Morgan v. Okla. Corp.

• Decision Date: 09 November 2011
• Docket Number: No. 108,711.,108,711.
• Citation: 274 P.3d 832
• Parties: John Ed MORGAN and Elaine Morgan, Respondents/Appellants, v. OKLAHOMA CORPORATION COMMISSION and Chevron USA, Inc., Applicants/Appellees.
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

274 P.3d 832

John Ed MORGAN and Elaine Morgan, Respondents/Appellants,

v.OKLAHOMA CORPORATION COMMISSION and Chevron USA, Inc., Applicants/Appellees.

No. 108,711.

Court of Civil Appeals of Oklahoma, Division No. 4.

Nov. 9, 2011.

Certiorari Denied Feb. 27, 2012.

Wes Johnston, Johnston & Associates, Chickasha, Oklahoma, for Appellants.

Eric R. King, Leslie L. Lynch, Gable & Gotwals, Oklahoma City, Oklahoma, for Appellee Chevron USA, Inc.

Andrew Tevington, Michele Craig, Deputy General Counsel, Office of General Counsel, Oklahoma Corporation Commission, Oklahoma City, Oklahoma, for Oklahoma Corporation Commission.

JERRY L. GOODMAN, Presiding Judge.

¶ 1 John Ed Morgan and Elaine Morgan (Morgans) appeal from an August 17, 2010, order of the Oklahoma Corporation Commission (OCC). On appeal, the Morgans assert the OCC erred in hearing the matter as there is no justiciable controversy. Alternatively, they assert the OCC's finding that Chevron USA, Inc.'s (Chevron) use of the land was reasonable is beyond the OCC's jurisdiction. Based on the appellate record and review of the applicable law, we affirm in part and vacate in part.

FACTS

¶ 2 The facts of this case are extensive and well known by the parties. A complete recitation of the facts is unnecessary to a resolution of this appeal. The Morgans own land in Stephens County, Oklahoma. Chevron operates oil and gas wells collectively known as the Velma Sims Sand (Vess) Unit, which is located on the Morgans' land. The Morgans assert many of the wells have been abandoned and have fallen into disrepair. In May 2007, the Morgans filed suit against Chevron, inter alia, for nuisance and trespass. The Morgans asserted, inter alia, Chevron had used more of the surface than was reasonably necessary for longer than was reasonably necessary and had failed to properly maintain the wells. In the suit, which has been stayed pending this appeal, the Morgans sought damages and to enjoin Chevron from continuing to use their property.

¶ 3 In June of 2009, Chevron hired experts to examine the Vess Unit. Based on their findings, Chevron initiated a separate proceeding before the OCC seeking approval of a plan of remediation for the Vess Unit. The plan largely consisted of cleaning up debris and remediating several of the wells and surrounding areas. Chevron additionally requested the OCC to determine whether its operations complied with the OCC's Rules and Regulations, and "pose[d] no threat to the health, safety and welfare of the Respondents, nor the citizens of the State of Oklahoma." The Morgans sought dismissal, asserting the issues before the OCC were beyond its jurisdiction and the matter did not present a justiciable issue. The motion was denied.

¶ 4 A hearing was held on the merits of Chevron's application in October of 2009 before an Administrative Law Judge (ALJ). The ALJ issued a report on November 30, 2009, recommending Chevron's plan for remediation be approved. Chevron appealed, however, seeking to supplement the report with a finding that its' use of the Morgans' land was "reasonable." The cause was subsequently remanded to the ALJ, who issued a supplemental report on January 26, 2010. The report provides, in relevant part, "The Commission can regulate the use of land for operations and maintenance of well sites" and pursuant to its statutory jurisdictional authority, the testimony and exhibits "clearly show Chevron has made reasonable use of the at issue surface estate." The Morgans did not appeal the initial or supplemental report.

¶ 5 Subsequently, however, the Morgans filed a Motion to Settle Terms of Final Order on February 19, 2010. The ALJ ruled that a final order would be proposed based on both the original and supplemental reports. The Morgans appealed to the Commission en banc and Chevron moved to strike the appeal. The ALJ, as well as an oil and gas appellate referee, recommended the motion to strike be granted and the Morgans' motion to settle terms be denied. The OCC agreed and a final order of the OCC was subsequently filed on August 17, 2010. The Morgans appeal.

STANDARD OF REVIEW

¶ 6 Issues of the OCC's jurisdiction are questions of law, which are subject to independent findings upon review. S.P. Comm'n. Co. v. Corporation Comm'n. of Okla., 1978 OK 14, ¶ 11, 586 P.2d 327, 330; Union P.R.R. Co. v. Oklahoma Corp. Comm'n., 2001 OK CIV APP 56, ¶ 7, 23 P.3d 954, 956. Issues of law are reviewed de novo. Young v. Macy, 2001 OK 4, ¶ 9, 21 P.3d 44, 47. In a de novo review, we give no deference to the lower tribunal's legal ruling. Fisher v. Fisher, 2007 OK CIV APP 103, ¶ 3, 171 P.3d 917, 919.

ANALYSIS

A. Jurisdiction

¶ 7 For their first assertion of error on appeal, the Morgans assert the OCC, which is a tribunal of limited jurisdiction, exceeded its jurisdiction when it determined Chevron's operations on the surface were reasonable. The Morgans contend the issue of whether Chevron's operations used more of the surface than is reasonably necessary for longer than is reasonably necessary is a private rights dispute beyond the OCC's limited jurisdiction. Thus, the issue is not properly before the OCC.

¶ 8 Chevron disagrees, asserting the OCC has "exclusive jurisdiction, power and authority" over the "construction, operation, maintenance, site remediation, closure and abandonment of the facilities and activities...." 17 O.S.2001 and Supp.2009, § 52(A)(2) and 52 O.S.2001 and Supp.2009, § 139(B)(2). Chevron contends the OCC's determination that it made reasonable use of the surface was a proper exercise of its authority granted it by the Legislature to make and enforce orders to: 1) assure a greater ultimate recovery of oil and gas from the unit; 2) prevent waste; and 3) protect the correlative rights of the owners of the unit. Thus, the Morgans' jurisdictional challenge should be denied.

¶ 9 The OCC also asserts it has exclusive jurisdiction over the operation, maintenance, site remediation, closure and abandonment of facilities used in the drilling, development, production and processing of oil and gas on a lease. Thus, it had the duty to review Chevron's plan of remediation and determine whether its' wells should be plugged and abandoned or their operations permitted to continue. As part of this review, the OCC asserts it must determine whether Chevron and its' surface facilities are in compliance with applicable rules and regulations. In short, whether Chevron's operations are reasonable. Accordingly, the OCC contends it properly determined the issue of reasonable use of the surface.

¶ 10 The OCC is a tribunal of limited jurisdiction. It only has such authority as is expressly or by necessary implication conferred upon it by the Oklahoma Constitution and statutes of the state. Public Serv. Co. of Okla. v. State ex rel. Corp. Comm'n., ex rel. Loving, 1996 OK 43, ¶ 21, 918 P.2d 733, 738; Tenneco Oil Co. v. El Paso Nat. Gas Co., 1984 OK 52, ¶ 4 & fn. 1, 687 P.2d 1049, 1050 & fn. 1; Merritt v. Corporation Comm'n., 1968 OK 19, ¶ 7, 438 P.2d 495, 497; Meinders v. Johnson, 2006 OK CIV APP 35, ¶ 19, 134 P.3d 858, 865. The OCC oversees the conservation of oil and gas and its jurisdiction is limited to the protection and resolution of public rights. Marathon Oil Co. v. Corporation Comm'n of State of Oklahoma, 1994 OK 28, ¶ 14, 910 P.2d 966, 969 (citing Nilsen v. Ports of Call Oil Co., 1985 OK 104, 711 P.2d 98); Tenneco, 1984 OK 52, at ¶ 5, 687 P.2d at 1050; Leck v. Cont'l Oil Co., 1989 OK 173, ¶ 7, 800 P.2d 224, 226. The OCC does not have jurisdiction to award damages or determine private rights disputes between an industry within its regulatory authority and an individual outside the limited powers granted by the Constitution and statutes. Meinders, 2006 OK CIV APP 35, at ¶ 19, 134 P.3d at 865 (citations omitted).

¶ 11 The protection of public rights includes the prevention of waste and the protection of correlative rights of owners of mineral interests in the land overlying a common source of supply. Marathon Oil Co., 1994 OK 28 at ¶ 14, 910 P.2d at 969.See also Tucker v. Special Energy Corp., 2008 OK 57, ¶ 9, 187 P.3d 730, 733 (citing Leck, 1989 OK 173 at ¶ 8, 800 P.2d at 226) (Public rights are involved when "a unitization order, pooling order, or order setting the allowables on the unit's well" affects "the correlative rights of all mineral rights owners in [a] common source of supply [in a] unit."); Samson Resources Co. v. Corporation Comm'n, 1985 OK 31, ¶ 9, 702 P.2d 19, 22 ("The recognized power and responsibility of the Commission to act to protect correlative rights [is] confined to situations in which a conflict exists which actually affects such rights within a common source of supply and thus affects the public interest in the protection of production from that source as a whole.").

[A] matter of public rights must at a minimum arise "between the government and others." In contrast, "the liability of one individual to another under the law as defined," is a matter of private rights. Our precedents clearly establish that only controversies in the former category may be removed from Art. III courts and delegated legislative courts or administrative agencies for their determination. Private-rights disputes, on the other hand, lie at the core of the historically recognized judicial power.

Tenneco Oil Co., 1984 OK 52, ¶ 21, 687 P.2d 1049, 1054–55 (citing Northern Pipeline Co. v. Marathon Pipe Line, 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) ).

¶ 12 With respect to private rights disputes, "[s]ubject matter jurisdiction rests solely with the district court to determine private rights in mineral interests and oil and gas leaseholds...." Grayhorse Energy, LLC v. Crawley Pet. Corp., 2010 OK CIV APP 145, ¶ 12, 245 P.3d 1249, 1254–55 (citing Leck v. Continental Oil Co., 1989 OK 173, ¶ 6, 800 P.2d 224, 226). The OCC "is without authority to hear and determine disputes between two or more private persons or entities in which the public interest is not involved." Grayhorse Energy, LLC,...