Opinion ID: 1140822
Heading Depth: 1
Heading Rank: 2

Heading: Pertinent Provisions

Text: Section 30-227, W.S. 1957, C. 1967, states that when a proper application for a permit to drill has been made, with payment of the required fee, the Commission shall promptly issue the permit, unless the drilling of the well is contrary to law, or to a rule, regulation, or order of the commission. There admittedly is no law, rule, regulation, or order preventing issuance of the permit here involved, unless it be the Commission's Rule 302. This rule, in pertinent part, reads: In the absence of special orders of the Commission establishing drilling units or authorizing different well density or location patterns for particular pools or parts thereof, each oil and gas well shall be located in the center of a forty (40) acre governmental quarter quarter section   , with a tolerance of 200 feet in any direction from the center location; provided, that no oil or gas well shall be drilled less than 920 feet from any other well drilling to or capable of producing oil or gas from the same pool   . By its own language, Rule 302 applies only in the absence of special orders of the Commission authorizing different well density or location patterns from that contemplated in the rule. As far as the Grass Creek Field is concerned, a different well density pattern and a different location pattern were already in existence when the Commission was created, but there is no special order of the Commission pertaining thereto. In our former decision, at 446 P.2d 554, we said Rule 303 is in effect an escape hatch to claimed infringement of property rights by Rule 302. It can serve as an escape hatch, however, only if properly administered, and that means the Commission cannot be arbitrary about allowing or refusing exceptions under Rule 303. Administrative officers and boards will not be permitted to act in an arbitrary, capricious or fraudulent manner; and courts will restrain administrative agencies from becoming despotic. Wyoming Department of Revenue v. Wilson, Wyo., 400 P.2d 144, 145, reh. den. 401 P.2d 960. In 2 Am.Jur.2d Administrative Law § 229, p. 126, recognition is given to the proposition that an administrative agency may not lay down a general regulation which predetermines cases within the regulation in disregard of particular circumstances. Also, courts have sometimes said arbitrary and capricious action on the part of an administrative agency is wilful and unreasoning action, without consideration and in disregard of facts and circumstances. Bishop v. Town of Houghton, 69 Wash.2d 786, 420 P.2d 368, 373. See also Olson v. Rothwell, 28 Wis.2d 233, 137 N.W.2d 86, 89. The Commission's Rule 302 utterly and completely disregards the circumstances present in a field which was developed prior to the adoption of such rule, where wells were not drilled at the center of 40-acre subdivisions of land. If it were not for Rule 303, it would be unreasonable and arbitrary for the Commission to apply Rule 302 in the Grass Creek Field. As we have indicated, it is made clear in Rule 302 that it is not to be operative when special orders of the Commission authorize something different. Apparently the Commission intends that its special orders will be forthcoming in connection with applications for exceptions under Rule 303. It follows, however, that the Commission must be reasonable and not arbitrary in its consideration of applications for exceptions in fields like the Grass Creek Field. Otherwise, the escape hatch we have spoken of would not be present. The position taken by Marathon has been that Pan American failed in its burden of proof and failed to submit substantial evidence relating to the exception requested. We stated in our former decision, at 446 P.2d 555, that neither counsel for Marathon nor the Commission had appropriately shown us wherein Pan American failed in its proof. We specifically asked for and gave the Commission an opportunity on the second go-round to furnish technical guidance as to the reasons why Pan American's expert testimony had been rejected. The testimony we referred to was based almost entirely on the actual performance of the field over the past 20 years. It projected that performance into the future. We said in our former decision, also at 446 P.2d 555, with respect to findings on the pivotal factual issues presented concerning the necessity for an exception well for protection of Pan American's correlative rights, that such findings were nothing more than ultimate findings of fact or conclusions of law; and that such findings were not basic findings of fact. The additional findings of fact made by the Commission following its last hearing still are not helpful in the critical areas. For example, we still are furnished no technical guidance or given any factual reasons for rejecting Pan American's expert testimony based on actual performance of the field. The Commission claims there was a conflict in the evidence; and with respect to the weight of evidence, it concluded Pan American failed to establish by a preponderance of the evidence that uncompensated drainage was occurring. We fail to find from any of the Commission's findings why it was not occurring. After a specific finding that the evidence of Pan American was sufficient to make a prima facie case and to entitle it to the requested exception, if the evidence stood alone, the Commission followed by finding that the weight of the countervailing evidence of Marathon was at least equal to the evidence of Pan American. All we get from this is that the Commission considered the evidence of Marathon sufficient to offset the evidence of Pan American, but the finding fails to set forth facts found by the Commission to support its conclusion that Pan American's prima facie case was overcome. It is true the Commission did mention by way of general comment that Pan American's witnesses admittedly did not take into account the existence or effect of the fault, a factor which the Commission deems to be of significance. The mere existence of a fault is not sufficient to prevent water from seeking the lower levels and from eliminating oil production at lower levels first. It would take some additional facts, aside from the fault, to make a situation which would produce the kind of phenomenon relied on by the Commission. If there are facts to overcome the inferences to be drawn from contour maps, and to overcome the inference that water will first replace oil at the lower levels, the Commission has not made a finding of such facts. We pointed out in our former decision, at 446 P.2d 555, that it is not incumbent upon us to search the record to supply omissions in the findings of fact. We cannot, without indulging in speculation and guesswork, assume special facts are present in the Grass Creek Field to prevent water from first replacing oil at the lower levels. And if we assume, as we are left to do, that water will first replace oil at the lower levels, then we must conclude that uncompensated drainage of Pan American's oil is and has been for some time occurring. Our conclusion is that the Commission has not made findings of fact based upon substantial evidence sufficient to justify its denial of Pan American's application for an exception. Its action was therefore arbitrary and accordingly we cannot say the trial court's direction for issuance of a permit to drill was erroneous under the circumstances. Judgment of the district court affirmed.