Carter Oil Co. v. State

• Decision Date: 23 October 1951
• Docket Number: No. 34122,34122
• Citation: Carter Oil Co. v. State, 240 P.2d 787, 205 Okla. 541 (Okla. 1951)
• Parties: CARTER OIL CO. v. STATE et al.
• Court: Oklahoma Supreme Court

Page 787

240 P.2d 787

205 Okla. 541

CARTER OIL CO. v. STATE et al.

No. 34122.

Supreme Court of Oklahoma.

Oct. 23, 1951.

As Corrected Nov. 19, 1951.

Syllabus by the Court.

1. Under Article 9, Sec. 20, of the constitution of the State of Oklahoma, the Supreme Court review of appealable orders of the Corporation Commission shall be judicial only, and in all appeals involving an asserted violation of any rights of the parties under the constitution of the United States, or the constitution of the State of Oklahoma, the court shall exercise its own independent judgment as to both the law and the facts.

2. Under the above provision of the constitution, it is provided that in all other appeals from the orders of the Corporation Commission the review of the Supreme Court shall not extend further than to determine whether the Commission has regularly pursued its authority, and whether the findings and conclusions of the Commission are sustained by the law and substantial evidence.

3. Under 52 O.S.Supp. 1949, Sec. 87.1 (a), (b), (c) and (d), the legislature has expressed and defined the powers of the Corporation Commission in the exercise of its administrative control over the production of oil and gas and under these statutory provisions the Commission can only exercise its jurisdiction as it affects pools where it has established well-spacing, drilling, or zoning units, and where the Commission after hearings has determined that the orders are necessary under the state police powers for the prevention of waste as specifically defined in the statute.

4. Under the record made before the Corporation Commission, the evidence shows that the Commission has not established a well-spacing, drilling, or zoning as applied to the Carter-Knox Woods pool, within which pool the two wells in question were drilled. Therefore, the provisions of the statute referred to in paragraph 3 of the syllabus do not apply.

5. Under the Session Laws of 1947, page 327, Sec. 4, and subsequent amendment, Title 52 O.S.Supp., 1949, Sec. 86.4, the legislature authorized the Corporation Commission to promulgate rules and regulations applicable to each common source of supply and to make general orders, rules, and regulations applicable alike to all common sources of supply in the state, but under this grant of power the legislature expressly stated under the statute here considered 'that the Corporation Commission shall not, under the provisions of this act, make any order establishing a well-spacing or drilling unit.'

6. Under the Corporation Commission's rule 202 a well drilled for oil to a common source of supply in excess of 2500 feet shall be located not less than 330 feet from any lease line and not less than 600 feet from another producing well, unless otherwise permitted by the commission. The Commission's order authorizing the drilling of the second well was a valid order.

7. Where one lessee holds a lease on a ten acre tract within the pool in question covering all production of oil at depths below the 4000 foot level, and another lessee holds a lease on all oil production above the 4000 foot level, and where the lessee holding the lease covering the lower level drills a well to a depth of more than 4000 feet, it is entitled under rule 202 to produce the well from the lower level if within the maximum allowable as established by the Corporation Commission's order applicable to units within the pool.

8. Where the lessee holds the lease on the same ten acre tract to depths above the 4000 foot level, it must, under rule 202, apply to the Corporation Commission for permission to drill the second well. Upon proper application the Commission is authorized to grant the lessee permission to drill the additional well to a depth of 4000 feet as provided in its lease contract, and said lessee is entitled to produce said well within the allowable production as allocated to said unit by the Commission.

9. Where the lessee's well producing oil at a depth below the 4000 foot level was capable of producing 93 barrels daily as of the date of the Corporation Commission's order, and the lessee's well producing at a depth of less than 4000 was capable of producing 55 barrels of oil daily as of that date, and the lessee's well under the 4000 foot level was completed in April, 1948, and the lessee's well above the 4000 foot level was completed in November, 1948, and where the Commission had not established well-spacing, drilling or zoning units under the applicable statutes, the Corporation Commission exceeded its authority under its order to allocate the allowable production equally between the two wells.

10. Under the oil and gas conservation laws of the State of Oklahoma, an order of the Corporation Commission which fixes or limits the daily allowable production of oil from a unit within a common source of supply of an oil producing area, to an amount of oil less than the amount allowed other similar units within said common source of supply is contrary to law.

11. The law of capture under which oil and gas belongs to the one who reduces it to possession obtains in Oklahoma except as it is or may be modified under laws enacted under the police power, such as proration and spacing statutes, and zoning ordinances. Such statutes and ordinances are not self-executing. They simply authorize administrative boards to issue orders that have the effect of regulating or abrogating, in a measure, the law of capture.

12. Where the Corporation Commission's order is in derogation of valid statutory enactments governing the Commission's power and authority to regulate the drilling and production of oil and gas wells, thereby depriving a producer of his property without due process of law, such order impinges on the guarantees embraced within the periphery of the federal and state constitutions, and is thereby void.

13. Where the Commission's findings and order are based on the testimony of two expert witnesses, one stating the upper level formation well produces approximately 75% of recoverable oil, and the lower level well approximately 25% of the recoverable oil, and the other expert stating the lower level will produce approximately 75% and the upper level approximately 25% of the recoverable oil, and the Commission finds the evidence to be 'almost of diametrical opposites' and without more finds that each lessee is entitled to 50% of the oil to be produced from the unit, said finding and order based thereon is not sustained by the evidence, and therefore is contrary to law.

W. T. Anglin, Holdenville, Forrest M. Darrough, Joseph A. Gill, Tulsa, John L. Cravens, Oklahoma City, for appellant.

Floyd Green, Conservation Atty. Corporation Commission, Oklahoma City, C. D. Cund, Duncan, T. Murray Robinson, Oklahoma City, for appellees.

O'NEAL, Justice.

This is an appeal from an order of the Corporation Commission of the State of Oklahoma, fixing the allowable production of oil from a ten acre tract of land, and fixing the amount of percentage thereof to be taken by The Carter Oil Company, the holder of an oil and gas lease covering said ten acre tract as to oil and gas produced below the 4000 foot level below the surface, and Van-Grisso Oil Company, the holder of an oil and gas lease covering said tract as to the oil and gas to be produced from above the 4000 foot level below the surface.

The Carter-Knox-Woods pool is a source of supply of oil and gas underlying several sections of land in Township 3 North, Range 5 West, Grady County. The productive portion of the formation is quite narrow horizontally, being approximately 600 to 700 feet wide running in a northwest and southeast direction. The productive portion of said formation is so situated within the section as to dip from the northeast to the southwest at an angle of approximately sixty degrees and is to a depth of approximately 4000 feet, extending from several feet above said depth to several feet below that depth. The Carter Oil Company owned an oil and gas lease covering the ten acre tract here involved, namely: The Southwest Quarter of the Southeast Quarter of the Southeast Quarter of Section 6, Township 3 North, Range 5 West of the I. M. On May 26, 1938 it assigned said oil and gas lease to T. H. McCasland 'insofar as said lease covers producing horizon above the depth of 4000 feet.' Later Van-Grisso Oil Company, Norman W. Brillhart and Glen S. Norville acquired a part of the interest of McCasland. Under the lease as now owned The Carter Oil Company asserts the right to produce oil and gas in said formation below the depth of 4000 feet and Van-Grisso Oil Company and associates assert the right to produce from above the depth of 4000 feet.

In April, 1948, The Carter Oil Company drilled, and completed for production, a well on said tract about eighty feet west of the center of said tract. Thereafter, May 17, 1948, Van-Grisso Oil Company and associates filed an application with the Corporation Commission for permission to drill a well on said ten acre tract, as an exception to the Commission's rule 202, which, without such exception, prohibited the drilling of another well below the depth of 2500 feet. The application stated the matter of divided lease ownership; the drilling of a well by The Carter Oil Company, and alleged refusal of The Carter Oil Company to recognize the right of applicant to share in the production of said well, and asserted that unless permission were granted to drill the additional well under an exception to rule 202 of the Commission, they would lose oil rightfully belonging to them.

The application was set for hearing June 11, 1948 before W. H. Sollers, Trial Examiner, at which time W. D. Grisso produced evidence in support of the application. At that hearing W. D. Grisso, representing the applicants, suggested that the matter of division of the allowable production as between the two wells be deferred until after the Van-Grisso well had been drilled so that the...