## Facts

- The Oklahoma Corporation Commission previously combined two adjoining 40-acre tracts into a single 80-acre drilling and spacing unit for oil and gas development.
- W. E. Anderson owned a fractional fee interest (36.96%) in one 40-acre tract within the unit; Kenneth A. Ellison owned a fractional leasehold interest (25.2%) in the adjoining 40-acre tract; their interests were allocated within the unit by the spacing arrangement.
- On Ellison’s application, the Commission found that all owners in the unit except Anderson had agreed to Ellison’s proposed plan of development.
- The Commission authorized Ellison to drill a unit well with estimated drilling and completion costs of nearly $300,000.
- The Commission determined that $800 per acre was the reasonable lease bonus value in the area.
- The Commission’s order gave Anderson an election: (1) participate in the working interest by paying his proportionate share of drilling and completion costs and share in 7/8 of production, or (2) decline to participate and accept an $800-per-acre bonus for a lease of his interest, retaining only a royalty interest.
- If Anderson failed to make an election within 30 days, the order deemed him to have elected the $800-per-acre bonus option.

## Issues

1. Whether the Corporation Commission, under 52 O.S. 1951 § 87.1, could require a non-consenting owner in a spacing unit either to pay a proportionate share of drilling costs to participate or to accept a Commission-determined lease bonus and royalty.
2. Whether the spacing order made the parties common-law co-tenants such that the operator’s remedy was limited to recouping costs solely from the non-consenting owner’s share of production, rather than through a compelled election.
3. Whether the pooling order and election/default mechanism violated constitutional protections of property (including due process and taking principles).

## Decision

- The Supreme Court of Oklahoma affirmed the Corporation Commission’s order.
- The court upheld the constitutionality of 52 O.S. 1951 § 87.1 as a conservation measure.
- The court held the Commission acted within its statutory authority in authorizing Ellison to drill and in prescribing participation-or-lease terms for Anderson.
- The court rejected Anderson’s co-tenancy theory as controlling, concluding spacing and pooling regulation could set terms beyond common-law co-tenancy rules.
- The court found no unconstitutional deprivation of property because Anderson had an opportunity either to participate on a proportionate-cost basis or to take a Commission-found reasonable bonus and retain royalty.
- The court deferred to the Commission’s factual findings (including the $800-per-acre bonus and estimated well costs) where supported by competent evidence.

## Legal Principles

- The Corporation Commission may, to prevent waste and protect correlative rights, establish spacing units and issue pooling orders allocating the opportunity to recover a just and equitable share of production or proceeds.
- When owners have not agreed on unit development, the Commission may authorize a well for the unit and require non-consenting owners to elect between proportionate-cost participation in the working interest or non-participation for a fair bonus and royalty.
- A spacing order is a regulatory device for efficient drainage and allocation; it does not convert owners’ interests into a private common-law co-tenancy that limits the Commission’s statutory powers.
- Conservation regulation that reasonably allocates risks and benefits of unit development does not constitute an unconstitutional taking or denial of due process where the owner is given a fair election and compensation terms supported by evidence.
- Commission factual determinations in pooling matters are not disturbed on appeal if supported by competent evidence; appellate review focuses on legal and constitutional limits.

## Conclusion

The Oklahoma Supreme Court sustained a compulsory pooling order that required a non-consenting owner in a spacing unit to either pay a proportionate share of well costs to participate in the working interest or accept a Commission-determined lease bonus and royalty, holding the order authorized by statute and consistent with constitutional property protections.


Anderson v. Corp. Comm'n, 327 P.2d 699 (Okla. 1957)