16 Tex. Admin. C od e § 3
. 3 7 (2008) ( Tex. R.R . Comm’n, St atewide Spacing Rule) 1 (“ Rul e 37 ” ). B e c a

us e the re le va

nt p or tio ns of Rul e 37 have no t c ha

ng e d d ur ingthe pe nd e nc y of

thi s appea l, we cite to the c urre nt rule for convenie nce unle ss otherwise noted. 

### TEXA S C OU R T OF A PPEAL S, THIR D DIST R ICT , AT AU STIN

NO. 03-0 4 -00 027 -CV

Anadarko E &P Com pany, L .P . f/ k/a RME Pe trole um Com pany; Larry T. Long, S am m y Adam son an d L. All an Lon g, in their Capacities as Trustees for the Lawrence Allan Long T rust, Charles Edw ard Long T rust, Larry Thom as Long T rust and Joh n Steph en Long T rust , Appellan ts
v. Ra i l ro a d Co mmis s i o n o f T ex a s ; A n a d a rk o E &P C o mp a n y , L . P. f/ k/a RME Pe trole um Com pany , Appellees

F ROM THE DISTRICT CO URT OF TRAVIS COUNTY , 200TH JUDICIAL DISTRICT NO. GN20446 1 , HO NORAB LE LORA J. LIVI NGSTON , JUDGE PRESIDI NG

M E M O R

A N D U M O P I N I O N This administrative appea l involves a cha lleng e to a f inal order

issued by

the Texas Railroad Co m m i s s i o ngra n t i n g a w el l -s p ac i n g ex ce p t i o nu n d er S t at ew i d e Ru l e 37 to appellant 1 Anada rko E& P Company , L .P. f /k/a RME Petrole um Company
. On appea l, A nadark o ra i s es
s ev er al p ro ce d

u ra l ch al l en ges t o t h e C o m m i s s i o n ’s fi n al o r d e r , a n d ap p el l an t s L arry

T
. L o n g, Sammy Adamson, and L . Allan L ong , in their ca pacities as trustees for

the L awr ence Allan L ong Tr us t, C ha rl e s E dw ard

L on g Tr us t, L arr y Th oma s L on g Tr

us t, a nd JohnSte ph e n L on g Tr

us t (collec tively

the “L ong Trusts”), a

rgue that the Commission’s order wa s not supported by substantialThe Commission i ssued a nunc pro t unc orde r on Nove mber 13, 2002, c orre cting two 2 cler ical er rors in its previous orde r. 2 evidenc e. Be cause we find no merit in A nadar ko’s proce dural challeng es and we co n cl u d e the Commi ssion’s final order was supporte d by

substantial evidence , we a ffirm the district court’s judgme nt affir

ming the Commission’s order.
BACK GR OUND The Commi ssion issued a final order g ranting a per mit for the B arksda le Well No. 8 on September 12, 2002. Com mis sio n s ta ff had prev io us ly

g ra nte d a pe rm it f or Wel l N o. 8 to 2 Anada rko’s pre dece ssor, which wa s challeng ed by the L ong Trusts for la ck o f notice. In its final order , the Commiss ion de termined that the orig inal permit, g rante d administratively by Commi ssion staff w ithout protest, was void ab ini tio be c a us e the L on g Tr

us ts fa ile d to re c e ive no tic e of the pe rm it application in ac corda

nce w ith Com mission rules. Upon pr oper notice and hea ring , the Commiss ion g rante d an ex ception to the spac ing r equire ments under Rule 37 to pre vent waste and issued a ne w permit for Well No. 8.
The Origi nal Pe rmit An a da rk o’ s p re de c e ssor UP RC app lie d to the Com mis sio n f or a pe rm it t o d

ri ll Well No. 8 in 1997. As part of its application, UPR C reque sted a Rule 37 exception and submitted a conditional wa iver of obje ction from Sonat Expl oration. The plat attache d to UPRC ’s application
err oneously

identified the off

set lease h o l der a

nd operator as Sonat Expl oration, instead of the L ong Trusts. Given the c onditional nature of th e wa iver e x ecute d by Sonat Ex ploration, the3

Commi ssion sent notice of UPRC’s Rule 37 application to Sonat Ex ploration on J anuar y 9, 1998. Th e Com mis sio n r e c e ive d no ob je c tio n to UPR C’ s a

pp lic a tio n w ith in t

he re qu isi te te n- da

y tim e period and, theref

ore, Commission st aff

g rante d UPRC an administ rative Rule 37 e x ception as allowed unde r subsec tion (h)(2)( A). See 16 Tex. Admin. Code § 3.37(h)(2) (A). I n the abse nce of an objec tion, t h e C ommissi on did not hold a hear ing or rec eive e vidence reg ardingUPRC’s application. UP R C co m p l et ed the well in J une 1998 af ter re ceivingapprova l of its Rul e 37 application fr om Comm ission st aff
. The Lo ng T rus ts’ Compla int On May 23, 2001, the L ong Trusts filed a c omplaint with the C o m m ission on the g round that they

failed to re ceive notice of UPRC’s application for a Rule 37 e x ception for Well No. 8. The Com mission set the m atter for hearing and conducted an administrative hea ring on the complaint. Duringthe hea ring , the Commiss ion also considere d whether the well was e ntitled to a Rule 37 exception.

Be cause no one disputed that the L ong Trusts wer e entitled to re ceiv e notice under Rule 37 and UPR C had failed to g ive not ice of its application for a Rule 37 exception to the L on g Tr us ts, a ma jor fo c us of the a dmi nis tr a tiv e he ari ngwa s w he the r t he or ig ina l per

mit wa s v oid
or voidable. Anada

rko argued that the per

mit was merely

voidable bec ause e vidence was submitted that the L ong Trusts had ac tual knowledg e of the proposed locat i o n fo r Well No. 8 befor e it was dr ill e d. Th e L on g Tr

us ts a re a wo rk ingint e re st own er in W ell No. 8 a nd , in thi s c a pa c ity , U PRC sent the L ong Trusts an appr oval for e x penditure ( “AF E”) w ith well location plats showing that the proposed location for Well No. 8 would require a Rule 37 ex ception. The L ong Trusts signe d the4

AFE in March 1998. Thus, Anada rko ar g ued that the L ong Trusts’ sig ning of the AF E demonstrate d actua l knowledg e of U PRC ’s application for a Rule 37 e x ception and, t here fore , cure d any defe ct in notice. Howe ver, like the plat submitt ed with U PRC ’s application to the Commi ssion, the plat sent to the L ong Trusts failed to identify the L ong T ru s ts as the offse t operator to the west of the portion of the unit wher e Well No. 8 was drilled.

The he aring s examiner s is s u e d a p r o p o s a l f

o r d e c is io n r e c o mm e nding that the orig inal permit be de clar ed voidable, not void, bec ause the L ong Trusts had ac tual knowledg e of th e proposed
we ll lo c a ti o nan d

d id n o t f il e a ti me ly c o mp la int w it

hth e Co mm is s io n . T h e h e ar in g s e xaminers fu rt he r re c omm e nd e d that the Com mis sio n g ra nt a Rul e 37 e xce pti on fo r Wel l No . 8 on th e basis that the well is nec essar

y to preve nt waste. The Commission considered the pro p o s al for decision in a public confe renc e on Se pte mbe r 1 2, 20 02 , a

nd re je c te d th e he arings ex ami ners’ re c omm e nd a tio n in pa rt . Co ntr ary

to the re commendation, the Commission vot ed to dec lare the permit void ab ini tio beca use the L ong Trusts did not rec eive notice of UP RC’s application as require d by the pl ain l anguag e of Rule 37. Th e Com mis sio n a do pte d th e e xami ne rs ’ r e c omm e nd a tio n to g ra nt a Rul e 37 ex c e pti on

fo r We ll No. 8 to preve nt waste. Those commissioners who wer e pre sent signe d a fina l order.

Al th ou gh repr esen tat iv es o f t he L on g Trus ts were p res ent at t he C om mi ss io n’s p ub lic confe renc e on September 12, 2002, they

wer e not g iven a copy of the Commission’s si g ned orde r. The re cord re fl ec t s t hat later that day Commi ssion staff fax ed a c ourtesy copy of the orde r to the attorney s for Ana darko a

nd the L ong Trusts. The ne x t day , September 13, 2002, the Commi ssion mailed a c over le tter and a copy of the fina l order to the attorn ey s of re cord in the a dminist rative5

p r o c e e d i n g . T h e a t t o r

n e y f o r t h e L o n g T r

u s t s r e c e i v e d

t h e c o v e r l e t t e r an d f i n a l o r d e r o nM o n d ay, September 16, 2002.
Mo tio ns f

or Re he aring Anada r k o f il e d it s mo ti o nf

o r r e h e ar in g o nO c to b e r

2 , 2 0 0 2
. T h a t s a me d ay , a f te r
rec eiving Anada

rko’s motion for re hear ing, the L ong Trusts filed a le tter with the Co m m i ssion
r e qu e s t i n g t h a tt h e C o m m i s s i o nr e v i s e i t s f i n a l o r d e r an d d e n y t h e R

u l e 3 7 e x c e p t i o n . T w o d ays later, on O ctober

4, 2002, the L ong Trusts filed a f ormal docume nt specifica lly labeled a s its mot ion for r ehea ring . L ike the letter

filed on Oc tober 2nd, the Octobe r 4th motion asked the Commissi on to rec onsider its fi nal orde r and de ny the Rule 37 exception. Rely ing upon the date it mailed the copies of the final orde r, the Commission considered both Anada rko’s motion for re hear ing a nd the L ong Trusts’ motion for re hear ing f iled on October

4th to be timely

filed.
Nunc Pro Tun c Orde r

On Novembe r 13, 2002, the Commission denied the parties’ motions for r ehea ring and issued a nunc pro tunc orde r cor rec ting two c lerica l error s in its previous order. The Com mis sio n c or

re c te d the y e ar of

the he ari ngfr om “ 20 02 ” to “ 20 01 ” and , b a se d o n th e e vid e nc e in the re cord, the Commi ssion corr ecte d the y ear that the L ong Trusts lear ned about W ell No. 8 from “1988” to “ 1 9 9 8
. ” F o ll o w in g th e is s u an c e o f th is nu n c p r o tu

n c o r d e r , A n a d ar

k o f il e d a s e cond
m o t i o n fo r re h earing . The he aring s examiners advised the pa rties by letter that the nunc pro tunc order corr ecte d only cler ical err ors and that the Commi ssion no long er ha d jurisdiction to act on the
m at t er . T h e C o m m i s s i o nt h er ef o re t o o k n o ac t i o no nAn ad ark o ’s s ec o n d m o t i o nfo r r eh ea ri n g.The district c ourt also signe d an order denying Anada rko’s plea to the ju ri s d i ct i o n and, 3 there afte r, ente red f

indings of f

act a nd conclusions of lawreg arding its denial of the plea. The parties do not appe al from the district c ourt’s denia l of Anada rko’s plea to the jurisdiction. 6 App e als in D ist

ric t Co urt Anada rko and the L ong Trusts filed sepa rate appea ls from the Commissi on’s final orde r issued September 12, 2002. The district c ourt signe d an ag ree d order consolidating the two appea ls. There afte r, the district c ourt enter ed final judgme nt a ffirming the C o m m i s sion’s final orde r. Anada

rko and the L ong Trusts appea l the di strict court’s final judgme nt aff irming the 3 Commi ssion’s final order
.
DI SCU SSIO N

On appe al, Anada

rko ra ises nine i ssues. I n g ener al, Anada rko fa ults the Comm ission fo r d e c lari ngthe or ig ina l pe rm it v oid , n ot vo ida ble , and fo r c on sid e ri ng wh a t it vie ws a s an unti me ly mot ion fo r r e he ari ngfi le d b y

the L on g Tr

us ts. F or the ir pa rt , the L on g Tr

us ts c ha lle ng e the me ri ts of the Commission’s order ar g uing that the Commi ssion applied the wrong leg al s tandar d in gr anting a Rule 37 exception and that the Commission’s order wa s not supported by substantial evidence
. Stan dard of Revie w

We reviewthe Commiss i o n ’s fi n al order under the substantial evidenc e rule
. See Tex. Gov’t Code Ann. § 2001
. 1 7 4 (W es t 2008). Unde r the substantial evide nce r ule, we g ive signific ant defere nce to the age ncy in its field of e x pertise. Railroad Comm’n v. Torch Ope rating Co. , 9 12 S.W. 2d

79 0, 79 2 (T e x. 19 95 ); Te x as He alt h F ac ili tie s Co mm ’n v . Ch ar te r M

e d. -D all as , Inc. , 665 S.W .2d 446, 452 (Tex. 1984). We presume that the ag ency ’s order i s v al i d and that7

its findings, infer ence s, conclusions, and deci s ions are suppor ted by substantial evidence
. City of El Paso v. Public Util. Comm’n , 8 83 S.W. 2d 17 9, 18 5 ( Te x. 19 94 ); Charter Med. , 6 6 5 S.W .2d at 452. The c omplaining pa rty has the burde n to overc ome t h is presumption. City of E l P as o , 88 3 S. W.2 d at 18 5; Hammac k v. Public Util. Comm’n , 13 1 S.W. 3d 71 3, 72 5 ( Te x. Ap p. —Aus tin 2004, pet. denied)
.

I n conductinga sub s t an tial evidence revie w, we ma y not substit ute our judg ment for that of

the ag ency

on the weig ht of t h e evide nce on que stions commit ted to the ag ency ’s dis c re tio n. Te x. Go v’ t Cod e Ann. § 2 00 1. 17 4; Charter Med. , 6 65 S.W. 2d a t 45 2; H.G. Sledge

, Inc. v. Prospective Inv. &Trading Co., Ltd. , 36 S.W .3d 597, 602 (Tex. A pp.—Austin 2000, pet. denied). Th e iss ue f

o r t h e r e v i e w i n g c o u rti s n o tw h e t h e r w e b e l i e v e t h e a g e n c y ’ s d e c i s i o nw a s c o r r e c t, but whether

the re cord de monstrates some re asonable basis for the ag ency ’s ac tion. Charter Med. , 66 5 S. W.2 d at 45 2; Central Power & Ligh t Co . v. Public Util. Comm’n , 36 S.W .3d 547, 561 (Tex. App.—Austin 2000, pet. denied). We will uphol d the ag ency ’s orde r unless the a g ency ’s decision is not rea sonably supported by

substantial evidenc e, in violation of a c onstitut ional or statutory provision, in excess of t he age ncy ’s s tatutory authority , made throug h unlawful proc edure , aff ecte d by other e rror of law, arbitra

ry or ca pricious, or c hara cter ized by an abuse of discre tion. See Tex. Gov’t Code Ann. § 2001.174(2)( A)-( F)
.

Certain issues raised by

the par ties involve questions of statutory construction, which
we r eview de novo
. See, e .g. , City of San Antonio v. C ity of Boerne , 111 S.W .3d 22, 25 (Tex. 2003) (appe llate courts revie w matters of statutory construction de novo ); In re Hum phreys , 880 S.W .2d 4 0 2 , 4 0 4 ( T e x. 1 9 9 4 ) ( qu e s ti o n s o f la w ar e a lw ay s s u

b je ct to de novo revie w). When construing8

a s tatute , o u r p r im ar

y g o a l is to d e te r

mi n e an d g iv e e f

f e c t to th e le g is latu

r e ’ s inte n t. City of Sa n A nto nio , 111 S.W .3d at 25. To deter mine leg islative intent, we look to the statute as a whole, as opposed to isolated provisions. State v. Gonzalez , 8 2 S. W.3 d 3 22 , 3 27 (T e x. 20 02 ). We b e g in with the pl ain l anguag e of the s tatute at issue and apply its common meaning
. City of S an An ton io , 111 S.W .3d at 25. Where the statutory text is unambiguous, we adopt a construction supported by the statute’s plain languag e, unless that construc tion would lead to an abs urd re sult. Fleming Foods of Tex., Inc

. v. Ry lander , 6 S.W. 3d 27 8, 28 4 ( Te x. 19 99 ). We g ive se ri ou s c on sid e ra tio n to an ag ency ’s interpre tation of the statutes it is c harg ed with e nforc ing, so long a s that interpre tation is reasona

ble and c on s istent with the statutory lang uag e. Tarra nt A

pp ra isa l D ist . v . M

oo re , 84 5 S. W.2 d 8 20 , 8 23 (Tex . 1 99 3) ; Steering Comms. for the Cities Served by TXU Elec. v . PUC , 42 S.W. 3d

29 6, 30 0 ( Te x. Ap p. —Aus tin 20 01 , no pe t.)
. Th is is pa rt ic ula rl y tr ue wh e n th e statut e involves a complex subject matter. Steering Comms. f or Citi es , 42 S.W .3d at 300. Courts, however ,

“ do n o td e f

e r t o a dm i n i s t r a t i v e i n t e r

p r e t a t i o ni nr e g a

r d t o qu e s t i o n s w h i c hd o n o tl i e w i t h in administrative expertise, or de al with a nontec hnical question of law .” Ry lan de r v . F ish e r Co ntr ols Int’l, Inc

. , 45 S.W .3d 291, 302 (Tex. App.—Austin 2001, no pet.).

Additionally , cer

tain issues raised by

the par ties challen ge t h e Commissi on’s auth o r it y . T h e T e xa s Ra il r o a d

Co mm is s io n“ is a

c r e a tu r e o f th e L e g is latu

r e an d h a s n o inh ere nt authority .” Public Util. Comm’n v. GTE-SW Corp. , 901 S.W .2d 401, 407 (Tex. 1995). L ike other state a dmi nis tr a tiv e a g e nc ie s, the Com mis sio n “ ha s o nly tho se po we rs that th e L e g isl a tur e e xpre ssl y confe rs upon it” and “any implied powe rs that are nece ssary to car ry out the express responsibilities g iven to it by

the L egi s l at u re .” Public Util. Comm’n v. City Pub. Serv . Bd. , 53 S.W .3d 310, 316Section 81.051 of the natura l r esourc es code provides in re levant par t: “The c ommissi on 4 has jurisdiction ove r all . . . oil and g as we lls in Tex as.” Te x . Nat. Res. Code Ann. § 81.051( a)( 2) (West 2001). 9 (Tex. 2001). I t is not enough that the power claimed by

the Comm i s s i o n be re asonably useful to the Commi ssion in dis ch argingits duti es; the powe r must be either expressly

confe rre d or
nece ssarily

implied by

statute. The a g ency

may not “exercise what is eff ec t ively a new power , or a powe r contra dictory

to the statute, on the theory that such a power is ex pedient for

administrative purposes.” Id.
Statu tory Schem e and Rul e 37 We p ro vid e a

br ie f o ve rv ie w o f t

he re le va nt s tatut ory sche me to g ive c on te xt to the pa rt ie s’ argume nts . T he le g isl a tur e ha s g ive n the Com mis sio n excl us ive jur isd ic tio n to r e g ulate oil and g as we lls in Tex as. See Tex. Nat. Res. Code Ann. § 81.051(a )(2) (West 2001). Pursuant 4 to this authority , the Commiss ion has adopted va rious rules re g ardingthe drilling a nd spacing of oil an d gas wells in Texas, including Rule 37—the Statewide SpacingRule. Se e ge ne ra lly 16 Te x. Ad

min . Co de §§ 3. 1- .1 06 (2 00 8) . In r e le va nt p art , Ru le 37 pr ov ide s:
No well for

oil, ga s, or g eothermal resourc e shall her eaf ter be drilled nea

rer than 1,200 fee t to any well completed in or drill ing to the s ame horiz on on the same tra ct or fa rm , a nd no we ll sh a ll be dr ill e d n e are r t ha n 4 67 fe e t to any

pr op e rt y lin e , le a se lin e , o r s u

b d i v i s i o n l i n e ; p r o v i d e d t h e c o m m i s s i o n i n o r d e r t o p r e v e n t w a s t e o r t o pr e ve nt the c on fi sc a tio n of pr op e rt y , may g ra

nt e xce pti on s to pe rm it d

ri lli ngwi thi n sh or te r d ist anc e s.
16 Tex. Admin. Code § 3.37. Rule 37 further provides that when an exception to the s p acing
re qu ir e me nts is d e sir e d, the a pp lic ant s ha ll f

ile an a pp lic a tio n w iththe pr op e r f e e s and a tta c hme nts10

as pre scribed by

the rule. Id. § 3 .3 7( a )( 2) . T he a pp lic a ti on mu st inc lud e a plat th a t c on fo rm s to the requirements i n subsection (c ) of Rule 37. Id. § 3.37(c) . I n addition, the applicant must file a list of the mailing addresse s of all aff ecte d persons as identified i n subsection (a )(2) (A) of the rule. Id. § 3.37(a) (2)( A). The purpose of this li st is to allow the C o m m i s s i o n t o g ive notice of the application to all aff

ecte d persons. See Tex. Nat. Re s. Code Ann. § 85.205 (West 2001) (r equiring the Commi ssion to provide notice and an opportunity for hear ing)
. Rule 37 also require s a per son acqua inted with the facts pertinent to the application to cer tify that all fac ts stated in the application
are true a nd within the knowledg e of that person. 16 Te x . Admin. Code § 3.37(a) (2). Commi ssion staff may

g rant a n admi nistrative appr oval of a n application for exception if notice of at least ten day s has bee n g iven and no protest has been f iled or written wa ivers of objec tion are r ece ived from a ll persons to whom notice would be g iven under the rul e. Id. § 3.37(h)( 2). I f a pr otest is filed, the Commis sio n wi l l h o l d a hea ring on the application for exception. See Tex. Nat. Res. Code Ann. § 85.205; 16 Tex. Admin. C ode § 3.37(a )(3)
. A n a d a r k o ’ s C l a i ms Cha lle nges to Com mi

ssi on Au tho rit

y We turn first to Anada

rko’s c laims that the Commi ssion erre d in declar ing the initial permit void. I n its second, third, fourth, and fifth issues, Anadarko c halleng es the Commission’s authority to rec onsider the issuance of the orig inal permit on the g rounds that: the proce edingwas
an im pe rm iss ibl e c oll a te ra l atta c k o n a fi na l Co mmi ssi on

or de r; the Com mis si on la c ks a uth or ity to reviewthe orde r g ranting t h e o ri g inal permit; and, eve n if the Commissi on could re view the final orde r g rantingthe per mit, the Com mi s s i o n erred in fa iling to consider and g ive ef

fec t to the11

equitable de fense s of lache s, estoppel, waiver , and ratification, a nd, there fore , the Commiss ion erre d in declar ing the permit void and not voidable.

We rejec t Anadar

ko’s ar g ument that the Co m m i s s i o n proce edingwas a n im p e r mi s s ib le c o ll a te r a l a tt a c k o n a f in a l Co mm is s io n o r d e r . B o th th e T e xa s Su p r e me Court and thi s Co ur t ha ve re c og nize d that the Com mis sio n ha s statut or y a uth or ity in c e rt a in c ir c ums tanc e s to
rec onsider it s prior orders i n oil and g as matters. See M agnolia Petroleum Co. v. New Proce ss Prod. Co. , 104 S.W. 2d 11 06 , 111 0- 11 (T e x. 19 37 ); Sexton v. Mount Olivet Cemete ry Ass’n , 720 S.W .2d 129, 139 & n.5 ( Tex. App.—Austin 1986, writ ref’d n.r .e.) ( d is cussing power of ra ilroad commission t o re co n s i d er

p ri o r o rd er s an d

ci t i n g Magnolia Petroleum Co. v. New Proce ss Pr od. Co. , su

pra ; Ra ilr oa d Com m’n v . A lum inu m C o. of A m. ( “ALC OA ”) , 380 S.W .2d 599, 602 (Tex. 1964) (holding commission may

modify proration orders “ wher e conditions have change d materia lly , new a nd unfore seen pr oblems arise or mistakes are discovere d.”)) . I n Magnolia Petroleum Co. , th e su pr e me court c onsidered whether the Commiss ion had authority to rec onsider its previous denia l of a Rule 37 exception and held that, althoug h the Co mmissi on was without authority to reviewor set aside judicial de cre es, the Commission had authority to rec onsider its own order s upon a showing of cha ng ed cir cumstance s. Magnolia Petroleum Co. , 104 S.W .2d at 1110. In Railroad Commissi on v. ALCOA , the supreme court c onfirmed that “ the Commiss ion’s power to regulate oil and g as production i n t h e interest of c onservation and protec tion of corr elative r ights is a c ontinuing one and its order s are subject to cha ng e or modifica

tion where . . . mistake

s are discove red .” 380 S.W.2d at 602 (empha sis added) . I n Sexton v . Mount Olivet Ceme tery Association , this Court discussed the Com mis sio n’ s a

uth or ity to r e c on sid e r i ts p ri or

or de rs in li ght of the su

pr e me c ourt ’s ho ldi ng s in12

Magnolia Petroleum Co. , su pra and ALCOA , su

pra , and conc luded that t h e statutes administered by the ra ilr oa d c omm iss ion g ra nte d the Com mis sio n the po we r to se t a sid e its pr e vio us or de rs in o il and g as matters. 720 S.W.2d at 139 & n.5. This Court explained:
I n eac h of these decisions, the statute involved (Tex. Re v. Civ. S tat. Ann. ar t. 6049c, §§ 5, 7, now codifie d as Tex. Nat. Res. Code §§ 85
. 0 49-.053, 85.058-.064 ( 1978)) a lm o s tam o un t e d

t o ane xp r e s s d e l e g a t i o nt o t h e C o m m i s s i o no f a p o w e r to rec onsider its previous orders i n oil and gas matters, for it direc ted t he Commissi on, on complaint or on its own “initiative,” to inquire “ from time to time ” into any aspec t of the oil and g as business to deter mine, afte r hea

ring , whether

“wa ste” wa s occur ring or wa s imminent and to issue whateve r “r ule, re g ulation or order ” may be “re asonably

require d to corre ct, pre vent or lesse n such wa ste.”
Id. The statutes in question have not chang ed. Section 81.051 of the natural re source s
c od e g ra nts the Com mis sio n e xclu siv e jur isd ic tio n o ve r o il a nd g a s w e lls in T e xas. Te x. Nat. R e s. Code Ann. § 81.051. Section 85.201 authorizes the Commission t o make a n d en fo rce rules and orde rs for the conser vation of oil and g as, the pre vention of wa ste o f oil and g as, and,
corr esponding ly , the protec tion of corr elative r ights. Id. § 85 .2 01 (We st 20 01 ); see Se xton , 720 S.W .2d at 139 n.5. In addit ion, section 85.058 g ives the Commissi on authority to inquire “whe ther the oil and g as conse rvation laws of this state or the rules a

nd order s of the [C] ommissi on promulg ated unde r those laws a re be ing violate d.” Id. § 85.058 (West 2001) . And sec tion 81.053 g ives the Commissi on express aut hority to “hea r and de termine c omplaints.” Id. § 81.053 (West 2001). Fur

thermore , section 85.205 ser ves th e co n s tituti onal and leg islative objective of protec ting c orre lative rights by requiring that no Commi ssion rule or order may be adopte d without “notice or hear ing a s provided by

law.” Id. § 85.205.We emphasize that our holding toda y does not stand for the g ener al proposition that 5 an administrative ag ency

has the inher ent authority to rec onsider its prior adjudicative order s. See Sexton v . Mount Olivet Ceme tery Ass’n , 720 S.W .2d 129, 139 & n .5 (Tex. App.—Austin 1986, writ ref ’d n.r.e .). Whether a

n ag ency possesses s u ch au t h o rity must be considere d in light of the statute t h at vests the ag ency with administrative power
. Id. at 138 (a g encie s have no inhe rent authority ). To the extent Anadar

ko relies on Sp ro le

s M oto r F re igh t Lin e v . S

mi th , 130 S.W .2d 1087 6 (Tex. Civ. App.—Austin 1939, writ ref ’d), a nd Public Utility Commission v. Brazos Electric Power Cooperative , 7 23 S.W. 2d 17 1 (Te x. Ap p. —Aus tin 19 86 , w ri t r e f’ d n .r .e .) , in su pp or t of its c la im that the Commiss ion lacks authority to reviewits prior order s, we find those ca ses distinguishable. Unlike the Commissi on’s authority in this case, Sproles did no t in vo lve the Com mis sio n’ s a uth or ity in o il a nd g a s matte rs , b ut i ns te a d c on c e rn e d th e g ra nti ng of an applic a tio n f or a c e rt if ic a te of c o n v e n i e n c e an d

n e c e s s i t y t o o p e r a t e m o t o r

tr u c k s a s a c o m m o nc ar

r i e r o nT e xa s h i g h w ay s. 130 S.W .2d at 1087. Simil arly , Brazos Electric Power Cooperative involved an entirely differ ent a g e nc y —n a me ly , th e pu

bli c uti lity c omm iss ion , no t the ra ilr oa d c omm iss ion —a nd thu s an e nti re ly differ ent statute. 723 S.W.2d at 173. 13

The Commission proceedingat issue involv ed a h ea ring and dete rmination of the L ong Trusts’ complaint that the administrative appr oval g rante d by Commi ssion staff wa s g rante d in violation of the Commi ssion’s rules re g ardingoil and g as conse rvation, the pre vention of wa ste, and prote ction of cor

relative rig hts—in particular that the L ong Trusts wer e depr ived of “ notice and hear ing a s provided by

law” unde r Rule 37. B ased on the prec edents of both the supre me cour t and thi s Co ur t in te rp re tin g the Com mis sio n’ s st a tut or y a uth or ity , w e c on c lud e that the Com mis sio n, in the abse nce of

judi ci al re v i ew of its prior orde r, has statutory authority to rec onsider its prior
a dmi nis tr a tiv e or de r g ra

ntingthe or ig ina l Ru le 37 e xce pti on to U PRC. See M

agnolia Petroleum 5 Co. , 1 04 S.W. 2d

a t 11 10 ; ALCOA , 380 S.W. 2d a t 60 2; Sexton , 720 S.W .2d at 139 & n.5. We further conclude that the proc eedingwas not an imper missibl e collateral attack on a final Comm ission order
and that th e Com mis sio n a c te d w ith in i ts s tatut or y a uth or ity to co ns ide r t

he L on g Tr

us ts’ c omp la int
. 6 We o ve rr ule An a da

rk o’ s se c on d a

nd thi rd iss ue s.14 I n its fourth issue, Anada rko complains th at the Commissi on err ed in dec laring the or ig ina l pe rm it v oid

ra the r t ha n me re ly vo ida ble . A na da

rk o is c on cern ed with what it te rm s the retroa ctive eff

ect of the Commi ssion’s pe rmit r evocation—i.e., that its production under the ori ginal perm it was il legal fro m i ts in cept io n. Ana dark o fr ame s t hi s ar gumen t i n j uri sd ict iona l te rm s. Ac c or din g to A na da

rk o, be c a us e the or ig ina l pe rm it w a s v a lid on its fa c e and

the la c k o f n oti c e to the L on g Tr

us ts w a s n ot a

jur isd ic tio na l de fe c t, t

he pe rm it w a s me re ly

“ vo ida ble ” —i. e ., its
re vo c a tio n wa s e ff

e c tiv e pr os pe c tiv e ly

—n ot “ vo id. ” We fi nd the se argume nts to be wi tho ut m e ri t. We fi rs t obse rv e tha

t in Magnolia Petroleum Co. , su pra , the supreme court held that a C ommissi on order enter ed without proper motion, notice, and hear ing was “void.” 104 S.W .2d at 1106. I n that case , New Process Production Company filed an application to drill three additional wells o n a m i n er al lease in Greg g County , Texas. Id. at 1107. The Commission, after notice of the application was duly

g iven, denied the reque st. Id. There af t er , Ne w P ro cess a g ain consulted the Commi ssion a

bout dr illing the additional wells. Id. The c ompany prese nted the matter

to the Commi ssion “without any motion, additional applica tion, or notices,” a

nd the Commiss ion, without h ea ri n g, enter ed a se cond orde r g rantingthe application. Id. B e c a u s e th e Co mm is s io n ’ s s e c o nd order was e ntere d “without any motion, additional applic at i o n, or notices,” the supreme court
canc elled, annulled, and declare d void the C ommissi on’s s econd or der g rantingthe application. Id. I n Railroad Commissi on v. Mc Knight , the supreme court c onfirmed i t s holding in Ma gn oli a Petroleum Co. “that the [second] order was void, not bec ause t h e [ C ]om misson was without potential jurisdiction to enter it but b ec ause it was entere d without proper motion, notice and hear ing.” 619 S.W .2d 255, 258 (Tex. 1981).Anada rko re lies on the statements of a commissioner at the c onfer ence in which the 7 Commi ssion considered the proposal for decision in asser

ting that the Commission failed t o c onsider An a da rk o’ s e qu ita

ble de fe ns e s. Ho we ve r, it is immate ri a l what th e c omm iss ion e rs may have sa id i n the proc ess of a

rriving at a de cision. See City of Frisco v. Tex as W ater Rights Comm’n , 579 S.W .2d 66, 72 (Tex. Civ. App.—Austin 1979, writ ref’d n.r .e.). Stateme nts of a commissioner made during the deliberative process i n an open meeting are irrele vant t o the j udicial determination whether the a g e nc y or de r i s r e a so na

bly su sta ine d b y

a pp ro pr iate fi nd ing s a

nd c on c lus ion s that have su pp or t in the evidenc e. Id.
15

As previously

noted, sec tion 85.205 e x pressly limit s the Commi ssion’s a uthority by prohibiting it f

rom adopting a rule or permit “e x cept a fter notice and hea ring as provided by

law.” Tex. Nat. Res. Code Ann. § 85.205. Ther e is no dispute that the L ong Trusts wer e entitled to notice under Rule 37. Rule 37 provide s that “[n] o well drilled in violation of this sec tion without s pecia l permit obtained, issued, or g rante d in the manner presc ribed in said section . . . shall be permitted to produce .” 16 Te x . Admin. Code § 3.37(e) (empha sis added)
. I n the absence of proper notice, we conclude that the Commiss ion did not err in dec laringthe orig inal permi t “v o i d”—i.e., the p roduction was illega l from its inception—rather than “voidable .” S

e e M ag n o li a P e tro le u m Co. , 10 4 S. W.2 d at 11 07 ; McKnight , 6 19 S.W. 2d a t 25 8; see also Rodrigue z v. Servic e Lloyds Ins. Co. , 99 7 S.W. 2d 24 8, 25 4 (T e x. 19 99 ) (c ourt s de fe r to an a g e nc y ’s int e rp re tatio n o f i ts o wn ru le s unle ss plainly err oneous or inconsistent with the reg ulation or underly ing statute). We overr ule Anada rko’s fourth issue. We s imi larl y re je c t A na da

rk o’ s c omp lain t tha t th e Com mis sio n e rr e d in fa ili ngto consider a nd g ive ef fec t to the equitable defe nses of lache s, estoppel, waiver, and ratification. The 7
rec ord i s cl ea r t hat the Commissi on considere d and re jected the equitable a

rguments raised by An a da rk o. Th e Com mis sio n spe c if ic a lly re je c te d A na da

rk o’ s d e fe ns e of

la c he s w he n it

re fu se d to16

adopt the hear ings examiners’ rec ommendation and proposa l for dec ision on thi s issue. L ikewise, the Commiss ion rejec ted the re maining a rgum en t s as serted by

Anada rko whe n it considered a

nd denied Anada

rko’s motion for rehe aring
. Be cause the rec ord demonstrates that t h e C o mmissi on considere d and re

jected the equitable de fense s raised by Anada rk o, we c onsider only

whether the Com mis sio n e rr e d in

fa ili ngto g ive e ff

e c t to the se de fe ns e s. This Court has rec og nized that a n administrative ag ency

makes funda

mental policy choice s when it adopts rules unde r the APA rule making proce dures. Texas Ass’n of Long Distance Tel Co. (Tex altel) v. Public Util. Comm’n , 798 S.W .2d 875, 886 (Tex. App.—Austin 1990, writ denied)
. Such policy choice s nece ssarily involve the balanc ing of

competinginterests and a n evaluation of the equities of the situation. Id. Th e Com mis sio n’ s ado pti on of no tic e re qu ir e me nts thus repre sents a funda

mental policy

choice that proper

notic e i s require d befor e the Commission or its staff may

g rant a Rule 37 exception. See16 T ex . Ad m i n . Code § 3.37(a) (2)( A) (r equiring notice), ( h)(2) (prohibiting a dminist rative g rant of Rule 37 e x ception unless notice has been g iven and no prote st has been f iled or written wa ivers o f o b j ec t i o n are rec eived) . Fur thermore , as pr e vio us ly

no te d, thi s n oti c e re qu ir e me nt h a s b oth c on sti tut ion a l and

statut or y un de rp inn ing s. We cannot conc lude that the Commissi on err ed with r eg ard to the w eig ht it afforde d UPRC’s “equit ab l e” fa ct ors as a g ainst the interests in strict enf orce ment of Rule 37’s notice require ments. See R odriguez , 9 9 7 S .W.2d at 255 (ag ency is bound to follow its own rules a nd pr oc e dure s) ; Public Util. Comm’n v. Gulf States Util. Co. , 809 S.W .2d 201, 207 (Tex. 1991) (same)
. We overrule Anada

rko’s fif th issue.17

Notice I ni t s fi rs tan d s i x t h i s s u es , An ad ark o ar gu es t h at t h e Lon g T ru s t s ’ a ct u al k n o wl ed ge of the wel l locatio n a

nd the Com mis sio n’ s su

bs e qu e nt h e ari ngand

fi nd ingthat th e pe rm it i s
nece ssary to preve nt waste satisfied the notice re quirements in Rule 37 or, alternatively , cure d any defe ct in notice. We disag ree .

Ha vin g a do pte d th e no tic e re qu ir e me nts in R ule 37 , th e Com mis sio n wa s e nti tle d to insist upon strict compliance with its rule. See R odriguez , 9 97 S.W. 2d a t 25 5 ( a g e nc y

is b ound to fo llo w i ts r

ule s) ; Gulf States U

tils. Co. , 8 09 S.W. 2d

a t 20 7 ( same ); see also F.A. Gillespie &Sons Co. v. Rail road Comm’n , 161 S.W .2d 159, 163 (Tex. 1942) (“A n operator’s rig hts must be acquire d in c omp lia

nc e wi th t he pr ov isi on s o f a va lid ru le of the Com mis sio n; and no ne c an be a c qu ir e d in violation of it.”). As pre viously sug g ested, that the C ommissi on require s strict compliance with the notice requirements of Rule 37 is consistent with the s tatutory scheme and structur e of the rule. The natura l resourc es code prohibits the Comm ission from ad o p t i ng an orde r or r ule per taining to the
conser vation or waste preve ntion of oil and g as “e x cept a fter notice and hea ring as provided by

law.” Te x. Nat. R e s. Cod e Ann. § 8 5. 20 5. Th e pla in l angua g e of Rul e 37 pla c e s th e burd e n o f c or re c tly ide nti fy inga ff e c te d p e rs on s sq

ua re ly up on the a pp lic ant. 16 Te x. Ad

min
. Cod e § 3. 37 (a )( 2) . It is there fore incumbent upon the applica nt f or a Rule 37 exception to ensure that the c orre ct par ties have been ide ntified so that the Commiss ion may provide prope r notice to those pa rties. Id. We ag ree with Anadar

ko, and the Commission found, that the L ong Trusts had ac tual knowledg e of the proposed location of W ell No. 8. But actual knowle dg e of the proposed location do e s n o t e qu a t e t o a c tu a l kn o w l e d g e o f U P R C ’ s a p p l i c a t i o n f

o r a R u l e 3 7 e xc e p t i o n . No r d oe s it18

equate to the notice that the L ong Trusts wer e entitled to re ceive i n o rd er to allow them an opportunity

to protest that application. The AF E submitted to the L ong Trusts identified t he L ong Trusts as a 25% working interest owne r i n t h e proposed we ll. But the plat attac hed to the AF E failed to identify the L ong Trusts as the a ffe cted of fset oper ator of the adjac ent trac t. Even if we assume, based solely on the proposed loc ation of the we ll as i d en t i fi ed i n the plat, that the L ong Trusts knew a Rule 37 exception would be required, we cannot assume the L ong Trusts knew they wer e the of

fset oper ator and we re the ref

ore e ntitled to protest such an exception. Whil e we ag ree with Anadar ko that the L ong Trust s h ad actua l knowledg e of the proposed loc ation of Well No. 8 , we do not agree that such knowledg e satisfied the notice require ments of Rule 37. The noti ce require ments of Rule 37 are desig ned to protec t the corr elative rig hts of those parties a ffe cted by a Rule 37 exception. The mere knowledg e of a we ll’s proposed location without more does not prote ct cor rela tive rig hts beca

use it does not g ive notice of any p o t en t i al ad v erse eff

ects to such r ights. The ref ore, w e conc lude that the L ong Trusts’ ac tual knowledg e of the proposed location of Well No. 8 neither satisfies the requirements of Rule 37 nor
cure s any defe ct in notice. We likewise c onclude that the Commission’s subsequent hea ring on the L on g Tr

us ts’ c omp la int

c ann ot c ur e the de fe c ts i n n oti c e re g ard ing the or ig ina l pe rm it application. See, e.g. , In re Adoption of Armstrong , 394 S.W. 2d 55 2, 55 5- 56 (T e x. Ap p. —E l Pa so 1965) (on r emand, a dopting opinion of U.S. S upreme Court in Ar ms tro ng v . M an zo , 380 U.S. 545 (1965) ( subsequent hea

ring does not cure due proc ess def ect r eg ardinglack o f not ice of orig inal pr oc e e din g )) . We ov e rr

ule An a da

rk o’ s f ir st a nd sixthiss ue s.19

Final Order and Motions for Rehearing I n its thre e rema ining issues, Anada rko challeng es the district court’s de terminations t h at t h e N o v em b er

1 3 , 2 0 0 2 , nu n c p ro tu n c o rd er o f t h e C o m m i s s i o nwa s n o ta f i n al o rd er an d b ri n gs tw o c ha lle ng e s to the L on g Tr us ts’ mot ion s f

or re he ari ng . We re

je c t th e se c la ims
. The rec ord demonstrates that the Commi ssion issued its fina l or der on Septe mber 12, 20 02 . T he re a ft e r, on

No ve mbe r 1 3, 20 02 , th e Com mis sio n is su e d a n o rd e r nunc pr o tu

nc to
corr ect two c lerica l error s in its previous order
. The Commi ssion’s order nunc pro tunc c orre cted the he ari ngdate fr om “ De c e mbe r 1 2, 13 , a nd 14 , 2 00 2” to “ De c e mbe r 1 2, 13 , a nd 14 , 2 00 1” and

a lso
corr ecte d another

date f rom “Mar ch 1988” to “ Marc h 1998.” I n its seventh issue, Anada rko contends that the di strict court erre d in holding that the November

13, 2002, order

nunc pro tunc was not a f

inal order
. The e ssence of Ana darko’ s argument is that the L ong Trusts wer e re quired to file a second moti on for r ehea

ring from the Nove mber 13, 2002, order

nunc pro tunc in order to pr eser ve their complaints on appea l, and the L ong Trusts failed t o d o s o . There fore , acc ording to Anadar ko, the district court should have dismiss ed the L ong Trusts’ administrative a

ppeal f or lac k of jurisdiction. We disagr ee. I n suppo rt o f t his argument, Anada rko re lies primarily

upon section 2001.145 of the Ad min istrativ e Pr oc e dure Ac t (“AP A”), wh ic h r e qu ir e s a tim e ly mot ion fo r r e he ari nga s a prer equisite to an appe al in a conte sted ca se. SeeTex. Gov’t Code Ann. § 2001.145(a) (West 2008). Both the Texas Supreme Court and thi s Court have pr eviously reje cted this argument. I n Con su me rs W ater, Inc. v. Public Utility Commission , the supreme court held that a sec ond motion for rehe aring
wa s n o tre qu i re d

wh en t h e a gen cy ’s s u

b s eq u en to rd er

d en i edth e p ar t i es ’ m o t i o n s fo r r eh ea ri n g,20

but amended the p revious orde r to add the f inding of “imminent peril” re quired unde r subsection 2001.144(a )(3) of the APA. 741 S
. W
. 2 d 3 4 8, 349 (Tex. 1987). Significa nt to our analy sis here, the supreme c ourt reve rsed this Court’s judgme nt a nd holding that a sec ond motion for r ehea ring was re quired. See id. (r ev er s i n g Consumers W ater, Inc. v . Public Util. Comm’n , 707 S.W .2d 186 (Tex. App.—Austin 1986)).

The supre me cour

t has since c onfirmed that r eviewing co u rt s should use a “mor e prag matic and flexibl e approac h” to evaluate the f inality of an a g ency ’s orde r. Texas-New Me xico Po we r Co . v . Te

x as In du s. En e rg

yCon su me rs , 8 06 S.W. 2d 23 0, 23 2 ( Te x. 19 91 ). Un de r t his approa ch, cour

ts must recog nize the ne ed to minimize disruption of the administrative proce ss and to affor d regulated par

ties and consumers with an opportunit y for tim ely judicial revie w of a ctions that af fe ct t h em . Id. Th e su

pr e me c ourt

e xpla ine d th a t “ the re is n o s ing le ru le dis po sit ive of a ll qu e s ti o n s o f f

in a li ty , an d r e v ie w in g c o u rts s h o u ld c o n s id e r th e s tatuto r y an d c o n s ti tuti o n a l c o n te xt in which the ag ency operates, and should tre at as final a decision ‘which is def initive, promulgated i n a fo rmal manne r and one with which the ag ency expects compliance .’” Id. (quoting 5 J . Stein, G. Mitchell & B. Me zines, Admini strative L aw 48- 10 (1988))
.

Ap ply ingthe su pr e me c ourt ’s “ mor e pr a g matic and fl e xible a pp ro a c h, ” thi s Co ur

t, i n Office of Public Utility Counsel v. Public Utility Commission , held t h at a s ec ond motion for rehe aringwas not re quired whe n the subsequent or ders of t h e ad m i nistrative ag ency did not alter the orig inal o rd er wi t h respect to the first motion for re hear ing. 843 S.W.2d 718, 726 (T e x. Ap p. —Aus tin

19 92 , wr it de nie d)
. I n o the r w or ds , w he re the a g e nc y ’s su bs e qu e nt o rd e r d idWe observe that this di stinction is consist ent with other c ases c ited by Anada rko. See 8 R a i l r oad Comm’n v. E

xxon Corp. , 6 4 0 S. W. 2 d 3 4 3 , 3 4 6 ( T e x. Ap p . — B e a u mo n t 1 9 8 2 , w r it ref’ d n. r. e .) ; Mahon v. V

an dy gr iff , 578 S.W .2d 144, 146-47 (Te x . Civ. App.—Austin 1979, writ ref’d

21 not gr ant the motion for rehea ring or ot herw ise chang e the previous order in response to a motion for r ehea ring , this Court determined that there was no ne ed for a sec ond motion for rehe aring
. Id. T o the extent Anadar

ko relies on this Court’s dec ision in S o u th e rn U

n io n G a s Co. v. Railroad Commission , 690 S.W .2d 946, 948 (Tex. App.—Austin 1985, writ ref ’d n.r.e .), we find that case distinguishable. In that case , the Commiss ion gr anted the g as compa ny ’s motion for
r e h e ar i n g f

o r t h e l i m i t e d p ur

p o s e o f c h an g i n g t h e e f

f e c t i v e d a t e t o i mp l e m e n t n e w r a t e s an d , t h e r e b y, mod if ie d it s e arl ier ord er. Th e Com mis sio n d e nie d th e mot ion fo r r e he ari ngin a ll o the r r e sp e c ts. T h e g a s c o mp an y d id n o t f il e a s e c o n d mo ti o n f

o r r e h e ar ing
. Id. at 947. This Court determined that Southern Union Gas was require d to file a sec ond motion for rehe aringafte r the Commission modified its earlier

order
. Id. at 948. This Court r ej ec t ed t h e argume nt that a sec ond motion
was unnece ssary beca

use the modification of the ear lier order was not substantial. Id. a t 94 8- 49 ; see R o s s v . Te

x a s Ca ta s tr o

p h e P r o p . I n s . A ss’n , 7 7 0 S.W .2d 641, 644 (Tex. App.—Austin 1989, no writ) (to dra

w distinction between or der that ag ency chang es substantially in response to motion for r ehea ring and one that chang es only in minor fashion is not the law of this state). I n this case, unlike Southern Union Gas , the Commiss ion denied the mot i ons for
re h ea ri ng . L ike Office of Public Utility Counsel , th e r e w a s n o c h an g e in th e Co mm is s io n ’s orde r wi th r e sp e c t to the L on g Tr us ts’ mot ion fo r re he ari ng . Th e re fo re , we c on c lud e that the L on g Tr us ts
wer e not re quired to file a

second motion for rehea

ring from the Com mission’s November 13, 2002, order nunc pro tunc
. We overrule Anada rko’s seve nth issue. 8n . r . e . )
. InExx on Corp. , th e a g e nc y g ra nte d th e mot ion

fo r r e he aringand

the re vie wi ngc ourt

he ld that a sec ond motion for rehe aring was thus require d. 640 S.W .2d at 345-46. In Mahon , the initial ag ency order was c ontinge nt upon future events and, there fore , was not a final order
. 578 S.W .2d at 147. The a g ency

issued two subsequent orde rs, and t h e ap pellant did not file a motion for rehe aringreg arding either of these orde rs. Id. at 146. On re view, this Court affirme d the trial cour t’s dismiss al for f

ailure to file a

motion for rehe aringfrom the a g ency ’s final orde r. Id. at 147-48.

22 I n it s e ig hth

and ninth i ssu e s, An a da

rk o c ha lle ng e s th e su ff

ic ie nc y and tim e lin e ss of t he L ong Trusts’ motions for re hear ing. A nadar ko first argues that the L ongTrusts’ letter f iled October 2, 2002, was not a pr oper moti on for rehea ring and, therefor e, pre serve d nothing f or re view. Second, Ana darko a rgues that the L ong Trusts’ motion for re hear ing f iled October

4, 2002, was untimely

beca use the APA require s a motion for rehe aring to be filed within twe nty day s after a par ty rec eives notice of the Commission’s final order a nd the L ong Trusts rec eived a copy of the Commiss ion’s final orde r on the da y it was signe d, September 12, 200 2 , there by making the
a p p l i c a b l e t w e n t y- d ay d e a d l i n e O c t o b e r 2 n d an d r e n d e r i n g t h e O c t o b e r

4 t hm o t i o nu n t i m e l y. B e c a us e we c on c lud e the L on g Tr us ts’ Oc tob e r 4th mot ion

fo r r e he ari ngwa s ti me ly filed, we do not consider Anadar ko’s arg ument reg arding the s ufficie ncy of t he October 2nd letter fi le d b y the L on g Tr

us ts. As pr e vio us ly

no te d, secti on 20 01 .1 45 of the APAre qu ir e s a

pa rt y to f ile a tim e ly motion for rehe aringas a pr ere quisite for judicial re v i ew . T ex . Gov’t Code Ann. § 2001.145( a). Section 2001.146 specifie s that a par ty must file i t s m o tion for re hear ing not late r than the twentieth day

afte r the date on which the pa rt y or the pa

rty ’s attorne y

of re cord is notified a s
re q u i re d u nder se ction 2001.142. Id. § 2 00 1. 14 6( a ) ( Wes t 20 08 ); Te mp le In de p. Sc h. Di

st.
v . E ng lis h , 896 S.W .2d 167, 169 (Tex. 1995). Under subsection 2001.14 2(a) , a par ty shall be23

noti f ie d e it h e r p e r s o n a ll y o r b y f

ir s t c la s s ma il o f an y d e c is io n o r o r d e r . T e x. G o v ’ t Code Ann. § 2001. 1 4 2 (a) (West 2008). The APA thus provides two me thods by which a pa

rty or the pa rty ’s attorney can be notified of an a g ency ’s dec ision: personal notice or notice by first class mail. Id. I n this case, the r ecor d ref lects that the L ong Trusts did not rece ive a c opy of the Commi ssion’s order at the publ ic confere nce on September 12, 2002. Although Commission staff faxed a courtesy

copy of the orde r to the L ong Trusts’ later that day , this faxed copy

does not satisfy the APA re q u i re m en t o f persona l notice or notice by first class mail. SeeTex. Gov’t Code Ann. § 2 0 0 1
. 1 4 2 (a ). The r ecor d ref lects that Commissi on staff ma iled a copy of the orde r to the L on g Tr us ts’ a tto rn e y

of re c or d th e ne xt day

—S ept embe r 1 3, 20 02 —a nd that th e L on g Tr

us ts’ attorney of rec ord rec eived this mailed notice on September 16, 2002. I t is this mailed notice that satisfies the re quirements in sec tion 2001. 1 4 2 (a ) o f the APA. See id. There fore , the dea dline for filing a motion for rehe aringwas twe nty day s from September

16, 2002, or Oc tober 6, 2002. Tex. Gov’t Code Ann. § 2001.146(a) . Be cause t h e L o n g T rusts’ motion for re hear ing w as filed October 4th, w e conclude the motion wa s timely , and we overr ule Anada

rko’s ninth issue. We now tur n to the me ri ts o f t

he L on g Tr

us ts’ c la ims
. T h eL o ng T r u s t s ’ C l a i ms I nt wo i s s u es , t h e Lon g T ru s t s c o n t en d t h at t h e C o m m i s s i o nerre d i ngra n t i n g a Rul e 37 ex ception to Anada rko’s pre dece ssor in interest UPRC. First, the L ong Trusts argue that the Commiss ion applied the wr ong leg al standar d and, sec ond, the L ong Trust s ar gu e that the Commi ssion’s order w as not supported by substantial evidence
.24 Anada rko and the Commi s s i o n as s er t that the L ong Trusts have f ailed to pre serve their complaint that the Commi ssion a pplied the wrongleg al standar d by failing to raise this issue in their motion for rehe aring . Alternatively , Anada rko and the Commi ssion a rgue that eve n if we conclude the issue has be en ra ised, the L ong Trusts’ complaint is more properly considere d in the context of whether the Commi ssion’s order is supporte d by substantial evidence beca use the e ssence of t he L ong Trusts’ arg ument is that the C ommissi on applied the wrong law to the fa cts of this case
. Havingrevie wed the L ong Trusts’ October 4th motion for rehe aring , we disag ree with Anadar ko and the Commiss ion that the L ong Trusts have failed to pr eser ve this iss ue. Howe ver, w e agree that the
essenc e of the L ong Trusts’ complaint is that the Commi ssion applied the wronglaw to the fa cts of this case a

nd that this arg ument is more prope rly considered i n the context of whether the Commi ssion’s order is supporte d by substantial evidence , which we addre ss more fully below. I nt h ei r s ec o n d

i s s u e, t h e Lon g T ru s t s ar gu e t h at t h e C o m m i s s i o n ’s o rd er gra n t i n g a Ru l e 3 7 exception is not supported by substantial evidence . Essentially , the L ong Trusts argue that Anada

rko fa iled to establish that Well No. 8 was necessa ry to preve nt waste. For

the re asons dis c us se d b e low , w e re

je c t th e L on g Tr

us ts’ argume nt. Rul e 37 all ows the Com mis sio n to g ra nt a n e xce pti on

to t he sp a c ingre qu ir e me nts th e r e u n d e r

o ntw o g r o u n d s : t o p r e v e n t w a s te an d to p r e v e n t t

h e c o n f is c a ti o no f

p r o p e rty
. 1 6 T e x. Admin. Code § 3.37(a) (3). The Commi ssion’s f inal order g rante d UPRC a Rul e 37 exception on the g round that Well No. 8 was nec essar y to preve nt waste. The supre me cour

t has define d the term “ waste,” as used in Rule 37, to mean “ the
u lt im a te lo s s o f o il .” Gu l f L a n d Co. v. Atlantic Ritchfield Co. , 131 S.W .2d 73, 80 (Tex. 1939).A “ re g ula r” loc a tio n is a

we ll l oc a tio n th a t do e s n ot r e qu ir e a Rul e 37 e xce pti on

be c a us e 9 it me e ts the re qu ir e me nts of the Com mis sio n’ s state wi de sp a c ingru le s o r t he sp a c ingre qu ir e me nts in “spec ial field rules” applicable only to a par ticular fie ld. 25 Under this definition, the court explained that a Rule 37 exception to preve nt w aste may be justified if a substantial

amount of oil or g as that otherw ise would ultimately be lost will be save d by the drilling of

a we ll. Id. (e mph a sis a dd e d)
. To ob ta in a Rule 37 e xce pti on to p re ve nt w a ste , it mus t be sh ow n th a t, b e c a

us e of unus ua l c on dit ion s in

the loc a lize d a

re a , c los e r s pa c ingof w ells is
nece ssary to rec over the hy droca

rbons. W

rather v. HumbleOil & Ref. Co. , 214 S.W .2d 112, 117 (Tex. 1948). Thus , to obtain a Rule 37 exception, UPRC was re quired to show that unusual conditions—i.e., differ ent from conditions in adjac ent parts of the field—existed under the tra ct for which the e x ception wa s sought; that as a result of these unusual conditions, hy droca rbons ca nnot be re c ov e re d by a

ny e xistin g we ll o r b y

a dd iti on a l w e lls dr ill e d at “ re g ula r” loc a tio ns ; and that the

9
vo lum e of

oth e rw ise unre c ov e ra

ble hydr oc arb on s is su

bs tanti a l. Th e re c or d d e mon str a te s th a t th e B ark sd a le Es tate Ga s Uni t on whic h We ll N o. 8 is located is a

n irregularly

shaped unit with a pa

nhandle se ction simil ar to the sha pe of the State of Texas or O k la h o ma . T h e w e ll is lo c a te d in th e p an h an d le s e c ti o no f th e un it e qu id is ta n t f r om east a nd west lines. Althoug h regular locations ex ist on the unit, n o regular locations ex ist in t he panhandle section. The undisputed e vidence s h o w e d th a t t h e re w as a r apid depositional environment in the are a of Well No. 8 as c ontrasted to the r emainingfield as a whole. The evidenc e showe d that thi s r a pid de po sit ion a l e nv ir on me nt w ou ld i mpa c t th e he te ro g e ne ity , p e rm e a bil ity , a nd po ro sity in the a re a of W e l l N o . 8
. T h e C o m m i s s i o nd e t e r m i n e d t h a tt h e l e a s e g e o m e t r

y o f t h e p an h and le section couple d with the impact of the r apid depositional environment c onstitut ed an unusual26

c on dit ion that pr e c lud e d th e re se rv oir fr om b e inga de qu a te ly

dr a ine d b y

we lls a t r e g ula

r l oc a tio ns . I n a dd iti on , the e vid e nc e sh ow e d th a t We ll N o. 8 w ill re c ov e r b e tw e e n 2 24 and 1, 05 6 mi lli on

c ub ic fee t of g as that would not otherwise be re cover able by wells at reg ular locations. The Commi ssion thus determined that Well No. 8 would recover a substantial amount of hydroca rbons that would not oth e rw ise be re c ov e ra

ble by we lls a t r e g ula

r l oc atio ns . The L ong Trusts challeng e the Commission’s order on the g rounds that there was conflictingevidenc e pre sented on the issue of “unusual c onditions” at t he location of Well No. 8 and that the Commiss ion failed to re quire UPRC to demonstrate u n u sual conditions at the site of the proposed we ll. To the extent the L ong Trusts argue that cer tain evidenc e in the re cord showe d a lac k of unusual conditions, the L ong Trus t s i gn o re the established pr emise that the Commission was entitled to acc ept or re

ject in whole or

in part the testim ony of t he var ious witnesses who testified. See City of Corpus Chris ti v. Public Util. Comm’n , 188 S.W .3d 681, 695 (Tex. App.—Austin 2005, pe t. d e nie d) ; Railroad Comm’n v. Lone Star Gas Co. , 6 18 S.W. 2d 12 1, 12 5 ( Te x. Civ . App .— Au sti n 19 81 , n o w ri t) ; City of Frisco v. Texas W ater Rights Comm’n , 57 9 S
. W
. 2 d 66, 69 (Tex. Civ. App.—Austin 1979, writ ref ’d n.r.e.)
. L ikewise, the Commi ssion wa s the sole judg e of the weig ht to be ac corde d the witnesses’ te stimony
. Central Power & Light Co. , 36 S.W .3d at 561.

The Commi ssion’s or der e x pressly states in finding -of- fac t ten that the “undisputed g e olo g ic e vid e nc e sh ow s th a t th e re wa s a ra pid de po sit ion a l e nv ir on me nt i n th e are a of the B ark sd a le No. 8 as c ontrasted to the f ield as a whole.” The Commi ssion found that this “rapid depositional
en v i ro n m en t ” in co n

j u n ct i o n wi t h t h e le as e ge o m et ry co n s t i tu t edan u nu s u al co n d i t i o nj u s t i fy i n g a Rule 37 exception. The rec ord thus de monstrates that the Commi ssion’s de cision to grant a Rule 3727

exception was base d in part on the unusual condition of a “ rapid de positional environment” in the localized are a of the proposed we ll. W e conc lude t h at there is a rea sonable ba sis in the recor d befor e us t o support the C ommissi on’s findi ng of unusual conditions at t he location of Well No. 8. See Charter Me d. , 6 65 S.W. 2d a t 45 2; Central Power & Light Co. , 36 S.W .3d at 561. The L ong Trusts further

argue that the Commission ’s orde r wa s not supported by substantial evidence b ec ause the Commi ssion’s consideration of “lea se g eometry” wa s improper. I n consideringwhether

to gr ant a Rule 37 exception to preve nt w aste, the supreme c ourt has held that the Commiss ion need not confine its analy sis to the s ole questi on as to whethe r the we ll will s ave oil that otherwise w ould be lost. Gulf Land Co. , 13 1 S.W. 2d a t 85
. Rathe r, “ the Com mis sio n s ho uld be lef t rea sonabl y

fre e to exercise its sound judg ment and discre tion,” keepingin mind that the Commi ssion’s duty

is to conser

ve oil and g as above g round as we ll as below. Id. Such discretion would rea sonably

include the a

bility to decide which fa ct o rs t o consider in de termining whether to gr ant a Rule 37 e x ception to pre vent waste , as we ll as how much we ight to g ive ea ch fa ctor. Id. ; see also Halbouty v. Railroad Comm’n , 35 7 S.W. 2d 36 4, 37 4 (T e x. 19 62 ) (f ind ingCom mis sio n, in exercising its reg ulatory

discretion, may

g ive g re ater or less weig ht to releva nt fac tors in setting pr od uc tio n li mit a tio ns ); Texas Bldg. Owners & M a n a ge r s Ass’n v. Public Util. Comm’n , 110 S.W .3d 5 2 4 , 5 3 6 ( T e x . A p p . —

A u s t i n2 0 0 3 , p e t
. d e n i e d ) ( w h e ne x e r c i s i n g d e l e g a t e d r e g u l a t o r y a u t h o r i t y, ag ency has discre tion to consider fa ctors leg islature may not have f

orese en and to de cide r eleva ncy and we ight of

those fac tors in eac h circ umstance)
. That t he Commissi on may consider f

actor s bey ond mere g eolog y in determining whether require ments nece ssary

to gr ant a Rule 37 e x ception to preve nt w aste have been met was28

more re cently

confirme d by

the supreme court in Exx on Corp. v. Railroad Commissi on , 571 S.W .2d 497 (Tex. 1978). I n that case , the cour t upheld the Commiss ion’s deter mination that an exis ting well bore , as we ll as economic infe asibility of drillin g at re gu l ar locations, established unusual conditions justi fying a

Rule 37 exception to prevent wa ste. Id. a t 50 1. Citi nge vid e nc e that th e oil to be produc ed fr om the proposed we ll could not be produc ed fr om any other e x isting we ll, the court aff irmed the Commission’s determination that an exception was ne cessa ry to preve nt waste. Id. The Commissi o n ’s consi deration of economic infe asibility in Exx on Corp. is no differ ent than the Com mission’s consideration of lea se g eometry in this case. We there fore reje ct the L ong Trusts’ cla im that the Commi ssion wa s forbidden f rom consider ing le ase g eometry when deter mining whe ther a

Rule 37 exception should have bee n g rante d to preve nt waste. The L ong Trusts also argue that the Commission’s order w as notsupported by substan ti a l e v id e n c e b e c a u s e th e Co mm is s io nf

a il e d to ma k e a f in d in g th a t n o w e ll a t a

r e g u la r location would dra in the hy droca rbons to be re cover ed by

Well No. 8. Cont rar

y to this assertion, the Commi ssion ex pressly

deter mined in finding of fac t 11 that lease g eometry coupled with the impac t of the de positional environment would prec lude the panhandle section of the B arksda le Unit from being draine d “by

wells at regular locations.” The rec ord demonstrated that the formation into which Well No. 8 was c ompleted was a tight g as for

mation, which means that ga s is not easily produce d fr om t he re se rv oir

wi tho ut s timulatio n. I n a dd iti on , th e e vid e nc e su bmi tte d b y

UPR C in c lud e d a

we llTo the e xten t th at L on g T ru sts c omp la in t hat th e Com mis sio n a llo we d U PRC to omi t 10
“ se le c te d r e g ula

r lo cat io ns ” fr om i ts a

na ly sis , th e L on gTr

us ts p oint to a

se c on d w e ll that U PRC c ou ld h a ve dr ill e d at a

re g ula r l oc a tio n o n a

no the r a dja c e nt tr a c t. I n c on sid e ri ng wh e the r to g ra nt a Rule 37 exception applicable to thi s trac t, the Commi ssion in it s discretion was entitled to acce pt or reje ct the testimony

and e v idence in whole or in par t, se e City

of C or pu s Ch ris ti v . P ub lic Ut il. Comm’n , 1 88 S.W. 3d

68 1, 69 5 ( Te x. Ap p. —Aus tin 20 05 , p e t. d e nie d) ; Railroad Comm’n v. Lone Star Gas Co. , 618 S.W .2d 121, 125 (Tex. Civ. App.—Austin 1 9 8 1 , no writ), and w e may not substitut e our judg ment for that of the Commiss ion on q u est ions committ ed to the Commissi on’s discretion. Texas He alth Faciliti es Comm’n v . Charter Med.-D allas, Inc. , 665 S
. W
. 2 d 4 4 6 , 452 (T e x. 19 84 ); H.G. Sledge , Inc. v

. P r o spectiveInv. &Trading Co., Ltd. , 36 S.W .3d 597, 602 (Tex. App.—Austin 2000, pet. denied). 29 rese rvoir simulation study showing that Well No. 8 would recove r hydroca rbons that would not be
rec overe d by

a we ll at a re g ular location. We theref ore r ejec t the L ong Trusts’ conte ntion. 10 Finally , the L ong Trusts contend that the Commi ssion e rre d in c onsideringvolumes of g as that had be en illeg ally produce d since 1998 whe n decidingwhether to gr ant a Rule 37
e xce pti on to p re ve nt w ast e in 20 01 . The Com mis sio n d e te rm ine d th a t th e pr op os e d w e ll w ou ld
rec over be tween 224 a

nd 1,056 milli on cubic feet of g as t hat would otherwise be unrecover able by wells at re g ular locations. The L ong Trusts ag ree that the lower number of 224 million cubic fe et of g as is based on r ecor d evi d en ce reg arding2001 production for war d, while the hig her numbe r was ba sed on rec ord evide nce r eg arding1998 production for war d. As we ha

ve pre viously

noted, the Commi ssion has broad discr etion in determining which fa ctors to consider when gr anting a Rule 37 exception and how much we ight to g ive ea ch fa ctor. Se e Ha lbo uty , 357 S.W. 2d a t 37 4; Gulf Land Co. , 131 S.W .2d at 85. Be cause the rec ord demonstrates the Commi ssion c onsidered that from 2001 forwa rd t h e p r o p o s e d

w e ll w o u ld

r e c o v e r 2 2 4 mi ll io nc u

b ic f e e t o f g a s th a t w o u ld

o th e r w is e be
unre c ov e ra

ble , w e fi nd

no me ri t in

the L on g Tr

us ts ’ argum e nt, and

we c on c lud e that th e re is a30

rea sonable ba sis in the recor d to suppor t the Commi ssion’s conclusion that a Rule 37 exception was
nece ssary in 2001 to prevent wa ste. We t h e r e f o r e r e je c t th e L o n g T r

u s ts ’ c la im th a t th e Co mm is s io n ’ s o r d er is not supported by

substantial evidence , and we overr ule the L ong Trusts’ sec ond issue.
CO NC LU SION Havingoverr

uled the par

ties’ issues on appe al, w e af fi rm the judg ment of the district court af

firming the Commiss ion’s final orde r.

__________________________________________ J an P. Patterson, J ustice Be fore Chief J ustice L aw, Justi ces Patter son and Pury ear ; Chief J ustice L aw Not Par ticipating Affir med Filed: January

7, 2009