Southern Union Production Co. v. Corporation Commission

• Citation: 465 P.2d 454
• Decision Date: 27 January 1970
• Docket Number: No. 42116,42116
• Parties: SOUTHERN UNION PRODUCTION COMPANY, Plaintiff in Error, v. CORPORATION COMMISSION of the State of Oklahoma; and Eason Oil Company, Defendants in Error.
• Court: Supreme Court of Oklahoma

Page 454

465 P.2d 454

SOUTHERN UNION PRODUCTION COMPANY, Plaintiff in Error, v. CORPORATION COMMISSION of the State of Oklahoma; and Eason

Oil Company, Defendants in Error.

No. 42116.

Supreme Court of Oklahoma.

Jan. 27, 1970.

Appeal from an order of the Corporation Commission of the State of Oklahoma.

Paul Brown, Brown, Verity & Brown, Oklahoma City, William S. Jameson, Dallas, Tex., for plaintiff in error.

T. Murray Robinson, Oklahoma City, for Eason Oil Co., defendant in error.

Ralph L. Wampler, Oklahoma City, for corporation commission of Oklahoma, defendant in error.

LAVENDER, Justice.

This is an appeal from an order (No. 62,532) of the Corporation Commission of the State of Oklahoma, which involved a prior pooling order (No. 53,163) of the Commission affecting certain common sources of supply underlying Section 14, Township 23 North, Range 13 West, in Woods County, and purported to determine and declare the legal effect of such prior pooling order at the time of its entry and at the time of the entry of the later order (No. 62,532).

At the time of the entry of the prior pooling order, October 25, 1963, the oil and gas leasehold interests in that 640-acre governmental section were held in the following proportions: Plaintiff in error Southern Union Production Company (hereinafter called 'Southern Union'), 402 acres, consisting of the East Half, and the East half of the Southwest Quarter, of the section; defendant in error Eason Oil Company (hereinafter called 'Eason'), 160 acres, consisting of the Northwest Quarter of the section; and Anadarko Production Company (hereinafter called 'Anadarko,' but is not a party to this appeal), 78 acres, consisting of the West Half of the Southwest Quarter of the section.

By order of July 30, 1963, the Commission extended previously established 640-acre drilling and spacing units for the production of gas and gas condensate from the Basal Cherokee Sand to include this Section 14 and established that section as one drilling and spacing unit. By order of October 15, 1963, the Commission established 640-acre drilling and spacing units for the production of gas and gas condensate from the Tonkawa, Cottage Grove, Oswego, Chester, and Mississippi formations, with this Section 14 as one drilling and spacing unit. These orders provided the spacing unit bases for the pooling order involved in the order under attack herein, but are not involved in this appeal.

Thereafter, Southern Union filed an application for the pooling of the lessees' interests with respect to the Cherokee formation (which is another name for the Basal Cherokee Sand) underlying this Section 14, and Anadarko filed an application for the pooling of the lessees' interests with respect to the Cherokee, Tonkawa, Cottage Grove, Oswego, Chester, and Mississippi formations underlying this Section 14. The applications were combined for hearing, and, on October 25, 1963, the Commission entered its Order No. 53,163, which is involved in the Commission's order (No. 62,532) under attack in this appeal.

In its Order No. 53,163, the Commission ordered as follows:

'1. That the oil and gas leasehold interests in the Tonkawa, Cottage Grove, Oswego, Cherokee, Chester and Mississippi common sources of supply underlying Section 14, Township 23 North, Range 13 West, Woods County, Oklahoma, are hereby pooled for the production of gas and gas condensate from each of said common sources of supply, and Southern Union Production Company is hereby named the operator of said Unit, and is hereby permitted and authorized to drill and operate the well on said Unit for the production of gas and gas condensate from each of said common sources of supply.

'2. That for the purpose of this Order the sum of $90,000.00 is fixed as the cost of drilling and completing said well in said Mississippi lime formation a depth sufficient to test the same, and in the event there is a dispute as to such cost after said well has been completed, the Commission retains jurisdiction of this Cause for the purpose of redetermining such cost; that the sum of $35.00 per acre is hereby fixed as a fair and reasonable cash bonus to be paid to Eason Oil Company as compensation in lieu of the right to participate in the Working Interest in said well.

'3. That the said Eason Oil Company shall be permitted to participate in the Working Interest in said well by paying its proportionate part of the cost of drilling and completing the same, or furnishing satisfactory security for the payment thereof, within ten (10) days from the date of this Order; that in the event Eason Oil Company does not desire to participate in the Working Interest in said well, it shall be paid the sum of $35.00 per acre as compensation in lieu thereof.

'4. That Eason Oil Company is hereby required to elect, within ten (10) days from the date of this Order, as to which method it desires to pursue in the development of said Unit, and in the event it does not make such election it shall be assumed that it has elected to accept a bonus in the sum of $35.00 per acre as compensation in lieu of its right to participate in the Working Interest in said well.

'5. That Southern Union Production Company shall commence operations for the drilling of the above described well on said Unit within forty (40) days from the date of this Order, and continue the drilling thereof with due diligence to completion, or the provisions hereof shall be inoperative and this Order shall be null and void.'

No appeal was taken from that order, and no question is raised as to the validity of that order, either on constitutional, jurisdictional, or other grounds.

Eason elected not to participate in the working interest in said well by paying its proportionate part of the cost of drilling and completing the same, and accepted a cash bonus of $5,600.00 (160 acres at $35.00 per acre), as provided for in the order. Southern Union drilled a well on the tract, which tested all of the formations mentioned in the order, and completed it as a 'marginal gas well' in the Oswego formation, but plugged the well later. At the time of the making of the order under attack herein, no other well had been drilled on this unit.

Apparently Southern Union claims that, by its payment to Eason, and Eason's acceptance, of the cash bonus provided for in the Commission's Order No. 53,163, Southern Union became the owner (insofar as any production of oil or gas from any of the formations specified in that order is concerned) of all of the leasehold interest which Eason had held in this Section 14 at the time of the making of that order and the payment and acceptance of such cash bonus. And, apparently because of that claim and Eason's own claim that, by its election and acceptance of the cash bonus provided for in that order, it was excluded only from participation in any production from the well authorized by that order, Eason filed an application with the Corporation, requesting the Commission to interpret its Order No. 53,163, and (on the basis of the drilling of the well authorized by that order, its completion as a dry hole, and the abandonment thereof) to declare 'that all of the effectiveness of said Order is gone and that no party is either bound by, or has any further interest in, the provisions thereof.'

After notice and hearing on such application, the Commission entered its Order No. 62,532, under attack in this appeal:

'1. That the drilling by Southern Union Production company of the well authorized by Order No. 53,161, and its subsequent abandonment as a dry hole, terminated all of the rights of development created by said pooling order in respect to the Tonkawa, Cottage Grove, Oswego, Chester, Mississippi, and Cherokee common sources of supply, and the parties are now in the same position they would be if such pooling order had not been entered.'

'2. That all of the effect of Order No. 53,163 has terminated.'

'3. That this order is limited to the interpretation of the pooling order and has no effect upon the spacing orders under which such pooling order was entered.'

Southern Union attacks this later order on two somewhat related grounds. The first one is to the effect that, under and by virtue of the provisions of the Commission's Order No. 53,163, it acquired all of the leasehold interest which Eason had held with respect to all of the formations mentione in that order, underlying this Section 14, at the time of the making of that order and its payment, and Eason's acceptance, of the cash bonus provided for in that order. The second one (which is based partially upon the leasehold interest which it claims to have acquired under and by virtue of the provisions of said Order No. 53,163) is that the Corporation Commission was without jurisdiction to make an order of the character and effect of its Order No. 62,532.

Although defendants in error concede that the Corporation Commission has no jurisdiction to try title, they argue that because of 52 O.S.1961, § 112, the Commission did have the authority to enter the order complained of here. That statute authorizes the Commission, upon a showing of substantial change in conditions subsequent to its earlier order, to enter an order repealing, amending, modifying or supplementing such earlier order. Eason contends that all it was asking the Commission to do, and all that it did, was 'supplement' its previous order. We do not agree.

The application of Eason, as we have already seen, was, in part, that 'this Commission should now determine that all of the effectiveness of said (earlier order No. 53,163) is gone and that no party is either bound by, or has any further interest in, the provisions thereof,' and that the Commission '* * * determine the rights...