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Tenneco Oil Co. v. State Indus. Comm'n - 131 N.W.2d 722 (N.D. 1964)

Rule:

An applicant for an exception to a spacing order upon the ground that such an exception is necessary to prevent confiscation has the burden of showing that he is entitled to the permit.

Facts:

By its order No. 222, the Industrial Commission established 80 acre spacing in the Glenburn Oil Field. The regular spacing units were designated as the East Half or the West Half of the quarter sections. Whether a spacing unit ran north and south or east and west, the drilling pattern required the wells to be drilled in the Northeast Quarter and the Southwest Quarter of quarter sections. Tenneco Oil Co., which owned the lease upon the West Half, and subsequently, the lease upon the East Half of the Northwest Quarter of Section 6, applied for an exception to the regular spacing pattern in the Glenburn Oil Field. According to Tenneco, there was no reasonable possibility of drilling a producing well upon the newly constituted spacing unit except in the location for which the exception permit was requested. The Industrial Commission denied the application. The District Court of Burleigh County affirmed the decision of the Industrial Commission.

Issue:

Should the oil company’s application for an exception to the regular spacing pattern in the Glenburn Oil Field be approved?

Answer:

No.

Conclusion:

The Supreme Court of North Dakota sustained the order of the Industrial Commission. According to the Court, an applicant for an exception to a spacing order upon the ground that such an exception was necessary to prevent confiscation has the burden of showing that he was entitled to the permit. The applicant must show that the well was necessary to protect his right to recover his fair share of the recoverable oil underlying his land. In the case at bar, the Industrial Commission found that the applicant had not sustained the burden of proof. The evidence in this case established that there were many areas upon the outer boundaries of the Glenburn Field where such a circumvention of the spacing program would be of advantage to the owners and lessees of such areas but also that it would be injurious to the correlative rights of the owners and lessees of adjacent producing acreage.

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