Harding & Shelton, Inc. v. Sundown Energy, Inc.

2006 OK CIV APP 12, 130 P.3d 776, 2006 Okla. Civ. App. LEXIS 1, 2006 WL 627150
CourtCourt of Civil Appeals of Oklahoma
DecidedJanuary 20, 2006
DocketNo. 101,570
StatusPublished
Cited by3 cases

This text of 2006 OK CIV APP 12 (Harding & Shelton, Inc. v. Sundown Energy, Inc.) is published on Counsel Stack Legal Research, covering Court of Civil Appeals of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Harding & Shelton, Inc. v. Sundown Energy, Inc., 2006 OK CIV APP 12, 130 P.3d 776, 2006 Okla. Civ. App. LEXIS 1, 2006 WL 627150 (Okla. Ct. App. 2006).

Opinion

Opinion by

LARRY JOPLIN, Judge.

¶ 1 Appellants Harding & Shelton, Inc., and Consolidated American Resources, L.L.C. (Applicants), seek review of an order of the Corporation Commission granting in part and denying in part its application for pooling order. In this proceeding, Applicants complain the Commission erred as a matter of both fact and law in denying that part of its application by which Applicants sought pooling of formations subject to a prior pooling order. Having reviewed the record, the order of the Commission is affirmed.

¶ 2 In 1969,1970 and 1977, the Corporation Commission entered orders establishing a 640 acre drilling and spacing unit for various formations underlying section 20, Township 16 North, Range 18 West, I.M., in Dewey County, Oklahoma. In December 1985, the Commission entered Order No. 289640, establishing a 640 acre drilling and spacing unit for the Oswego Lime, Cleveland Sand, Douglas Sand, Tonkawa, Cottage Grove, Cherokee Sand, Morrow, Springer and Chester Lime formations underlying section 20, and appointed Sanguine, Ltd. (Sanguine) as operator. Subsequently, the Rounds 1-20 well was drilled and completed in the southwest quarter of section 20, producing from the Chester Lime formation.

¶ 3 The holder of one or more leases covering 160 acres of the 640-acre unit released its lease(s); the owner of one or more leases covering 320 acres of the unit released its Iease(s) except as to the well bore of the existing Rounds 1-20 well. Applicants subsequently obtained leases covering those 480 acres.

¶ 4 In 2004, Applicants filed an application (as amended) to pool the rights and interests of mineral owners in the Cherokee Sand, Chester Lime, Cleveland Sand, Cottage Grove, Douglas Sand, Morrow, Oswego, Springer, and Tonkawa formations, all subject to the 1985 pooling order, as well as the lower, unpooled Atoka, Hunton, Mississippi, and Viola formations underlying section 20 in order to drill a well through both the previously pooled formations and the lower un-pooled formations to the lowest (Viola) formation. Mustang, owner of the remaining 160 mineral acres in section 20, filed a Response, Adoption of Application and Request for Affirmative Relief, adopting Applicants’ position and asking for entry of Applicants’ requested pooling order.

¶ 5 Respondents Sundown Energy, Inc., JMA Company, L.L.C. and Dominion Exploration (Sanguine’s successor) protested, challenging Applicants’ standing to seek pooling of the formations previously pooled by the 1985 Sanguine order. Sundown specifically argued that the 1985 pooling order remained in full force and effect; that any relief on the current application constituted an impermissible collateral attack on the prior pooling order; and, because Applicants obtained their leasehold interests subject to the prior, valid pooling order, Applicants had no standing to prosecute this new pooling application in derogation of the prior order.

¶ 6 Applicants responded. First, they asserted that neither they nor the actual mineral owners were parties to the prior pooling proceedings, so the prior pooling orders had no effect as to them. Second, they pointed out, Mustang, as owner of the interest farmed out to Sanguine, possessed standing to seek relief as to the previously pooled formations, and had joined in their prayer for affirmative relief. Third, Applicants argued that the protestants’ right to object depended on their status as Saiiguine’s successor, but that the protestants possessed no interest in the unit to protect. Lastly, they argued that to sustain the protestant’s objection would affect the private, contractual, leasehold [778]*778rights of the Applicants, exceeding the Commission’s limited authority to protect correlative rights.

¶ 7 Upon hearing, an administrative law judge (ALJ) determined that Applicants possessed standing to seek both pooling of the previously unpooled formations in the present action, and modification of the previous pooling order in a proceeding commenced for that purpose. The ALJ consequently recommended approval of Applicants’ pooling request as to the Atoka, Mississippi, Hunton and Viola formations, but recommended denial of the pooling application as to all of the other formations still subject to the valid 1985 pooling order.

¶8 Applicants appealed, challenging the ALJ’s recommendation to deny that part of their application as to the previously pooled formations, and again asserted invalidity of the prior pooling proceedings as to them, non-parties in those proceedings. An appellate referee affirmed the decision of the ALJ with modification, holding: (1) “[wjhile some of the arguments are couched in terms of ‘standing,’ the true issues concern collateral attack and the power of the Commission to modify its prior orders”; (2) Applicants “presented no showing ... of a change in conditions or knowledge of conditions necessitating the repeal, amendment or modification of’ the 1985 pooling order; (3) Applicants’ “pooling application constitutes a collateral attack on” the 1985 pooling order, proscribed by 52 O.S. § 111; but, (4) “[ujnder 52 O.S. § 112, [Applicants] ... have standing to seek to show a change of conditions or knowledge of conditions necessitating the repeal, amendment or modification of’ the 1985 pooling order.

¶ 9 Upon further proceedings before the Commission en banc, the Commission adopted the recommendations of the appellate referee and appointed Applicant Harding & Shelton, Inc. as operator. Applicants appeal.

¶ 10 The Corporation Commission is a tribunal of limited jurisdiction and has only such authority as is expressly or by necessary implication conferred upon it by the Constitution and statutes of this state. Okla. Const., art. IX, § 18; Merritt v. Corporation Comm,., 1968 OK 19, 438 P.2d 495; Chicago R.I. & P. Ry. Co. v. State, 1932 OK 467, 12 P.2d 494. “[T]he enactments for the conservation of oil and gas are public in nature,” and the Corporation Commission is statutorily charged with the authority and responsibility “to protect correlative rights ... [and] the public interest in orderly development and production of resources and the prevention of the drilling of unnecessary wells.” Samson Resources Co. v. Corporation Com’n, 1985 OK 31, ¶ 10, 702 P.2d 19, 22; Tenneco Oil Co. v. El Paso Natural Gas Co., 1984 OK 52, ¶ 18, 687 P.2d 1049, 1052. When considering whether to grant or deny an application to pool common sources of supply, the Corporation Commission possesses “incidental” authority to determine whether a prior pooling order was still effective as to the applicant’s interest. Buttram Energies, Inc. v. Corporation Commission of State of OK, 1981 OK 59, ¶ 7, 629 P.2d 1252, 1254.

¶ 11 “Under the spacing statute, [52 O.S. § 87.1,] only one well is drilled and produced from a given formation within a drilling and spacing unit unless the Commission, to increase recovery, orders increased density drilling or despacing.” Eason Oil Co. v. Howard Engineering, Inc., 1990 OK 101, ¶ 6, 801 P.2d 710, 713. A pooling order ordinarily remains in effect so long as production continues from the pooled common source(s) of supply. See, Southern Union Production Co. v. Eason Oil Co., 1975 OK CIV APP 48, ¶ 16, 540 P.2d 603, 608. See also, 5 Summers, The Law of Oil and Gas,

Free access — add to your briefcase to read the full text and ask questions with AI

Related

EAGLE ENERGY PRODUCTION, L.L.C. v. THE CORPORATION COMMISSION
2015 OK CIV APP 51 (Court of Civil Appeals of Oklahoma, 2014)
Sundown Energy, L.P. v. Harding & Shelton, Inc.
2010 OK 88 (Supreme Court of Oklahoma, 2010)

Cite This Page — Counsel Stack

Bluebook (online)
2006 OK CIV APP 12, 130 P.3d 776, 2006 Okla. Civ. App. LEXIS 1, 2006 WL 627150, Counsel Stack Legal Research, https://law.counselstack.com/opinion/harding-shelton-inc-v-sundown-energy-inc-oklacivapp-2006.