Hon. Ernest 0. Thompson, Chairman 

Railroad Commission of Texas 

Tribune Building 

Austin, Texas Opinion NO. S-123 

Re: Authority of the Railroad Commission to 

require that a certain portion of the 

natural gas production of the Texas 

Hugoton Field be dedicated to the surface u*e of fuel for irrigation pumps, 

and related questions. 

Dear General Thompson: 

You have requested the opinion of this office as follows: 

"The Commission has been petitioned to issue certain orders relating to the usage of natural gas for a 

localized area and purpose', namely, for irrigation pump 

fuel in the Texas Hugoton Field. The Commission's authority to issue the type orders requested is not specifically set out in the statutes; 60 a request is hereby 

made for an opinion concerning the Commission's authority 

in such matters. 

“1. ) 

“2.) 

“3. ) 

Can the Commission Issue an order requiring 

that a certain portion of the production from 

a field, or from a certain well, be dedicated 

to a local use, (i.e. fuel for irrigation 

pumps) and further, that such production not 

be charged against the allowable? 

Can the Commission issue an order providing 

that a royalty owner, within the confines of 

a field, has the right to use whatever portion 

of his one-eighth of the gas produced for a 

local use? 

Can the Commission issue an order which provides 

that the act of delivering natural gas from a 

gas well for use 86 pump fuel for irrigation 

pumps on the 8ame land does not make the deliverer a gas utility company? 
Hon. Ernest 0. Thompson, page 2 (S-123) 

"4.) Can the Commission issue an order which provides 

that the act of delivery of gas from a pipeline 

for such use does not make the deliverer a gas 

utility?" 

In the interest of clarity, we set out our replies to the enumerated questions in their listed order. 

(1) The recent case of Railroad Commission Y. Rowan Oil Co., 

Tex. 259 S.W.2d 173 (1953), (the Spraberry Case), reiterated 

thefamil?$rinciple that: 

"An order of the Railroad Commission must be bottomed 

upon a specific grant of power either contained in the Constitution or delegated by the Legislature." 

The constitutional power of the Railroad Commission to issue orders for the prevention of waste of natural gas as a part of the natural 

resources of this State is found in Section 59a of Article XVI of the Constitution of Texas, and the statutory power of the Commission to regulate 

the production of natural gas is found in Title 102, V.C.S. Articles 6014, 

6015, 6o4gc, 6049d, V.C.S., authorize wells to be shut down completely in 

order to prevent waste (Railroad Commission v. Rowan Oil Co., supra),.and 

Art. 6008 authorizes the Commission to prorate production from gas wells to 

prevent waste or to protect correlative-rights.- Corzelius V. Harrell, 143 

Tex. 509, 186 S.W.2d 961 (1945). It is therefore apparent that for an order to be valid requiring a part of the production of gas from certain wells 

to be utilized for certain surface uses, such order must be reasonably related to the prevention of waste or the adjustment of correlative rights. 

See Railroad Commission Y. Rowan Oil Co., supra. 

As you know, waste in connection with the production of natural 

gas from gas wells has been defined by law. Art. 6008. The Commission also 

has authority to define factually what constitutes waste in a particular 

field, so long as the definition is reasonable, non-discriminatory and 

non-confiscatory. Railroad Commission v.~Rowan Oil Co., supra. 

With these fundamentals in mind, we have concluded that an order 

of the Commission requiring that a certain portion of the production from 

a field or from a certain well shall be dedicated to a surface use for fuel 

for irrigation pumps is not 86~8 matter of law reasonably related to the 

prevention of waste or to the adjustment of correlative rights within the 

conservation statutes. Arts. 6008, 6014, 6015, 6049c, 6049d, V.C.S. - Corzelius Y, Harrell, supra; Railroad Commission Y. Rowan Oil Co., supra. 

That being true, the Commission does not have authority to promulgate such 

an order. 
Hon. Ernest 0. Thompson, page 3 (S-123) 

We similarly conclude that all such production should be charged 

against the allowable and recorded, under Art. 6008. Although~ the Commission is vested with a broad discretion in gas proration matters (Art. 6038; 

31-A Tex.Jur. 659, Sec. 389), we think that allowing such a credit on the 

allowables for such irrigation pump fuei purposes would be discriminatory 

between operators, 

Sec. 383). 

and as such invalid. (Art. 6008; 31-A Tex.Jur. 645, 

(2) The obligation to pay royalties, either in money or in 

kind, is a matter which is resolved in the contract between the lessor 

and the lessee. 

Judge Smedley described the contractual relationship arising 

under an oil and gas lease as follows, in Tennant Y. Dunn, 130 Tex. 285, 

110 S.W.2d 53 (1937): 

"The parties to a contract may agree upon a standard 

of value, and they are bound by such agreement unless the 

standard fails," 

To the extent, therefore, that the lease contracts call for 

royalty payment of the gas in kind, this is a contractual obligation between the parties subject to approprdate enforcement as such. If such 

contracts do not embody provisions calling for royalty payments in kind, 

there is no authority for the Commission to alter, amend or abrogate 

these contractual provisions by administrative fiat, and for the Commission to attempt to do so would raise serious constitutional questions. 

(3)(h) We group your third and fourth questions because they 

pertain to the single issue of whether the Commission can issue an order 

providing that either an operator or a pipeline company delivering gas 

for irrigation fuel pump use would not become a gas utility as a result 

of such action. 

Since the definition of a "gas utility" is technically prescribed by law in Art. 6050, the Commission is without authority to 

issue an order relieving an operator or a,pipeline from inclusion within the statute, as there is no discretion'reposed in the Commission in 

this regard. Whether or not an operator or a pipeline is within the 

statutory classification of a "gas utility" as defined in Art. 6050, 

requires the examination and resolution of the facts in each instance. 

Our determination of whether or not the actions in question would legally classify the operators or the pipelines as "gas utilities", within 

the contemplation of Art. 6050, et seq., has not been asked, and our 

answer would depend upon an examination of all of the circumstances involved in the complete operation. Of course, irrespective of such determination, the statutory definition of a "gas utility" prescribed by 

the Legislature could clearly be amended to provide a specific exception 

for the operations described in your request. 
Hon. Ernest 0. Thompson, page 4 (S-123) 

The Railroad Commission does not have authority to 

issue an order requiring that a certain portion of natural 

gas production from the Texas Hugoton Field shall be dedicated to the specific surface use of fuel~for irrigation 

Pump*, and the Commission cannot order that such production 

shall not be charged against the appropriate allowable. 

Whether a royalty owner may take his gas royalty in kind 

is a contractual obligation to be negotiated between the 

contracting parties. Whether or not the act of delivering 

gas from a gas well or from a pipeline constitutes such 

deliverer a "gas uti+ity" is to be determined by the statutory definition prescribed in Art. 6050. 

APPROVED: 

Willis E. Gresham 

Reviewer 

w. v. Geppert 

Reviewer 

Yours very truly, 

JOHN BEN SHEPPERD 

Attorney General of Texas 

Robert S. Trotti 

First Assistant