People's Petroleum Producers v. Sterling

• Decision Date: 19 July 1932
• Docket Number: No. 365,386,389,408.,392-396,365
• Citation: 60 F.2d 1041
• Parties: PEOPLE'S PETROLEUM PRODUCERS, Inc., et al. v. STERLING et al., and eight other cases.
• Court: U.S. District Court — Eastern District of Texas

60 F.2d 1041 (1932)

PEOPLE'S PETROLEUM PRODUCERS, Inc., et al. v. STERLING et al., and eight other cases.^*

Nos. 365, 386, 389, 392-396, 408.

District Court, E. D. Texas, Tyler Division.

July 19, 1932.

Saye, Smead & Saye, of Longview, Tex., for complainants.

Byron A. Irwin, of Shreveport, La., and D. H. Culton and S. A. L. Morgan, both of Amarillo, Tex. (Morgan, Culton, Morgan & Britain, of Amarillo, Tex., of counsel), for complainants Bill & Dave Corporation and others.

Before HUTCHESON, Circuit Judge, and GRUBB and BRYANT, District Judges.

HUTCHESON, Circuit Judge.

In these cases the parties have agreed that a temporary restraining order, issued against the so-called martial law defendants R. S. Sterling, W. W. Sterling, Jacob F. Wolters, and L. S. Davidson, is to remain in force, further orders as to them to abide the decision of the Supreme Court of the United States on the Constantin appeal. The cases are before us now for action on the application of plaintiffs for a temporary injunction against the Railroad Commission, the Attorney General, et al. In their last analysis, they present another stand by some of the producers of oil in the East Texas Oil field against the claimed usurpation of power on the part of agencies purporting to act for the state. In the general sense that they challenge the power as unlawfully put forth behind a mask of pretense to accomplish the forbidden purpose of restricting production, they thresh again old straw. Danciger v. Commission (Tex. Civ. App.) 49 S.W.(2d) 837; MacMillan v. Commission (D. C.) 51 F.(2d) 400; Constantin v. Smith (D. C.) 57 F.(2d) 227, 228.

Most of the plaintiffs mainly pitch their case as McMillan did, upon the proposition that the orders assailed are not true conservation orders within the scope and purpose of the statute against waste. They say, as they did there, that the orders are purely production restrictions, and that as such they find, not support, but condemnation, in the statute, which provides: "Provided, however, this shall not be construed to mean economic waste, and the Commission shall not have power to attempt by order, or otherwise, directly or indirectly, to limit the production of oil to equal the existing market demand."

Plaintiffs point to the proposal of Thurman Hill, chairman of the meeting of the Oil States Advisory Committee, that, in order to secure a fair price for crude oil now being produced in the Mid-Continent fields, the several oil states by their regulatory bodies here assembled pledge themselves to restrict the output of crude oil in their states¹; to the agreement which followed this proposal, "that production of crude oil in the United States should be limited to the market demand, which was fixed at 2,376,000 barrels per day, and that of this figure Texas should contribute 900,000 barrels"; to the testimony of Charles F. Roeser, by deposition in December, 1931, that the activities of the Texas Oil & Gas Conservation Association were directed to attempting to control the production in East Texas, so as in co-operation with the balance of the state, oil production in Texas could be what the market would absorb, "we men in the producing business realize that it would be impossible for the market to absorb over 900,000 barrels from the state"; to the testimony of Cullen Thomas and others, that the Railroad Commission had signed the Oil States agreement with the proviso that they would co-operate to limit production in so far as they could legally do so; to the orders of the commission reducing the allowable per well until October, when they were enjoined; to the action of the Governor in then instituting martial law, as plaintiffs claim, to limit production by force; to the action of the commission, on resuming control of the field, in reducing the field allowable to 325,000 barrels distributed per well; and to the action of the military since, as shown in plaintiffs' proof, in punitorily seizing and sealing wells which had produced more than the allowable — as conclusive proof that the purpose of the commission in making the orders was not to prevent physical waste, but merely to keep production within demand. They assert that, designed and effective only to limit production and having no reasonable relation to the prevention of physical waste, the orders are invalid, because not within the authorization of the statute, but contrary to its express prohibitions.

Some of the plaintiffs, while adopting these views, also assail both orders and statute as violative of the due process clauses of State and Federal Constitutions (Const. Tex. art. 1, § 19; Const. U. S. Amend. 14).

The defendants, while stoutly asserting that the action of the commission now sought to be enjoined was not taken under the influence of the desire, or with the purpose, to limit production, that its real purpose, in the sense of motive, was in accordance with the statutes of the state to prevent and control waste in the field, as stoutly argue that the motives of the commission, that is, the secret springs from which their actions have flowed, may not be inquired into by the courts, that their purpose may be discovered only in the operation and effect of their orders, and that, if these orders in their operation and effect have a reasonable relation to the duty and power of the commission, they may not be assailed for motive.

They say, pointing to the statutes, that the Legislature has conferred upon them broad and comprehensive powers, and given clear and definite directions for their exercise,² and that not only have plaintiffs failed to offer evidence rebutting the prima facies which the commission's orders carry, but the evidence of the defendants is overwhelming that the rules of the commission, in treating the East Texas field as substantially one pool, limiting production from that pool to 325,000 barrels, and prorating the limited production per well, are not only not unreasonable and arbitrary, but are affirmatively shown to be reasonable and proper rules to effect the legislative end, the conservation of the petroleum resources of the state against physical waste. To the view of plaintiffs, that because of the "rule of property" in this state established in Stephens County v. Mid-Kansas Oil & Gas Co., 113 Tex. 160, 254 S. W. 290, 29 A. L. R. 566, that owners of land and purchasers of oil rights own the oil in place, the Legislature may not regulate or control the manner of its production, and that, if it may, its delegation of that power to the commission is invalid, defendants oppose the many cases in the state and federal courts of Texas which have held otherwise. Danciger v. Commission (Tex. Civ. App.) 49 S.W.(2d) 837; our cases of MacMillan v. Commission (D. C.) 51 F.(2d) 400; Henderson v. Commission (D. C.) 56 F.(2d) 218, 220; Constantin v. Smith (D. C.) 57 F.(2d) 227, 228; and cases cited in them. They assert that, oil being a natural resource, and the rights of the person to take the oil in the several states being substantially the same, in fact, though different in name, there can in principle be no less power in one state than in another to reasonably regulate and control, in the interest of conservation, the manner of its findings and production.

They say, finally, that, not only are the Texas conservation laws valid, the commission authorized as the statutory agent of the state to make them effective, and the rules in question in their general effect within the authorization of such laws, but that on this record there is no basis for a finding that they are, as to plaintiffs, so unnecessarily restrictive of private rights as to warrant the conclusion that the rules are, in a constitutional sense, confiscatory as constituting a taking of plaintiffs' property; that the record, in fact, shows the contrary.

We have carefully examined the record in the light of these contentions. We have been, and are, greatly impressed with the manifold evidences of the desire, the dominant purpose, on the part of the oil industry, to get and keep crude prices up, and with, to say the least of it, the complaisant if not compliant attitude of the public officials toward that desire, and if, as the plaintiffs seem to think it is, the controlling issue in this case were whether the commission, as it agreed last year to do, is co-operating as far as it legally can in keeping the production from the Texas oil fields within definite limits, we should, I think, be blind to what all others see, if we found it otherwise than as plaintiffs contend.

That is not, it cannot be, the issue in the case, for it is definitely and beyond cavil settled that in a constitutional government such as ours, with its division of powers, courts may not, except as the purpose is exhibited in their operation and effect, inquire into the purposes or the motives behind legislative acts.³ McCray v. U. S., 195 U. S. 60, 24 S. Ct. 769, 49 L. Ed. 78, 1 Ann. Cas. 561; Angle v. Chicago, St. Paul Ry., 151 U. S. 12, 14 S. Ct. 240, 38 L. Ed. 55; Soon Hing v. Crowley, 113 U. S. 713, 5 S. Ct. 730, 28 L. Ed. 1145⁴; Smith v. St. Louis & Southwestern Ry., 181 U. S. 248, 21 S. Ct. 603, 45 L. Ed. 847; Purity Extract Co. v. Lynch, 226 U. S. 199, 33 S. Ct. 44, 57 L. Ed. 184; MacMillan v. Commission (D. C.) 51 F.(2d) 400, 402; McLeaish v. Binford (D. C.) 52 F.(2d) 151; Railroad Commission v. Galveston Chamber of Commerce, 105 Tex. 115, 145 S. W. 573.

In the MacMillan Case we pointed this out, but there "plaintiff established that the allowable for the East Texas fields was fixed at an arbitrary basis, arrived at without test or experimentation, either on plaintiff's property or in the field generally, as to the amount that might be safely withdrawn by each owner from his property without causing any physical waste. He made it clear that the allowable had been fixed arbitrarily, and that therefore the plan so adopted and promulgated had the same relation to physical waste as an...