Samson Resources Co. v. Oklahoma Corp. Com'n

• Decision Date: 21 July 1987
• Docket Number: No. 62102,62102
• Citation: 1987 OK 73,742 P.2d 1114
• Parties: SAMSON RESOURCES COMPANY, Appellant, v. The OKLAHOMA CORPORATION COMMISSION and TXO Production Corp., Appellees.
• Court: Oklahoma Supreme Court

Page 1114

742 P.2d 1114

1987 OK 73

SAMSON RESOURCES COMPANY, Appellant, v. The OKLAHOMA CORPORATION COMMISSION and TXO Production

Corp., Appellees.

No. 62102.

Supreme Court of Oklahoma.

July 21, 1987.

As Corrected Oct. 1, 1987.

Rehearing Denied Sept. 29, 1987.

Gregory L. Mahaffey, J. Jayne Jarnigan, Mahaffey & Gore, P.C., Oklahoma City, for appellant.

Gretchen P. Hoover, Deputy General Counsel, and Leslie W. Pepper, Asst. General Counsel, Oklahoma Corp. Com'n, Oklahoma City, for appellee, Oklahoma Corp. Com'n.

Robert A. Miller, Susan E. Ross, Crabtree and Miller, Oklahoma City, for appellee, TXO Production Corp.

ALMA WILSON, Justice:

The controversy in this case is whether Samson Resources Company, the appellant, timely elected under a forced-pooling order of the Corporation Commission to participate in the development of an oil and gas well, and whether the Commission has jurisdiction to hear the matter.

In January of 1982 TXO Production Corporation (TXO) drilled and completed the Harris No. 1 well in Section 24, Township 4 North, Range 14 East, Pittsburg County, Oklahoma, pursuant to a pooling order obtained from the Corporation Commission. Samson Resources Company (Samson) elected to participate under the terms of the order with its interest. After the well had been completed, a second pooling order was necessary to cover a forty acre interest owned of record by W.O. Pettit, which interest was uncommitted to the unit well. On October 13, 1982, the Corporation Commission entered a second pooling order. Among the terms of that order Pettit was required to elect to TXO in writing, within fifteen days of October 13, 1982, which of the alternatives in paragraph 3 of the order that the owner accepted. Paragraph 3 provided for the options of participating in the development of the unit, receiving a cash bonus plus overriding or excess royalty, or receiving a fair share of production.

On October 28, 1982, W.O. Pettit sent a certified letter to TXO which stated:

In response to your force pooling [sic] order covering above captioned section, this is to advise I have farmed out my interest to Samson Resources Company, 2700 First National Tower, Tulsa, Oklahoma 74103, who has informed you they will participate with my interest.

On November 1, 1982, Samson sent a letter to TXO stating:

This letter is to confirm my earlier phone conversation wherein I informed you of our acquisition of W.O. Pettit's interest in the captioned unit.

Please forward a revised Exhibit "A" to the Operating Agreement covering the captioned unit.

TXO contended that neither of these letters were valid elections by Samson to participate in the drilling of the Harris No. 1 well, pursuant to the Corporation Commission's second pooling order. Samson sought a determination by the Commission that its election was proper, and that it was entitled to participate as a working interest owner in the Harris well. After a hearing before the Oil and Gas Referees who denied Samson's application, a decision by the Corporation Commission, reversing, followed by a reconsideration in which the Commission upheld the decision of the referees, the Commission ultimately denied Samson's application and ruled that Samson failed to make a valid election. Samson appealed to this Court.

I.

The first issue we address is whether the Corporation Commission had jurisdiction to decide the controversy or whether our holding in Tenneco Oil Co. v. El Paso Natural Gas, 687 P.2d 1049 (Okl.1984) requires that the district court hear the matter.

After the Corporation Commission issued its order in the case at bar, this Court handed down Tenneco. Samson cites Tenneco for the proposition that the Corporation Commission has no jurisdiction to entertain disputes over the status of elections under pooling orders. Such a construction is too broad. In Tenneco, as in the case at bar, the issue before this Court was the proper forum for deciding whether one of the parties had properly elected to participate in the drilling of a well. But unlike the case before us, the parties in Tenneco had entered into a private operating agreement which had to be construed in order to determine whether the election was valid. This Court found that the dispute involved the private rights of the parties, and that "no attempt [was] made by any party in the instant case to change or challenge the public issue of conservation of oil and gas," and therefore the proper forum was the district court. Tenneco, 687 P.2d at 1054-1055.

In two cases decided after Tenneco, this Court also found that the district court was the proper forum for the disputing parties. In both Samson Resources Co. v. Corporation Comm'n, 702 P.2d 19 (Okl.1985), and MM Resources, Inc. v. Huston, 710 P.2d 763 (Okl.1985), as in Tenneco, the issues involved the construction of private contracts between the parties. In all three of the cases cited this Court found that no issue of public interest was involved and that therefore the Corporation Commission was without jurisdiction in the matter.

Conversely, the case of Nilsen v. Ports of Call Oil Co., 711 P.2d 98 (Okl.1985) involved the clarification of a Corporation Commission order relating to the authorization "to drill and operate a well" on the unit. Ports of Call had interpreted this phrase to mean a completed well into the target formations, and that it necessarily contemplated continuous operations to achieve that end, including the commencement of a second and third borehole following blowout problems which had been encountered. The opposing parties construed "a well" to be limited to the initial borehole. We found that the parties were...