Holmes v. Corporation Commission, 42193

• Decision Date: 10 March 1970
• Docket Number: No. 42193,42193
• Citation: 466 P.2d 630
• Parties: C. W. HOLMES and Earl B. Mitchell, Jr., Executor of the Estate of John R. Wilver, Deceased, Plaintiffs in Error, v. The CORPORATION COMMISSION of the State of Oklahoma and Viersen & Cochran, Defendants in Error.
• Court: Oklahoma Supreme Court

Page 630

466 P.2d 630

C. W. HOLMES and Earl B. Mitchell, Jr., Executor of the Estate of John R. Wilver, Deceased, Plaintiffs in Error, v. The CORPORATION COMMISSION of the State of Oklahoma and Viersen & Cochran, Defendants in Error.

No. 42193.

Supreme Court of Oklahoma.

March 10, 1970.

Syllabus by the Court

The notice requirements of 52 O.S.1961, § 97 are applicable in proceedings brought in the Corporation Commission under the provisions of 52 O.S.1961, § 87.1(d) to pool separately owned mineral estates.

Appeal from the Corporation Commission of the State of Oklahoma; Ray C. Jones, Chairman.

From an order of the Corporation Commission pooling separately owned mineral estates, adjudicating rights of participation in production and other correlative rights, and authorizing the drilling of a well, protestants below, appeal.

Affirmed.

Mitchell, Mitchell & DeClerk, by James R. Cox, Enid, for plaintiffs in error.

Wallace E. Robertson, Oklahoma City, for Viersen & Cochran, defendant in error.

Ralph L. Wampler, Oklahoma City, for Corporation Comm., defendant in error.

WILLIAMS, Justice:

This is an appeal by C. W. Holmes and Earl B. Mitchell, Jr., Executor of the Estate of John R. Wilver, Deceased, protestants below, from an order of this State's Corporation Commission pooling the separately owned mineral estates, adjudicating the rights of participation in production and other correlative rights, and authorizing the drilling of a gas well by Viersen and Cochran, applicant below, to the common source of supply in a drilling unit in Carfield County, Oklahoma. The parties will be referred to as protestant(s), applicant and the Commission.

In November, 1965, the Commission entered its order creating drilling and spacing units of one entire governmental section each for the production of gas and gas condensate from the Mississippi Lime common source of supply underlying certain described lands in Garfield County, Oklahoma. Among the lands described in that order was Section 8, Township 21 North, Range 6 West, Garfield County, the property involved herein.

Subsequent to the entry of the above order creating a drilling and spacing unit of Section 8, applicant Viersen and Cochran filed its application seeking an order pooling the individual mineral estates in the section or drilling unit involved and authorizing the drilling of a well thereon. In this application, applicant alleged that it and parties with whom it had reached an agreement for the development of the drilling and spacing unit owned the oil and gas leasehold estate in the west half of Section 8, but that it had been unable to reach an agreement with the owner or owners of the leasehold estate in the east half of the section. Applicant further alleged that the leasehold estate on the east half formerly had been owned by John R. Wilver but recently had been assigned by Wilver to C. W. Holmes, such assignment subject to the reservation of a production payment of $2,000 per acre payable out of 1/2 of 7/8 of the production.

At the hearing before the Commission, protestant Holmes moved to continue the hearing on the ground that the notice thereof was defective. This motion was overruled and the Commission proceeded to hear evidence. In summary, applicant introduced evidence attempting to establish that John Wilver had obtained, as lessee, oil and gas leases covering the east half of section 8 and subsequently had assigned these leases to his sister, C. W. Holmes, reserving a production payment of $2,000 per acre out of 1/2 of 7/8 of the production; that Wilver had obtained oil and gas lease on other lands in Garfield County and had assigned these leases to his sister under similar conditions as those involved herein; that in view of the production payment imposed by Wilver in the assignments to Holmes, the leasehold estate had no value and the permitted well in section 8 could not be drilled; that if the production payment had not been imposed, the value of the leasehold estate covering the Mississippi Lime common source of supply would be $40.00 per acre; that the cost of drilling and completing a well in section 8 would be approximately $100,000, which cost would be recovered in five years; and, that section 8 is presently being drained by production from the Mississippi Lime formation underlying section 7, which adjoins section 8.

Protestant Holmes introduced the testimony of an expert witness that the present value of the leasehold estate in the east half of section 8 was from $50.00 to $100.00 an acre. The witness stated that the permitted well in section 8 could be drilled and completed for $85,000 to $90,000, but admitted that this amount could increase to $100,000 if difficulties were encountered. The witness also admitted that section 8 was located in an area where the gas market was presently poor and production low.

At the conclusion of the evidence, protestant Holmes stated that she was not actively engaged in the oil business and requested the Commission to include in the pooling order, in addition to provisions determining the value of her leasehold interest and her prorata share of the costs of development if she chose to participate in the working interest in the drilling unit, a third alternative, a so-called 'bonuspenalty', allowing her to participate in development but not receive any portion of the 7/8 working interest until such time as applicant had recovered the costs of drilling, completing and operating the permitted well plus a reasonable penalty. Subsequent to protestant's request, applicant reopened to introduce evidence that due to the length of time estimated for applicant to recover its costs it would be economically unfeasible to drill a well in section 8 if it (applicant) were allowed a bonus-penalty of only...