Oxford Oil Co. v. Atlantic Oil & Producing Co.

• Decision Date: 27 December 1926
• Docket Number: No. 3695.,3695.
• Citation: 16 F.2d 639
• Parties: OXFORD OIL CO. et al. v. ATLANTIC OIL & PRODUCING CO. et al.
• Court: U.S. District Court — Panama Canal Zone

16 F.2d 639 (1926)

OXFORD OIL CO. et al. v. ATLANTIC OIL & PRODUCING CO. et al.

No. 3695.

District Court, N. D. Texas, Dallas Division.

December 27, 1926.

C. L. Bass, of Fort Worth, Tex., R. H. Ward, of Houston, Tex., and Davis, Jester & Tarver, of Corsicana, Tex., for plaintiffs.

John L. Young and S. W. Marshall, both of Dallas, Tex., for defendant Oil Co.

Dan Moody, Atty. Gen., and Ernest May, of Austin, Tex., for members and employees of State Railway Commission.

ATWELL, District Judge.

On the 14th of July, 1923, the plaintiffs were the owners of the oil, gas, and other minerals in place on, in, and under 3 1/3 acres of land, approximately 56 feet in width at one end, and approximately 36 feet in width at the other end, and 3,190 feet in length, situated in Navarro county, Tex. The land was owned by the state of Texas on the 2d day of October, 1869, at which time it patented the same to John Taylor, from whose assigns the plaintiffs deraigned title. Thereafter the Constitutions of Texas, adopted in 1869 and 1876, relinquished to the grantees and patentees of all lands granted and patented by the state all the minerals in such lands.

Section 2 of article 10 of the 1876 Constitution of the state of Texas provides:

"The Legislature shall pass laws to correct abuses and prevent unjust discriminations and extortion in the rates of freight and passenger tariffs on the different railroads in this state; and shall, from time to time, pass laws establishing reasonable maximum rates and charges for the transportation of passengers and freight on said railroads, and enforce all such laws by adequate penalties."

On December 19, 1890, the said provision was amended to read:

"Railroads heretofore constructed. or which may hereafter be constructed, in this state are hereby declared public highways, and railroad companies common carriers. The Legislature shall pass laws to regulate railroad freight and passenger tariffs, to correct abuses, and prevent unjust discrimination and extortion in the rates of freight and passenger tariffs on the different railroads in this state, and enforce the same by adequate penalties; and, to the further accomplishment of these objects and purposes, may provide and establish all requisite means and agencies invested with such powers as may be deemed adequate and advisable."

A later constitutional amendment, in 1894, to section 30 of article 16, fixed the tenure of state officers, including that of three railroad commissioners.

On March 31, 1919, the Legislature passed an act (Laws Tex. 1919, c. 155) to conserve the oil and gas resources of the state and to define waste in the production of such minerals, and invested the Railroad Commission with authority to make and enforce the needful rules and regulations.

Article 2 of the act provided for the conservation in the original stratum of oil and gas when discovered, and for the protection of the same from infiltrating waters. Article 3 made it the duty of the Railroad Commission to make and enforce rules and regulations for such a conservation, and gave the commission ample authority in that direction; among other provisions was this language:

"It is empowered to establish rules and regulations for the drilling of wells and preserving a record thereof, and it shall be its duty to require such wells to be drilled in such manner as to prevent injury to the adjoining property, and to prevent oil and gas and water from escaping from the stratas in which they are found into other stratas, and to establish rules and regulations therefor."

Articles 4, 5, and 7 of the acts provided for the appointment of supervisors and their salaries; connection with pipe lines and other regulatory provisions, together with the establishment of a penalty of not more than $5,000 a day against the violator of such rules, to be recovered in any court of competent jurisdiction.

Acting under these statutes, the Railroad Commission, on and prior to May 1, 1920, had promulgated 40 rules and regulations. No. 37 is as follows:

"No well for oil or gas shall hereafter be drilled nearer than three hundred (300) feet to any other completed or drilling well on the same or adjoining tract or farm, and no well shall be drilled nearer than one hundred fifty (150) feet to any property line; provided that the commission, in order to prevent waste or to protect vested rights, will grant exceptions permitting drilling within shorter distances than as above prescribed, upon application filed fully stating the facts, notice thereof having first been given to all adjacent lessees affected thereby. Rule 37 shall not for the present be enforced within the proven fields of the Gulf Coast."

Rules 28, 29, 33, 35, and 31 tightened the provision by making its observance the duty of pipe lines, contractors, and drillers, and in requiring certain certificates by those who would carry oil or handle the same, or be connected therewith.

The defendant Atlantic Oil Producing Company owned the land immediately west of and adjoining the plaintiff's strip. The Humble Oil & Refining Company and other oil companies owned the land adjacent to the plaintiff's holdings and on the east. The northern 900 feet of the plaintiff's strip contained more oil than that part extending further south.

In the summer of 1923 the owners, upon the east and west, began to drill their lands. The petition is silent as to the distance of such wells from the plaintiff's strip. I assume that such wells were no closer than rule 37, above quoted, allowed. Thereupon the plaintiffs began to make preparation to offset. The defendant Atlantic Company protested, and the commission, after investigation and hearing, to and in which the plaintiffs participated, denied the plaintiffs the right to drill ten wells in their strip in the proven territory mentioned, but allowed them to drill four wells — the first at a distance of 150 feet south of the north boundary, the second 1,063 feet, the third 1,220 feet, and the fourth 2,126 feet therefrom — and, upon plaintiff's continued preparation to drill a greater number, secured an injunction preventing the plaintiff from doing so, from which injunction the plaintiffs appealed, and which appeal has not yet been finally determined. After the appeal, other preparations were made by the plaintiffs, and they were attached in contempt.

In all of these proceedings before the commission and before the court, the defendant Atlantic Company was active. Defendants C. E. Gilmore, W. A. Nabors, and Walter Splawn composed the Railroad Commission. R. B. Wathall and C. O. Rison were employees thereof. But see Bohri v. Barnett (C. C. A.) 144 F. 389, as to liability of officers who act under law believed valid.

This court has jurisdiction to rule the controversy, not because of the diversity of citizenship of the parties, but because of the constitutional questions raised.

Plaintiffs claim that rule 37, promulgated by the commission, is void. They claim that the vesting of the authority in the commission by the Legislature to supervise the drilling of oil wells in Texas is and was illegal; that such illegal acts and regulations was a violation of two of the provisions of the national Constitution, namely, section 10 of article 1, and the Fourteenth Amendment.

Even though plaintiffs' land was originally patented to plaintiffs' assignees by the state, and all minerals therein conveyed to such assignees, the state was not thereby denied its usual and reasonable police power thereover. To sustain the contention of the plaintiffs under the provision of the Constitution (article 1, § 10), which provides that "no state shall * * * pass any * * * law impairing the obligation of contracts," would be to close the gates upon the right of the state to prohibit practically any use of private property that might be injurious to the individual or to society. The individual's right to use his property is limited to such uses as do not deprive some other citizen of an equally free use of his property. Individual rights may not be so magnified as to trample out of existence, or into deformity the individual rights of the neighbor. The state does not impair the obligation of its contract when it puts into operation a government utility to restrain and prevent one of its citizens from using land that it had patented to such citizen in such a way as would injure another citizen. "Sic utere tuo ut non alienum laedas."

Again "the obligation of a contract is the duty of performance. It is the binding force, coupled with the means and right of enforcement or power to compel performance." A regulation such as is complained of may not be said to lessen the validity of the patent that the state originally issued to the assigns under whom the plaintiffs claim. Hays v. Port of Seattle (D. C.) 226 F. 287; Brown v. Colorado, 106 U. S. 95, 1 S. Ct. 175, 27 L. Ed. 132; Lord...