Trout v. Wyoming Oil and Gas Conservation Commission

Mitchell Energy Corporation (Mitchell) proposed unitizing several tracts of land for mineral-production purposes in order to improve the efficiency of the use of the formation underlying the lands. The working-interest owners on the various tracts discussed several allocation formulas to be employed once the tracts were unitized. The working-interest owners decided to take a vote on five of the proposed formulas. One of the formulas was proposed and favored by Kye Trout (plaintiff), a working-interest owner within the proposed unit. This formula was not popular among most of the other working-interest owners and was rejected. The working-interest owners approved one of the other allocation formulas, which received 82.39 percent of the vote. Mitchell filed the proposed unitization plan with Wyoming Oil and Gas Conservation Commission (Commission) (defendant), seeking the Commission’s approval. At the administrative hearing on Mitchell’s application, two engineers testified that the proposed allocation formula was fair and equitable. The Commission approved the proposed unitization plan, specifically finding that the allocation formula chosen by the working-interest owners “allocate[d] oil and gas in a just and equitable manner to each separately owned tract so far as can be practically determined.” The Commission’s order outlined the working-interest owners’ discussions and debates on the various proposed allocation formulas. The order specifically addressed Trout’s formula, finding that an overwhelming majority of the working-interest owners had disfavored and would not support his formula. Trout challenged the Commission’s order on the grounds that his correlative rights would not be protected under the approved allocation formula. The trial court certified Trout’s case to the state supreme court.