Eason Oil Company v. Corporation Commission

1975 OK 14, 535 P.2d 283
CourtSupreme Court of Oklahoma
DecidedFebruary 4, 1975
Docket47036
StatusPublished
Cited by47 cases

This text of 1975 OK 14 (Eason Oil Company 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
Eason Oil Company v. Corporation Commission, 1975 OK 14, 535 P.2d 283 (Okla. 1975).

Opinions

LAVENDER, Justice:

The Norge Marchand Unit (Marchand) consists of all or parts of twenty-six sections in Townships 6 and 7, Range 8 West, Grady County, Oklahoma. It contains 75 wells and is approximately 7½ miles long by 3 miles wide. The common source of supply is the Marchand sand formation at a depth between 10 and 11 thousand feet. The discovery was in early 1971. The area was fully developed through drilling of some 70 wells by June, 1972.

The lessees undertook a study as to uni-tization in August, 1971, through an operating committee. The committee developed and approved a water flood. The project’s purpose would be to maintain the then field pressure of approximately 2200 lbs. Different from most water floods, its objective would be to maintain pressure, not restore a completely depleted mechanical drive. It was believed the breakdown of the field and the flooding by water of producing wells would not occur until late life of the field. Prevention of deterioration of that pressure was estimated to allow a total production of approximately 55 million barrels of oil over a 15 year period. Production under ordinary conditions, without maintenance of that pressure through flooding, was estimated to yield 30 million barrels. Sun Oil Company was designated operator of the project.

August, 1973, Sun Oil Company (Sun) filed its application for creation of the unit and approval of Plan of Unitization. Notice was given to operators in that area. Evidentiary hearings were held by the Corporation Commission. Some 66%, as to surface acres in the unit, and 75%, as to participation interest in the plan, of the working interest owners ratified the plan. Sun, along with others who ratified, became proponents of the plan at the hearings. Some of these proponents, Sun Oil Company, Big Chief Drilling Company, Apache Exploration Company, Jerry Chambers Producing Co., Walter Duncan and Phillips Petroleum Company, with the Corporation Commission are the appellees in this court. Eason Oil Company and Cuma Oil Company, Inc., appellants, along with others, opposed the plan. Appellants proposed their own plan.

The Corporation Commission by Order No. 100904, dated October 31, 1973, created the Marchand Unit, approved the Plan of Unitization, and approved the tract participation percentage as provided in the plan. Appeal of this order was lodged in this court November 28, 1973. An application to vacate or modify and amend Order No. 100904 was filed by the now appellants in the Corporation Commission November 18, 1973. The February 22, 1974, Order No. 103387 denied that application. It modified some findings but reconfirmed Order No. 100904. That denial order was appealed. Supplemental petition of Sun was filed in the Corporation Commission January 11, 1974, seeking an order finding the plan had been ratified as required by statute. Order No. 103271, dated February 19, 1974, found the Unitization Plan had been adequately ratified and ordered the plan to be in effect. That order was appealed. Each of the three orders appealed were perfected as separate appeals. These appeals were consolidated in this court.

The creation of the unit and the water flood project itself is not opposed. All opposition is directed at the formula for the apportionment and allocation of the unit production contained in the plan. A division of interest or formula for that pur[286]*286pose is required by 52 O.S.1971, § 287.4 to be included in the plan of unitization. That statute provides in part:

* * * and subject to the further requirements hereof, each such plan of unitization shall contain fair, reasonable and equitable provisions for :
(b) The division of interest or formula for the apportionment and allocation of the unit production, among and to the several separately-owned tracts within the unit area such as will reasonably permit persons otherwise entitled to share in or benefit by the production from such separately-owned tracts to produce or receive in lieu thereof, their fair, equitable and reasonable share of the unit production or other benefits thereof. A separately-owned tract’s fair, equitable and reasonable share of the unit production shall be measured by the value of each such tract for oil and gas purposes and its contributing value to the unit in relation to like values of other tracts in the unit, taking into account acreage, the quantity of oil and gas recoverable therefrom, location on structure, its probable productivity of oil and gas in the absence of unit operations, the burden of operation to which the tract will or is likely to be subjected, or so many of said 'factors, or such other pertinent engineering, geological, or operating factors, as may be reasonably susceptible of determination.” (Emphasis Added)

Appellants argue subsection (b), supra, mandates and requires the five delineated items be used in designing the value of the separately-owned tracts as to its contribution to the total value of the unit.

The plan of unitization must contain fair, reasonable and equitable provisions for the apportionment and allocation of the unit production among the separately-owned tracts. A separately-owned tract’s share of the unit production must be measured by the value it contributes to the total value of the unit for oil and gas purposes. Each tract must be measured by the same set of values as must the unit as a whole. In the construction of statutes, the word “shall” is usually given its common meaning of “must” and interpreted as implying a command or mandate depending upon the construction of the statute as a whole and the intention of the Legislature. Oklahoma Alcoholic Beverage Control Board v. Moss, Okl., 509 P.2d 666 (1973).

After the command or mandate requirements subdivision (b), supra, provides in conjunction with the values to be considered for oil and gas purposes:

“ * * * taking into account * * * (setting out five factors) * * * or so many of said factors, or such other pertinent engineering, geological, or operating factors, as may be reasonably susceptible of determination.”

The five listed factors are proper ones to be considered. The use and emphasis to be placed upon all, part, or none of these five factors is not mandated by statute. Other engineering, geological, or operating factors may be used. These additional factors are to be pertinent and reasonably susceptible of determination. The formula is not placed in a statutory strait-jacket by a demand the five listed factors must be used. This would render useless the phrase “or so many of said factors, or such other * * * factors * *

Legislative acts are to be construed in such manner as to reconcile the different provisions and render them consistent and harmonious, and give intelligent effect to each. Personal Loan & Finance Co. v. Oklahoma Tax Com’n, Okl., 437 P.2d 1015 (1968). In Alfalfa Electric Coop., Inc. v.

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1975 OK 14, 535 P.2d 283, Counsel Stack Legal Research, https://law.counselstack.com/opinion/eason-oil-company-v-corporation-commission-okla-1975.