Tenneco Oil Co. v. State Indus. Commission

Decision Date17 December 1964
Docket NumberNo. 8103,8103
Citation131 N.W.2d 722
PartiesTENNECO OIL CO. v. STATE INDUSTRIAL COMMISSION. In the matter of a hearing called on a motion of the State Industrial Commission of the State of North Dakota to consider the application of Tenneco Oil Company for an exception location for a well in the N 1/2 of NE 1/4 of Section 6, Township 158 North, Range 81 West, in the Glenburn Field, Renville County, North Dakota.
CourtNorth Dakota Supreme Court
Syllabus by the Court

1. Upon an appeal from an order of the Industrial Commission, the order will be sustained if the Commission has regularly pursued its authority and its findings and conclusions are sustained by the law and credible evidence. (Sec. 38-08-14 NDCC)

2. The Industrial Commission has the power and the duty to set spacing units in oil fields when necessary to prevent waste, to avoid drilling unnecessary wells or to protect correlative rights. (Sec. 38-08-07 NDCC)

3. Exceptions to an order prescribing oil well locations may be granted upon a finding that a well at a prescribed location would not produce in paying quantities. (Sec. 38-08-07 NDCC)

4. A spacing order may not deprive an owner or lessee of land of a fair chance to recover the oil and gas under the land.

5. An applicant for an exception to a spacing order has the burden of showing that he is entitled to the exception.

6. The right to be protected against confiscation is not unlimited and where the situation which would circumvent the spacing rule is created by the voluntary act of a party after the rule has attached to the property, such party is relegated to his rights as they existed prior to the creation of such a situation.

Cox, Pearce, Engebretson, Murray, Atkinson & Gunness, Bismarck, for appellant Tenneco Oil Co.

Sp. Asst. Atty. Gen. Gerald W. Vandewalle, for State Industrial Commission.

Fleck, Mather, Smith & Strutz, Bismarck, for California Oil Co.

BURKE, Judge.

This is an appeal from a judgment of the District Court of Burleigh County affirming an order of the State Industrial Commission which denied the appellant, Tenneco Oil Co., an exception to the regular spacing pattern in Glenburn Oil Field in Renville County.

By its order No. 222, the Industrial Commission established 80 acre spacing in the Glenburn Oil Field. Since the field ran generally in a North and South direction, the regular spacing units ran in the same direction and were designated as the East Half or the West Half of the quarter sections. The order of the Commission, however, permitted the designation of any two adjacent 40 acre tracts in the same quarter section as a spacing unit. However, whether a spacing unit ran north and south or east and west, the drilling pattern required the wells to be drilled in the Northeast Quarter and the Southwest Quarter of quarter sections.

The Northwest Quarter of Section 6, Township 158, North, Range 81 West, Renville County is owned by Harvey Schrouder. At one time the East Half of this quarter section was leased by California Oil Company. The California Company had designated the East Half of the quarter section as a spacing unit and had drilled for oil in the Northeast Quarter thereof in accordance with the regular drilling pattern for the field. The drilling was not successful and the California Company thereafter surrendered or failed to renew its lease.

Tenneco, which owned the lease upon the West Half of the described quarter section, instituted this proceeding by applying the Industrial Commission for the allowance of an exception to the regular field drilling pattern which would permit it to drill in the Northwest Quarter of the quarter section instead of in the Southwest Quarter. This application was filed as Case No. 516 and a hearing was had thereon. At this hearing the testimony of the experts was directly in conflict. The experts who testified for Tenneco stated that, in their opinion, a well drilled in the Southwest Quarter of the quarter section would enter the oil bearing structure below the water-oil contract level, that such a well would not produce oil and that the only way that Tenneco and the landowner could recover their fair share of the oil underlying the quarter section was by means of a well located in the Northwest Quarter of the quarter section. The experts, who testified on behalf of the California Company, stated that, in their opinion, a well drilled in the Southwest Quarter of the quarter section, would enter the oil bearing structure about 34 feet above the water-oil contract level, would be a commercially satisfactory well, would adequately drain the oil from the West Half of the quarter section and would protect the correlative rights of other operators and owners in the field. These opinions were supported by contour maps of the top of the oil bearing structure which in turn were supported by the drilling logs of completed wells and by the geophysical findings of seismographic explorations.

While the Industrial Commission had this case under consideration Tenneco acquired the lease to the East Half of the quarter section which had been dropped by the California Company. Tenneco then filed with the Industrial Commission a new or amended application for a permit for a drilling exception. This application designated the North Half of the quatter section as the spacing unit and, as in the original application, requested a permit to drill in the Northwest Quarter of the quarter section. This application was designated as Case No. 532 and a new hearing was had thereon. At the hearing it was established by uncontradicted testimony that there was no reasonable possibility of drilling a producing well upon the newly constituted spacing unit except in the location for which the exception permit was requested. In opposition there was testimony that such a well would interfere with the correlative rights of other producers and owners and that a well drilled in the Southwest Quarter of the quarter section, although it was not in the newly designated spacing unit, would give both Tenneco and the owner of the land a fair opportunity to recover their share of the oil under the whole quarter section.

In its decision the Commission found that the evidence in support of the application was inconclusive and denied the application 'upon its present merits.'

An appeal was taken from this decision to the District Court of Burleigh County and a judgment affirming the decision was entered upon that appeal. This appeal is from that judgment.

Section 38-08-14 NDCC sub-sec. 4, limits the extent of review upon an appeal from an order of the Industrial Commission as follows:

'* * * Orders of the commission shall be sustained if the commission has regularly pursued its authority and its findings and conclusions are sustained by the law and by substantial and credible evidence.'

Section 38-08-07 NDCC makes it the duty of the Industrial Commission to set spacing units in oil fields 'When necessary to prevent waste, to avoid the drilling of unnecessary wells, or to protect correlative...

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1 cases
  • Amoco Production Co. v. North Dakota Indus. Commission, 9934
    • United States
    • North Dakota Supreme Court
    • June 30, 1981
    ...of the evidence" test. Hence, our prior case law applying the substantial evidence rule is applicable. Tenneco Oil Co. v. State Industrial Commission, 131 N.W.2d 722, 724 (N.D.1964). In Bank of Hamilton v. State Banking Bd., 236 N.W.2d 921 (N.D.1975), a case involving another administrative......
2 books & journal articles
  • CHAPTER 13 APPEAL OF COMMISSION ORDERS
    • United States
    • FNREL - Special Institute Oil and Gas Conservation Law and Practice (FNREL)
    • Invalid date
    ...(1981 Replacement). [71] 5 Davis, Administrative Law Treatise, 2d Ed., §29:1, p.337 (1984). [72] Id. [73] Id. at §29:1, p. 332. [74] 131 N.W.2d 722 (N. Dak. 1964). [75] Id. at 723. [76] Id. at 723-724. [77] Id. at 724. [78] Id. at 726. [79] Id. [80] 307 N.W.2d 839 (No. Dak. 1981). [81] Id. ......
  • CHAPTER 2 STATE SPACING AND JURISDICTION OVER CONSERVATION
    • United States
    • FNREL - Special Institute Federal Onshore Oil and Gas Pooling and Unitization II (FNREL)
    • Invalid date
    ...Min. L. Fdn., 1985). [45] Amoco Prod. Co. v. N.D. Indus. Comm'n, 307 N.W.2d 839 (N.D. 1981). In Tenneco Oil Co. v. St. Indus. Comm'n, 131 N.W. 2d 722 (N.D. 1964), the operator attempted to redesignate spacing units from stand-up to laid-down after a dry hole had been drilled. The North Dako......

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