Court Opinion

ID: 5010508
Source: CourtListenerOpinion
Date Created: 2021-10-01 02:43:13.621428+00
Date Added: 2024-06-11T08:16:45.440772
License: Public Domain

BAUGH, Justice.
This is a Rule 37 case. Appeal is by the Railroad Commission and the permittee from a judgment of the District Court setting aside a permit granted by the Commission to Cook Drilling Company to drill an eleventh well near the northwest comer of its 45-acre lease in Rusk County. The tract in question runs north and south, is 870 feet wide, its west boundary 2570 feet long and its east boundary 1901 feet long. The well involved was authorized to be drilled under an exception to Rule 37, in the northwest corner of this tract, 150 feet from its west line, 220 feet from its north line, and 223 feet northwest of a producing well on said tract. It was granted on the recited grounds to prevent confiscation and to prevent waste.
We find no new questions presented on this appeal. The first contention made by the Attorney General on behalf of the Railroad Commission is that ap-pellee did not show that it had a justiciable interest in the controversy. Such suits are authorized under Sec. 8, Art. 6049c, Vernon’s Texas Civil Statutes, to be brought by “any interested person affected by” the order attacked.’ From the above statement as to the location of said well, under the Commission’s own spacings of 330-660 feet, which imply a finding that a well will, under ordinary conditions, drain oil 330 feet from its bore, it is manifest that the well in question was within drainage distance of appellee’s lease both to the west and to the north. That being ,true, appellee was, under numerous holdings of this court, an interested party within the meaning of the statute. See Railroad Comm. v. Gulf Production Co., Tex.Civ.App., 115 S.W. 2d 505, 508, affirmed by Supreme Court *640in 134 Tex. 122, 132 S.W.2d 254; Railroad Comm. v. Humble Oil & Ref. Co., Tex.Civ.App., 119 S.W.2d 728, 730, writ refused, and cases therein cited.
The chief question presented is whether there was substantial evidence before the Commission at the hearing upon the application to sustain such order either on the ground of confiscation or on that of waste prevention.
While some confusion has occurred in the past as to the method and extent of the inquiry on the trial of cases involving orders of the Commission, this has been largely removed by the decisions of the Supreme Court in Lone Star Gas Co. v. State, 153 S.W.2d 681, and Gulf Land Co. v. Atlantic Refining Co., 134 Tex. 59, 131 S.W.2d 73. Granting or refusing a permit for an oil well is not a general order, legislative in character, and prospective in operation, such as a rate order, or, for that matter, the promulgation of the general Rule 37 itself. The action of the Commission on an application for a permit to .drill a well as an exception to .Rule 37, is but an administrative act, quasi judicial in character, wherein the Commission must determine whether the facts of the particular case authorize an exception to, or a deviation from, the general spacing distances prescribed by the Rule itself. While it has been stated in opinions of the Supreme Court that such hearings are informal, and not governed by strict rules of procedure observed in trials to a court, it is clearly contemplated that facts should be adduced in such hearing which would meet the requirements of the substantial evidence rule. That is, that there should be at least some compliance with judicial process. As stated by the Supreme Court in Brown v. Humble Oil & Refining Co., 126 Tex. 296, 83 S.W.2d 935, 945, 99 A. L.R. 1107, involving the same question here presented, “The decisions of the Railroad Commission on this question must be based upon proof, and must not be capricious or unreasonable. The mere holding of a hearing does not justify its action. If after a hearing the commission acts without regard to the evidence, or makes a ruling wholly unsupported by the evidence, it cannot be said to have exercised its discretion.” See, also, Gulf Oil Corp. v. York, Tex.Civ.App., 134 S.W.2d 502, 505.
It is now settled that in an application for a permit as an exception to Rule 37, the burden rests upon the applicant to show by substantial evidence before the Commission that he is entitled to it. Railroad Comm. v. Magnolia Petroleum Co, 130 Tex. 484, 109 S.W.2d 967, reaffirmed by the Supreme Court in Gulf Land Co. v. Atlantic Refining Co, supra. After such permit is issued, it is presumed, under the statute and numerous decisions, to be valid and the burden then rests upon the party attacking it to overcome such presumption.
The only evidence introduced on the trial hereof was the proceedings before the Commission, the testimony of the examiner who heard the application (who, in the main, merely verified the proceedings had before him), and excerpts from amendments to Rule 37 and from proration orders of the Commission. The question presented, therefore, is whether the appellee, as the trial court found, discharged the burden resting upon it to show that there was no substantial evidence before the Commission to sustain its order. We have concluded that it did and that the trial court’s judgment setting aside the permit should be affirmed.
Not only was no confiscation of Cook’s property shown in the hearing before the Commission, but it was, we think, negatived. Cook’s testimony, and the documentary evidence presented to the Commission showed that with ten wells on the 45-acre tract, under the existing allowable, when compared with the eight times surrounding area, whether delineated by rectangle or circle, Cook was extracting from such tract more oil per acre per day than the average of the surrounding area. The only disparity of density Cook claimed was on small tracts to the southwest; and the wells in this more densely drilled area appear, as shown by the map presented to the Commission, to be too far removed from said tract to drain oil from beneath it; and in the drainage area surrounding the well authorized in the northwest portion of the Cook tract, Cook already enjoyed a drainage advantage over appel-lee’s adjoining tracts without the well in question. The well in question was located, not in the portion of Cook’s lease claimed by him as being drained, but on the portion farthest removed *641from such area. Cook testified that his application for such permit was based upon the assumption that the underground conditions beneath his and the adjoining tracts were substantially uniform; and the excerpts from the Commission’s proration schedule for this area, offered by the Gulf at such hearing, showing the daily allowable per well for the area, so indicates. It must be concluded, therefore, that the underground conditions, well potentials, etc., in the area involved were substantially uniform.
No competent evidence whatever on the question of waste was presented to the Commission at the hearing. And when the appellee presented to the Commission evidence that, according to the Commission’s own proration schedule and per well allowable the underground conditions in the area involved were substantially uniform, and that fact was made to appear upon the trial, it sufficiently negatived the waste issue as sustaining the order to rebut the prima facie validity of the order on that ground, under the Commission’s own fact findings on which Rule 37 is based. The same question was presented to us in Stanolind Oil & Gas Co. v. Midas Oil Co.,- Tex.Civ.App., 123 S.W.2d 911, 916, writ dismissed, correct judgment, and we there so held.
Nor do we construe the decision of the Supreme Court in the Gulf Land Company v. Atlantic Refining Co. case, supra, as holding otherwise. In' its brief appellant Cook Drilling Company premises its contention that the permit is sustainable on the ground of waste by the following statement: “In approaching this question we must indulge the presumption that the more wells that are drilled, the greater will be the recovery of oil from any given pool,” citing the Atlantic case, supra. We do not construe the Atlantic case as so holding. In that case the opinion was grounded on the proposition that the Commission had not passed upon the waste issue; that even if it be conceded that the “more wells, more oil theory” were correct, it would still not follow that waste would occur as a matter of law; and that bringing to the surface the maximum amount of recoverable oil from beneath the ground was but one of the elements entering the question of waste prevention. Waste above ground must also be considered in regulating production.
On the other hand this same question has been repeatedly considered by this court and overruléd. We merely refer to some of these cases without reiterating here our views in this matter. Railroad Comm. v. Marathon Oil Co., Tex.Civ.App., 89 S.W.2d 517, writ refused; Magnolia Petroleum Co. v. Railroad Comm., Tex. Civ.App., 93 S.W,2d 587, writ refused;. Railroad Comm. v. Gulf Production Co., Tex.Civ.App., 115 S.W.2d 505, affirmed by the Supreme Court in 134 Tex. 122, 132 S.W.2d 254; Lippincott v. Atlantic Refining Co., Tex.Civ.App., 128 S.W.2d 847, writ dismissed; and Railroad Comm, v. Shell Oil Co., Tex.Civ.App., 154 S.W.2d 507, decided June 25, 1941.
■ We hold, therefore, that no such presumption obtains that wells drilled at closer distances than those prescribed by Rule 37 are necessary to prevent waste as defined by law and the rules of the Commission. To so hold would in effect nullify the Rule itself. On the other hand, unless some grounds for an exception to the spacings prescribed by the Commission in the Rule itself, and recited by the Commission in such Rule as being necessary to prevent physical waste of oil and gas, are shown to exist, the presumption must be indulged. that closer drilling, as a general rule, will tend to cause, rather than to prevent, waste. Such has been the consistent holding of the majority of this court since this question was fully considered in Rule 37 cases reported in Sun Oil Co. v. Railroad Comm., Tex.Civ. App., 68 S.W.2d 609; Humble Oil & Refining Co. v. Railroad’ Comm., Tex.Civ. App., 68 S.W.2d 622; Id., Tex.Civ.App., 68 S.W.2d 625.
For the reasons stated, the judgment of the trial court is affirmed.
Affirmed.