JERRY L. GOODMAN, Vice-Chief Judge.
¶ 1 B & W Operating, L.L.C., and B & W Exploration, Inc. (collectively "B & W"), appeal Order No. 619555 of the Oklahoma Corporation Commission (OCC) approving Devon Energy Production Company, L.P.'s (Devon) application seeking an order pooling a 640-acre spacing unit covering Section 8-19N-3E, Payne County, Oklahoma. Based on our review of the facts and applicable law, we affirm.
¶ 2 Devon filed an application with the OCC on March 7, 2013, seeking to pool, inter alia, the Mississippian and Woodford formations underlying Section 8-19N-3E, Payne County, Oklahoma ("Section 8").
¶ 3 On June 6, 2013, a hearing was held before an Administrative Law Judge (ALJ) where B & W requested a plan of development that permitted election in subsequent wells, after participation in the initial well, either on a formation-by-formation basis or well-by-well basis, and not by the unit. On July 10, 2013, the ALJ filed her Report, rejecting B & W's request and recommending the Commission grant Devon's application.
¶ 4 B & W timely filed an exception to the Report and an oral argument was heard before the Oil and Gas Appellate Referee. On October 11, 2013, the Referee filed her Report, affirming the ALJ's recommendations. B & W moved for oral arguments before the OCC en banc to consider exceptions to the Referee's Report, which the OCC ultimately denied. On December 23, 2013, OCC issued Order No. 619555 and force pooled B & W's, among others, oil and gas leasehold interests in the Mississippian and Woodford common sources of supply underlying Section 8. B & W appeals.
¶ 5 We will affirm the OCC's order if it is sustained by law and supported by
¶ 6 On appeal, B & W contends OCC Order No. 619555 is not supported by law or substantial evidence. B & W asserts that after electing to participate in an initial horizontal test well, a non-operator working interest owner, such as B & W, should have the right to elect to participate in subsequent horizontal wells within a pooled unit, or elect not to participate in a given well, without forfeiting its unit leasehold interests.
¶ 7 Devon and the OCC disagree, asserting Oklahoma law authorizes the OCC to pool by drilling and spacing unit only, and not by the wellbore or well-by-well. Defendants cite Amoco v. Corporation Comm'n, 1986 OK CIV APP 16, 751 P.2d 203, approved for publication by the Oklahoma Supreme Court, for support.
¶ 8 In Amoco, R & R Exploration Co., Inc. (R & R) applied to the OCC to force pool a 640-acre drilling and spacing unit. Amoco Production Co. (Amoco) was designated as operator of the unit under Order No. 199609. R & R elected not to participate in the initial well and was compensated. R & R subsequently assigned a portion of its interest to Bartex Exploration, Inc. (Bartex). Bartex then informed Amoco that it wished to participate in a second well being drilled. Amoco declined, insisting the pooling order and R & R's previous election eliminated Bartex's participation in subsequent wells in the unit. After the parties requested the OCC interpret Order No. 199609, the OCC held Bartex had the right to participate in subsequent wells in the spacing unit.
¶ 9 Amoco appealed and the Court of Civil Appeals (COCA) reversed, finding the OCC exceeded its jurisdiction. Citing 52 O.S.1981, § 87.1(e), COCA found the statute mandated developing the spacing unit as a unit, specifically rejecting that § 87.1(e) authorized pooling by the wellbore. Amoco, at ¶ 12, at 206. Moreover, citing Helmerich & Payne, Inc. v. Corporation Comm'n, 1975 OK 23, ¶¶ 7-8, 532 P.2d 419, 422, COCA stated "[w]hen the statute says the Commission shall require the owners `to pool and develop their lands in the spacing unit as a unit' it is limiting pooling within the designated drilling and spacing unit of 640 acres. . . . [W]e feel the regulatory statute is restrictive." Id. at ¶ 15, at 206.
¶ 10 Although B & W acknowledges that Amoco held § 87.1(e) mandated developing the spacing unit as a unit, it asserts Amoco is distinguishable and does not prohibit a plan of unit development that includes wellbore elections in subsequent wells for initial participants. B & W contends the ban on pooling by the wellbore in § 87.1(e) is limited to interest owners who do not participate in the initial well in the unit. It asserts Amoco did not anticipate the changing times in the contemporary oil and gas business or the nuances of horizontal drilling and spacing units for horizontal wells.
¶ 11 We disagree. The Oklahoma Supreme Court affirmed the holding in Amoco in SKZ, Inc. v. Petty, 1989 OK 150, 782 P.2d 939. In SKZ, the OCC pooled interests in a drilling and spacing unit. Various interest owners sought to participate in
Id. at ¶ 8, at 942 (emphasis added). "The purpose of our pooling statutes is to pool the interest owners' rights to the oil and gas in the named common sources of supply underlying the unit. The actual hole or holes in the ground used to extract the oil and gas cannot be given effect as individual units.." Id. at ¶ 9, at 942. Accordingly, § 87.1(e) requires pooling the spacing unit by a unit and not by the wellbore regardless of whether an interest owner participates in an initial well.
¶ 12 B & W further contends OCC Order No. 619555 is not just and reasonable and does not allow B & W to receive its just and fair share of oil and gas in Section 8 as required by § 87.1(e).
¶ 13 Section 87.1(e) requires that "just and reasonable" conditions be established so that an owner can realize its fair share. The phrase "just and reasonable" invokes equitable principles and implies good judgment and fairness, common sense and justice. See State v. Public Serv. Co. of Oklahoma, 1980 OK 110, ¶ 16, 614 P.2d 1100, 1103; Sien v. Sien, 1994 OK CIV APP 159, ¶ 7 fn. 1, 889 P.2d 1268, 1271 fn. 1.
¶ 14 In response to similar arguments, the Court in Amoco stated:
Amoco, at ¶¶ 16-17, 751 P.2d at 206-07.
¶ 15 One result of a pooling order is the unitization of the working interest in the entire tract as to the named formation. Amoco, 1986 OK CIV APP 16, at ¶ 12, 751 P.2d at 206. As a result, risk of loss is equalized by forcing all interest owners to choose, in advance, whether to participate. Ranola Oil Co. v. Corporation Comm'n of Oklahoma, 1988 OK 28, ¶ 15, 752 P.2d 1116, 1119. An election not to participate transfers to the designated operator, by operation of law, the right to drill. Grace Pet. Corp. v. Corporation Comm'n of Oklahoma, 1992 OK CIV APP 143, ¶ 6, 841 P.2d 1172, 1174; Amoco, 1986 OK CIV APP 16, at ¶ 16, 751 P.2d at 206. When the compensation fixed by the pooling order is paid to the party electing not to participate, the rights of the parties are vested. SKZ, 1989 OK 150, at ¶ 10, 782 P.2d at 943; Ranola, 1988 OK 28, at ¶ 15, 752 P.2d at 1119.
¶ 16 B & W's request would turn the development into a wellbore process, contrary to § 87.1(e). As previously discussed, § 87.1(e) requires pooling the spacing unit as a unit and not by the wellbore. Accordingly, the Court rejects B & W's assertion that a just and reasonable plan of unit development is wellbore elections. Finally, as pointed out in Helmerich, B & W's "relief and authority for their theory lies with legislative enactment, not with the Court." Amoco, 1986 OK CIV APP 16, at ¶ 18, 751 P.2d at 206 (citing Helmerich, 1975 OK 23, at ¶ 13, 532 P.2d at 423).
¶ 17 Order No. 619555 of the OCC approving Devon's application seeking an order pooling a 640-acre spacing unit covering Section 8-19N-3E, Payne County, Oklahoma, is therefore affirmed.
¶ 18
FISCHER, P.J., and WISEMAN, J., concur.