Brown v. Humble Oil & Refining Co.

• Decision Date: 12 June 1935
• Docket Number: No. 6729.,6729.
• Citation: 83 S.W.2d 935
• Parties: BROWN et al. v. HUMBLE OIL & REFINING CO.
• Court: Texas Supreme Court

83 S.W.2d 935

BROWN et al. v. HUMBLE OIL & REFINING CO.

No. 6729.

Supreme Court of Texas.

June 12, 1935.

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

Suit by the Humble Oil & Refining Company against C. H. Brown, the Railroad Commission, and others. Order refusing a temporary injunction against the individual defendants was reversed and rendered by the Court of Civil Appeals [68 S.W.(2d) 622], and C. H. Brown and others bring error.

Judgment of Court of Civil Appeals affirmed.

Hamilton & Hamilton, of Dallas, and James V. Allred, Atty. Gen., Maurice

Cheek, Asst. Atty. Gen., and J. W. Wheeler, all of Austin, for plaintiffs in error.

E. E. Townes, Rex G. Baker, and R. E. Seagler, all of Houston, and Ben H. Powell and J. A. Rauhut, both of Austin, for defendant in error.

Moody & Robertson, of Austin, as amicus curiæ.

Robert E. Hardwicke, of Fort Worth, amicus curiæ.

SHARP, Justice.

The Humble Oil & Refining Company filed this suit to set aside an order of the Railroad Commission granting a permit to Mrs. Gladys McCook, guardian of the estate of Dora May Johnson, a minor, to drill an oil well on 1½ acres of land owned by the minor in Gregg county, and against C. H. Brown, lessee thereof, and O. C. Fisher, his drilling contractor, to restrain them from drilling or producing oil therefrom; and to restrain the Railroad Commission from granting any further drilling permit thereon. The district court refused such relief, and the case was appealed to the Court of Civil Appeals at Austin, and the judgment of the trial court was reversed and the injunctive relief prayed for granted by a divided court. 68 S.W.(2d) 622, 623.

We quote from the opinion of the Court of Civil Appeals the following controlling facts:

"The Humble acquired a lease on a 47/48 interest in 102-acre tract out of the G. W. Hooper survey in Upshur and Gregg counties in 1931. Dora May Johnson owned the other 1/48 interest subject to the life estate of her mother. On October 20, 1932, by a partition decree of the district court of Gregg county, there was set aside to said minor a 3-acre tract, 130 varas square, adjoining the south line of said 102-acre tract, near its southeast corner. On December 17, 1932, Mrs. McCook, as guardian, with approval of the probate court, and pursuant to previously executed contract with her attorneys, conveyed to her attorneys, Hamilton & Hamilton, as compensation for their services, the minor's east half of said 3-acre tract. Hamilton & Hamilton in turn conveyed same on December 19, 1932, to C. H. Brown who contracted on December 22, 1932, with O. C. Fisher to drill a well thereon. This well, after protests, suit, and other proceedings not necessary to set forth here, has been drilled on said east 1½ acres. Thereafter, on April 10, 1933, Mrs. McCook, individually and as guardian, applied to the Railroad Commission for a permit to drill another well on the west 1½ acres of said 3-acre tract, which permit was granted on April 21, 1933, under an exception to rule 37 to protect vested rights. On April 28, 1933, Mrs. McCook, as guardian, under authorization of the probate court, leased said west 1½ acres to C. H. Brown, the same man to whom Hamilton & Hamilton had conveyed the east 1½ acres of said tract, who entered into a drilling contract with O. C. Fisher on May 4, 1933, to drill a well thereon. This suit was thereupon filed by the Humble which owned the lease on the lands to the west, north, and east of the 3-acre tract partitioned to Dora May Johnson."

The first question presented for decision, as was presented in the Court of Civil Appeals, is that the question involved here is moot. This contention is based upon an affidavit which shows that the well in question was completed and had been producing oil under such permit since June 28, 1933. The permit was granted on April 21, 1933, and a drilling contract was made on May 4, 1933, to drill the well. A suit was filed in the district court to set aside the permit on May 12, 1933, and, upon the execution of a bond, a temporary restraining order was entered on that date. This order was continued to May 31, 1933, and, upon a hearing thereof, the order was on June 1, 1933, dissolved. An appeal was taken to the Court of Civil Appeals, and on June 2, 1933, the appeal bond was filed. The Court of Civil Appeals correctly held that the case was not moot. This holding is sound, because the order of the Railroad Commission upon this question is subject to review by the courts. See articles 4662, 6453, 6049c, Vernon's Ann. Civ. St. Certainly under the state of this record the rights of the parties are not settled until the litigation has terminated. We overrule this contention.

The main question for decision here involves the construction of rule 37 of the Railroad Commission. This rule relates to the development and production of oil and gas. The discovery of oil and gas has brought for solution many complex problems. The Legislature has been frequently called upon to pass laws fixing the rights of all parties interested therein. In 1917 section 59(a), article 16, of the Constitution of Texas was adopted, and that provision requires the Legislature to pass all such laws as may be appropriate to "the conservation and development of all of the natural resources of this State." Oil and gas should be, and generally are, treated as being natural resources.

In 1899 the Legislature, clearly recognizing the public interest in oil and gas, enacted articles 6004-6007, Revised Civil Statutes 1925. These articles describe how a well shall be drilled and the precautions to be taken when drawing the casing from a well which had penetrated oil or gas bearing rocks, "in such manner as shall prevent the oil and gas from escaping therefrom." Articles 6008-6013, Vernon's Ann. Civ. St., now provide heavy penalties for failure to prevent the escape of oil and gas, and plainly recognize the rights of any citizen to take steps to compel the compliance with the law in order to restrain the waste of oil and gas.

The oil industry in this state has become stupendous. There are now many separate oil fields operated in this state, under varying conditions. Texas is now the leading state in the production of oil and in oil refineries. The handling of this giant industry and its complex problems calls for the services of trained and experienced persons. It is utterly impossible for the Legislature to meet the demands of every detail in the passage of laws relating to the production of oil and gas. The necessities of the situation require that this duty be placed upon some tribunal to carry out some just and reasonable public policy. This duty is placed on the Railroad Commission.

The basis for the power of the Railroad Commission to act is found in the Acts of the Legislature, title 102, art. 6004 et seq., Vernon's Ann. Civ. St. The Legislature has defined in plain and specific language the public policy of this state with respect to the conservation and waste of oil and gas. Article 6014, which was in force at the time the permit in this case was granted, in part reads:

"The production, storage or transportation of crude petroleum oil or of natural gas in such manner, in such amount, or under such conditions as to constitute waste is hereby declared to be unlawful and is prohibited. The term `waste' among other things shall specifically include:

"(a) The operation of any oil well or wells with an inefficient gas-oil ratio, and the Commission is hereby given authority to fix and determine by order such ratio.

"(b) The drowning with water of any stratum or part thereof capable of producing oil or gas, or both oil and gas, in paying quantities.

"(c) Underground waste or loss however caused and whether or not defined in other subdivisons hereof.

"(d) Permitting any natural gas well to burn wastefully.

"(e) The wasteful utilization of natural gas, provided, however, the utilization of gas, lawfully permitted to be produced from a well producing both oil and gas, for manufacturing gasoline shall not be construed to be wasteful, and provided further that the utilization of natural gas authorized by the Commission under the provisions of Section 2 of Acts of the Forty-Second Legislature, First Called Session, Chapter 26 (Art. 6008), shall not be construed as wasteful.

"(f) The creation of unnecessary fire hazards.

"(g) Physical waste or loss incident to, or resulting from, so drilling, equipping, locating, spacing or operating well or wells as to reduce or tend to reduce the total ultimate recovery of crude petroleum oil or natural gas from any pool.

"(h) Waste or loss incident to, or resulting from, the unnecessary, inefficient, excessive or improper use of the reservoir energy, including the gas energy or water drive, in any well or pool; however, it is not the intent of this Act to require repressuring of an oil pool or that the separately owned properties in any pool be unitized under one management, control or ownership.

"(i) Surface waste or surface loss, including unnecessary or excessive surface losses or destruction of crude petroleum oil or natural gas without beneficial use.

"(j) The escape into the open air, from a well producing both oil and gas, of natural gas in excess of the amount which is necessary in the efficient drilling or operation of the well.

"(k) The production of crude petroleum oil in excess of transportation or market facilities or reasonable market demand. The Commission is authorized to determine when such excess production exists or is imminent, and to ascertain the reasonable market demand.

"The Commission is expressly authorized to consider any or all of the above definitions in making rules, regulations or orders to prevent waste of oil or gas. (As amended Acts 1929, 41st Leg., p. 694, ch. 313; Acts 1931, 42nd Leg., 1st C. S., p. 46, ch. 26; Acts 1932, 42nd Leg., 4th C. S., p. 3, ch. 2, § 1.)"

The foregoing article was amended...