Calvert Drilling Co. v. Corporation Commission

1979 OK 7, 589 P.2d 1064, 62 Oil & Gas Rep. 516, 1979 Okla. LEXIS 225
CourtSupreme Court of Oklahoma
DecidedJanuary 23, 1979
DocketNo. 50909
StatusPublished

This text of 1979 OK 7 (Calvert Drilling Co. v. Corporation Commission) is published on Counsel Stack Legal Research, covering Supreme Court of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Calvert Drilling Co. v. Corporation Commission, 1979 OK 7, 589 P.2d 1064, 62 Oil & Gas Rep. 516, 1979 Okla. LEXIS 225 (Okla. 1979).

Opinion

HARGRAVE, Justice:

The determinative question presented by this appeal from Order No. 129314 of the Oklahoma Corporation Commission is: Does the Commission have the power to extend a drilling and spacing unit to encompass land overlying the edge of the prospective Prue Common Source of Supply in Section 2, T14N, R4W, in Oklahoma County? The land covered by spacing units formed in the above order is subject to oil and gas interests owned by Calvert Drilling Company, the appellant, Exxon Corporation and Kerr McGee Corporation, the appellees. The spacing units established in the questioned order are two 320 acre units in Section 2, being the west and east half thereof.

Exxon Corporation applied for the 320 acre units after the appellant had completed a well with a calculated openflow potential of 6,854 MCF per day in the NW/4, of the SW/4 of Section 2. The spacing order is an extension of previously established units of the same size immediately to the west and south in the West Edmond field and extends that spacing over the east edge of the field proven to exist by the production from the above mentioned well in the NW/4 of the SW/4 known as the Snyder # 1, and to the east half of that Section as a prospective common source. The trial examiner reviewed the testimony which uniformly demonstrates both a common source of supply, the lower Prue, and the existence of that common source of supply on both of the units requested. The trial authority denied the requested spacing on the basis of the views expressed in Caudillo v. Corporation Commission, Okl., 551 P.2d 1110 (1976), stating the area for which spacing is sought is not “entirely underlain by the Prue and this Commission does not have jurisdiction to space.”

At the trial examiner’s hearing, the first witness testified that a single well on each requested 320 acre spacing unit would adequately drain the Prue formation. This witness stated a continuation of the 320 acre stand-up spacing was preferable to a 320 prone spacing because the Snyder well was only 330 feet from what would be the south edge of a prone spacing unit in the north of the section and the present Snyder well would drain the west half of that prone unit.

This first witness noted there was a 25 year old abandoned Prue oil well in the NE of the SE of the section above Section 2 (Section 35). This witness also noted that there exists two zones of the Prue formation known predictably as the upper and the lower Prue. According to this witness, the upper Prue is not productive and is separated from the lower Prue by 10 to 20 feet of shale. This witness also stated that a well in the SE/4 of the SW/4 of Section 2 (Hil-pert) showed a gross lower Prue thickness of 8 feet.

In Section 2, the witness noted there is 23 feet of productive Prue formation in the Calvert Snyder #1 in the NW/4 of the SW/4. For this reason, the witness stated it was his opinion that the east half of the SE/4 of Section 2 could not be excluded as possibly underlain by the productive Prue formation. Additionally, 4 feet of gross Prue formation is encountered by a well drilled in Section 1, to the east of the requested spacing units.

Mr. B. testified as a petroleum geologist on behalf of Kerr-McGee referring to an exhibit he prepared that approximately 130 acres would probably not be productive in the Prue and stated that until a well was drilled, one could not be sure.

Mr. C., a petroleum geologist for Kerr-McGee, testified to reasons for establishing a stand-up 320 acre unit in Section 2. They are: (1) all of the N/2 of the Section can be drained by the Snyder #1 as presently established; (2) drilling two wells in the west half under a lie-down unit would constitute economic and physical waste; (3) formation of a W/2 unit would prevent economic and physical waste; (4) lastly, formation of a lie-down unit in the Section would not prevent establishment of a [1066]*1066second well close to the present Snyder well. The witness stated that his exhibit is only an interpretation of available data and subsequent drilling could demonstrate that interpretation wrong and prove the existence of productive sand, although this exhibit reflects that the SE/4 of Section 2 may not be underlain with Prue.

All the exhibits included in the record of the trial examiner which disclose the location and thickness of the Prue sand are net isopach maps using an 8% porosity figure for a cutoff. The record does not reflect whether this refers to a porosity cutoff which excludes the presence of gas or oil or is a lower limit on the porosity necessary to support an economically productive well in its own right. It is, however, a fair conclusion from the record that gross Prue sand is encountered in Section 2 generally.

The appellant raises two points of error which are substantially encompassed in the objection that the evidence is uncontrovert-ed that a portion of the land encompassed in the spacing order is not underlain by the common source of supply and therefore the Corporation Commission has no power to space the whole unit. The appellant takes the position that all the land spaced by the order of the Corporation Commission must overlie the common source of supply and the Corporation Commission has no power to space a unit of land not completely overlying the common source of supply. At the outset, from the application of this statement to the evidence of this case, a problem becomes apparent. That is, the purpose of preventing economic waste cannot be accomplished if one must know the boundaries of a formation exactly before a unit is established, because this exact knowledge is obtainable only by drilling, and that drilling is of itself one of the economic wastes sought to be prevented by the statute.

The appellant’s argument then makes the assumption that the common source of supply, as defined in the statute, is limited not to the common formation in which the oil and gas is found, but to those portions of the formation to which a well may be drilled so as to produce in paying quantities. Under applicable statutes, the applicant for a spacing order need not establish the whole area is underlaid by a formation productive enough to support a well which would be economic in its own right; it is sufficient that the formation probably contains oil and gas capable of being withdrawn by a well on the drilling and spacing unit. 52 O.S.1971 § 86.1(c) states:

“The term ‘Common Source of Supply’ shall comprise and include that area which is underlaid or which, from geological or other scientific data, or from drilling operations, or other evidence, appears to be underlaid, by a common accumulation of oil or gas or both; . . . ” [Emphasis added]

52 O.S.1971 § 87.1 (since amended) contains the following provisions this Court deems pertinent to this appeal:

“(a) To prevent or to assist in preventing the various types of waste of oil or gas prohibited by statute, or any of said wastes, or to protect or assist in protecting the correlative rights of interested parties, the Commission, upon a proper application . . . shall have the power to establish well spacing and drilling units of specified and approximately uniform size and shape covering any common source of supply, .

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Related

Sinclair Oil & Gas Company v. Corporation Commission
1963 OK 23 (Supreme Court of Oklahoma, 1963)
Cameron v. Corporation Commission
1966 OK 193 (Supreme Court of Oklahoma, 1966)
Crews v. Champlin Oil & Refining Company
1966 OK 72 (Supreme Court of Oklahoma, 1966)
Harvey v. Hall
1970 OK 92 (Supreme Court of Oklahoma, 1970)
Panhandle Eastern Pipe Line Co. v. Corporation Commission
285 P.2d 847 (Supreme Court of Oklahoma, 1955)
Caudillo v. Corporation Commission
1976 OK 198 (Supreme Court of Oklahoma, 1976)

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Bluebook (online)
1979 OK 7, 589 P.2d 1064, 62 Oil & Gas Rep. 516, 1979 Okla. LEXIS 225, Counsel Stack Legal Research, https://law.counselstack.com/opinion/calvert-drilling-co-v-corporation-commission-okla-1979.