Arkansas Fuel Oil Co. v. Reprimo Oil Co.

• Decision Date: 27 January 1936
• Docket Number: No. 4536.,4536.
• Citation: 91 S.W.2d 381
• Parties: ARKANSAS FUEL OIL CO. et al. v. REPRIMO OIL CO.
• Court: Texas Court of Appeals

91 S.W.2d 381

ARKANSAS FUEL OIL CO. et al. v. REPRIMO OIL CO.

No. 4536.

Court of Civil Appeals of Texas. Amarillo.

January 27, 1936.

Rehearing Denied February 24, 1936.

Appeal from District Court, Travis County; J. D. Moore, Judge.

Suit by the Reprimo Oil Company to enjoin the Railroad Commission from enforcing an order denying plaintiff a permit to drill a well as an exception to the spacing rule, wherein the Arkansas Fuel Oil Company and another intervened. From a judgment granting an injunction, interveners and the Railroad Commission appeal.

Reversed and rendered.

Beeman Strong and A. D. Moore, both of Beaumont, and Carl McLynn, of Austin, for appellant Yount-Lee Oil Co.

Phillips, Trammell, Chizum, Estes & Edwards and Clayton L. Orn, all of Fort Worth, for appellant Arkansas Fuel Oil Co.

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

Pollard & Lawrence, of Tyler, for appellee.

MARTIN, Justice.

In this case appellee, Reprimo Oil Company obtained in the trial court injunctive relief against the Railroad Commission of Texas, its members, and two interveners.

The essential facts are:

In 1931 intervener Yount-Lee Oil Company acquired an oil and gas lease on the west 20 acres of an 84-acre tract of land in Gregg county. The title and interest of said intervener to the north 5 acres of said 20-acre tract subsequently passed to appellee. This is the tract in controversy. It was in the form of a rectangle, 578 feet east-west, 381 feet north-south. Intervener Yount-Lee Oil Company owned an oil and gas lease on the land immediately south and west of it, and intervener Arkansas Fuel Oil Company on that immediately north of it. The McMillan Petroleum Company owned the oil and gas lease on a long narrow strip of ten acres of land, the north portion of which lay adjacent to the said 5-acre tract. Prior to October, 1934, appellee had and still has a producing oil well located in the approximate center of its 5-acre tract. Immediately east thereof was a producing well on the McMillan tract, distant 150 feet east of the common boundary between the two tracts. Claiming the presence of "waste" and that its property was being confiscated by drainage into the McMillan well, appellee applied to the Railroad Commission of Texas for a permit to drill a second well as an offset to the McMillan, distant 300 feet immediately west of same and 150 feet west of its east boundary line. This being in violation of the spacing rule for wells in East Texas (1 to 10 acres) as contained in rule 37 of the Railroad Commission, appellee sought to bring itself within the exception to same, which exception allows more than the above to prevent waste or confiscation. Its application, after a hearing, was denied. It filed suit for relief, the nature of which sufficiently appears from the following paragraph of the trial court's judgment: "That said denial was under the facts in evidence arbitrary, unjust, unreasonable and discriminatory as to said plaintiff, and that said order of the Railroad Commission of Texas denying such application for a permit should be in all things set aside, and that said defendants Railroad Commission of Texas and the members thereof, said interveners, their agents, representatives, employees and all other persons should be permanently enjoined from in any wise interfering with the location, drilling and maintenance of said oil and/or gas well upon said property as sought by plaintiff in said application and be permanently enjoined from in any wise interfering with the production, saving and marketing of oil and/or gas therefrom, and from in any wise instituting or prosecuting any suit or action for the collection of any penalties or for contempt and criminal proceedings against the plaintiff."

We do not turn aside to discuss or detail the many contentions found in the briefs on file. Some of these will be indicated by the nature of the general discussion which follows.

In our opinion, the appellee failed to discharge the burden of proof which the law places upon it to establish the invalidity of the commission's order of refusal to grant a drilling permit.

That the Texas statute intended to preserve its natural resources of gas and oil and to protect these from "waste" is valid and constitutional, is no longer to be doubted. Champlin Refining Co. v. Corporation Commission, 286 U.S. 210, 52 S. Ct. 559, 76 L.Ed. 1062, 86 A.L.R. 403; State v. Jarmon (Tex.Civ.App.) 25 S.W.(2d) 936 (writ ref.); Danciger Oil & Refining Co. v. Railroad Commission (Tex.Civ. App.) 49 S.W.(2d) 837.

The validity of article 6014, and amendments thereto (Vernon's Ann.Civ.St. art. 6014), and the promulgation of rule 37 and others of like kind by the Railroad Commission in aid of such statute and to make effective its purpose, rest upon the right of sovereignty under its police power to protect and to preserve natural resources in the interest of the general public.

"All property is held subject to the valid exercise of the police power; nor are regulations unconstitutional merely because they operate as a restraint upon private rights of person or property or will result in loss to individuals. The infliction of such loss is not a deprivation of property without due process of law; the exertion of the police power upon subjects lying within its scope, in a proper and lawful manner, is due process of law. * * *

"The police power of a state embraces regulations designed to promote * * * the general prosperity, as well as regulations designed to promote the public health, the public morals, or the public safety. Lake Shore & Mich. South Ry. Co. v. Ohio, 173 U.S. 285, 292, 19 S.Ct. 465, 43 L.Ed. 702, 704; Gilman v. Philadelphia, 3 Wall. 713, 729, 18 L.Ed. 96, 100; Pound v. Turck, 95 U.S. 459, 464, 24 L.Ed. 525, 527; Hannibal & St. J. Railroad Co. v. Husen, 95 U.S. [465] 470, 24 L.Ed. 527, 529." Lombardo v. City of Dallas, 124 Tex. 1, 73 S.W.(2d) 475, pages 478, 479.

Ownership prior to the passage of an ordinance under the police power of sovereignty does not create a vested right in property free from such police regulations. McEachern v. Town of Highland Park, 124 Tex. 36, 73 S.W.(2d) 487.

This sufficiently disposes of appellee's contention that it had a vested right to drill a well offsetting one on an adjacent tract at equidistant points from the common boundary line, this because such right was recognized by the Railroad Commission at the time of its acquisition of the 5-acre tract in controversy. There are, of course, limitations upon the above rule, not necessary to here set out, because in our opinion they are not presented by this record.

This entire case can be disposed of by answering two questions, viz.:

(1) Was appellee's property being confiscated or threatened with confiscation or appropriation by another or others, as a result of its inability to drill the well in question under the rules of...