Chaparral Energy v. C.E. Harmon Oil, 102,910.

• Decision Date: 04 August 2006
• Docket Number: Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 1.,No. 102,910.,102,910.
• Citation: 2006 OK CIV APP 142,149 P.3d 1070
• Parties: CHAPARRAL ENERGY, L.L.C. and Noram Energy, L.L.C., Applicants/Appellants, v. C.E. HARMON OIL, INC.; Charles E. Harmon; John Edward Morgan; Sharon Ann Harmon; et al., and The Oklahoma Corporation Commission, Respondents/Appellees.
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

149 P.3d 1070

2006 OK CIV APP 142

CHAPARRAL ENERGY, L.L.C. and Noram Energy, L.L.C., Applicants/Appellants, v. C.E. HARMON OIL, INC.; Charles E. Harmon; John Edward Morgan; Sharon Ann Harmon; et al., and The Oklahoma Corporation Commission, Respondents/Appellees.

No. 102,910.

Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 1.

Court of Civil Appeals of Oklahoma, Division No. 1.

August 4, 2006.

Certiorari Denied October 30, 2006.

Appeal from the Oklahoma Corporation Commission.

AFFIRMED.

Gregory L. Mahaffey, Lee D. Groeneveld, Mahaffey & Gore, P.C., Oklahoma City, OK, for Applicants/Appellants.

Frank D. Spiegelberg, John L. Randolph, Pray, Walker, Jackman, Wiliamson & Marlar, Tulsa, OK, for Respondents/Appellees, C.E. Harmon Oil, Inc. and Charles E. Harmon.

Opinion by CAROL M. HANSEN, Judge.

¶ 1 Applicant/Appellants, Chaparral Energy, L.L.C., and NorAm Energy, L.L.C. (collectively Chaparral), seek review of the Corporation Commission's order denying in part Chaparral's application to modify and construe the order of unitization for the N.W. Velma Hoxbar Unit (Unit) in Stephens County, Oklahoma. We affirm the Commission's order because it is supported by competent evidence.

¶ 2 The Commission issued an order in 1966 creating the Unit and setting forth operating terms in the Plan of Unitization (Plan). Respondent/Appellee, C.E. Harmon Oil (Harmon Oil), became operator of the Unit in 1995. Its principal, Respondent/Appellee Charles E. Harmon, acquired a 10% working interest and assigned a 1% working interest to Harmon Oil. Chaparral acquired 86% of the working interest in 2003 and sought to remove Harmon Oil as operator. When Harmon Oil refused to relinquish operations, Chaparral brought the present action before the Commission. It alleged its acquisition of 86% of the working interest was a change of condition requiring modification of the Plan. It later amended its application to request construction of the Plan provisions regarding election of operator, seeking a finding Chaparral was properly elected operator. Harmon Oil opposed the application.

¶ 3 After a hearing and internal appeals, the Commission entered an order granting only agreed amendments to the Plan, and otherwise denying relief. It found Chaparral failed to prove there had been a substantial change of condition, and change in ownership was not a change of condition sufficient to support modifying its previous order. The Commission found Harmon Oil was and would continue to be the Unit Operator. Chaparral appeals.

¶ 4 In reviewing an order of the Corporation Commission, we will affirm the order if it is supported by substantial evidence. We will not weigh the evidence, but will consider only the evidence tending to support the order to determine whether it "furnishes a substantial basis of facts from which the issue tendered could be reasonably resolved." Landowners, Oil, Gas and Royalty Owners v. Corporation Commission, 1966 OK 111, 415 P.2d 942, 943.

I

¶ 5 Two of Chaparral's propositions of error challenge the Commission's finding Harmon Oil was and continued to be the Unit Operator. Pursuant to 52 O.S.2001 § 287.4(a), "The designation of the unit operator shall be by vote of the lessees in the unit in a manner provided in the plan of unitization and not by the Commission." In this case, the Plan provides for Unit Operations to be supervised by an Operating Committee, which consists of one representative designated by each lessee. The representative's vote is weighted according to its lessee's percentage participation in the Unit. The Operating Committee acts at meetings called by the Unit Operator on its own motion or at the request of lessees having at least 10% interest. There must be fourteen days advance written notice of the meeting, with agenda attached. Non-attending lessees may vote by notifying the Unit Operator. The Unit Operator may obtain the approval of the Operating Committee of any action necessary to Unit operations without a meeting by polling the members "by U.S. mail or telegraph." The Operating Committee may remove the Unit Operator "by the affirmative vote of at least ninety percent (90%) of the voting interest remaining after excluding the voting interest of Unit Operator."

¶ 6 Chaparral submitted into evidence a letter its land manager sent to Harmon, stating, "NorAm Petroleum, L.L.C. and Chaparral Energy, L.L.C. have voted to remove C.E. Harmon Oil, Inc. as the unit operator ... [and] have selected Chaparral Energy, L.L.C. as...