H. F. Wilcox Oil & Gas Co. v. Walker, Case Number: 25048

• Citation: 1934 OK 280,168 Okla. 355,32 P.2d 1044
• Decision Date: 08 May 1934
• Docket Number: Case Number: 25048
• Court: Supreme Court of Oklahoma
• Parties: H. F. WILCOX OIL & GAS CO. v. WALKER et al.

1934 OK 280

32 P.2d 1044

168 Okla. 355

H. F. WILCOX OIL & GAS CO. v. WALKER et al.

Case Number: 25048

Supreme Court of Oklahoma

Decided: May 8, 1934

Syllabus

¶0 1. Oil and Gas--Right of Owner or Lessee of Land to Take Oil From Common Source of Supply--Police Power of State to Prevent Waste.

Every owner or lessee of lands has the right to take from the source below all the oil that he may be able to reduce to possession including that coming from land belonging to others, subject to the reasonable exercise of the police power of the state to prevent unnecessary loss, destruction or waste, and whenever the full production from any common source of supply of oil can only be obtained under conditions constituting waste, to prevent inequitable or unfair taking from a common source of supply.

2. Same--Powers of Corporation Commission as to Conservation of Oil.

The authority of the Corporation Commission relating to the conservation of oil is definitely limited to the power expressly or by necessary implication granted to it by law, and must be exercised in strict conformity therewith.

3. Same--Authority of Commission to Order Proration of Production Among Wells--Jurisdictional Facts to Be Ascertained.

Under the provisions of sections 7954-7963, C. O. S. 1921, the authority of the Corporation Commission to restrict the production of oil from a specific source of supply, and to require ratable taking therefrom by the various owners of the surface of said lands under which said source of supply exists, is conditioned upon a determination by the Commission that the full production therefrom cannot be obtained except under conditions constituting waste; and where the Corporation Commission predicates its orders restricting production upon the statutory definition of waste that the production of oil is in excess of the reasonable market demands, not only the determination that waste will be committed, but also a determination of the reasonable market demand of such common source of supply is a jurisdictional prerequisite, and in the absence of such finding, the order of the Commission is void, and not voidable, and subject to collateral attack.

4. Same--Authority of Commission Limited to Proration of Market Demand Among Wells Producing From Common Source of Supply.

The Corporation Commission is not authorized by law to prorate the total market demand from four separate and distinct sources of supply of oil among the producing oil wells in the four separate and distinct sources of supply, its authority to prorate production of oil being limited to proration of the market demand among the wells producing from a common source of supply.

5. Same--Statutory Notice as Prerequisite to Proration Order.

The giving of the notice provided by section 7959, C. O. S. 1921, before entering an order restricting the production of oil from a particular source of supply is mandatory, and upon failure to give such notice, the Corporation Commission is without jurisdiction to enter an order restricting production and requiring ratable taking.

Original action for writ of prohibition by the H. F. Wilcox Oil & Gas Company against Paul Walker et al., constituting the Corporation Commission of Oklahoma. Writ granted.

Armstrong & Murphy, for petitioner.

Edwin Dabney, Proration Attorney (Hayes, Richardson, Shartel, Gilliland & Jordan, of counsel), for respondents.

OSBORN, J.

¶1 This is an original action in this court by H. F. Wilcox Oil & Gas Company against Paul Walker, Roy Hughes, and J. C. Walton, constituting the Corporation Commission of the state of Oklahoma, in which petitioner seeks a writ of prohibition to prohibit the Corporation Commission from enforcing certain orders set out in said petition.

¶2 It is alleged that the Corporation Commission made and promulgated a certain order No. 6433, effective August 15, 1933, which is set out in part as follows:

"(13) The Commission further finds that numerous operators of wells drilled into the Wilcox common source of supply have produced more oil therefrom than has been permitted by the orders of the Commission in effect from time to time since September 11, 1929, and that to secure equitable and fair taking of oil from such common source of supply, it is necessary to equalize the actual production had from the several wells, and, as a basis for the future determination of the status of each well, it is necessary that the operators of the several wells file with the Commission complete reports of the production of oil from each well for each month or fraction thereof, commencing with the 3rd day of January, 1931, down to and including the month of July, 1931."

¶3 And by section 11, p. 24, the Commission ordered as follows:

"(1) The operator of each well in said zone shall, on or before the first day of September, 1933, file with the Commission, in the office of the proration umpire, a verified statement of the gross number of barrels of oil produced each month from the 3rd day of January, 1931, to the first day of July, A. D. 1933, the number of barrels transported from the premises where produced each month, the name of the transporter and the means of transportation, and the number of barrels of oil in lease tankage on July 1, 1933, at 7 o'clock a. m.

"(2) If the operator of any well shall fail to file such statement with respect thereto on or before the 1st day of September, 1933, at 7 o'clock a. m., he shall immediately shut in such well, and shall not produce any oil therefrom, or open the same for any purpose until such statement is filed.

"(3) Each taker of oil from said zone on or before the 1st day of September, A. D. 1933, shall file with the Commission, in the office of the proration umpire, a verified statement of the number of barrels of oil taken and transported from the premises where produced each month from the 3rd day of January, A. D. 1931, to 7 o'clock a. m. July 1, 1933, the means by which the same was transported and the place of delivery thereof.

"(4) If any operator or taker shall fail to file the statement herein provided for within 10 days after the time prescribed, the proration umpire shall report the fact to the proration attorney, who shall institute such proceedings against such operator or taker as may be authorized by law for violation thereof, and to secure compliance therewith.

"(5) The proration umpire shall, as soon as possible, determine as nearly as practicable from such statements, reports previously filed with the Commission, and any other available sources of information, the gross number of barrels of oil each well in said zone was overproduced as of 7 o'clock a. m. July 1, 1933, as against the allowable production thereof under orders of the Commission in force and effect from time to time. If the proration umpire is unable to determine to his satisfaction the particular well of any operator from which any production may have been had, he shall apportion the same among the several wells of the group from which he finds the same was had, in proportion to the potentials thereof. Such overproduction of each well shall be posted by the proration umpire as soon as determined, and a certificate thereof shall be immediately mailed by him to the operator of such well. The proration umpire shall preserve a record of the calculation of such overproduction or underproduction in his office, and the same shall be made available for inspection by any operator during usual office hours.

"(6) If any operator in said zone is dissatisfied with such determination of the overproduction or underproduction of any well, as so posted and certified, he shall, within 10 days of the date the same was posted, apply to the Commission, in writing, for a revision thereof, stating in the application the particular error or errors complained of, either in the allowable production credited to such well or production charged against the same for any month, and stating the correct allowable or production had during such month. The Commission will set a time for hearing such application and determination of the matter, of which notice to all persons interested shall be given by posting at the Office of the proration umpire, at least 10 days prior thereto, and by mailing to the operator of such well."

¶4 By the above order it is admitted that the Commission is laying a predicate for the enforcement of various and sundry prior orders relating to the proration and production of oil in the Oklahoma City field for the following periods: (1) November 1, 1931, to January 1, 1933; (2) January 1, 1933, to April 10, 1933, at which time chapter 131, S. L. 1933, became effective. It is conceded that if said orders are void on their face, a writ of prohibition may properly be issued herein.

¶5 It is contended by petitioner that all of the prior orders relating to the production and proration of oil in the Oklahoma City field from November 1, 1931, to January 1, 1933, are void, unenforceable, and subject to collateral attack in this proceeding for the following reasons: First. That by order No. 5664, promulgated November 1, 1931, the Commission found that the Oklahoma City field was composed of four common sources of supply, to wit, the Wilcox zone; the Simpson below Wilcox zone; the siliceous lime zone; and the fault line zone; and that in determining the market demand, all of the separate sources of supply were considered together, and that the market demand for each separate source of supply was not determined, and the total market demand was not allocated to the four determined common sources of supply, by reason whereof the Corporation Commission was wholly without jurisdiction to make or enter a valid order restricting the full production by the various operators and owners of the various wells. Second. That the Corporation Commission failed to give proper notices as required by law before making and entering the various orders, by reason whereof said orders are wholly illegal, and void and...