## Facts

- The Oklahoma Corporation Commission regulated production in the West Edmond Hunton pool under proration and conservation statutes.
- The pool operated under a flat daily per-well oil allowable of 150 barrels per day.
- The Commission also set a limited permissible gas–oil ratio of 2,000 cubic feet of gas per barrel of oil.
- Together, the two limits capped each well at 300,000 cubic feet of gas or 150 barrels of oil per day, whichever occurred first.
- Denver Producing & Refining Co., an operator in the pool, applied to amend the ratio limit to 5,000:1, which would have allowed up to 750,000 cubic feet of gas or 150 barrels of oil per day, whichever occurred first.
- The pool had 571 oil-producing wells, and gas–oil ratios varied widely; 128 wells exceeded the 2,000:1 limit and smaller subsets exceeded 3,000:1, 4,000:1, and 5,000:1.
- Denver contended the 2,000:1 limit penalized high-ratio wells, prevented many wells from making the full flat oil allowable, and impaired correlative rights.
- After an evidentiary hearing, the Commission denied the requested amendment, finding the existing limit served conservation objectives.

## Issues

1. Whether the Commission’s combined flat allowable and 2,000:1 gas–oil ratio restriction was arbitrary, unreasonable, or unlawfully discriminatory because it curtailed high gas–oil ratio wells more than others and prevented some wells from producing the full flat allowable.
2. Whether limiting production from high-ratio wells to conserve reservoir energy and avoid waste is a lawful exercise of the state’s police power consistent with producers’ correlative rights.

## Decision

- The Oklahoma Supreme Court affirmed the Commission’s denial of the application to raise the permissible gas–oil ratio to 5,000:1.
- The court held the 2,000:1 limit, even though it curtailed some wells more than others and prevented a substantial percentage of wells from producing the full flat allowable, was not arbitrary, unreasonable, or unlawfully discriminatory.
- The court concluded there was substantial evidence that operating under the challenged limits would conserve oil and gas and increase ultimate recovery from the pool.
- The court applied a deferential review focused on whether the Commission acted within statutory authority and whether the record reasonably supported the order.

## Legal Principles

- The Corporation Commission may impose a flat per-well allowable and may further restrict production by fixing a permissible gas–oil ratio for wells producing from a common source of supply.
- Differential curtailment among wells does not, by itself, render a conservation order unlawfully discriminatory; the controlling question is whether the restriction is reasonably related to conservation and supported by evidence.
- Correlative rights in a common reservoir are qualified by reasonable conservation regulation adopted under the state’s police power to prevent waste and improve ultimate recovery.
- On appeal, a Commission order will be sustained when supported by substantial evidence and within the Commission’s delegated authority, particularly on technical reservoir-management questions.
- The Commission’s continuing supervisory jurisdiction to revise allowables and ratios as experience and data develop supports the validity of conservation orders that may have uneven short-term effects.

## Conclusion

The court upheld the Commission’s refusal to raise the gas–oil ratio limit, ruling that a conservation-based gas–oil ratio restriction may lawfully reduce production from high-ratio wells and keep some wells from reaching a flat oil allowable when substantial evidence shows the restriction reduces waste and increases ultimate recovery from the common pool.


Denver Producing & Refining Co. v. State, 184 P.2d 961 (Okla. 1947)