AI Generated Opinion Summaries

This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.

Facts

• In 2018, the New Mexico Oil Conservation Division proposed comprehensive revisions to the rules governing horizontal wells under the Oil and Gas Act. These revisions included the adoption of the 2018 Rules concerning the drilling, spacing, and operation of horizontal wells. Jalapeno Corporation challenged the adoption of these rules, arguing that they were arbitrary, capricious, and contrary to law, particularly focusing on guidelines for well spacing, infill horizontal wells, and transitional provisions.

Procedural History

• [Not applicable or not found]

Parties' Submissions

• Appellant (Jalapeno Corporation): Contended that the 2018 Rules for well spacing, infill horizontal wells, and transitional provisions were arbitrary and capricious and not in accordance with law.
• Appellee (New Mexico Oil Conservation Commission): Argued in support of the validity and legality of the 2018 Rules.
• Intervenors-Appellees (Marathon Oil Permian LLC and New Mexico Oil & Gas Association): Supported the Commission's position, advocating for the 2018 Rules' adherence to legal standards and their necessity for modern horizontal well regulation.

Legal Issues

• Whether the 2018 Rules concerning well spacing are arbitrary, capricious, or not in accordance with law.
• Whether the 2018 Rules regarding infill horizontal wells violate the correlative rights of non-consenting owners and improperly expand the application of risk charges.
• Whether the transitional provisions of the 2018 Rules were adopted without sufficient explanation or notice, thus being arbitrary, capricious, or not in accordance with law.

Disposition

• The New Mexico Court of Appeals affirmed the Commission's adoption of the 2018 Rules.

Reasons

• The Court found that Jalapeno Corporation did not meet its burden to show that the 2018 Rules were arbitrary, capricious, or not in accordance with law. The Court held that:
  Well Spacing: The rules concerning well spacing were not arbitrary or capricious and were in accordance with law, as they were reasonably related to the legislative purpose of preventing waste and protecting correlative rights (paras 6-13).
  Infill Horizontal Wells: The definition of "infill horizontal well" and the application of risk charges were not arbitrary, capricious, or contrary to law. The Commission considered the impact on correlative rights and reasoned that those rights were protected by existing procedures for notice and hearing (paras 14-25).
  Transitional Provisions: The transitional provisions were not adopted without sufficient explanation or notice. The Commission provided a rationale for the rule changes and complied with statutory and rule-based notice obligations, thus not violating constitutional due process rights (paras 26-32).
  The Court's decision was based on the Commission's broad authority to prevent waste and protect correlative rights, the rational basis for the 2018 Rules in light of the whole record, and the procedural protections afforded to owners under the Act.