Seal v. Corporation Com'n
| Decision Date | 17 June 1986 |
| Docket Number | 61652,Nos. 61636,s. 61636 |
| Citation | 725 P.2d 278 |
| Court | Oklahoma Supreme Court |
| Parties | Dennis E. SEAL, Darlene C. Seal, Donald D. Seal, Pamela Upchurch, Sueellen Farris, Farmers United Cooperative Pool, Western Oklahoma Royalty Association, J. Cooper West, Neva L. Harris, Hugh Howard Walsh III, A.R. Heiman, Shelby Snider Corporation, R.C. Bradley, Trustee for the R.C. Bradley Revocable Trusts, F.M. Tarpley, Trustee for the F.M. Tarpley Revocable Trusts, Gordon R. Brechiesen, A.E. Martin, Amory Corporation, George Gallesty, Gallesty Oil Properties, Inc., Fuller Petroleum, Inc., Carl A. Neilson, Elsie M. Elder, Nancy Delong Machino, G.M. Tapp and Albert B. Tapp, Appellants, v. The CORPORATION COMMISSION of the State of Oklahoma, Appellee. AMERADA HESS CORPORATION, Amoco Production Company, Apache Corporation, Atlantic Richfield Company, Cities Service Oil and Gas Corporation, Devon Energy Corporation Energy Reserves Group, Inc., El Paso Exploration Company, Exxon Corporation, Getty Oil Company, Grace Petroleum Corporation, Gulf Oil Corporation, Inexco Oil Company, Kerr-McGee Corporation, Kirby Exploration Company, Mapco Production Company, Marathon Oil Company, Monsanto Oil Company, Mustang Production Company, Phillips Petroleum Company, Samedan Oil Corporation, Santa Fe Energy Company, Shell Western E & P Inc., Sun Exploration and Production Company, Tenneco Oil Company, and Texaco Inc., Appellants, v. The CORPORATION COMMISSION of the State of Oklahoma Composed of The Honorable Hamp Baker, Chairman; The Honorable Norma Eagleton, Vice Chairman; and The Honorable James B. Townsend, Commissioner, Appellees. |
Tomerlin, High & High by David High, Delmer Stagner, Durbin, Larimore & Bialick by James K. Larimore, Oklahoma City, for appellants Dennis E. Seal, et al.
James H. Bailey, General Counsel, Gretchen P. Hoover, Deputy General Counsel, Patrick W. Willison, Asst. General Counsel, Oklahoma Corp. Com'n, Oklahoma City, for appellee.
McAfee & Taft by Stanley L. Cunningham, Laurence M. Huffman, Philip D. Hart and Gary W. Catron, Oklahoma City, for appellants Amerada Hess Corp.
Emery McCandless & Gaitis, P.C. by Neal A. Gerstandt and James M. Gaitis, Oklahoma City, for appellant El Paso Exploration Co.
Pray, Walker, Jackman, Williamson & Marlar by Bland Williamson, Tulsa, for amicue curiae Oklahoma Independent Petroleum Ass'n.
This consolidated appeal presents to this Court issues regarding the constitutionality of 52 O.S.Supp.1983 §§ 541-547 (Act) and the validity of Rules 6-100 through 6-113 (Rules) promulgated by the Oklahoma Corporation Appellants Amerada Hess Corporation, et al. (collectively Amerada) challenge the constitutionality of both the Act and the Rules. The major thrust of Amerada's arguments is twofold: (1) the Act and Rules are not a valid exercise of the state's police power and is thus violative of the due process provisions of the Constitutions of the United States and Oklahoma, and (2) the Act and Rules interfere with contractual rights and obligations under the federal and state constitutions.
Commission (Commission) in Order No. 250466.
Appellants Dennis E. Seal, et al. (collectively Seal) challenge the validity of the Rules only, maintaining they are contrary to and inconsistent with the purpose and intent of the Act and constitute a taking of property without due process of law.
The Commission asserts the Act and Rules are constitutional and are in furtherance of a legitimate public interest and are hence a proper exercise of the State's police power.
Before we discuss the merits, we must address Seal's argument concerning Amerada's standing to challenge the constitutionality of the Act. Seal contends that Amerada lacks standing because Amerada is deprived of no constitutional right as the Act requires it to do what courts of equity would require it to do in individual actions where an imbalance has occurred.
"In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues." 1 The standing doctrine encompasses several limits on the exercise of jurisdiction. At a minimum, standing is not established unless a plaintiff has "such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends...." 2 The "personal stake" element is met if the plaintiff seeking redress has suffered, or is threatened with, some "distinct and palpable injury" 3 and if there is some causal connection between the alleged injury and the actions being challenged. 4 Because we conclude Amerada alleges a direct and pecuniary injury, and it seeks to protect its proceeds of sales from the purported illegal effect of the Act and Rules thereunder, we find Amerada has standing to challenge the constitutionality of the Act and Rules.
The public policy considerations prompting the challenged legislation were first discussed in a concurrent resolution, S.C.Resolution No. 7 entitled "Oil and Gas--Sales--Discrimination," passed by the Senate on February 22, 1983, and by the House of Representatives on March 1, 1983, and filed with the Secretary of State on March 2, 1983. The findings set forth in the resolution are as follows:
On May 3, 1983, Governor George Nigh signed into law Enrolled House Bill No. 1221, codified as 52 O.S.Supp.1983 §§ 541-547. The Act which became effective immediately is expressly intended to address the protection of "the rights and correlative rights of all interest owners of natural gas wells and wells producing casinghead gas and to afford all such owners an equal opportunity to extract their fair share of gas and to sell and be paid in proportion to their interest therein." The Act is further expressly intended "to protect such owners against discrimination in purchases in favor of one owner as against another." 6
Under Section 542, whenever a well is placed into production, all owners are entitled to share ratably in the revenues from the sale of production. Prior to the date of first production, the operator of the unit area must offer each owner of the well an election whereby the operator seeks to market that owner's ratable share of production or a designated portion thereof. In the event the owner so elects, the operator shall seek to market the owner's share at the best price and terms available in the area but not at a price or terms less favorable than those received by the operator. Each electing owner has 30 days within which to reject the offer but the owner's failure to reject is deemed an acceptance thereof. If no offer to purchase is secured within 120 days of an election the owner may rescind the election in writing. If an owner does not exercise the election, the owner is not obligated to deliver his ratable share for sale nor is the operator obligated to market such share. The Act does not prevent each owner from receiving the price agreed upon by contract and from taking his share of production in kind or separately disposing of his share.
Section 543 provides that if an electing owner receives a contract for sale of only his portion of production, the other electing owners having no contract are entitled to share ratably in the revenue from the contract "to the extent of their net revenue interest." Each electing owner receiving a contract to sell must give written notice to all other net revenue owners without a contract for the purchase of their share.
Section 544 provides that the amount of gas produced daily from a well is owned by each owner in the well in proportion to each owner's interest in the well, irrespective of which owner actually produces the gas. Each owner producing and selling or disposing of gas separately must account to the other owners not selling or otherwise disposing of gas and compensate them for their proportionate part of the gas disposed of or sold.
Section 545 provides that distribution of revenue from the sale of production be made pursuant to 52 O.S.Supp.1985 § 540. Additionally, any owner receiving revenues directly from the purchaser must forward the same to the party responsible for distribution under Section 540.
Section 546 states that the Act shall not be construed as setting or restricting the Section 547 empowers the Commission to promulgate rules and regulations for implementing the Act, including the power to establish and enforce penalties for violations thereof. It provides that such power does not preclude...
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