Court Opinion

ID: 9603918
Source: CourtListenerOpinion
Date Created: 2023-08-22 02:11:24.412056+00
Date Added: 2024-06-11T09:12:45.436065
License: Public Domain

HUXMAN, Circuit Judge
(dissenting).
I find myself unable fo agree with the conclusion reached by the majority.
Injunction is an equitable remedy and the granting or denying of a temporary injunction is governed by broad, general, equitable considerations, gleaned from the facts in each case. No hard and fast rules can be laid down determining when such relief should be allowed.
It is well settled that a temporary injunction should be granted upon the application of a party to a controversy seeking temporarily to enjoin a promulgated regulation under a statute when there is doubt as to either the constitutionality of the statute or the validity of the regulation. Again, there can be no hard and fast rule as to the degree of doubt required concerning the validity of the statute or regulation thereunder. Admittedly, if the loss to the applicant is grave and stands admitted if the statute or regulation is held invalid, and if the granting of the injunction does not detrimentally affect the state if ultimately the statute and regulation are upheld, then less doubt as to the constitutionality of the law or the reasonableness of the regulation will support the granting of a temporary injunction than will be required if the granting thereof would result in loss to the state.
Here it stands admitted that the challenged regulation results in grievous and irreparable loss to the applicant if the statute or regulation should, on final hearing, be held invalid. It also stands admitted that if the injunction is granted and subsequently the regulation is upheld, the state will suffer no ultimate loss.
I know of no statute or regulation that has gone so far in interfering with individual rights guaranteed by the Fourteenth Amendment to. the Constitution of the United States as do the statute and regulation under attack here. The right to reduce oil and gas to possession and use the same as one sees fit is a valuable property right. It is protected to the individual by the Fourteenth Amendment to the Constitution. Ohio Oil Co. v. Indiana, 177 U.S. 190, 20 S.Ct. 576, 44 L.Ed. 729; Champlin Refining Co. v. Corporation Commission of Oklahoma, 286 U.S. 210, 52 S.Ct. 559, 76 L.Ed. 1062, 86 A.L.R. 403; Marrs v. City of Oxford, D.C.Kan., 24 F.2d 541; Haskell v. Cowham, 8 Cir., 187 F. 403. It may not be interfered with except as required by paramount public interest, and then the regulation must not only be necessary but also reasonably relate to the public necessity sought to be promoted and reasonably tend to accomplish the same. Lawton v. Steele, 152 U.S. 133, 14 S.Ct. 499, 38 L.Ed. 385; Champlin Refining Co. v. Corporation Commission, supra; Thompson v. Consolidated Gas Utilities Corp., 300 U.S. 55, 57 S.Ct. 364, 81 L.Ed. 510.
The legislative body of a state may not under the pretext of serving the paramount public interest interfere with private rights in an oppressive or arbitrary manner.
*72That the production of oil is affected with a paramount public interest subject to regulation under the police powers of. the state is recognized without exception. So, also, the right to regulate the production of oil and gas to prevent physical waste stands unchallenged. It is also quite generally conceded that it falls within the broad police powers of the state to enact proper regulations preventing' economic waste of oil and gas.
The powers of the state to regiilate the correlative rights of different owners in a common source of supply has not received the consideration of the courts in many cases. In Champlin Refining Co. v. Corporation Commission, supra, the Supreme Court upheld a regulation by the state of Oklahoma adjusting the correlative rights of owners of oil in a common source of supply. The regulation there was promulgated under a statute prohibiting waste and for the purpose of preventing waste in the common source of supply. All the challenged order in the Champlin case did was to prorate the available market in the pool among all the wells in the pool to prevent physical waste. The Supreme Court upheld the regulation on the theory of preventing physical waste as is evidenced by •the following language of the opinion (286 U.S. at page 233, 52 S.Ct. at page 564, 76 L.Ed. 1062, 86 A.L.R. 403): “Plaintiff insists that it has a vested right to drill wells upon the lands covered by its leases and to take all the natural flow of oil and gas therefrom so long as it does so without physical waste and devotes the production to commercial uses. But if plaintiff should take all the flow of its wells, there would inevitably result great physical waste even if its entire production should be devoted to useful purposes.”
The paramount public interest in oil and gas that will support governmental interference in the property rights of an owner thereof is the conservation of an irreplaceable natural resource. Any regulation to be valid must reasonably relate to conservation. The elements required to sustain valid conservation regulations are summarized by the Supreme Court in Thompson v. Consolidated Gas Utilities Co., supra [300 U.S. 55, 57 S.Ct. 374, 81 L.Ed. 510], where the court said: “Either production greater than the demand or use for an inferior purpose would necessarily involve overground waste of gas. The manner, place, or extent of production might lead to underground waste. We assume that the prohibition of any wasteful conduct, whether primarily in behalf of other owners of gas in the common reservoir, or because of the public interests involved, is consistent with the Constitution of Texas and that of the United States, and that to prevent waste production may be prorated. We assume, also, that the State may constitutionally prorate production in order to prevent undue drainage of gas from the reserves of well owners lacking pipe line connections.”
The challenged statute and regulation not only seek to regulate the production of oil and gas in the common source of supply, to the end that physical or economic waste may be prevented or that the correlative rights of owners in the common source may be preserved, but seek to regulate the correlative rights of separate and distinct pools between which there is no connection and between which no drainage can occur. The order, in effect, says te the Otis Pool: “We will not permit you to produce the oil that admittedly you can produce without waste and for which you have a market, because if you do, some stripper pool many miles away will have no market. Therefore, we propose to take from you part of your market and give it to some other source of supply.”
Defendant contends that there is but a single market, which they call the state market. The theory advanced is that the purchaser of crude oil from any given pool is the ultimate consumer of the finished product, the gas and oil, and that therefore a given source of supply has no separate market. This argument is more ingenious than persuasive. It is difficult for me to believe that, when an automobile driver stops at a filing station and asks for tejí gallons of gas, he is in the market for crude oil. Webster’s New International Dictionary defines “market” as: “The region in which any commodity can be sold; the geographical or economic extent of the commercial demand for commodities.” I have a market for my products when there are those who are willing and able to buy my commodities. A market for crude petroleum products is not the same as a market for gasoline.
In Thompson v. Consolidated Gas Utilities Co., supra, the Supreme Court held that one person’s market may not be taken from him and given to another so that the latter may have a market. It is true that the *73facts in that case are somewhat different from what we have here. However, as I interpret the decision, the fundamental principle announced therein is applicable to this case. As I view the decision, it restates the doctrine that before the state may interfere with the right of owners of oil products to do with them as they please, it must establish that it is necessary to do so in order to prevent waste. In syllabus 9 it is stated: “The purpose of the order, as plainly shown by evidence and court findings, was neither to prevent waste nor to prevent undue drainage from the reserves of other well owners, but was solely to compel the pipe-line owners to furnish a market to those who had no pipe-line connections. Held the order is void under the Federal Constitution as a taking of private property for private benefit.”
It is argued that it is necessary to deprive the Otis Pool of the right to sell the oil for which it has a market and which admittedly can be produced without committing waste in the pool, because it is necessary to prevent waste in other pools. It is' asserted that oil can be produced in flush or semi-flush pools at such greatly reduced cost as compared with cost of production from stripper wells that practically all crude oil buyers will buy all their demand from flush pools and that as a result stripper pools will have no market; that the oil therein will be lost and physical waste will follow. The ultimate conclusion flowing from this line of reasoning is that stripper wélls cannot sell oil at as low a price as can wells in flush pools; that they will be forced out of the market and oil left in the wells will be lost; to prevent this waste it is necessary to maintain a price level high enough so they may sell in competition with flush production. For the purpose of this opinion it may be conceded that the state has power to regulate the price of crude oil to prevent economic waste, but even then the means employed to accomplish the purpose must be reasonable and have relation to the object sought to be accomplished. It appears to me to be an unreasonable regulation to deprive a purchaser of crude products of the right to purchase where he can buy most economically and to force him to purchase at a disadvantage to himself, with the object in view of attempting to maintain a price level which will permit stripper pools to operate. Taking one man’s market and giving it to another is unreasonable and therefore in violation of the Constitution.
The state undoubtedly has the right to regulate the amount of production to consumptive demand in order to prevent waste, but here again the means employed must be reasonable and have relation to the object sought to be accomplished. A regulation which takes from one person his market for crude oil and gives it to another to prevent over-production, while at the same time permitting unlimited development which further adds to the burden of overproduction, is unreasonable. As stated in the majority opinion, we may not substitute our judgment for that of the Legislature as to the best means of accomplishing a permissible governmental function, nor do I mean to indicate the proper remedy, but as stated, we may inquire into the reasonableness of the regulation to the end that one may not be deprived of his rights without due process of law.
For the purpose of this hearing, it is not essential that the constitutionality of the act or the reasonableness of the regulation be finally determined. It is sufficient to inquire whether there is reasonable doubt as to either. I have grave doubts as to the constitutionality of that portion of the statute which authorizes the state to regulate the correlative rights as between pools without reference to the element of waste; and more doubt as to the reasonableness of the challenged regulation. If we once hold that the state may not only regulate this industry, affected with a paramount public interest, in order to prevent waste, but that it may also divide and allocate markets to different consumers or producers disassociated from some form of waste, then we have destroyed the last remaining vestige of free enterprise and have completely regimented the oil industry. It is my opinion that the temporary injunction should be granted.