Opinion ID: 2429351
Heading Depth: 3
Heading Rank: 1

Heading: Fair and Reasonable Offer Requirement

Text: Before the commission may establish a pooled unit, the MIPA applicant must make a fair and reasonable offer to pool voluntarily to the other interest owners in the proposed unit. Tex.Nat.Res.Code § 102.013. The commission has authority to create a pooled unit only when the owners have not agreed to pool their interests. Id. § 102.011. If the commission finds that the applicant did not make a qualifying offer, it lacks jurisdiction over the petitioner's application and must dismiss it. Carson v. Railroad Comm'n, 669 S.W.2d 315, 318 (Tex.1984); Windsor Gas Corp. v. Railroad Comm'n, 529 S.W.2d 834, 837 (Tex.Civ.AppAustin 1975, writ dism'd as moot); Tex.Nat.Res.Code § 102.-013(b). This requirement, probably more than any other aspect of the MIPA, makes the Texas Act unique, compared to the compulsory pooling acts of other states. 3 E. Smith & J. Weaver, Texas Law of Oil and Gas § 12.3(B)(1)(a), at 23 (1990) [hereinafter Smith Douglass & Whitworth, Practice Before the Oil and Gas Division of the Railroad Commission of Texas, 13 St. Mary's L.J. 719, 743 (1982) [hereinafter Douglass Smith, The Texas Compulsory Pooling Act, 43 Texas L.Rev. 1003, 1009 (1965) [hereinafter Smith, Texas Compulsory Pooling Act]. The obvious intent of the legislature is to encourage voluntary pooling. The Act, then, is more aptly described as an Act to encourage voluntary poolingrather than an Act to provide compulsory state action. Smith, Texas Compulsory Pooling Act 1009. Reasonable minds may, of course, differ on what constitutes a fair and reasonable offer. Because the MIPA does not define the phrase fair and reasonable offer to pool voluntarily, this is left to the commission's discretion. 3 Smith 12.3(B)(1)(a), at 23-0. Not surprisingly, application of this standard has been often litigated. See, e.g., Carson v. Railroad Comm'n, 669 S.W.2d 315 (Tex.1984); Railroad Comm'n v. Broussard, 755 S.W.2d 951 (Tex.App.Austin 1988, writ denied); American Operating Co. v. Railroad Comm'n, 744 S.W.2d 149 (Tex.App.Houston [14th Dist] 1987, writ denied); Buttes Resources Co. v. Railroad Comm'n, 732 S.W.2d 675 (Tex.App.Houston [14th Dist.] 1987, writ refd n.r.e.); Windsor Gas Corp. v. Railroad Comm'n, 529 S.W.2d 834 (Tex.App.Austin 1975, writ dism'd as moot). The MIPA provides that a person affected by a commission pooling order is entitled to judicial review of that order in a manner other than by trial de novo. Tex. Nat.Res.Code § 102.111.