Adkins v. Board of Oil, Gas & Mining

926 P.2d 880, 303 Utah Adv. Rep. 3, 1996 Utah LEXIS 95, 1996 WL 638402
CourtUtah Supreme Court
DecidedNovember 5, 1996
DocketNo. 950219
StatusPublished
Cited by2 cases

This text of 926 P.2d 880 (Adkins v. Board of Oil, Gas & Mining) is published on Counsel Stack Legal Research, covering Utah Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Adkins v. Board of Oil, Gas & Mining, 926 P.2d 880, 303 Utah Adv. Rep. 3, 1996 Utah LEXIS 95, 1996 WL 638402 (Utah 1996).

Opinion

HOWE, Justice:

Petitioner John Adkins seeks review of the dismissal of his request for agency action by the Board of Oil, Gas, and Mining for his failure to state a claim upon which relief may be granted and his failure to provide proper notice to all interested parties. The request [882]*882sought retroactive modification of an oil field spacing order, a forced pooling of interests with respondent Union Pacific Resource Company (UPRC), and a proportional share of UPRC’s past and future production profits.

I. STANDARD OF REVIEW

Under Utah Code Ann. § 63-46b-16, dealing with judicial review of an agency’s formal adjudicative proceedings,1 we treat the Board’s dismissal of Adkins’ petition as analogous to a court’s dismissal of a complaint pursuant to a rule 12(b)(6), Utah Rules of Civil Procedure, motion for failure to state a claim. Therefore, we grant “no particular deference” to the Board’s legal conclusions. Bennion v. Graham Resources, Inc., 849 P.2d 569, 570 (Utah 1993). In addition, “[w]e accept the factual allegations in the complaint as true and consider them and all reasonable inferences to be drawn from them in the light most favorable to the [petitioner].” St. Benedict’s Dev. v. St. Benedict’s Hosp., 811 P.2d 194, 196 (Utah 1991).

II. FACTS

General Background

The Utah Oil and Gas Conservation Act, Utah Code Ann. § 40-6-6, authorizes the Board of Oil, Gas and Mining to issue “spacing orders” which divide oil and gas fields into “drilling units,” each typically allowing one well per unit for maximally efficient recovery of mineral resources. “All lands determined by the Board to overlay the pool” must be included in a drilling unit. § 40-6-6(5)(b). The Board determines the size and shape of the drilling units on the basis of various geologic and engineering factors. § 40-6-6(4), (5). The Act provides protection for “correlative rights,” § 40-6-1, defined as “the opportunity of each owner in a pool to produce his just and equitable share of oil and gas in a pool without waste.” § 40-6-2(2). It also minimizes unnecessary wells by providing that the “drilling unit may not be smaller than the maximum area that can be efficiently and economically drained by one well.” § 40-6-6(3). The Board has the power to modify existing spacing orders. § 40-6-6(6). Landowners within a drilling unit may elect to pool their interests, or if they do not, the Board may force a pooling of interests so that all owners within the unit will share in the costs and rewards of resource production. § 40-6-6.5(2)(a). It logically follows from the above statutes that no landowner has any claim on production from drilling units other than those upon which his land is situated.

Relevant Specific Facts

Adkins owns 40 acres on the northeast edge of the Pineview oil field, which is part of the Nugget formation in Summit County, Utah. He has owned the land continuously during all relevant time periods. The land was under lease to Amoco Production Company from 1975 to 1981 and to Wells Petroleum from May 1982 to May 1985. Both leases expired for lack of production. In 1975, Quasar Petroleum petitioned for a temporary order, which the Board granted, dividing the Pineview field into 160-acre drilling units. In 1976, however, UPRC’s predecessor in interest, Champlain Petroleum Company, petitioned for a reduction of the unit size to 80 acres, contending that this was the largest area which could be effectively drained by one well and that the smaller drilling units would provide necessary flexibility of well sites, protect Champlain’s correlative rights, and avoid the possibility of drilling dry holes. The Board granted the petition and issued a temporary spacing order over the objections of other oil company witnesses who protested that the application was premature and not sufficiently supported by production and engineering data. This reduction placed Adkins’ 40 acres and an adjoining 40 acres together in a drilling unit where no well had been drilled. Adkins was personally served with notice of the 1976 hearing but did not participate. Although he had the opportunity to appeal the Board’s ruling, he did not do [883]*883so. In 1976, Champlain completed the Bing-ham 1-42-3 well in an 80-acre drilling unit which is two units directly south of Adkins’ unit. That well, now owned by UPRC, has been consistently productive from that time to the present, yielding to date over 3 million barrels of oil.

The Nugget formation has produced under a fairly strong water drive in which water encroaches upon the edges of the field as the oil is withdrawn. Consequently, the oil initially in place under Adkins’ land has migrated south out of his drilling unit toward the Bingham well. The well site for the drilling unit which encompasses Adkins’ land is situated on his property, but a well has never been drilled. He asserts that drilling a well on his property is unnecessary and would be wasteful since the oil beneath his land has migrated and was and is being produced by UPRC’s Bingham well. Moreover, it would be entirely futile at this point since Adkins’ land no longer overlays any oil. Adkins has received no benefit from the oil formerly underlying his land. This situation gave rise to Adkins’ request for agency action.

Adkins sought a modification of the drilling unit size to 200 acres so as to include his 40 acres with 160 acres of UPRC’s land in a new unit encompassing the Bingham well. Although the Oil and Gas Act specifies that absent unusual circumstances, drilling units should be regular, § 40-6-6(4)(a), Adkins proposed an irregularly sized drilling unit which would include his 40 acres but exclude the other 40 acres in his present drilling unit. He also sought to have the new spacing order applied retroactively to the beginning of production from the Bingham well in 1976, allowing him a proportional share of past, as well as future, profits.

Following Adkins’ request for agency action, UPRC moved to dismiss for failure to state a claim on which relief may be granted under section 63^6b-l(4)(b). UPRC asserted that Adkins could prove no set of facts upon which relief could be granted and also that Adkins had failed to comply with Utah Administrative Code requirements for notice to all interested parties because he did not notify the co-tenant on his current 80-acre drilling unit of his request for agency action. Although the co-tenant’s land was not to be included in the proposed new unit, UPRC asserted that the co-tenant was an interested party since he would have no approved well site within his own 40 acres if Adkins’ land was placed in another drilling unit.

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Bluebook (online)
926 P.2d 880, 303 Utah Adv. Rep. 3, 1996 Utah LEXIS 95, 1996 WL 638402, Counsel Stack Legal Research, https://law.counselstack.com/opinion/adkins-v-board-of-oil-gas-mining-utah-1996.