Nilsen v. Ports of Call Oil Co.

1985 OK 104, 711 P.2d 98, 89 Oil & Gas Rep. 135, 1985 Okla. LEXIS 178

• Court: Supreme Court of Oklahoma
• Decided: December 17, 1985
• Docket: 57886, 57716
• Status: Published

Opinions

LAVENDER, Justice:

On March 18, 1980, the Corporation Commission entered Order No. 165975, on application of Ports of Call Oil Co., pooling the various common sources of supply within the 640 acre drilling and spacing unit comprised of Section 14, Township 10 N., Range 13 W., Caddo County, Oklahoma. Under this order the applicant, Ports of Call, was directed to begin the drilling of the unit well within 180 days of the date of the order. In the event this provision was not complied with, the order, by its own terms, would become null and void. Order No. 165975 also contained provisions under which those holding working interests in the unit could elect to participate in the unit well or receive compensation for their working interests.

Ports of Call commenced a well on Section 14, referred to as the Tomcat # 14-1, within the 180 days allowed by the Commission order. The Tomcat # 14-1, borehole was subsequently lost after a series of blowouts caused by very high pressure gas deposits encountered in Ports of Call’s drilling operations. The initial borehole was plugged and a second borehole commenced. This borehole was also lost after sustaining damage caused by blowouts. Ports of Call then initiated the drilling of a third borehole. All parties agree that the second and third holes were initiated after the expiration of the 180 days provided in Order No. 165975.

At this point it appears that various parties who had elected not to participate in the initial well began to challenge Ports of Call’s right to proceed in the drilling of the subsequent boreholes, as they had been commenced after expiration of the time provided by the initial pooling order. The first attack was presented in the form of an application for pooling order covering Section 14 filed with the Commission by Helmerich & Payne, Inc.¹

Next, Ports of Call filed an application for clarification of Order No. 165975 and subsequently moved that this application be consolidated with Helmerich & Payne’s request for a pooling order.

The second attack on Ports of Call’s continuing operations in Section 14 was commenced in the District Court of Caddo County. In this suit, Carl A. Nilsen sought to quiet title to various mineral leases within the NW/4 of Section 14 which Nilsen had acquired on June 5, 1981.

Several months later, Taft Milford, another holder of mineral interests in Section 14, filed an application for assumption of original jurisdiction and petition for writ of prohibition and motion for immediate stay in this Court, seeking to block the Commission’s consideration of Ports of Call’s application for clarification of Order No. 165975. This matter was designated cause No. 57,-716. As the question of the Commission’s jurisdiction to entertain Ports of Call’s application had been raised in the Commission but not yet ruled on, this Court declined to issue an order staying the proceedings.

The Commission heard argument on the question of jurisdiction. Subsequently, the Commission entered Order No. 203625. In this order the Commission found that it did have jurisdiction of the subject matter of Ports of Calls’ application under the power to repeal, amend, modify or supplement Commission orders granted by the Legislature in 52 O.S. 1981 § 112. However, the Commission ruled that it did not have jurisdiction to determine whether Ports of Call’s operations in Section 14 had constituted a continuous drilling operation. The Commission stated that this was a matter to be decided by the district court in the pending quiet title action.

Two days after the entry of Order No. 203625, Ports of Call filed a supplemental pleading in cause No. 57,716, requesting the issuance of a writ of mandamus directing the Commission to address the issues raised in its initial application.

Two days following the Commission hearing on Ports of Call’s application, the District Court of Caddo County heard arguments on demurrers which had been presented by Ports of Call to Nilsen’s action on the ground that the district court lacked jurisdiction to entertain a collateral attack on a Commission order. Two weeks later the district court sustained Ports of Call’s demurrers, citing Woods Petroleum Corp. v. Sledge,² as determining that the court lacked jurisdiction over the matter. Nilsen, in cause No. 57,886, appealed this order of the district court, which had dismissed his action without leave to refile.

This Court, by subsequent order, consolidated causes 57,716 and 57,886 for consideration, and has also stayed the Commission from hearing an application for an order vacating Order No. 165975.³ The question which the. parties to this matter seek to have resolved is whether Ports of Call’s operations in Section 14 constitute a continuous drilling operation under the pooling order issued by the Commission. The problem here lies in finding a forum to make this determination. Both the Commission and the district court have declined to assume jurisdiction regarding this question.

In ruling on Ports of Call’s special demurrer to its jurisdiction, the district court relied on the case of Woods Petroleum Corp. v. Sledge.⁴ In Woods this Court addressed a case in which a unit operator, unhappy with the result it had obtained in the Commission regarding the rights of other interest owners in the unit to participate in increased density wells, had attempted to attack that result through the vehicle of a quiet title action in district court. We stated that the operator’s proper remedy would have been to appeal the Commission order allowing participation in the increased density wells. We then found that the blatant attempt to circumvent the result of the Commission’s rulings constituted a prohibited collateral attack⁵ upon those rulings, and thus, that the question posed to the district court was beyond its authority to entertain. In such cases the court’s authority extends only to the question of whether the order under attack is void.⁶

Woods does not imply that the district court lacked jurisdiction to proceed in a quiet title action merely because such an action would call for determination of the legal effect of a Commission order.⁷ The district court clearly has jurisdiction to adjudicate the legal effect (as distinguished from the continuing effectiveness) of a Commission order or of an order of a court of competent jurisdiction upon title to land.⁸ What the district court may not do is entertain a collateral attack upon such an order under the guise of an action to quiet title, as was the case in Woods.

The question for which the parties to this matter seek resolution, however, may not be categorized as a simple determination of the effect of a final order upon the title to the mineral interests involved. The question sought to be presented is whether Ports of Call’s operations had been in compliance with Order No. 165975, or, if they had not, whether the Order had ceased, by its own terms, to be of force and effect.

The parties arguing in support of the request for a writ of prohibition to preclude the Commission from answering this question cite the case of Southern Union Production Company v. Corporation Commission,⁹ as supporting their position. They argue that Southern Union stands for the proposition that the Commission may not determine the effect of actions by parties to a pooling order upon the viability of that order. These parties read Southern Union overbroadly. In Southern Union the parties had requested a determination of whether the completion of the unit well as a dry hole and the subsequent abandonment by the unit operator had terminated the effectiveness of the pooling order under which operations had been conducted. The Commission entered an order in which it found the prior pooling order had terminated. However, the Commission went further and attempted to state in this order that the parties were “now in the same position they would be if such order had not been entered.” We found that this amounted to an attempt to determine the legal effect of the termination of the prior pooling order upon the parties’ legal title. An attempt, in effect, to render a judgment quieting title. This was condemned as being beyond the Commission’s limited authority. Southern Union may not be read to preclude the Commission’s power to determine that a prior order has ceased to be of force and effect.

In the case of Cabot Carbon Co. v. Phillips Petroleum Co.,¹⁰ we specifically recognized the power of the Commission to clarify its previous orders under the authority of 52 O.S. 1951 § 112.¹¹ In making this ruling we distinguished between the power granted to clarify, or “supplement,” previous orders, the exercise of which does not effect a change in the prior order or in the rights accrued under that order, and the powers granted to repeal, amend or modify a previous order. The power to effect a change in a previous order, we have held,¹² requires a showing before the Commission of a change in conditions or knowledge of conditions necessitating the repeal, amendment or modification. Failure to make such a showing renders an attempt to modify a prior order subject to the prohibition on collateral attacks set forth by the Legislature in 52 O.S. 1981 § 111.¹³

In the present case, the question sought to be adjudicated is in the nature of a clarification of the Commission’s language in Order No. 165975 relating to the authorization “to drill and operate a well” on the unit consisting of Section 14. It is apparent that Ports of Call has interpreted this to mean a completed well into the target formations, and that it necessarily contemplates continuous operations to achieve that end, including the commencement of a second and third borehole following the blowout problems which had been encountered. Those opposing Ports of Call’s continued operations construe “a well” to be limited to the initial borehole. The parties here are clearly entitled to have the issue clarified by the Commission.¹⁴ It necessarily follows, from this opinion’s previous discussion relating to the proper reading to be given to the Southern Union case, that the Commission as well has the authority to determine whether Order No. 165975 has ceased, by its own terms, to be of force and effect.

The authority of the Commission to enter an order clarifying a previous order is continuing in nature, flowing from the entry of that prior order.¹⁵ While only the district court has the power to adjudicate the legal effect of Order No. 165975 on the private interests involved,¹⁶ the Commission has continuing jurisdiction to resolve the precise question sought here to be presented. Thus, we find that the district court' properly refused to attempt to exercise jurisdiction in this matter.

While recognizing the Commission’s authority to supplement its own orders, this opinion may not be read as in any way derogating the right of mineral interest owners to enter into voluntary agreements under the auspices of 52 O.S.Supp. 1984 § 87.1. Nor should it be read in any way to conflict with our recognition of the exclusive power of the district courts to adjudicate private interest disputes arising under such agreements.¹⁷

However, where the parties, such as here, are conducting operations under a Commission imposed pooling order, and the question sought to be litigated arises from the construction of that pooling order, the proper forum to decide the question of construction is the Corporation Commission. Such a determination may then be appealed directly to this Court.¹⁸

In view of the evident conflict in jurisdiction between these forums under our general supervisory authority, we assume original jurisdiction of this matter and issue the requested writ of mandamus to the Oklahoma Corporation Commission directing it to proceed in the adjudication¹⁹ of whether Ports of Call’s operations in the development of Section 14 were within the scope of Order No. 165975. The writ of prohibition requested by petitioner Taft Milford is denied. The order of the trial court sustaining Ports of Call’s special de-murrer is affirmed. The temporary stay previously entered is dissolved.

SIMMS, C.J., DOOLIN, Y.C.J., and HAR-GRAVE, WILSON and KAUGER, JJ., concur. HODGES, OPALA and SUMMERS, JJ., concur in judgment.

1 . Helmerich & Payne, Inc., subsequently dismissed its application.

2 . 632 P.2d 393 (Okla.1981).

3 . Filed by Emil Larson, Doyle Snow and Sitco, Inc., aligned in this cause as respondents.

4 . Supra, note 2.

6 . This result is consistent with the general rule under Oklahoma law holding that, in a collateral attack on a judgment, the court’s inquiry may not extend beyond a determination of whether the assailed judgment is void on the face of the judgment roll. See Farmers’ Union Co-op Royalty Co. v. Woodward, 515 P.2d 1381 (Okla.1973).

7 . In the case of Shell Oil Co. v. Keen, 355 P.2d 997, 1000 (Okla.1960), we recognized the authority of the district court to proceed in an action based upon Commission orders. And, in Stipe v. Theus, 603 P.2d 347 (Okla.1979), we recognized the district court’s jurisdiction to determine reasonable costs of development under a Commission pooling order.

8 . See State ex rel. Commissioners of the Land Office v. Lewis, 197 Okl. 288, 170 P.2d 237 (1946). And see also Riddle v. Jay, 356 P.2d 1074 (Okla.1960).

9 . 465 P.2d 454 (Okla.1970).

10 . 287 P.2d 675, 679 (Okla.1955).

11 . The current codification of this provision, 52 O.S. 1981 § 112, is identical to the 1951 codification. This provision states, in pertinent part:

Any person affected by any Legislative or administrative order of the Commission shall have the right at any time to apply to the Commission to repeal, amend, modify, or supplement the same....

12 . Carter Oil Co. v. State, 205 Okl. 374, 238 P.2d 300 (1951).

13 . Union Texas Petroleum v. Corp. Comm., 651 P.2d 652, 659 (Okla.1981), cert. den. 459 U.S. 837, 103 S.Ct. 82, 74 L.Ed.2d 78.

14 . This result is also clearly indicated by the Legislature’s prohibition embodied in 12 O.S. 1981 § 1657, precluding the district courts from proceeding under the Uniform Declaratory Judgments Act as to Commission orders.

15 . We have previously pointed out, and here reemphasize, that the nature of the Commission’s jurisdiction in entering orders, such as are involved here, flows from our statutes concerning oil and gas conservation. 52 O.S. 1981 § 81, et seq. Under these statutory provisions the Commission’s jurisdiction is limited to the protection of public rights in the development and production of oil and gas. Samson Resources Co. v. Corp. Comm., 702 P.2d 19, 21 (Okla.1985); Tenneco Oil Co. v. El Paso Natural Gas Co., 687 P.2d 1049, 1052 (Okla.1984).

16 . Southern Union Production Co. v. Corp. Comm., supra, note 9.

17 . See Samson Resources Co. v. Corp. Comm., supra, note 15; Tenneco Oil Co. v. El Paso Natural Gas Co., supra, note 15.

18 . 52 O.S. 1981 § 112.

19 . State ex rel. H.F. Wilcox Oil & Gas Co. v. Walker, 168 Okl. 543, 35 P.2d 269 (1934).