Note 15 - Injection Wells Suspension	6 Months Ended
Jun. 30, 2018
Notes to Financial Statements
Suspended Injection Well Costs Disclosure [Text Block]	Note 15 . Injection Wells Suspension As a result of a seismic event with a magnitude of 2.1 occurring on August 31, 2014, the Chief of the Division of Oil and Gas Resources Management (“Chief” or “Division”) issued Orders on September 3, 2014, to immediately suspend all operations of both of Avalon’s saltwater injection wells. The Orders were based on the findings that the two saltwater injection wells were located in close proximity to an area of known seismic activity and also that the saltwater injection wells pose a risk of increasing or creating seismic activity. The two saltwater injection wells are located approximately 112 feet apart. Based on these findings, the Chief ordered the immediate suspension of all operations of the two saltwater injection wells, until the Division could further evaluate the wells. On September 5, 2014, Avalon submitted the information required by the Chief’s Order in regards to its AWMS #1 injection well, and the Chief lifted the suspension for that well on September 18, 2014. On September 19, 2014, Avalon submitted information and a written plan required by the Chief’s Order proposing the establishment of certain operations and management controls on injections at the AWMS #2 injection well. To date, the Division has not responded to that plan despite Avalon’s requests for feedback. On October 2, 2014, Avalon filed an appeal with the Ohio Oil and Gas Commission (the “Commission”) disputing the basis for suspending operations of AWMS #2 and also the authority of the Chief to immediately suspend such operations. On March 11, 2015, an appeal hearing was held. The Chief stated during the hearing that the suspension is only temporary, and that he expects that AWMS #2 will be allowed to inject once the state’s final policymaking is complete. On August 12, 2015, the Commission upheld the temporary suspension of injection operations of AWMS #2 stating that the temporary suspension will allow the Chief to more fully evaluate the facts in anticipation of the Division’s implementation of a comprehensive regulatory plan that will specifically address injection-induced seismicity. Avalon appealed that decision in September 2015 to the Franklin County Court of Common Pleas, but that appeal was dismissed on a filing technicality. Avalon appealed the dismissal to the Ohio 10th District Court of Appeals, which found the Commission erred in its filing of their decision. Following the Commission’s proper notice, Avalon appealed again to the Franklin County Court of Common Pleas (the “Court”). On November 1, 2016 an appeal hearing was held in that Court. On December 23, 2016, the Court issued its Decision and Order in Avalon’s favor, and vacated the Commission’s decision. The Court found that the Division’s suspension and refusal to work with the Company for over 26 months was arbitrary and not in accordance with reason. Subsequent to the ruling, and in accordance with the Court’s Decision and Order, both Avalon and the Division submitted their proposed restart plans to the Court. Avalon’s plan sets forth both the initial volumes and pressures and increases in volume and pressure while continuously monitoring seismicity and addressing the concerns of public health and safety. On February 21, 2017, the Court issued its Final Decision and Order. The Court’s Final Decision and Order sets conditions for the restarting of AWMS #2 in accordance with the proposed restart plans filed by Avalon with minor revisions. While the Company was making preparations for restarting the well and opening the facility, the Division appealed the Final Decision and Order and filed a Motion to Stay the Court Order on February 22, 2017. The Motion to Stay was granted by the Ohio 10th District Court of Appeals on March 21, 2017. On September 14, 2017, an appeal hearing was held. On July 31, 2018 the Ohio 10 th District Court of Appeals issued its decision on the appeal. In the decision, the Ohio 10 th District Court of Appeals overruled the majority of the Division’s assignments of error, but also found that the Franklin County Court of Common Pleas abused its discretion in issuing the restart order for the Company’s injection well. The Ohio 10 th District Court of Appeals therefore reinstated the previous Ohio Oil and Gas Commission decision in this matter. Based on the decision, operations of Company’s #2 injection well will remain suspended. The Ohio 10 th District Court of Appeals decision is appealable to the Ohio Supreme Court. The Company is in the process of evaluating the decision in light of other ongoing litigation in this matter, and will vigorously pursue all available legal avenues. In addition, on August 26, 2016, Avalon filed a complaint in the 11 th Appellate District Court in Trumbull County, Ohio for a Peremptory Writ of Mandamus to compel the Director of the Ohio Department of Natural Resources (“ODNR”) to initiate appropriations procedures to determine damages from the illegal regulatory taking of the Company’s property, or issue an alternative remedy at law. There is currently no implemented state-wide policy on induced seismicity and The ODNR has refused to communicate with the Company regarding the status and requirements of any policymaking. The Company believes that the actions, and lack of responsible actions, by ODNR, which were triggered by a seismic event that presented no hazard or risk to any individual or to the environment, is a clear violation of the Company’s property rights and a violation of the Fifth and Fourteenth Amendments to the U.S. Constitution; Article I, Section 19 of the Ohio Constitution; and Ohio Revised Code Chapter 163. The hearing was scheduled to commence on June 25, 2018. On June 8, 2018, the 11 th Appellate District Court in Trumbull County, Ohio issued a motion to stay all further proceedings in the writ of mandamus action until a ruling is made on the suspension order by the Ohio 10th District Court of Appeals. To date, the hearing date has not been rescheduled based on the July 31, 2018 decision from the Ohio 10 th District Court of Appeals. The Company intends to vigorously pursue the complaint and obtain due process and fair compensation. At December 31, 2017, in accordance with FASB ASC 360 - 10 - 35, Property, Plant and Equipment – Overall – Subsequent Measurement , Avalon assessed the recoverability of the carrying values of the salt water injection wells based on the Chief’s decision to temporarily suspend operations of the wells. Avalon estimated future cash flows directly associated with and which are expected to arise as a direct result of the wells once the temporary suspension is lifted. The assumptions used by management in developing the estimates of future cash flows were based on current market conditions and comparable prior periods while in operation. Based on the estimated undiscounted sum of the future cash flows, the net book value of the property, plant and equipment relating to the wells of approximately $3.7 million at December 31, 2017 was recoverable in less than the estimated remaining useful life of those assets. There were no changes to this assessment at June 30, 2018. Management continues to consider whether indicators of impairment are present and tests for recoverability, as necessary. There can be no guarantee that the salt water injection wells will resume operations. If management concludes that the suspension is other than temporary and the carrying amount of the salt water injection wells are not recoverable, Avalon may record an impairment charge up to $3.5 million, the carrying value of the salt water injection wells at June 30, 2018.

Note

Injection Wells

Suspension

As a result of a seismic event with a magnitude of

2.1

occurring on

August 31, 2014,

the Chief of the Division of Oil and Gas Resources Management (“Chief” or “Division”) issued Orders on

September 3, 2014,

to immediately suspend all operations of both of Avalon’s saltwater injection wells. The Orders were based on the findings that the

two

saltwater injection wells were located in close proximity to an area of known seismic activity and also that the saltwater injection wells pose a risk of increasing or creating seismic activity. The

two

saltwater injection wells are located approximately

112

feet apart. Based on these findings, the Chief ordered the immediate suspension of all operations of the

two

saltwater injection wells, until the Division could further evaluate the wells.

September 5, 2014,

Avalon submitted the information required by the Chief’s Order in regards to its AWMS

injection well, and the Chief lifted the suspension for that well on

September 18, 2014.

September 19, 2014,

Avalon submitted information and a written plan required by the Chief’s Order proposing the establishment of certain operations and management controls on injections at the AWMS

injection well. To date, the Division has

not

responded to that plan despite Avalon’s requests for feedback.

October 2, 2014,

Avalon filed an appeal with the Ohio Oil and Gas Commission (the “Commission”) disputing the basis for suspending operations of AWMS

and also the authority of the Chief to immediately suspend such operations. On

March 11, 2015,

an appeal hearing was held. The Chief stated during the hearing that the suspension is only temporary, and that he expects that AWMS

will be allowed to inject once the state’s final policymaking is complete.

August 12, 2015,

the Commission upheld the temporary suspension of injection operations of AWMS

stating that the temporary suspension will allow the Chief to more fully evaluate the facts in anticipation of the Division’s implementation of a comprehensive regulatory plan that will specifically address injection-induced seismicity. Avalon appealed that decision in

September 2015

to the Franklin County Court of Common Pleas, but that appeal was dismissed on a filing technicality. Avalon appealed the dismissal to the Ohio

10th

District Court of Appeals, which found the Commission erred in its filing of their decision. Following the Commission’s proper notice, Avalon appealed again to the Franklin County Court of Common Pleas (the “Court”).

November 1, 2016

an appeal hearing was held in that Court. On

December 23, 2016,

the Court issued its Decision and Order in Avalon’s favor, and vacated the Commission’s decision. The Court found that the Division’s suspension and refusal to work with the Company for over

months was arbitrary and

not

in accordance with reason. Subsequent to the ruling, and in accordance with the Court’s Decision and Order, both Avalon and the Division submitted their proposed restart plans to the Court. Avalon’s plan sets forth both the initial volumes and pressures and increases in volume and pressure while continuously monitoring seismicity and addressing the concerns of public health and safety.

February 21, 2017,

the Court issued its Final Decision and Order. The Court’s Final Decision and Order sets conditions for the restarting of AWMS

in accordance with the proposed restart plans filed by Avalon with minor revisions. While the Company was making preparations for restarting the well and opening the facility, the Division appealed the Final Decision and Order and filed a Motion to Stay the Court Order on

February 22, 2017.

The Motion to Stay was granted by the Ohio

10th

District Court of Appeals on

March 21, 2017.

September 14, 2017,

an appeal hearing was held.

July 31, 2018

the Ohio

District Court of Appeals issued its decision on the appeal. In the decision, the Ohio

District Court of Appeals overruled the majority of the Division’s assignments of error, but also found that the Franklin County Court of Common Pleas abused its discretion in issuing the restart order for the Company’s injection well. The Ohio

District Court of Appeals therefore reinstated the previous Ohio Oil and Gas Commission decision in this matter. Based on the decision, operations of Company’s

injection well will remain suspended. The Ohio

District Court of Appeals decision is appealable to the Ohio Supreme Court.

The Company is in the process of evaluating the decision in light of other ongoing litigation in this matter, and will vigorously pursue all available legal avenues.

In addition, on

August 26, 2016,

Avalon filed a complaint in the

Appellate District Court in Trumbull County, Ohio for a Peremptory Writ of Mandamus to compel the Director of the Ohio Department of Natural Resources (“ODNR”) to initiate appropriations procedures to determine damages from the illegal regulatory taking of the Company’s property, or issue an alternative remedy at law. There is currently

implemented state-wide policy on induced seismicity and The ODNR has refused to communicate with the Company regarding the status and requirements of any policymaking. The Company believes that the actions, and lack of responsible actions, by ODNR, which were triggered by a seismic event that presented

hazard or risk to any individual or to the environment, is a clear violation of the Company’s property rights and a violation of the Fifth and Fourteenth Amendments to the U.S. Constitution; Article I, Section

of the Ohio Constitution; and Ohio Revised Code Chapter

163.

The hearing was scheduled to commence on

June 25, 2018.

June 8, 2018,

the

Appellate District Court in Trumbull County, Ohio issued a motion to stay all further proceedings in the writ of mandamus action until a ruling is made on the suspension order by the Ohio

10th

District Court of Appeals. To date, the hearing date has

not

been rescheduled based on the

July 31, 2018

decision from the Ohio

District Court of Appeals. The Company intends to vigorously pursue the complaint and obtain due process and fair compensation.

December 31, 2017,

in accordance with FASB ASC

360

35,

Property, Plant and Equipment – Overall – Subsequent Measurement

, Avalon assessed the recoverability of the carrying values of the salt water injection wells based on the Chief’s decision to temporarily suspend operations of the wells. Avalon estimated future cash flows directly associated with and which are expected to arise as a direct result of the wells once the temporary suspension is lifted. The assumptions used by management in developing the estimates of future cash flows were based on current market conditions and comparable prior periods while in operation. Based on the estimated undiscounted sum of the future cash flows, the net book value of the property, plant and equipment relating to the wells of approximately

$3.7

million at

December 31, 2017

was recoverable in less than the estimated remaining useful life of those assets. There were

changes to this assessment at

June 30, 2018.

Management continues to consider whether indicators of impairment are present and tests for recoverability, as necessary. There can be

guarantee that the salt water injection wells will resume operations. If management concludes that the suspension is other than temporary and the carrying amount of the salt water injection wells are

not

recoverable, Avalon

may

record an impairment charge up to

$3.5

million, the carrying value of the salt water injection wells at

June 30, 2018.