## Facts

- W.E. Anderson (plaintiff) owned a fractional fee interest in a 40‑acre tract of land in McClain County, Oklahoma.   
- Kenneth A. Ellison (defendant) owned a portion of the leasehold estate in an adjacent 40‑acre tract.   
- By prior order, the Oklahoma Corporation Commission designated the two 40‑acre tracts as a single 80‑acre drilling/spacing unit, allocating each owner a proportionate interest in the unit.   
- Ellison applied to the Commission for authority to drill an oil well on his 40‑acre tract within the spacing unit; the estimated cost of completing the well was about $300,000.   
- All other owners in the unit, except Anderson, agreed with Ellison on a plan of development; Anderson opposed Ellison’s application.   
- The Commission issued an order:  
  - Authorizing Ellison to drill the well;  
  - Allowing Anderson to participate in the working interest by paying his proportionate share of drilling and completion costs; and  
  - Alternatively, giving Anderson the option to decline cost participation and instead accept $800 per acre as a lease bonus for his undivided interest, to be paid by Ellison.   
- The order further provided that if Anderson failed to elect within 30 days, he would be deemed to have elected the $800‑per‑acre lease bonus option.   
- Anderson appealed directly to the Oklahoma Supreme Court, arguing that the earlier spacing order made him and Ellison tenants in common, so Ellison could not require pre‑payment of drilling costs but instead must recoup Anderson’s share solely out of production.   

## Issues

1. Whether the Oklahoma Corporation Commission, under its conservation and spacing authority, may require an unconsenting interest owner in a drilling unit either to pay his proportionate share of drilling costs in advance to participate in production or to accept a fixed cash bonus and lease his interest to the operator.   
2. Whether a spacing order designating tracts as a single drilling unit necessarily creates a common‑law tenancy in common that limits the Commission’s power to structure cost‑sharing and participation terms in subsequent development orders.   

## Decision

- The Oklahoma Supreme Court affirmed the Corporation Commission’s order.   
- The Court held that the Commission acted within its statutory authority and the state’s police power over oil and gas conservation in:  
  - Authorizing Ellison to drill the well on the unit;  
  - Conditioning Anderson’s full participation on payment of his proportionate share of drilling and completion costs; and  
  - Providing Anderson the alternative of accepting a reasonable per‑acre lease bonus in lieu of cost participation.   
- The Court rejected Anderson’s contention that the spacing order alone created a tenancy‑in‑common relationship that barred the Commission from imposing these cost‑sharing options.   

## Legal Principles

- State conservation agencies, acting under valid statutes, may exercise the police power to prevent waste and protect correlative rights in oil and gas fields, including through well‑spacing and compulsory unitization mechanisms.   
- Within such authority, a commission may require non‑operating owners in a spacing unit either to:  
  - Contribute their proportionate share of drilling costs to fully participate in production; or  
  - Accept a fair cash bonus or other compensatory arrangement in lieu of such participation.   
- A spacing or unitization order that integrates separate tracts into a single drilling unit does not, by itself, fix a purely private, common‑law tenancy‑in‑common that overrides the regulatory scheme; rather, ownership interests are subject to reasonable regulatory conditions imposed in furtherance of conservation objectives.   

## Conclusion

The Oklahoma Supreme Court upheld the Corporation Commission’s authority to regulate cost participation and development terms within a drilling and spacing unit. Anderson could either pay his share of drilling costs and share fully in production or accept a reasonable lease bonus; he could not insist on risk‑free participation with his costs recouped only out of production, because the Commission’s conservation powers permitted the challenged order.


Anderson v. Corporation Commission, 327 P.2d 699 (Okla. 1957)