Oklahoma Corporation Commission Update Benjamin J. Brown, Esq. September 9, 2019
Outline Oklahoma Corporation Commission New ALJ’s Commission Rule Changes Common Issues with Exhibits Submitted to the OCC Discussion of Interesting Cases Interest Conveyance & Commission Filing Timeline Right to Bonus Fair Market Value analysis discussion - how to conduct and the importance
New ALJ’s Jan Preslar (OKC) J. D from Oklahoma City University, and a B. S. and M. Ag. in Mechanized Agriculture from Texas A&M University. She is admitted to practice in the U. S. District Court for the Western District of Oklahoma, the 10 th Circuit Court of Appeals, and the United States Supreme Court. Serves as Senior Administrative Law Judge in the Commission’s Western Regional Service Office. Previously served as General Counsel for the Oklahoma Ethics Commission and as Deputy Attorney General and Chief of the General Counsel Division of the Office of the Oklahoma Attorney General. Before her public service, she practiced 14 years in the area of oil & gas litigation with Hall, Estill, Hardwick, Gable, Golden & Nelson and Watson & Mc. Kenzie.
New ALJ’s Connie Moore (Tulsa) Received Juris Doctorate from the University of Tulsa College of Law, Bachelor of Science degree in Zoology from the University of Tulsa and a Master of Science degree in Radiation Physics from the University of Oklahoma. She has been with the Oklahoma Corporation Commission for 29 years, 16 as an Administrative Law Judge and 13 years with the General Counsel’s office. Before her public service, she previously worked as a Radiation Physicist, then later maintained a private practice with primary emphasis in real estate and probate law and served as the alternate Municipal Judge in Broken Arrow, Oklahoma.
Pertinent Chapter 5 Rule Changes Application filing deadline is now 3: 30 p. m. instead of 4: 00 p. m. Must send Emergency Applications to technical staff the same day we fax to OCC We can request Cause CD No’s now with just Applicant Name, Relief Sought, and Lands covered (must be followed up with filing within 3 business days or the number is cancelled) We may protest cases at docket call, but they must be followed up with a written protest and filed with the Commission “Day Certain” Orders for non-emergency applications shall be submitted within 30 calendar days Orders for emergency applications shall be submitted within 10 business days Failure to timely submit an Order may result in the ALJ re-opening the record and recommending the application be dismissed
Interesting Chapter 10 Rule Changes OAC 165: 10 -3 -28 (c)(1): “… the [directional] survey shall be submitted electronically using a program provided by the Commission. ” Several additions/changes regarding disposal wells- contact your attorney for further discussion OAC 165: 10 -29 -2 (c) applies to horizontal Woodford wells where the lateral is drilled E/W 165’ 330’
Common Exhibit Issues Illegible – maps are too cluttered Incorrectly labeled (most commonly, the formation is incorrect – the formation must match the common sources of supply named in the Application) Isopach’s need DATA POINTS! Wells names and their operators should be labeled Spacing Apps now require isopach(s) Incorrect survey data Signed Telephonic Affidavits should be returned as quickly as possible
Interest Conveyance and Filing Timeline On 6/26/2018, Collapsed Casing, Inc. makes an interest conveyance to Sidetrack Oil & Gas. On 6/28/2018, Barn Burner Energy requests Pooling be filed for subject section. On 6/29/2018, Barn Burner Energy filed its Pooling Application. On 8/7/2018, the Pooling was recommended by the Commission. The Pooling Order issued on 10/4/2018.
Interest Conveyance and Filing Timeline On 1/14/2019, Sidetrack Oil & Gas filed an Application amending aforementioned Pooling Order. Sidetrack Oil & Gas asserts Pooling Order is invalid as to specific respondent because their interest was conveyed 3 days prior to pooling filing and Barn Burner Energy should have known that at the time of filing. Sidetrack Oil & Gas claims naming predecessor in title is insufficient notice.
Interest Conveyance and Filing Timeline Sidetrack Oil & Gas’s assertions: Sidetrack Oil & Gas’s mineral interest is not subject to the Pooling Order Sidetrack Oil & Gas was the record title owner of a mineral interest in the Section prior to the filing of the Pooling Application Sidetrack Oil & Gas was not named as a respondent, and therefore, was not afforded its due process Naming respondents' predecessor-in-title is ineffective in obtaining jurisdiction over respondents and the interest owned by respondents at the time of the filing of the Application.
Interest Conveyance and Filing Timeline Barn Burner Energy’s assertions: Barn Burner Energy’s had properly checked the county records, noted in the Pooling Order that issued. The attempt to vacate the Pooling Order was a collateral attack. Relying on Chancellor, Barn Burner Energy’s argued that ruling in favor of Sidetrack Oil & Gas would place an onerous burden on the applicant to check county records daily. Chancellor v. Tenneco Oil Co. , 653 P. 2 d 204 (Okla. 1982). Publication notice is sufficient to bring parties within jurisdiction if the relevant parties are unknown despite due diligence.
Interest Conveyance and Filing Timeline ALJ recommended that the pooling order does not apply to interests owned by Sidetrack Oil & Gas. The Commission cannot issue orders that adversely affect property rights without due process. Cravens v. Corporation Commission, 1980 OK 73, 613 P. 2 d 442. What does this mean going forward?
Interest Conveyance and Filing Timeline Diligent checking of records. A party's constitutional right to notice is not dependent upon how long a period of time they owned the interest prior to their rights being affected.
Right to Bonus Roughneck Resources sells only its Mississippian and Woodford rights to Tiger Mike, LLC files two 640 -acre pooling applications, each covering the Mississippian, Woodford, and Hunton. Tiger Mike, LLC’s geologist testifies that the value should be allocated equally, 1/3 to each formation. Tiger Mike, LLC’s landman testifies that a party can elect out of any, or all, of the three formations and receive the 1/3 bonus as allocated.
Right to Bonus After the Pooling Order issues, Roughneck Resources elects out of the Hunton, requesting bonus payment be made. Tiger Mike, LLC denies the bonus payment, arguing that no bonus is due because no Hunton well has been proposed. The Pooling Order states that the rights and equities of owners in the Mississippian, Woodford, and Hunton are pooled and adjudicated.
Right to Bonus Refusing to pay the bonus for rights that are pooled is tantamount to an unconstitutional taking of those rights without compensation. “All orders requiring such pooling shall be made after notice and hearing, and shall be upon such terms and conditions as are just and reasonable and will afford to the owner of such tract in the unit the opportunity to recover or receive without unnecessary expense the owner's just and fair share of the oil and gas. ” 52 O. S. § 87. 1.
Conducting Fair Market Value Analysis “Fair market value” is the measure of compensation forcibly pooled minerals. Amoco Production Co. , 751 P. 2 d 203; Miller v. OCC, 635 P. 2 d 1006 (Okla. 1981); Coogan v. Arkla Exploration Co. , 589 P. 2 d 1061, 1063 (Okla. 1979). Landman (or someone under their direction) checks: Sections immediately surrounding target Section(s) for any leasing activity in the last year. Contact those parties and request lease bonus/royalty data. Compile values. The best and highest values are those to be testified to at the time of hearing. Distinguishable values: Multi-section transactions, recent poolings, closed-bid transactions, other circumstances…
Conducting Fair Market Value Analysis Something to consider: Two 640 -acre pooled units and Multi-unit horizontal wells…. Should multi-section transactions then be considered? What about a 1, 280 -acre pooled unit?
Benjamin J. Brown, Esq. bbrown@charneybrown. com