Ostby v. Board of Oil and Gas Conservation of State, 374 Mont. 472, 324 P.3d 1155 (Mont., 2014)

On April 22, 2014 the Montana Supreme Court issued the opinion in Ostby v. Board of Oil and Gas Conservation of State, 374 Mont. 472, 324 P.3d 1155 (Mont., 2014) holding that a proceeding seeking judicial review of the Montana Board of Oil and Gas Conservation (the “Board”) must proceed as a de novo review in District Court and not as a judicial review under the Montana Administrative Procedures Act (“MAPA”).

In this case, Montana’s state oil and gas administrative agency approved stand-up 1280 spacing units. Setbacks for the authorized wells in these units were to be no closer than a 1,320-foot lateral setback and 200-foot toe and heel setback to the unit boundaries, as well as 500-foot lateral setbacks from the North Dakota border. Plaintiffs argued that the Board had exceeded its authority and the order adopting the units was an abuse of discretion.

The main issue on appeal was whether the district court’s review should be limited to the record established at the administrative hearing (the standard for appeal under MAPA) or whether review should be de novo, i.e., without deference to the administrative findings (the standard for appeal under Section 82-11-144, MCA, Montana Board of Oil and Gas Conservation statute).

The Montana Supreme Court held that because the Plaintiffs had, in its complaint, cited the Oil and Gas Conservation Act (Section 82-11-144, MCA) that it was entitled to de novo review and remanded the case to district court to make its factual findings. This ruling implies that administrative agency oil and gas decision in Montana are not as final as they may be in other states.