Gilmore v. Oil and Gas Conservation Commission

The Wyoming Oil and Gas Conservation Commission (the commission) (defendant) considered a unitization plan for the Hartzog oil field, which was owned by 81 entities. The commission had a duty to investigate whether oil waste was occurring or imminent. Eventually, the reservoir pressure fell below the bubble point, so the potential for secondary recovery of oil was diminishing. A technical committee of well operators found that the reservoir’s original pressure of 5,000 pounds per square inch gauge (PSIG) had fallen below 1,500 PSIG, the bubble point. The committee recommended unitization of the oil field to prevent waste. Approximately four million barrels of oil would have been wasted by a two-year delay of unitization and recovery. After making a finding that waste was occurring, the commission ordered a stop to production until a unitization plan could be implemented. The 81 owners needed to vote on a formula for allocating oil production after unitization. They considered 71 formulae over the course of three years. After using a computer to arrive at a compromise formula, formula number 67, which had 11 parameters, received 75.89 percent approval. The commission reduced the required percentage for compulsory unitization from 80 percent to 75 percent as permitted by statute and approved the unitization plan based on formula 67. Gilmore (plaintiff) was allocated 1.2 percent of unitized production. Gilmore alleged that the unitization plan did not protect his correlative rights for two reasons. First, the formula was unfairly based on recent production, which disadvantaged Gilmore who had experienced recent downtime. Second, the United States 1880 Geological Survey, on which Gilmore’s lease was based, shorted Gilmore by about 33 acres. Gilmore brought suit in the district court. The district court affirmed the commission’s decision. Gilmore appealed to the Wyoming Supreme Court.