Opinion
NOT TO BE PUBLISHED
Appeal from an order of the Superior Court of Orange County No. 30-2009-00310530, Thierry Patrick Colaw, Judge.
Mahaffey & Associates, Douglas L. Mahaffey; Snell & Wilmer LLP, Richard A. Derevan, Todd E. Lundell, and Andreea V. Micklis for Plaintiff and Appellant.
Edmund G. Brown, Jr., Kamala D. Harris, Attorneys General, J. Matthew Rodriquez, Chief Assistant Attorney General, John A. Saurenman, Senior Assistant Attorney General, Christina Bull Arndt and Laurie R. Pearlman, Deputy Attorneys General, for Defendants and Respondents.
OPINION
O’LEARY, J.
Angus Petroleum Corporation (Angus) appeals from an order dismissing its petition for writ of prohibition by which it sought to prevent the Department of Conservation, Division of Oil, Gas and Geothermal Resources (the Department), from taking further action to enforce an administrative order directing Angus to disconnect water injection lines from 13 oil wells, at which it was resuming production after many idle years, until it obtained a current valid permit. The petition was dismissed because Angus failed to exhaust its administrative remedies.
The wells at issue are a subset of the wells that were subject to an earlier administrative order considered by this court in The Termo Co. v. Luther (2008) 169 Cal.App.4th 394 (Termo). In Termo, we reversed the trial court order denying Angus’s petition for writ of administrative mandamus (Code Civ. Proc., § 1094.5), because the trial court had applied the wrong standard when reviewing the Department’s order directing the plugging and abandonment of the then idle wells. We concluded because the order affected a fundamental vested right, the trial court should have applied the independent judgment standard of review. In this appeal, Angus contends our holding in Termo excuses it from exhausting its administrative remedies. We reject its contentions and affirm the order.
FACTS
Order No. 976 and the Termo Decision
We take our preliminary facts from our decision in Termo, supra, 169 Cal.App.4th 394. In 2005, the Director of the Department (the Director) affirmed an administrative order (Order No. 976) of the Supervisor of the Division of Oil, Gas, and Geothermal Resources (the Supervisor) directing the plugging and abandonment of the 28 oil wells that comprised the Springfield Unit in Huntington Beach, California. There had been no production from any of the wells since 1998. (Termo, supra, 169 Cal.App.4th at p. 399.)
There were some problematic ownership issues with the wells. At the time, “Hunt Petroleum (AEC), Inc. (Hunt), and Angus each owned one-half interests in the Springfield Unit and Angus was the original unit operator.” (Termo, supra, 169 Cal.App.4th at p. 399.) Termo Co. (Termo) bought Angus and obtained the requisite bonding; the Department deemed Termo the operator of the wells. Termo then sold Angus to another company called South Coast Oil Company (South Coast), but the notices and bonds that were statutorily required prior to the Department’s recognition of a new operator had not been supplied. Hunt believed the idle wells had no further potential for production and wanted them plugged and abandoned. Angus disagreed and wanted to resume production. The two owners were in litigation over resumption of production from the wells. The Supervisor agreed with Hunt concluding the idle wells had “‘no potential for future commercial production and as idle wells pose[d] a threat to public health and safety and natural resources” and issued Order No. 976 directing the wells be plugged and abandoned. (Termo, supra, 169 Cal.App.4th at p. 400.)
Pursuant to the statutorily specified administrative review procedure, Angus appealed Order No. 976 to the Director. The Director affirmed the order concluding, “the wells were deserted, within the meaning of Public Resources Code section 3237, because (1) there had been no production for seven years and no attempt at production; (2) Angus and Hunt were at a stalemate concerning future operations; and (3) the geology was ‘not conducive to a contained flood operation.’” (Termo, supra, 169 Cal.App.4th at p. 401.) The Director further concluded a rebuttable presumption of desertion applied because Angus (and/or its new owner South Coast) had not posted requisite bonds. (Ibid.; see Pub. Res. Code, § 3237, subd. (a)(3)(E).)
All statutory references are to the Public Resources Code, unless otherwise indicated.
Angus filed a petition for writ of administrative mandate (Code Civ. Proc., § 1094.5) challenging the Director’s decision affirming Order No. 976, which was denied by the trial court applying the deferential substantial evidence standard of review. (Termo, supra, 169 Cal.App.4th at p. 401.) On appeal, we held the order affected a fundamental vested right and therefore the trial court should have applied the independent judgment standard of review to the Director’s decision. In our opinion, filed on December 17, 2008, we reversed the judgment and remanded the matter to the trial court. (Id. at p. 414.)
Although the matter was remanded for the trial court to reconsider Angus’s writ petition under the independent judgment standard, it never happened. In May 2009, the Director rescinded Order No. 976. The ownership issues had been resolved (apparently all 28 wells had been transferred to Angus as a wholly owned subsidiary of South Coast), and there was no longer an impasse between owners as to resumption of unit production operations. Angus had filed the appropriate bonds to obtain Department approval of the transfer of the wells. Accordingly, from the Department’s perspective, the factual basis for the determination the wells had been deserted, and upon which the plug and abandonment order had been issued, no longer existed.
Current Dispute: Order No. 1003
On August 31, 2009, the Supervisor issued Order No. 1003 pertaining to 13 of the wells that had been at issue in Order No. 976, which are all water injection wells. Order No. 1003 stated Angus had been issued a water injection permit for the Springfield Unit in 1991. On June 25, 1999, the Department sent a letter advising the operator, which at the time was Termo, that based on Termo’s representations “all production and injection wells have remained shut-in since September 1998, pending plugging and abandoment[, ]” the permit was terminated and Termo was directed to “disconnect all water injection lines from the injection wells within 60 days....” No new water injection permit had ever been issued authorizing Angus to conduct water injection operations. Nonetheless, “[w]hen a [Department] inspector visited the Springfield Unit operation on August 4, 2009, he found water injection lines connected to the idle injection wells. These lines must be disconnected... so long as Angus has no permit to conduct water injection operations at the Springfield Unit.”
Administrative Appeal/Petition for Writ of Prohibition
On September 14, 2009, Angus filed a request for an appeal of Order No. 1003 before the Director, and a hearing was set for October 21, 2009, but it has not yet taken place. On October 9, 2009, Angus filed the instant petition for writ of prohibition seeking a declaration the Department may take no steps to enforce Order No. 1003.
Angus’s petition alleged that in 1991, it obtained all requisite government approvals to conduct water-flooding operations in the Springfield Unit, and it had not violated any of the conditions of those approvals. It alleged this court held in Termo the prior order, Order No. 976, was unenforceable because Angus had a fundamental vested right to operate and extract oil from the wells. Angus further alleged Termo held the provisions of the Public Resources Code setting out the administrative procedure for challenging the order were unconstitutional and, therefore, it could not be required to first seek administrative review of the order.
On November 24, 2009, the trial court denied Angus’s requested relief and dismissed the petition because Angus had failed to exhaust its administrative remedies. The trial court’s ruling was “without prejudice to Angus requesting a writ of [administrative] mandate should it wish review of any decision by the Director after the administrative process has been exhausted.”
Angus filed a notice of appeal from the order denying its petition for writ of prohibition. The Director rescheduled the hearing on Angus’s administrative appeal of Order No. 1003. Angus filed a petition for writ of supersedeas in this court seeking a stay of the administrative hearing by the Department pending our decision in this appeal. On May 28, 2010, we granted Angus’s request for a temporary stay of the administrative hearing.
DISCUSSION
A. Exhaustion of Administrative Remedies: General Legal Principles
Angus contends the trial court erred by dismissing its petition for writ of prohibition due to its failure to first exhaust its administrative remedies. We disagree.
“[A] party aggrieved by an administrative decision must exhaust any available, nonduplicative administrative review procedures before challenging the decision in court. [Citations.]... [¶] The exhaustion doctrine ‘“precludes [judicial] review of an intermediate or interlocutory action of an administrative agency.”’ [Citation.] A court may review only a decision by the final administrative decision maker. [Citations.] Accordingly, if no party seeks administrative review of an intermediate administrative decision, the decision becomes final and will not be disturbed by the courts. If administrative review proceedings are initiated, however, a court may neither review nor enforce the administrative decision until after the administrative review proceedings are completed. [Citation.] [¶] The exhaustion requirement (1) promotes judicial economy by affording the administrative agency an opportunity to provide the relief requested in whole or in part, so as to avoid costly litigation or reduce the scope of litigation; (2) recognizes the expertise of the agency’s quasi-judicial tribunal; and (3) facilitates the development of a complete factual record, which can assist later judicial review. [Citations.]” (City of Fillmore v. Board of Equalization (2011) 194 Cal.App.4th 716, 725-726.) There are exceptions to the exhaustion requirement including that “[i]f an administrative remedy fails to satisfy the standards of due process, the exhaustion requirement is excused. [Citation.]” (Imagistics Internat., Inc. v. Department of General Services (2007) 150 Cal.App.4th 581, 591; see also Jonathan Neil & Assoc., Inc. v. Jones (2004) 33 Cal.4th 917, 936, fn. 7.)
The Public Resources Code establishes an administrative process for reviewing Department orders as a prerequisite to judicial review. In short, the operator of a well who is aggrieved by an order of the Supervisor must file a notice of appeal with the Director. (§ 3350.) A noticed hearing on the appeal is held and a written decision issued. (§§ 3351, 3352, 3353.) If unsatisfied with the agency’s decision, the operator may then seek judicial review by way of administrative mandamus. (§ 3354.)
Here, Angus filed a notice of appeal of Order No. 1003 to the Director, but then commenced the instant action seeking a judicial declaration that it need not participate in the administrative review process and that Order No. 1003 cannot be enforced. It contends: (1) it need not participate in the administrative review process because this court held in Termo the administrative procedures do not withstand due process scrutiny; (2) Termo’s conclusion the Department’s prior order directing plugging and abandonment of the wells implicated a fundamental vested right for purposes of establishing the standard of review in an administrative mandamus proceeding, precludes the Department from taking any administrative action interfering with Angus resuming production from the wells; and (3) the Department is barred by laches and estoppel from asserting Angus lacks proper permits to conduct water flooding of the wells.
B. Termo Decision
Because it is the foundation upon which Angus builds its arguments, we begin with a summary of the reasoning in this court’s decision in Termo, supra, 169 Cal.App.4th 394. The underlying facts have already been set forth above. In short, following the Director’s affirmance of Order No. 976 directing Angus to plug and abandon the 28 oil wells, of which the current wells are a subset, Angus filed a petition for writ of administrative mandamus challenging the Director’s decision. The trial court, applying the substantial evidence standard of review, affirmed the Director’s decision. Angus appealed. We reversed, concluding the trial court should have applied the independent judgment standard of review. (Termo, supra, 169 Cal.App.4th at p. 413.)
Termo, supra, 169 Cal.App.4th 394, reasoned as follows. Where the Legislature has not specified the applicable standard of review, a trial court reviews a final administrative decision substantially affecting a fundamental vested right using the independent judgment standard pursuant to which it “‘“not only examines the administrative record for errors of law but also exercises its independent judgment upon the evidence[, ]”’” i.e., it determines whether the agency’s findings are supported by the weight of the evidence. (Id. at p. 405.) In all other cases, the trial court is restricted to a review of the administrative record “‘to determine whether the findings are supported by substantial evidence and whether the agency committed any errors of law....” [Citation.]’ [Citation.]” (Ibid.)
Termo, supra, 169 Cal.App.4th 394, relying upon this court’s decision in Goat Hill Tavern v. City of Costa Mesa (1992) 6 Cal.App.4th 1519, explained, “‘“[t]he term ‘vested’ in the sense of ‘fundamental vested rights’ to determine the scope of judicial review... [in an administrative mandamus proceeding] is not synonymous with... the ‘vested rights’ doctrine relating to land use and development.” [Citation.] “When an administrative decision affects a right which has been legitimately acquired or is otherwise vested, and when that right is of a fundamental nature from the standpoint of its economic aspect or its effect... in human terms and the importance... to the individual in the life situation, then a full and independent judicial review of that decision is indicated because [t]he abrogation of the right is too important to the individual to relegate it to exclusive administrative extinction.” [Citation.]’ [Citation.]” (Termo, supra, 169 Cal.App.4th at pp. 406-407.)
We found the order at issue in Termo (Order No. 976), directing the wells be abandoned and plugged affected a fundamental vested right, requiring a heightened standard of judicial review. Angus had legitimately acquired the right to drill and pump oil from the idle wells and had produced oil from the wells for at least six years until they were idled in 1998. Angus now wanted “to put the wells back on line” and, although we specifically declined to address whether Angus satisfied the legal requirements for resuming production, we noted it had “produced at least some evidence that production may be feasible.” (Termo, supra, 169 Cal.App.4th at p. 407, fn. 5.) The abandon and plug order would have “the effect not only of shutting down a business that has been in existence for 20 years or more, but also of terminating the right to produce oil—an extraordinarily valuable resource, especially in the current economic era.” (Id. at p. 407.)
There was a second aspect to the Termo decision. Termo also explained that pursuant to established California Supreme Court authority, even when a fundamental vested right is involved, “‘the Legislature [is] free... to specify... that certain administrative determinations need to be subjected only to substantial evidence review rather than independent judgment review.’ [Citation.]” (Termo, supra, 169 Cal.App.4th at p. 408, citing Fukuda v. City of Angels (1999) 20 Cal.4th 805, 824, fn. 17.) Such a legislative pronouncement will be honored by the courts, provided the statutory scheme contains adequate procedural safeguards, because the directive reflects the Legislature’s recognition that certain agencies are “‘“presumably equipped or informed by experience to deal with a specialized field of knowledge, whose findings within that field carry the authority of an expertness which courts do not possess and therefore must respect.” [Citation.]’ [Citation.]” (Termo, supra, 169 Cal.App.4th at p. 409, citing Tex-Cal Land Management, Inc. v. Agricultural Labor Relations Bd. (1979) 24 Cal.3d 335, 346.)
Termo found it was not clear whether the applicable provisions of the Public Resources Code specified a substantial evidence standard for judicial review of the Director’s decision. But even if they did, the statutory administrative review scheme did not provide adequate due process procedural safeguards so as to justify doing away with the independent judgment standard of judicial review in the case of a fundamental vested right. (Termo, supra, 169 Cal.App.4th at p. 411.) Termo identified several inadequacies in the statutory scheme including: the lack of separation between prosecutorial and adjudicatory functions; inadequate notice provisions; failure to specifically afford the person charged with the right to file an answer or present evidence in accordance with the Evidence Code; and the failure to specify the standard of proof. (Id. at pp. 412-413.)
C. Due Process
Below, and in its original briefing in this appeal, Angus’s primary argument is it was not required to exhaust its administrative remedies because in Termo we found the statutory administrative review scheme lacked adequate due process procedural safeguards. We need not spend an inordinate amount of time on Angus’s due process contention. Effective January 1, 2011, the statutory scheme was completely overhauled in direct response to this court’s decision in Termo, supra, 169 Cal.App.4th 394. (Assem. Bill No. 2453 (Stats. 2010, ch. 264); see, e.g., Assem. Com. on Judiciary, Analysis of Assem. Bill No. 2453 (2009-2010 Reg. Sess.) Apr. 20, 2010 [“these significant changes are intended to address purported shortcomings in the oil and gas appeals statute raised by the Court of Appeal in [Termo, supra, ] 169 Cal.App.4th 394”].)
The current statutes specify the deferential standard of judicial review to be applied to any decision by the Director: “The court’s inquiry shall extend to whether the [D]irector acted without or in excess of jurisdiction, whether there was a fair hearing, and whether there is any prejudicial abuse of discretion. Abuse of discretion is established if the administrative proceeding has not been conducted in the manner required by law, the decision is not supported by the findings, or the findings are not supported by substantial evidence in light of the whole record.” (§ 3355.) The newly revised statutes provide for a bifurcated appeal process whereby certain orders of the Department are subject to a formal hearing before an administrative law judge, while others remain subject to an informal review process before the Director (§ 3351), subject to increased due process protections (Pub. Res. Code, § 3352).
In supplemental briefing, Angus concedes that because the revised statutes are procedural, they will apply to any administrative review by the Department. (See Brenton v. Metabolife Internat., Inc. (2004) 116 Cal.App.4th 679, 689 [“applying changed procedural statutes to the conduct of existing litigation, even though the litigation involves an underlying dispute that arose from conduct occurring before the effective date of the new statute, involves no improper retrospective application because the statute addresses conduct in the future”].) Accordingly, Angus agrees that because the administrative procedures it challenges (i.e., the ones considered in Termo) can no longer be applied, its challenges to the adequacy of that administrative remedy is moot.
D. Vested Rights
Angus contends Termo’s conclusion the Department’s prior order directing plugging and abandonment of the idle wells implicated a fundamental vested right precludes the Department from interfering with Angus resuming water-injection pumping from any of the 28 wells at issue in Termo. It argues Termo resolved the conflict between Angus and the Department, i.e., Termo confirmed in Angus a “fundamental vested right to extract oil [from those wells] in the only way it has ever done so, by water-flooding. The no-permit argument has already been heard and squarely rejected by this court.” Accordingly, Angus asserts its vested right to pump oil from the wells in unassailable “in the absence of proof that its continued exercise constitutes a public nuisance.” We reject the argument.
Angus’s argument is premised upon reading into Termo something that simply is not there. The only substantive issue in Termo was the applicable standard of judicial review to be applied in an administrative mandamus proceeding under Code of Civil Procedure section 1094.5. Furthermore, Termo was not a case about exhaustion of administrative remedies. Termo concluded the prior order, Order No. 976, directing the abandonment and plugging of all the oil wells in the Springfield Unit, having the effect of shutting down an established business, implicated a fundamental vested right and, thus, independent judicial review of the order was necessary because “‘“abrogation of the right is too important to the individual to relegate it to exclusive administrative extinction.” [Citation.]’” (Termo, supra, 169 Cal.App.4th at pp. 406-407.) Termo specifically declined to consider whether Angus had satisfied the statutory requirements for bringing the wells back on line and resuming production. (Id. at p. 407, fn. 5.)
Of course, inasmuch as any administrative review of Order No. 1003, must be conducted in accordance with the amended statutory scheme, so to any future judicial review will be governed by the current version section 3355 concerning the scope of judicial review.
Termo further observed a “fundamental vested right” in the scope of judicial review context was not synonymous with the term as used in the land use context. (Termo, supra, 169 Cal.App.4th at p. 406.) “‘Whether an administrative decision substantially affects a fundamental vest right must be decided on a case-by-case basis. [Citation.]”’ [Citation.]” (Ibid.) The order at issue in this case, Order No. 1003, is a different order than Order No. 976 at issue in Termo. The latter order would have terminated all potential for resuming production at the wells. The current order pertains to whether Angus has current valid permits to resume production at some of the wells.
E. Laches/Estoppel
Angus contends the Department is barred by the equitable doctrines of laches and estoppel from seeking to enforce Order No. 1003. We reject its contentions.
“‘“Laches is an equitable defense based on the principle that those who neglect their rights may be barred from obtaining relief in equity. [Citation.] ‘“The defense of laches requires unreasonable delay plus either acquiescence in the act about which the plaintiff complains or prejudice to the defendant resulting from the delay.”’ [Citation.]”’” (Golden Gate Water Ski Club v. County of Contra Costa (2008) 165 Cal.App.4th 249, 263 (Golden Gate).)
Angus argues laches should be applied to preclude the Department from asserting the lack of a current permit to resume pumping from the water-injection wells, or to enforce Order No. 1003. Its reasoning is the letter by which the Department claims Angus’s 1991 permit was revoked was written in 1999. Therefore, the Department knew in 1999 that Angus supposedly lacked a valid permit, yet it waited until 2009 to issue Order No. 1003. Angus asserts the Department knowingly took no action for years despite “knowing that Angus at all times continued its water-flooding operation.” It further complains the Department went so far as to test the water-injection wells in 2005, and determine they continued to operate satisfactorily, further “acquiesce[ing] in Angus’s continued use of the water injection wells.”
Alternatively, Angus argues equitable estoppel should apply to preclude the Department from acting. Equitable estoppel “‘rests firmly upon a foundation of conscience and fair dealing....’” (Feduniak v. California Coastal Com. (2007) 148 Cal.App.4th 1346, 1359 (Feduniak).) “‘“[W]here one by his words or conduct wilfully causes another to believe the existence of a certain state of things, and induces him to act on that belief, so as to alter his own previous position, the former is [precluded] from averring against the latter a different state of things as existing at the same time....” [Citation.]’ [Citations.]” (Ibid.) Angus argues the Department is estopped to assert a lack of a current permit because of its long delay in asserting the lack of a valid permit, Angus’s belief it had all necessary permits, and its reliance by continuing to invest in its facilities.
The Department points out that Angus raises these laches and estoppel claims for the first time on appeal—the arguments were not raised in the trial court. Angus does not suggest otherwise. The applicability of these equitable doctrines generally involves factual determinations. (Golden Gate, supra, 165 Cal.App.4th at p. 263 [laches a question of fact for trial court]; Feduniak, supra, 148 Cal.App.4th at p. 1360 [estoppel a factual question].) “As a general rule, theories not raised in the trial court cannot be asserted for the first time on appeal....” (P&D Consultants, Inc. v. City of Carlsbad (2010) 190 Cal.App.4th 1332, 1334 [equitable estoppel cannot be raised for first time on appeal]; Canal-Randolph Anaheim, Inc. v. J.E. Wilkoski (1980) 103 Cal.App.3d 282, 289 [laches may not be raised for the first time on appeal].)
Because the arguments were not raised below, Angus cannot raise them here. This is not a case were facts are uncontroverted and the questions can be decided as a matter of law. Furthermore, Angus has offered no explanation as to why these claims are not properly developed first in the course of administrative review. (See Piscioneri v. City of Ontario (2002) 95 Cal.App.4th 1037, 1053 [“affirmative defenses of laches and unclean hands should first be factually developed at the administrative hearing”].)
DISPOSITION
The order is affirmed. The Department is awarded its costs on appeal. The temporary stay is dissolved. The petition for writ of supersedeas is denied as moot.
WE CONCUR: RYLAARSDAM, ACTING P.J., MOORE, J.