Southwest Kansas Royalty Owners Ass'n v. State Corp. Com'n of State of Kan., s. 60808

• Decision Date: 20 January 1989
• Docket Number: 61249,Nos. 60808,s. 60808
• Parties: SOUTHWEST KANSAS ROYALTY OWNERS ASSOCIATION, Appellees, and Kansas Power & Light Co., et al., Appellants, v. The STATE CORPORATION COMMISSION OF the STATE OF KANSAS, et al., Appellees.
• Court: Kansas Supreme Court

Page 1

769 P.2d 1

244 Kan. 157

SOUTHWEST KANSAS ROYALTY OWNERS ASSOCIATION, Appellees and Kansas Power & Light Co., et al., Appellants, v. The STATE CORPORATION COMMISSION OF the STATE OF KANSAS, et al., Appellees.

Nos. 60808, 61249.

Supreme Court of Kansas.

Jan. 20, 1989.

Syllabus by the Court

1. The scope of appellate review of an administrative agency's order is to determine whether the district court reviewed the order in accordance with its statutory responsibility. The party seeking review has the burden of showing the district court that the agency's order is invalid under K.S.A. 77-621(c).

2. The findings of an administrative agency are presumed valid on review. So long as the record contains substantial competent evidence in support of the agency's findings of fact pursuant to K.S.A 77-621(c)(7), the findings are reasonable and should be upheld by the courts.

3. The district court is required to weigh the evidence from the record in order to make a separate and distinct ruling on each material issue on which its decision is based. Where it adopts findings of fact and conclusions of law of the administrative agency which are sufficient in themselves to explain its reasoning, the court is not required to make further findings and conclusions.

4. The decision to receive additional evidence on review of agency action is within the sound discretion of the district court.

5. There is substantial competent evidence to support the Kansas Corporation Commission's finding that the Kansas Hugoton Gas Field is a common source of supply.

6. A litigant may assert only his own constitutional rights.

7. Under the facts of this case, appellants had sufficient notice that other amendments might be necessary to implement the proposed amendment to the Kansas Hugoton Gas Field Basic Proration Order.

8. Congress has carefully circumscribed the field of federal regulation so as not to supplant state authority over the production or gathering of natural gas. An order which is primarily directed at the production of gas rather than the marketing thereof and is necessary for the prevention of waste does not transgress federal regulation of natural gas in interstate commerce.

9. Substantial competent evidence supports the Kansas Corporation Commission's finding that infill wells are required to effectively drain basic proration units because of permeability barriers.

10. Substantial competent evidence supports the Kansas Corporation Commission's findings that localized geological studies can be extrapolated to the field as a whole.

11. Substantial competent evidence does not support the Kansas Corporation Commission's finding that infill wells are necessary to protect correlative rights. Substantial competent evidence does exist, however, to support the Commission's finding that infill wells are necessary to prevent waste. The Commission has the authority to act in order to prevent waste where correlative rights are not threatened. The order is thus valid under the harmless error rule of K.S.A. 77-621(d).

12. Substantial competent evidence supports the Kansas Corporation Commission's finding that delay in infill drilling will result in waste.

13. The Kansas Corporation Commission is empowered to consider the element of time in fulfilling its mandate to prevent waste. Substantial competent evidence supports its conclusion that gas not produced within the next 50 years is without economic value and thus infill drilling is necessary for recovery of slow-draining gas in order to prevent waste.

14. The Kansas Corporation Commission is required to give clear and complete findings of essential facts on which its orders rest. The Commission is not, however, required to explain why it did not accept every piece of evidence presented.

15. Substantial competent evidence supports the Commission's finding that a market will exist for the natural gas produced by infill wells.

16. The Kansas Corporation Commission's assignment of minimum allowables is not inconsistent with its previous orders.

Martin J. Bregman, General Counsel, Topeka, argued the cause and John K. Rosenberg, Asst. Gen. Counsel, Topeka, was with him on the brief for appellant Kansas Power & Light Co.

Mark H. Adams, II, of Adams and McCarthy, Wichita, argued the cause and Jane G. Alseth, Omaha, Neb., was with him on the briefs for appellant Northern Natural Gas Co., and J.D. Steelman, Tulsa, Okl., was with him on the briefs for appellant Williams Natural Gas Co.

Jack Glaves, of Law Offices of Jack Glaves, Wichita, argued the cause and D.J. McCarthy, of the same firm and Clarence A. Conoley, Asst. Gen. Counsel, Kansas City, Mo., were with him on the briefs for appellant Panhandle Eastern Pipe Line Co.

Shari M. Feist, Asst. Gen. Counsel, argued the cause and Frank A. Caro, Jr., Gen. Counsel, was with her on the brief for appellee Kansas Corp. Com'n.

Gregory J. Stucky and Dale M. Stucky, of Fleeson, Gooing, Coulson & Kitch, of Wichita, and B.E. Nordling, of Kramer, Nordling, Nordling & Tate, Hugoton, were on the brief for appellee Southwest Kansas Royalty Owners Ass'n.

Charles H. DuBois, of Mobil Oil Corp., Denver, Colo., Buck Sanders, of Anadarko Petroleum Corp., Houston, Tex., and Jerome E. Jones, and Patricia A. Gorham, of Hershberger, Patterson, Jones & Roth, Wichita, were on the brief for appellees Mobil Oil Corp. and Anadarko Petroleum Corp.

Spencer L. Depew and David W. Nickel, of Depew Gillen & Rathbun, Wichita, were on the brief for intervenor/appellee Santa Fe Minerals.

Richard C. Byrd, of Anderson, Byrd & Richeson, Ottawa, argued the cause and James G. Flaherty, of the same firm, and Lin Patterson, Houston, Tex., were with him on the brief for intervenor/appellee Mesa Ltd. Partnership, and James G. Flaherty, of the same firm, and J.A. Hannah, Oklahoma City, Okl., were with him on the brief for intervenor/appellee Tenneco Oil Co.

Steven D. Gough, of Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita, argued the cause, and Stephen F. Gates and David E. Brody, of Denver, Colo., were with him on the brief for intervenor/appellee Amoco Production Co.

Stanford J. Smith, of Robbins, Tinker, Smith & Metzger, Wichita, argued the cause and Stanford J. Smith, Jr., of the same firm, and John C. Lovett, Tulsa, Okl., were with him on the brief for intervenor/appellee Cities Service Oil and Gas Corp.

HERD, Justice:

This is an appeal from the district court's order affirming the order of the Kansas Corporation Commission (Commission) amending the Basic Proration Order (B.P.O.) for the Kansas Hugoton Gas Field to allow infill drilling. The appeal of Williams Natural Gas Company (Williams) and Northern Natural Gas Company (Northern) has been consolidated with that of Panhandle Eastern Pipeline Company (Panhandle) and Kansas Power & Light Company (K.P.L.). Appellant Williams was formerly Northwest Central Pipeline Corporation, and Gas Service Company, an intervenor, has merged into K.P.L.

Appellees Mobil Oil Corporation (Mobil), Anadarko Petroleum Corporation (Anadarko), Santa Fe Minerals, Southwest Kansas Royalty Owners Association (Southwest), Mesa Operating Limited Partnership (Mesa), Tenneco Oil Company (Tenneco), Amoco Production Company (Amoco), and Cities Service Oil & Gas Corporation (Cities Service) join the Commission as proponents of its order.

The facts concerning the Hugoton Field are well known, having been recited in innumerable cases dealing with commission regulation but for ready reference we repeat them here. The Hugoton Field is the largest known reservoir of natural gas in the world. Colorado Interstate Gas Co. v. State Corporation Comm., 192 Kan. 1, 4, 386 P.2d 266 (1963), cert. denied 379 U.S. 131, 85 S.Ct. 272, 13 L.Ed.2d 333 (1964). It extends south from Kansas into Oklahoma and Texas. The Kansas portion of the field was discovered in 1922 and covers over two and one-half million acres. Approximately 90% of the gas produced from the Kansas Hugoton Gas Field is commingled in integrated pipeline systems with gas produced from various other states and distributed throughout many parts of the country. See Colorado Interstate Gas Co., 192 Kan. at 4-7, 386 P.2d 266. The purchase and sale of such gas is subject to regulation as interstate commerce by the Federal Energy Regulatory Commission (FERC), under the Natural Gas Policy Act (N.G.P.A.) of 1938, 15 U.S.C. § 3301 et seq. (1982). Northern Natural Gas Co. v. Kansas Comm'n., 372 U.S. 84, 83 S.Ct. 646, 9 L.Ed.2d 601 (1963).

The Commission first exercised its jurisdiction over the Kansas Hugoton Field on March 21, 1944, when it issued the B.P.O. pursuant to G.S.1935, 55-701 et seq., finding the field was a common source of supply. See Colorado Interstate Gas Co., 192 Kan. at 6, 386 P.2d 266. The purpose of the B.P.O. is to ensure orderly development of the field by prescribing regulations for the production of gas from the field. The B.P.O. attempts to ensure that each owner will recover, without waste, that amount of gas underlying his or her land. The Commission retains jurisdiction over the field for the purpose of issuing further orders as necessary. The B.P.O. has been amended many times since it was first issued, as additional geological and engineering information has been gained by development of the field.

This case began on July 31, 1984, when Cities Service, an owner and operator of approximately 500 wells, or about 12.5% of the leasehold interests in the Kansas Hugoton Field, filed an application with the Commission to amend the B.P.O. to allow an optional infill well (an additional well) on each Basic Proration Unit (B.P.U.) of 480 acres or more in the Kansas Hugoton Field. The infill application was filed pursuant to the Kansas conservation statutes, K.S.A.1987 Supp. 55-703 and K.S.A. 55-703a. Cities Service alleged the latest engineering and geological evidence demonstrated that the one well allowed in each B.P.U., as originally established in the B.P.O., was...