Anderson v. Ellison

• Decision Date: 13 December 1960
• Docket Number: No. 6423.,6423.
• Citation: 285 F.2d 484
• Parties: W. E. ANDERSON, Appellant, v. Kenneth A. ELLISON; Sinclair Oil & Gas Company, a corporation; Cities Service Oil Company, a corporation; Phillips Petroleum Company, a corporation; Warren Petroleum Corporation, a corporation; Corporation Commission of Oklahoma; Mineral Mining Company, a corporation; and G. B. McKinley, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

285 F.2d 484 (1960)

W. E. ANDERSON, Appellant, v. Kenneth A. ELLISON; Sinclair Oil & Gas Company, a corporation; Cities Service Oil Company, a corporation; Phillips Petroleum Company, a corporation; Warren Petroleum Corporation, a corporation; Corporation Commission of Oklahoma; Mineral Mining Company, a corporation; and G. B. McKinley, Appellees.

No. 6423.

United States Court of Appeals Tenth Circuit.

December 13, 1960.

Luther Bohanon and Leon S. Hirsh, Oklahoma City, Okl. (Bert Barefoot, Jr., Oklahoma City, Okl., on the brief), for appellant.

T. Murray Robinson, Oklahoma City, Okl. (C. E. Barnes and Ralph E. Boggess, Oklahoma City, Okl., on the brief), for appellees Kenneth A. Ellison, Mineral Mining Co., and G. B. McKinley.

Angus A. Davidson and James H. McGowan, Tulsa, Okl., and Russell V. Johnson, Oklahoma City, Okl., submitted a brief for appellee Sinclair Oil & Gas Company.

Before BRATTON, PICKETT and BREITENSTEIN, Circuit Judges.

PICKETT, Circuit Judge.

This diversity action is an aftermath of extensive litigation which resulted in the affirmance of an order of the Oklahoma Corporation Commission fixing the rights and liabilities of the owners of undivided interests in a drilling and spacing unit established for the production of oil and gas from a common source of supply. Anderson v. Corporation Comm., Okl., 327 P.2d 699. An appeal to the Supreme Court of the United States was dismissed for want of a substantial federal question. Anderson v. Corporation Comm., 358 U.S. 642, 79 S. Ct. 536, 3 L.Ed.2d 567. The complaint sets forth the entire proceedings before the Commission; alleges that the plaintiff Anderson was the owner of a portion of the unit; and, although admitting that the offer was made after the time fixed in the order, alleges that Anderson had offered to pay his proportionate share of the cost of drilling and completing the well. It was asserted in the complaint that the Commission unlawfully assumed judicial powers not granted by law and was without authority to divest an owner of an interest in a drilling unit of that interest. The complaint sought a judgment declaring that Anderson was the owner of an undivided interest in the unit and entitled to receive his share of the oil and gas produced therefrom. There were no material issues of fact, and the matter was submitted to the trial court on the several motions of the parties for summary judgment. This is an appeal from an order dismissing the action after consideration of those motions.

In 1953 the Corporation Commission established 80-acre drilling and spacing units for the Bromide Sand Section of the Simpson formation in McClain County, Oklahoma. Anderson owned 36.9% of the minerals under one 40-acre tract which constituted one-half of the drilling unit, and the defendant Ellison owned 25.2% of the leasehold in the adjoining 40 acres which constituted the other half of the unit. In 1955 Ellison applied to the Commission for an order pooling and fixing the rights and interests of all parties holding interests in the unit. The application alleged that all the owners except Anderson agreed upon a plan of development. After a hearing, the Commission designated Ellison as the operator of the unit, and authorized him to drill a well at an estimated cost of $300,000. The spacing order provided that the well should be located on the acreage in which Ellison owned an interest.

Although Anderson, in his response to Ellison's application stated that he did not desire to participate in the costs of drilling the well, the Commission's order permitted him to participate and retain a working interest by electing to pay his proportionate share of the drilling and completion costs. In the alternative, the order provided that Anderson could elect to accept a bonus for a lease of his undivided interest, and the Commission found that $800 per acre was the reasonable bonus value of the leasehold interests in the unit. The order also provided that if Anderson did not make an election within 30 days, it would be presumed that he had elected to accept the $800 per acre bonus for the interest owned by him.

Anderson took an appeal to the Oklahoma Supreme Court, but no attempt was made to supersede the Commission's order.¹ While the appeal was pending, Ellison proceeded to drill the authorized well and completed it as a producer. Thereafter the Commission denied Anderson's request to fix the amount of his proportionate share of the cost of the well, which he then offered to pay. Anderson contends that the present action, instead of being a collateral attack upon the Commission's order, is brought for the purpose of obtaining a decree declaring that the order does not divest him of his interest in the unit and that he is still the owner thereof.² The well was drilled on the half of the unit in which Anderson had no interest. Without the spacing statute and the Commission's pooling order he would have no right to share in the oil and gas produced from the well.³ Cf. Phillips Petroleum Co. v. Davis, 194 Okl. 84, 147 P.2d 135; Amis v. Bryan Petroleum Corp., 185 Okl. 206, 90 P.2d 936.

Title 52 Okl.St.Ann. § 87.1 provides that "All orders requiring such pooling shall be made after notice and hearing, and shall be upon such terms and conditions as are just and reasonable and will afford to the owner of such tract in the unit the opportunity to recover or receive without unnecessary expense his just and fair share of the oil and gas. * * *" The statute also states, "Such pooling order of the Commission shall make definite provisions for the payment of costs of the development and operation, which shall be limited to the actual expenditures required for such purpose not in excess of what are reasonable, including a reasonable charge for supervision. In the event of any dispute relative to such costs, the Commission shall determine the proper costs after due notice to interested parties and a...