Samedan Oil Corp. v. Cotton Pet. Corp., CIV-75-0434-D and CIV-77-0415-D.

• Decision Date: 08 December 1978
• Docket Number: No. CIV-75-0434-D and CIV-77-0415-D.,CIV-75-0434-D and CIV-77-0415-D.
• Parties: SAMEDAN OIL CORPORATION, Plaintiff, v. COTTON PETROLEUM CORPORATION, Sun Oil Company, Oklahoma Natural Gas Corporation and the United States of America, Defendants. COTTON PETROLEUM CORPORATION, Plaintiff, v. The Honorable Cecil ANDRUS, Secretary of the Interior, Stanley Speaks, Area Director for the Bureau of Indian Affairs, Anadarko Agency, and Samedan Oil Corporation, Defendants.
• Court: U.S. District Court — Western District of Oklahoma

466 F. Supp. 521

SAMEDAN OIL CORPORATION, Plaintiff, v. COTTON PETROLEUM CORPORATION, Sun Oil Company, Oklahoma Natural Gas Corporation and the United States of America, Defendants.

COTTON PETROLEUM CORPORATION, Plaintiff, v. The Honorable Cecil ANDRUS, Secretary of the Interior, Stanley Speaks, Area Director for the Bureau of Indian Affairs, Anadarko Agency, and Samedan Oil Corporation, Defendants.

Nos. CIV-75-0434-D and CIV-77-0415-D.

United States District Court, W. D. Oklahoma.

December 8, 1978.

G. D. Ashabranner and Fisher Ames, Oklahoma City, Okl., for Samedan Oil Corp.

G. L. Jidge Verity, Oklahoma City, Okl., for Cotton Petroleum Corp.

William C. Phelps and Rufus N. McKnight, Jr., Dallas, Tex., for Sun Oil Co.

William Scheurich, Tulsa, Okl., for Oklahoma Natural Gas Corp.

Larry D. Patton, U. S. Atty., by John E. Green, First Asst. U. S. Atty., Oklahoma City, Okl., for the United States, Cecil Andrus and Stanley Speaks.

MEMORANDUM OPINION

DAUGHERTY, Chief Judge.

The first of these consolidated cases, Samedan Oil Corporation v. Cotton Petroleum Corporation, CIV-75-0434-D (hereinafter referred to as "75-0434"), is an action to quiet title to an oil and gas lease covering certain restricted Indian land located in Canadian County, Oklahoma, which was included in a communization agreement executed and approved by an authorized representative of the Secretary of the Interior and for an accounting and other relief. The second case Cotton Petroleum Corporation v. Andrus, CIV-77-0415-D (hereinafter referred to as "77-0415") is an action for judicial review of the administrative decision of the Secretary of the Interior, as entered by the Interior Board of Land Appeals (IBLA) Cotton Petroleum Corp. v. Samedan Oil Corp., 29 IBLA 13 (February 8, 1977) affirming the approval of the communization agreement mentioned above. The Court has subject matter jurisdiction of these cases pursuant to 28 U.S.C. § 1331 and both cases have been submitted to the Court for decision upon stipulated facts, the briefs of the parties and the administrative record.

From the record before the Court, it appears that pursuant to the Act of March 3, 1891, 26 Stat. 989, 1022 (1891), certain land including the SW ¼ SW ¼ of Section 22, Township 12 North, Range 9 West, Canadian County, Oklahoma, was allotted to Without Nose, Cheyenne-Arapaho Allottee No. 1165, by a trust patent in 1892. By restrictive deed approved November 13, 1920, the SW ¼ SW ¼ of Section 22 was conveyed to Lottie Coyote Sleeper who died in 1975 and whose heirs had not been determined when 75-0434 was filed.

By Order No. 65190 dated March 3, 1967 (Exhibit B2 to Exhibit # 12),¹ and Order No. 73241 dated April 10, 1969 (Exhibit B1 to Exhibit # 12), the Oklahoma Corporation Commission established Section 22 as a drilling and spacing unit for the production of gas and gas condensate from the Skinner Sand and Morrow Sand common sources of supply. Subsequently, Sun Oil Company (Sun) acquired an oil and gas lease (hereinafter referred to as the "Sun lease") from Lottie Coyote Sleeper covering the SW ¼ SW ¼ of Section 22 for a term of five years from the date of its approval (Exhibit # 1). Said lease was approved by a representative of the Secretary of the Interior on October 14, 1969. Sun agreed to assign the Sun lease to Cotton Petroleum Corporation (Cotton) by an agreement dated July 2, 1974, subject to certain conditions which included drilling a test well in the NW ¼ of Section 22 to a prescribed depth and within a specified time and the formation of a unit in Section 22 (Exhibit # 2).

On November 7, 1974, Cotton completed the test well within the prescribed time limit (Exhibit 3). Shortly thereafter, Cotton submitted an unsigned proposed communization agreement to the United States Geological Survey whereby the SW ¼ SW ¼ of Section 22 was to be included in the drilling unit consisting of all of Section 22 as established by the Oklahoma Corporation Commission's Orders No. 65190 and 73241. However, the Geological Survey returned the proposed communization agreement to Cotton without approval because the Sun lease had expired on October 14, 1974, and was being offered for sale on December 3, 1974 (Exhibit # 4).

At said sale, Tom R. Gray, Jr., acting on behalf of Samedan, was the successful bidder and an oil and gas mining lease covering the SW ¼ SW ¼ of Section 22 was subsequently executed (Exhibit # 6). This lease (hereinafter referred to as the "Samedan lease") was for a term of five years from the date of its approval on January 9, 1975, and was assigned to Samedan by an approved assignment dated December 13, 1974 (Exhibit # 8).

By an assignment dated December 30, 1974, Sun purported to assign the Sun lease to Cotton (Exhibit # 9). However, this assignment was never approved by the Secretary of the Interior or his authorized representative as required.

In January, 1975, Cotton instituted "force pooling" proceedings before the Oklahoma Corporation Commission (Exhibit # 10). These proceedings resulted in Order No. 111345 dated March 5, 1975, which pooled the outstanding interests underlying Section 22 for the production of gas and gas condensate from the Morrow and Skinner common sources of supply, designated Cotton as the operator and fixed the cost of the well drilled thereon at $486,000.00 (Exhibit D to Exhibit # 12). Claiming ownership under the Samedan lease, Samedan elected to participate in the well drilled by Cotton in the NW ¼ of Section 22 (Exhibit E to Exhibit # 12) and tendered its proportionate part of the costs of said well. However, Cotton refused the tender and returned Samedan's check on the ground that Cotton did not recognize Samedan's ownership under the SW ¼ SW ¼ of Section 22 and therefore did not recognize Samedan's right to participate in Cotton's well in the NW ¼ of said section.

In a joint letter to Cotton and Samedan dated January 25, 1975, the Area Oil and Gas Supervisor of the United States Geological Survey requested that a communitized area consisting of all of Section 22 be formed so that the royalty owners under the Indian lands involved could share in royalties on production from Cotton's well in the NW ¼ of Section 22 (Exhibit # 1). However, Cotton replied that it did not desire to enter into a communization agreement at that time because Cotton wanted to pursue litigation regarding the validity of the Sun lease. Thereafter, without the knowledge or consent of Cotton, Samedan entered into a communization agreement dated April 21, 1975, and approved on May 20, 1975, with the Anadarko Area Director of the Bureau of Indian Affairs, acting on behalf of the estate of Lottie Coyote Sleeper, whereby the SW ¼ SW ¼ of Section 22 was included in a unit consisting of Section 22 for the production of gas and gas condensate from the Morrow and Skinner formations (Exhibit # 12).

On May 27, 1975, Samedan commenced 75-0434 seeking to quiet title to its lease against Cotton and Sun and also Oklahoma Natural Gas Company which has been buying the production from the unit since first production on January 11, 1975. Sun subsequently filed a disclaimer wherein it disclaimed all right, title and interest in and to the lease covering the SW ¼ SW ¼ of Section 22 which it entered into with Lottie Coyote Sleeper and assigned to Cotton.

On June 9, 1975, Cotton instituted an administrative appeal to the Commissioner of Indian Affairs objecting to the Anadarko Area Director's approval of the communization agreement between Samedan and the estate of Lottie Coyote Sleeper. Proceedings in 75-0434 were stayed by this Court pending the outcome of the administrative appeal. Jurisdiction over said appeal finally vested in the IBLA and on February 8, 1977, the IBLA issued its decision affirming the decision of the Anadarko Area Director (Exhibit # 13). Thereafter, Cotton commenced 77-0415 seeking judicial review of the IBLA's decision.

As noted previously, 75-0434 and 77-0415 have been consolidated and the parties have stipulated that all matters on file in each case may be incorporated into the record in both cases. Disposition of 77-0415 in favor of the Defendant Secretary of the Interior will require a decision in favor of Samedan in 75-0434. Therefore, the Court will conduct the judicial review sought in 77-0415 before considering 75-0434.

In reviewing the decision of the Defendant Secretary of the Interior, as reached by the IBLA, the Court must determine whether, upon the entire administrative record, there is substantial evidence to support the Secretary's decision, and if so, the decision must stand. Roberts v. Morton, 389 F.2d 87 (D.Colo.1975), aff'd, 549 F.2d 158 (Tenth Cir. 1976), cert. denied, 434 U.S. 834, 98 S.Ct. 121, 54 L.Ed.2d 95 (1977); see 5 U.S.C. § 706(2)(E); Nickol v. United States, 501 F.2d 1389 (Tenth Cir. 1974); Pan American Petroleum Corp. v. Udall, 352 F.2d 32 (Tenth Cir. 1965); Henrikson v. Udall, 350 F.2d 949 (Ninth Cir. 1965). "Substantial evidence" is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Consolo v. Federal Maritime Commission, 383 U.S. 607, 86 S.Ct. 1018, 16 L.Ed.2d 131 (1966); Consolidated Edison Co. v. NLRB, 305 U.S. 197, 59 S.Ct. 206, 83 L.Ed. 126 (1938). It must be enough to justify, if the trial were to a jury, a refusal to direct a verdict when the conclusion sought to be drawn from it is one of fact for the jury. Consolo v. Federal Maritime Commission, supra; NLRB v. Columbian Enameling & Stamping Co., 306 U.S. 292, 59 S.Ct. 501, 83 L.Ed. 660 (1939). This is something less than the weight of the evidence, and the possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency's finding from being supported by substantial evidence. Illinois Central Railroad Co. v. Norfolk & Western Railway Co., 385 U.S. 57, 87 S.Ct. 255, 17 L.Ed.2d 162 (1966); Consolo v. Federal Maritime Commission, supra; NLRB v. Nevada...