Spiers v. Magnolia Petroleum Co.

1951 OK 276, 244 P.2d 852, 206 Okla. 510, 1 Oil & Gas Rep. 901, 1951 Okla. LEXIS 766
CourtSupreme Court of Oklahoma
DecidedOctober 23, 1951
Docket34078
StatusPublished
Cited by25 cases

This text of 1951 OK 276 (Spiers v. Magnolia 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
Spiers v. Magnolia Petroleum Co., 1951 OK 276, 244 P.2d 852, 206 Okla. 510, 1 Oil & Gas Rep. 901, 1951 Okla. LEXIS 766 (Okla. 1951).

Opinion

GIBSON, J.

This is an appeal from an order of the Corporation Commission wherein the Commission amended a former order providing for the unitization of the Chitwood Spiers Sand Area in an oil field in Grady county, Oklahoma.

The Commission had established what is known as the Chitwood Spiers Sand Unit by its order No. 21066 made and entered in its cause No. CD 1612 on May 29, 1948. On February 8, 1949, the Commission, after extended hearings, made and entered its order No. 22064 in the same cause holding that its former order creating the Unit should be amended by decreasing the area and by changing the basis of participation by the royalty owners from a surface-acreage basis to an acre-foot basis. This change affected not only the royalty owners’ interest but the interest of the lessees as well.

In its petition to amend the former order Magnolia Petroleum Company, in part, alleges that extensive development had taken place since the entry of order 21066; that three wells had been drilled within the boundaries of the Unit in an attempt to discover production in the Spiers sand; that a study of the date obtained revealed that the pay zone of the Spiers sand unit was not as extensive as at first believed; that under 52 O. S. 1941 §286.5, only so much of the common source of supply as has been reasonably defined by actual drilling operations may be included within the area and said unit should be reduced to the area shown on an attached map, Exhibit A.

It was further proposed “that the new formula of participation shall be on an acre foot basis — that is, each tract shall have assigned to it that proportion of the unitized substances that the acre feet of sand under said tract bears to the total number of acre feet of sand under the entire unit.”

Claude C. Spiers, a landowner, filed his written protest to said petition in which he attacked the constitutionality and validity of the Unitization Act, and further alleged that the amendments sought would be unfair, unjust and inequitable to him; that sufficient wells had not been drilled to show the necessity, expediency or equity of the same; that the proposed formula of participation was unfair, unjust and inequitable *512 and that the Commission had no jurisdiction to modify or change its former order.

A. Ben Chadwell and another royalty owner filed no formal pleading but they appeared and protested the proposed amended order and participated with their attorney in the proceedings.

Hereafter we shall refer to the petitioner as “Magnolia”; Claude C. Spiers, the protestant, as “Spiers”; and the appearing royalty owners as “Chadwell”.

Spiers alone raises the question that the Unitization Act is illegal and that it violates provisions of the State and Federal Constitutions. The constitutionality of this Act was upheld by this court in Palmer Oil Corp. v. Phillips Petroleum Co., 204 Okla. 543, 231 P. 2d 997, and the decision in that case is controlling here. Spiers’ contentions with reference to the constitutionality of the Act are denied.

The remaining paramount questions involved in this appeal are whether the Corporation Commission has the power under the Unitization Act, after hearing evidence, to diminish or reduce the area of a unit area and to change the participation factor after the unit and the method of participation has once been established by a Commission order.

If the Commission is vested with such powers to amend its order, then it is apparent, from our view of this record, that there was ample and sufficient evidence to sustain the amending order No. 22064. The decision of the Commission depended upon how it resolved conflicting evidence. Primarily the decision depended upon the weight of expert evidence by geologists and petroleum engineers. No others are qualified to advise the Commission or this court of the conditions and area of an oil sand two miles below the surface of the earth.

We say again that all experts testifying in this case were highly qualified in their respective fields. They differed in some of their conclusions drawn from the known facts and data revealed from various oil wells that had been drilled in the Chitwood Field. All experts were subjected to extensive examination and cross-examination. The Commission had the advantage of use of a blackboard whereon the experts demonstrated their theories and conclusions, and the full effect of impressionability on the .trier of facts is not revealed by the typewritten record before us. The Commission itself, by its experience in various cases involving the conservation of natural resources, becomes somewhat expert in weighing the value of expert testimony. Where the decision of the Commission is not clearly against the weight of the evidence or is sustained by sufficient evidence, this court will not vacate the order nor will it substitute its opinion for that of the Commission. Peppers Refining Co. v. Corporation Commission, 198 Okla. 451, 179 P. 2d 899; Denver Producing & Refining Co. v. State, 199 Okla. 171, 184 P. 2d 961; Palmer Oil Corp. v. Phillips Petroleum Co., supra.

But has the Commission the power to amend its order in respects above stated? It is a question of the first impression with this court. In his brief Chadwell clearly states the issue when he avers that the Corporation Commission has no authority to reduce the size of a unit once created under the! Unitization Act and that the area and the formula, having been fixed, it was not proper thereafter for the Commission to change either.

With reference to the fundamental reasons for the enactment of the Uniti-zation Act, we appreciate the following statement in Chad well’s brief:

“On the theory that the greatest good to the greatest number provides a proper motive, and that the conservation of natural resources furnishes the authority, the Legislature passed this law which substitutes an interest in the whole property for an interest in the separate property previously owned by *513 the affected owners. It was a bold legislative step, and it was not taken by the Legislature until it had spent years digesting the concept of a common source of supply as one mechanical unit for the production of oil and gas. Nature does not provide proper underground restraining barriers which will prevent one man’s wrongful production practices from affecting the whole reservoir. Further, the energy of the reservoir is a unit, and its most efficient use comes when employed as a unit. But this does not mean that a reservoir must be unitized when first discovered, nor that unitization is proper in every instance.”

He then discusses certain sections of the Act, including section 11, which provides that in a proceeding in which an order is entered creating a unit, the Commission shall retain jurisdiction for the purpose of amending the plan of unitization from time to time whenever by reason of changed conditions, for good cause shown, it is made to appear that such amendment is necessary or proper.

He then quotes from section 12 that the unit area may be unitized with adjoining or contiguous portions of the same common source of supply and that the larger unit so created shall supersede such smaller unit or units.

It is then argued by counsel that since section 11 provides for amendment of the plan,

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Bluebook (online)
1951 OK 276, 244 P.2d 852, 206 Okla. 510, 1 Oil & Gas Rep. 901, 1951 Okla. LEXIS 766, Counsel Stack Legal Research, https://law.counselstack.com/opinion/spiers-v-magnolia-petroleum-co-okla-1951.