Wilcox Oil Company v. Corporation Commission

1964 OK 131, 393 P.2d 242, 1964 Okla. LEXIS 348, 1964 WL 109547
CourtSupreme Court of Oklahoma
DecidedJune 9, 1964
Docket40519
StatusPublished
Cited by5 cases

This text of 1964 OK 131 (Wilcox Oil Company 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
Wilcox Oil Company v. Corporation Commission, 1964 OK 131, 393 P.2d 242, 1964 Okla. LEXIS 348, 1964 WL 109547 (Okla. 1964).

Opinion

WILLIAMS, Justice.

The matter to be resolved in this appeal is whether this Court should affirm an order made by the Corporation Commission holding that Wilcox Oil Co., a part of whose lease was placed in the same half-section drilling and spacing unit with a part of a lease owned by Shadid et al., could not charge up to the unit operation the cost of a *243 well previously drilled and already abandoned.

In August, 1959, Wilcox Oil Company, plaintiff in error, hereinafter referred to as Wilcox, commenced the drilling of a well, hereinafter referred to as Duggin No. 1, for oil and gas in the SEJ4 NW(4 of Section 8, Township 9 North, Range 22 West, Beck-ham County. Wilcox owned oil and gas leaseholds covering the entire west half of that section except the N^ of NWJ4 which was owned by defendants in error, Fred V. Shadid, N. F. V. Barkett, Ralph J. Shadid and E. M. Woody, hereinafter referred to as Shadid et al. For reasons not here involved it was necessary to abandon such well and commence the drilling of a second well, hereinafter referred to as Duggin No. 1-A, approximately one hundred feet away. After operations ceased on Duggin No. 1-A, the Corporation Commission of Oklahoma, hereinafter referred to as Commission, entered its orders creating half-section drilling and spacing units for further development of the Des Moines “A” Formation and the Missouri Formation. The west half of Sec. 8, 9N, 2W was designated as such a drilling and spacing unit. In September, 1961, Wilcox completed the Duggin No. 1-A well. In June, 1962, Shadid et al. filed an application with the Commission asking “That upon hearing the Commission enter an order pooling the Zone A of the Des Moines granite wash formation leasehold interests in the unit secondly above described, and assess and determine the costs of such Zone A of the Des Moines granite wash development and assess and determine the costs of the Missouri Formation development, and adjust the rights and equities of the parties hereto and grant any and all other relief to which the applicants are entitled.”

Following a hearing before it on such application the Commission ordered Shadid et al. to pay Wilcox one-fourth of the cost of the Duggin No. 1-A well and refused to require them to pay any of the expenses incurred by Wilcox in connection with the Duggin No. 1 well. From that order Wilcox appeals. For reversal it advances two propositions. The first is that “The Commission erred in not allowing Wilcox Oil Company to recover all of its actual expenditures incurred in the development of the unit involved”.

The amount spent by Wilcox on Duggin No. 1 is not in dispute.

The parties agree that 52 O.S.1961 § 87.1(d) is the applicable statute. In pertinent part it provides:

“ * * * When two (2) or more separately owned tracts of land are embraced within an established spacing unit * * * the owners thereof may validly pool their interests and develop their lands as a unit. Where, however, such owners have not agreed to pool their interests, and where one such separate owner has drilled ' * * * a well on said unit to the common source of supply, the Commission, to avoid the drilling of unnecessary wells, or to protect correlative rights, shall * * * require such owners to pool and develop their lands in the spacing unit as a unit. All orders requiring such pooling shall be made after notice and hearing, and shall be upon such terms and conditions as are just and reasonable and will afford to the owner of such tract in the unit the opportunity to recover or receive without unnecessary expense his just and fair share of the oil and gas. * * * Such pooling order of the Commission shall make definite provisions for the payment of cost of the development and operation, which shall be limited to the actual expenditures required for such purpose not in excess of what are reasonable, including a reasonable charge for supervision. In the event of any dispute relative to such costs, the Commission shall determine the proper costs after due notice to interested parties and a hearing thereon

Under its first proposition Wilcox argues that since a person who in good faith enters into peaceable possession of land upon which he owns an oil and gas lease and pro *244 duces oil and gas therefrom and the lease is thereafter declared void is entitled to the reasonable cost of producing the oil and gas in an action for an accounting by the landlord that its “position in this case is not less equitable and tenable than “that of such a trespasser”.

Wilcox contends that Shadid et al. “did not come forward and say we would like to participate in the making of the decision to spend the money”; that “they were content to wait until production was obtained”; that they “now wish to say that Wilcox spent too much money obtaining” production; that “if it was reasonably made when made, no thereafter change in knowledge could make it unreasonable now”. No question of the reasonableness of the charges for the expenses incurred in connection with the drilling and plugging of No. 1 well is here in issue. Rather the issue is whether or not Shadid et al. should be required to reimburse Wilcox for one-fourth of the cost of such well.

The contentions made by Wilcox are not applicable here. It must be remembered that the element of acquiescence does not enter into the present case. At the time Duggin No. 1 was being drilled Shadid had no interest in the land upon which such well was being drilled nor had the Corporation Commission entered a spacing order declaring such well to be their unit well. If Shadid et al. had been tenants in common with Wilcox, it may be that such contentions would then be pertinent. This Court has ruled upon a similar question in the case of tenants in common and has held that the drilling party is entitled to recoup his costs for unproductive wells on the same lease, inasmuch as they are part of the single enterprise of developing the lease. See Moody v. Wagner, 167 Okl. 99, 23 P.2d 633. However, in the instant case Wilcox and Shadid et al. were not interested in the same lease. Their interests did not combine until the Corporation Commission established the Duggin No. 1-A well as the unit well for the west half of Section 8. If Wilcox had never obtained any production, Shadid et al. would not have been concerned with their operations. In its brief Wilcox states “If Wilcox had abandoned operations after the Duggin No. 1 got in trouble and had not proceeded with the operations and drilled the Duggin No. 1-A, the problems which are here in controversy would not have arisen. ⅝ * * a

The drilling of the “junked well”, Duggin No. 1, is not shown to have added anything of value to the property of Shadid et al. There was no evidence that such well defined the production limits and pointed to the location from which production was obtained.

In support of its first proposition Wilcox cites the case of Champlin Refining Co. v. Aladdin Corporation, 205 Okl. 524, 238 P.2d 827. We do not consider it applicable as the facts are distinguishable from those of the present case. In the Champlin case, Champ-lin sought from the landowners recovery of the costs incurred in the drilling of a dry hole. The dry hole was drilled after a producing well had been drilled and prior to the drilling of a second producing well. In that case we held that the cost of drilling the dry hole was part of the reasonable costs of development and production.

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1964 OK 131, 393 P.2d 242, 1964 Okla. LEXIS 348, 1964 WL 109547, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wilcox-oil-company-v-corporation-commission-okla-1964.