Hold Oil Corp. v. Corporation Commission

1987 OK CIV APP 63, 746 P.2d 692, 97 Oil & Gas Rep. 112, 1987 Okla. Civ. App. LEXIS 159, 1987 WL 3720
CourtCourt of Civil Appeals of Oklahoma
DecidedSeptember 1, 1987
DocketNos. 65531, 66566
StatusPublished
Cited by2 cases

This text of 1987 OK CIV APP 63 (Hold Oil Corp. v. Corporation Commission) 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
Hold Oil Corp. v. Corporation Commission, 1987 OK CIV APP 63, 746 P.2d 692, 97 Oil & Gas Rep. 112, 1987 Okla. Civ. App. LEXIS 159, 1987 WL 3720 (Okla. Ct. App. 1987).

Opinion

HUNTER, Judge:

This appeal, Number 66,566, and appeal Number 65,531 were consolidated under the surviving number 66,566. Prior to this consolidation, Appeal Number 65,531 was consolidated with Appeal Numbers 65,529, 65,530, 65,852, 65,853 and 65,855 with Appeal Number 65,531 as the surviving number. Appeal Number 66,566 had been previously consolidated with Appeal Numbers 66,567 and 66,568, with Appeal Number 66,566 as the surviving number. Appellant, Hold Oil Corporation, instituted all of these appeals from certain orders of the Corporation Commission relating to three separate wells; “Ace” well, “First Oklahoma” well, and “Houck” well.

Appellant, Hold Oil Corporation, was the designated operator of “Ace” and “First Oklahoma” under separate forced pooling orders, and was the designated operator of “Houck” under an increased density order. Appellee, Royalty Petroleum Company, filed three separate applications seeking removal of Hold as the operator of each of the three wells in question. In its applications, Royalty alleged that Hold should be removed as operator and Royalty or some other party be designated operator due to the unsatisfactory manner in which Hold has conducted operations. The three applications were consolidated for hearing.

The hearing examiner entered certain findings and recommendations which were adopted by the Corporation Commission in its three separate orders. The Commission orders found that Hold consistently failed to distribute revenues received for production in a timely manner; persisted in a pattern of clearly improper accounting practices and failed to send Appellees intelligible billings or cost statements; and was uncommunicative about the well operations to Appellees. The Commission ordered that Hold be removed as the operator for each of the three wells, and that Royalty be designated as the operator of the three unit wells. The Commission further ordered that Hold would have twenty (20) days to turn over to the new operator all undistributed revenues for the unit wells and that Hold would turn over to the new operator all future gas revenues received by Hold within ten (10) days of receipt. Further, the Commission ordered that Hold was to deliver to Royalty a list of all parties entitled to share in the production revenues, together with all division orders, transport orders and recent updates to the division order title opinions. From the three separate orders of the Corporation Commission, Appellants perfected three separate appeals, which were consolidated under the surviving number 65,531.

Subsequent to perfecting the appeals of the above mentioned Corporation Commission orders, Appellant, Hold filed three separate applications with the Corporation Commission for orders clarifying the removal orders, with a finding that Hold was not required to turn over to Royalty money received by Hold which is attributable to the interest of Hold or its partners. Hold took the position that upon their receipt of the monthly revenues from the purchaser, Hold need only turn over to the new opera[694]*694tor, Royalty, the total revenues, less the portion attributable to Hold and its partners. The Corporation Commission entered three separate orders denying the application for clarification of Hold and required Hold to turn over to Royalty all gas revenues received by Hold, including those attributable to the interest of Hold and its partners in the unit wells. Upon receipt of the revenues, Royalty was then ordered to distribute to Hold and its partners their proportionate share of the revenues. From the orders denying clarification, Appellants timely perfected their appeals, which were consolidated under surviving Number 66,-566.

APPEAL NUMBER 65,531

Appellants appeal from Corporation Commission order Numbers 287683, 287684 and 287685 which remove Hold as operator of the three wells and designate Appellee, Royalty Petroleum Company as operator of these wells.

Appellants contend the Commission did not have jurisdiction to remove Hold as operator on the basis of a private dispute, nor did they have jurisdiction to order Hold to pay monies to Royalty or require Hold to turn over its valuable documents. Hold argues that the dispute, as to its manner and method of operation of the three wells, is a private dispute between the parties which does not confer jurisdiction upon the Corporation Commission to order its removal as the unit operator. In support of its position, Hold relies on the cases of Tenneco Oil Company v. El Paso Natural Gas, 687 P.2d 1049 (Okl.1984) and Samson Resources Company v. Corporation Commission, 702 P.2d 19 (Okl.1985). However, these cases are distinguishable, and not persuasive. Both Tenneco and Samson deal with private operating agreements not incorporated within a Corporation Commission forced pooling order. The question in both cases was whether the Corporation Commission had exclusive jurisdiction to remove the operator under the private or voluntary agreement. The Court in the Samson case held that the relief requested, the replacement of an operator designated under a voluntary pooling agreement, was clearly beyond the Commission’s conferred jurisdiction, as it concerned a dispute between private parties in which the public interest in correlative rights was not involved. The facts in this appeal are distinguishable because Hold was appointed operator of the unit wells, not by private agreement between the parties, but by order of the Corporation Commission. Therefore, we find that the Tenneco and Samson decisions do not deprive the Corporation Commission of jurisdiction to order the removal of Hold as the designated operator of the unit wells.

The Commission found that although the parties might have other disputes that could be resolved only in the District Court, the application for removal of the operator was properly before the Commission. The designation of Hold as the operator for the three wells was by order of the Commission under the provisions of Title 52 O.S. 1981 § 87.1(e). The forced pooling orders are a reasonable exercise of the State Police Power to protect the correlative rights of the owners in a common source of oil and gas supply. The managerial responsibility of a designated unit operator in developing for, producing and selling oil or gas from the unitized pool is also an exercise of the State Police Power. Crest Resources v. Corporation Commission, 617 P.2d 215 (Okl.1980). The Commission has continuing jurisdiction to determine and redetermine provisions for the payment of development and operational costs in connection with the development of the spacing and drilling unit. Amarex Inc. v. Baker, 655 P.2d 1040 (Okl.1982). We therefore find that the Commission did have jurisdiction to enter its orders removing Hold as the unit operator, as well as requiring Hold to pay certain revenues to Royalty and turn over certain documents needed for management and operation of the wells. This jurisdiction is based on the continuing jurisdiction of the Corporation Commission to manage and safeguard the correlative rights of the various interest holders within the unit.

Appellants contend the Corporation Commission orders are not supported by substantial evidence. Hold also contends the orders of the Commission are not based on competent evidence. This proposition is without merit.

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1987 OK CIV APP 63, 746 P.2d 692, 97 Oil & Gas Rep. 112, 1987 Okla. Civ. App. LEXIS 159, 1987 WL 3720, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hold-oil-corp-v-corporation-commission-oklacivapp-1987.