Opinion ID: 1865114
Heading Depth: 1
Heading Rank: 1

Heading: Findings of Jurisdictional Facts in the Commissioner's Order

Text: With respect to the pool-wide unit involved here, Section 5 C provides: Any order for such a unit operation shall be issued only after notice and hearing and shall be based on findings that (1) the order is reasonably necessary for the prevention of waste and the drilling of unnecessary wells, and will appreciably increase the ultimate recovery of oil or gas from the affected pool or combination of two pools, (2) the proposed unit operation is economically feasible, (3) the order will provide for the allocation to each separate tract within the unit of a proportionate share of the unit production which shall insure the recovery by the owners of that tract of their just and equitable share of the recoverable oil or gas in the unitized pool or combination of two pools, and (4) at least three-fourths of the owners and three-fourths of the royalty owners, such three-fourths to be in interest as determined under (3) hereof, shall have approved the plan and terms of unit operation, such approval to be evidenced by a written contract or contracts covering the terms and operation of said unitization signed and executed by said three-fourths in interest of said owners and three-fourths in interest of the said royalty owners and filed with the Commissioner on or before the day set for said hearing. These four requirements were referred to by the Court of Appeal as the mandatory findings of jurisdictional facts upon which its [the Commissioner's orders] issuance is conditioned. Because the Court of Appeal found that the Commissioner's order did not contain these findings, it was held to be void and it was annulled. The Commissioner's Order Number 457-EE recites: following legal publication and posting of notice, and notice by mail to all known interested parties, it being reasonably necessary to conserve the oil and gas resources of the State, to prevent waste . . ., to avoid the drilling of unnecessary wells and otherwise to carry out the provision of law . . . . A finding that the secondary recovery would appreciably increase the ultimate recovery of oil from the affected pool is implicit in the testimony of the experts, who appeared on behalf of Franks at the hearing and by the exhibits filed. The petroleum engineer testified that as a result of the secondary recovery project the increased profit to the working interest is estimated to be somewhat over $15.4 million. The increase in profit to the 1/8th royalty interest is estimated to be about $2.8 million. In addition, the petroleum engineer testified: The future profit by primary operations will be $228,500. The estimated future profit over and above the investment and operating expenses from secondary operations is estimated to be over $15 million. . . . Obviously, the project would appreciably increase the ultimate recovery. The requirement under (1) of the above quoted provision of Section 5 C was therefore supported by the record. It is hardly open to question that on this evidence the proposed unit operation is economically feasible as required by (2) above. By an attachment to the order, including a plat and a schedule showing each tract's size and percentage of participation in the production to be realized from the unit, the requirement of (3) is satisfied. That part mandates that the order provide for the allocation to each tract within the unit of a proportionate share of the unit production, insuring to the owners their equitable share of the production. A specific finding in the order fulfills the requirement of (4) pertaining to the 75 percent requirement, viz.: The Commissioner of Conservation finds as follows: . . . . . . 2. That the applicant has offered and introduced into evidence at the public hearing a Unit Agreement ratified and executed by the owners of more than seventy-five (75%) per cent of the total royalty interest and more than seventy-five (75%) per cent of the total leasehold or working interests in the field. That the applicant has also offered and introduced into evidence a Unit Operating Agreement which has been executed and ratified by the owners of more than seventy-five (75%) per cent of the total leasehold or working interests in the field. Although counsel for Brown contends that he introduced an unconformed act of assignment at the September 15 hearing which evidenced the fact that Brown owned more than a 25 percent interest in the proposed unit, the Commissioner found the document was not in the record. At the time when counsel purported to introduce the assignment, however, he did not state the percentage of interest the assignment conferred on Brown. Considering this fact, the unauthenticated character of the assignment, and the statement of Franks' attorney in the presence of Brown's attorney that the assignment was not executed by one authorized to sign (a fact not disputed at the hearing), the finding of the Commissioner is neither arbitrary or capricious. Although some of the evidence which supports all four of the mandatory conditions which must be satisfied for issuance of a valid order are not contained in the order itself, the conditions are in fact supported by the record. Due to the fact that none of these mandatory conditions were contested at the hearing, except notice, failure to include some of these findings in the order itself involves no prejudice to Brown, the only party complaining of the order's invalidity. And, as our determination on the notice issue resulted in a finding that there was no lack of notice, all of the mandatory conditions to the issuance of the order have been fulfilled. Principally, the findings are articulated in the order itself. Order number 457-EE was therefore based upon the findings made mandatory by Section 5 C. A contrary decision would sometimes follow in a situation where a finding was not contained in the order with respect to a mandatory condition which had been contested and where the Commissioner's expertise should have been employed in a finding to resolve the contradictions in the evidence. Proper regard for the rightful concern of interested parties where valuable rights to oil and gas are involved makes desirable that the State's power be exercised only where the statutory authority affirmatively appears. The sacrifice of these legitimate interests may as readily result through the Commissioner's oversight or neglect as by improper findings. The insistence that the Commission make these jurisdictional findings before it undertakes to act not only gives added assurance that these valuable interests for which the legislature enacted these safeguards will be observed, but it also gives to the reviewing courts the assistance of an expert judgment on a knotty phase of a technical subject. City of Yonkers v. United States of America, 320 U.S. 685, 64 S.Ct. 327, 88 L.Ed. 400 (1943). Administrative proceedings involving a similar problem were the subject of a caveat to administrative bodies by this Court in the recent decision of Baton Rouge Water Works v. Louisiana Public Service Commission, 342 So.2d 609 (1977): For purposes of judicial review, and in order to assure that the Commission has acted in accordance with law, it is usually preferable that, in a contested case involving complex issues, the administrative agency makes findings as to the central disputed issues and explain the reasons for its determination. Cf.: Louisiana Power and Light Co. v. Louisiana Public Service Commission, 324 So.2d 430 (La.1975); White v. Louisiana Public Service Commission, 259 La. 363, 250 So.2d 368, 373 (1971); Hunter v. Hussey, 90 So.2d 429 (La.App. 1st Cir. 1956), certiorari granted. `It is enough if the Commission proffers findings and conclusions sufficiently detailed to permit reasoned evaluation of the purposes and implications of its order.' In re Permian Basin Area Rate Cases, 390 U.S. 747, 814, 88 S.Ct. 1344, 1384, 20 L.Ed.2d 312 (1968). See also 2 Davis, Administrative Law Treatise, Chapter 16 (1958); 2 Cooper, State Administrative Law 465-78 (1965); Schwartz, Administrative Law, Sections 140, 141 (1976). We have not before now, however, held that such formal findings and reasons are sacrosanct to the validity of an administrative determination, unless required by statute. Nevertheless, Louisiana courts have on occasion remanded for this purpose, when unable to review the agency determination in the absence thereof. See Louisiana decisions cited in the preceding paragraph. For the reasons assigned, the judgment of the Court of Appeal is reversed and set aside, and Order number 457-EE of the Commissioner of Conservation is declared valid. Brown's attack upon the order is therefore dismissed at its cost.