the personnel working at the

drilling site ; and local emergency management officials, who must

plan and train for the implementation of emerge ncy activities.

1 8 . The parties agree that the "generally accepted industry

standards and practices" for the oil and natural gas industry are

found in the operating standards and recommended practices

adopted by The American Petroleum Institute (API) , a t rade

association for the oil and natural gas industry . Recommended

Practice 49 (API 49) is th e generally accepted industry standard

for oil and gas drilling operations likely to encounter H2S and

was relied upon by all parties throughout the hearing. The

standard includes guidance on personnel protection measures,

personnel training, personnel protection equipment, and community

contingency planning. API 49 recommends the use of a community

warning and protection plan when atmospheric H2S exposures beyon d

the well site could exceed potentially harmful exposure levels

and could affect the general public.

1 9 . Mosher/Preserve's expert opined that H2S might be

encountered at levels as high as 21 percent (210,000 parts per

million (ppm)) in s outhwest Florida , and that "it's quite likely"

H2S would be encountered at the proposed wellsite. At the same

time, h owever, he agreed with the assessment of Respondents'

experts that the likelihood of encountering H2S at this site was

merely "possible," "sporadic," and "unlikely," and that there was

"zero" potential of a severe H2S release under high pressure.

20 . Florida has two major oil producing areas: the

Sunniland Trend in southwest Florida and the Smackover formation

near Jay, Florida, in the northwest part of the st ate. Unlike

the Smackover formation which has higher temperatures and

pressures and a high concentration of H2S, the Sunniland Trend

has normal temperatures and pressures and a s poradic presence of

H2S. Less than two percent of wells in s outhwest F lorida have

been reported to contain H2S, and those reports relate to

production wells where bacteria (biological contamination) w as

likely introduced into the formation during production. Of over

300 oil wells drilled in southwest Florida, only six were

reported to have encountered H2S. Notably, the Tribal W ell ,

located 1.5 miles to the southeast of the proposed site ,

encountered relatively low pressure during drilling and had no

H2S, and another well located 12 miles to the north likewise had

no high pr essure or H2S. It is unlikely that Hughes will

encounter high pressure or H2S if it drills at the proposed site.

2 1 . Even though it is unlikely that high pressure or H2S

will be encountered during the drilling of this proposed well,

Hughes still submitte d an H2S contingency plan as part of the

drilling application. The Department determined the plan

provided an effective design to detect, evaluate, and control any

hazardous release of H2S. In response to public concerns, in

January 2014 Hughes revised i ts plan to provide more protections .

The revised plan exceeds the guidance provided in API 49.

2 2 . The revised plan clarifies and adds multiple

protections, including implementing the plan at a vertical depth

of 9,000 feet, which is 2,700 feet before the zone that Mosher

claims could contain H2S; clarifying that an H2S alarm

notification at 15 ppm would result in an instant well shut - in

(i.e. , closure of the well ) to prevent the escape of H2S;

instituting a reverse 911 call system to allow local officials to

notify the public by telephone of any incident; creating an air

dispersion model to understand the likelihood of public exposure;

and adding H2S scavengers to the drilling mud.

2 3 . Adding H2S scavengers in the mud is a protective

measure. Specificall y, the zinc oxide scavengers will react with

H2S to create benign zinc sulfide and water. Even if H2S is

present in the formation, the H2S scavengers will neutralize the

H2S before it could reach the surface. The H2S scavengers will

effectively eliminate the likelihood of H2S escaping from the

well during drilling operations.

2 4 . The drilling plan requires the Trinity C formation

(which Hughes estimated will begin at a depth of around 11,850

feet) to be cemented off and sealed once drilled. This formati on

will not be encountered in the first 15 or 20 days of drilling.

Once encountered, the formation will be exposed for only four to

six days. Even if H2S were encountered during this short exposed

duration, all of the protections included in the revised plan

would be in place, including overbalanced drilling mud, H2S

scavengers, blowout preventers, H2S monitors, and alarms.

2 5 . When wells are drilled, there are numerous personnel

monitoring the drilling fluid, or mud, which is designed not only

to carry cuttings to the surface, but more importantly to act as

a barrier to keep fluids or gasses in the geologic formation.

The mud is weighted with additives to combat reservoir pressures.

Drill operators want the same amount of mud pumped into the hole

as th e amount flowing back up. If more fluid is flowing back up,

then the mud is not heavy enough to hold back the fluids or

gasses encountered. If this imbalance occurs, the well is shut -

in immediately and the mud weight is adjusted. A shut - in can be

accomp lished in just a few seconds. Anything in a shut - in well

will stay in the well. Hughes' normal drilling plan is to

slightly overbalance the mud weight. This ensures that nothing

unintentionally escapes from the reservoir.

2 6 . Mosher and Preserve conten d that if H2S is encountered,

dangerous concentrations of H2S would leave the wellsite. In

response to this type of concern, a s part of the revised plan,

Hughes conducted an air dispersion model using the methodology

provided by API 49. The API 49 model is a Gaussian model with

default values reflecting the worst - case exposures. The peer -

reviewed and conservative model calculated by Dr. Walker looked

at H2S concentrations of 10, 15, and 100 ppm. At the extreme

case, a 100 - ppm release at the well would b e reduced below 10 ppm

within about 20 feet from the well and further reduced to one ppm

within 60 feet from the well. Although H2S is unlikely to escape

the well, 100 ppm was selected as a precautionary level because

this level is an immediate danger to human life and health.

Reaching 100 ppm is highly unlikely because at an instantaneous

reading of 15 ppm, the well is immediately shut - in.

2 7 . The air dispersion model results demonstrate that

atmospheric H2S exposures beyond the wellsite could not excee d

potentially harmful exposure levels nor could exposures affect

the general public. Thus, even though the plan includes a

community warning and protection provision, it is not required

under API 49.

2 8 . In an abundance of caution, however, the plan prov ides

for a public notification zone of 2,000 feet in case of an H2S

release . This zone is two orders of magnitude beyond the 20 -

foot, 10 ppm distance dispersion of H2S based on the modeled

worse case release and exceeds any required notification zones in

other states. The notification boundary is conservative, as

compared with industry standards. While Mosher's expert

recommended more stringent standards tha n API 49 , he knew of no

contingency plan for an oil drilling permit in the United States

that inc luded his recommended standards.

2 9 . Mosher's expert testified that based on his review of

literature, the lowest observable adverse effect from H2S was at

concentrations of 2.1 ppm. Based on a worst case scenario

release of 100 ppm of H2S, the gas woul d disperse to a

concentration of 2.1 ppm in less than 40 feet from the well. The

property boundary abutting the neighborhood to the west is over

800 feet from the well.

30 . API 49 expressly provides that wellsite personnel

should be provided protection devices if concentrations of H2S

exceed 10 ppm for an eight - hour time - weighted average. The

revised plan requires wellsite personnel to don a self - contained

breathing apparatus if the monitors encounter an instantaneous

reading of 10 ppm H2S. Instantane ous readings are more

protective of human health than the time - weighted averages

proposed by Mosher's expert. Using an instantaneous trigger is

another area where the revised plan exceeds the recommendation of

API 49.

3 1 . The greater weight of evidence d emonstrates that the

H2S contingency plan meets or exceeds guidance of API 49. The

revised plan requires hands - on training for public officials and

fire/rescue staff before reaching the depth of 9,000 feet. The

revised plan further requires hands - on trai ning and drills

related to the procedures for use, and location of, all self -

contained breathing apparatus and evacuation procedures. The

plan is a complete and accurate contingency plan that will assist

operators and local emergency management in the unl ikely event of

an H2S escape. It exceeds the degree of caution typically

employed in industry standards.

3 2 . Mosher and Preserve contend that the plan fails to

include specific instructions and training for nearby residents

in the event of an emergency . However, emergency plans are

designed for use by operators at the facility and the local

emergency management officials rather than nearby residents.

Thus, the Department did not require the applicant to provide

specific instructions for those residents.

3 3 . Mosher and Preserve also contend that the plan fails to

adequately describe the evacuation routes in the event of an

emergency. However, evacuation routes and the potential closure

of roads are normally in the domain of local governments , as the

o perator and Department have no control over this action .

3 4 . Mosher and Preserve contend that the plan d oes not

include complete and accurate information for all property owners

in the area . This is understandable since some property owners

either fail ed to respond to inquiries by Hughes when it assembled

the information for the plan or were reluctant to provide any

personal information. Recognizing this problem, the Department

reviewed the website of the Collier County property appraiser to

complete t he information. To the extent information on certain

parcels may not be co mplete, Hughes can update th at aspect of th e

plan on an on - going basis before operations begin . If a permit

is issued, t he Department will continue to coordinate with

Collier Count y and other local emergency management officials for

the purpose of planning to implement the contingency plan.

3 5 . Based on the foregoing, the evidence establishes that

the probability of a dangerous release of H2S beyond the wellsite

is highly remote and speculative in nature. The revised

contingency plan is consistent with industry standards and

satisfies the requirements of the rule.

b. Schwartz

3 6 . Like Mosher and Preserve, Schwartz agreed that except

for the concerns expressed in his amended pl eading, no other

issues remain. Schwartz first contends that Hughes did not

demonstrate sufficient efforts to select a proposed location for

drilling to minimize impacts as required by rule 62C - 30.005.

Subparagraph (2)(b)1. requires that drilling sites b e located "to

minimize impacts on the vegetation and wildlife, including rare

and endangered species, and the surface water resources." In

particular, Schwar t z is concerned about the potential impact on

the Florida panther , an endangered species .

3 7 . Hug hes selected the proposed site primarily because of

its proximity to the Tribal W ell, which had a significant show of

oil. In order to increase the chances for commercial production,

the horizontal segment of the well needs to be perpendicular to

the natu ral fractures in the limestone. In this location, Hughes

must drill horizontally from west to east in the direction of the

Tribal W ell.

3 8 . Hughes was unable to locate the well on the automotive

test track directly south of the agricultural field and we st of

the Tribal W ell because of objections by Harley - Davidson, then

the owner of the track. A second proposed location just east of

the test track was considered but Harley - Davidson would not grant

access from the track to the upland sites on th e adjacen t

location. A third option was to construct a lengthy access road

from the north to one of the upland sites just east of the test

track. However, this alternative would have resulted in

significant impacts to wetlands and native vegetation.

3 9 . The prop osed site offer s the least amount of

environmental impact. It is 1.5 miles from the Tribal W ell. It

has no federal or jurisdictional wetlands on the site, and

groundwater modeling submitted with an application for a water

use permit demonstrated that the proposed use of water will not

adversely affect surrounding wetlands.

40 . The proposed access road and drilling pad will not

impact any cypress - mixed forest swamps, hardwood hammocks,

mangrove forests, archeological sites, or native ceremonial

grounds. Nor will they adversely affect known red - cockaded

woodpecker colonies, rookeries, alligator holes, research sites,

or pine uplands.

4 1 . The evidence establishes that Hughes chose a site that

minimized environmental impacts.

4 2 . Schwartz also contends t hat the wellsite activities

will directly decrease the recovery chances of the Florida

panther. According to Schwartz, this decrease will occur because

the activities involve creating an access road, truck traffic,

noise, lights, and vibrations. He also asserts that the proposed

wellsite will result in a small amount of direct habitat loss

when the cattle field is converted to a drilling pad .

4 3 . The USFWS has developed a panther scientific habitat

assessment methodology. It relies upon peer - reviewed st udies

that found that panthers will select land cover types while

avoiding others. The methodology ranks the value of land cover

types from zero to ten based on the potential for panther

selection.

4 4 . Applying the USFWS' scoring to the proposed wellsite ,

an improved pasture area has a value of 5.2, which means the land

cover is neither actively selected nor avoided by panthers. The

areas to the south and east of the proposed wellsite are forested

wetlands and forested uplands, which have substantially h igher

values that range from 9.2 to 9.5. If converted to an open water

reservoir under the Camp Ke a is ERP, the site value would be zero,

the land cover type most avoided by panthers. The underlying

USACE permit specifically required panther habitat com pensation.

4 5 . Hughes ' expert established that the proposed site

minimizes impacts on wildlife by avoiding habitat selected by

panthers such as wetlands, forested uplands, saw palmetto

thickets, fresh water marshes, prairies, and native habitats.

Based o n a dozen visits to the site for the purpose of conducting

vegetation mapping and wildlife surveys, the expert concluded

there are no panthers currently known to be living, breeding, or

denning on the site.

4 6 . A home range for a panther is the area provi ding

shelter, water, food, and the chance for breeding. The typical

home range for a male panther is 209 square miles, and female

home ranges average around 113 square miles. The evidence

establishes the proposed drilling activity will not interfere

with the panthers' use of the site. Approval of the permit will

not remove or push any panthers out of their home range.

4 7 . Hughes' expert opined that the four male panthers,

which historically traversed the area within a mile of the

proposed wellsite, woul d only likely move through the area every

15 or 20 months or longer. The temporary nature of the drilling

activities means the panthers may not even be near the location

during that time. If a panther is near the location and

frightened by any activities , it will avoid the area, but will

eventually return. Based on the large home range of the panther,

the temporary activities will not increase the likelihood of

intraspecies aggression or decrease panther survivability.

4 8 . The more persuasive evidence i s that panthers are

adaptable. They are habituated to the drilling operations in

southwest Florida based on over a hundred thousand telemetry data

points taken near 93 oil wells in the primary zone. Panthers are

not threatened by the presence of humans. In fact, they live and

den in and around residential communities and active agricultural

operations.

4 9 . Panthers need prey, water, and shelter. The drilling

activities will not adversely affect prey availability or impact

water resources. The proposed wellsite's location within a

disturbed agricultural field will not impact the panther's

ability to shelter.

50 . During the permit review process, the Department

requested input from the USFWS, the Florida Fish and Wildlife

Conservation Commission ( FFWCC) , and other interested parties

regarding the proposed drilling permit. No formal comments were

offered by the USFWS, and its biologist for conservation planning

indicated informally that the surface impacts from an oil well

are "very minor." Likewise, th e FFWCC offered no formal comments

on the application.

5 1 . The evidence supports a finding that the proposed

permit activities will not affect the panther's use of, or travel

to and from, the Refuge. The activities will not affect the

panthers' availabil ity of prey or increase panther competition

for food or home range territory. The drilling will not

adversely affect the panther's breeding, survivability, or the

recovery of the species.

5 2 . The only other threatened or endangered species found

in the v icinity of the proposed site was an eastern indigo snake,

which was located two and one - half miles away and would not

travel to the proposed wellsite, as its home range is up to a

maximum of 450 acres.

5 3 . Schwartz further contends that section 377.242 re quires

that the permit be denied because the proposed wellsite is within

one mile from the seaward (western) boundary of the Refuge. The

Refuge is located entirely inland and does not have a seaward

boundary, as contemplated by section 377.242(1)(a)3. Th erefore,

no drilling will be located within one mile of the seaward

boundary of any state, local, or federal park, aquatic preserve,

or wildlife preserve. This is consistent with the Department's

routine and long - standing interpretation of the statute.

D . Big Cypress Swamp Advisory Committee

5 4 . Petitioners and Intervenor initially contend ed that the

permit should be denied because a meeting of the Committee was

n ever convened pursuant to section 377.42. The Committee,

however, met on March 11 and 31, 2 014. Although a majority of

the Committee voted to recommend that the Department deny the

permit on various grounds, the recommendation of the Committee is

not binding on the Department , and after consideration, was

rejected . In their Proposed Recommende d Orders, the opponents

now contend that the permit should be denied because the

Comm ittee did not meet before the Department issued its proposed

agency action. For the reasons stated in the Conclusions of Law,

this contention is rejected.

CONCLUSIONS OF LAW

E. Standing

5 5 . Respondents have not stipulate d to the facts necessary

to establish standing for the challengers . On this issue, the

record shows that the opponents' substantial interests could

reasonably be expected to be affected by the issuance of a

permit. See, e.g. , St. Johns Riverkeeper, Inc. v. St. Johns

River Water Mgmt. Dist. , 52 So. 3d 1051, 1054 (Fla. 5th DCA

2011). Therefore, they have standing to challenge the permit.

F. Burden of Proof

56. The general rule is that, absent a statuto ry directive,

the burden of proof is on the party asserting the affirmative of

the issue. Therefore , Hughes has the burden of proving by a

preponderance of the evidence th at under the general permitting

criteria in section 377.241, the Department should i ssue a

permit.

G. Statutory Criteria

5 7 . The Department issues permits under chapter 377 to

persons with a lawful right to drill. See § 377.241, Fla. Stat.

When enacted by the Legislature in 1961, t he overall purpose of

the statute was to institute a permit process in order to protect

landowners from undue burdens from mineral leases. See Fla.

Wildlife Fed., Inc. v. Dep't of Envtl. Prot. , Case Nos. 96 - 4222

and 96 - 5038, 1998 Fla. ENV LEXIS 136 at *10 (Fla. DOAH April 8,

1998; Fla. DEP May 22, 1998). However, this case does not

concern a dispute between Collier Land Holdings, Ltd., the legal

interests of the fee simple owner of the property, and Hughes,

the mineral rights owner.

58. The statutory criteria for issuance of a permit for oil

exploration are found in section 377.241 . The statute reads in

relevant part as follows:

The [Department], in the exercise of its

authority to issue permits as hereinafter

provided, shall give consideration to and be

guided by the following criteria:

(1) T he natu re, character and location of

the lands involved; whether rural, such as

farms, groves, or ranches, or urban property

vacant or presently developed for residential

or business purposes or are in such a

location or of such a nature as to make such

improveme nts and developments a probability

in the near future.

(2) The nature, type and extent of ownership

of the applicant, including such matters as

the length of time the applicant has owned

the rights claimed without having performed

any of the exploratory operations so granted

or authorized.

(3) The proven or indicated likelihood of

the presence of oil, gas or related minerals

in such quantities as to warrant the

exploration and extraction of such products

on a commercially profitable basis.

5 9 . The three criteria do not constitute a pass - fail

checklist for an applicant or require a determination that the y

have been met ; rather , they are guidelines for balancing

interests. The statute should be interpreted as calling for a

weighing process where each criterion is evaluated and then

weighed against the other factors. Id. at *9. This approach was

approved by the court in Coastal Petroleum Company v. Florida

Wildlife Federation, Inc. , 766 So. 2d 226, 228 (Fla. 1st DCA

1999).

60. Although not defined, t he term "lands involved" in

subsection (1) includes some area beyond the immediate footprint

of the drilling pad that would be potentially impacted by

pollution. Fla. Wildlife Fed. at *14. Besides balancing the

interests of the property owner and Hughes , t his means that

potential risks to nearby off - site owners , such as Mosher, or

potentially sensitive environmental lands , like the Refuge, must

also be considered . Within t his broad statutory charge , several

rules cited by the opponents come into play . First, r ule 62C -

30.005(2)(b)4. requires that applicants for drilling permits

within the Big Cypress watershed make "every effort" to locate

their projects in areas covered by grazing, farming, or cleared

lands. Rule 62C - 27.001(7) requires that if H2S is l ikely to be

encountered during the drilling operations, a contingency plan

th a t comports with API 49 must be filed. Finally, rule 62C -

30.005(1)(a) requires that the drilling activity not cause any

"permanent adverse impact on the water resources and sheet flow

of the area, or on the vegetation or the wildlife of the area,

with special emphasis on rare and endangered species."

61. Subsections (2) and (3) address the interest s of the

owner of the mineral rights. More specifically, subsection (2)

directs th e Department to consider the "nature, type and extent

of ownership of the applicant , " a consideration not in dispute ,

as Hughes has legally - secured mineral rights on the parcel.

Subsection (3) requires the Department to consider whether the

target of expl oration is likely to provide commercially - viable

oil production. In other words, is there evidence to show a

proven or indicated likelihood of the presence of oil, or simply

mere speculation that oil exists.

6 2 . The greater weight of evidence shows that the permit

requires the drilling pad to be located in the most

environmentally sensible location. The evidence also

demonstrates that the project will not harm any Florida panther

habitat or the Florida panther as a species. With respect to the

potentia l human risks of a H2S release, Mosher and Preserve were

unable to present any persuasive evidence that would support the

theory that the permitted operations would cause a discharge of

H2S to any off - site locations at any dangerous concentrations,

even in a worst case scenario. As to subsection (2), there is no

dispute that Collier Land Holdings, Ltd. , has leased the mineral

rights on the property to Hughes with the understanding that an

exploratory well will be drilled. Finally, subsection (3)

requires that there is a reasonable indicated likelihood, rather

than a guarantee, that the site is commercially viable. B ased on

earlier drilling results at the nearby Tribal Well, t here is a

reasonable indicated likelihood that the site will be

commercially prod uctive.

6 3 . Given the above considerations, there are no

countervailing factors that would outweigh the interests of the

applicant in pursuing its mineral rights. The refore, a balancing

of the three factors supports the issuance of the permit.

H. The Big Cypress Swamp Advisory Committee

6 4 . Section 377.42 creates a five - member Committee and

describes its duties. The relevant portion of the statute read s

as follows:

(2) The Big Cypress Swamp Advisory Committee

is hereby created in the Department of

Environmental Protection. The Big Cypress

Swamp Advisory Committee shall be appointed

by and serve at the pleasure of the Secretary

of [the Department of] Environmental

Protection. To ensure compliance with all

requirements for obtaining a permit to

expl ore for hydrocarbons in the Big Cypress

Swamp area, each application for such permit

shall be reviewed by the Big Cypress Swamp

Advisory Committee. The committee shall have

no final authority on approval or denial of

permits but shall make recommendations to the

department . The committee shall meet at the

call of the chair to evaluate a pending

application for a permit to drill in the Big

Cypress watershed and may make other

evaluations requested by the department. The

membership of the committee shall b e as

follows:

(a) The State Geologist, who shall serve as

chair.

(b) A representative from the oil industry.

(c) A representative from an organized

conservation group.

(d) A botanist.

(e) A hydrologist.

(3) The committee shall administer this

secti on pursuant to the laws of the state,

and the rules and orders of the department

which apply generally to oil and gas. If

site - specific conditions require, the

committee may recommend that additional

procedures, safeguards, or conditions which

are necessa ry to protect the integrity of the

Big Cypress area be required as a condition

to the issuance of a permit to drill and

produce. (Emphasis added . )

6 5. The opponents contend that the statute contemplates

that a meeting be conducted before the Department makes its

preliminary determination on the merits of the application. They

assert that they were prejudiced because the new information ,

witnesses , and recommendations generated by the Committee were

not available for them to use during the de novo hearin g. As

noted earlier, the Committee did not meet until aft er the

proposed agency action was issued and a de novo hearing

conducted .

66 . The purpose of a Committee meeting is not to gather

information to assist third parties who challenge permit s ;

rather , the Committee convenes meeting s to evaluate "pending

application [s] for a permit to drill in the Big Cypress

watershed " and , as appropriate, to submit non - binding

recommendation s to the Department. T he se recommendations may be

accepted or rejected by th e Department. While the convening of a

meeting early on the process would promote the most efficient use

of resources and a speedier determination of the case , t he

requirements of the statute were satisfied when the Committee met

in March 2014 to evaluate Hughes' pending application and then

submitted its recommendation to the Department.

6 7 . Notably, the only statutory criteria by which the

Department shall consider issuing permits under chapter 377 are

found in section 377.241. None of the operative criteria require

the Department to consider an evaluation that may be proffered by

the Committee. Therefore, even assuming arguendo that the timing

of the Committee me e t ing is a procedural oversight , it is

irrelevant to the substantive criteria the Depar tment is bound to

follow within the four corners of section 377.241.

6 8 . Finally, while unnecessary to a disposition of this

case, the Committee recommendations appear to be beyond the

jurisdiction of the Department or inconsistent with long - standing

Dep artment precedent. For example, concerns over truck traffic

are typically addressed by local land use authorities, and there

is no rule or statute mandating the preparation of a spill plan

for an exploratory well. Likewise, the Department does not

requir e an absolute assurance or guarantee on the part of a

permit applicant, as suggested by the Committee majority . See,

e.g. , Putnam Cnty. Envtl. Council v. Dep't of Envtl. Prot. , Case

No. 01 - 2442, 2002 Fla. ENV LEXIS 197 (Fla. DOAH July 23, 2002;

Fla. DEP A ug. 6, 2002).

I. Setback Requirement

6 9 . Schwartz contends that because the drilling pad is

within one mile from the seaward ( western ) boundary of the

Refuge, the permit violates section 377.242(1)(a)3. That

provision reads as follows:

No structure in tended for the drilling for,

or production of, oil, gas, or other

petroleum products may be permitted or

constructed within 1 mile of the seaward

boundary of any state, local, or federal park

or aquatic or wildlife preserve or on the

surface of a freshwate r lake, river, or

stream.

7 0 . Under the Department's long - standing, routine

interpretation of the statute, t he Refuge is located entirely

inland and therefore has no seaward boundary. H owever, Schwartz

argues that the boundary closest to the ocean sho uld be deemed a

seaward boundary. Were this interpretation accepted, it would

lead to an absurd result. See, e.g. , Louzon v. State , 78 So. 3d

678, 681 (Fla. 5th DCA 2012)(a statute should not be construed so

as to achieve an absurd result). The Departme nt's interpretation

of the statute i s far more reasonable than the one advocated by

Schwartz, a nd the contention that the project violates the

setback requirement is rejected.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, i t is

RECOMMENDED that the Department enter a final order issuing

Permit No. 1353H, without further modification s .

DONE AND ENTERED this 3rd day of June , 201 4 , in Tallahassee,

Leon County, Florida.

S

D. R. ALEXANDER

Admini strative 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 Hearing s

this 3rd day of June , 2014.

ENDNOTE S

1 Although Schwartz represented himself at hearing, all papers

filed by him in this proceeding, including his Proposed

Recommended Order, have been prepared by unnamed counsel.

2 Both Mosher (before hiring couns el in October 2013) and

Schwartz (through one of his attorneys) knew well before the

proposed agency action was issued in September 2013 that a meeting

of the Committee had not been convened. However, they did not

raise the issue until shortly before the final hearing in late

February 2014.

3 On May 27, 2014, or three months after the final hearing,

Schwartz filed a Motion to Supplement the Record Regarding

Location of Residence (Motion), together with an affidavit. The

Motion is opposed by Responden ts. The Motion represents that

while Schwartz continues to receive mail at a post office box in

Fort Lauderdale, he no longer resides in Lake Worth and has moved

to Estero in southern Lee County. The Motion further represents

that its purpose is "to assi st the appellate court(s) should an

issue arise regarding the appropriate venue for any appeal that

may be filed by one or more of the parties." If the appellate

court requires assistance regarding the appropriate venue, the

matter may be presented to the court. The Motion is denied.

COPIES FURNISHED:

Lea Crandall, Agency Clerk

D epartment of Environmental Protection

Mail Station 35

3900 Commonwealth Boulevard

Tallahassee, Florida 32399 - 3000

Ralf G. Brookes, Esquire

Ralf Brookes Attorney

1217 East Ca pe Coral Parkway, Suite 107

Cape Coral, Florida 33904 - 9604

Matthew R. Schwart z

Post Office Box 460234

Fort Lauderdale, Florida 33346 - 0234

Jeffrey Brown, Esquire

Department of Environmental Protection

Mail Station 35

3900 Commonwealth Boulevard

Tallahas see, Florida 32399 - 3000

Timothy M. Riley , Esquire

Hopping, Green & Sams, P.A.

Post Office Box 6526

Tallahassee, Florida 323 14 - 6526

Herschel T. Vinyard, Jr., Secretary

Department of Environmental Protection

Mail Station 35

3900 Commonwealth Boulevard

Ta llahassee, Florida 32399 - 3000

Matthew Z. Leopold, General Counsel

Department of Environmental Protection

Mail Station 35

3900 Commonwealth Boulevard

Tallahassee, Florida 32399 - 3000

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

A ll parties have the right to sub mit written exceptions within

15 days of the date of this Recommended Order. Any exceptions to

this Recommended Order should be filed with the agency that will

render a final order in this matter.