*1 Petitioner, BENNION, H. Sam
v. RESOURCES, INC., and the
GRAHAM Oil, Gas and Respondents.
Mining,
No. 910089. Supreme Dam, Court of Utah. Gen., Atty. R. Paul Van Thomas A. Mitchell, Atty. Gen., City, Asst. Lake Salt
March 1993. Oil, Mining. for Board of Gas and Lear, McNulty,
Phillip W. Matthew F. City, for Salt Lake Graham Resources. Stirba, City, Salt H. Peter Lake Sam Bennion.
ZIMMERMAN, Justice: petitions H. Bennion for a writ of Sam review from an of the Utah Board Mining granting summary Gas judgment for Graham Inc. The Board ruled that section 40-6-9 of Code, (Supp. 1990) (amended 1992), Benn- did not entitle requiring an order Re- ion to Graham sources to account gas produc- of oil and share pooling arrangement tion because place. We affirm. dispute. The relevant facts are not in inter- Bennion owns an undivided mineral lands within unit in est in certain County. He Duchesne owner, i.e., interest an owner within agree to bear drilling unit “who refuses to share of the costs of the proportionate operation of the well.” Utah 40-6-6(6) (1988) (current ver- Code Ann. § 40-6-2(11) (Supp.1992)). Gra- sion at id. § operates two oil and ham Resources the same unit. How- wells within ever, arrangement, vоl- there is no involuntary, Bennion untary or between 40-6- Resources.1 See id. (current 6(5)-(8) (1988) 40- at id. suggests (Supp.1992)). The record 6-6.5 no other interest owners that there are drilling unit. does two wells he owns interest. Resources in which claims that this assertion. on lands controvert are not located owned *2 570 16(4)(d); 1990, Cowling with the see v. Board Gas 17, filed July On 220, (1991). Mining, 830 P.2d 223 & n. & under request action
Bоard a to order asking the Board merits, find proceeding Before to the we to to account for and Resources Graham briefly development helpful it to review due him from the proceeds all pay Bennion 1955, gas Prior to of Utah oil and law. parties asked the to The Board two wells. capturе. rule recognized the resolution, by but attempt negotiate a to P.2d at 224. This doctrine Cowling, 830 81, 1990, to reach they had failed August gas landowner to drill for oil allowed a then scheduled agreement. The Board an many as as the and with wells wherever 27, September 1990. See id. hearing for thought appropriate. a Id. Be- lаndowner 40-6-9(5), (6) Supp.1992). (Supp.1990 & gas are found in subterrane- cause oil and reservoirs, pools, or these wells often 6th, pre- Bennion filed a September On only gas, from beneath drained oil Board. statement with the hearing issue land, but from beneath the well owner’s 10th, Resources September On rule of adjacent lands as well. Under the alternative, or, in the for dismissal moved however, the capture, well owner was judgment. September summary On compensate adjacent required to those 17th, prehear- its Resources filed gas for the oil and removed landowners not file a Bennion did ing issue statement. adja- Those from their lands. Id. beneath motion, Resources’ but response to Graham therefore were forced cent landowners objecting a letter to the Board sent attempt pro- in an drill their own wells being con- of the motion as consideration pool. practices of the Such tect their share procedurе. Bennion also trary and wasteful. Id. were uneconomical clarify the issues that the Board to asked 1955, Legislature In the Utah enacted September at the 27th addressed would be Act, and Gas Conservation the Utah Oil respond to Board did not hearing. The capture modified the law of and es- which days letter. Two bеfore purposes The tablished the Board. Id. continuance, hearing, Bennion for a moved gas Act were to conserve oil and the 1955 scheduling a conflict claiming that he had reducing and maximiz- resources waste issues he was unclear as to what and that production protect efficient and to land- hearing. would be addressed i.e., rights,” just their “correlative owners’ hearing, September 27th At pool. equitable shares of the Id. Bennion’s motion for a con- Board denied superseded Act was 224-25. The 1955 granted Graham Resources’ tinuance and Act of the Utah Oil and Gas Conservation summary judgment. The Board motion for 1983, essеntially to which was intended Act, motion for a determined that Bennion’s purposes prior as the serve the same because in authority continuance was unwarranted more the Board. placed but Storey, ample knowledge Dragoo of the issues before A. & Ruth Ann had Denise See Act Board and of the date of Utah’s Oil & Gas Conservation 49, Energy Pol’y 52-53 5 J. L. & summary judgment, the Board granting In (1983). right a correlative is mere- Because not entitled to reasoned that Bennion was and un- ly “a to an undifferentiated 40- from the wells under section gas pool in an oil or quantifiable interest voluntary pooling agreement or 6-9 until a land,” the 1983 Act created a beneath one’s involuntary pooling order was effect con- identify and define correla- mechanism to seeks re- cerning the wells. Bennion now pool. particular oil or tive in a order. view of Board’s P.2d at 225. mechanism Cowling, That re first state the standard of “well-spacing order” dispute “drilling Because this turns on statu unit” that is view. a establishes interpretation, pool. the Board’s id. Once tory we review coextensive with the See unit, a interpretation applicable statutes for Board has established right can be deter- give correctness and its view on matter landowner’s or her “fractional share mined on his particular deference. Id. based 63-46b- ownership (8) of the total surface within within Subpart those units. particular provides pertinent unit.” Id. at 226. part: operator The of a well under a pooling spacing order further limits the which there are nonconsenting and location of that can be number wells owners shall furnish the nonconsеnting *3 placed drilling in the unit. at 225. See id. monthly owners with statements of all owner, including No interest a nonconsent- incurred, together costs quanti- with the owner, ing in can drill his or her own well ty gas produced, of oil or and the amount by spacing the unit unless authorized the proceeds of realized from the sale of this order. Bennion v. Utah Bd. State of production during preceding the months. (Utah 1142 Mining, Gas & 675 P.2d consenting and when the owners re- 1983). Therefore, this court has stated nonconsenting cover from a owner’s re- compensation that “a vested to some linquished provided interest the amounts prevent regulatory is ... essential to the (6) section, for in Subsection of this the legislation unconstitutionally depriv- from relinquished interest the nonconsent- ing” adjacent the prop- owner of his or her automatically owner shall revert to erty compensation. without Id. her]; him nonconsenting and the own- [or case, In argues the instant that er shall from that time own the same right” his drilling “vested within the unit production interest in the well and from payments entitles him to for his mineral it, and be liable for the further if costs as interest and allows him to invoke Board participated had in the initial [or she] authority under section 40-6-9. That stat- operation. and These costs are provided, time, ute that “oil and payable production out of unless other- proceeds produc- derived from the sale of agreed nonconsenting wise between the oil, tion from producing gas, well operator. owner and the hydrocarbons related in the state shall be (1988) 40-6-6(8) Utah Code Ann. (empha- § paid persons legally all entitled tо these added) (repealed 1992) (current sis version payments_” 40-6- § 40-6-6.5(7)-(9) (Supp.1992)). at id. § 9(1) added) (current (Supp.1990) (emphasis plain language (8) The subpart indi- 40-6-9(l)(a) version at (Supp.1992)). id. § pooling place cates that a order must inbe If a party legally payments is entitled to operator required before an is to make аn made, that have not party been that can payment to a nonconsent- petition the Board hearing for a on the ing mineral interest owner. In addition 40-6-9(4) matter. (Supp.1990 Id. & § plain meaning the provision, of this the Supp.1992). If the Board finds that the assigning mechanism for costs described in pay failure to the was “without (8) the subрart depends second sentence of justification, reasonable it order a on the pooling existence of a order. A complete accounting require pro- nonconsenting “relinquishes” owner his or paid....” ceeds and interest to be Id. her interest to the extent that it is worth 40-6-9(7).2 § the value of the amounts he or she must The version of section consenting 40-6-9 at is subpart owners under sue “legally (6) 40-6-6, here does not define entitled.” relinquished and the However, the Board (8) concluded that Benn- subpart interest “reverts” under when “legally payments ion was not entitled” to nonconsenting speci- owner makes the pooling аrrangement because no payment. fied amounts set forth (6) effect. The Board subpart reasoned that section nonconsenting include the own- conjunction 40-6-9 must be read in with er’s share of the cost of certain surface governs equipment estab used connection with the well lishment of units and the operation, and other costs of and a noncon- pooling penalty, owners under orders sent determined be 2. The 1992 amendment to section 40-6-9 cussed in the text. See Utah Code Ann. 40-6- did substantively change provisions (Supp.1992). dis 9 equivalent property a vested inter- percent to “with
Board, percent that is accept If we were to est” —is untenable. complete to drill and incurred costs argument, effectively strike 40-6-6(6) (amended we would (1988) Id. well. language in section pooling 1992) 40-6- id. (current ignore pervasive regulation that section’s a volun- 6.5(4)(d)(i)(D)(Supp.1992)). Absent consenting of the relations between amounts can be es- tary agreement, these nonconsenting owners.4 pooling only through order. tablished See id. recognize that Bennion has vest ed, rights by virtue of his undi phrase “le argues that the interest in lands vided mineral within 40-6-9 does not gally in section entitled” pur the Board unit established arrangement be require that a *4 However, to 40-6-6. as we suant section person only that the place, requires but Cowling, appropriate said in the mecha property a inter seeking relief have vested vested, nisms for the these argues gas at issue. He enforcement est in the oil and rights “[vjoluntary pooling are undisputed, he has an vested that because orders,” pooling аgreements forced and being gas oil property interest the and Cowling, 40-6-6. See governed by section operated by produced from the wells Gra voluntary pool 830 P.2d 226. a at Without “legally he is entitled” ham ing parties the a arrangement between or pay right to immediate therefore has a Board, pоoling has order from the Bennion however, Board, agree the ment. We with enforcing statutory means his correl case, of this that the facts section under Therefore, rights. attempt his to in ative the standards 40-6-6 sets forth means voke section 40-6-9 as a of enforce section legal entitlement under Bennion’s ment fаil. must determined. A nonconsent- 40-6-9 is to be ing drilling mineral interest owner within a argument, As an Bennion alternative rely upon unit the Act to may pooling if a contends that even order rights pooling 40-6-9, his or her unless a prerequisite enforce to relief under section statutory power, in effect.3 arrangement is the Board had the on its motion, pool the own to force unit or order comprehensive regulation of From the solving parties agree pooling, the to thus to responsibilities con- rights relative problem the of his lack of entitlement. He as well as the tained section requested orally he the contends that spеcific pooling to an reference antecedent pooling to on its Board force own motion order, legislature that the intend- think we regulate legal enti- ed this section that nonconsenting argument unpersuasive. is He a under tlement of owner in the pooling anything a does not cite to Utah Oil section 40-6-9 and that order be Act or place nonconsenting a owner can and Gas Conservation the Board’s before requir- a rights. Bennion’s rules that could serve as basis for enforce his or her vested pooling argument “legally lan- to force on its own entitled” —that request agency as motion. a for ac- guage in section 40-6-9 should be read Without any subject expressly that is a lease or disavows other contract We note that 3. principles law in his chal development reliance on common of oil lenge ing, generally order. See Cowl to the Board’s average royalty "receive landownеr's as (noting P.2d at 225 that the common royalty to each tract within the attributable abrogated only capture law is rule 6—6(7)(b) drilling § Code Ann. unit.” Utah 40— it conflicts with Utah Oil and Gas extent that (1988) (amended 1992) (current at id. version Co., Act); v. Utex Oil 905 F.2d 40-6-6.5(6)(a) (Supp.1992)). The wells at is- (10th Cir.1990) (noting that non- status, paid-out sue in case had achieved this largely consenting statute, are owners controlled any claim entitlement Bennion does not do not set all available but statutes forth Thus, royalty provision. we under the remedies). a claimant the statu- do not address whether advantage tory may royalty of section 40- take acknowledge that before achieves a well status, 40-6-6(7)(b) 6-9. grants paid-out nonconsenting unit owner of a tract in a purely ceeding and ascertained Bennion’s share of the decision is pooling, to force tion lan- against clear from the the costs to be offset discretionary. This is what Graham 40-6-6(5): “In the ab- owed Bennion. guage voluntary pooling, the board sence of It is clear that Graham Resources had all pooling all interests.. enter an order necessary the information for the Board to 40-6-6(5) (1988)(empha- Ann. Utah Code “proportionate determine Bennion’s share 1992) (current added) (amended sis operation in the of the cost of the 40-6-6.5(2)(a) (Supp.1992)). Benn- at id. § аnd could have entered well” a for- request for forced did not include a ion pooling necessary. mal order if that were petition action. pooling 40-6-6(6) (1988). See complain of the Board’s cannot now He circumstances, Under the to enter an order he did not seek. failure appropriаte procedural was an vehicle for Finally, Bennion claims that determining what Graham owed Bennion. the Board did not unfairly treated because entry depended of a requesting a clarifica- respond to his letter upon bringing other owners Although perhaps un- of the issues. tion Board, in the unit before the that wise, respond failure to to the the Board’s easily could have been done. statute, rule, letter did not violate dispute in this case seems to have *5 that has principle of administrative law grown out of animosities between Bennion im- brought to our attention. More been have portantly, parties’ prehеaring issue both degree provoked some of irritation on the Resources’ motion statements so, part of the Board. that is not a valid summary judgment and for dismissal or refusing grant reason for the relief to clearly indicate supporting memorandum petitioner is entitled. It which a seems that Bennion knew what issues would bе upon me that the Board’s insistence such a hearing. September 27th addressed procedural highly technical distinction Also, undermines the nothing the record purpose capricious. and is serves useful ample that Bennion had Board’s conclusion to address the issues raised at time other claims
We have reviewed Bennion’s merit. The
and find them to be without dismissing petition
Board’s order
is affirmed. HALL, HOWE, C.J., C.J., Associate In the Matter of DISCIPLINE OF J.,
DURHAM, concur. SCHWENKE, 10- A. Paul DOB: STEWART, Justice, dissenting. 12-51 ADM: 05-09-83. opinion disagree majority I with 900136, 910095. Nos. the Board of the extent that it sustains Supreme Court of Utah. Mining overly I think is an Gas and what application proce- technical March petition ac- dures. Bennion’s Ann. 40-6-9 asked tion under Utah Code
the Board to order Graham Resources
account for and Bennion all him from two wells. No one doubts
due appropriate. The
that an have
only issue is whether Bennion should
formally sought pooling order first. The' certainly granted have Benn-
Board could appropriate accounting pro-
ion relief