Conoco, Inc. v. Corporation Commission

1988 OK 27, 764 P.2d 516, 100 Oil & Gas Rep. 567, 1988 Okla. LEXIS 29
CourtSupreme Court of Oklahoma
DecidedMarch 15, 1988
DocketNos. 68756-68758 and 68760
StatusPublished
Cited by1 cases

This text of 1988 OK 27 (Conoco, Inc. 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
Conoco, Inc. v. Corporation Commission, 1988 OK 27, 764 P.2d 516, 100 Oil & Gas Rep. 567, 1988 Okla. LEXIS 29 (Okla. 1988).

Opinion

LAVENDER, Justice:

In Order No. 310755 the Oklahoma Corporation Commission adopted amendments to six of the Commission’s rules relating to the production of natural gas. Four separate appeals were filed in this Court challenging Order No. 310755.1 In each case the challenge has been limited to the amendment of OCC-OGR 2-331. These appeals have been consolidated for consideration.

Prior to amendment of OCC-OGR 2-331 by Order No. 310755 that rule established the allowable production rate for unallocated gas wells as 50 percent of the well’s wellhead absolute open flow (WHAOF) potential. The form of OCC-OGR 2-331 as amended by Order No. 310755 would reduce the allowable production rate for unallocated capable2 gas wells to a production of one million cubic feet per day plus 25 percent of the well’s WHAOF potential in excess of two million cubic feet per day.

In the appeals challenging the amendment of OCC-OGR 2-331 by Order No. [518]*518310755 the appellants have raised numerous arguments concerning the validity of the Commission’s action in adopting this amendment. These arguments have addressed the Commission’s order on substantive grounds as well as on the ground that the Commission’s procedure in the adoption of the amendment to OCC-OGR 2-331 was defective. Because we find a single argument advanced by appellants to be dispositive in this case we limit our discussion to that point.

It is clearly established that the authority of the Corporation Commission relating to the conservation of oil and gas is limited to the powers expressly or by necessary implication granted to it by Constitution or by statute.3 Further, the exercise of the Commission’s authority, to be valid, must be in strict conformity with the grant of power.4

Appellants argue that the Commission is without authority to promulgate a rule setting allowable production rates for unallocated gas wells on a state-wide basis. Our examination of the statutory basis claimed by the Commission as authority for its imposition of such a rule leads to the conclusion that the argument presented by appellants is valid.

In briefs on appeal and in oral argument before the Court the Commission has presented 52 O.S.1981 §§ 236 through 247 as providing statutory authority for its actions. However, the Commission acknowledged that it relied more specifically on the provisions of sections 239 and 243 as the source of its power to enact a rule setting a state-wide allowable. Title 52 O.S.1981 § 239 provides:

Whenever the full production from any common source of supply of natural gas in this state is in excess of the market demands, then any person, firm or corporation, having the right to drill into and produce gas from any such common source of supply, may take therefrom only such proportion of the natural gas that may be marketed without waste, as the natural flow of the well or wells owned or controlled by any such person, firm or corporation bears of the total natural flow of such common source of supply having due regard to the acreage drained by each well, so as to prevent any such person, firm or corporation securing any unfair proportion of the gas therefrom; provided, that the Corporation Commission may by proper order, permit the taking of a greater amount whenever it shall deem such taking reasonable or equitable. The said Commission is authorized and directed to prescribe rules and regulations for the determination of the natural flow of any such well or wells, and to regulate the taking of natural gas from any or all such common sources of supply within the state, so as to prevent waste, protect the interests of the public, and of all those having a right to produce therefrom, and to prevent unreasonable discrimination in favor of any one such common source of supply as against another.

Title 52 O.S.1981 § 243, provides:

The Corporation Commission shall have authority to make regulations for the prevention of waste of natural gas, and for the protection of all natural gas, freshwater, and oil-bearing strata encountered in any well drilled for oil or natural gas, and to make such other rules and regulations, and to employ or appoint such agents, with the consent of the Governor, as may be necessary to enforce this act.

No previous interpretation has been given to sections 239 or 243 by this Court regarding the authority granted the Commission under those provisions. However, appellants argue that this Court’s decisions [519]*519in the H.F. Wilcox Oil & Gas Co. cases5 in regard to a statute analogous to section 239 but dealing with production of oil6 is fatal to the Commission’s reliance on section 239. The language of the statute considered in the Wilcox cases provided:

That whenever the full production from any common source of supply of crude oil or petroleum in this State can only be obtained under conditions constituting waste as herein defined, then any person, firm or corporation, having the right to drill into and produce oil from any such common source of supply, may take therefrom only such proportion of all crude oil and petroleum that may be produced therefrom, without waste, as the production of the well or wells of any such person, firm or corporation, bears to the total production of such common source of supply. The Corporation Commission is authorized to so regulate the taking of crude oil or petroleum from any or all such common sources of supply, within the State of Oklahoma, as to prevent the inequitable or unfair taking, from a common source of supply, of such crude oil or petroleum, by any person, firm, or corporation, and to prevent unreasonable discrimination in favor of any one such common source of supply as against another.

In these cases this Court examined whether the quoted provision, and in particular, the language “any or all such common sources of supply,” had provided the Commission the authority to regulate allowable levels of production on any basis other than on individual common sources of supply. In rejecting the proposal that the Commission had been granted authority under this provision to regulate on a broader basis, this Court stated:7

Applying the principles announced hereinabove to the provisions of our law above quoted relating to the power of the Commission, it is manifest that the Corporation Commission has been granted power to limit the production from the common sources of supply only when the conditions mentioned in the statute are found by it to exist, to wit: “Whenever the full production from any common source of supply of crude oil or petroleum in this State can only be obtained under conditions constituting waste.” By the provisions of section 11567, O.S.

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Related

Marathon Oil Co. v. Corporation Commission
1994 OK 28 (Supreme Court of Oklahoma, 1994)

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Bluebook (online)
1988 OK 27, 764 P.2d 516, 100 Oil & Gas Rep. 567, 1988 Okla. LEXIS 29, Counsel Stack Legal Research, https://law.counselstack.com/opinion/conoco-inc-v-corporation-commission-okla-1988.