Summary
In Humble Oil Refining Co. v. Welborn, 216 Miss. 180, 62 So.2d 211 (1953), the Mississippi Supreme Court upheld the action of the State Oil and Gas Board which approved an allocation formula based solely on acreage, in spite of one party's contention that the oil producing sands under his land were thicker and contained more hydrocarbons than adjoining lands.
Summary of this case from Gilmore v. Oil Gas Conservation Com'nOpinion
No. 38617.
January 12, 1953.
1. Oil and gas — gas drilling units — several owners within unit — allocation of production on basis of acreage.
Where the Oil and Gas Board has lawfully integrated the lands of several owners into one gas drilling unit of 320 acres, the Board properly ordered that the several owners share in the production in the proportion of the surface acreage of each such owner, notwithstanding the claim of some of the owners that their acreage is more productive than that of other owners within the unit. Chap. 256, Sec. 9(d) Laws 1948; Chap. 220 Laws 1950.
Headnote as approved by Hall, J.
APPEAL from the circuit court of Jones County; F.B. COLLINS, Judge.
Tom P. Caldwell, M.M. Roberts and Herman P. Pressler, for appellants.
A. The orders of the State Oil and Gas Board were supported by substantial evidence.
B. The orders of the State Oil and Gas Board did not violate any constitutional rights of appellees A.E. Welborn and Hiram L. Welborn. Superior Oil Co., et al. v. Foote, et al., 59 So.2d 85; Green, et al. v. Superior Oil Co., 59 So.2d 100; Hutchins, et al. v. Humble Oil Refining Co., 59 So.2d 103; Superior Oil Co. v. Griffith, et al., 59 So.2d 104; Superior Oil Co. v. Morgan, et al., 59 So.2d 105; Superior Oil Co. v. Beery, 59 So.2d 689; The California Co. v. State Oil and Gas Board, 27 So.2d 542; Secs. 6132-16, 6132-21(d), 6132-22(a), Code 1942.
Buchanan Montgomery, for appellees.
I. Rules and regulations of the State Oil and Gas Board cannot be made the basis of res adjudicata. The only judgment which is immune to attack is one protected by the rules of res adjudicata. Viator v. Stone, 201 Miss. 487, 29 So.2d 274, suggestion of error overruled, 29 So.2d 658; Aylward Production Corp. v. State Corporation Comm., (Kan.), 176 P.2d 861; Application of British-American Oil Producing Co., et al., (Okla.), 213 P.2d 841; Chap. 256, Sec. 6(c), Laws 1948.
II. A statute or an administrative order, rule or regulation, innocuous on its face, may become invalid in its application, and a party in interest has a constitutional right to show the facts by which he contends that, as to him and his property, the statute, order, rule or regulation is so unreasonable and oppressive as to result in confiscation of the property of such party. Superior Oil Co. v. Foote, 214 Miss. 857, 59 So.2d 85, 94; Hunter v. Justice's Court, 36 Cal.2d 315, 223 P.2d 465; Bernstein v. Bush, 29 Cal.2d 777, 177 P.2d 916; Frederic v. Board of Supervisors of Jackson County, 197 Miss. 293, 20 So.2d 92; Secs. 24, 25 Mississippi Const. of 1890; Witherspoon v. State, 138 Miss. 310, 103 So. 134, 139; Jones v. Walsh, 194 Miss. 247, 11 So.2d 908; Reid v. Halpin, 185 Miss. 396, 188 So. 310; Planters' Mercantile Co. v. Armour Packing Co., 109 Miss. 470, 69 So. 293, 295; White Eagle Oil Co. v. State Corporation Comm., (Kan.), 214 P.2d 337; Londoner v. Denver, 210 U.S. 373, 28 S.Ct. 708, 52 L.Ed. 1103; 42 Am. Jur. Pub. Adm. Law, No. 138, p. 481; Ohio Bell Telephone Co. v. Public Utilities Comm. of Ohio, 301 U.S. 292, 57 S.Ct. 724, 81 L.Ed. 1093; Baltimore Ohio R.R. Co. v. United States, 298 U.S. 349, 392, 80 L.Ed. 1209, 1224.
III. The establishment of drilling units embracing separately owned tracts of land which lie wholly without an oil or gas pool is unlawful, and the Board has no power to embrace nonproductive tracts in the drilling unit. Griffith v. Gulf Refining Co., (Miss.), 60 So.2d 518; Hassie Hunt Trust v. Proctor, (Miss.), 60 So.2d 551; State Oil and Gas Board v. Superior Oil Co., 202 Miss. 139, 30 So.2d 589; Chap. 256, Secs. 1, 6(c), 9(b), (c), (d), Laws 1948.
IV. The allocation or apportionment provided for by section 9(d) of Chapter 256 of Laws 1948 applies to the apportionment of the production from the pool among the units in the pool rather than apportionment between separately owned tracts in a unit, such apportionment as among separately owned tracts being governed by contract in cases of voluntary pooling, and being governed by the provisions of section 10(a) of chapter 220 of Laws 1950 in cases of forced pooling. Summers' Oil and Gas, Perm. Ed., Vol. 5, p. 682; Sec. 286.5, Oklahoma Laws 1945; Chap. 256, Sec. 9(d) Laws 1948; Chap. 220, Sec. 10(a) Laws 1950; Koenig v. Calcote, 199 Miss. 435, 25 So.2d 763; Griffith v. Gulf Refining Co., (Miss.), 60 So.2d 518.
V. If a statutory formula for the apportionment of production of gas from a pool among units is used as a formula for apportionment of unit production among separately owned tracts embraced in such unit, and such application of such formula is so arbitrary and unreasonable as to result in confiscation of property, then, in such instance, when applied to designated real estate, such statutory formula is void. Chap. 256, Secs. 6(c) (12), 9(c), (d), 10(a); Chap. 220, Sec. 10(a), Laws 1950; Millette v. Phillips Petroleum Co., 209 Miss. 687, 48 So.2d 344, 347; Frederic v. Board of Supervisors of Jackson County, 197 Miss. 293, 20 So.2d 92, 94.
VI. The order in each of the cases makes appellees unwilling philanthropists. Such order takes their property without due process and without a compensatory return. Griffith v. Gulf Refining Co., (Miss.), 60 So.2d 518; Chap. 256 Laws 1948, Secs. 1, 6(c); Millette v. Phillips Petroleum Co., 209 Miss. 687, 48 So.2d 344.
VII. The elements necessary to give the Board jurisdiction to proceed to the final order "requiring the persons who have not agreed to integrate their interests and to develop their lands as a drilling unit," were not shown to exist at the hearing of these cases before the State Oil and Gas Board. Chap. 256, Secs. 4, 9(c), (d), Laws 1948; 42 Am. Jur. Pub. Adm. Law, Sec. 130, pp. 465-466; Miles v. Amerada Petroleum Corp., (Texas), 241 S.W.2d 822, 825; Sec. 264, Code 1942; Chap. 220, Sec. 10(a) Laws 1950.
VIII. Appellant, as lessee, under the public policy of the State, was under an obligation to do nothing to destroy or deplete the lands of appellees, its lessors, and could not, with impunity, impair the value of appellees' property by seeking compulsory pooling orders which result in the confiscation of the property of appellees. Millette v. Phillips Petroleum Co., 209 Miss. 687, 48 So.2d 344; Griffith v. Gulf Refining Co., (Miss.), 60 So.2d 518, suggestion of error overruled, 61 So.2d ___; Sec. 16, Mississippi Const. 1890; Chap. 256, Sec. 15(b) Laws 1948.
Appellant owns a commercial oil and gas lease on 299 acres of land owned by appellees. This lease contains no pooling provision. The land is all contiguous but is situated in four different sections and is all in the Soso Gas Field. The State Oil and Gas Board adopted spacing rules which provide that each drilling unit in this field shall consist of one-half section or 320 acres. Appellees' lands were therefore placed in four drilling units and permits were granted for drilling each of these units and wells have been drilled, none of which, however, are upon the lands owned by appellees. Appellant filed petitions with the Oil and Gas Board for the integration of the interests of all owners of oil and gas rights in each unit and orders were entered granting the relief sought. Appellees appealed therefrom to the circuit court which reversed the orders of the Oil and Gas Board and from that action Humble appeals here.
By Chapter 220, Laws of 1950, the State Oil and Gas Board is authorized, when two or more separately owned tracts of land are embraced within an established drilling unit and the owners have not agreed to integrate their interests, to require such owners to integrate their interests and to develop their lands as a drilling unit for the prevention of waste or to avoid the drilling of unnecessary wells. The lower court was of the opinion that this provision in the statute is unconstitutional but since his decision we have held to the contrary. Superior Oil Co. v. Foote, 214 Miss. 857, 59 So.2d 89.
Appellees sought to prove in the hearing before the Oil and Gas Board that the sands underlying their lands are thicker and contain more hydrocarbons than the adjoining lands in the same unit for which reason they assert that their lands are more productive and that consequently the order of integration should allocate to their acreage in each unit a larger proportion of the production from each unit well than that which should be allocated to the other lands comprising the unit. Stated differently, appellees contended before the Oil and Gas Board and here contend that they should not be compelled to share in the production from each unit in proportion to the actual surface acreage owned by them in the unit, but that they are entitled to more royalty per acre than the other owners in the unit. (Hn 1) We think this contention is foreclosed by our conservation law, Chapter 256, Laws of 1948, for by paragraph (d) of Section 9 thereof it is expressly provided that "Anything herein contained to the contrary, notwithstanding, any allocation or apportionment of production shall be made on the basis of and in proportion to the acreage content of the drilling units prescribed for the producing horizons for the pool . . ." We do not write the statutes and must interpret them as adopted by the legislature. That body has fixed surface acreage as the basis for apportionment of production in each unit. The judgment of the circuit court will therefore be reversed and judgment will be entered here affirming the orders of the Oil and Gas Board.
Reversed and judgment here.
McGehee, C.J., and Holmes, Arrington and Ethridge, JJ., concur.