The Oklahoma Bar Journal May 2024

the Corporation Commission holds sway when public rights are at issue, such as in questions regarding spacing orders, pooling orders and other “enactments for the conservation of oil and gas.” 36 Furthermore, “the power to clarify or interpret any Commission order” in its aspects that implicate public rights rests squarely with the Commission. 37 Meanwhile, private rights, including – in at least some respects – interpreting Corporation Commission orders, are the province of the district courts, to wit: “Respective rights and obligations of parties are to be determined by the district court.” 38 In Toklan Oil & Gas Corp. v. Citizen Energy III, LLC, one party accused the other of transferring ownership of a sizable overriding royalty interest to a third party with the purported intention of so burdening the leasehold as to make developing it financially nonviable for the other party. Without addressing the ultimate issue of whether or not the party was hindering development ( i.e. , causing waste) by transferring ownership of an override for a dubious purpose, the Oklahoma Court of Civil Appeals held that “the Commission does not have jurisdiction to alter the ownership of royalty or to shift royalty away from the party taking the work ing interest pursuant to a pooling order.” 39 Were the Corporation Commission to do so, it would be adjudicating matters of contract, which is to say matters of private rights, which would exceed the bounds of its limited jurisdiction. NOTICE One significant and conspic- uous change in the law since Mr. Nesbitt’s article was published

many terms that may be included in a more detailed private agree ment executed after the pooling order is in place, such as, for instance, terms that govern suc cession of operator. As Mr. Nesbitt wrote, “Such an operating agree ment will effectively supersede the pooling order, especially as to its many detailed provisions which are not detailed in a pool ing order.” 33 As stated previously, private agreements are contracts that implicate the private rights and obligations of parties to the agreement, and the power to adju dicate matters related to private agreements properly belongs to the district courts, as expressed by the Oklahoma Supreme Court in Tenneco Oil Co. v. El Paso Nat. Gas Co. Though this remains true, in recent years, reports of the Corporation Commission have at times asserted that the power to select an operator belongs solely to the Corporation Commission in every instance, regardless of the existence of a private agreement that dictates the succession of operator between the parties to the agreement. This position would seem to contravene Mr. Nesbitt’s assertion – as true today as it was when he made it in 1979 – that pri vate operating agreements super sede the pooling order with respect to terms not addressed in the order, as well as exceed the Corporation Commission’s jurisdictional man date to decide matters involving public, not private, rights. Identifying the precise boundaries of the Corporation Commission’s jurisdiction is a persistent and recurring point of controversy, and for good reason. Determining whether the power to JURISDICTION

decide an issue properly belongs to the district courts, tribunals of gen eral jurisdiction that exist to resolve controversy, or the Corporation Commission, an administrative body with quasi-judicial authority of limited jurisdiction that exists to exercise the state’s police power, can have a significant influence on the outcome of a dispute. 34 Mr. Nesbitt notes that certain legal questions around orders and costs – namely regarding the enforceability of the Corporation Commission’s judgments and whether or not they are binding on district courts in litigation arising out of a dispute over costs – remained, at the time, unsettled. Oklahoma’s appellate courts have since issued decisions to offer some clarity around these and other issues. In Gulfstream Petroleum Corp. v. Layden , the Oklahoma Supreme Court stated with refreshing finality that the Corporation Commission’s decisions regarding costs are indeed binding on district courts, hold ing that, except with respect to inquiries into the Corporation Commission’s jurisdiction, “[g]enerally, the district courts of this state lack the jurisdiction to even inquire into the validity of [Corporation Commission] orders.” 35 This is not to say that the district courts are powerless in matters related to the Corporation Commission. In Tenneco and other cases in its lineage, the Oklahoma Supreme Court delineated the boundaries of the jurisdictional tug-of-war between these two fonts of judicial authority. In keeping with the Corporation Commission’s essential purpose as it relates to oil and gas – that being, in simplest terms, the protection of correlative rights and prevention of waste –

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

14 | MAY 2024

THE OKLAHOMA BAR JOURNAL