Helmerich & Payne, Inc. v. Corporation Commission
| Decision Date | 18 February 1975 |
| Docket Number | No. 46491,46491 |
| Citation | 532 P.2d 419 |
| Parties | HELMERICH & PAYNE, INC., et al., Appellants, v. The CORPORATION COMMISSION of the State of Oklahoma and LVO Corporation, Appellees. |
| Court | Oklahoma Supreme Court |
Barth P. Walker, Oklahoma City, for appellants.
Ferrill H. Rogers, Oklahoma City, for appellees.
C. Harold Thweatt and Crowe, Dunlevy, Thweatt, Swinford, Johnson & Burdick, Oklahoma City, amicus curiae.
The basic issue presented for decision in this case is: whether the Oklahoma Corporation Commission under its regulatory power over oil and gas may order an election by lessees or mineral owners to participate in a drilling program or in lieu thereof to accept bonuses or overrides in a nine governmental section unit.
A statement of the salient facts as we view them is in order.
The Corporation Commission, sometimes referred to as Commission, by Order dated November 16, 1972, established 640-acre drilling and spacing units for the production of gas and gas condensate from seven common sources of supply 1 under nine governmental sections of land located in Blaine and Custer Counties, Oklahoma. At a later hearing the Commission issued Order No. 96649 dated March 26, 1973, which is the subject of this appeal; the definitive parts of said order are hereinafter set out.
Within the nine governmental sections the leasehold interests were owned in the approximate amounts as follows:
Lessee Net acres % of ownership
LVO 810 14.06
Tenneco 1600 27.78
Reading & Bates 790 13.72
Union of Calif. 1160 20.14
ONG 1040 18.05
Mobil 360 6.25
--------- --------------
5760 100.00%
LVO made the original application asking for an adjudication of the rights and equities and pooling the interests of oil and gas leaseholders, and unleased mineral interests in the seven separate common sources of supply in the nine governmental sections. LVO and its associate, ONG, have interests in all nine governmental sections. The other interests are not as widely held within the nine sections and tend to be concentrated in definite geographical areas: Tenneco to the northwest; Reading & Bates to the northeast; Union of Calif. to the south one-half; and, mobil scattered.
The definitive parts of the Commission's Order No. 96649 are as follows:
'2. That for the purpose of this Order, the sum of $779,000.00 is fixed as the approximate cost of drilling and completing a unit well to the Hunton Formation, and the sum of $600,000.00 is fixed as the approximate cost of drilling and completing a unit well to the Mississippi-Chester Formation, and in the event there is a dispute as to such cost after any unit well has been completed, the Commission retains jurisdiction of this Cause for the purpose of redetermining such cost; that the sum of $30.00 per acre or no cash bonus but an override of 1/16 of 7/8 on oil and 1/8 of 7/8 on gas is hereby fixed as a fair and reasonable bonus to be paid any party whose interest is pooled herein in lieu of his right to participate in the working interest of any and all unit wells in which he has an interest.
3. The owner of an outstanding leasehold estate shall be permitted to participate in the working interest of any and all unit wells in which he has an interest by paying his proportionate part of the cost thereof, or furnishing satisfactory evidence for the payment thereof, within 10 days from the date he receives written notice from applicant that a unit well has been commenced; or the owner of such an outstanding leasehold estate may, in lieu of full participation, elect to accept a bonus in cash or an overriding royalty as set out above for any acreage owned in the unit where the first well is drilled, and to participate as to one-third of the acreage owned by him in each and every subsequent well down to the top of the Mississippi-Chester Formation, and as to one-fourth of his acreage as to all formations below the top of the Mississippi-Chester.
4. In the event any owner of an outstanding leasehold estate does not desire to participate in the development of the nine-section area, he shall be awarded a bonus, either in cash or in overriding royalty, as set out above, in lieu thereof; and he shall be required to elect within 15 days from the date of this Order whether he desires to accept the bonus herein established for all his interests in any and all of the nine drilling and spacing units, and the type of bonus he elects to receive, or whether he desires to participate in the development program under one of the alternatives set out above. In the event any owner fails to make such an election, his failure to elect shall act as an election to accept the cash bonus of $30.00 per acre for all his interest in the nine drilling and spacing units.
5. Applicant shall commence a well on one of the units within 60 days after the effective date of this Order and shall commence wells on nine units within one year after the effective date of this Order. As to any units upon which a well has not been commenced at the expiration of the one year period, this Order shall be null and void.
6. In the event any unit well is not commenced as provided herein, this Order shall become null and void as to all units except those previously drilled and completed, and the pooling of the outstanding leasehold interest in all of the remaining drilling and spacing units shall be vacated, set aside and held for naught.'
The findings of the Commission are likewise innovative.
'7. This is the first application presented to the Commission seeking approval of a comprehensive drilling program comprising several drilling and spacing units, and the simultaneous pooling of the interests in several units in order to carry out the program.
8. In support of the application, it is contended that this type of drilling program will serve to prevent waste and will protect correlative rights in various ways, including the encouragement of exploration for, and development of oil and gas reserves. Applicant points out that in many areas in Oklahoma, including...
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