Helton v. Railroad Com'n of Texas

• Decision Date: 05 June 2003
• Docket Number: No. 01-01-01007-CV.,01-01-01007-CV.
• Citation: 126 S.W.3d 111
• Parties: Arch W. HELTON and Helton Properties, Inc., Appellants, v. RAILROAD COMMISSION OF TEXAS and Tri-Union Development Corporation, Appellees.
• Court: Texas Court of Appeals

126 S.W.3d 111

Arch W. HELTON and Helton Properties, Inc., Appellants, v. RAILROAD COMMISSION OF TEXAS and Tri-Union Development Corporation, Appellees.

No. 01-01-01007-CV.

Court of Appeals of Texas, Houston (1st Dist.).

June 5, 2003.

Rehearing Overruled July 25, 2003.

Rex H. White, Austin, for Appellant.

Joe Foy, Jr., Assistant Attorney General, Glenn Johnson, Brenda L. Clayton, Kelly, Hart and Hallman, Austin, for Appellee.

Glenn Johnson, Brenda L. Clayton, Kelly, Hart and Hallman, Austin, for Intervenor.

Panel consists of Justices HEDGES, JENNINGS, and ALCALA.

OPINION

ELSA ALCALA, Justice.

Appellants, Arch W. Helton and Helton Properties, Inc. (Helton) challenge the trial court's judgment, entered in a suit for judicial review of a final order issued by appellee, the Railroad Commission of Texas (the commission). The trial court's judgment affirmed the commission's interpretation of an earlier order the commission issued under the authority of the Mineral Interest Pooling Act (MIPA). See Tex. Nat. Res.Code Ann. §§ 102.001-.112 (Vernon 2001).¹ Helton brings three issues in which he contends that the commission (1) unlawfully ruled that the MIPA forced-pool unit created by the commission in 1980 for the Alvin North (8550) Field "remains in effect and is not dissolved," (2) abrogated its statutory duty to reclassify the unit, and (3) entered an arbitrary order that detrimentally affects only Helton's rights. We conclude, however, that challenges raised by the commission and appellee, Tri-Union Development Corporation (Tri-Union), concerning Helton's right to relief in the trial court, are dispositive of the appeal. We affirm the trial court's judgment based on those challenges.

Undisputed Facts and Procedural History

The Alvin North (8550) Field was discovered in 1976. Permanent field rules formulated by the commission in 1979 specified gas proration units for this field, with the reservoir being classified as gas-producing. Owners of working interests within the field had already voluntarily pooled their interests before 1980, when the commission authorized a forced MIPA pool for all mineral interests in the 244-acre Alvin North (8550) field reservoir. The commission issued its 1980 forced pooling order on the application of J. Wylie Harris, who owned both a working interest and royalty interests within the field. From before 1980 through 1985, Buttes Resource Company (Buttes) operated the pooled unit and produced gas from the drillsite known as the Buttes Resources Reese Gas Unit No. 1-L well. The Buttes unit was replaced in 1985 and recompleted at the E.J. Force Well No. 1 in the Alvin North (8550) field. The E.J. Force Well No. 1 is the only well in the field and has been the MIPA gas-unit drillsite since 1985. Tri-Union currently operates the unit. Helton's property consists of two non-drillsite tracts adjacent to the drillsite, and Helton also owns a mineral interest in one of the tracts that formed the pooled unit.

The unit produced hydrocarbons without interruption through the present, but currently produces more oil than gas. Until late 1987, gas was produced at a gas-to-oil ratio of about 70,000 cubic feet per barrel of liquid, but production is now less than 10,000 cubic feet of gas per barrel of liquid. The liquid produced is crude oil, not condensate. Although "thought to be" a gas-producing well in 1980, the parties agree that from a production standpoint, the unit is now more properly classified as an oil well.

In 1987, Helton applied to the commission to reclassify the E.J. Force Well No. 1 as an oil well, rather than a gas well, based on the well's gas-to-oil production ratio. While Buttes was still the operator of the field, the commission twice granted a request by Buttes that the unit remain classified as a gas well. In 1999, the commission approved reclassification of the unit as an oil well.

In late 1999, Helton applied to the commission to dissolve the MIPA pooling unit and to divide the E.J. Force Well No. 1 unit into its separate tracts. This prompted a request by Tri-Union that the commission determine the status of the unit and its proper classification. The commission held an examiners' hearing to consider Tri-Union's status and, contingently, Helton's request to divide the unit. Helton and Tri-Union participated in the hearing through counsel, and Harris appeared, testified, and argued as a third-party intervenor.

The examiners' opinion, supported by findings of fact and conclusions of law, recited that the pooled unit was properly formed, that "none of the statutory conditions for the involuntary dissolution of the pooled unit" had been met, and that the unit thus remained in effect. The commission adopted the examiners' findings of fact and conclusions of law, ordered that the E.J. Force Unit, Alvin North (8559) Field remain in effect and not be dissolved, and denied Helton's request to divide the unit as moot. Helton sought judicial review of that order from the trial court, but did not serve Harris with a copy of the petition seeking judicial review. The trial court signed a broad order that affirmed the commission's ruling without stating any reasons.

Standard and Scope of Review

An agency's enabling legislation determines the proper procedures for obtaining review of the agency's decision. Tex. Nat. Res. Comm'n v. Sierra Club, 70 S.W.3d 809, 811 (Tex.2002). The commission issued the order challenged here under MIPA.² MIPA authorizes judicial review of a commission pooling order "in a manner other than by trial de novo" in the district court of the county where the land is located, here Brazoria County. See Tex. Nat. Res.Code Ann. § 102.111, § 102.112. MIPA's minimal provisions, however, must be read in conjunction with the Administrative Procedures Act (APA), Tex. Gov't Code Ann. §§ 2001.171-.178 (Vernon 2000). See Sierra Club, 70 S.W.3d at 812. When the APA conflicts with agency-enabling legislation, the latter controls. Sierra Club, 70 S.W.3d at 812. When, as here, the acts do not conflict, the APA controls. See id.

The commission issued the order Helton challenges after conducting a contested-case hearing. See Tex. Gov't Code Ann. § 2001.003(1) (Vernon 2000) (defining "contested case" as "a proceeding ... in which the legal rights, duties, or privileges of a party are to be determined by a state agency after an opportunity for adjudicative hearing"). In accordance with the governing statutes, Helton's suit for judicial review was conducted without a jury, and the trial court reviewed the commission's order under the substantial-evidence test based solely on the record before the commission. See Tex. Gov't Code Ann. §§ 2001.174-.175 (Vernon 2000) (governing "procedures for review" and "review" under "Substantial Evidence Rule or Undefined Scope of Review"); R.R. Comm'n v. Pend Oreille Oil & Gas Co., 817 S.W.2d 36, 40 (Tex.1991) (construing predecessor to APA and holding that "other than by trial de novo" manner of review restricts judicial review to agency record).

As the party challenging the commission's order, Helton had the burden in the trial court to demonstrate a lack of substantial evidence to support the commission's order. See Miller v. Houston Indep. Sch. Dist., 51 S.W.3d 676, 680 (Tex.App.-Houston [1st Dist.] 2001, pet. denied). Under the substantial-evidence test, the trial court could not substitute its judgment for that of the commission and could not reverse its order unless the commission violated one of the six distinct bases for reversal under the APA and, in that event, the trial court could not grant relief, but only reverse or remand to the commission. See Tex. Gov't Code Ann. § 2001.174(2)(A)-(F);³ Cash Am. Int'l, Inc. v. Bennett, 35 S.W.3d 12, 17 (Tex.2000) (judicial review under APA of Pawnshop Act decision of Consumer Credit Commissioner); Sierra Club v. Tex. Nat. Res. Conservation Comm'n, 26 S.W.3d 684, 688 (Tex.App.-Austin 2000) (Sierra Club I), aff'd on other grounds, 70 S.W.3d 809 (Tex.2002) (Sierra Club II) (judicial review under APA of Solid Waste Disposal Act decision of Natural Resource Conservation Commission).

Consequences of Failure to Serve Copy of Petition on J. Wylie Harris

As in the trial court, the commission and Tri-Union contend that section 2001.176(b)(2) of the APA required Helton to serve Harris with a copy of Helton's petition for judicial review of the commission's order. See Tex. Gov't Code Ann. § 2001.176(b)(2) (Vernon 2000). The commission and Tri-Union further contend that Helton's undisputed failure to serve Harris compelled the trial court to dismiss Helton's petition for judicial review, or, alternatively, to deny Helton relief for failure to prove its case. Helton concedes that it did not serve Harris with a copy of the petition, but disputes that it was required to because Harris was "not a party." Helton also disputes whether the commission and Tri-Union may properly reassert their section 2001.176(b)(2) challenge on appeal, because they did not file notices of appeal to assert those challenges.

A. Nature of Judicial Review of Agency Decisions

Parties have no absolute right to challenge an administrative order: the right of judicial review arises only when (1) a statute creates it, (2) the order adversely affects a vested property right, or (3) the order otherwise violates a constitutional right. See Gen. Servs. Comm'n v. Little-Tex Insulation Co., 39 S.W.3d 591, 599 (Tex.2001); cf., Dep't of Protective & Regulatory Servs. v. Schutz, 101 S.W.3d 512, 521-22 (Tex.App.-Houston [1st Dist.] 2002, no pet. h.) ("No right of judicial review from the action of an administrative agency exists unless a statute provides for such review, the action violates constitutional procedural due process, or the constitution waives the state's immunity from suit."). The doctrine of sovereign immunity is the rationale that underlies these prohibitions. See Lowe v. Texas Tech Univ., 540 S.W.2d 297, 298 (Tex.1976); ...