State ex rel. Commissioners of the Land Office v. Corporation Commission

1987 OK 126, 747 P.2d 306, 97 Oil & Gas Rep. 373, 1987 Okla. LEXIS 266, 1987 WL 3068
CourtSupreme Court of Oklahoma
DecidedDecember 16, 1987
DocketNo. 59120
StatusPublished
Cited by1 cases

This text of 1987 OK 126 (State ex rel. Commissioners of the Land Office v. Corporation Commission) 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
State ex rel. Commissioners of the Land Office v. Corporation Commission, 1987 OK 126, 747 P.2d 306, 97 Oil & Gas Rep. 373, 1987 Okla. LEXIS 266, 1987 WL 3068 (Okla. 1987).

Opinion

HARGRAVE, Vice Chief Justice.

The Commissioners of the Land Office administer certain lands of the state for the benefit of the common schools by virtue of Oklahoma Constitution, Article XI § 3, 64 O.S.1981 § 1. The Land Office is authorized to lease any of the lands it administers for oil and gas production. 64 O.S. 1981 § 281. The land involved in the instant dispute has been leased by the Land Office to the Anadarko Production Company, the appellee. Anadarko, as lessee, drilled and operated a gas well on land leased from the Land Office. The Land Office received royalties from Anadarko’s production under the terms of the lease.

After the proceeds from production had been distributed for a period of months, Anadarko, by application to the Corporation Commission, requested the Commission to establish a drilling and spacing unit for the common source of supply underlying the land on which Anadarko had drilled the well. Notice of its application was published by Anadarko in two newspapers as required by 52 O.S.1981 § 87.1(a). The Land Office claims not to have received notice of the pending application. This application resulted in Commission Order 146045 which established a 640-acre drilling and spacing unit for the Anadarko well effective October 10, 1978.

The Commissioners of the Land Office filed an application to vacate the spacing order on May 22, 1980. This application is based upon a claim that failure to give notice of the spacing application constituted a constitutional infirmity, in addition to the claim the Land Office was not subject to the jurisdiction of the Corporation Commission. After a hearing the Corporation Commission denied the Land Office’s application for vacation of the spacing order.

The Land Office appeals from the Corporation Commission’s refusal to vacate the order. Anadarko has cross appealed, claiming the Commission erred in failing to rule that the Land Office’s application was barred by waiver, estoppel or laches. The Corporation Commission has adopted the argument of Anadarko in opposition to the appeal of the Commissioners of the Land Office.

The Land Office contends the land of the state it administers for the benefit of the common schools is not subject to the oil and gas conservation laws of Oklahoma; that the Corporation Commission has no jurisdiction over state lands.

Title 52 O.S.1981 § 87.1(a) provides:

To prevent or to assist in preventing the various types of waste of oil or gas prohibited by statute, or any of said wastes, or to protect or assist in protecting the [308]*308correlative rights of interested parties, the Commission, upon a proper application and notice given as hereinafter provided, and after a hearing as provided in said notice, shall have the power to establish well spacing and drilling units of specified and approximately uniform size and shape covering any common source of supply, or prospective common source of supply, of oil or gas within the State of Oklahoma; ... (emphasis added)

There is nothing to suggest that state lands are exempt from the operation of this statute. The Land Office concedes this, but argues 64 O.S. § 286 provides the exclusive means whereby state lands may be developed for oil and gas in common with other lands. Section 285 of Title 64 O.S. 1981 provides in part:

... Provided, the Commissioners of the Land Office shall have authority to enter into agreements upon such terms and conditions as they may impose, providing for the communitizing of any oil and gas lease executed by them with other leases to be jointly operated and developed as a unit when they deem such communitization action to be to the best interest of the funds and property under their management....

Similarly, there is no indication in this statute exempting state lands from the operation of the state’s oil and gas laws. What the statute does authorize is voluntary communitization of the state’s land and other property. This section does not deny the power of the Commission to order such communitization. The Land Office argues this sentence grants the Land Office the exclusive power to enter into drilling and spacing units in its sole discretion. This proviso is also necessary in light of the fact that some sections of state leases must require offset wells to be drilled:

... All leases for oil and gas provided in this article shall contain a provision requiring the lessee to drill a sufficient number of wells upon the leased premises to offset the wells upon adjoining contiguous premises, ...

We therefore hold that the Land Office is not exempt from Corporation Commission jurisdiction, and state lands are not exempt from state oil and gas conservation laws.

The appellant, Commissioners of the Land Office, contend that failure to give actual notice to them when their identity and whereabouts were known violates their rights to due process guaranteed by Article II, § 7 of the Constitution of the State of Oklahoma and the Fourteenth Amendment of the Federal Constitution. This argument assumes the state is a person under the above constitutional authority. In view of the analysis below it is unnecessary to address this contention.

The Land Office contends that the publication notice is constitutionally inadequate in view of the decision in Cravens v. Corporation Commission, 613 P.2d 442 (Okl.1980). In Cravens, supra, the Court held:

... [W]hen an applicant seeks to establish a drilling and spacing unit which includes a producing leasehold and the applicant knows of the identity of parties owing (sic) an interest therein or can with due diligence ascertain same, such applicant must not only give the notice required by statute and rule but must comply with the standards of Bomford [v. Socony Mobil Oil Co., 440 P.2d 713 (Okl.1968)] and Mullane [v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950)].

Each party, as it coincides with their interest, argues that the Cravens, supra, opinion is, or is not, retroactive so as to apply to this action. Subsequent to the course of the briefing cycle in this action, this question has been answered in Harry R. Carlile Trust v. Cotton Petroleum, 732 P.2d 438 (Okl.1986). There the Court stated that because of the significant hardships that would be imposed if the decision were given retroactive effect, the rule is to be applied prospectively to spacing units which will be formed by Commission orders after the effective date of Carlile, supra. All spacing orders made by the Commission prior to the effective date of the Carlile, supra, opinion will be left unaffected by the notice standards of Cravens, supra, and Carlile, supra, and shall apply prospectively to units formed after the effective date of the opinion. More germane to this proceeding Carlile, supra, states that [309]*309orders yet to be made in proceedings presently before the Commission and in cases on direct appeal, in which areas under production are sought to be, or were, comprised within a spacing unit, shall be regarded as governed by notice standards announced in Cravens, supra.

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Bluebook (online)
1987 OK 126, 747 P.2d 306, 97 Oil & Gas Rep. 373, 1987 Okla. LEXIS 266, 1987 WL 3068, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-ex-rel-commissioners-of-the-land-office-v-corporation-commission-okla-1987.