Megan Mason Dister
In PLC, LLC v. State, Department of Natural Resources, 484 P.3d 572 (Alaska 2021), the supreme court held that a company that held an overriding royalty interest (ORRI) in a state oil and gas lease had standing to challenge a Department of Natural Resources (DNR) decision on the unit operator’s proposal for unit expansion. (Id. at 574). PLC held an ORRI in a state oil and gas lease operated by Hilcorp. (Id. at 575). Hilcorp applied to DNR to expand its unit including an 80-acre portion that PLC leased. (Id.). DNR reviewed Hilcorp’s application and proposed modifications to the application to remove the 80-acre PLC lease because DNR found it was not likely to produce natural gas in paying quantities. (Id.). Hilcorp agreed to the modification and DNR approved the unit expansion. (Id.). PLC appealed DNR’s decision to DNR’s Commissioner arguing that Hilcorp’s original methodology to determine hydrocarbon presence was more accurate than DNR’s methodology. (Id.). The Commissioner denied PLC’s appeal finding PLC lacked standing because PLC held a nonpossessory interest in the unit and the superior court affirmed. (Id. at 575–76). The supreme court held PLC had standing, reasoning PLC had a sufficient personal stake in the DNR decision because if DNR granted the original unit expansion PLC would have benefited financially. (Id. at 577). Even though unit operators have the sole right to expand the unit, ORRI holders still have a stake in the boundaries of the unit. (Id.). Additionally, the court found DNR’s decision adversely affected PLC’s interest because DNR’s decision to exclude PLC’s lease led PLC to lose revenue. (Id. at 580–81). Reversing the superior court’s decision, the supreme court held an ORRI holder in a state oil and gas lease had standing to challenge a DNR decision on a unit operator’s proposal for expansion. (Id. at 583).