Court Opinion

ID: 9773163
Source: CourtListenerOpinion
Date Created: 2023-08-29 17:38:47.676949+00
Date Added: 2024-06-11T17:31:45.754884
License: Public Domain

GONZALEZ, Justice,
dissenting.
Today, the court 1) unwisely and improperly refuses to recognize the lawful authority of the Railroad Commission (RRC), 2) introduces a novel definition of “casing-head gas”, and 3) reverses an errorless judgment. The court also remands the case for a trial on damages without any guidance whatsoever as to the proper measure of damages. This opinion will create uncertainty and chaos in the oil and gas industry and may discourage drilling. For these reasons, I dissent.
FACTS
Amarillo Oil is the owner of the gas and gas rights under a 61.42 acre tract of land. Energy-Agri is the owner of the oil and casinghead gas and the oil and casing-head gas rights under the same acreage. A well, now operated by Amarillo Oil, was completed in the Brown Dolomite Formation and has produced gas for more than thirty years. Energy-Agri later drilled its own well on the same tract, initially completing it in the deeper Granite Wash Formation.1 In order to improve its perform-*29anee, Energy-Agri perforated the well at the same depth from which the Amarillo Oil gas well produces. This well, the Kim-berlin #2, was perforated before trial. Energy-Agri drilled another well, the Kim-berlin #3, and planned to perforate it in the same manner.
The parties dispute whether the substance extracted as a result of the perforations is “gas” or “casinghead gas”. Amarillo Oil filed suit to quiet title and alleged that Energy-Agri was converting its gas; it also requested an injunction, an accounting, and damages.
The trial court granted a temporary injunction against Energy-Agri and permitted a test to be made in the presence of RRC staff to determine if the Energy-Agri wells should be classified as “oil” or “gas” wells. Following the test, the RRC did not change its previous classification of the wells as “oil” wells.
Thereafter, a trial ensued, and the jury answered questions favorably to Energy-Agri. Specifically, the jury found that the Brown Dolomite can produce oil, that it is not a horizon productive of gas only, and that Energy-Agri’s wells are capable of producing oil. Amarillo Oil did not present any evidence on alleged damages, request any questions on damages, or request a new trial to determine damages.
Based on the jury findings, the trial court rendered a take-nothing judgment against Amarillo Oil and dissolved the temporary injunction. The court of appeals dismissed the case, holding that Amarillo Oil’s title claims constitute an impermissible collateral attack upon the Railroad Commission’s orders classifying the wells as oil wells over which the district court lacks jurisdiction.
RRC CLASSIFICATION ENTITLED TO GREAT DEFERENCE
I agree with the court that the statutory definition of casinghead gas is the appropriate definition to apply in this case. However, I disagree with the court’s conclusion that the statutory definition is unambiguous. In my opinion, the definition of casinghead gas is ambiguous and we should look to the RRC interpretations. The RRC has been charged by the legislature to apply the statutory definition of casinghead gas. Tex.Nat.Res.Code Ann. § 86.041 (Vernon 1978); see also Gulf Land Co. v. Atlantic Refining Co., 131 S.W.2d 73, 81 (Tex.1939) (RRC is given power and duty to make rules and orders to effectuate aims and purposes of statute). The RRC applied this definition in classifying the wells in question. Amarillo Oil has not properly challenged the construction or application of this definition by the RRC in this case as being erroneous or unsound. Thus, the court should give the RRC’s classification great weight and deference.
Courts give great weight to long standing construction of statutes by the RRC. Deep South Oil Co. v. Texas Gas Corp., 328 S.W.2d 897, 903 (Tex.Civ.App.—Beaumont 1959, writ ref’d n.r.e.); see also Franklin Fire Ins. Co. v. Hall, 247 S.W. 822, 823 (Tex.1923). Especially when interpreting an ambiguous or uncertain statute, the “proper course is to follow the departmental construction, unless that interpretation is clearly erroneous or unsound.” Shaw v. Strong, 96 S.W.2d 276, 281 (Tex.1936) (Cureton, C.J., concurring); see also Ex parte Roloff, 510 S.W.2d 913, 915 (Tex.1974). The only way to attack a RRC determination is through the judicial review process outlined in the Natural Resources Code. See Tex.Nat.Res.Code Ann. § 86.225. This has not been done, and the RRC’s conclusion that the substance in question is casinghead gas should therefore stand.
The question of what is “gas”, “casing-head gas”, and “oil” is complicated because hydrocarbons exist in either a liquid or vapor phase or in a mixed vapor or liquid phase depending on temperature, pressure, and chemical composition. If any one of these variables is altered, a portion of oil may become a gas and vice versa. The time and place of inquiry are also critical variables. Whether a substance is oil or gas depends on whether it is located in the reservoir, the wellbore, or after separation. Hydrocarbons may change from a gas to a liquid or vice versa in each of these loca*30tions. See Note, Phase Severance of Gas Rights From Oil Rights, 63 Tex.L.Rev. 133 (1984).
The application of the definition of cas-inghead gas requires technical expertise, and the legislature has provided that the RRC maintain such experts on its staff. Gregg v. Delhi-Taylor Oil Corp., 162 Tex. 26, 344 S.W.2d, 411, 413 (1961). For this reason, it makes more sense for the RRC to make the determination of what is “oil” and what is “gas” or “casinghead gas.”2
The court would allow individual juries to determine (in a sense make classifications) whether a substance being extracted is “oil”, “gas”, or “casinghead gas”. This ad hoc approach extends to potentially thousands of leases3 and will create uncertainty and chaos in the oil and gas industry, which will likely discourage drilling.4 Juries will be charged with interpreting and applying the same definition as the RRC is charged by the legislature with applying. Juries will also consider the same evidence as the RRC. Our already overburdened court system will in all likelihood be inundated with these types of cases, and different juries faced with identical evidence on adjoining tracts may reach different results. After today, even though the RRC classifies wells as “oil” wells or “gas” wells and issues permits accordingly, operators may not exercise their rights under the permits out of fear of litigation and inconsistent jury verdicts.5 Adherence to the RRC determinations leads to consistency and orderly development of the State’s oil and gas reserves — this the court sacrifices. As I have previously stated, the RRC’s determination of what is “gas” or “casinghead gas” is not the last word. Parties dissatisfied with the RRC’s classification have the right to judicial review as outlined in the Natural Resources Code.
A NEW DEFINITION OF CASINGHEAD GAS
The court arrives at a new definition of casinghead gas by concluding that the statute is unambiguous and reading together the statutory definitions of “casinghead gas” and “oil well”. Maj. opinion page 22.
Casinghead gas is statutorily defined as “any gas or vapor indigenous to an oil stratum and produced from the stratum with oil.” Tex.Nat.Res.Code Ann. § 86.002(10). The court today rewrites this definition by inappropriately equating “stratum” with “oil well”. An oil well is defined as “any well that produces one barrel or more of oil to each 100,000 cubic feet of gas.” Tex.Nat.Res.Code Ann. § 86.002(6). The end result of the court’s new definition is that a stratum must produce at least one barrel of oil for each 100,000 cubic feet of gas in order to be an oil stratum. This is an unorthodox view, and I am surprised that the court attempts to justify its decision by merely stating “the intent of the legislature is apparent from the face of the statute.” Maj. opinion page 24. There is absolutely no authority for equating a stratum with an oil well. In my opinion, the definition of “casing-head gas” is ambiguous, and the RRC has *31construed this definition for over half a century. If the legislature was dissatisfied with this construction, they would have changed it by now. Rather than mucking up the definition of casinghead gas, the court should follow the RRC’s construction.
The legislature clearly applied the 100,-000:1 gas oil ratio (GOR) only to an entire well’s production, as opposed to each individual stratum from which the well produces. Section 86.043 of the Texas Natural Resources Code authorizes the RRC to “fix and determine the gas-oil ratio of all wells in the state” (emphasis added) without mentioning any determination of the gas-oil ratio for individual strata. Neither the legislature nor the RRC have made provisions for calculating a GOR for strata.
Moreover, before today, oil wells could produce from strata which individually produce at more than a 100,000:1 GOR and produce from other strata that produce at less than a 100,000:1 GOR, so long as total production from the entire well met the 100,000:1 GOR. See Tex.Nat.Res.Code Ann. §§ 86.002(10) and 86.097 (Vernon 1978). This practice will have to cease; according to the court's new definition of casinghead gas, the only way an oil well will actually produce at the 100,000:1 GOR permitted by statute is if all strata also produce at a 100,000:1 GOR. If any strata produce at more than a 100,000:1 GOR, production will be violative of the new definition. If any strata produce at less than 100,000:1 GOR, the well’s GOR will be less than 100,000:1 because no strata greater than 100,000:1 will be allowed to offset it.6 If ;the legislature had intended this construction of these statutes, they would have said so. Instead, the legislature, in the “protection of public and private interests,” granted the RRC “broad discretion in administering the provisions of this chap-ter_” Tex.Nat.Res.Code Ann. §§ 86.-001, 86.041.
I am not suggesting that Energy-Agri’s oil wells should be entitled to draw from horizons which produce only gas. This is impermissible. See Tex.Nat.Res.Code Ann. § 86.097 (“No person ... operating an oil well may produce from the oil well gas found in a horizon productive of gas only.”).
RENDITION OP JUDGMENT QUIETING TITLE
I am further puzzled by the court’s action in rendering judgment for Amarillo Oil quieting title to all gas in the Brown Dolomite Formation at the Kimberlin wells. Amarillo Oil chose the legal theories under which it brought this lawsuit; it requested all of the questions that the trial court submitted to the jury and the jury answered them unfavorably to Amarillo Oil. Specifically, the jury determined that the Brown Dolomite Formation can produce crude petroleum oil.
In light of the adverse jury findings, the only way the court can justify its decision is by concluding Amarillo Oil has established its case as a matter of law. We must conclude that, under all the evidence, the Brown Dolomite Formation unequivocally cannot produce oil. In reviewing the evidence, we must consider it in the light most favorable to the verdict.
The only evidence the court discusses is evidence pertaining to “white oil” produc*32tion.7 The court concludes that if “white oil” production had been excluded, Energy-Agri’s wells “apparently” would not even qualify as oil wells. The court ignores the evidence of R.L. Vogt, a professional chemist with many years of experience analyzing hydrocarbons in the Panhandle Field. Vogt testified that the substance coming out of Energy-Agri’s wells was not white oil because white oil is water clear and the substance coming out of the well was a light straw color. According to Vogt, a substantial portion of the hydrocarbons produced through the LTX unit were originally in the form of crude oil in the reservoir, and that liquid “is in fact a portion of the crude oil and is crude oil.” Nor does the court address Energy-Agri’s complaints about the circumstances under which the test was performed. Eight to nine pounds of back pressure were kept on the well during the tests; this depresses the oil level in the wellbore by as much as three feet for each pound of pressure. According to Energy-Agri’s evidence, had the test been conducted under actual operating conditions and without the back pressure impeding the flow of liquids into the well-bore, the oil production would have been greater. Dan Michael, an independent consulting geologist, testified that a well, when operated properly, can produce oil and casinghead gas from the Brown Dolomite Formation.
Other evidence showed that even Amarillo Oil’s gas well produced crude petroleum oil. Jerry Bennett, general. manager of Medallion Equipment Company, leased a compressor unit to Amarillo Oil. On two occasions, he visited the well site to work on the compressor and on both occasions he discovered oil in the scrubber unit of the well. On one occasion, he found several gallons of oil. Bennett firmly stated that the oil was crude oil and not lubricating oil for the compressor.
Other experts testified that vertical fractures in the shale below the Brown Dolomite permit the free passage of hydrocarbons in and out of the Brown Dolomite. This communication between formations makes oil production from the Brown Dolomite possible. At least three other witnesses testified that the Brown Dolomite produces large quantities of oil in parts of the_Panhandle Field close to the tract in question. Just to the north of the tract in controversy, over 42,000 barrels of crude oil has been produced from wells perforated in the Brown Dolomite.
This evidence demonstrates that the Brown Dolomite may produce oil. Thus, it is ridiculous to say, as the court has done, that as a matter of law, Amarillo Oil has conclusively proven otherwise. If the court must persist in its conclusion, it should at least apply the proper standard of review and explain why Energy-Agri’s evidence is not some evidence to support the jury verdict.
DAMAGES
I am further disturbed by the fact that the court gives Amarillo Oil another bite at the apple on the issue of damages by remanding this case in the interest of justice. At trial, Amarillo Oil sought damages for an accounting and for conversion, but as the court acknowledges, these claims were waived when Amarillo Oil did not request jury questions on these claims. Tex.R. Civ.P. 279; Washington v. Reliable Life Ins. Co., 581 S.W.2d 153, 156 (Tex.1979). Nonetheless, the court remands this cause for a determination of damages. To support its decision to send this case back to the trial court, the court claims to have found error in the judgment of the trial court. Maj. opinion page 21. The court, *33however, does not favor us with an explanation of the alleged error.
I do not believe the trial court committed an error. Energy-Agri should not be penalized for the strategic decision Amarillo Oil made when it abandoned its claim for damages. The court’s action gives Amarillo Oil an opportunity to revive claims it once deserted and improperly permits a losing party to have a new trial. Uselton v. State, 499 S.W.2d 92, 99 (Tex.1973).8 The better practice would be for Amarillo Oil to file a new claim.
Finally, I am troubled by the court’s statement that “Amarillo Oil pursued an improper remedy for its legal damage”. Maj. opinion page 27-28. The court’s failure to tell the parties what measure of damages is recoverable will only add to the confusion and invite further litigation.
For all of these reasons, I dissent.

. There are five identifiable geologic rock formations in the Panhandle Field, including the Brown Dolomite and the Granite Wash Formations. They are interconnected and communicate at various points in the field. Final Order Adopting and Clarifying Rules and Regulations for the Panhandle Fields, Finding of Fact No. 11, Tex.R.R. Comm'n, Oil and Gas Div., Docket No. 10-87,017 (Jan. 9, 1990). Evidence at trial demonstrated that the tract in controversy consists of only three formations. The Brown Dolomite Formation is the uppermost formation, followed by the Granite Wash and the Granite Formations. Fractures in the shale below the Brown Dolomite permit the free passage of hydrocarbons in and out of the formations.

. The court erroneously assumes a controverted fact when it says in its introductory paragraph: "At issue ... is the ownership of gas produced from two wells_" Maj. opinion page 21 (emphasis added). The whole lawsuit is a controversy over whether the substance being extracted by Energy-Agri is “gas” or “casinghead gas" and the court improperly settles the issue by the way it frames the question.

. According to the RRC, more than 15,000 oil and gas wells have been assigned the same surface acreage. Final Order Adopting and Clarifying Rules and Regulations for the Panhandle Fields, Finding of Fact No. 21, Tex.R.R. Comm'n, Docket 10-87,017 (Jan. 9, 1990).

. To understand the chaos and uncertainty, compare this case to Dorchester Gas Producing Co. v. Harlow Corp., 743 S.W.2d 243 (Tex.App.—Amarillo 1987, writ dism’d by agr.), and Raw Hide Oil & Gas Inc. v. Maxus Exploration Co., 766 S.W.2d 264 (Tex.App.—Amarillo 1988, writ denied). In the present case, the jury found the Brown Dolomite Formation was capable of producing up to 6 barrels of oil per day, while the juries in Dorchester and Raw Hide found the Brown Dolomite Formation not capable of producing oil at all.

. This will be especially true until the measure of damages is resolved. At the very least, the court should minimize the chaos it creates today by spelling out recoverable damages.

. The statutory definition requires the gas be indigenous to an oil stratum. Nowhere in the statute is the term "stratum" defined. The term "stratum" likely contemplates a formation or group of formations not in communication with other formations. Otherwise, production from one stratum will affect the conditions in the other strata which determine title. At best, it is unclear from the statutory definition of casing-head gas whether the five formations of the Panhandle Field which are in communication with each other should be treated as a single stratum.
The court also equates stratum with formation. The court notes that a formation is "[a] succession of sedimentary beds that were deposited continuously and under the same general conditions.” Maj. opinion page 23 n. 3. According to this definition, a formation may be identified in a number of wells. Therefore, the court’s GOR requirement would seem to apply to all production from the formation, not just production from a single well; yet the court, with no apparent rationale, applies the GOR test for stratum to a particular location.

. This evidence is irrelevant. The trial court’s instructions to the jury excluded white oil production from calculation of crude oil production. Specifically, crude oil was defined as "any liquid hydro-carbon mixture or portion thereof ... which is in a liquid phase in the reservoir ... and obtained at the surface as such and which is not the result of condensation of gas before or after it leaves the reservoir.” (emphasis added). This excludes white oil, which is gas obtained in a liquified form as a result of condensation. The jury determined that, excluding white oil production, the Brown Dolomite can produce six barrels of oil through Energy-Agri’s wells. I believe that there is some evidence to support this finding. Furthermore, the court presumes that the jury disobeyed this instruction.

. To relitigate the issues of damages and conversion comes close to offending the policy reasons supporting the doctrine of collateral estoppel.