Title: Cook v. Wyoming Oil and Gas Conservation Com'n

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Cook v. Wyoming Oil and Gas Conservation Com'n1994 WY 81880 P.2d 583Case Number: 93-280Decided: 08/29/1994Supreme Court of Wyoming
D.L. 
COOK,

Appellant 
(Petitioner),

v.

WYOMING 
OIL AND GAS CONSERVATION COMMISSION,

Appellee 
(Respondent),

and 
North Finn, Appellee (Respondent/Intervenor).

 

Appeal 
from District Court, Natrona County, Dan Spangler, J.

 

Representing 
Appellant:

Neil 
J. Short, Casper.

Representing 
Appellee:

Roberta 
L. Rinegar, Asst. Atty. Gen., Casper, for appellee Wyoming Oil and Gas 
Conservation Com'n.

Thomas 
F. Reese of Brown & Drew, Casper, for appellee North 
Finn.

 

Before 
GOLDEN, C.J., THOMAS, MACY and TAYLOR, JJ., and CARDINE, J. 
(RET.)

MACY, 
Justice.

[¶1]      Appellant D.L. 
Cook sought review in the district court of Appellee Wyoming Oil and Gas 
Conservation Commission's report, wherein the Commission approved Appellee North 
Finn's application to add land to the North Carson Muddy Unit (the Unit) and 
denied Cook's application for a special order to protect his correlative rights. 
The Commission had changed its interpretation of WYO. STAT. § 30-5-110 (1983) 
with regard to the percentage of approval which was required from 
non-cost-bearing interests and cost-bearing interests for the expansion of an 
existing secondary recovery unit. The district court certified the case to this 
Court for review.

[¶2]      We 
affirm.

[¶3]      Cook articulates 
two issues:

1. 
Whether the Wyoming Oil and Gas Conservation Commission acted in an arbitrary 
and capricious manner by reversing its interpretation and application of W.S[.] 
§ 30-5-110(h), (j).

2. 
Whether the "new" interpretation and application of W.S. § 30-5-110(h), (j) by 
the Wyoming Oil and Gas Conservation Commission must be applied prospectively 
only and therefore cannot be applied to this case.

[¶4]      The Commission 
originally approved the application in 1989 for the Unit to operate as a 
secondary recovery unit in Campbell County, Wyoming. North Finn was the operator 
of the Unit, and Cook owned interests in the Unit. A well was subsequently 
drilled outside the Unit in order to offset the Unit's production. Cook also 
owned interests in that well (the Cook well). The Cook well was located on a 
tract of land (the Cook tract) which was situated directly east of the southern 
portion of the Unit. Bottom-hole pressure tests revealed that the Cook well was 
draining the same reservoir as was being drained by the 
Unit.

[¶5]      North Finn was 
concerned that hydrocarbons would be swept from the Unit to the Cook tract when 
secondary recovery injection processes were being conducted in the southern 
portion of the Unit. Consequently, North Finn began its secondary recovery 
operations in the northern portion of the Unit. In February 1993, North Finn 
determined that it was time to begin conducting secondary recovery operations in 
the southern portion of the Unit. North Finn applied to the Commission for 
permission to expand the Unit to include the Cook tract.

[¶6]      Originally, North 
Finn's application was not formally contested. A hearing examiner held a hearing 
in March 1993 on North Finn's application. After the hearing, the examiner found 
that all the statutory requirements for the expansion of an existing unit had 
been met except the requirement that North Finn secure approval of the expansion 
from one hundred percent of the non-cost-bearing interests and the cost-bearing 
interests in the proposed expanded unit area. Cook refused to approve the 
expansion plan.

[¶7]      Historically, the 
Commission had interpreted § 30-5-110(h) and (j) "to mean that, in order to add 
new land to a unit previously established under W.S. § 30-5-110, there must be 
one hundred percent agreement among [cost-bearing] interest[s] and 
[non-cost-bearing interests] in both the original unit and the land to be added 
to the unit." Because the hearing examiner was not sure about the percentage of 
approval which was required for the expansion of an existing unit, he referred 
the matter to the Commission. 

[¶8]      The Commission 
held a hearing, during which it considered arguments from all interested parties 
with regard to the proper interpretation of the statutory provisions. At the 
conclusion of that hearing, the Commission ruled that its previous requirement 
of approval from one hundred percent of all non-cost-bearing interests and 
cost-bearing interests in a proposed expanded unit area was incorrect under the 
statutory language. The Commission ruled that the statute required approval of 
the expansion plan from eighty percent of all cost-bearing interests and from 
eighty percent of all non-cost-bearing interests in the proposed expanded unit 
area.

[¶9]      Two months later, 
the Commission held a hearing on both North Finn's application for permission to 
expand the Unit and Cook's application for protection of his correlative rights. 
At the conclusion of the hearing, the Commission ordered "that the application 
of North Finn . . . be and [is] hereby approved, subject only to obtaining the 
consent of at least eighty percent (80%) of the non-cost-bearing interests and 
at least eighty percent (80%) of the cost-bearing interests." The Commission 
denied Cook's application.

[¶10]   Cook appealed to the district court 
from the Commission's decisions. The district court certified the case to us 
pursuant to W.R.A.P. 12.09(b).

"When 
a case is certified to this court pursuant to Rule 12.09, W.R.A.P., we examine 
the decision of the administrative agency as if we were the reviewing court of 
the first instance. The authority vested in a reviewing court is set forth in § 
16-3-114(c). . . ."

Montana 
Dakota Utilities Co. v. Public Service Commission of Wyoming, 
847 P.2d 978, 983 (Wyo. 1993), appeal after remand, 874 P.2d 236 (Wyo. 
1994) (quoting Union Telephone Company, Inc. v. Wyoming Public Service 
Commission, 821 P.2d 550, 556 (Wyo. 1991) (citations omitted)). See also 
Thunder Basin Coal Company v. Study, 866 P.2d 1288, 1290 (Wyo. 
1994).

[¶11]   In his first issue, Cook does not 
argue that the Commission's new interpretation of the statute was incorrect. 
Accordingly, we will not determine in this case whether the Commission properly 
interpreted the relevant statutory provisions. Cook's sole contention with 
regard to this issue is that the Commission acted arbitrarily and capriciously 
by refusing to follow its prior interpretation of the statute. He argues that 
the Commission's

interpretation 
and application of W.S. § 30-5-110 was so well-established and so 
well-understood that the sudden, abrupt change in policy would have significant 
impact in the oil and gas industry. In matters of this great import the 
[Commission] is bound by its prior position. The sudden, abrupt change is 
arbitrary and capricious.

Cook's 
argument is inconsistent with Wyoming case law. In Amoco Production Company 
v. Wyoming State Board of Equalization, 797 P.2d 552 (Wyo. 1990), we stated: 
"If, in fact, the statute was not being enforced as the legislature intended, 
the [agency] acted properly when it corrected that oversight." 797 P.2d  at 
555.

[¶12]   The Commission did not act in an 
arbitrary and capricious manner simply because it changed its interpretation of 
the statute. Indeed, the Commission is legally required to enforce the law as it 
has been drafted by the Legislature. See id.

[¶13]   In his second issue, Cook argues 
that the Commission erred by applying its new interpretation of the statute to 
the Unit. He argues that the interpretation may be used only prospectively. As a 
matter of law, we hold that the Commission did not err by applying its new 
interpretation to the Unit.

[¶14]   Cook suggests that the new 
interpretation "is tantamount to the promulgation of new legislation and to the 
repeal or amendment of existing legislation." We disagree. The Commission's new 
interpretation is not new legislation. The Commission has neither the power nor 
the authority to adopt legislation. Instead, the Commission is under an 
affirmative legal duty to implement the laws which are adopted by the 
Legislature. See 797 P.2d  at 555.

[¶15]   The Commission's new interpretation 
of § 30-5-110 was not applied retroactively in this case. The Commission 
announced its new interpretation of the statute on July 13, 1993. The full 
hearing on North Finn's application to expand the unit and on Cook's application 
for protection of his correlative rights was not held until September 8, 1993. A 
statute has not necessarily been applied retroactively because it has relied 
upon antecedent facts for its operation. BHP Petroleum Company, Inc. v. 
State, 784 P.2d 621, 626 (Wyo. 1989) (quoting Belco Petroleum Corporation 
v. State Board of Equalization, 587 P.2d 204, 210 (Wyo. 1978)). See also 
Amoco Production Company v. Hakala, 644 P.2d 785, 788 (Wyo. 
1982).

[¶16]   By conducting a full hearing on the 
expansion of the Unit in September 1993, the Commission gave Cook precisely the 
relief which he requested at the July 13, 1993, hearing:

[L]et's 
assume for a second that [the Commission] adopted the 80 percent total, just so 
[the Commission] know[s] before [it] go[es] to lunch and the record is clear, we 
will ask [the Commission] to make that a prospective decision and not include 
this North Carson Unit, because, as [the Commission] say[s] accurately in [its] 
notice, historically the [C]ommission has taken the [position] that [it] do[es] 
not have the authority to add lands to an established unit unless 100 percent of 
all parties agree, and/or, either [the Commission] appl[ies] the 100 
percent to the North Carson Unit or [it] reopen[s] the hearing on that unit to 
see if the addition is feasible, if it's economic[al], if Mr. Cook is being 
treated properly and so on.

(Emphasis 
added.)

[¶17]   Affirmed.