CHAPTER 9 JURISDICTION: THE RELATIONSHIP BETWEEN STATE CONSERVATION MANDATES AND VOLUNTARY AGREEMENTS—ACCOMMODATION AND CONFLICT

• Jurisdiction: United States

Onshore Pooling and Unitization
(Jan 1997)
CHAPTER 9
JURISDICTION: THE RELATIONSHIP BETWEEN STATE CONSERVATION MANDATES AND VOLUNTARY AGREEMENTS—ACCOMMODATION AND CONFLICT
Kemp J. Wilson
Crowley, Haughey, Hanson, Toole & Dietrich
Billings, Montana

The full text of this paper will be mailed to Institute registrants approximately four weeks after the program. The author apologizes for the delay --- mea culpa, mea culpa. The following is an outline of the paper for purposes of the oral presentation.

1. The basic purpose(s) of conservation agencies.

a. Prevention of waste.

b. Protection, or consideration, or adjustment, but not adjudication (?), of correlative rights.

i. "The rights of owners in a common source of supply include the right against waste...against spoilage...against malicious depletion...the right to a fair opportunity to extract oil or gas...and the right to conduct secondary recovery operations."

ii. The right to a "fair share" --- whatever that means.

2. The spacing, compulsory pooling, and unitization tools of conservation agencies.

a. The melding of waste prevention and correlative rights "protection."

b. Statutory correlative rights.

i. Cost determinations.

ii. Risk penalties and non-joinder financing.

iii. Production and cost sharing parameters.

iv. Operator appointment and removal.

c. The legislative preference for voluntary agreements.

i. Voluntary vs. compulsory pooling.

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ii. The platypus duck named Plan of Unitization, with the body of a voluntary agreement, and the bill and webbed feet of agency order.

3. Voluntary agreements --- how far can they go, and who decides what is too far?

a. The standard fare --- Voluntary agreements must be construed as subject to statutes and regulations. How about agency orders --- are they considered as forming a part of agreements?

i. Subsequent orders that are at odds with the voluntary agreement, i.e., the pooling agreement and subsequent agency order for spacing in a different direction.

ii. Voluntary agreements intended to augment or supplant previous orders.

iii. Union Pacific Resources Co. v. Texaco Inc.

b. The Oklahoma Conundrum --- A novel approach to the construction of voluntary agreements that touch upon conservation issues, and who has the primary jurisdiction to determine the nature of the touch. Tenneco Oil Co. v. El Paso Natural Gas Co.

i. Contracts entered to augment agency orders that affect private rights preclude further agency action...