FC Henderson, Inc. v. Railroad Commission of Texas
| Decision Date | 10 February 1932 |
| Docket Number | No. 403.,403. |
| Parties | F. C. HENDERSON, INC., v. RAILROAD COMMISSION OF TEXAS et al. |
| Court | U.S. District Court — Western District of Texas |
Dorenfield, Foster & Fullingim, of Amarillo, Tex., for plaintiff.
James V. Allred, Atty. Gen., and Fred Upchurch and Maurice Cheek, Asst. Attys. Gen., for the Commission.
Before HUTCHESON, Circuit Judge, and GRUBB and WEST, District Judges.
This is a suit brought by the plaintiff, a corporation of the state of Delaware, for a temporary injunction pending final hearing, and upon final hearing for a permanent injunction, against the members of the Railroad Commission and the Attorney General of Texas, from harassing, annoying, or preventing plaintiff from operating its natural gasoline plant, and from prosecuting any suit for injunction or for penalties against plaintiff and the persons from whom it has purchased gas. The prayer for temporary injunction having been pressed, a statutory court was organized, and the matter came on for hearing before the Court on both the temporary and final injunction.
The statutes whose validity is attacked, and whose enforcement is sought to be enjoined, are articles 6008 and 6014 of the Revised Civil Statutes of Texas of 1925, as amended by the Forty-Second Legislature at its First Called Session in 1931, c. 26 (Vernon's Ann. Civ. St. arts. 6008, 6014). These statutes purport to deal with and prevent the dissipation of the state's natural resources of oil and gas; they generally denounce waste and specifically prohibit the wasteful utilization of natural gas and its escape into the air. These statutes were enacted in pursuance of a policy entered upon by the state of Texas many years ago to conserve from waste its vast deposits of oil and gas. They, with other enactments, make out the general outline of the legislative plan, the administration and application of which is confided to the Railroad Commission of Texas under appropriate laws. In MacMillan v. Railroad Com. of Texas (D. C.) 51 F.(2d) 400, in which the orders of the commission were declared invalid because in violation of the statutes, this court had occasion to examine this statutory plan, its general validity, and the place of the commission in its carrying out. We there affirmed the general power of the state to conserve its natural resources, including oil and gas, and to confide to the commission the administration of those laws.
What is in question here is not the orders of the commission, but the statutes themselves, for here the commission is undertaking, through the Attorney General, to enforce the statutes by appropriate court action, which, as to this petitioner, has taken the form of a cross action filed in this suit, with a prayer for injunction against petitioner's waste of gas. The question for our decision is whether the plaintiff is right in its contention that the statutes bear so hardly and unjustly upon it as to deny it due process, or whether defendants, become cross-plaintiffs, are right that the statutes assailed by plaintiff are valid conservation measures, the violation of which cross-plaintiffs are entitled to have enjoined. The facts of the case are stipulated; they are without dispute. From them it appears that plaintiff, more than two years ago, constructed at a cost of several hundred thousand dollars a modern gas extracting plant, and has been operating it continuously since in a competent and effective manner. That its supply of gas is obtained from owners and operators of wells under contracts substantially alike in terms. These contracts obligate plaintiff to buy certain quantities of gas at a price fixed on the basis of its gasoline content, to extract that content and to turn back to each seller sufficient residue gas to operate its properties. They further provide that if plaintiff should sell the residue gas it will divide the proceeds with its vendor.
These contracts contemplate that if the gas is not sold it will be released and discharged into the air, the proof being that there is no way to use the gas in the extraction plant and that unless it may be used for some other purpose the necessary result of the operation of the plant is to blow it into the air. None of the residue gas has, during the more than two years operation, been sold. It has to the extent of 46,000,000,000 cubic feet been blown away into the air. Before being blown into the air and wasted, each 1,000 cubic feet of gas yields .34 of a gallon of gasoline, with the result that one twenty-fourth of its heat units are conserved, twenty-three twenty-fourths wasted. It was stipulated that "the residue gas can be utilized for light, fuel or power for domestic, industrial or manufacturing purposes in its condition as produced at the wells or after the gasoline content has been extracted." It was further stipulated that "95% of the gas produced in Texas contains an extractable quantity of gasoline, and there is a market in the State for some residue gas, no market at this time existing however, for the residue gas from plaintiff's plant because of conditions in the territory, unless the Common Purchaser Act of the First Called Session of the Forty first Legislature can be made effective." There was some testimony that at one time the wells produced a small amount of oil, but tests made the week before the trial showed no oil produced from any of them. That operated in accordance with the standard method of production as fixed by the Commission's orders that they should not run on open flow but on 50 per cent. capacity, they would produce no oil. We conclude, then, that to all intents and purposes the wells in question are gas wells, and not oil wells; are wells producing natural gas only.
The statutes complained against as construed and sought to be enforced by the defendants prohibit the use of gas as plaintiff uses it. Article 6008 provides that: "Any party or person * * * in possession of any well producing natural gas only, in order to prevent said gas from wasting by escape, shall, within ten (10) days after encountering such gas, confine said gas in said well until said gas shall be utilized for light or fuel; provided, however, the Commission may permit the use of such gas for the purpose of being introduced into an oil or gas bearing stratum in order to maintain or increase the rock pressure, or otherwise increase the ultimate recovery of oil or gas from such stratum and for any other purpose which, under circumstances surrounding each particular case, might be found by the Commission, after hearing, to be practical and conducive to the public welfare." Article 6014, after providing "Neither natural gas nor crude petroleum shall be produced, transported, stored, or used in such manner or under such conditions as to constitute waste," declares:
Plaintiff denounces these statutes and the actions of the commission in undertaking to prevent the taking of the gas from the wells from which plaintiff receives its supply for such wasteful uses as plaintiff engages in, as depriving it of its property without due process in that, though it is not an owner or operator of a well, it has contracted with such operators and that should the commission under color of the statutes in question prevent its contractors from delivering its supply its plant would be ruined and its property taken. That, in short, though the pressure of the statute is not directly applied to it, but only indirectly through pressure upon persons having contractual relations with it, such pressure is as effective to deprive it of its property, and as clearly within constitutional prohibitions as though it were directly applied. Truax v. Raich, 239 U. S. 33, 36 S. Ct. 7, 60 L. Ed. 131, L. R. A. 1916D, 545, Ann. Cas. 1917B, 283. It attacks article 6008 as invalid (1) because it undertakes to confine plaintiff's gas in the ground and prevent its using it except for light and fuel, in the face of the fact that there is no present market for gas for such purposes, and (2) because the statute is invalid as containing a delegation to the Commission of power to suspend the law.
As to the prohibition in article 6014 invoked by defendants against it, it contends that the statute is invalid, as it deprives the owner of property having no characteristics which subject it to...
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Henderson v. Terrell
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