## Facts

- The Kansas Corporation Commission (KCC) entered a 1968 order creating the Nichols Unit, a 5,800-acre compulsory oil-field unit under K.S.A. 55-1301 et seq., to prevent waste, conserve resources, and protect correlative rights.
- The unit was initially proposed with secondary recovery (waterflood), but the approved unit plan and operating agreement allowed the operator to change operational methods.
- Water injection was attempted and later stopped when it did not increase production; the unit nevertheless continued producing oil in small amounts.
- The approved operating agreement contained a termination clause providing that termination could occur only after the operator determined either (a) the pool could no longer be produced in paying quantities, or (b) unit operations were no longer feasible.
- Royalty and mineral owners applied to the KCC to dissolve the unit, arguing that the unit’s purpose failed when secondary recovery ceased and that the termination clause improperly placed dissolution control in the operator.
- The KCC denied dissolution, relying on the approved plan’s termination provisions and the operator’s continued position that the unit could produce in paying quantities.
- The district court affirmed, treating the approved plan and operating agreement as binding on interest owners; the owners appealed.

## Issues

1. Whether the KCC was required to terminate the unit because secondary-recovery operations ceased after the unit’s creation.
2. Whether the KCC erred by concluding the unit continued until terminated under the operator-triggered termination provision in the approved unit agreement.
3. Whether the operator-triggered termination clause was void as an unlawful delegation of the KCC’s statutory authority under the compulsory unitization act.

## Decision

- The Kansas Supreme Court affirmed the district court and the KCC’s order denying dissolution.
- The KCC did not have to dissolve the unit solely because waterflood operations ended where production continued and statutory purposes (waste prevention, conservation, correlative-rights protection) could still be served.
- The KCC properly treated duration and termination as governed by the approved unit plan and operating agreement, which allowed operational changes and conditioned termination on the operator’s determination regarding paying quantities or feasibility.
- The termination clause was not an unlawful delegation because the unitization statute contemplates Commission approval of a proposed plan, and the KCC retained regulatory authority to act to prevent waste or protect correlative rights if statutory standards were violated.

## Legal Principles

- Under Kansas compulsory unitization statutes, the Commission’s function is to approve or disapprove a proposed unitization plan for statutory compliance; once approved, the plan’s terms are generally binding on affected interest owners.
- Cessation of a particular recovery method does not require unit dissolution when the approved plan permits operational changes and the unit continues producing in paying quantities.
- A unit plan may condition termination on an operator determination regarding paying quantities or feasibility without invalid delegation, where the Commission retains oversight powers to enforce statutory purposes.
- Determinations tied to “paying quantities” may be assessed under a prudent-operator standard, limiting operator discretion within the approved framework.

## Conclusion

The court upheld the Commission’s refusal to dissolve the Nichols Unit, holding that the Commission could enforce the approved unit plan’s operator-triggered termination clause and that discontinuing secondary recovery did not, by itself, compel dissolution while production and statutory conservation purposes continued.


Parkin v. Kan. Corp. Comm’n, 234 Kan. 994, 677 P.2d 991 (Kan. 1984)