Hawkins v. Texas Co.

• Decision Date: 04 February 1948
• Docket Number: No. A-1390.,A-1390.
• Citation: 209 S.W.2d 338
• Parties: HAWKINS et al. v. TEXAS CO.
• Court: Texas Supreme Court

Page 338

209 S.W.2d 338

HAWKINS et al. v. TEXAS CO.

No. A-1390.

Supreme Court of Texas.

February 4, 1948.

Rehearing Denied March 31, 1948.

Error to Court of Civil Appeals of Third Supreme Judicial District.

Suit by the Texas Company against J. C. Hawkins and another to cancel a permit granted by the Railroad Commission to J. C. Hawkins to drill a tenth well on an oil lease. To review a judgment of the Court of Civil Appeals, 203 S.W.2d 1003, affirming a judgment of the district court for plaintiff, defendants bring error.

Judgments of the district court and of the Court of Civil Appeals affirmed.

Ben D. Clower, of Dallas, and Hart & Brown and James P. Hart, all of Austin, petitioner for Hawkins.

Price Daniel, Atty. Gen., and Elton M. Hyder, Jr., Asst. Atty. Gen., for petitioner Railroad Commission.

Fred T. Couper, Jr., of Houston, Black & Stayton, and John W. Stayton, all of Austin, and John C. Jackson, of Houston, for respondent.

SMEDLEY, Justice.

As an exception to Rule 37, and "to prevent physical waste," the Railroad Commission of Texas, with its chairman Colonel Thompson, voting "no," granted to petitioner, J. C. Hawkins, on December 23, 1940, a special permit to drill a tenth well on a 21.6 acre tract of land in the eastern part of the East Texas oil field. This suit to test the validity of the order was filed by respondent, The Texas Company, which is the owner of an oil and gas lease of a 30.54 acre tract of land, on which there are six producing oil wells, lying to the north of and immediately adjoining the 21.6 acre tract. The trial court's judgment cancelling the permit and enjoining the drilling of the well was affirmed by the Court of Civil Appeals. 203 S.W. 2d 1003. Two applications for writs of error, one by petitioner, J. C. Hawkins, the applicant for the permit, and the other by the Railroad Commission of Texas, were granted.

The correctness of the judgments of the district court and the Court of Civil Appeals is to be tested by the application of the "substantial evidence rule." Thomas v. Stanolind Oil & Gas Co., 145 Tex. 270, 198 S.W. 2d 420, 421; Trapp v. Shell Oil Company, 145 Tex. 323, 198 S.W.2d 424; Railroad Commission of Texas v. Mackhank Petroleum Co., 144 Tex. 393, 190 S.W.2d 802; Railroad Commission of Texas v. Shell Oil Company, 146 Tex. ___, 206 S.W.2d 235; Gulf Land Co. v. Atlantic Refining Co., 134 Tex. 59, 131 S.W.2d 73.

Notwithstanding the above cited decisions, the application for writ of error filed herein in behalf of the Commission suggests misunderstanding or uncertainty as to the meaning of the substantial evidence rule and as to the scope of judicial review in a suit to test the validity of an order of the Commission filed pursuant to Section 14 of Chapter 76, Acts Regular Session, 44th Legislature (Section 8, Article 6049c, Vernon's Annotated Civil Statutes). That application, quoting from the dissenting opinion in the Trapp case, above cited, states in substance that the rule should be and is that in the trial of a case like this, as soon as a single witness testifies to facts which would sustain the permit, it will become useless for the court to proceed further, for regardless of the evidence to the contrary, the court will be powerless to do otherwise than to sustain the permit. The substantial evidence rule does not mean that.

Repeatedly in the above cited decisions and in other decisions the court, in making a brief statement of the scope of judicial review of the facts in a suit filed under Section 8 of Article 6049c to test the validity of an order of the Railroad Commission, has said that the finding of the Commission will be sustained by the court if it is reasonably supported by substantial evidence, meaning evidence introduced in court. The word "reasonably" has been deliberately used in the statement and its use gives to the judicial review a broader scope than it would have if some substantial evidence were regarded sufficient of itself to sustain the Commission's order. It is for the court to determine as a matter of law the reasonableness of the support afforded by substantial evidence. Thomas v. Stanolind Oil & Gas Co., 145 Tex. 270, 273, 198 S.W. 2d 420; Trapp v. Shell Oil Company, Inc., 145 Tex. 323, 350, 198 S.W.2d 424.

In making its decision of this question the court examines and takes into consideration all of the evidence, the entire record. Trapp v. Shell Oil Co., 145 Tex. 323, 341, 349, 198 S.W.2d 424. It does not look merely to the evidence offered by one of the parties, or to the testimony of one or two witnesses, and sustain the Commission's order if that evidence or testimony can be regarded as substantially supporting the order. In that procedure there would be no real review of the factual basis for the Commission's order, and no trial in court. It clearly appears from the language of Section 8 of Article 6049c that there must be a trial in court of the suit brought to test the validity of the Commission's order. This, according to the decisions above cited, does not mean a trial as of the ordinary civil suit in which the court makes its own findings based upon a preponderance of the evidence before it. Nevertheless, it means that there shall be a trial and in that trial, in so far as the facts are concerned, the court determines from all of the evidence before it, the entire record, whether the Commission's action is or is not reasonably supported by substantial evidence. The foregoing is a reiteration of the explanation of the substantial evidence rule made in Railroad Commission v. Shell Oil Co., the Trem Carr case, 139 Tex. 66, 161 S.W.2d 1022, which was quoted with approval in the Trapp case above cited, and part of which is as follows:

"This does not mean that a mere scintilla of evidence will suffice, nor does it mean that the court is bound to select the testimony on one side, with absolute blindness to that introduced by the other. After all, the court is to render justice in the case. The record is to be considered as a whole, and it is for the court to determine what constitutes substantial evidence. The court is not to substitute its discretion for that committed to the agency by the Legislature, but is to sustain the agency if it is reasonably supported by substantial evidence before the court." 139 Tex. 66, 79, 161 S.W. 2d 1022, 1029.

The facts in this case are undisputed, except that there is some difference in the opinions expressed by the two petroleum engineers who testified, one for petitioners and the other for respondent. The 21.6 acre Hawkins tract is situated in the extreme east part of the East Texas oil field and in the south one-third of the field. When the application for the permit to drill the well was filed and granted there were nine producing oil wells on the tract. In the general area of the tract all of the oil wells were pumping wells, none flowing. There were a number of submarginal wells, that is, wells that will not make twenty barrels of oil daily, and a number of plugged and abandoned wells to the east, northeast and southeast of the Hawkins tract, the better wells being to the south, west and north.

The Hawkins tract, with its nine wells, has been drilled to a density of 2.4 acres per well. If a tenth well should be drilled, the density would be reduced to 2.16 acres per well. The well density of the rectangular area eight times the size of the Hawkins tract, excluding the portion that is not productive, is 2.81 acres per well, and the density of the eight times circular area, excluding the nonproductive part, is 3.29 acres per well. Respondent, The Texas Company, has six wells on its thirty acre tract immediately north of the Hawkins tract, giving it a density of five acres per well. The average density of the East Texas oil field is a well to a little over five acres. These calculations are based upon conditions existing in 1940, when the application for the permit was heard by the Commission. Rule 37, as amended July 24, 1939, and applicable to the East Texas oil field in December, 1940, provides that no well shall be drilled in the field nearer than 660 feet to any other well, and that no well shall be drilled nearer than 330 feet to any property or lease line, a spacing of one well to ten acres, but it permits the Commission to grant exceptions and permit drilling within shorter distances whenever the Commission shall determine that such exceptions are necessary either to prevent waste or to prevent the confiscation of property.

The East Texas oil field is a Woodbine reservoir of great size. It consists of a relatively porous sand connected throughout the length of the field through which the oil drains freely, the movement of the oil being from west to east and the pressure being maintained by a water drive. In 1940 there were about 25,000 producing oil wells in the East Texas field, of which 16,000 were flowing wells and 9,000 were pumping wells. About 4,000 of the pumping wells were on the west side of the field, being pumping rather than flowing wells because of water conditions. The other 5,000 pumping wells were in the east part of the field and they had to be pumped because in that part of the field the sand was thinner and somewhat tighter and the pressure lower than in the other part of the field. The Hawkins tract is situated in that area of the field where the wells were and are pumping wells. All of the wells in the general area of the Hawkins tract, including the eight times area, were pumping wells. The area in which the wells were pumped comprised in 1940 about 25,000 acres of the East Texas field, there being then about 125,000 producing acres in the entire field. Farther east as the sand becomes thinner and tighter and the pressure lower, the end of the producing field is reached.

The petroleum engineer Battle, who was called as a witness by respondent, testified that the amount of the recoverable oil beneath the Hawkins tract originally was...