Railroad Commission v. Gulf Production Co., 8474.

• Decision Date: 09 March 1938
• Docket Number: No. 8474.,8474.
• Citation: 115 S.W.2d 505
• Parties: RAILROAD COMMISSION OF TEXAS et al. v. GULF PRODUCTION CO.
• Court: Texas Court of Appeals

115 S.W.2d 505

RAILROAD COMMISSION OF TEXAS et al. v. GULF PRODUCTION CO.

No. 8474.

Court of Civil Appeals of Texas. Austin.

March 9, 1938.

Rehearing Denied March 30, 1938.

Dissenting Opinion April 11, 1938.

Appeal from District Court, Travis County; C. A. Wheeler, Judge.

Suit by the Gulf Production Company against the Railroad Commission of Texas and others to set aside as invalid a permit to drill an additional oil well on an adjoining tract of land, to enjoin the drilling of or production from such well, and to require that the well be plugged. Judgment for plaintiff, and the defendants appeal.

Judgment affirmed in part and reversed in part.

William McCraw, Atty. Gen., and Harry S. Pollard, Asst. Atty. Gen., for appellant Railroad Commission of Texas.

Clyde H. Hall and Campbell & Leak, all of Longview, for appellant J. C. Tippett.

Joe S. Brown and R. F. Carter, both of Houston, and Stanley Hornsby, of Austin, for appellee.

BAUGH, Justice.

This is a rule 37 case. On May 17, 1935, the Railroad Commission granted to J. C. Tippett, lessee, a permit to drill a third well on a 4.77-acre tract of land in the East Texas oil field in Gregg county, as an exception to rule 37 to prevent confiscation. The Gulf Production Company, owner of a lease on adjacent lands to the south, sued to set aside the permit as invalid, to enjoin the drilling of or production from such well, and prayed that the court order the well plugged. Upon a trial to the court on the merits the relief prayed for was granted, from which judgment this appeal is prosecuted.

This is the second appeal in this case. The former appeal was from an order of the trial court dismissing the suit which we reversed upon a confession of error. See Tex.Civ.App., 84 S.W.2d 359. We think the case presents no new questions of law. The tract of land here involved, recovered by the state as vacant land, lease on which is held by Tippett, is 175 feet wide north and south, and 1,187.5 feet long east and west. At the time this permit was granted the leases surrounding this tract were owned and developed as follows: On the south the Gulf Production Company lease of 48.1 acres, drilled to a density of one well to each 6.8 acres; on the east Shell Production Company lease of 47.9 acres drilled to a density of one well to each 7.9 acres; on the north the Tidewater Oil Company lease of 35 acres, drilled to a density of one well to each 5.8 acres; on the north and west the Hensley-Tom and Sallie Bell lease of an estimated area of 7.8 acres, drilled to a density of one well to each 2.9 acres. The Tippett lease here involved with the two wells thereon, prior to the granting of this permit, was drilled to a density of one well to each 2.38 acres.

In this connection the trial court found, in response to appellee Tippett's request for findings of fact, as follows:

"That J. C. Tippett's wells Nos. 1 and 2 as located on his Acklin and Mary Nichols lease, had on said date, and now have, drainage advantage over the adjacent leases; that said two wells were and are permitted to produce a daily allowable of approximately 8.51 barrels of petroleum oil to each acre of leasehold estate; that Gulf Production Company's wells were and are permitted to produce a daily allowable of approximately 2.91 barrels for each acre of its leasehold estate; that the H. C. Hensley Tom Bell `B' lease next adjoining J. C. Tippett's lease on the North, was and is permitted to produce a daily allowable of approximately 7.7 barrels of petroleum oil and gas for each acre of leasehold estate, and that the Tidewater's Tom Bell lease next immediately North of the H. C. Hensley Tom Bell `B' lease and North of the said J. C. Tippett's lease, was and is permitted to produce approximately 3.42 barrels of petroleum oil for each acre of leasehold estate, thus affording the said J. C. Tippett a daily allowable of approximately four barrels per acre over and above the average barrels per acre allowable of said four leases; that if the J. C. Tippett well No. 3 here complained of shall be permitted to produce under the present allowable, production from the three wells on the J. C. Tippett lease will aggregate 12.7 barrels per acre of leasehold estate, or 8.2 barrels per acre per day in excess of the average daily allowable permitted said four leasehold estates.

"The third well here complained of was not necessary to prevent confiscation of J. C. Tippett's property nor to prevent waste, but, on the contrary, if permitted to produce petroleum oil and gas, it will tend to, and will, create or occasion waste of petroleum oil and gas."

Only two witnesses testified in the trial upon the issues here presented, R. D. Parker and J. S. Hudnall, both as expert petroleum engineers. Both testified that under the conditions on the surrounding leases at the time the permit was granted, a third well was not needed to prevent confiscation of Tippett's property. On the contrary, it was shown that his tract had a drainage advantage over surrounding leases without the additional well. It was not shown whether these witnesses testified in the hearing before the Railroad Commission or not. The only ground, therefore, on which it was attempted to sustain the permit was that it was necessary to prevent physical waste, which was not the ground recited in the order of the commission granting it. On that issue, Parker testified that it was not only not necessary to prevent waste, but that it would cause waste and drain oil from underneath appellee's lease. Hudnall testified that it was needed to prevent waste. This opinion, however, he admitted upon cross-examination, was predicated upon his disagreement with the wisdom and efficacy of the 660-330 feet spacing provisions of rule 37; and his belief that the more wells that are drilled on a given area, the greater will be the ultimate recovery of oil therefrom. That consequently, in order to prevent waste, the surrounding leases regardless of size should be drilled to a greater density than the spacing provisions of rule 37 permit.

The same character of testimony by the same witness was before us in Railroad Commission v. Marathon Oil Co., Tex.Civ. App., 89 S.W.2d 517, writ refused, wherein we held that it amounted to a collateral attack upon the validity of rule 37, and was entitled to no weight as a basis of support to an exception to the rule.

It is now settled that a lessee is entitled only to an equal opportunity with the lessees of adjacent lands to recover his fair share of the oil in place beneath his tract; and when he is enabled to do so, the requirements of the law and the commission's rule to protect him against confiscation have been met. Railroad Commission v. Marathon Oil Co., supra; Edgar v. Stanolind Oil & Gas Co., Tex.Civ.App., 90 S. W.2d 656, writ refused; Arkansas Fuel Oil Co. v. Reprimo Oil Co., Tex.Civ.App., 91 S.W.2d 381; Empire Gas & Fuel Co. v. Railroad Commission, Tex.Civ.App., 94 S. W.2d 1240, writ refused. The uncontroverted evidence in the instant case showed that at the time this permit was granted, Tippett had such opportunity without a third well on his tract.

The Railroad Commission also contends that appellee, Gulf Production Company, did not show itself to be "an interested person affected by" the permit here involved, within the meaning of the amended statute, article 6049c, section 8, Vernon's Ann.Civ.St., authorizing it to attack the permit. This contention is not sustained. Of the two wells on Tippett's tract, one was 50 feet and the other 87.5 feet from the line of the Gulf's lease. Whereas, of the two wells on the Gulf lease, south of these two wells, one was 183 feet and the other 141 feet from Tippett's line, thus giving Tippett a clear drainage advantage on that side of his tract. The third well granted thereon was located 87.5 feet from the Gulf's line, thus increasing the drainage from the Gulf lease. Manifestly, the Gulf was affected by such permit within the meaning of the statute. Empire Gas & Fuel Co. v. Railroad Commission, Tex.Civ.App., 94 S.W. 2d 1240, writ refused; Murphy v. Turman Oil Co., Tex.Civ.App., 97 S.W.2d 485, writ refused 300 U.S. 685, 57 S.Ct. 752, 81 L.Ed. 887.

Appellant Tippett in a separate brief filed herein also makes the contention that under article 4644, R.S., it was incumbent upon appellee to allege and prove, before injunctive relief would lie, that he was unable to respond in damages. This exact contention was overruled by us in Humble Oil & Refining Co. v. Railroad Comm., 85 S.W.2d 813, and in Edgar v. Stanolind Oil & Gas Co., Tex.Civ.App., 90 S.W.2d 656, writ refused, and need not be further discussed here.

The Railroad Commission also complains of that portion of the trial court's judgment ordering the well plugged, as an invasion of the administrative function of the Railroad Commission. While we have passed on this issue generally adversely to this contention, see Turnbow v. Barnsdall Oil Co., Tex.Civ.App., 99 S.W. 2d 1096, writ refused, we have concluded that under the facts and circumstances shown by the record, that this portion of the trial court's judgment should be set aside.

The permit here involved was granted on May 17, 1935. This case was tried in November, 1935. The evidence discloses that conditions in this area had substantially changed between the granting of the permit and the time of the trial. Many of the facts as to density of drilling in this particular area urged by appellants as supporting the permit arose after the granting of the permit and before the trial. That is, additional wells were drilled or permits for same granted in the vicinity of Tippett's tract of land after the permit here involved was granted. It is now settled, however, in testing the validity of such a permit, on an appeal to the court, the court in doing so is confined to the conditions as they existed at the time the commission acted. Railroad Commission v. Magnolia Petroleum Co., Tex.Sup., 109 S.W.2d 967...