Gulf Land Co. v. Atlantic Refining Co.

• Decision Date: 26 July 1939
• Docket Number: No. 7521.,7521.
• Citation: 131 S.W.2d 73
• Parties: GULF LAND CO. et al. v. ATLANTIC REFINING CO. et al.
• Court: Texas Supreme Court

Page 73

131 S.W.2d 73

GULF LAND CO. et al. v. ATLANTIC REFINING CO. et al.

No. 7521.

Supreme Court of Texas.

July 26, 1939.

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

Suit by the Atlantic Refining Company and others against the Gulf Land Company and the Railroad Commission to set aside as invalid the Commission's permit to the Gulf Land Company to drill a second well on a 2.35-acre tract of land in the East Texas oil field. To review a judgment of the Court of Civil Appeals, 122 S.W.2d 197, partly reversing and rendering and partly reversing and remanding with instructions a judgment refusing to set aside the permit, the Atlantic Refining Company and others bring error.

Affirmed.

Gerald C. Mann, Atty. Gen., Wm. McCraw, Former Atty. Gen., and Chas. D. Rutta and Harry S. Pollard, Former Asst. Attys. Gen., for plaintiff in error Railroad Com. of Texas.

Henry H. Brooks, of Austin, for plaintiff in error Gulf Land Co.

Powell, Wirtz, Rauhut & Gideon, C. B. Jeffrey, Black, Graves & Stayton, and C. B. Ellard, all of Dallas, for defendants in error.

J. W. Wheeler, of Austin, amicus curiae.

CRITZ, Justice.

This is a Rule 37 case. When oil was discovered in East Texas on or about October 12, 1930, one Willis Smith owned in such field 128 acres of land, all in one tract. On January 14, 1931, Willis Smith leased 39.98 acres of the above 128-acre tract to one Byrd, and through mesne assignments this 39.98-acre tract now belongs to Atlantic Refining Company.

On January 28, 1931, Willis Smith leased to Hudson et al. 43 acres of the above 128-acre tract. This 43-acre tract was later subdivided into smaller tracts. One of these subdivisions contains 6.88 acres. This 6.88-acre tract is involved in this suit. Another subdivision of the 43-acre tract contains 23 acres, and now belongs to Hawkeye Petroleum Corporation. We do not attempt to trace the title to the balance of the 128-acre tract, as to do so would serve no purpose here.

At the time the above 6.88-acre tract was segregated from the 43-acre tract, and at the time the 128-acre tract was subdivided, the spacing provisions of Oil and Gas Rule 37 was 150-300 feet. By this was meant that no well could be drilled at any point less than 150 feet from any property or division line, or at any point less than 300 feet from any other well, unless a special permit was secured. As we understand this record, at the time the 6.88-acre tract was segregated from the larger tract of which it was then a part, it, the 6.88-acre tract, was capable of being developed as a whole under Rule 37 as it then existed, without the necessity of granting an exception as provided for in such rule. At this point we pause to note that Rule 37 as it then existed provided for exceptions to its spacing provisions "in order to prevent waste or protect vested rights."

On February 25, 1932, the Railroad Commission amended the oil and gas rule as applicable to oil and gas wells in the East Texas field so that it read as follows: "Rule 1. (a) Rule 37, adopted November 26, 1919, is hereby amended in so far as it applies to the East Texas Field so as to hereafter read as follows: No well shall hereafter be drilled for oil or gas at any point less than Six Hundred and Sixty (660) feet from any drilling or completed well; and no well shall hereafter be drilled for oil or gas at any point less than Three Hundred and Thirty (330) feet from any property or division line; provided, however, the Commission, in order to prevent waste or to protect vested rights, will, after hearing, grant exceptions permitting drilling within a less or shorter distance than hereinabove prescribed, upon application duly filed fully stating the facts, notice of such application and hearing having been first given to all adjacent lessees affected thereby; provided, that if all adjacent lessees affected thereby waive in writing, notice of hearing on or objection to the granting of said application, the Commission may proceed to determine such application without hearing."

On May 29, 1934, oil and gas Rule 37 was again amended so that it now reads as follows:

"It is hereby ordered by the Railroad Commission of Texas that Rule No. 1 of Subdivision II. (Drilling) of Division 3, being special rules governing the East Texas field, is hereby amended so as hereafter to read as follows:

"Rule I. Spacing Rule. No well for oil or gas shall hereafter be drilled in said East Texas field nearer than 660 feet to any other completed or drilling well on the same or adjacent tract or farm; and no well shall be drilled in said field nearer than 330 feet to any property line, lease line, or subdivision line; provided that the Commission in order to prevent waste, or to prevent the confiscation of property will grant exceptions to permit drilling within shorter distances than above prescribed whenever the Commission shall determine that such exceptions are necessary either to prevent waste or to prevent the confiscation of property. When an exception to such rule is desired, application therefor shall be filed with the Commission fully stating the facts, which application shall be accompanied by a plat drawn to the scale of one inch equaling four hundred feet, accurately showing to scale the property on which permit is sought to drill a well under an exception to this rule, and accurately showing to scale all other completed, drilling and permitted wells on said property; and accurately showing to scale all adjacent surrounding properties and wells. Such application shall be verified by some person acquainted with the facts, stating all facts therein stated are within the knowledge of the affiant true, and that the accompanying plat is accurately drawn to scale and correctly reflects all pertinent and required data. Such exception shall be granted only after at least ten days' notice to all adjacent lessees affected thereby has been given and after public hearing at which all interested parties may appear and be heard, and after the Commission has determined that an exception to such rule is necessary either to prevent waste or to protect property belonging to applicant from confiscation. All pending applications shall be amended to conform to this rule before being acted upon.

"No well drilled in violation of this rule without special permit obtained in the manner prescribed in said rule, and no well drilled under such special permit which does not conform in all respects to the terms of such permit, shall be permitted to produce either oil or gas; and any such well so drilled in violation of said rule or in violation of a permit granted as a special exception to said rule shall be plugged.

"The order entered by this Commission on August 30, 1933, commonly designated as the direct and equidistant offset order is hereby rescinded, annulled and shall be of no further force and effect. All other rules, regulations and orders of this Commission which conflict with the terms and provisions of Rule No. 1 as hereby amended and promulgated are hereby declared to have no further application to wells in said East Texas field to the extent of such conflict.

"In the adoption and promulgation of this order it is here declared that the Commission intends to adopt each phrase, sentence, and paragraph separately and independently of each other such phrase, sentence and paragraph, and if any portion of this order or any portion of the rule hereby adopted shall be declared invalid, such declaration and such invalidity shall not affect any other portion."

On May 29, 1934, the day oil and gas Rule 37 was amended to read as just above set out, the Railroad Commission adopted another order which to our minds has the same force and effect as a rule. Such order reads as follows: "It is ordered by the Railroad Commission of Texas that in applying Rule 37 (Spacing Rule) of Statewide application and in applying every special rule with relation to spacing in every field in this State no subdivision of property made subsequent to the adoption of the original spacing rule will be considered in determining whether or not any property is being confiscated within the terms of such spacing rule, and no subdivision of property will be regarded in applying such spacing rule or in determining the matter of confiscation if such subdivision took place subsequent to the promulgation and adoption of the original spacing rule."

On August 30, 1933, the Railroad Commission entered the following order, which we think also has the effect of a general rule: "It is hereby ordered by the Railroad Commission of Texas that in all orders, judgments, and decrees written by the Railroad Commission of Texas, no motion for a new trial shall be filed or entertained unless it is filed within twenty (20) days after such order, judgment, or decree has been rendered and entered of record. It must be filed in writing and signed by the applicant or by his attorney, specifying the grounds on which it is founded. No ground not specified shall be considered by the Commission."

This suit involves the validity of an order of the Railroad Commission entered on July 29, 1936, granting Gulf Land Company a permit to drill a second well on a tract of 2.35 acres of land. The 2.35-acre tract was a part of the 6.88-acre tract above mentioned. The 6.88-acre tract is, roughly speaking, a triangular tract. At the time the permit here questioned was granted, the 6.88-acre tract had been subdivided into six smaller tracts, each owned by a separate owner. Each of these six smaller tracts had one producing well thereon. The subdivision of the 6.88-acre tract into six smaller tracts took place after it was segregated from the larger tract of which it was then a part. We presume that each of the wells in operation on each of the six smaller tracts at the time this permit was granted had been lawfully granted. We indulge this presumption...