Moncrief v. Wyoming Oil and Gas Conservation Com'n

Decision Date28 May 1999
Docket NumberNo. 98-245,98-245
Citation981 P.2d 913
PartiesW.A. MONCRIEF, Jr., Appellant (Petitioner), v. WYOMING OIL AND GAS CONSERVATION COMMISSION; and Barrett Resources Corporation, Appellees (Respondents).
CourtWyoming Supreme Court

Craig Newman of The Law Office of Craig Newman, Casper, Wyoming, for Appellant.

Gay Woodhouse, Acting Attorney General; and Roberta L. Rinegar, Senior Assistant Attorney General, for Appellee Wyoming Oil and Gas Conservation Commission.

William A. Keefe and Malcolm M. Murray of Gorsuch Kirgis LLP, Denver, Colorado, for Appellee Barrett Resources Corporation.

Before LEHMAN, C.J., and THOMAS, MACY, GOLDEN and HILL, JJ.

MACY, Justice.

Appellant W.A. Moncrief, Jr. (Moncrief) petitioned for a review of the order in which Appellee Wyoming Oil and Gas Conservation Commission (the commission) approved the application filed by Appellee Barrett Resources Corporation (Barrett) for an order from the commission establishing a single 320-acre drilling and spacing unit. The district court certified the case to the Wyoming Supreme Court.

We affirm the commission's order.

ISSUES

In his petition for review, Moncrief stated the following issues:

1. Whether under the provisions of the Wyoming Oil and Gas Conservation Commission Act, WYO. STAT. ANN. § 30-5-101 et seq., the Decision is in excess of statutory and regulatory jurisdiction, contrary to law, lacking in statutory right, arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law, and unsupported by substantial evidence in granting Barrett Resources Corporation's application for the establishment of a 320-acre drilling and spacing unit for the Frontier, Muddy, Lakota, Sundance and Morrison Formations given the evidence submitted by Barrett Resources Corporation and the record of the proceeding before the [Wyoming Oil and Gas Conservation Commission].

2. Whether the Decision is in excess of statutory and regulatory jurisdiction, contrary to law, lacking in statutory right, arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law, and unsupported by substantial evidence in finding, as required by WYO. STAT. ANN. § 30-5-109(b), that 320 acres is "not smaller than the maximum area that can be efficiently drained by one well" drilled to each of the Frontier, Muddy, Lakota, Sundance and Morrison Formations given the evidence submitted by Barrett Resources Corporation and the record of the proceeding before the [Wyoming Oil and Gas Conservation Commission].

Moncrief defined the issues more specifically in his brief on appeal to state the following:

1. Did the Commission err in creating a 320-acre drilling unit for five separate hydrocarbon pools when the sole evidence by the applicant justifying the 320-acre size ... drilling unit requested consisted of a computer simulation which omitted entirely three of the five formations in question, erroneously included one formation not actually productive in the single well used to construct the computer simulation, did not include actual properties of one of the formations available to the modeler, and was otherwise not representative of the geology of the area under consideration and when other evidence before the Commission as to two of the five formations in question declared that 320 acres is smaller than the maximum area which can be efficiently drained by one well?

2. Is the Commission's Decision in error in creating a 320-acre drilling unit when previously created drilling units for the same pools immediately adjacent to the requested 320-acre drilling unit are twice as large, thereby rendering the 320-acre drilling unit in question not of "approximately uniform size" as required by Wyo. Stat. Ann. 30-5-109(a)?

3. Is the Commission's Decision impermissibly based upon the vast sums of money being expended and proposed to be expended by Respondent Barrett in the area under consideration when compared to the slower and less densely drilled exploration pace suggested by Appellant and the other party to the proceeding below which would involve nominally one-half the drilling dollars proposed by the Respondent Barrett?

FACTS

In February of 1998, Barrett filed an application for an order establishing a 320-acre drilling and spacing unit on the east half of Section 19, Township 37 North, Range 86 West, 6th P.M., Natrona County, for the Frontier, Muddy, Lakota, Sundance, and Morrison Formations (subject formations). Moncrief and Chevron U.S.A., Inc. (Chevron) objected to Barrett's application.

The requested drilling and spacing unit was the fourth unit to be established for the subject formations in the Waltman Field (Cave Gulch Area). The first spacing unit, which was established on the south half of Section 29 and the north half of Section 32, covered 640 acres. The second spacing unit, which was established on the south half of Section 20 and the north half of Section 29, also covered 640 acres. The third spacing unit, which was a vertical 320-acre unit located west of and adjacent to the adjoining halves of the two 640-acre units, was established on the east half of Section 30. The drilling and spacing unit at issue in this appeal is a 320-acre vertical unit located directly north of the previously established 320-acre vertical unit. The following map depicts the spacing units which have been established in the Waltman Field:

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

A Portion of Township 37 North,

Range 86 West, 6th P.M., Natrona County, Wyoming

The commission heard this matter on March 10, 1998, and approved Barrett's application, reserving jurisdiction to take additional action as it deemed necessary and proper. Moncrief filed a petition in the district court for a review of the commission's order, and the district court certified the case to the Wyoming Supreme Court pursuant to W.R.A.P. 12.09(b).

STANDARD OF REVIEW

When we are reviewing cases that have been certified to us pursuant to W.R.A.P. 12.09(b), we apply the appellate standards which are applicable to a reviewing court of the first instance. Weaver v. Cost Cutters, 953 P.2d 851, 854 (Wyo.1998). W.R.A.P. 12.09(a) limits judicial review of administrative decisions to a determination of the matters specified in Wyo. Stat. Ann. § 16-3-114(c) (Michie 1997).

When this Court reviews an administrative agency decision, our job is to determine whether the decision meets the applicable legal standards and is supported by substantial evidence in the record. Anschutz Corporation v. Wyoming Oil and Gas Conservation Commission, 923 P.2d 751, 754 (Wyo.1996). Our function is to examine the conflicting evidence to determine whether the commission reasonably based its findings and decision upon all the evidence which was before it. Id. Technical decisions relative to the waste of oil and gas resources, however, are for the commission, as the trier of fact made up of experts in the field, to make and not for this Court to decide. 923 P.2d at 757; Larsen v. Oil and Gas Conservation Commission, 569 P.2d 87, 93 (Wyo.1977); Pan American Petroleum Corporation v. Wyoming Oil and Gas Conservation Commission, 446 P.2d 550, 554 (Wyo.1968). "Our function is only to determine whether the administrative decision meets the applicable legal standards and whether the facts of record are supportive of this decision." Larsen, 569 P.2d at 93.

DISCUSSION

"In 1951, the legislature enacted the Oil and Gas Conservation Act, Wyo. Stat. §§ 30-5-101 to 30-5-104 and §§ 30-5-108 to 30-5-119 (1983 & Cum.Supp.1994) ... to regulate the oil and gas industry in the state." Union Pacific Resources Company v. Texaco, Inc., 882 P.2d 212, 222 (Wyo.1994). The act created the commission and gave it the necessary jurisdiction and authority to effectuate the purpose of the act, which is to provide a comprehensive regulatory program to prevent the waste of Wyoming's oil and gas resources and to protect the correlative rights of property owners. 882 P.2d at 222-23; Wyo. Stat. Ann. §§ 30-5-102, -104(a), -109 (Michie 1997).

The commission possesses the authority, in establishing drilling units, to prevent waste and to protect correlative rights. Union Pacific Resources Company, 882 P.2d at 224; § 30-5-109(a). Once a drilling unit has been established, the commission has continuing authority to modify its orders to ensure that the drilling unit is not smaller than the maximum area that can be efficiently drained by one well. Union Pacific Resources Company, 882 P.2d at 224-25; § 30-5-109(b), (d). When data is developed which establishes the extent of the common source of supply, the commission has authority to protect the public interest by increasing or decreasing the size of a drilling unit. Union Pacific Resources Company, 882 P.2d at 225.

A. Substantial Evidence

The issue before the commission was whether a 320-acre drilling and spacing unit was an appropriately sized unit for the subject formations. Section 30-5-109(b) provides:

In establishing a drilling unit, the acreage to be embraced within each unit and the shape thereof shall be determined by the commission from the evidence introduced at the hearing but shall not be smaller than the maximum area that can be efficiently drained by one (1) well.

Moncrief contends that the commission's order in this case is legally and factually erroneous because the only basis for the finding that 320 acres is not smaller than the maximum area which can be efficiently drained by one well is a flawed computer reservoir simulation. Moncrief maintains that the computer simulation did not include three of the five formations involved, erroneously modeled a formation which was not productive in the single well utilized for the model, did not include actual porosity values significantly higher than those input by the modeler, and was otherwise flawed. Moncrief contends that this Court's decision in Larsen, 569 P.2d 87, requires that considerable effort be made to...

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