Court Opinion

ID: 9538314
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:34:42.207247+00
Date Added: 2024-06-11T14:57:44.073601
License: Public Domain

OPALA, Justice,
concurring in part and dissenting in part:
Our review is sought of an order by the Corporation Commission [commission] pooling a 640-acre spacing unit for oil and gas development. Three couples [Hulsizers, Mitchells and Kennedys]-all overriding royalty owners-appear here as appellants. Two of them [Mitchells and Kennedys] also have a conversion option to a working interest after payout of well costs. All interests before us underlie a 77.31-aere tract in the pooled unit. The oil-and-gas lessee of that tract [0’Neill]-one of the original appellants-was allowed to dismiss his appeal.
The order under review extends to the lessee, as well as to all the other appealing interests, an election between participating in the development or accepting, in lieu of a cash bonus, a fair-share-of-production formula in overriding royalty of ¼6 of ⅝ on oil and casinghead gas and of Vs of ⅞ on natural gas and natural gas condensate. Should the lessee decline to participate, he is to bear, out of his share, all override burdens upon his leasehold estate. Without prejudicing their appeal rights, appellants and the lessee all elected not to participate in drilling.
The threshold issue the court deals with here is whether, in the exercise of its pooling authority, the commission may reach for modification interests of those who are sans drilling rights in praesenti [e. g. owners of overriding royalty, excess royalty, production payment claims, conversion options or similar interests]. The court resolves this issue with an unqualifiedly negative answer thrust upon it by an overly restrictive search for solution sought to be extracted from the narrow text of a single phrase in 52 O.S.1971 § 87.1(d). I cannot accede to the court’s view.
By its very nature the commission’s power to force pooling is brought to bear upon, and its exercise stands confined to, owners of drilling rights. 52 O.S.1971 §§ 86.1(d) and 87.1(d). But its power to affect for modification interests within the pooled unit is not similarly restricted to that class of interest holders. The two powers-distinct in purpose-are not always co-extensive in sweep. The latter, which is incidental to the former, may be far more expansive when its exercise is necessary to bring about needed adjustment of rights to accomplish forced pooling.1 Leaseholds, or other working interests, may be so laden with obligations in excess of the usual Vs royalty as to constitute by themselves a cumbersome, if not indeed a negative asset, for fair market value appraisal as a working interest. Whenever this occurs, an obstacle to pooling might arise which the commission must have the power to deal with by being able to reach the various burdens for necessary adjustment of the working interest value. I would therefore hold that, upon proper finding of a tenable ground therefor, supported by substantial evidence, the commission has the authority to affect, in forced pooling, overriding royalty or oth*190er interests not coupled with drilling rights or working interest in praesenti. Layton v. Pan American Petroleum Corporation, Okl., 383 P.2d 624 [1963]; Patterson v. Stanolind Oil & Gas Co., 182 Okl. 155, 77 P.2d 83 [1938]; see e. g. Holmes v. Corporation Commission, Okl., 466 P.2d 630 [1970].
The other issue the court deals with here is whether a pooling order must provide, as a matter of law, that, with the pooled lessee’s election not to participate in drilling, the obligation to pay all of his override or similar burdens shall stand imposed on the unit operator. The court resolves this issue with another absolute answer from which I am compelled to recede.
There is, in my view, no statutory impediment to allowing flexibility in allocating lease obligations. My examination of 52 O.S.1971 § 87.1(d) does not lead me to conclude that its provisions mandate either course. Where a proper finding is made and substantial evidence sustains the existence of some tenable ground for imposing override or like obligations either on the pooled lessee-whether participant or not-or on the unit operator as part of some pooled rights fair-share-adjustment formula, the commission’s decision should be sustained.2 In the overall adjustment of rights in the pooled area, obligations burdening a leasehold in excess of the usual ⅛ royalty may be imposed on the unit operator or remain the liability of the lessee, but in no case may the unit operator be compelled to pay more than the fair market value of the working interests being pooled. The course taken in each case must, of necessity, depend on the manner in which the working interest involved came to be fitted into the unit operation [whether by participation, via a fair share of production coupled with a cash bonus or without such a bonus].
Cited by the court in support of its conclusion is Youngblood v. Seewald, 299 F.2d 680 [10th Cir. 1961]. That case is neither authority for this court nor is it persuasive by force of analogy. The question reached there was confined to declaring the quantum of rights an override owner had vis-a-vis the unit operator. Both parties relied on their diverse interpretation of a not-too-clear commission order. The federal court placed on the commission order a construction deemed by it to be warranted by state statutes and by the face of the record. I can derive from Youngblood no intellectual benefit for a decision in this case.
Left undetermined by the commission’s findings and unexplained by its order are these salient questions: (1) Why were Hul-sizers-who own nothing more than an override interest-extended the opportunity to elect between participation and a production share? (2) Why was there a need to affect their override interest? (3) Why was John Withrow-another override interest owner-treated differently from Hulsizers? (4) Were Mitchells and Kennedys-as conversion option holders-extended an election opportunity because their interest to participate in futuro [after payout of well costs] was treated as equivalent to one in praesen-ti or because the poolor desired to “accelerate” that interest and hence advance it for immediate satisfaction? (5) Does the commission order operate to “extinguish” the Mitchell and Kennedy conversion option interests? (6) Could appellants have elected to participate even though their lessee did not choose a like course? (7) If the last answer be in the affirmative, what would be the appellants’ working interest share and their “proportionate part” of production costs?
Without the commission’s answer to most of these questions the regimen imposed by the order before us is too vague for judicial construction. The most serious impediment to present review lies in the commission’s utter failure to make essential explanatory findings as to the very basis upon which its determination is sought to be rested.3 For this reason alone I would be constrained to reverse.
*191I would reverse with directions to make specific findings that are responsive to the issues formed and inherent in the proceedings below, applying principles of law expressed in this opinion.
I am authorized to state that IRWIN, V. C. J., and BARNES, J., concur in these views.

. Capturing the essence of this distinction, a federal court said that in Oklahoma royalty interests are pooled “by operation of law" upon entry of the commission’s spacing order, but working interests may not be pooled except by agreement or compulsory unitization order. Whitaker v. Texaco, Inc., 283 F.2d 169, 172 [10th Cir. 1960].

. Superior Oil Co. v. Oklahoma Corp. Commission, 206 Okl. 213, 242 P.2d 454, 457 [1952].