Northwest Oil Co. v. Railroad Commission

• Decision Date: 07 January 1971
• Docket Number: No. 7185,7185
• Parties: NORTHWEST OIL COMPANY et al., Appellants, v. The RAILROAD COMMISSION of Texas et al., Appellees.
• Court: Texas Court of Appeals

Page 371

462 S.W.2d 371

NORTHWEST OIL COMPANY et al., Appellants, v. The RAILROAD COMMISSION of Texas et al., Appellees.

No. 7185.

Court of Civil Appeals of Texas,

Beaumont.

Jan. 7, 1971.

Rehearing Denied Jan. 28, 1971.

McDonald, Sanders, Ginsburg, Phillips, Maddox & Newkirk, Fort Worth, for appellants.

Crawford Martin, Atty. Gen. of Texas, Rex H. White, and Linward Shivers, Asst. Attys. Gen., McGinnis, Lochridge, Kilgore, Byfield, Hunter & Wilson, Austin, for appellees.

KEITH, Justice.

The appeal is from a final judgment of the District Court of Orange County, denying to Northwest Oil Company and Malcolm K. Brachman any relief from two orders of the Railroad Commission entered pursuant to the provisions of Article 6008c, Vernon's Ann.Civ.St., the Mineral Interest Pooling Act. The case was tried under the substantial evidence rule of procedure and the parties are not in disagreement as to this facet of the case.

Gas was discovered in 1962 in what the Commission subsequently designated as the Ten Mile Creek (2nd Nodosaria) Field in its orders . The proration unit rule promulgated by the Commission provided for 320 acres plus 10 per cent tolerance up to 352 acres. Brachman, pursuant to the usual Commission procedures then prevailing, established a 320-acre unit and in January, 1965, drilled a producing gas well thereon known as the No. 1 B. Redding Well. Northwest Oil Company is the operator of the well.

The appellees, E. B. Stephenson, M. B. Stephenson, and Mrs. James C. Dowler, brothers and sister (hereinafter referred to collectively as 'Stephensons'), each owned in fee a tract of land containing slightly more than two acres, or an aggregate of 6.198 acres, all of which was situated entirely within the exterior boundaries of Brachman's unit. Their land was located about 1,000 feet from the producing well which Brachman drilled.

Before he commenced drilling, Brachman made overtures to the Stephensons to include their acreage in the unit upon which he subsequently drilled his producing well. Under our view of the law governing the case, it is sufficient to say that no agreement was reached and Brachman proceeded to drill his well and no part of the revenue from the production has been paid to the Stephensons. ¹

Accepting the implied invitation of the appellees that the orders of the Commission may find support only in the subsequent efforts of the Stephensons to pool their land with that of Brachman, we turn to a consideration of those negotiations.

On August 23, 1967, the Stephensons filed an application with the Commission under the Mineral Interest Pooling Act for the entry of 'an order permitting their 6.198 acres (2.066 acres for each applicant) to be pooled on a productive acreage basis with all interests in the Northwest Oil Company #1 B. Redding Gas Unit (34101), 320 acres, Ten Mile Creek (Nodosaria, 2nd) Field, Orange County, Texas.' The application described the Stephenson acreage as having 'been made 'island acreage' by the exclusion of such small tract acreage from the Northwest Oil Company #1 B. Redding Gas Unit.' The application recited that if granted, such 'will protect the correlative rights of these applicants since they have been and will continue to be drained by the Northwest Oil Company #1 B. Redding Gas Unit well and will avoid the drilling of unnecessary wells on the applicants' lands and the request for a special allowable for said wells.'

It was then alleged that 'Applicants have not been provided a reasonable opportunity to pool voluntarily. In law no pooling offers have been made to applicants by Northwest Oil Company or its representatives. All alleged offers made to applicants are shown by the attached letters dated August 11, 1964 (see footnote 1, supra), and June 1, 1967, from Attorneys for Malcolm K. Brachman.' Further allegations were to the effect that the Stephensons had made 'fair and reasonable offers for the voluntary pooling' of their interests, and referred to letters dated August 17, 1964 (see footnote 1), and June 20, 1967, the latter being from trial counsel for the Stephensons, written long after the cost of the well had been recouped by Brachman, and at a time when it was still a prolific producer of gas.

We pause to note that at no time in the correspondence, the application to the Commission, or in the testimony adduced upon the trial of the cause, did the Stephensons allege or contend that they had any intention ever to drill for gas upon their acreage. Upon being questioned about the matter upon the trial, E. B. Stephenson, who acted as spokesman for all three applicants, testified that he had no money to put up to drill the well. We reproduce in the margin a part of his re-direct examination with reference to his position in the matter Before the well was drilled. ²

This case is controlled by the opinion of the Supreme Court in Railroad Commission of Texas v. Coleman, 460 S.W.2d 404, (1970; motion for rehearing overruled December 31, 1970), reversing Coleman v. Railroad Commission, 445 S.W.2d 790 (Tex.Civ.App.--Texarkana, 1969). ³ Chief Justice Calvert's interpretation of the Mineral Interest Pooling Act and the limitation upon the power of the Commission to pool is set out in these two short quotations from the court's opinion:

'We interpret the language quoted from section 2(a) of the statute As authorizing invocation of the Commission's power to pool by only those owners who have drilled or propose to drill on the proration unit to the common reservoir; that only a person who has drilled or proposes to drill can qualify as 'any such owner.' (460 S.W.2d at p . 407)

'After considering all of the arguments for a contrary holding, we remain convinced that the Legislature intended that The Railroad Commission's power to require pooling can be invoked only by an owner who has drilled or proposes to drill a well on a proration unit to a common reservoir.' (Id. at p. 408--emphasis supplied.)

We note, particularly, that the court spoke of the Commission's 'power to pool' and 'power to require pooling' could be invoked 'only by' an owner who has drilled or proposes to drill to a common reservoir. This choice of words brings the holding within the rationale of Stauffer v. City of San Antonio, 162 Tex. 13, 344 S.W.2d 158, 160 (1961), and State v. Jackson, 376 S.W.2d 341, 344 (Tex.Sup., 1964). As was said in Brown v. Humble Oil & Refining Co., 126 Tex. 296, 83 S.W.2d 935, 940 (1935) (cited in Stauffer and Jackson): 'The power of the Railroad Commission to act on this matter is limited to the authority granted by the Legislature.'

Thus, the delegated Power possessed by the Railroad Commission to require pooling could be invoked, under Coleman, only by a showing that the applicant for such forced pooling was 'an owner who has drilled or proposes to drill * * * to a common reservoir.'

The Stephensons did not include any such averment in their application to the Railroad Commission so that they failed to 'invoke' the power delegated to the Commission to require pooling. No proof was offered upon the trial of the cause which would tend to support any such position; and, as a matter of fact, it is clear that the Stephensons never at any time either 'drilled or propose to drill' a well to the common reservoir. We have here a situation somewhat similar to that faced by the court in Foree v. Crown Central Petroleum Corp., 431 S.W.2d 312, 316 (Tex.Sup., 1968), wherein the court, in discussing the problem of primary jurisdiction, laid another exception to the general rule that the courts are not ousted of jurisdiction 'when the administrative agency is powerless to grant the relief sought and has no authority to make incidental findings which are essential to the granting of the relief.'

The Commission made extensive 'incidental' findings in support of its order, no one of which included a finding that the Stephensons were 'such owners' who had either drilled or proposes to drill a well to a common reservoir.

Appellees, in their post-submission brief, contend that appellants are precluded from relying upon the Coleman Case, citing the general rule that parties are restricted upon appeal to the theory on which the case was tried in the court below, a rule which has firm support in our law. Appellees point out, appropriately, that no mention was made of the rationale upon which Coleman was decided and, further, that appellants stated in their brief that: 'It would thus appear that the Act is applicable to the situation now before the Court * * *.' This brief was filed eight days before the Coleman decision was announced; and, as we have commented upon previously (footnote 3), it is not surprising that the admission was made.

We have no quarrel with the doctrine which confines a party on appeal to his theory urged upon the trial, but here we have a more fundamental question presented, one going to the very bedrock of appellees' claimed right to pool--the Power of the Commission to order forced pooling at their request. More than a century ago, in Withers v. Patterson, 27 Tex. 491, 496--497 (1864), it was said:

'The jurisdiction of the court means the power or authority which is conferred upon a court, by the 'constitution and laws, to hear and determine causes between parties, and to carry its judgments into effect. It is a plain proposition, that a court has no power to do anything which is not authorized by law.

'* * * court only exercises its jurisdiction when the facts exist which authorize it to do the thing in question. And the question whether the jurisdiction of a court has been exercised or not, is solved by ascertaining whether or not the facts existed which authorized the court to act as it did act.'

See also: Templeton v. Ferguson, 89 Tex. 47, 33 S.W. 329, 332 (1895); Cleveland v. Ward, 116 Tex. 1, 285 S.W. 1063, 1069 (1926); Morrow v. Corbin, 122 Tex. 553, 62 S.W.2d 641, 644 (1933); National Life Company v. Rice, 140 Tex. 315, 167 S.W.2d 1021,...