EAGLE ENERGY PRODUCTION, L.L.C. v. THE CORPORATION COMMISSION

2015 OK CIV APP 51, 351 P.3d 750, 2014 Okla. Civ. App. LEXIS 118
Court of Civil Appeals of Oklahoma·Decided December 5, 2014·No. 112,165·Published·Cited by 1 cases

Opinion

LARRY JOPLIN, Presiding Judge.

{1 Appellants, Eagle Energy Production, L.L.C., Claremont Corporation and Pomona Production, L.L.C., seek review of an order of the Oklahoma ' Corporation Commission denying motions to reconsider the Commission's order of August 22, 2013, in which the Commission found Appellees, Tower Royalty Co., L.L.C,. and Thistle Royalty Co., L.L.C,, are not bound by forced pooling order No. 5528381, issued on April 8, 2008. Appellants complain the Commission erred in its determination that the 2008 Commission order did not effectively pool the rights of Tower Royalty Co. or its successor, Thistle Royalty Co.

12 In November 2007, Orea Resources L.L.C., the pooling applicant, filed the pooling application at issue in this cause, seeking to pool the drilling rights of the owners in the 640-acre horizontal drilling and spacing unit formed for the Misener-Hunton common source of supply, in Section 30, Township 15 North, Range 4 East of LM., Lincoln County, Oklahoma. Tower Royalty, Appellee, owned mineral interests in the spacing unit for which Orea sought the pooling order.

T3 On March 27, 2007, prior to Oreca filing the pooling application later that year, Tower entered into a one-year oil and gas lease with Blackburn Properties, Inc. The lease covered 155.69 mineral acres within the spacing unit at issue. The lease provided that if drilling of a well, resulting in oil and gas production in paying quantities, was commenced within the primary term of the lease, the lease would be extended. There is no evidence in the record that oil and gas production commenced within the term of the lease, which might have extended the lease. Instead, the Tower-Blackburn lease expired on March 27, 2008, according to the terms of the lease itself.

T4 As Oreca proceeded with the pooling application, Blackburn was listed as one of the respondents in the pooling proceeding, because Blackburn entered into the mineral lease with Tower Royalty earlier that year. Terms of the Tower-Blackburn lease, including the lease expiration date, were available to Orea during the pooling process. Prior to the expiration of its lease, Blackburn protested the pooling application as one of the respondents. Tower Royalty was never served or listed as a respondent in the pooling proceedings, although Appellants allege Tower had actual notice and was in collusion with Blackburn to impede application of the pooling order. Blackburn made no election un- | *752 der the pooling order. The pooling hearing was held on January 8, 2008 and the pooling order (No. 552381) was issued by the Corporation Commission on April 8, 2008, twelve days after the Tower-Blackburn lease expired. Special Energy, Inc. was named operator under the 2008 pooling order. After Special Energy acquired the working interests and drilling rights, Special Energy conveyed them to Eagle Energy Production, L.L.C., Claremont Corporation and Pomona Production, LLC. A bonus from the production was paid to Blackburn, Blackburn having been listed in the pooling order and having made no election. Tower was not included in the 2008 order and was given no bonus payment under the terms of the pooling.

T5 Appellants allege the lease between Tower and Blackburn was an attempt to "game" the system and avoid the pooling order. The Commission's August 22, 2013 order makes reference to Appellants' allegations that Tower and Blackburn did not engage in an arm's length transaction and did not establish a fair market value for the lease. In fact, the Commission's 2008 order found the Tower-Blackburn lease was not representative of fair market value. During the most recent request for clarification proceedings, Appellants continued to assert allegations of impropriety or "not acting in good faith" on the part of Tower and Blackburn. Although Appellants assert the allegations of impropriety are not new and were brought prior to the latest proceeding, the record does not indicate the Commission ever made a finding of bad faith or improper conduct on the part of Tower or Blackburn, and there are no stipulated facts asserting Tower or Blackburn acted improperly.

T6 After the pooling order was issued, Tower filed an affidavit of notice on September 26, 2008 in Lineoln County, asserting the Tower-Blackburn lease expired prior to the issuance of the pooling order and that Tower was not a respondent in the pooling proceedings, and therefore not subject to the pooling order. On July 22, 2010, Tower and Thistle 1 filed a quiet title action in Lincoln County against Appellants, asserting their working interests were not subject to the 2008 pooling order. On September 27, 2010, Eagle Energy initiated the current matter at the Corporation Commission, asking the Commission to determine that the interests of Tower and Thistle have been and remain subject to the 2008 pooling order. The district court proceeding was thereafter stayed, pending a final determination by the Commission. After both an ALJ Report and an Appellate Referee report recommended finding that the drilling rights of Tower and Thistle were subject to the 2008 pooling order, the Commission en bane heard oral argument on June 30, 2018. The Commission issued its decision on August 22, 2018, finding the 2008 pooling order (No. 552381) did "not pool or otherwise affect the rights, titles, interests or obligations of either Tower Royalty Company, LLC. or Thistle Royalty Company, LL.C. with respect to any mineral interests they own" in the described section. Eagle, Claremont and Pomona filed motions to reconsider. Those motions were denied, resulting in the appealed from "Order Denying Motions to Reconsider."

17 Review of a challenge on appeal from an order of the Oklahoma Corporation Commission is outlined in Article IX, § 20 of the Oklahoma Constitution.

The Supreme Court's review of appealable orders of the Corporation Commission shall be judicial only, and in all appeals involving an asserted violation of any right of the parties under the Constitution of the United States or the Constitution of the State of Oklahoma, the Court shall exercise its own independent judgment as to both the law and the facts. In all other appeals from orders of the Corporation Commission the review by the Supreme Court shall not extend further than to determine whether the Commission has regularly pursued its authority, and whether the findings and conclusions, of the Commission are sustained by the law and substantial evidence. Upon review, the Supreme Court shall enter judgment, *753 either affirming or reversing the order of the Commission appealed from[.]

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EAGLE ENERGY PRODUCTION, L.L.C. v. THE CORPORATION COMMISSION, 2015 OK CIV APP 51, 351 P.3d 750, 2014 Okla. Civ. App. LEXIS 118 (Okla. Ct. App. 2014).

2015 OK CIV APP 51 (EAGLE ENERGY PRODUCTION, L.L.C. v. THE CORPORATION COMMISSION) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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351 P.3d 750 (Court of Civil Appeals of Oklahoma, 2014)