Anderson v. Corporation Commission
| Decision Date | 26 February 1957 |
| Docket Number | No. 36969,36969 |
| Citation | 327 P.2d 699 |
| Parties | W. E. ANDERSON, Plaintiff, v. The CORPORATION COMMISSION of the State of Oklahoma and Kenneth A. Ellison, Defendants. |
| Court | Oklahoma Supreme Court |
1. By the provisions of 52 O.S.1951, sec. 87.1, the Corporation Commission is authorized to fix the proportionate part of the cost of drilling and completing an oil and gas well to be paid by an owner of an undivided part interest in the leasehold estate in a drilling unit and order such owner to elect to pay the same or to accept a fixed sum per acre as a bonus for a lease and to further order that, if the election is not made within a fixed time, it be presumed that he has elected to take the bonus for a lease.
2. Section 87.1 of Tit. 52 O.S.1951, is not in conflict with the State or Federal Constitutions guaranteeing that private property shall not be taken for private use nor without due process of law.
3. A statute authorizig the Corporation Commission to regulate production of oil and gas so as to prevent waste and to secure equitable apportionment among owners of the leasehold interest of the oil and gas underlying their land, and to fairly distribute among them, the costs of production and of the apportionment is a proper exercise of the police power and does not violate the provisions of the State or Federal Constitutions.
Appeal from the Corporation Commission of the State of Okla.
W. E. Anderson, as Plaintiff, filed this proceeding against the Corporation Commission of the State of Oklahoma and Kenneth A. Ellison, as Defendants, appealing from an order of said Commission, granting Ellison a permit to drill an oil well on a well spacing unit and granting Anderson the option of paying his share of the cost of the well and participating in the working interest or 7/8 of the production therefrom or of accepting a fixed amount per acre for a lease on his interest in said drilling unit. Order of Commission Affirmed.
Bohanan & Barefoot, Oklahoma City, Rinehart & Rinehart, El Reno, Leon S. Hirsh, Oklahoma City, for plaintiff.
Robinson, Shipp, Robertson & Barnes, Ralph Boggess, for K. A. Ellison.
Floyd Green, Oklahoma City, for Corp. Commission of Oklahoma.
This is a proceeding in this court, instituted by W. E. Anderson, as plaintiff, against the Corporation Commission of Oklahoma and Kenneth A. Ellison, as defendants, on appeal from an order of said Commission, authorizing the drilling of an oil well on an eighty acre tract of land in McClain County, Oklahoma, and directing the terms of participation in the production therefrom.
Anderson was the owner of 36.96% of the fee in a forty acre tract of land. Ellison was the owner of 25.2% of the leasehold estate in the adjoining forty acres. The two tracts had been by prior order of the Commission, designated as a single drilling or spacing unit in which the parties' respective percentage interests were one half that in the individual forties as above set out. On May 11, 1955, on application of Ellison, the Commission made an order finding the percentage ownership of said unit and that all other owners except Anderson had agreed with Ellison on a plan of development of the unit. Ellison was authorized to drill a well, the cost of completing the same being near $300,000. Anderson was authorized to participate in the working or lessee interest by paying to Ellison his proportionate share of the drilling and completion costs of the well. The Commission further found that $800 per acre was the reasonable bonus value of the leasehold and ordered that Anderson have the option of electing to participate in the working interest in the well or to accept from Ellison $800 per acre bonus for a lease on his undivided interest. It was further ordered that, if Anderson had not made an election within thirty days thereafter, he would be presumed to have 'elected to take the said $800 per acre bonus for the acreage owned by him underlying said tract.' It is from that order that this appeal has been perfected.
Anderson's attack upon the order is founded upon the assertion that, by reason of the pooling and unitization order, a co-tenancy relationship was created between himself and Ellison; that the order appealed from was in violation of the rights of co-tenants and outside the authority conferred by the statute--52 O.S.1951 § 87.1; that, if said statute authorized the order, it violates the provisions of the State and Federal Constitutions in that it amounted to a taking of private property for private use and without due process of law; that, if said statute authorized that order, it is further unconstitutional in that it compels citizens to contract against their wills and it also impairs vested contractual rights; and lastly, that the Corporation Commission could not exercise such judicial powers except by a due process of law wherein a litigant is entitled to a trial by jury.
Petroleum and petroleum products have, in less than two generations, become most vital in life and industry over the entire world. They have, by reason thereof, become probably the most important of natural resources. It was only natural that, with the increase in importance and use, the necessity for conservation was recognized. To curtail over-production and waste for the benefit and protection of the general public, restraints had to be placed around the individual's rights to develop and produce beyond the demand or need. The only logical method of restraint, other than limitation of production per well, was the curtailment of drilling by exercise of the police power. There evolved the well spacing laws. But, with well spacing alone, the object of curtailment was met, although often at the expense of serious inequalities and inequities between the various mineral owners and lessees. Under such primary restraints, when Ellison drilled a well on the forty acres in which he owned an interest, Anderson would have no rights whatever therein, his ownership being of an interest in an adjoining forty acres. Thus, consideration of the correlative rights of such owners and lessees became a necessary part of the legislation. The results were the acts authorizing unitization and pooling in each common source of supply in order that the exercise of the police power in the conservation of natural resources would not effect too serious an unbalancing of correlative rights. The act under consideration, 52 O.S.1951 § 87.1, authorized the order complained of as a necessary and integral part of securing those various rights. In that connection, we are here dealing with rights of the owners of what is commonly called the 'working interest.' No issue is presented as to the other one eighth or 'royalty interest.'
By the order, Ellison who had made agreements will all other owners of interests in the minerals underlying the eighty acre drilling unit for development of the same, was granted a permit to drill a well on the forty acres in which he owned an interest but in which Anderson owned none. By the same order, Anderson was granted the privilege of participating in the production from that well if he met the requirements. He could pay his proportionate part of the drilling and completion costs of the well and receive his portion of the seven eights working interest of the production or he could accept $800 per acre as a bonus therefor and share only in the royalty interest.
We need not consider the reasonableness of the order since Anderson's contention goes solely to the authority of the Commission to make it. His argument is that, because the former order made him and Ellison co-tenants in the eighty acres, the only method by which Ellison could recover, under the rules of law applicable to such a relationship, Anderson's proportionate part of the cost was by deducting it from the production, if the well proved to be good. However, with so many interdependent rights and burdens to be...
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