French Petroleum Corp. v. Oklahoma Corp. Commission

1991 OK 1, 805 P.2d 650, 111 Oil & Gas Rep. 545, 62 O.B.A.J. 235, 1991 Okla. LEXIS 1, 1991 WL 2626

• Court: Supreme Court of Oklahoma
• Decided: January 15, 1991
• Docket: No. 73679
• Status: Published

Opinions

KAUGER, Justice.

This is an appeal from the issuance of a temporary order by the appellee, Oklahoma Corporation Commission (Corporation Commission). The temporary order restricts production from two wells operated by the appellee, DLB Energy Corp. (DLB Energy) and the appellant, French Petroleum Corporation (French), in the Harvey Steffen Unit to 1,300 MCF per day with the combined production from the two wells not to exceed the unit’s annual allowable. We find that because the order issued is temporary, and because a final determination of the central issue — whether the well operated by DLB Energy, or the well operated by French is entitled to priority in the production of the unit allowable — is still before the Corporation Commission, the issues tendered are not ripe for review, and that the appeal should be dismissed.¹

FACTS

On August 14, 1985, the Oklahoma Corporation Commission (appellee/Corporation Commission) issued increased density order No. 283661' providing for the predecessors in interest of DLB and French to re-complete the Harvey Steffen No. 2 (DLB well) and to drill a third well, the Harvey Steffen No. 3 (French well), in the Harvey Steffen Unit (unit) to the Atoka-Morrow formation.² When the application was filed, Texaco was operating the unit well — the Harvey Steffen No. 1 (No. 1 well). Order No. 283661 provides that the three wells are to share a single unit allowable to be established by taking the initial potential test from the best well in the section. Under order No. 283661, the No. 1 well has priority to the unit allowable, the DLB well has second priority, and the French well is authorized to produce the remaining portion of the allowable not produced by the other two wells. However, the order provides that the authority to drill the two additional increased density wells expires one year after the order is executed unless the wells are commenced on or before the expiration date.3

An attempt to deepen and to recomplete the DLB well began on November 25, 1985. Drilling ended on January 11, 1986. The DLB well’s completion report provided that the well was dry, that the formation was too tight, and that no pipe liner was run. The DLB well was plugged by setting an iron bridge plug above the Atoka-Morrow. On December 20, 1988, after having initially denied its application, the Corporation Commission approved DLB Energy’s request to reenter the DLB wellbore.⁴ DLB Energy began drilling on December 21, 1988. It reentered the DLB wellbore, drilled out the cast iron bridge plug, and recompleted the well in the Atoka-Morrow. Drilling ended on January 9, 1989, and the DLB well began producing on February 22, 1989.

It is undisputed that the French well was commenced within the time frame outlined by order No. 283661. The controversy here revolves around the central issues in three related causes before the Corporation Commission ⁵ — whether the DLB well was commenced within the time constraints of order No. 283661, and whether it is entitled to priority production of the unit allowable. The DLB well is capable of producing the entire unit allowable. Therefore, if the priority schedule outlined in order No. 283661 is upheld, the French well cannot produce without violating the order.⁶ When the DLB well began production, the French well was producing the unit allowable. French did not curtail production when the DLB well went on-line. At the same time, DLB Energy was producing its well as though it was entitled to production priority in the unit. This production scenario would have caused the unit to be in an overproduced status by approximately July 1, 1989, with the possibility that the Corporation Commission would shut-in the drilling unit.

DLB Energy filed an application with the Corporation Commission on April 19, 1989. It asserted that French was ignoring the priority schedule set forth in order No. 283661 by continuing to produce its well at an unrestricted rate. DLB requested that an order issue enforcing Order No. 283661 and finding French in contempt for continued production of its well. The cause was originally heard by a hearing officer on April 24, 1989. Counsel for French appeared at the hearing on the afternoon of the 24th and asserted that the cause should be set over for a trial de novo because French had not received notice. The hearing officer found good cause to grant the continuance and the new trial. By agreement of the parties, the cause was reset for May 1, 1989. After taking the evidence, the hearing officer entered a temporary order, pending a ruling in the three related causes, restricting production from the two wells operated by DLB Energy and French in the Harvey Steffen Unit to 1,300 MCF per day with the combined production from the two wells not to exceed the unit’s annual allowable. Both parties appealed the oral report of the hearing officer to the Corporation Commission en banc. The cause was argued to the Commission en banc on May 10, 1989. By temporary order, the Corporation Commission en banc affirmed the hearing officer, and it entered a temporary order pending a ruling in CD Nos. 148555, 148068, and 148369. Order No. 3396Ó3 is dated June 22, 1989, with an effective date of May 1, 1989.

BECAUSE THE ORDER APPEALED FROM IS TEMPORARY AND BECAUSE THE ULTIMATE ISSUE-PRIORITY PRODUCTION OF THE UNIT ALLOWABLE — REMAINS BEFORE THE CORPORATION COMMISSION, THE CAUSE IS NOT RIPE FOR REVIEW.

French asserts that although the Corporation Commission order is labeled “temporary,” it is a final reviewable order. French argues that the appeal is not premature because the order adjudicates rights and equities between the parties and affects French’s right to priority in producing hydrocarbons from the Harvey Steffen Unit. DLB Energy insists that the order is temporary and that judicial intervention will entangle the Court in the administrative process without the benefit of a decision on the central issue — the right to priority production of the unit allowable. We agree.

The ripeness doctrine is a part of judicial policy militating against the decision of abstract or hypothetical questions. The conclusion that an issue is not ripe for adjudication emphasizes a prospective examination of the controversy indicating that future events may affect its structure in ways that determine its present justiciability. Subsequent events may sharpen the controversy or remove the need for decision of at least some aspects of the matter.⁷ The basic rationale of the ripeness doctrine is twofold: 1) to prevent the courts, through avoidance of premature ad-jucation, from entangling themselves in abstract disagreements over administrative policies; and 2) to protect agencies from judicial interference until their administrative decisions have been formalized and their effects felt in a concrete way by the parties.⁸ The factors to be considered in any ripeness analysis are the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.⁹

We applied the ripeness factors in H & L Operating Co. v. Marlin Oil Corp., 737 P.2d 565, 567-68 (Okla.1987).¹⁰ In H & L, the drilling company sought an emergency application to drill an off-pattern well. The application was granted. After the well had been drilled to a depth of 2,260 feet, an application was filed to stay the emergency order. The stay was granted. H & L appealed from a Corporation Commission order refusing to vacate the stay. We recognized in H & L that the goal of the cause was to determine whether permission should be granted to drill an off-pattern well. However, the issue presented in the cause focused upon the propriety of staying an emergency order once issued, not upon the final issue of well location. Because the issue of well location was still to be determined by the Corporation Commission, the Court found that no substantial controversy of an immediate nature was presented. Rendering a decision in H & L would have immersed the Court in the agency process by determining a preliminary issue while leaving the Corporation Commission in the same position it found itself before the opinion issued. The Corporation Commission would still be faced with the issue of location of the off-pattern well.

The hardship issue in H & L was also found to be inferior as a real consideration for determining that the appeal was ripe for decision. Physical and contractual restraints and the loss of capital investment already expended in commencing the well were not adequate to show a real hardship. The Court noted that the drilling company risked the same losses if the permanent order did not support drilling at the location provided in the emergency order. The possibility of trading one hardship for another, depending on uncertain future events that the appeal could not resolve, did not justify intervention.

Here, we find ourselves in the same uneasy position we occupied in H & L. The issue that will finally determine the rights of the parties is not before the Court— whether the well operated by DLB Energy or the well operated by French is entitled to priority in the production of the unit allowable. This precise issue is before the Corporation Commission. It was presented when French filed an application to construe order No. 238661 and an application to modify the order and redetermine the allowable.¹¹ A decision in the instant cause would leave the Corporation Commission to determine which party is entitled to priority production of the unit allowable. Interference at this juncture would immerse the Court in the administrative process without expediting a final administrative decision.

The argument proffered on the hardship issue is also similar to the one presented in H & L. French asserts that failure to vacate the Corporation Commission’s temporary order will result in a portion of French’s allowable being produced by DLB Energy. The party entitled to production of the unit allowable must be determined in a hearing on the merits. It is not before this tribunal. Additionally, all the temporary order of the Corporation Commission accomplished was to delay the date upon which the unit would be shut-in. Before the temporary order issued, both French and DLB were producing their wells at unrestricted rates. The temporary order simply put a cap on what each party could produce. If the temporary order were vacated, the parties presumably could resume unrestricted production from the unit. A determination here would result in one hardship — the possibility of a premature shut-in of the unit — being traded for another — the possibility that DLB may be producing hydrocarbons which French is entitled to produce.

This issues presented by the temporary order are not fit presently for judicial decision. Neither is the hardship which may be experienced by the parties of the character that would justify intervention at the appellate level. Therefore, we find that because the order is temporary, and because a final determination of the central issue — whether the well operated by DLB Energy or the well operated by French is entitled to priority in the production of the unit allowable— is still before the Corporation Commission, the issues tendered are not ripe for review, and the appeal should be dismissed.

CONCLUSION

The Corporation Commission may issue temporary orders.¹² Temporary orders may also be rescinded at any time.¹³ Intercession at this point would involve this Court in the administrative process and ongoing decision making without the chance that a resolution here would affect the outcome of the underlying controversy. The issues tendered are not ripe for review.

APPEAL DISMISSED.

HODGES, V.C.J., and LAVENDER, DOOLIN, HARGRAVE, ALMA WILSON and SUMMERS, JJ., concur. OPALA, C.J., and SIMMS, J., concur in result.

1 . Although neither DLB Energy nor the Corporation Commission indicated that this appeal should be dismissed in their respective responses to the petition in error, both parties characterized Order No. 339603 as temporary, pending final rulings in related causes C.D. Nos. 148555, 148068, and 148369.

2 . The Harvey Steffen Unit is a 640-acre unit for the Atoka-Morrow common source of supply located at Section 20, Township 13 North, Range 9 West, Canadian County, Oklahoma. No controversy surrounds the well which existed in the unit at the time the increased density order was filed — the Harvey Steffen No. 1 operated by Texaco. Both DLB and French agree that the No. 1 well, a marginal producer, is entitled to production priority of the unit allowable.

3 . Order No. 283661, issued on August 14, 1985, provides in pertinent part:

"... 9. Allowable. The wells producing from the Atoka-Morrow separate common source of supply underlying Section 20 should share a single unit gas allowable to be determined by taking the initial potential test from the best well in the section. The Harvey Steffen No. 1 well would then have priority to that allowable with the Harvey Steffen No. 2 well having second priority and the Harvey Steffen No. 3 well being able to produce whatever portion of the allowable is remaining ...

11. Authority to drill the two additional increased density wells will expire twelve months after the execution date of this order unless the wells are commenced on or before the expiration date ...”

The Harvey Steffen No. 2 well referred to in Order No. 283661 is the DLB well. The Harvey Steffen No. 3 is the French well.

4 . On January 5, 1989, French filed an emergency application to revoke DLB Energy’s intent to drill for the DLB well. A hearing on the application was held on January 10, 1989. French’s application was denied on March 9, 1989.

5 . CD No. 148068 is an emergency application by French to revoke DLB Energy’s intent to drill. The Corporation Commission issued order No. 336522 denying the application for an emergency order. French also filed applications to construe the original increased density order (CD No. 148555) and an application to modify order No. 283661 and to reallocate the unit allowable (CD No. 148554). There is also a District Court action pending between French and DLB Energy-

6 . Order No. 339603 provides in pertinent part: "... IT IS THEREFORE ORDERED by the Corporation Commission that, temporarily, and pending a ruling in CD Nos. 148555, 148068 and 148369, the DLB Steffen # 2 Well be permitted to produce only 1,300 MCF per day and that the French #3 Steffen Well be permitted to produce only 1,300 MCF per day and, in any event, the combined production from the Harvey Steffen Unit in Section 20, Township 13 North, Range 9 West, Canadian County, Oklahoma, shall not exceed that unit's annual allowable. This order is temporary and shall expire on December 31, 1989, unless further extended by the Commission ..." (Emphasis supplied.)

7 . L. Tribe, Amercian Constitutional Law, Ch. 3, § 3-10, pp. 77-78 (2nd Ed. Foundation Press, Inc. 1988).

8 . Abbott Laboratories v. Gardner, 387 U.S. 136, 148, 87 S.Ct. 1507, 1515, 18 L.Ed.2d 681, 691 (1967); Western Okla Chapter v. Corporation Comm’n, 616 P.2d 1143, 1148 (Okla.1980).

9 . Abbott Laboratories v. Gardner, see note 8, supra; H & L Operating Co. v. Marlin Oil Corp., 737 P.2d 565, 568 (Okla.1987).

10 .Although not characterized as a "ripeness problem,” this Court refused to interfere with a temporary order of the Corporation Commission in Lone Star Gas Co. v. Corporation Comm’n, 170 Okla. 292, 39 P.2d 547, 555 (1934). The temporary order in Lone Star fixed gas rates pending receipt of evidentiary materials which would allow the Corporation Commission to set permanent rates. Our refusal to intervene was premised on the fact that although an incorrect rule of law may have been applied in fixing the temporary rates, the matter could be adjusted when the final order issued.

11 . These applications were filed more than two months before the application in the instant cause. The record does not reflect any decision in the two causes.

12 . Lone Star Gas Co. v. Corporation Comm’n, see note 10 at 550, supra.

13 . Western Okla. Chapter v. Corporation Comm'n, see note 8 at 1147, supra.