Byrd v. Shell Oil Co., 11392.

• Decision Date: 16 February 1944
• Docket Number: No. 11392.,11392.
• Citation: 178 S.W.2d 573
• Parties: BYRD et al. v. SHELL OIL CO., Inc.
• Court: Texas Court of Appeals

Page 573

178 S.W.2d 573

BYRD et al. v.SHELL OIL CO., Inc.

No. 11392.

Court of Civil Appeals of Texas. San Antonio.

February 16, 1944.

Rehearing Denied March 16, 1944.

Appeal from District Court, 126th District, Travis County; Roy C. Archer, Judge.

Suit by the Shell Oil Company, Incorporated, against D. H. Byrd and others to test validity of a permit to drill an oil well under an exception provided for in Oil Well Spacing Rule 37.From a judgment canceling the permit, the defendants appeal.

Affirmed.

Gerald C. Mann, of Dallas, E. R. Simmons, of Austin, and Neal Neece, of Dallas, for appellants.

R. H. Whilden, of Houston, Dan Moody and J. B. Robertson, both of Austin, for appellee.

MURRAY, Justice.

This is a Rule 37 case.D. H. Byrd applied to the Railroad Commission of Texas for and was granted a permit to drill a sixth well upon a 9.71-acre tract in the East Texas Oil Field, under the exception provided for in Rule 37, on the allegation that same was necessary to prevent confiscation of property and physical waste.Byrd in fact applied for a permit to drill a third well on a five-acre tract, but as such tract was a voluntary subdivision of the 9.71-acre tract such application must be regarded as an application to drill a sixth well upon the 9.71 acre tract.The Shell Oil Company, Incorporated, filed suit in the District Court of Travis County to test the validity of the permit, as provided for in Article 6049c, § 8, Vernon's Ann.Civ.Stats.The trial court cancelled the permit and Byrd and the Railroad Commission have appealed.

It is conceded that the 9.71-acre tract has an advantage over the eight times area surrounding it, as to number of wells, of almost two to one, and that the underground conditions, that is, sand thickness, porosity, permeability, potentials, etc., were substantially uniform.Therefore, there can be no question as to waste.In fact, appellants only attempt to uphold the action of the Commission in granting the permit upon the ground of confiscation of property.

Appellant Byrd's exact contention is that to the east of his tract is the townsite of Kilgore and this townsite is very densely drilled to the extent, in some instances, of twenty-seven wells per acre, which has produced a low pressure area, causing the water drive from west to east to increase and that the wells on his tract will be drowned out before they will have produced a quantity of oil equal to the amount which originally underlay his tract.The Kilgore townsite is about three-fourths of a mile from the Byrd tract.It is further shown that this condition is true of the entire segment of the field which lies between Kilgore and the west edge of the field.

We are of the opinion that the Commission improperly granted this permit to Byrd.If Byrd drills this sixth well on the 9.71-acre tract, then he would clearly be draining oil from his neighbors, who would also be entitled to permits to drill additional wells to prevent drainage from their lands.This process presumably would be kept up until the entire segment from Kilgore to the western edge of the field was drilled to the same density as the townsite.Such a program would be a very wasteful and unscientific method of developing this entire segment of the East Texas Oil Field and, as shown by the evidence, would ultimately result in the 9.71-acre tract producing less oil than it will produce under conditions as they now exist.

We feel that what was said in Railroad Commission v. Shell Oil Co. (Trem Carr), 139 Tex. 66, 161 S.W.2d 1022, 1026, settles this case.We quote:

"* * * In order to be valid a discrimination between persons must have a reasonable basis in fact.There must be some factual basis for classifying some applicants as subject to the general spacing provisions of the rule and other applicants as within the exception.This reasonable basis can only be a showing of unusual conditions peculiar to the area where the well is sought to be drilled—not testimony that would be equally applicable to any other part of the field.Therefore, in order to sustain the validity of the rule we must give it the construction that the exception is to be granted only upon a showing of unusual conditions."

It is true that the Trem Carr case is a waste case and this a confiscation case, but we can see no reason why the above rule would apply in the one and not in the other.

This case was originally appealed to the Austin Court of Civil Appeals, but when the members of that Court disagreed as to the proper disposition of the casethe Supreme Court transferred it here.We have before us a tentative opinion written by Justice Blair of that Court, holding that the permit was properly granted by the Commission, and another tentative opinion, by Chief Justice McClendon of that Court, holding that the permit was improperly granted.Both of these opinions are full and exhaustive and contain an excellent discussion of the law from their respective viewpoints.After much consideration, we are inclined to agree with the views of Chief Justice McClendon, which we set out below, as follows, to-wit:

The question may be stated as follows: When there is no excess or non-compensated net drainage from a tract to adjacent tracts, may the Commission properly grant a permit to drill an additional well on such tract as an exception to Rule 37 to prevent confiscation, in order to enable the tract to recover oil of which it has been and is being deprived by reason of a situation (here intensive drilling in a townsite to the east) which affects alike the tract in question, the eight times area, and a large segment of the oil field?The facts are without material dispute.Under the holding in the Trem Carr case the permit could not be supported if it were granted to prevent waste.In this particular regard there is no distinction in principle between waste prevention and confiscation prevention.The basis of this holding of the Trem Carr case(which accorded with prior decisions) is that it is essential to the validity of the rule, and a contrary holding would destroy the rule.The opinion, on this point, reads:

"If * * * an exception to prevent waste may be granted on the basis of testimony that is equally applicable to any other field or part of a field subject to the rule— as in the case where the `more wells, more oil' theory is relied upon—then there is actually no basis in fact for a distinction between cases subject to the general provisions of the rule and cases within the exceptions therein, and the Commission has no real guide or standard at all."

This holding has been followed in every subsequent case in which it has been involved, and has been applied not only to those cases in which the situation professedly sought to be remedied existed throughout the entire field (more wells, more oil theory), but to those in which such situations affected only a part of the field, sometimes only the eight times area, but was not limited to the tract in issue.In the following cases writs of error were refused: Letwin v. Gulf Oil Corp., Tex.Civ.App., 164 S.W.2d 234, 236, where "the underground conditions surrounding this well and the area eight times the size of the tract involved were similar";Railroad Comm. v. Shell, Tex.Civ.App., 164 S.W.2d 773;Railroad Comm. v. Shell, Tex.Civ.App., 165 S.W.2d 502, where the same conditions prevailed in the eight times area;Trapp v. Atlantic RefiningCo., Tex.Civ.App., 169 S. W.2d 797, and the companion case in 170 S.W.2d 506.In the following cases writs were refused for want of merit: Humble Oil & Refining Co. v. Flanagan, Tex.Civ. App., 165 S.W.2d 508;Marine Production Co. v. Shell Oil Co., Tex.Civ.App., 165 S.W. 2d 934, where the same condition existed throughout the particular area of the field;Railroad Comm. v. Magnolia Petroleum Co., Tex.Civ.App., 169 S.W.2d 794, where same conditions existed in the eight times and adjacent area;Holcomb v. Atlantic Refining Co., Tex.Civ.App., 172 S.W.2d 523, where there was no net drainage to support confiscation and no unusual conditions to support waste;Potter v. Humble Oil & Refining Co., Tex.Civ.App., 173 S.W.2d 309, where there was no net drainage and same conditions existed in eight times area, citing numerous cases on this point.It is thus apparent...