-- . . 

THE ,QTTORNEY GENERAL 

OF’ TEXAS 

GERALD C. MANN AUSTIN zi. - 

Honorable John E. Taylor 

Chief Supervisor 

Railroad Commission of Texas 

Austin, Texas 

Dear Sir: Opinion No. 0-853 

Re: Rule to require owner of a tract 

of land to pool and combine with 

other tracts. 

We are in receipt of your opinion request wherein 

you ask us the following questions: 

"1 . Does the Railroad Commission of Texas 

. have the right under the law as it now exists to 

promulgate as a part of its spacing regulations 

and as a conservation measure in a particular 

oil field the following provisions: 'As to ang~'- 

tract containing less than 20 acres, the Commission, in order to prevent waste or to prevent 

the confiscation of property, will grant excep-' 

tions to prevent drilling on such tracts upon 

application therefor as hereinabove providedt 

however, the Commission will not grant an application to drill on a tract or tracts containing 

less than 20 acres unless the applicant has made 

a bona fide effort to pool such tract or tracts 

with a contiguous tract or tracts or parts thereof, so as to establish at least a 20-acre unit. 

In such cases, applicant shall offer, evidence at 

the Hearing on his application concerning iis 

efforts to enter into a pooling agreement. 

“2 . Is the Railroad Commlsslon of Texas now, 

clothed with the legal power to adopt any rule 

which would require the owner or owners of'a tract 

of land to pool or comblne same as a prerequisite 

to granting such owner or owners a permit to drill 

a well for'oil and/or gas thereon even though the 

drilling of same be necessary in order to prevent 

waste or the confiscation of property." 

In an article styled "The Conservation of Oil", 51 

Harvard Law Review 1236, by the Honorable Northcutt Elg, we 

find the following statement: 
Honorable John E. Taylor, May 30, 1939, Page 2 o-853 

"The Texas statute says that 'It is not the intent of this act to require -- that the separately 

owned properties in any pool be unitized under one 

management, control or ownership.' Texas Annotated 

~~;~;;~~Civll Statutes/Vernon's 1937, Article 6Cl4g. 

several cases which have denied exceptions 

to the kpacingrule and thereby prevented drilling 

of *ells on small 'tracts have suggested that a fair 

result could be reached by control of production on 

the adjoining lands. The power of the Commission to 

regulate production in relation to spacing was thought 

favorably settled In the.decislon in Brown-v. Humble 

Oil Company, 126 Tex. 296, 83 S.W. (2) 935, but the 

opinion on'~rehearing, 126 T&x. 296 at 314, 87 S.W. ~~- 

(2) 1069, castsome doubt upon this, and the Commisslon.has indicated that it does not construe the 

original provision as authorlzlng it to require.pool- 

.ing. (Statement of,Chairman Thompson at hea~ring, 

May 17, 1937.)" 

Whlle~we do not contend that such a-departmental 

construction should govern in answering this question, we ,do 

feel that same is .entltled to considerable weight, Is persuasive, and 'should be given our consideration. 

An. injunction against 'production has been detiied in 

some cases unt1l'th.e well owner shall (at some future date) 

shave obtained "the amount of oil he is legally entitled to'; 

that is, "his fair share of the oil in place under his land." 

See Stanolind Cl1 & Gas Company v. Railroad Commission, 96 

S. W. (2) 664; Bumble Cl1 & Refining Company v. Railroad Commission, 85 S. W. (2) 813. 

In 1935 Oklahoma and New Mexico, and in 1936 Louisiana enacted statutes of a new pattern. These statutes whlchh 

have been the subject of considerable favorable attention before trade and proiessional groups, authorize the regulatory 

body to establish in each pool proration units composing a 

uniform number of acres fixed by the area which one well will 

economically drain and develop. Where the slze or shape of 

an individual tract does not conform to that of the standard 

proration unit, "Pooling" of properties can be required. 'By 

Pooling" Is meant an arrangement whereby the owners of small 

tracts club together on the costs of drllling a single well, 

sharing in expense and in the recovery In proportion to their 

acreage. However, these allow the owner of a small tract tb 

drill his well, nothwithstanding failure of his lease to equal 

the size of a proration unit; but In such case he receives 

only an allowable which is proportlonate to the,ratio between 

his area and the area of the standard unit. 
._,- ~I 

: 

Honorable John E. Taylor,'+y 30, 1939, page 3 O-853 

The New Mexico and'iouisia&' statutes make "Pooling" 

available to-owners who, because of the smallness or shape of 

their tracts, might 'be deprived of a fair share of oil in the 

proration unit. The Oklahoma statute permits the' owners of 

one or more smaller tracts in the unit to pool with the owner 

of a ~majWlt,y of~the:tyqWag,e ,xn,the unit ,lf., the latter drills 

a well.. ~'The Oklahoma'.‘atat~te'has.been~upheld bythe Supreme 

Court of Oklahoma in'a,recent case by a blear-cut,'loglcal 

opinion which cites other applicable decisions. Pattersonv. . 

Stanollnd Oil ana Gas Company, 77 Pac. I?) 83 (March 11, 1938). 

Affirmed 59 Supreme Court ~Reporter', ,259. 

,. 

These statutes have 'an interesting background. As 

long ago as 1928 in the &Geof. l4arrs.v~. City of ,Oxfora, 24 F. 

(2) 541, an ordinance of a Kansans ~town which~llmited the drilling of wells to one per city.block.w,as sustained by the Federal Court. ,The ordinance allocated a 1/8th royalty interest 

among ,the land ovners ofa ~~~b1odk:~.in~.proport,ion~to~their acreage andawarded the.r~ht"to,drill~tq,'the;operator holding 

.the"~major,ity ,o.f ,acres;in the: ~bloCk. underleas, :.' It gave ~the 

,other'~laridovners .the right;to'~ oontribute,,to the' c.ost of that 

~811;~ and,to r?ceive.in,ret~n'a:,ahare"Sn th@;working int&rest 

in proportion to acreage;,.,,The case :turnina'onthe validity 

of ~a eitr ordinance'did not~Involve a renulatorg statute although the Court did mention the~doctrine of correl&tive riahts 

in uassinu~.~ :, 

has csus 

A sabse~uent,ae~lsion.by, a Texas Federal Court 

ained an, orderof the Railroad Commission; made in 

conformitv with an ordinanae of the Citr of South Houston, 

oreatl ng drilli ng dlstric.ts of sixteen acres ea&hpo;iz$tiq 

drilling .to.,one well.per'district. and DrOViainR aoollng 

f xoenses~-a~/or.~r,Fodaotion,,amOnR thenroaerties in the dis- 

&igt .along the same.general,lines of ~the ordinance passed 

win Rarrs vi~City~of~'Gxfordl ~~Tysco~:Oil..Company~v. Railroad Commiss'son, 12 F. Supp.'1,95, Agaln, Tysco Oil Company v. 

Railroad Commission, 12 F. Supp.202., 

","The drill.ing district program, invo'lving com- 

~, pulsory localized anltization, is a step'ln the 

direction, of a plan of field-wide unitiza tion in- 

~troduaed to the industrynearly a decade ago. The 

legal and engineering basest for.requlrlng and'effectuatingeompulsorg~unltization~of an entire pool 

seem,capable of demon~strat'ion, but the political 

difficulty of enactme,ntand enforcement have kept 

field-wide compulsory unit~ization in,the blueprint 

,stage." See "The Conservation of.Oil",in Volume 51 

of the.Harvard.%aw Review, 1937-1938,,.at page 1236 

_, by R.orthcuttElg. 

: ~In~T~exaswe do.:.nothave, such a. statute which author- 

&es a,reaylator~ oodv td :eatablish~ in each'pool proration 

~?,., C,>'. i-7 

,.. 
, ._., 

Honorable John E. Taylor, May 30, 1939, page 4 O-853 

units comuosing a uniform number of acres fixed br the area 

which one well will economically drain and develoD. but on 

the' other hand) Article 6014 (g), Revised Civil Statutes of 

Texas, 1923, expressly provides: 

It . . .It is not the intent of this act to re- 

.that the seDaratelr owned DroDerties In 

ooi be unitized under one management. control 

orownershiD." 

While it has been argued by some persons that this 

statute does not directly prohibit enforced pooling In the - 

State of Texas 'by the.Railroad Commission, (see article publlshea..in thee Progress Reports of the American Petroleum 

Institute Committee on Well,Spacing, submitted at the Eighth 

Mid-year Meeting, at Wlchita,.Kansas, May, 1938, on page 8' 

thereof under paragraph B, designated "Pooling of Tracts in 

Lieu ofnExceptions ), ~see 13 Texas Law Review, "The Rule of 

written by Robert B. Rardwicke of FortWorth, Texas, 

'"In ,Texas,many of the difficulties in connection 

'with the spacing rules arise from efforts to get exceptions to the general.rule, ,especially where the 

distribution of~the allowable is on a potential basis,' 

regardless of the',.size of the tractupon whichthe 

~well.is situat,ed. ,Texas Revised Civil Statutes,, ~' 

1925, Article 6014g, as amendedby Texas Lawa, 1935, 

House Bill 782, Par.~2, approved by the Governor April, 

13, 1933, whi&h,reaas inpart: 'It is not the Inten-., 

tion of 'thisact to~reou'ire'reDressurinn f an oil uool 

or that the seuaratslr owned DroDerties $ anv uool 

be unitized under one management. control or ownershiD.' 

This languages appeared in previous acts, and apparently 

for the purpose of protecting some operators from the 

bugaboo of compulsory unit operation for the entire 

pool. In that Connection the article by Vance Rowe, 

~Unltizatlon:Proves Its,elf' ,ln.l9?4,i7'4 011 pekly, 

No. 7, page 19; ,is interesting: llh le the exas a& 

~av have the desired and desirable effect of.Dreventunit oDeration for the entire ~001. it has bea 

forcefullr argued that It also Drevents the Railroad,,~- 

Commission fro%Yenforcinn the ~oolina'of'small or ir,-- 

regularly shaDed tracts with other tracts so that uniiecessarv'wells will not be drilled.~ If there be no 

authority to enforce pooling of tracts.in order to 

carry out a proper and uniform spacing program or a "- 

proration unit program, the Texas act certainly auth; 

oi+iie$~, and almost requires, confiscation of the ,.~ 

smaller-or irregularly shaped tracts., should the spat- 
Honorable John E. Taylor, May 30, 1939, Page 5 o-853 

ing of proration units programs be strictly enforced 

to prevent the waste and hazard of close drilling.'" 

-we are of the opinion, however, that the language of Article 

6014 (g) certainly does not.specifically grant the power to 

enforce poollng and clearly, by innuendo, precludes the enforcement thereof by the Railroad Commission: On the other 

hand, we are of the opinion that Article 6014 (g) as amended, 

defines and denounces "waste" of oil and gas, and that same 

confers upon the Railroad Commission the power to adopt rules 

and regulations to prevent waste. The power thus conferred 

is~ administrative. It is the power t.o enforce, or execute the 

statute; not to extend it. The members of the Commission 

must stay within the statute, %hLch'-goes to the .iurlsdiction." 

Waite v. Macy, 246 ,U. S. 606, 609; RaFlrod Commission v. .~- 

G. H. & S. A. Railway Company, 112. S. W. 353; Sugarland Railway Company v. State, 163 S. W. 1057. 

.- 

The Railroad Commission may adopt reagonable regulations to enforce the statute, but cannot go beyond it. 

We submit that if such an important change in pol-icg 

is to be adopted, tt must be adopted by the Legislature. ltself, if indeed, under the situation, it can be adopted at 

all. 

It is settled. law that the power to promulgate 

"rules and regulations" for the purpose Of enforcing-or executlng a statute is not legislative. United Statesv. 

United Verde Copper Co., 196 0. S. 20 7-215, but on.the other 

hand it has been repeatedly hela that the limits of the 

Railroad CosWssfon's power is to regulate and~not to abridge 

or enlarge; see Railroad Company v,. UnitedStates, 188 F. 

X91-195; 

"'If the power here granted to promulgate, 

rules and regulations has been validly granted, 

It is simply the power, "to make and enforce regulations for the ,execution of a statute according 

to its terms.' It Is not the power to tiodify exlsting rules of law.!' 

The true rule' on this subject i's very carefully -. 

stated in St. Louis Merchants' Bridge Company v. United States, 

188 Federal 191, opinion by Judge Sanborn of the Eighth Circult Court of Appeals, one of the ablest of the Fed.eral Judges, 

as follows: 

'The Congre'ss did not in fact~delegate, and 

it could not delegate, to the Secretary of Agri- 
Honorable John E. Taylor, May 30, 1939, page 6 O-853 

culture, or to any other executive officer the 

power to a&a to the class of railroad companies 

or to the acts punishable under this statute such 

others as Ln his judgment ought to be punishable 

thereunder. 

"A legislative body-may delegate the power 

to find some fact or situation on which the operatlon of a l&w is conaltloned or to make and enfbrce regulations for the execution bf a statute 

according to its'terms. Unions Bridge Company v. 

United States, 204 U. S:364, 386, 27 Sup. Ct. 

357;51 Ii; Ed. 523. -MarshaPl~Fi.eld & Compan 

Clark, 143 U. S. 649, 677, 693, 12~Snp: Ct. $9";; 

36 L. Ea; 294; Caha v. United States, 152 U: S.' 

211, 218, 219, 14 Sup. Ct. 513, 38 L. Ed. 415; 

St:Louis & I. Ea:Ry. v. Taylor, 210 U.S. 281; 

287, 28 sup. Ct. 616, 52 L. M. 1061; Coopers-. 

ville Cooperative creamery company v. Lemon, 163 

Fed. 145, 147, 89 C. C. A. 595.. 

But it cannot delegate Its legislative power, 

its power to exercise the indlapensbble discretlbn 

to make, to add to, to take from, or to modify the 

law. 'The true distlnctlon,t', sald'Judge Ranney -- 

for the Supreme Court of 0hl.o ln Clnclnnatl, Wilmlngton & Zanesvllle R. R. Company v. Commissioners, 1 

Ohio-St.. 77, 88, in a declaration which has been-- 

r&eateiily apprbvea by the Supreme Court, 'is be; 

tween the delegation of power to make the law, which 

necessarily involves a discretion as to what It shall 

be, and conferring authority or discretion as to Its 

exception, to be exercised under an& In pursuance '.- 

\ of the law. The first cannot be done. To the latter no valid objection can be made: Marshall Field 

& Company v. Clarki 143 U. S. 649, 693, 12 Sup. Ct. 

495, 33 L,. Ed. 294i:.Union Bridge Company v:United 

Statea, 204.0. 9. 364, 382, 27 Sup. Ct.. 67 .51 L. 

523;~Morrlll v. Jones, 106 U. S. 46 i? , 467 1 

ct. 423, 27 L. Ea:267; United States'v. &ton, 

u. s. 677, 687, 688, 12 sup. Ct. 764, 36 L. Ed. 

591; Unlted States v. Maid (D.C.) 116 Fed. 650.;" 

Unit& Sttites v. Blasll 

United States v. Hoover Y 

ame (D.C.) 116 Fed; 654; 

D.C.) 133.Fed. 950, 952; 

United States v. Moody (D.C. .164 Fed. 269, 271-' 

Locke's Appeal, 72 Pa. 491, 1 98, 13 Am. Rep. 716. 

Therefore, answering your last question firs%--it 

is 'dur opinion, and you may be so advised, that the Ra%lroad 

Commission of Texas has no authority, conferred upon'lt, under 

the present statutes which will enable kt to make such ref3uls- 
Honorable John E. Taylor, May 30, 1939, page 7 o-853 

tory orders that would requFre the owner or owners of a tract 

of.lana to pool or combine same with other tracts as a prerequisite to grantMg such owner or owners a permit to drill 

a well for oil and/or gas thereon even though the drilling of 

same be necessary in order to prevent waste or confiscatLon 

of property. 

Having answered your second. question in the negative 

'. land being of the opinion that an administrative body is precluded from doing that j.ndirectly which it cannot do directly, 

we also answer your first question 1n the negative. In aaaition to the'authorities we have already cited, we,feel that 

we may be justlfled Fn making the following observations with 

reference thereto: 

If the Railroad Commission were to enter an order 

to the effect: 

"'The'Commisslon will not grant an appllca- 

., 

tion to"arill on a tract or tracts containing 

less than 20 acres unless the applicant has made 

a bona fide effort to pool such tract or tracts '. 

with a contiguous tract or tracts orparts thereof, 80 as to extablish at least a 20-acre unit. 

In such cases, applicant shall ,offer evidence 

at the hearing one his applLcatLon concerning his 

efforts to enter into a pooling agreement." 

then and in that event, it is our opinion that the effect of 

such an order would be that the Commlssion'would be imposing 

a rule affecting the title to property and being a regulation 

on the use of property. Such a regulation coulanot be inposed without an express delegation of statutory authority 

from the Legislature to the Commission, giving it power so 

t0 do. 

We further submit that the effect of such an order 

would be to permit the Railroad CommissFon to pass upon the 

reasonableness of the proposed pooling contract, sought to 

be entered into by the applicant and in the absence of express legislative authority granting the Commission the power 

so to do,~we are of ~the opinion that in so doing the Commission would be in fact exceeding its delegated authority and 

would be wholly without jurisdLction in so acting. 

.In the case of United States v. 11,150 Pounds of 

Butter, 195 F~. 657-644, the court held that a forfeiture ofproperty could not be validly claimed on account of a viola=- 

tion of an administrative order or regulation where the controlling statute aid not SO provide. 
Honorable John E. Taylor, May 30, 1939, page 8 O-853 

This case follows the theory that the legislative 

policy in respect to the consequences flowing from a violation of an admlnistratlve regulation must be declared by the 

Leglslature itself. 

St is our opinion that if the Legislature haad intended to grant the Railroad Commission authority to impose 

such regulatory orders - that intention could have been 

easily stated - and 7% is necessary that it should have 

been stated. (See) Eaton v. United States, 144 0. S. 677. 

Trusting that this satlsfactorlly answers your 

question in the premises, we remaln 

Yours very truly 

ATTORNEY GENERAL OF TEKAS 

By s&ar Gale 

Edgar Cde 

Assistant 

EC :MM:wc 

APPROVED: 

S/Ge~ala C. Mann 

ATTORl?EYGEIiERALOF~S