Title: Majority of Working Interest Owners In Buck Draw Field Area v. Wyoming Oil and Gas Conservation Com'n

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Majority of Working Interest Owners In Buck Draw Field Area v. Wyoming Oil and Gas Conservation Com'n1986 WY 143721 P.2d 1070Case Number: 85-287Decided: 07/01/1986Supreme Court of Wyoming
The MAJORITY OF the 
WORKING INTEREST OWNERS IN the BUCK DRAW FIELD AREA: Diamond Shamrock 
Exploration Company, Woods Petroleum Corporation, Chorney Oil Company, Cities 
Service Oil and Gas Corporation, W.A. Moncrief, Jr., Apache Corporation, Ep 
Operating Company by Enserch Exploration, Inc., Managing General Partner, First 
Energy Corporation, Petitioners,

v.

WYOMING OIL AND GAS CONSERVATION 
COMMISSION, Respondent, Kerr-McGee Corporation, Marathon Oil Company and 
LouisianaLand and Exploration 
Company, Intervenors.

Appeal from Oil and Gas 
Conservation Commission.

Marilyn S. Kite, 
(argued) of Holland & Hart, Cheyenne, and 
Michael J. Brennan of Holland & Hart, Denver, Colo., 
for Majority Working Interest 
Owners.

Neil J. Short, 
(argued) of Ross & Short, Casper, for Diamond Shamrock Exploration 
Co.

Joe Scott, Sp. 
Asst. Atty. Gen., for 
respondent.

Houston G. 
Williams and George M. Porter of Williams, Porter, Day & Neville, Casper, 
Robert A. Miller, (argued) of Crabtree & Miller, Oklahoma City, Okla., and 
Delvin Menge of Marathon Oil Co., Casper, for intervenors Kerr-McGee Corp. and 
Marathon Oil Co.

S. Thomas 
Throne, (argued) Sheridan, for intervenor La. Land and Exploration 
Co.

Before THOMAS, C.J., and BROWN, CARDINE, URBIGKIT 
and MACY, JJ.

CARDINE, 
Justice.

[¶1.]     After an administrative 
proceeding, the Wyoming Oil and Gas Conservation Commission (commission) ordered 
that the interest owners shut-in their oil wells in the Buck Draw North Oil and 
Gas Field until they agreed upon a unitization plan for secondary recovery 
operations. A majority of the working interest owners filed a petition for 
review in the district court, and the case was certified directly to this court. 
Several of the working interest owners, Kerr-McGee Corporation (Kerr-McGee), 
Marathon Oil Company (Marathon), and LouisianaLand and Exploration Company (LL & E), 
support the commission's decision and have intervened. We must decide whether 
evidence considered by the commission was properly before it, whether 
substantial evidence supported the commission's finding that further primary 
production would cause waste, and whether the conditional shut-in amounted to an 
improper forced unitization.

[¶2.]     We 
affirm.

Facts

[¶3.]     The Buck Draw North Oil 
and Gas Field was discovered by LL & E in 1983. LL & E and other 
interest owners developed the field quite rapidly, and there is presently at 
least one producing oil well on each 640-acre drilling unit. The initial 
reservoir pressure of the field, 8,100 pounds per square inch (psi), has 
diminished as production has occurred.

[¶4.]     In January of 1985 the 
commission, on its own motion, called a hearing to review data on the field's 
diminishing pressure. The commission and some of the interest owners were 
concerned that the field's pressure would drop below the bubble point1 of 4,665 psi, making secondary 
recovery operations difficult.2 On January 8, 1985, the commission 
issued an order restricting production so that the reservoir's pressure would 
remain above the bubble point. The commission also ordered the owners to conduct 
a pressure survey, submit the data as soon as possible, and appear at the 
commission's April meeting to report on the feasibility of unitization and 
secondary recovery.

[¶5.]     Prior to the 
commission's order, the owners had formed a technical committee to determine the 
best methods of developing the field. The committee continued its work 
throughout the spring of 1985 and hired an independent consulting firm, Jerry R. 
Bergeson & Associates, Inc. (Bergeson), to study secondary recovery 
possibilities. The committee's work was not completed in time for the April 
hearing; so, at that hearing, the commission and the owners agreed to maintain 
the restrictions on production pending completion of the study. The commission 
issued an order to that effect.

[¶6.]     After the April 
hearing, the technical committee received a preliminary Bergeson study based on 
data from a small part of the reservoir. The technical committee used this 
preliminary study for a model study to determine the technical and economic 
feasibility of secondary recovery. The committee concluded that a waterflooding 
operation would cause a significant loss of primary reserves if commenced while 
the reservoir pressure was above the bubble point. It recommended that unlimited 
primary production be resumed and that secondary recovery be studied further 
only after the pressure fell below the bubble point.

[¶7.]     A majority of the 
owners accepted the committee's recommendation, but Kerr-McGee, LL & E and 
Marathon disagreed. They favored a more 
extensive study of secondary recovery before the reservoir pressure fell below 
the bubble point. LL & E conducted an in-house study of the water-flood 
method of secondary recovery while Kerr-McGee retained Bergeson to study the 
miscible-gas-flood method.

[¶8.]     On August 13, 1985, the 
commission held its main hearing to decide how the North Buck Draw Field should 
be further developed. The majority, which favored resuming unlimited primary 
production of oil, called four witnesses. Dr. Phil Schenewerk, a petroleum 
engineer for Ensearch Exploration Company, told the commission of the technical 
committee's findings. He testified that there would be a significant loss of 
primary reserves if secondary recovery was begun with the field pressure above 
the bubble point. This opinion was supported by Robert Scott, an exploration 
manager for Chorney Oil Company, and Steve Mastovich, a Diamond Shamrock 
Corporation geologist. They presented testimony, data and exhibits which 
indicated that the oil-bearing formation could not be successfully flooded with 
water or gas because it was discontinuous and fractured. The water or gas would 
move through the fractures and bypass the portions of the formation where the 
oil was located. According to Bruce Heath, supervisor of improved recovery for 
Woods Petroleum Corporation and the majority's fourth witness, it would be 
uneconomic to continue producing after an unsuccessful flood attempt because 
only the fluid used in the flood would be produced. The remaining oil that could 
have been produced under primary production would be trapped in place and 
lost.

[¶9.]     Mr. Heath testified 
that it would be better to wait until reservoir pressure dropped below the 
bubble point before beginning any secondary operations. Primary production would 
then be safely completed and data would be available to analyze the prospects 
for secondary recovery. Mr. Heath stated that a risky immediate water flood 
would produce 3,713,000 barrels of oil equivalent while a safe water flood begun 
below the bubble point would produce only a little less, 3,397,000 barrels. 
According to Mr. Heath's most optimistic projection, an immediate miscible gas 
flood would produce a 14.65 percent rate of return on investment, too little to 
justify the risks involved.

[¶10.]  The three witnesses called by Kerr-McGee 
and LL & E based their testimony on the additional studies they had 
conducted after the technical committee decided that it would rely upon the 
preliminary Bergeson study. Unlike the technical committee's studies, these 
studies were based on data from the entire field. These witnesses disputed all 
of the important conclusions drawn by the majority's 
witnesses.

[¶11.]  Robert Chebul, an LL & E production 
manager, stated that the North Buck Draw Field was a candidate for secondary 
recovery because it was continuous. That opinion was corroborated by Mr. Connie 
Hawkins, a senior geologist for LL & E who described the geologic origin of 
the formation and explained in great detail why he concluded that the formation 
was continuous and not highly fractured. David Kimes, a Kerr-McGee reservoir 
engineer, also testified that the formation was continuous and therefore a 
likely candidate for secondary recovery by either miscible gas flooding or water 
flooding.

[¶12.]  Both Mr. Chebul and Mr. Kimes testified 
that secondary operations would succeed only if begun above the bubble point. 
Mr. Chebul explained how a water flood would be impaired below the bubble 
point:

"[W]hen you draw the 
pressure down below bubble point [the] gas breaks out of * * * solution in the 
oil and creates a gas saturation in the reservoir which wasn't existing above 
the bubble point. "Once that gas saturation has been established in the 
reservoir, any subsequent attempt to inject waters into the reservoir, the 
injected water will take the path of least resistance and it will preferentially 
flood through those zones where that gas saturation has been created, thereby 
bypassing the parts of the reservoir where the oil saturation still 
exists."

Mr. Kimes 
offered a similar scenario for the miscible gas flood if the bubble point was 
passed.

[¶13.]  None of the minority witnesses thought 
that secondary operations above the bubble point posed much risk. They pointed 
out that the formation would not be damaged during a water flood because it 
contained only a small amount of clay which could disperse within the formation 
and obstruct the flow of oil. Mr. Kimes stated that there were too few fractures 
to interfere with a miscible gas flood.

[¶14.]  Finally, the minority witnesses testified 
that secondary recovery was economically feasible if begun above the bubble 
point. Under LL & E's water-flood model, 15 million barrels of oil (MMBO) 
and 33 billion cubic feet (BCF) of gas would be produced. This would amount to 
19 million barrels of oil equivalent (MMBOE).3 But continued primary operations 
would produce only 13.8 MMBOE consisting of 6.6 MMBO and 58 BCF of gas. In 
essence, the water flood would favor oil production over gas production while 
unabated primary production would essentially make Buck Draw North into a gas 
field. Mr. Chebul testified that he had contacted a likely gas buyer, Phillips 
Petroleum, and had been informed that Phillips would not be able to handle all 
the gas that would be produced from Buck Draw North under primary 
production.

[¶15.]  Mr. Chebul concluded his testimony by 
analyzing the waterflood operation in terms of dollars. He said the additional 
production of 5.2 MMBOE from water flooding would be worth $135 million to the 
owners and $22.5 million to the state through taxes. Of course, the owners would 
incur additional costs for the water flood; and Mr. Chebul presented the 
commission with various calculations of the rate of return on this investment. 
If the water flood cost $25 million and took two years to implement, the rate of 
return would be 16 percent. If the water flood could be achieved more quickly, 
the rate of return could be as high as 37 percent.

[¶16.]  Mr. Kimes described the results of the 
miscible gas flood model which Bergeson prepared for Kerr-McGee. He testified 
that a gas flood would produce 13.4 million barrels of oil which would never be 
produced through primary production methods. He presented a graph which showed 
that the miscible gas flood would not diminish the amount of gas ultimately 
recovered. In other words, the increased oil production would represent a net 
gain from the field. Mr. Kimes supported these figures by introducing, as an 
exhibit, a summary of the study which had been prepared by Bergeson.4

[¶17.]  Mr. Kimes estimated that at $26 per 
barrel - the price of oil at the time of the hearing - the additional oil would 
be worth $348 million; and the rate of return for the gas flood, after income 
taxes, would be between 20 and 40 percent. He admitted that these estimates were 
not yet fully supported by hard data because the full Bergeson study was not 
quite finished. He assured the commission and the parties that as soon as the 
Bergeson data was available, Kerr-McGee would apply it to an economic model and 
produce firm figures on the rate of return from a miscible gas 
flood.

[¶18.]  At the conclusion of Mr. Kimes' 
testimony, the commission accepted brief written and oral statements from other 
interested parties. These statements were in the nature of opinion, and none of 
the parties chose to cross-examine. After these comments, the hearing came to a 
close.

[¶19.]  Throughout the hearing many studies were 
discussed, and the parties were not always able to effectively respond to them 
because they had not been made available to all. The parties and the commission 
agreed that several of the studies, including the full Bergeson study, LL & 
E's water-flood model, and Kerr-McGee's economic data, should be made available 
to the majority interest owners after the hearing. Woods Petroleum Corporation 
of the majority group was also expected to give a water-flood study that it 
performed to Kerr-McGee and LL & E. On August 16th, several days after the 
hearing, the commission published an order in which it created a procedure for 
supplementing the record. After listing the studies that had been discussed at 
the hearing, the order stated:

"These studies and 
reports should be made available to the Commission staff and the parties. * * * 
This exchange of information should be completed no later than September 9, 
1985. The Commission staff will then have until October 8, 1985, to make a 
recommendation to the Commission on the matter."

The order did 
not say when the record would be closed, whether a party could rebut the 
additional material, or whether further statements by interested parties would 
be accepted.

[¶20.]  On September 6th the parties exchanged 
the full Bergeson report, Kerr-McGee's economic model, LL & E's water-flood 
model, and the Woods Petroleum study. The record was not closed with the receipt 
of this additional material. Numerous letters, rebuttals and complaints from 
both sides were filed with the commission between September 6th and the 
commission's decision on October 10th. Even the Bureau of Land Management (BLM), 
which did not make a statement at the August 13th hearing, took advantage of the 
open record. On September 30th, the BLM sent a letter to the commission in which 
it pointed out the various disagreements between the primary parties and 
suggested that the wells be shut-in pending further study.

[¶21.]  Before the record closed, lawyers for the 
majority interest owners and Kerr-McGee submitted written closing arguments to 
the commission. The majority's closing was limited to argument, but Kerr-McGee's 
closing included ten factual exhibits. One of those exhibits was a new economic 
model run5 which predicted a 29.7 percent rate 
of return for a miscible gas recovery operation. Unlike Kerr-McGee's original 
calculation of a 40 percent return, this model run showed a 29.7 percent rate of 
return because one of the assumptions was changed to make the secondary 
operation more costly. Kerr-McGee apparently submitted this final model run in 
response to criticism leveled at its earlier model run by Southland Royalty 
Company, one of the majority interest owners. Southland had submitted its 
criticism to the commission on September 20th, two weeks after the data exchange 
of September 6th.

[¶22.]  The commission published its decision on 
October 10, 1985.6 The commission made the following 
important findings of fact:

1. The North Buck Draw 
Field is "in pressure communication within the subject 
lands."

2. Continued production, 
even though restricted, would cause the field to fall below the bubble point 
within three to six months.

3. "Maximum oil recovery 
is achieved when secondary or tertiary recovery operations are initiated above 
the bubble point pressure."

4. "If miscible gasflood 
operations are initiated above the bubble point pressure, approximately 
[13,400,000 barrels of oil] are recoverable in addition to those reserves 
recovered by primary means. Waterflood operations commenced above the bubble 
point would result in the incremental recovery of about seven million barrels of 
oil."

5. "The economics and 
feasibility of waterflooding or gasflooding are highly dependent on the timing 
of such operations. The proponents do not agree among themselves as to which 
method is better. The Commission must take economics into consideration; 
however, the Commission will not be placed in the position of determining what 
type of enhanced recovery should be initiated or when. Thus, the Commission's 
primary charge for the prevention of hydrocarbon waste is first and foremost. 
The waste of up to 13,400,000 barrels of oil must be prevented. Also, allowing 
the formation pressure to fall below the bubble point pressure constitutes 
inefficient use of and unnecessary dissipation of reservoir 
energy."

6. "Liberation of the gas 
in the reservoir below the bubble point would change the producing 
characteristic from that of an oil reservoir to that of a gas reservoir * * *. 
Such gas production in a time of gas oversupply is a less efficient use of 
reservoir energy than if the reservoir is maintained above the bubble point as a 
volatile oil reservoir."

7. "The risk of waste 
associated with conducting only primary recovery operations far exceeds the risk 
of waste associated with enhanced recovery operations."

[¶23.]  In its conclusions of law, the commission 
determined that further primary production would cause waste as that term is 
defined in subsections (B) and (D) of § 30-5-101(a)(i), W.S. 1977. Under 
subsection (B) waste is

"[t]he inefficient, 
excessive or improper use, or the unnecessary dissipation of, reservoir 
energy";

and under 
subsection (D) it is

"[t]he * * * producing of 
any oil or gas well in a manner that causes * * * reduction in the quantity of 
oil or gas ultimately recoverable from a pool under prudent and proper 
operations * * *."

[¶24.]  The commission ordered that production in 
the Buck Draw North Field Area be shut-in pending unitization for enhanced 
recovery. The majority interest owners filed a petition for review in the 
district court, and the matter was certified to this 
court.

Evidence in the 
Record

[¶25.]  Petitioners, the majority interest 
owners, claim that they were denied the right to effective cross-examination 
because the commission considered three documents which petitioners never had a 
chance to rebut. The documents consist of a Kerr-McGee economic analysis which 
was attached to Kerr-McGee's written closing argument, a letter from the BLM 
submitted to the commission on September 30, 1985, and a letter from an LL & 
E engineer received by the commission on September 25, 1985. Attached to the 
letter from LL & E was a memorandum "summarizing the effect of delayed water 
injection (injection below the bubble point pressure) on the Buck Draw field * * 
*."

[¶26.]  Petitioners' argument is sound with 
respect to the law of contested case procedure. Section 16-3-108, W.S. 1977, 
guarantees a party the right to confront written testimony given by the other 
side. Subsections (a) and (c) of § 16-3-108, W.S. 1977, state in pertinent 
part:

"(a) Subject to these 
requirements and agency rule if the interests of the parties will not be 
prejudiced substantially testimony may be received in written form subject to 
the right of cross-examination as provided in subsection (c) of this 
section.

* * * * * 
*

"(c) A party may conduct 
cross-examinations required for a full and true disclosure of the facts and a 
party is entitled to confront all opposing witnesses."

[¶27.]  The denial of the right of 
cross-examination constitutes reversible error under § 16-3-114(c), W.S. 1977, 
which provides in part:

"The reviewing court 
shall:

* * * * * 
*

"(ii) Hold unlawful and 
set aside agency action, findings and conclusions found to 
be:

* * * * * 
*

"(D) Without observance 
of procedure required by law." See also Wyoming Bancorporation v. Bonham, Wyo., 527 P.2d 432, 437 n. 6 
(1974).

[¶28.]  The problem with petitioners' argument is 
factual rather than legal. They make the following assertions of fact in their 
brief:

"The Majority Working 
Interest Owners first became aware of the BLM recommendations when the Order was 
distributed on October 10, 1985. 

"The Commission also 
received, considered and relied upon extra record testimony submitted by 
Kerr-McGee in its `Closing Statement' * * *. Extensive technical information was 
also submitted by LL & E after the close of evidence. * * * The Majority 
Working Interest Owners were unaware of this data until after the record was 
filed in this Court."

But none of 
these "facts" are supported by evidence in the record. First, there is nothing 
in the record which indicates that the commission closed the administrative 
record prior to its decision. If anything, Acting Chairman Glass indicated at 
the August 13th hearing that the record would remain open throughout the 
decision period. He stated that the commission would accept written comments on 
a report prepared by Bergeson up until the date of the decision. Because there 
is no indication that the record was closed, we cannot treat the three documents 
as extra-record material.

[¶29.]  Second, nothing in the record establishes 
that petitioners did not see the three documents in time to rebut them. The 
commission stamped the letters from the BLM and LL & E when it received 
them. The stamp indicates that the letters were received several weeks before 
the commission announced its decision on October 10, 1985. The Kerr-McGee 
closing argument is not stamped. We do not know when it was received, but it is 
entirely possible that petitioners received all three of these documents, or 
knew of their submission, in time to rebut them. We cannot conclude that these 
documents were unknown to petitioners just because they make that bald assertion 
in their brief. Statements in briefs are not evidence that can be considered by 
a reviewing court. Kirby Building Systems, Inc. v. Independence Partnership 
No. One, Wyo., 
634 P.2d 342, 345 n. 2 (1981).

[¶30.]  Petitioners could have employed the 
procedure outlined in Rule 12.08, W.R.A.P., to create a record supporting their 
contention. Rule 12.08 states in part:

"If, before the date set 
for hearing [conducted by the district court on review], application is made to 
the court for leave to present additional evidence, and it is shown to the 
satisfaction of the court that the additional evidence is material, and there 
was good reason for failure to present it in the proceeding before the agency, 
the court in contested cases shall order that the additional evidence be taken 
before the agency upon conditions determined by the court. The agency may adhere 
to or modify its findings and decision after receiving such additional evidence, 
and shall supplement the record to reflect the proceedings had and the decision 
made. Supplemental evidence may be taken by the court in cases involving fraud 
or involving misconduct of some person engaged in the administration of the law 
affecting the decision.

[¶31.]  In their petition for review to the 
district court, petitioners alleged that

"[t]he WOGCC [commission] 
relied upon materials outside of the record, including but not limited to a 
recommendation of the Bureau of Land Management, which materials the Petitioners 
were not allowed to cross examine or counter in violation of Wyoming Statute § 
16-3-107(r) and W.S. § 16-3-108(c)."

At that point in 
the proceedings they could have applied to the district court, under Rule 12.08, 
supra, for leave to present additional evidence on this issue. If they showed 
the district court that they had a good reason for failing to complain to the 
agency about these alleged extra-record documents, then the court would have 
remanded them to the agency to establish the record. See Matter of State Bank 
Charter Application of Security Bank, Buffalo, Wyo., 606 P.2d 296, 301 (1980). 
But none of this was done, and consequently the record before us does not 
support petitioners' claim of error.

[¶32.]  If petitioners had made a successful 
application under Rule 12.08, W.R.A.P., it might have been difficult for the 
commission to establish a record to reflect how the supplemental evidence was 
received and made available to all parties. The commission states in its brief 
that

"it is quite clear that 
all parties at the hearing in August 1985, were aware of everyone's opportunity 
to submit additional data, evidence, comments, and argument and no one objected 
to the procedure. Many parties both for and against unitization, including the 
Petitioners, submitted such material. The Commission's files and records of this 
matter were open to all for their perusal."

But the record 
does not support all of these assertions. Some of the material in the record 
that was presumably submitted after the August 13th hearing was never stamped to 
indicate that the commission received it. And the record does not indicate that 
all of the additional data was available for the parties' perusal. These 
elementary facts should be noted in the record as each document is accepted by 
the commission.

[¶33.]  Another problem with the commission's 
action was its failure to settle on a specific procedure and stay with it. The 
commission's order of August 16th indicated that it would accept only four 
additional studies which were on the verge of completion. The studies were to be 
exchanged by the parties in early September, but the order did not indicate 
whether the parties would then be permitted to comment on the contents of those 
studies. The parties all assumed that they could submit responses to the 
studies. Before long the record was cluttered with responses to the responses. 
Because the commission did not set a date to close the record, it was almost 
inevitable that one side would get in the last word and the other side would 
claim that it was unable to properly confront the 
evidence.

[¶34.]  An agency can take documentary evidence 
in a contested case after the hearing, but it should make clear in its order how 
many levels of response and counter-response it will permit. As we noted above, 
a party is entitled to at least one response to any new evidence submitted. 
After the supplemental evidence and responses are in the record, the agency 
should close the record on a predetermined date and return any evidence which is 
submitted contrary to the settled procedure. If this process is followed, the 
record will clearly show the reviewing court that there are no procedural 
errors. There will be no need to collect additional evidence under Rule 12.08, 
W.R.A.P., and the reviewing court and parties can concentrate on the 
merits.

[¶35.]  Although the procedure used by the 
commission in this instance was less than desirable, petitioners did not 
establish a record from which we can conclude that there was no opportunity to 
confront or cross-examine the evidence submitted. The burden was on petitioners, 
and having failed to carry that burden, there is no basis for 
reversal.

Waste

[¶36.]  Petitioners concede that the commission 
has the power to shut-in producing wells to prevent the waste of oil and gas. 
Inexco Oil Company v. Oil and Gas Conservation Commission, Wyo., 490 P.2d 1065 
(1971); §§ 30-5-102(a) and (b), 30-5-104(b), 30-5-117, W.S. 1977, and May 1985 
Cum. Supp. But they contend that the commission's finding of waste suffers from 
two fatal flaws. First, they claim that before the commission could conclude 
that primary production would be wasteful, it had to make a finding, in the 
record, that secondary operations would be economically feasible. According to 
appellants, the commission did not include this finding in the record. Second, 
even if the finding had been included, appellants claim that it was not 
supported by substantial evidence.

The Feasibility 
Finding

[¶37.]  An agency's action must be set aside if 
the agency does not support it with sufficient factual findings in the record. 
Section 16-3-110, W.S. 1977, states:

"A final decision or 
order adverse to a party in a contested case shall be in writing or dictated 
into the record. The final decision shall include findings of fact and 
conclusions of law separately stated. Findings of fact if set forth in statutory 
language, shall be accompanied by a concise and explicit statement of the 
underlying acts supporting the findings." (Emphasis 
added.)

"This Court has held that 
this statute imposes a duty on the agency to make findings of basic facts upon 
which its ultimate findings of fact or conclusions are based, without which 
there can be no basis for appeal." Big Piney Oil & Gas Company v. Wyoming Oil and Gas Conservation Commission, Wyo., 715 P.2d 557, 561 
(1986).

[¶38.]  The commission and the petitioners agree 
that economic feasibility is a basic fact which must be found before an ultimate 
finding of waste can be made under § 30-5-101(a)(i)(D), W.S. 1977. That statute 
defines waste as:

"The locating, drilling, 
equipping, operating or producing of any oil or gas well in a manner that 
causes, or tends to cause, reduction in the quantity of oil or gas ultimately 
recoverable from a pool under prudent and proper operations * * *."7

In its brief, 
the commission correctly states that

"it would not be `prudent 
and proper operations' to conduct secondary recovery if secondary recovery was 
not feasible, or if the value of increased recovery exceeded the cost of 
incremental production." See LeBar v. Haynie, Wyo., 
552 P.2d 1107, 1111 (1976).

[¶39.]  But the commission claims that the 
necessary finding of feasibility was included in its order. In finding number 8 
the commission stated:

"The economics and 
feasibility of waterflooding or gasflooding are highly dependent on the timing 
of such operations. The proponents do not agree among themselves as to which 
method is better. The Commission must take economics into consideration; 
however, the Commission will not be placed in the position of determining what 
type of enhanced recovery should be initiated nor when."

This finding 
immediately followed the commission's finding that 13,400,000 barrels of 
additional oil would be recovered by a miscible gas flood and 7,000,000 barrels 
by a water flood. When finding number 8 is taken in context, it clearly implies 
that the commission found both recovery operations to be economically feasible. 
The commission simply left it up to the owners to decide which of the two 
feasible methods they should adopt. We hold that the commission's feasibility 
finding complied with the requirements of § 16-3-110, W.S. 
1977.

Substantial 
Evidence

[¶40.]  Petitioners correctly point out that an 
agency's action is arbitrary and capricious and must be reversed if any 
essential finding is not supported by substantial evidence. Holding's Little 
America v. Board of County Commissioners of Laramie County, Wyo., 670 P.2d 699, 703 (1983); § 
16-3-114(c)(ii)(A), W.S. 1977. Substantial evidence is

"such relevant evidence 
as a reasonable mind might accept as adequate to support a conclusion. * * * 
Such evidence may be less than the weight of the evidence but cannot be contrary 
to the overwhelming weight of the evidence." Big Piney, supra, 715 P.2d  at 
561-562 (citing Mountain Fuel Supply Company v. Public Service Commission of 
Wyoming, Wyo., 
662 P.2d 878 (1983)).

"We do examine the entire 
record before the administrative agency in arriving at a determination as to 
whether substantial evidence is present." Western Radio Communications, Inc. v. 
Two-Way Radio Service, Inc., Wyo., 718 P.2d 15, 20 (1986). See also Gilmore 
v. Oil & Gas Conservation Commission, Wyo., 642 P.2d 773, 776 
(1982).

"If there is substantial 
evidence to support a finding, * * * the ultimate weight to be given that 
evidence is to be determined by the agency in light of its expertise and the 
experience of its members in such matters. * * * If the agency's decision is 
found to be supported by substantial evidence, we cannot substitute our judgment 
for that of the agency, but we are required to uphold its findings upon appeal." 
Big Piney, supra, 715 P.2d  at 562.

[¶41.]  Petitioners argue that the commission's 
finding that secondary operations would be feasible is unsupported by 
substantial evidence. We disagree. Mr. Chebul and Mr. Kimes both testified that 
the after-tax, rate of return on secondary operations would range from 16 to 40 
percent. These estimates were supported by exhibits and detailed computer models 
submitted to the commission at the August 13th hearing and the September 6th 
data exchange. Moreover, the exhibits and computer model runs submitted by 
Kerr-McGee and LL & E were based on data from the entire oil and gas field. 
This was not true of the economic estimates of the petitioners which were 
extrapolated from data from only part of the field. We can well understand why 
the commission placed substantial weight on the Kerr-McGee and LL & E 
feasibility studies. Its feasibility finding was supported by substantial 
evidence.

Forced 
Unitization

[¶42.]  Petitioners argue that the commission 
exceeded its powers when it ordered them to shut-in their wells "pending 
unitization for enhanced recovery." They claim that the commission forced them 
into a unit in violation of § 30-5-110(f), W.S. 1977, which 
states:

"No order of the 
commission authorizing the commencement of unit operations shall become 
effective until the plan of unitization has been signed or in writing ratified 
or approved by those persons who own at least eighty percent (80%) of the unit 
production or proceeds thereof that will be credited to royalty and overriding 
royalty interests which are free of costs, and unless both the plan of 
unitization and the operating plan, if any, have been signed, or in writing 
approved or ratified, by those persons who will be required to pay at least 
eighty percent (80%) of the cost of unit operations."

[¶43.]  In reality, none of the interest owners 
have been forced into a unit. The commission's order gives the owners a choice 
of voluntarily forming a unit or ceasing their wasteful production. If the 
commission could not force this choice on the appellants, then it would be 
prevented from exercising its primary function, the prevention of 
waste.

"The commission has 
authority and it is its duty to make investigations to determine whether waste 
exists or is imminent, or whether other facts exist, which justify or require 
action by it hereunder." Section 30-5-104(b), W.S. 1977, May 1985 
Cum.Supp.

When the 
commission decides that waste is imminent, it has the authority, under § 
30-5-104(d)(ii)(A), W.S. 1977, May 1985 Cum.Supp.,

"[t]o regulate, for 
conservation purposes: "(A) The drilling, producing, and plugging of 
wells."

[¶44.]  When the legislature passed the waste 
prevention statutes, it apparently understood that producers would sometimes use 
wasteful methods out of ignorance or self-interest. That is why the commission 
was given the power to order a halt to such practices. If, under the facts of a 
given case, the commission must choose between a producer's economic well-being 
and the prevention of waste, it must choose the latter. See Larsen v. Oil and 
Gas Conservation Commission, Wyo., 569 P.2d 87, 93 & n. 4 (1977). Under 
extreme circumstances, the commission's decision might drive a producer out of 
business.

[¶45.]  In the case at bar, the commission's duty 
to prevent waste has forced it to issue an order that is unpalatable to the 
majority of the interest owners. They must either shut-in their wells, which 
might drive some of them out of business, or they can unitize for secondary 
operations. It may be unpalatable, but it is a legitimate choice. If, as a 
practical matter, the commission's order causes the parties to unitize, then 
that result can be attributed to the commission's overriding duty to prevent 
waste rather than an improper decision to force these parties to 
unitize.

[¶46.]  Affirmed.

FOOTNOTES

1 The bubble point is 
"[t]he pressure at which the oil begins to release gas from solution." Gilmore 
v. Oil and Gas Conservation Commission, Wyo., 642 P.2d 773, 774 n. 3 (1982) (citing 8 
Williams & Meyers, Oil and Gas Law, Manual of Terms 75 
(1981)).

2 "`Secondary 
Recovery.

"`Broadly 
defined, this term includes all methods of oil extraction in which energy 
sources extrinsic to the reservoir are utilized in the extraction. * * * The 
term is usually defined somewhat more narrowly as a method of recovery of 
hydrocarbons in which part of the energy employed to move the hydrocarbons 
through the reservoir is applied from extraneous sources by the injection of 
liquids or gases into the reservoir.'" Gilmore v. Oil and Gas Conservation 
Commission, supra, 642 P.2d  at 774 n. 4 (quoting 8 Williams & Meyers, Oil 
and Gas Law, Manual of Terms 681 (1981)).

3 Oil equivalent is 
reached by multiplying the amount of gas produced by a ratio of current oil and 
gas prices.

4 Bergeson sent the full 
study to Kerr-McGee on August 29, 1985, and it was added to the record and 
distributed to the parties in early September.

5 A model run is the 
application of a computer model to a set of variables. The model we are 
discussing here is designed to predict the rate of return on investment for 
secondary operations.

6 In its brief, the 
commission claims that it held a perfunctory hearing on October 10th before 
announcing its decision. The commission claims that at that hearing the parties 
waived any procedural problems created by the commission's acceptance of 
evidence after the exchange of data on September 6th. We cannot find that 
transcript in the record and, therefore, cannot consider the commission's waiver 
argument based on the details of that hearing.

7 The commission also 
found waste under subsection (B) of § 30-5-101(a)(i), W.S. 1977, but we will not 
discuss that alternative definition because we hold that the commission's 
finding of waste under subsection (D) was correct.