Railroad Commission of Texas v. Rowan & Nichols Oil Co.

• Decision Date: 03 November 1939
• Docket Number: No. 9173.,9173.
• Parties: RAILROAD COMMISSION OF TEXAS et al. v. ROWAN & NICHOLS OIL CO.
• Court: U.S. Court of Appeals — Fifth Circuit

107 F.2d 70 (1939)

RAILROAD COMMISSION OF TEXAS et al. v. ROWAN & NICHOLS OIL CO.

No. 9173.

Circuit Court of Appeals, Fifth Circuit.

November 3, 1939.

Gerald C. Mann, Durward D. Mahon and James P. Hart, and Harry S. Pollard, all of Austin, Tex., for appellants.

Dan Moody, of Austin, Tex., and Rice M. Tilley, of Fort Worth, Tex., for appellee.

Before FOSTER, SIBLEY, and HOLMES, Circuit Judges.

FOSTER, Circuit Judge.

This suit was brought by Rowan and Nichols Oil Co., owner of an oil lease in the East Texas Field, hereafter referred to as plaintiff, to enjoin the Railroad Commission of Texas, hereafter referred to as the Commission, its members and the Attorney General of Texas, from enforcing against plaintiff an order issued by the Commission, on August 29, 1938, and subsequent amendments, fixing the amount of crude oil permitted to be produced daily from the East Texas Oil Field, usually referred to as the "allowable", and prorating production as to the wells in the field. The orders fixed the total allowable at about 522,500 barrels a day and restricted each well to daily production of 2.32 per cent of its hourly potential production. Plaintiff did not challenge the authority of the Commission to enter the order nor attack the top daily allowable. The bill alleged the order as interpreted and enforced by the Commission was unreasonable, arbitrary and confiscatory of plaintiff's property, without due process of law, in violation of the 14th Amendment, U.S.C.A.Const. The bill prayed for an interlocutory injunction. By amendment this was waived and the case was tried before the District Judge, sitting alone. There was judgment for plaintiff. D.C., 28 F.Supp. 131. This appeal followed.

The District Court made extensive and comprehensive findings of facts, which were not excepted to. It is unnecessary to review them all. The case may be substantially stated as follows.

The East Texas Oil Field is approximately 40 miles in length from north to south with an average width of 4 miles from east to west. It lies in Upshur, Gregg, Smith and Rusk Counties, and it is of about 133,000 acres in surface extent. It has produced oil continuously since its discovery in October, 1930. The oil is in a continuous, common reservoir about 3600 feet below the surface, contained in what is called the Woodbine sand.

The average depth of the Woodbine sand throughout the field is 42 feet. On a line drawn through the centre of the field from north to south, which is called the fairway, the average depth of the Woodbine sand is about 100 feet. Plaintiff is the owner of an oil lease, known as the Todd B. Lease, covering 24.99 acres in Gregg County. It is located in the fairway. The average depth of oil bearing sand under the lease is 95 feet. It was estimated that at the time of suit the entire recoverable oil in the field was 2,217,980,000 barrels and the recoverable oil under plaintiff's lease was 1,151,168 barrels.

Plaintiff has 5 wells on its lease with a potential capacity of about 20,000 barrels per well per day. Under the order complained of each of its wells is allowed to produce a little over 22 barrels of oil a day, a total of 112 barrels. Orders of the Commission require all wells to be shut down on Saturdays, and Sundays leaving five productive days a week.

Plaintiff made application to the Railroad Commission for permission to drill a number of additional wells on its lease but was granted permission to drill only one. It costs about $10,000 to drill a well in the East Texas Field. The well has not been drilled. As to the enforcement of the order the parties have stipulated as follows:

"In the application and enforcement of the above proration order (a) each well that could not produce as much as 20-barrels of oil per day was allowed to produce the maximum amount that it could produce; (b) where 2.32% of the hourly potential of any well would amount to less than 20-barrels per day, the well was allowed to produce 20-barrels of oil per day; (c) where 2.32% of the hourly potential of any well would amount to more than 20-barrels of oil per day, such well was allowed to produce 2.32% of its hourly potential.

"This application of the order resulted in the following: Approximately 451-wells, not any one of which was capable of producing as much as 20-barrels per day, were allowed to produce daily a total of approximately 5,250-barrels. Approximately 19,032-wells whose individual hourly potential when multiplied by 2.32% amounted to less than 20-barrels, were each allowed to produce a full 20-barrels per day; or from all of such wells a total of approximately 380,640-barrels per day. These were wells whose hourly potential ranged anywhere from 1-barrel to 860-barrels per hour. Approximately 6,325-wells whose individual potential when multiplied by 2.32% amounted to more than 20-barrels were each allowed to produce daily that number of barrels which equalled the product of its hourly potential multiplied by 2.32%. The total daily production from these wells was...