Wrather v. Humble Oil & Refining Co.

• Decision Date: 23 June 1948
• Docket Number: No. A-1470.,A-1470.
• Citation: 214 S.W.2d 112
• Parties: WRATHER et al. v. HUMBLE OIL & REFINING CO.
• Court: Texas Supreme Court

Page 112

214 S.W.2d 112

WRATHER et al. v. HUMBLE OIL & REFINING CO.

No. A-1470.

Supreme Court of Texas.

June 23, 1948.

Rehearing Denied November 3, 1948.

Error to the Court of Civil Appeals of Third Supreme Judicial District.

Suit by the Humble Oil & Refining Company against John Wrather and the Railroad Commission of Texas, to set aside and enjoin further operation under an order of the commission granting John Wrather a permit to drill an oil well. Judgment for defendant was reversed and rendered by the Court of Civil Appeals, 205 S.W.2d 86, and defendants bring error.

Judgment of the Court of Civil Appeals affirmed.

Wheeler & Wheeler and J. W. Wheeler, all of Austin, for Wrather, petitioner.

Price Daniel, Atty. Gen., and Elton M. Hyder, Jr., Asst. Atty. Gen., for Railroad Commission, petitioner.

Rex G. Baker and R. E. Seagler and Nelson Jones, all of Houston, and Powell, Wirtz, Rauhut & Gideon and J. A. Rauhut, all of Austin, for respondent.

FOLLEY, Justice.

This is a Rule 37 suit, brought by the respondent, Humble Oil & Refining Company, against the petitioners, John Wrather and the Railroad Commission of Texas, to set aside and enjoin further operation under the order of the Railroad Commission granting the petitioner, John Wrather, a permit to drill Well No. 4 on a 0.4-acre portion of the Butts 1.14-acre tract, in exception to the 10-acre (660'-330') spacing rule applicable to the East Texas Field, which permit, dated December 6, 1940, recites that it was granted on grounds of preventing confiscation of property and waste. The trial court, in a trial without a jury, upheld the permit, but the Court of Civil Appeals set it aside and granted an injunction restraining further production from the well, which had been drilled upon the faith of the permit. 205 S.W.2d 86.

It was urged by petitioners in the courts below that the 0.4-acre strip was not a subdivision of the Butts 1.14-acre tract of which it was a part; but the Court of Civil Appeals held that the Wrather tract was severed from the larger tract subsequent to the effective date of the order of the Railroad Commission prohibiting such subdivisions, and thus it was not entitled to be considered as a separate drilling unit and that no confiscation of property was shown. The petitioners assign no error in this respect and have abandoned the confiscation theory. They continue to insist, however, that well No. 4 is necessary to prevent waste, and further assert that Humble has no real or substantial interest in the controversy sufficient to authorize it to maintain the suit within the meaning of Sec. 8 of Art. 6049c, Vernon's Ann.Civ.St. The latter contention was overruled both in the trial court and the Court of Civil Appeals. We shall first direct our attention to this jurisdictional question.

The Court of Civil Appeals held that in the absence of findings of fact by the trial court no presumption prevails from the take-nothing judgment therein that respondent was not an interested party. We agree with that holding for the reason stated by that court, which was that if the trial court had concluded that Humble was not an interested party the proper judgment would have been to dismiss the suit. Thus if any presumption arises it is that the trial court found that the respondent was an interested party within the meaning of the statute. We shall therefore detail only the evidence tending to support the presumed finding that Humble was an interested party authorized to prosecute the suit.

The respondent owns what is known as the Dura Thomas lease which is not adjacent to the Butts tract but is 239 feet and 274 feet respectively from its nearest corners and 408 feet from the Wrather Well No. 4. The Dura Thomas lease lies north of the Butts 1.14 acres, and extends some farther east and a considerable distance to the northwest, to a lower structural position than Wrather No. 4. Part of the Dura Thomas lease is within the eight-times circular area of the Butts tract. Humble also owns other leases situated to the west, northwest and southwest, known as the Knowles, Laird, Peterson, Crim and Strong, at distances ranging from 2000 or 3000 feet up to about 14,000 feet of the Butts tract. In fact, Humble owns approximately 10% of the entire East Texas Oil Field. It was shown that if Well No. 4 is allowed to produce it will ultimately yield 100,000 barrels of oil from the common reservoir of the field, which witnesses estimated would result in a net loss to Humble of 10,000 barrels. The water pressure in the field is from the west to the east. The drainage of oil from the west side is not limited to due west, but tends to fan out to the northwest and southwest, in the direction of the Humble owned properties. Those who are receiving the net loss from the production on the east side are those on the west, from the north end to the south end of the field, and the more wells drilled on the east side, the greater will be the drainage from them. On cross-examination of petitioners' own witness, Gordon Griffin, it was brought out that the Butts tract has been replenished with oil by drainage from the west side of the field, and that the faster it is withdrawn from the Butts tract the faster it will be drained from the west side; that the Wrather production causes a loss to leases situated five miles to the west, the entire width of the field at this point; that some of the Humble leases will never recover their recoverable oil in place, due to the eastward migration from them; that the owners who are receiving the net loss from this production on the east side are those on the west; and that the more wells drilled on the east side, the greater will be the drainage from them.

It was shown that the Wrather Well No. 4 would cause an additional drainage of 100,000 barrels to the Butts tract from other properties in the field during the next 20 years; that in the early part of this period this additional drainage will come primarily from leases west of the center of the field where oil is being replaced by water, and as depletion continues the area from which it will come will gradually move farther east, until at the last stages the drainage will be mostly from leases immediately surrounding the Butts tract; that thereby ultimately the Dura Thomas lease of Humble's would be adversely affected; that the effect of drilling and operating Wrather No. 4 will be to lower the pressure, cause uneven water encroachment, which results in entrapment of oil, and will shorten the flowing life of the wells and reduce rather than increase recovery from this area of the field.

Sec. 8 of Art. 6049c provides, in part, as follows:

"Any interested person affected by the conservation laws of this State relating to crude petroleum oil or natural gas, and the waste thereof, including this Act, or by any rule, regulation or order made or promulgated by the Commission thereunder, and who may be dissatisfied therewith, shall have the right to file a suit in a Court of competent jurisdiction in Travis County, Texas, and not elsewhere, against the Commission, or the members thereof, as defendants, to test the validity of said laws, rules, regulations or orders. * * *."

By that statute the Legislature has limited the right to contest a rule, regulation or order of the Commission to interested persons affected thereby. The petitioners make the contention that the right to sue is limited to adjoining or adjacent operators whose leases or holdings are subject to immediate net drainage. That contention is not justified either by the language of the statute or by the decisions on the subject.

In Empire Gas & Fuel Co. v. Railroad Commission, Tex.Civ.App., 94 S.W.2d 1240, writ refused, it was held that a lessee whose property was 430 feet from the permittee's lease, and nearly 900 feet from the involved location, was an interested party. Similar holdings were made in Rudco Oil & Gas Co. v. Gulf Oil Corporation, Tex Civ.App., 169 S.W.2d 791, and in Potter v. Humble Oil & Refining Co., Tex.Civ.App., 173 S.W.2d 309.

The right to sue is not limited to holders of adjoining leases. In Magnolia Petroleum Co. v. Edgar, Tex.Civ.App., 62 S.W.2d 359, 361, 362, writ refused, the court employed this language:

"* * * While the adjoining owners are most immediately interested, perhaps, owners more remotely situated in the same field are likewise interested, and that interest may or may not be dependent upon the proximity of their holdings to the lands sought to be drilled. And it would be impossible to define the limits of such interests in the vicinity of the lands involved. Obviously it could not be said that the adjacent owner, who might likewise own a narrow strip of land, would be so interested that he was a necessary party to such action, but that his adjacent owner, only a short distance further removed from the proposed well, was not a necessary party, though affected by the drilling of such well, or at least by offsets which might be necessitated by the drilling of such well. * * *"

We are dealing with a remedial statute which should be liberally, though sensibly, construed. A liberal construction will do no violence in so far as public policy is concerned. It will not necessarily promote useless or baseless lawsuits for the simple reason that it would be in rare instances indeed that a party would choose to engage in tedious and expensive litigation where none of its property rights would be involved or affected by the judgment to be rendered. In any event, it is not necessary in such a case that the plaintiff show legal injury and damages in the sense employed in a damage suit or that plaintiff show the effect of the order with the exactitude required in a tort action, for the obvious reason that in a damage suit one of primary issues is the extent of the injury and the amount of the damages, whereas in a suit under ...