Palmer Oil Corp. v. Phillips Petroleum Co.

1951 OK 78, 231 P.2d 997, 204 Okla. 543, 1951 Okla. LEXIS 517
CourtSupreme Court of Oklahoma
DecidedMarch 20, 1951
Docket33336, 33708
StatusPublished
Cited by41 cases

This text of 1951 OK 78 (Palmer Oil Corp. v. Phillips Petroleum Co.) is published on Counsel Stack Legal Research, covering Supreme Court of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Palmer Oil Corp. v. Phillips Petroleum Co., 1951 OK 78, 231 P.2d 997, 204 Okla. 543, 1951 Okla. LEXIS 517 (Okla. 1951).

Opinions

GIBSON, J.

Cause No. 33336 is an appeal from an order of the Corporation Commission providing for the unitized management, operation and further development of what is designated as “West Cement Medrano Unit”, located in Caddo county, Oklahoma, made in pursuance of the provisions of 52 O. S. Supp. 1945 §§286.1 to 286.17. Cause No. 33708 is an original action for a writ prohibiting the Corporation Commission from exercising further jurisdiction in the matter of said unit-ization. Since the question of the issuance of the writ depends upon the issues involved on the appeal the same will be disposed of following determination of the appeal.

Involved on the appeal are two major questions. One, the constitutionality of said sections of the statute which, as a whole, constitute what is known as the Unitization Act (H. B. 339 of the 1945 Oklahoma Legislature). The other, the legality of the order of the Commission if authorized under the Act to effect unitization. These questions will be considered in the order stated.

The nature of the Act and the purposes sought to be accomplished thereby are clearly reflected in the legislative declaration made in the first section thereof, as follows:

“Sec. 286.1. The Legislature finds and determines that it is desirable and necessary, under the circumstances and for the purposes hereinafter set out, to authorize and provide for unitized management, operation and further development of the oil and gas properties to which this Act is applicable, to the end that a greater ultimate recovery of oil and gas may be had therefrom, waste prevented, and the correlative rights of the owners in a fuller and more beneficial enjoyment of the oil and gas rights, protected.”

Plaintiffs in error recognize that the subject-matter of the Act is one within the police power of the state and that the constitutional questions presented are whether the Act constitutes a reasonable exercise thereof.

We will refer to and state or quote the particular provisions of the Act involved on considering the arguments directed thereto.

The plaintiffs in error, though numerous, represent but three classes in interest: lessors, lessees and those having, severally, royalties interest which are in excess of one-eighth of the total production.

On behalf of the lessees it is contended that the Act is violative of art. II, sections 7, 15, 23 and 24 of the Constitution of the State of Oklahoma, and of art. I, sec. 10, of the Fourteenth Amendment to the Constitution of the United States. For the purpose of the presentation, there is no segregation of the contentions as to each of said constitutional provisions for the expressed reason the grounds relied on have common application to all. Two grounds are relied on. One, the Act as a whole is unreasonable. The other, the Act constitutes an unauthorized delegation of legislative power.

On behalf of the lessors it is contended that the Act is violative of all of said constitutional provisions and of section 51 of art. V of the Constitution of the State of Oklahoma. The several violations are referable to definite grounds which have common application and there is no occasion to segregate the contentions as to each. Five grounds are relied on. One, the Act constitutes an unauthorized delegation of legislative power, which ground is the same as lessees’ ground number Two and is urged on the same bases. Two, that both in the formation of the unit and in the committee management [546]*546thereof lessees only are recognized and therefore to the exclusion of the lessor. Three, the Act imposes an unauthorized burden upon the royalty interest in the production. Four, the Act imposes an unauthorized burden upon the leased premises of the lessor. And, fifth, the Act is violative of the obligations of contracts.

The substance of lessees’ ground One is that the Act is unreasonable because it does not require as a condition to the establishment of the unit a finding by the Commission that, for the purpose of conservation, the application of Act will be more effective than that of the existing laws. In support thereof attention is called to the fact that under the provisions of the Act the unit may be established in fields where production has been had for nearly twenty years; that unitization, in which gas energy is a prime factor for operation, would be less satisfactory by reason of the expenditure thereof during operations prior to unification and would disturb the multitude of rights that had become established on the basis of the methods being employed under the existing laws. There is then declared:

“It is our earnest contention that a compulsory unitization statute which clearly disrupts the existing law and existing rights can only be justified where the advantages to be gained far offset the losses to be sustained to property or individual rights.”

There are then recited the findings required of the Commission by the Act, and it is stated that thereunder “the Commission could approve a plan of unitization which definitely could not result in an increased recovery of oil and gas over that being accomplished by present methods of operation under the general conservation law.” It is then declared that, by reason thereof:

“We submit that any compulsory unitization law, competing with the general conservation law whose real purpose is exactly the same, should not be given constitutional sanction under the police power unless it specifically provides that the Commission finds that any plan of unitization approved thereunder will accomplish the conservation of oil and gas with substantially greater results than is being accomplished under the general conservation law still in full force and effect.”

The findings required by the Act appear in section 286.4, as follows:

“If upon the filing of a petition therefor and after notice and hearing, all in the form and manner and in accordance with the procedure and requirements hereinafter provided, the Commission shall find (a) that the unitized management, operation and further development of a common source of supply of oil and gas or portion thereof is reasonably necessary in order to effectively carry on pressure-maintenance or repressuring operations, cycling operations, water flooding operations, or any combination thereof, or any other form of joint effort calculated to substantially increase the ultimate recovery of oil and gas from the common source of supply; and (b) that one or more of said unitized methods of operation as applied to such common source of supply or portion thereof are feasible, will prevent, waste and will with reasonable probability result in the increased recovery of substantially more oil and gas from the common source of supply than would otherwise be recovered; and (c) that the estimated additional cost, if any, of conducting such operations will not exceed the value of the additional oil and gas so recovered; and (d) that such unitization and adoption of one or more of such unitized methods of operations is for the common good and will result in the general advantage of the owners of the oil and gas rights within the common source of supply or portion thereof directly affected, it shall make a finding to that effect.

As indicated in the contention, the Act does not authorize the Commission to withhold establishment of unification where in the opinion of the Commission oil conservation may be accomplished better under existing laws.

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Bluebook (online)
1951 OK 78, 231 P.2d 997, 204 Okla. 543, 1951 Okla. LEXIS 517, Counsel Stack Legal Research, https://law.counselstack.com/opinion/palmer-oil-corp-v-phillips-petroleum-co-okla-1951.