Forest Oil Corp. v. Corporation Com'n of Oklahoma

• Citation: 1990 OK 58,807 P.2d 774
• Decision Date: 03 July 1990
• Docket Number: 72757,Nos. 72737,s. 72737
• Parties: FOREST OIL CORPORATION, Appellant, v. CORPORATION COMMISSION OF OKLAHOMA, Appellees.
• Court: Supreme Court of Oklahoma

Page 774

807 P.2d 774

1990 OK 58

FOREST OIL CORPORATION, Appellant, v. CORPORATION COMMISSION OF OKLAHOMA, Appellees.

Nos. 72737, 72757.

Supreme Court of Oklahoma.

July 3, 1990.

As Amended Feb. 4, 1991.

Dissenting Opinion Feb. 5, 1991.

Rehearing Denied Feb. 5 and April 2, 1991.

Appeal from the Corporation Commission of Oklahoma.

The appellant, Forest Oil Corporation (Forest), filed an application with the Corporation Commission seeking relief for a hardship well, the Belcher No. 1. Forest requested that: 1) the Belcher No. 1 be given a permitted production allowable of 2 MCFD; 2) the well be excused from testing requirements; and 3) the current allowable be adjusted to eliminate or excuse any overage accumulated by the Belcher Unit. The appellee, Oklahoma Natural Gas Company (ONG), requested that the Corporation Commission clarify the three orders covering the Belcher Unit, and that production from the Belcher Unit be curtailed to make-up overage established as of December 31, 1987. The hearing officer recommended that Forest's application be granted. The Corporation Commission en banc reversed. It issued Order No. 335027 finding that the hardship order provided for a single unit allowable to be established by the best-well test, and refusing to excuse any overproduction. We find that: 1) 52 O.S. Supp.1988 § 87.2 does not apply to a request for clarification of a Corporation Commission order filed pursuant to 52 O.S.1981 § 112; 2) if in response to an application filed before the Corporation Commission, a party asks for relief not requested in the original application, notice must be given pursuant to 12 O.S.1981 § 112, and that notice was properly given in the instant cause; 3) Order No. 335027 is a clarification rather than a modification order. In providing for a single unit allowable, it does not alter the location exception, increased density, or hardship orders; 4) pursuant to OCC-OGR 2-105(d) (1987), underage accumulated because of failure of the purchaser to take gas from an unallocated gas well may be applied to adjust overage produced; and 5) there are no countervailing policies to justify vicarious assertion of constitutional rights.

Corporation Commission Order Sustained in Part, Overruled in Part.

Laurence M. Huffman, Mark A. Moore, Oklahoma City, for appellant Forest Oil Corp. Richard K. Books, Janis W. Preslar, Oklahoma City, for appellant Mesa Midcontinent Ltd. Partnership.

Charles A. Adams, Oklahoma City, for appellee Corp. Com'n of Oklahoma.

Terry W. Tippens, Harry H. Selph, Thomas J. Enis, David L. Kearney, Oklahoma City, John L. Arrington, Jr., Thomas J. Kirby, Tulsa, William H. Huffman, Oklahoma City, for appellee Oklahoma Natural Gas Co.

KAUGER, Justice.

The issues presented are: 1) whether 52 O.S.Supp.1988 § 87.2 ¹ applies to a request for clarification of a Corporation Commission order filed pursuant to 52 O.S.1981 § 112; ² 2) if a party responds to an application filed before the Corporation Commission by requesting relief not asked for in the original application, whether notice must be given purusant to 52 O.S.1981 § 112; and if so, whether, for notification purposes, reliance upon a list provided by the party responsible for distribution of proceeds from the sale of oil and gas is proper; 3) whether Order No. 335027 is a clarification rather than a modification order; 4) whether, pursuant to OCC-OGR 2-105(d), ³ underage accumulated because

                of failure of the purchaser to take gas from an unallocated gas well may be applied to adjust overage produced;  and 5) whether a constitutional attack may be launched vicariously.  We find that:  1) 52 O.S. Supp.1988 § 87.2 does not apply to a request for clarification of a Corporation Commission order filed pursuant to 52 O.S.1981 § 112;  2) if in response to an application filed before the Corporation Commission, a party asks for relief not requested in the original application, notice must be given pursuant to 52 O.S.1981 § 112, and that notice was properly given in the instant cause;  3) Order No. 335027 is a clarification rather than a modification order.  In providing for a single unit allowable, it does not alter the location exception, increased density, or hardship orders;  4) pursuant to OCC-OGR 2-105(d) (1987), underage accumulated because of failure of the purchaser to take gas from an unallocated gas well may be applied to adjust overage produced;  and 5) there are no countervailing policies to justify vicarious assertion of constitutional rights.  The Corporation Commission order is overruled in so far as it refuses to excuse any overproduction.  In Chamberlin v. Chamberlin, 720 P.2d 721, 723-24 (Okla.1986), this Court found that "(a ) deficient record may not be supplemented on rehearing.  "  (Emphasis in text.)   In the last paragraph on page 3 of the Justice Lavender's dissent, he clearly relies upon materials that were not before this tribunal on appeal.  The record did not contain any reference to "notice of OCC's intent for making the change" to rule 2-111.  Reliance upon such materials is inappropriate.  These materials were submitted for the first time in the Corporation Commission's petition for rehearing.  Justice Lavender's statement on page 2 that "the record is void of any evidence that Rule 2-105(d) has ever been used for unallocated gas wells" is not supported by the record. 4
                

FACTS

This cause concerns interpretation of the maximum permitted production for two gas wells established by three orders issued by the Oklahoma Corporation Commission (Corporation Commission). ⁵ The orders cover an irregular 1,000 acre drilling and spacing unit (Belcher Unit) consisting of the E/2 E/2 of Section 22, all of Section 23, the N/2 N/2 of Section 26, and the NE/4 NE/4 of Section 27, all in Township 5N, Range 11W, Caddo County, Oklahoma. Two of the orders concern the Belcher No. 2 (increased density well) and were issued on April 20, 1983. Order No. 237086 provides for the drilling of the increased density well in the Belcher Unit. Order No. 237085 provides for the Belcher No. 2 to be drilled off-pattern, and assesses a twenty-five percent penalty against production. The third order relates to the Belcher No. 1 and was issued on January 26, 1984. Order No. 252636 (hardship order) recognizes the Belcher No. 1 as a hardship well. The cause turns on whether the hardship well order created a separate rate of production for the Belcher No. 1.

The original well in the Belcher Unit, the Belcher No. 1, was completed in 1973. The increased density well, the Belcher No. 2 After months of negotiation concerning production from the Belcher Unit, the technical department of the Corporation Commission wrote a letter to Forest on December 1, 1987. The letter stated that the Corporation Commission would support a maximum permitted production from the Belcher No. 1 of 2 million cubic feet per day (MCDF). The letter also indicated that if Forest did not take action to resolve the controversy in the Belcher Unit that production from the unit would be curtailed to 10% of its allowable to adjust for overproduction. In response, Forest filed an application with the Corporation Commission seeking relief for the Belcher No. 1. Forest requested that: 1) the Belcher No. 1 be given a permitted production allowable of 2 MCFD; 2) the well be excused from testing requirements; and 3) the current allowable be adjusted to eliminate or excuse any overage accumulated by the Belcher Unit. The appellee, Oklahoma Natural Gas Company (ONG), ⁷ responded to Forest's application on January 4, 1988. ONG requested that the Corporation Commission clarify the three orders covering the Belcher Unit and that production from the Belcher Unit be curtailed to make-up overage established as of December 31, 1987.

was completed in 1983 as an off-pattern well. As a result of a work-over operation, the Belcher No. 1 began to experience down-hole problems. After application by the appellant, Forest Oil Corporation (Forest), ⁶ the Corporation Commission granted the No. 1 well hardship status as a distressed well on January 26, 1984. In 1987, the Corporation Commission staff questioned the continued need to classify the Belcher No. 1 as a hardship well. Issues were also raised concerning the production allowable for the Belcher Unit.

When the hearing commenced on April 11, 1988, Forest moved to exclude ONG pursuant to 52 O.S.Supp.1988 § 87.2. The hearing officer sustained Forest's motion. On appeal, the Corporation Commission en banc found that § 87.2 was inapplicable, and denied Forest's application to exclude ONG. Forest filed a second motion to dismiss on May 20, 1988. Forest asserted that ONG sought to litigate a private contractual dispute before the Corporation Commission. On May 21, 1988, because the question at issue was the production allowable for the Belcher Unit, the motion was denied. The hearing on the merits began on June 20, 1988. The cause was again heard on July 7-8, and August 1-3, 1988. On September 21, 1988, the hearing officer recommended that Forest's application be granted. ONG appealed to the Corporation Commission en banc. The cause was argued to the Commission en banc on November 16, 1988. On February 3, 1989, the Corporation Commission issued Order No. 335027 (clarification order), finding that the hardship order issued on January 26, 1984 provided for a unit allowable to be established by the best-well test. ⁸

The order also provided that if the capacity production from the Belcher No. 1 exceeded the established unit allowable, the Belcher Unit's permitted production allowable would be production from the hardship well. Under those circumstances, any production from the Belcher No. 2 would be treated as overage. The Corporation Commission excused the Belcher No. 1 from testing requirements, but refused to excuse the 1978 unit overage of 105,918 MCF. The Corporation Commission's order is overruled only in so far as it refused to balance...