Oryx Energy Co. v. Barrett Resources Corp.

1996 OK CIV APP 160, 940 P.2d 227, 1996 Okla. Civ. App. LEXIS 161, 1996 WL 887526
CourtCourt of Civil Appeals of Oklahoma
DecidedNovember 26, 1996
DocketNo. 87053
StatusPublished

This text of 1996 OK CIV APP 160 (Oryx Energy Co. v. Barrett Resources Corp.) 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
Oryx Energy Co. v. Barrett Resources Corp., 1996 OK CIV APP 160, 940 P.2d 227, 1996 Okla. Civ. App. LEXIS 161, 1996 WL 887526 (Okla. Ct. App. 1996).

Opinion

OPINION

HANSEN, Presiding Judge:

Appellants, Oryx Energy Company (Oryx) and Amoco Production Company (Amoco) (collectively Appellants),1 seek review of a Corporation Commission (Commission)2 order, which, among other things, established a priority production schedule for the gas wells located within a single drilling and spacing unit

Oryx is the operator of the Allen drilling and spacing unit comprised of section 20-15N-13W, Blaine County, Oklahoma. Four wells have been drilled in the unit. The No. 1 well was plugged and abandoned. The No. [230]*2302 well was completed in the Morrow common source of supply in 1977. In September, 1994, the No. 3 well was drilled to the Morrow common source of supply pursuant to Commission’s increased density Order No. 380102. That order provided that the No. 3 well share a single unit gas production allowable with the No. 2 well.

The No. 4 well was drilled to the Morrow common source of supply pursuant to Commission’s increased density Order No. 388840, dated December 19, 1994, and began production in May, 1995. Order No. 388840 provided the No. 4 well was to share a single unit allowable with the No. 2 well. Order No. 388840 did not, however, vacate or modify Order No. 380102, which had provided the No. 3 well was to share a single allowable with No. 2, nor did it even mention well No. 3.

On February 28, 1995, Oryx made application to Commission to modify and amend Order No. 388840 to provide that the No. 4 increased density well should share an allowable with both the No. 2 and No. 3 wells. In support of its application, Oryx alleged that omission of the No. 3 well from the order was “due to an inadvertent error in the testimony”.

Appellee, Barrett Resources Corporation (Barrett), a working interest owner in the No. 3 well, but with no ownership in the No. 2 or No. 4 wells,3 filed a Response and Request for Affirmative Relief to Oryx’s application to modify and amend Order No. 388840. Barrett adopted Oryx’s application, but additionally requested as affirmative relief that the order to be issued provide “that the existing Allen No. 1, 2, and 3 wells be entitled to produce all of the unit allowable that they are capable of producing, with the increased density well [No. 4] authorized by Order No. 388840 entitled to produce the remainder”.

After a hearing at which considerable testimony was taken, Commission’s administrative law judge (ALJ) recommended that Oryx’s application to modify and amend be granted “consistent with applicant’s recommendation of a ratable share of the allowable as defined by Rule 165:10 — 13—9”.4 Barrett appealed the ALJ’s report to Commission, and the appeal was heard by an Oil & Gas Appellate Referee. Barrett argued the administrative law judge improperly construed and applied Rule 165:10-13-9 in recommending ratable sharing of the allowable, and further argued the ALJ’s conclusion — that ratable sharing would protect correlative rights throughout the entire unit — was contrary to the undisputed evidence.

By its Order No. 399085, Commission adopted the Oil & Gas Appellate Referee’s recommendations that the ALJ’s report be reversed and that Barrett’s request for affirmative relief in the form of priority sharing of the allowable be granted. Appellants bring their appeals from that order. Commission’s order will be affirmed if it is supported by substantial evidence and the law. Forest Oil Corporation v. Corporation Commission of Oklahoma, 807 P.2d 774 (Okla.1990).

Appellants first contend Barrett’s request for affirmative relief was an impermissible collateral attack on a prior commission order. They argue Barrett did not appeal from Order No. 388840, which authorized well No. 4, and that the order became the final determination of the parties’ rights. Appellants assert that among those vested rights was the right to ratably share the unit allowable pursuant to Rule 165:10-13-9(d), and that to modify the order to provide for a priority production schedule was an impermissible collateral attack on the original order.

Collateral attacks on Commission’s orders, rules and regulations are prohibited by 52 O.S. 1991 § 111. Section 111 further provides “the sole method of reviewing such orders and inquiring into and determining [231]*231their validity, justness, reasonableness or correctness shall be by appeal from such orders, rules or regulations to the Supreme Court”. Commission’s orders are not, however, made immutable by § 111. Our statutes and common law recognize the orders are subject to change by Commission when certain prerequisites are met.

The Oil and Gas Conservation Act5 itself provides, in 52 O.S. 1991 § 112, that “[a]ny 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”. In balancing the statutory dictates of §§ 111 and 112, the Oklahoma Supreme Court has determined that “an application for an order of modification constitutes a collateral attack on the prior order where that modification is not based upon substantial evidence showing a change of conditions or knowledge of conditions arising since the last order”. Union Texas Petroleum v. Corporation Commission, 651 P.2d 652 (Okla.1981).

Commission grounded its order on such a change of conditions or change in knowledge of conditions. In Order No. 399085, which is the subject of this appeal, Commission found:

The increased density order which allowed the drilling of the No. 4 well, was granted in part on the belief that the proposed well would have a limited drainage area and would be incapable of adversely affecting ... any existing wells in the unit. However, these conditions have changed as it is now known the No. 4 well can adversely affect the No. 2 and No. 3 wells and the change of conditions that has occurred favors the Commission leaning towards establishing a sharing of the allowable to protect the Allen No. 3 well which is in a more competitive portion of the reservoir and offset by more prolific offsetting wells which are closer to the No. 3 well than the offsets are to the No. 4 well.

We find there is substantial evidence of record to support Commission’s finding. Substantial evidence has been defined as “something more than a scintilla; possessing something of substance and of relevant consequence carrying with it a fitness to induce conviction, but remains such that reasonable men may fairly differ on the point of establishing the case”. Union Texas Petroleum v. Corporation Commission, 651 P.2d at 662.

Commission’s Order No. 388840, authorizing well No. 4, reflects Commission found “the testimony also established that the proposed well would not adversely affect any of the existing wells currently producing from this Morrow Sand common source of supply underlying this section”. During the hearing on Oryx’s application to amend and modify Order No. 388840, which was after well No. 4 had begun production, Oryx’s expert engineering witness acknowledged wells No. 3 and No. 4 were, to a certain extent, competing in the same reservoir.

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Bluebook (online)
1996 OK CIV APP 160, 940 P.2d 227, 1996 Okla. Civ. App. LEXIS 161, 1996 WL 887526, Counsel Stack Legal Research, https://law.counselstack.com/opinion/oryx-energy-co-v-barrett-resources-corp-oklacivapp-1996.