Opinion ID: 1175472
Heading Depth: 1
Heading Rank: 6

Heading: Forced Unitization

Text: 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. 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. 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. 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. Affirmed.