Rowan & Nichols Oil Co. v. Railroad Commission, 624.
| Decision Date | 03 November 1939 |
| Docket Number | No. 624.,624. |
| Citation | 28 F. Supp. 131 |
| Parties | ROWAN & NICHOLS OIL CO. v. RAILROAD COMMISSION OF TEXAS et al. |
| Court | U.S. District Court — Western District of Texas |
Dan Moody, of Austin, Tex., and Tilley & Tocker, of Fort Worth, Tex., for complainant.
Gerald C. Mann, Atty. Gen. of Texas, James P. Hart and D. D. Mahon, Assts. Atty. Gen. of Texas, and Harry S. Pollard, of Austin, Tex., for respondents.
This case as originally filed was one for three judges. Complainant, however, abandoned its application for interlocutory relief and the case was, by the agreement of all parties, submitted to one judge for final determination on its merits.
Complainant sues for an injunction to restrain the enforcement by the Commission of the order of August 29, 1938, in so far as it affects the production of oil from its mineral lease in the East Texas field. By stipulation of the parties, it was agreed that it would be unnecessary to amend to cover the orders subsequently entered continuing the same plan of proration.
More than the jurisdictional amount is shown to be involved and the order and its method of enforcement and application are attacked as confiscatory. The jurisdiction of the court appears of record and is in no way challenged by any of the parties.
Article 6029 of the Revised Civil Statutes of Texas, Vernon's Ann.Civ.St.Tex. art. 6029, directs the Commission generally to make and enforce orders for the conservation of crude petroleum oil to prevent the waste thereof.
Article 6049c, Vernon's Ann.Civ.St. Tex., in so far as it is pertinent here, provides: "In the event any such rule, regulation or order which the Commission may adopt provides for the limitation or fixing of the production of crude petroleum oil, or of natural gas from wells producing gas only, in any pool or portion thereof, the Commission shall distribute, prorate, or otherwise apportion or allocate, the allowable production among the various producers on a reasonable basis."
The order of August 29, 1938, in so far as it applied to the East Texas field, after fixing a top allowable of not to exceed 450,000 barrels a day as desirable, proceeded as follows:
By subsequent orders, shutdowns for two days a week have been put in effect. Furthermore, the evidence shows without contradiction, and in fact the parties have stipulated, that the method of application and enforcement of this order by the Commission is very different from the actual wording of the order itself. According to the stipulation which the parties have filed in the case, the Commission's interpretation, application and enforcement of this order is substantially as follows: A top allowable for the days during which the wells were allowed to produce of 522,500 barrels was fixed. Each well in the field that could not produce as much as 20 barrels per day was allowed to make all it could produce. Where the figure of 2.32% of the hourly potential of any well amounted to less than 20 barrels a day, that figure was disregarded and the well was allowed to produce 20 barrels a day. Where the figure of 2.32% would amount to more than 20 barrels per day, the well was allowed to produce on that basis. This application of the order resulted in the following: Approximately 451 wells, not any one of which was capable of producing as much as 20 barrels per day, were allowed to produce daily a total of approximately 5,250 barrels. Approximately 19,032 wells whose individual hourly potential when multiplied by 2.32% amounted to less than 20 barrels, were each allowed to produce a full 20 barrels per day; or from all of such wells a total of approximately 380,640 barrels per day. These were wells whose hourly potential ranged anywhere from 1 barrel to 860 barrels per hour. Approximately 6,325 wells whose individual potential when multiplied by 2.32% amounted to more than 20 barrels were each allowed to produce daily that number of barrels which equaled the product of its hourly potential multiplied by 2.32%. The total daily production from these wells was approximately 136,610 barrels. These wells had an hourly potential ranging from 865 barrels per hour to about 1,100 barrels per hour. In practical operation, the daily allowable of no well was controlled by the factor 2.32% of its hourly potential unless such well had a potential of 865 barrels or more per hour.
It is manifest that the way in which the Commission interprets, applies and enforces this order is entirely different from the order. Accordingly, the question of the validity of the actual order itself is not controlling, for as said by the Supreme Court in Greene v. Louisville & Interurban R. R. Co., 244 U.S. 499, 507, 37 S.Ct. 673, 677, 61 L.Ed. 1280, Ann.Cas.1917E, 88: "A valid law may be wrongfully administered by officers of the state, and so as to make such administration an illegal burden and exaction upon the individual." See, also, Southern Realty Corporation v. McCallum, D. C., 1 F.Supp. 614, at page 619.
Therefore the matter to be considered here is not the validity of the order as written but as construed and enforced by the Commission.
Complainant, in its brief, makes it clear that it does not attempt to attack the validity of the conservation statutes; that it does not now directly attack the top allowable fixed for the field; and further that it does not attack the spacing rule, generally called Rule 37. The gravamen of its complaint lies in its assertion, forcibly presented, that the Commission does not allocate the allowed production among the various producers "on a reasonable basis". In other words, it says that granting the right of the State to conserve its natural resources, conceding for the present the validity of the Commission's order in fixing the top allowable of the field, the manner in which this allowable has been allocated to the various parties is discriminatory and constitutes a confiscation of complainant's property.
Respondents, on their part, set up generally the characteristics of the East Texas field, the necessity for regulation, proration and so forth. They then assert that owing to the number of wells in the field and the conditions there existing, the present order is practically the only one that can be feasibly worked out. Large amounts of evidence were introduced with regard to the East Texas field generally, covering its characteristics, formations, geology and production problems. Those are matters which have all been gone over and discussed in numerous other cases involving that field and it is not necessary to again set them out here. A brief statement of some of the pertinent facts developed upon the trial, coupled with the statements which have been heretofore made, will be sufficient to dispose of this case.
Complainant has a lease of something over twenty-four acres and on this lease it has five wells. All of the wells are producers and, according to the Commission's potentials, they are capable of producing in excess of 865 barrels per hour. Under the order as applied, these wells are allowed to produce a fraction over 22 barrels a day for five days a week. The field is approximately 40 miles long and has an average width of about 4 miles. There are about 26,000 oil wells in the field. Of these, all save approximately 25 are producers. There are some wells which are capable of producing only 6 or 7 barrels a day and some wells that will produce over 25,000 barrels a day. Between those figures there is a wide spread in potentials. Complainant's wells, according to the Commission's figures, will produce on open flow over 20,000 barrels a day. But the actual result of production on open flow, of course, is not known and any such production would in all probability immediately result in a lessening of potentials. However, the figures as computed indicate the relative capacity of the various wells, according to the Commission's notion. Complainant attacks the method of obtaining these potentials but it is unnecessary to pass on that matter to decide this case. It can and should be determined on broader issues. The wells are located upon tracts of various sizes. Constant exceptions to the spacing rules have resulted in great density in drilling. In many instances, there are wells on a fraction of an acre. In complainant's case, there is an average of 1 well to about 5 acres. The structure and formation of the field varies. Toward the West, water is encroaching. Toward the East, the producing sand pinches out. There is apparently a well defined drainage in an Easterly direction. Complainant's lease is conceded to be one of the most favorably situated in the field. It is on what is known as the "Fairway". It has one of the thickest of the producing sand formations. It is well located on the structure and is highly desirable from the standpoint of permeability and porosity. It has so far encountered no water trouble. Complainant can produce without difficulty the oil lying under its land with the 5 wells which it has at this time. It has from time to time complained to the Commission with regard to its allowable without result. On one occasion, conceiving that the present scheme constituted nothing more than a per well basis of allocation, it applied for permit to drill a large number of additional wells. This application was generally denied, but a permit was given for one additional well, which has not been drilled.
The allowance of 20 barrels per day to all...
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Railroad Commission of Texas v. Rowan Nichols Oil Co
...a decree from the District Court for the Western District of Texas enjoining the Commission from carrying its proration plan into effect. 28 F.Supp. 131. With modification not here relevant the Circuit Court of Appeals affirmed the decree. 107 F.2d 70. We brought the case here by certiorari......
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Railroad Commission of Texas v. Rowan Nichols Oil Co
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Railroad Commission of Texas v. Rowan & Nichols Oil Co.
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