Court Opinion

ID: 9639326
Source: CourtListenerOpinion
Date Created: 2023-08-22 16:12:34.631207+00
Date Added: 2024-06-11T15:35:17.316338
License: Public Domain

KENNAMER, District Judge
(dissenting).
Under the provisions of the Aet approved February 11, 1915 (S. L. 1915, c. 25, p. 35), sections 7954-7963, inc., C. O. S. 1921, the corporation commission of Oklahoma is vested with jurisdiction to hear any proceeding instituted by any person, firm, or corporation, or the Attorney General on behalf of the state, involving any questions relating to the enforcement of the aet, and to determine all questions of fact involved in such proceeding.
The object of complainant’s action instituted in this court is to restrain the enforcement of certain orders of the corporation commission restricting the amount of oil complainant may produce from its properties within certain oil fields in the state of Oklahoma. Such orders are designated as proration orders. The statute upon which the pro-ration orders are bottomed is herein attacked as unconstitutional, and the orders made under the authority of the statute are attacked as unconstitutional in that they deny the complainant due process of law. The act involved is set out in full in the majority opinion.
*830• The material allegations of complainant’s bill and the' evidence introduced at the trial of the cause disclose that complainant is a corporation organized and existing under and by virtue of the laws of the state of New Mexico, and has been duly authorized to transact business within the state of Oklahoma, with its principal office and business located in the city of Enid, Old. It is engaged in the business of producing, transporting, refining, and marketing petroleum and natural gas, and their products. It owns and operates an oil refinery at Enid, Okl., with a daily capacity of approximately 17,000 barrels of crude oil. It refines and manufactures gasoline, kerosene, lubricating oil, waxes, and other products. In connection with its refinery, it operates approximately 725 tank cars for the distribution of its refined products among its customers and trade in Oklahoma, Texas, Colorado, Kansas, Arkansas, and many other states. It has and operates approximately 470 miles of pipe lines for the transportation of its products, 263 retail ■ gasoline filling stations, and 256 wholesale stations in various states. It has 45 producing oil and gas leases and many undeveloped leases, all representing an investment of several million dollars. It has made a large investment in leases in the Oklahoma City field and has several producing wells equipped at an expenditure of several hundred thousand dollars. On or about June 30, 1930, the corporation commission of the state of Oklahoma entered an order entitled “Or-. der No. 5181, Cause No. 10146,” which prescribed the allowable production from each of the principal oil producing fields for the state of Oklahoma, which included the complainant’s properties, and prescribed rules and regulations governing the production of oil in said fields, and on October 28, 1930, made Order No. 5369, and from time to time and until within a few days of the trial of this cause have amended and supplemented said orders so as to prorate the amount of production that may be produced from the various properties of the complainant based upon the estimated potential production of the various oil fields of the state of Oklahoma. Said orders purport to allow from time to time the number of barrels of crude oil to be produced daily from the oil fields of the state of Oklahoma, and said orders recite in support thereof that the number of barrels of crude oil allowed to be produced represent the reasonable market demands for crude oil from said state. The defendants have appointed and designated as their agents to enforce the orders Otto B. Bradford, commonly known as an umpire, for the Oklahoma City field, and Ray H. Collins, known as an umpire, for the state at large and especially the greater Seminole field. These umpires are paid large and lucrative salaries through voluntary contributions made by various oil companies operating in the various oil fields of the state. These contributing oil companies have formed and designated an- “Operator’s Committee.” The Operator’s Committee represents oil companies that are competitors of complainant in the business of producing, or refining, and marketing crude oil and its by-products.
The jurisdiction of this court to determine the constitutionality of the statute and the orders entered under the authority of the statute was not seriously questioned at the hearing. This is not an action against the state in violation of the Eleventh Amendment to the Constitution of the United States. An action to restrain an officer of the state from acting under a statute alleged to be in violation of the Constitution of the United States, or otherwise violating a citizen’s constitutional rights, is not a suit against the state.
Mr. Chief Justice White, speaking for a unanimous court, in Home Telephone & Telegraph Co. v. Los Angeles, 227 U. S. 278, 33 S. Ct. 312, 315, 57 L. Ed. 510, held that the prohibitions and guaranties of the Fourteenth Amendment to the National Constitution are addressed to, and control, not only the states, but also every person, whether natural or juridical, who is the repository of state power, and among other things said: “Here again the settled construction of the Amendment is that it presupposes the possibility of an abuse by a state officer or representative of the powers possessed, and deals with such a contingency. It provides, therefore, for a ease where one who is in possession of state power uses that power to the doing of the wrongs which the amendment forbids, even although the consummation of the wrong may not he within the powers possessed, if the commission of the wrong itself is rendered possible or is efficiently aided by the state authority lodged in the wrongdoer. That is to say, the theory of the Amendment is that where an officer or other representative of a state, in the exercise of the authority with which he is clothed, misuses the power possessed to do a wrong forbidden by the Amendment, inquiry coneermng whether the state has authorised the wrong is irrelevant, and the Federal judicial power is competent *831to afford redress for the wrong by dealing with the officer and the result of his exertion of power.” (Italics mine.)
Suits in the federal court to restrain the Oklahoma corporation commissioners from using the color of their office to deny a citizen or corporation rights guaranteed by the Fourteenth Amendment have been frequently maintained. Oklahoma Operating Co. v. Love, 252 U. S. 331, 40 S. Ct. 338, 64 L. Ed. 596; Oklahoma Gin Co. v. State of Oklahoma et al., 252 U. S. 339; 40 S. Ct. 341, 64 L. Ed. 600. See, also, Georgia Power Co. v. Decatur, 281 U. S. 505, 50 S. Ct. 369, 74 L. Ed. 999; Louisville & N. R. Co. v. Garrett, 231 U. S. 313, 34 S. Ct. 48, 58 L. Ed. 229; Lake Erie & Western R. Co. v. State Public Utilities Commission, 249 U. S. 422, 39 S. Ct. 345, 63 L. Ed. 684; Philadelphia Co. v. Stimson, 223 U. S. 605, 32 S. Ct. 340, 56 L. Ed. 570; Yick Wo v. Hopkins, 118 U. S. 356, 6 S. Ct. 1064, 30 L. Ed. 220; Virginia v. Rives, 100 U. S. 313, 25 L. Ed. 667; 25 C. J. § 53, page 743.
In Langford v. United States, 101 U. S. 341-346, 25 L. Ed. 1010, Mr. Justice Miller, speaking for the court, said: “The maxim, that the King can do no wrong, has no place in our system of constitutional law, as applicable either to the Government or to any of its officers.”
If the national courts did not possess this jurisdiction, “the Constitution, steel framed, of the national fabric would fall in ruin.” Free institutions, personal liberty, and property rights would be destroyed. See Looney, Attorney General of the State of Texas, v. Crane Co., 245 U. S. 178, 38 S. Ct. 85, 62 L. Ed. 230. Mr. Chief Justice White in disposing of the same contention made, at page 191 of 245 U. S., 38 S. Ct. 85, 88, said: “There is a contention to which we have hitherto postponed referring, that the court below was without jurisdiction because the suit against the state officers to enjoin them from enforcing the statutes in the discharge of duties resting upon them was in substance and effect a suit against the state, within the meaning of the Eleventh Amendment. But the unsoundness of the contention has been so completely established that we need only refer to the leading authorities. Ex parte Young, 209 U. S. 123, 28 S. Ct. 441, 52 L. Ed. 714, 13 L. R. A. (N. S.) 932, 14 Ann. Cas. 764; Western Union Telegraph Co. v. Andrews, 216 U. S. 165, 30 S. Ct. 286, 54 L. Ed. 430; Home Telephone & Telegraph Co. v. Los Angeles, 227 U. S. 278, 33 S. Ct. 312, 57 L. Ed. 510.”
In Terrace v. Thompson, 263 U. S. 197, 214, 44 S. Ct. 15, 17, 68 L. Ed. 255, the Supreme Court of the United States held: “Equity jurisdiction will be exercised to enjoin the threatened enforcement of a state law which contravenes the federal Constitution wherever it is essential in order effectually to protect property rights and the rights of persons against injuries otherwise irremediable.”
The conclusion reached by my distinguished colleagues, “that the statute is too indefinite and uncertain to be sustained as a penal statute,” cannot be seriously controverted. The drastic provisions of the statute subject an oil-operator to a penalty of $5,000 fine, 30 days in jail, or both, in the discretion of the court when such operator committed economic waste, underground waste, waste incidental to production in excess of transportation facilities, or produces his oil in excess of reasonable market demands, and that his property in a suit by the state, through the Attorney General or any county attorney, may be placed in an indeterminate receivership. It was held in Connally v. General Construction Co., 269 U. S. 386, 46 S. Ct. 126, 127, 70 L. Ed. 322, that: “A statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application violates the first essential of due process of law.” The power of the state to provide reasonable regulations to prevent actual waste, or wasteful utilization in the production and marketing of oil and gas, is well established. Ohio Oil Co. v. Indiana, 177 U. S. 190, 20 S. Ct. 576, 44 L. Ed. 729; Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 31 S. Ct. 337, 55 L. Ed. 369, Ann. Cas. 1912C, 160; Walls v. Midland Carbon Co., 254 U. S. 300, 41 S. Ct. 118, 65 L. Ed. 276. The reason for the rule is that waste of the natural resources of the state is not only detrimental to the common weal, but also injuriously affects the rights of landowners over a common pool of oil or gas, and all such owners are entitled to an equal privilege of reducing oil and gas to possession. Ohio Oil Co. v. Indiana, supra. I cannot subscribe to the conclusion that the owners of land in a common oil pool own such oil and gas in common, and the right of one owner to reduce oil and gas underlying the surface of his land to possession is dependent upon the ability of another *832owner to reduce the oil and gas beneath the surface of his land to possession. No such rule of property exists in the state of Oklahoma.
The right of an owner of land within Oklahoma to drill wells and reduce oil and gas to possession which lies beneath his land is a property right protected by the Fourteenth Amendment to the Federal Constitution. The Oklahoma Supreme Court has repeatedly followed the rule that an estate in fee simple in lands in Oklahoma includes all oil and gas in place in and under the land so long as it remains therein, and the owner of such land has a vested right to use it and to enjoy the profits accruing therefrom, since without the latter the former cannot be of value. Wright v. Carter Oil Co., 97 Okl. 46, 223 P. 835; Green v. Biddle, 8 Wheat. 1-76, 5 L. Ed. 566; Terrace v. Thompson, 263 U. S. 215, 44 S. Ct. 15, 68 L. Ed. 274.
In the ease of Wright v. Carter Oil Co., supra, the Oklahoma Supreme Court said: “The right to reduce oil and gas to possession is a valuable property right.” In the same ease, the court held that “oil and gas belong to the owner of the land and are a part of it so long as they are on it, or in it, and subject to his control, but when they escape and go into other land, or come under another’s control through the natural reservoir, the title of the former owner is gone.” Thus, an established rule of property has grown around oil and gas, and such property rights are subject to protection as other property rights.
In Ohio Oil Co. v. Indiana, supra, the court said: “On the other hand, as to gas and oil the surface proprietors within the gas field all have the right to reduce to possession the gas and oil beneath. They could not be absolutely deprived of this right which belongs to them without a taking of private property.” In West v. Kansas Natural Gas Co., 221 U. S. 229, 31 S. Ct. 564, 571, 55 L. Ed. 716, 35 L. R. A. (N. S.) 1193, the court in referring to the opinion of the court in Ohio Oil Co. v. Indiana, supra, said: “It surely cannot need argument to show that if they could not be deprived of the right to reduce the gas to possession, they could not be deprived of any right attached to it when in possession.” The trial court in the cited case, in construing an act of the Legislature of Oklahoma prohibiting the transportation of natural gas in interstate commerce, held (Kansas Nat. Gas Co. v. Haskell [C. C.] 172 F. 545) that natural gas found within the territorial limits of a state was not a product which the state may conserve and preserve by law as a thing in which the people of the state have a common interest, as wild animals, but that it was an absolute property right, of which the owner cannot be deprived without just compensation.
The Supreme Court of the United States, in Brown v. Spilman, 155 U. S. 665, at page 669, 15 S. Ct. 245, 247, 39 L. Ed. 304, said: “Petroleum gas and oil are substances of a peculiar character, and decisions in ordinary eases of mining, for coal and other minerals which have a fixed situs, cannot be applied to contracts concerning them without' some qualifications. They belong to the owner of the land, and are part of it, so long as they are on it or in it or subject to his control; but when they escape and go into other land, or come under another’s control, the title of the former owner is gone. If an adjoining owner drills his own land, and taps a deposit of oil or gas, extending under his neighbor’s field, so that it comes into his well, it becomes his property. Brown v. Vandergrift, 80 Pa. 142, 147; Westmoreland & C. Nat. Gas Co.’s Appeal, 130 Pa. 235, 18 A. 724 [5 L. R. A. 731].”
While the state, in the exercise of its police power, has the power, through appropriate legislation, to protect the public morals, health, and safety, it cannot take private, property from one person and transfer it to another for the private use and benefit of such person. The exercise of the police power is subject to constitutional limitations. “The chief restriction on this class of legislation is that vested rights must not be disturbed.” Cooley’s Constitutional Limitations, p. 744.
In Lawton v. Steele, 152 U. S. 133, 14 S. Ct. 499, 501, 38 L. Ed. 385, the court said: “To justify the state in thus interposing its authority in behalf of the public, it must appear — First, that the interests of the public generally, as distinguished from those of a particular class, require such interference; and, second, that the means are reasonably necessary for the accomplishment of the purpose, and not unduly oppressive upon individuals. The legislature may not, under the guise of protecting the public interests, arbitrarily interfere with private business, or impose unusual and unnecessary restrictions upon lawful occupations; in other words, its. determination as to what is a proper exercise of its police powers is not final or conclusive, but is subject to the supervision of the courts.”
*833The state has no title to oil and gas in place, and is without power to appropriate the oil and gas in and under the lands of one owner to' the use and benefit of another owner. The only interest the state has under its police power is to prevent actual waste and' to provide equal privileges to' every landowner to reduce such products to possession and place them in the channels of legitimate commerce. The state exceeds its constitutional authority when, under the pretense of preventing waste, it attempts to regulate market demands, and for the purpose of regulating and controlling the price at which the owner of oil and gas, after it has been reduced to possession, must market such product. It is plain from the provisions of section 2 of the act that it is a price-fixing statute. The act empowers the commission to determine at what price oil and gas may be marketed. In the presentation of the application for temporary injunction counsel for the defendants conceded that section 2 of the act was invalid as a price fixing statute. The orders of the commission recite that because of market demands the daily production of the state of Oklahoma must be restricted to approximately 550,000 barrels of oil daily, and the commission attempts by its orders, not only to restrict the daily amount of production, but also to prorate the markets among the various oil pools of the state. It is only reasonable to infer from the language employed in the orders of the commission and all the evidence introduced on the trial of the cause that the sole purpose of the commission in restricting the amounts of daily production in the state of Oklahoma was for the purpose of requiring all owners of oil and gas to market it at what is commonly termed the “posted price.” The “posted price” is simply a price agreed to be paid by the purchasing companies that substantially constitute the Operator’s'Committee.
It is the contention of counsel for the defendants that if the amount of oil to be produced is not restricted under the proration orders of the commission it will result in waste through storage of crude oil, especially storage in earthen tanks. Aside from a rule prohibiting storage in earthen tanks, the commission has in no manner undertaken to regulate the storage of crude oil. It is a matter of common knowledge that millions of barrels of crude oil are now confined in storage. If the Legislature deems storage of oil in earthen tanks wasteful, and there is no evidence that such practice has been engaged in, during recent years, it can pass a brief act prohibiting such storage. The evidence is uncontroverted that the complainant in this ease has been and is capable of producing, refining, and marketing its products without waste.
Producing, refining, and marketing crude oil is not a public service business. The producer does not devote his property to a public use so as to give the state the power to regulate it like railroads and other public utilities. Charles Wolff Packing Co. v. Court of Industrial Relations, 262 U. S. 522, 43 S. Ct. 630, 67 L. Ed. 1103, 27 A. L. R. 1280; and Tyson & Bro.-United Theatre Ticket Offices v. Banton, 273 U. S. 430, 47 S. Ct. 426, 71 L. Ed. 713, 58 A. L. R. 1236. It is also well settled that the Legislature, neither directly nor through the corporation commission, can regulate or fix the price of crude oil. The producer has the right under the Fourteenth Amendment to the National Constitution to fix his own price. Williams v. Standard Oil Co., 278 U. S. 239, 49 S. Ct. 115, 73 L. Ed. 287, 60 A. L. R. 596; Tyson & Bro.-United Theatre Ticket Offices v. Banton, 273 U. S. 418, 47 S. Ct. 426, 71 L. Ed. 718, 58 A. L. R. 1236; Charles Wolff Packing Co. v. Court of Industrial Relations, 262 U. S. 522, 43 S. Ct. 630, 67 L. Ed. 1103, 27 A. L. R. 1280; Fairmont Creamery Co. v. State of Minnesota, 274 U. S. 1, 47 S. Ct. 506, 71 L. Ed; 893, 52 A. L. R. 163; and Ribnik v. McBride, 277 U. S. 350, 48 S. Ct. 545. 72 L. Ed. 913, 56 A. L. R. 1327.
With all deference to the opinion of my associates, I cannot escape the conclusion that section 4 of the act is no more nor less than a part of the legislative scheme to fix prices for crude oil and that it does not provide for a fair and equitable proportionate taking by separate operators in the common ’field. Section 4 does not purport to require equitable taking except “whenever the full production from any common source of supply * * * can only be obtained under conditions constituting waste as herein defined,” which must mean that a person “having the right to drill into and produce oil from any such common source of supply, may take therefrom only such proportion of all crude oil and petroleum that may be produced therefrom, without waste, as the production of the well or wells of any such person, firm or corporation, bears to the total production of such common source 1 of supply,” whenever, quoting section 2, “there is not a market demand therefor at the well at a price equivalent to the actual value of such crude oil or petroleum,” as determined by *834the commission. Section 4 means that whenever there is not a market at the price Axed by the corporation commission for “the full production from any common source of supply of crude oil or petroleum in this State,” then “any person, firm or corporation, having the right to drill into and produce oil from any such common source of supply, may take therefrom only such proportion of all crude oil and petroleum that may be produced therefrom” and sold “at the well at a price equivalent to the actual value of such crude oil or petroleum” as determined by the corporation commission under the authority attempted to be conferred upon it by section 2 of the act. If this .is not the correct construction and the Legislature intended to authorize the commission to enforce in the oil fields “a just distribution, to arise from the enjoyment” by the operators in that field “of their privilege to reduce to possession,” then why did not the Legislature prohibit an operator from pumping his wells unless his adjoining neighbor in the same pool has facilities for pumping oil from the common source (and an operator using a pump may restrain an adjoining operator from leaving open un-producing wells on his property the effect of which is to interfere with the action of the pump, Higgins Oil & Fuel Co. v. Guaranty Oil Co., 145 La. 233, 82 So. 206, 5 A. L. R. 411 and note; Bassell v. West Virginia Central Gas Co., 86 W. Va. 198, 103 S. E. 116, 12 A. L. R. 1398; Thornton on Oil & Gas (3d Ed.) vol. 1, § 32), and why did not the Legislature require an operator to shut down his offset wells in the event his adjoining neighbor’s wells are choked up by casing and thereby prevented from producing? The so-called proportionate taking as provided for by section 4 only becomes operative in flush pools or in pools, the full production of which cannot find a market “at the well at a price equivalent to the actual value of such crude oil or petroleum” (section 2), as determined by the corporation commission. No provision is made prohibiting an operator from shooting his wells (Thornton on Oil & Gas [3d Ed.] vol. 1, § 33) and thereby artificially increasing the production of oil therefrom, although his neighbor may not be able to shoot his wells. It is clear to my mind that section 4 is nothing more than a mere mask behind which to disguise the price-fixing features' of the statute. Section 4 clearly contemplates markets and not an equal distribution of the oil in a common pool. If “a just distribution, to arise from the enjoyment * * * of their privilege to reduce to possession,” using the. language of the Ohio Oil Co. Case, was the purpose of section 4 of the act, it is strange it did not provide for taking into consideration acreage in figuring out the proportionate taking. Yet section 4 says that an operator can take out “only such proportion of all crude oil and petroleum that may be produced therefrom, without waste, as the production of the well or wells of any such person, firm or corporation, bears to the total production of such common source of supply.” Acreage is ignored and an operator with two 5,000-barrel wells on 5 acres may take out of the common source of supply, under the provisions of section 4, as much oil as an operator with two 5,000-bar-rel wells on 20 acres in the same field. Proportionate taking per well is wholly inequitable if the Legislature intends to secure “a just distribution, to arise from the enjoyment * * * of their privilege to reduce to possession,” because the operator with 20 acres has four times as much privilege as the operator with 5 acres in the same field. As further evidence that section 4 is concerned with markets and not with proportionate taking, the commission is authorized “to prevent unreasonable discrimination in favor of any one such common source of supply as against another,” which must mean that the commission is authorized to prorate markets because we cannot attribute to the Legislature the absurdity involved in an authorization to the commission to prohibit, for instance, the Oklahoma City field, from draining the Seminole field or the Tonkawa field, separated by many miles and shown by the undisputed evidence to be incapable of draining any other field.
Severing section 2 from the act and declaring or conceding its uneonstitutionaiity does not take it out of the act when we come to ascertain the legislative intent. . An unconstitutional law or part of a law may be considered in order to ascertain the intent of the Legislature in another law or a part of the same law. Lewis’ Sutherland Statutory Construction (2d Ed.) vol. 2, § 452.
The Illinois Supreme Court, in Baird v. Hutchinson, 179 Ill. 435, 53 N. E. 567, 568, said: “The meaning of the legislature must be gathered from all they have said, as well from that which is ineffective for want of power as from that which is authorized by law.”
Mr. Justice Van Devanter, in Davis v. Wallace, 257 U. S. 478, 42 S. Ct. 164, 166, 66 L. Ed. 325, applied this rule and said that:' “Where an excepting provision in a *835statute is found unconstitutional, courts very generally hold that this does not work an enlargement of the scope or operation of other provisions with which that provision was enacted, and which it was intended to qualify or restrain.” The court in that ease also held that declaring a section of a statute unconstitutional “does not make the provision any the less a key to the intention of the Legislature.”
Section 2 permeates the whole statute. It is the foundation of the statute and without it sections 3 and 4 are too vague and uncertain to vest any power in the corporation commission to make the rules and regulations assailed in this ease. The act nowhere undertakes to vest the corporation commission with power to define waste. See Hewitt v. Board of Medical Examiners, 148 Cal. 590, 84 P. 39, 3 L. R. A. (N. S.) 896, 113 Am. St. Rep. 315, 7 Ann. Cas. 750; Cline v. Frink Dairy Co., 274 U. S. 445, 47 S. Ct. 681, 71 L. Ed. 1146.
As shown by the commission’s various orders from June 30, 1930, down to date, it has purported to find a market demand for the entire state of Oklahoma, and then no doubt acting under the last clause in section 4 of the act, allocated those markets between various fields, a thing I do not believe the Legislature can constitutionally authorize, as it in effect takes one man’s market and gives it to another. In the commission’s order of June 36, 1936, it found that the existing wells in Oklahoma following the 1st day of July would produce approximately 1,362,666 barrels per day, and “that the daily demand in Oklahoma is and will be approximately 656,-666 barrels per day during the months of July, August and September, 1936.” In the decretal part of the order it distributes this market among the various fields, naming them in a schedule setting forth their estimated potential and estimated aetual production. This same scheme was followed in the succeeding orders. The commission in finding that the market demand in Oklahoma for certain months was a certain number of barrels evidently meant a market at the posted price, th e then existing price, and not a market at a lower priee. It is true that there may not be a market for more than 656,606 barrels per day at $1.67 a barrel, whereas, there may be a market for one million barrels per day at 75 cents per barrel.
Collins, umpire for the state at large, testified that although he did not make recommendations lipón which the commission assigned market demand in the Oklahoma City field for the month of January, 1931, he did make recommendations for the Seminole and the balance of the state, and that although he had nothing to do with assigning market demands to the respective fields he made recommendations to the commission. On re-examination Collins testified that he tried to get an increase of the market demand for the Oklahoma City field, but that in doing so he never ■ considered the priee; that he never tried to get a market at a price below the posted price because it would be nearly impossible to find a seller; and that he had never considered it his business to try to get any market below the market price, all of which goes to show that the commission’s so-called findings of market demands were based on a finding of the ability to sell at the then posted priee and not at a lower price.
Defendants point to-the enormous waste of gas and casinghead gas in the Oklahoma City field and introduced D. B. Bow as a witness, who testified that at a valuation of 6 cents a thousand the total value of gas and gasoline wasted during the year would be $29,466,666 if the field were opened up. But the commission has made no order requiring the producers to operate their wells on such a gas-oil ratio as will conserve the gas. The commission’s orders have been directed at the suppression of the production of oil. During oral argument it was stated by counsel, and not denied, that the record before the special master shows that one 18-barrel oil well is operated under the commission’s rules in the Oklahoma City field at an expenditure of over 3,666,666 cubic feet of gas per barrel. The commission must therefore either have construed section 7964 of the Oklahoma Comp. Stats. 1921, as authorizing the waste of gas without restriction when produced from an oil well, or otherwise has refused to enforce the statute passed in 1915 embodied in sections 7926 to 7922, inclusive, of the Oklahoma Comp. Stats. 1921, prohibiting the production of natural gas in sueh manner and under sueh conditions as constitute waste and providing that “whenever natural gas in commercial quantities, or a gas bearing stratum, known to contain natural gas in such quantity, is encountered in any well drilled for ml or gas m this state, sueh gas shall be confined to its original stratum until such time as the same can be produced and utilized without waste, and all such strata shall be adequately protected from infiltrating waters.” Not having taken any steps to conserve the gas as authorized and directed by the Oklahoma Statutes of 1915, embodied in. sections 7926 to 7922, Oklahoma Comp. Stats. *8361921, my conclusion is that the commission has not concerned itself with conservation of the natural resources but with the suppression of the production of oil in order to decrease the supply and thus increase the price.
The statutes involved in Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 31 S. Ct. 337, 55 L. Ed. 369, Ann. Cas. 1912C, 160; Ohio Oil Co. v. Indiana, 177 U. S. 190-202, 20 S. Ct. 576, 44 L. Ed. 729, and Walls v. Midland Carbon Co., 254 U. S. 300, 41 S. Ct. 118, 65 L. Ed. 276, were enacted to prevent physical waste or the wasteful utilization of the oil or gas or water. There is no contention in this case that the complainant has wasted or will waste any of the oil or use it for a purpose other than useful.
In view of the fact that the Oklahoma Act does not (a) take into consideration acreage, or (b) prohibit the use of pumps to create an excessive flow of oil, or (c) closing offset well or wells when a stoppage of an adjoining operator’s well is caused by losing the easing or other accident, or (d) make any provisions for equitable taking except “where the full production from any common source of supply of crude oil or petroleum * * * can only be obtained under conditions constituting waste,” which must mean where there is not a sufficient market at a fixed price for all the oil, I conclude that the act and the orders of the commission made in pursuance thereof were intended to accomplish one result and that is price-fixing by regulating the law of supply and demand by statute and rules of the commission.
In McMillan et al. v. Railroad Commission of Texas et al. (D. C.) 51 F.(2d) 400, a recent decision by three federal judges, the court declined to be deceived by the railroad commission’s proration orders purporting to have been made under the authority of the Texas oil conservation statute. Circuit Judge Hutcheson, speaking for the court composed of himself and District Judges West and Bryant, said:
“Presumptively valid though such acts are, courts, bound to give effeet not to fictions, but to realities, may not, in construing them, close their eyes to what all men can see. Disregarding pretense, subterfuge, and chicóme, courts must, looking through form to substance, ascertain the true purpose of a statute not from its recitals of purpose, but from the operation and effect of it as applied and enforced. Smith v. [St. Louis & S. W.] Ry. Co., 181 U. S. 248, 21 S. Ct. 603, 45 L. Ed. 847; Bailey v. Drexel Furn. Co., 259 U. S. 20, 42 S. Ct. 449, 66 L. Ed. 817, 21 A. L. R. 1432; Lochner v. New York, 198 U. S. 64, 25 S. Ct. 539, 49 L. Ed. 937, 3 Ann. Cas. 1133; Meyer v. Nebraska, 262 U. S. 390, 43 S. Ct. 625, 67 L. Ed. 1042,, 29 A. L. R. 1446; Henderson v. New York, 92 U. S. 259, 23 L. Ed. 543; Chy Lung v. Freeman, 92 U. S. 275, 23 L. Ed. 550. * * *
“Especially must this be so when, as here, under the thinly veiled pretense of going about to prevent physical waste the commission has, in co-operation uñth persons interested in radsing and maintaining prices of oil and its refined products, set on foot a plan which, seated in a desire to bring supply within the compass of demand, derives its impulse and springs from, and finds its scope and its extent in the attempt to control the delicate adjustment of market supply and demand, in order to bring and keep oil prices up.” (Italics mine.)
In Near v. State of Minnesota, 283 U. S. 697, 51 S. Ct. 625, 628, 75 L. Ed. 1357, Mr. Chief Justice Hughes, speaking for the court, said: “With respect to these contentions it is enough to say that in passing upon constitutional questions the court has regard to substance and not to mere matters of form, and that, in accordance with familiar principles, the statute must be tested by its operation and effect. Henderson v. Mayor [of New York], 92 U. S. 259; 268, 23 L. Ed. 543; Bailey v. Alabama, 219 U. S. 219, 244, 31 S. Ct. 145, 55 L. Ed. 191; United States v. Reynolds, 235 U. S. 133, 148, 149, 35 S. Ct. 86, 59 L. Ed. 162; St. Louis Southwestern Railway Co. v. Arkansas, 235 U. S. 350, 362, 35 S. Ct. 99, 59 L. Ed. 265; Mountain Timber Company v. Washington, 243 U. S. 219, 237, 37 S. Ct. 260, 61 L. Ed. 685, Ann. Cas. 1917D, 642.”
I think the above rule should be applied in this ease, and if applied it is plain that the purpose of the act and the commission’s rules and regulations is to control prices of crude oil.
Special counsel, appointed by the Governor of the State to appear and represent the interest of the state on the trial of this case, stated in his brief and in his oral argument that the practice of employing umpires, charged with the duty of executing the orders of the commission, under the control of monopoly and paid by the Operator’s Committee, was iniquitous. It is' a matter of common knowledge that the Governor of the State, just a few days prior to the final ar*837guments on submission of this ease to the court for decision, issued a public proclamation advising the purchasers of crude oil that unless the price was raised to $1 per barrel he would close down by executive order all the prorated wells in the oil fields of Oklahoma and call out the State Militia to enforce such order. It^js a fact that he has executed such order by placing the wells of the complainant, and other producers, under martial law for the reason that the price of oil has not been raised to $1 per barrel, and he bases his authority for such action on the provisions of the act in controversy. This constitutes a construction of the act in question by the executive officers of the state. If there ever existed any doubt as to the intent of the Legislature in vesting the corporation commission with authority to enter proration orders restricting the production of oil and gas from “any common source of supply,” which has involved the production of oil in so much uncertainty, surely no such doubt any longer exists. The act does not define “common source of supply,” nor does the evidence shed any satisfactory light upon what is a “common source of supply.” It only subjects the oil producer, under the circumstances involved, to speculation and conjecture and forces him to market his oil at the price determined by the commission to be in accordance with reasonable market demands.
■ The Supreme Court of the United States, in Yick Wo v. Hopkins, 118 U. S. 356, 6 S. Ct. 1064, 30 L. Ed. 220, held that public officers charged with the administration of a law, thus representing the state itself, may so oppressively enforce the law so as to amount to a practical denial of the equal protection of the laws secured by the Fourteenth Amendment to the Constitution of the United States. The court at page 373 of 118 U. S., 6 S. Ct. 1064, 1073, said: “Though the law itself be fair on its face, and impartial in appliance, yet, if it is applied and administered by public authority with an evil eye and an unequal hand, so as practically to make unjust and illegal discriminations between persons in similar circumstances, material to their rights, the denial of equal justice is still within the prohibition of the constitution.”
It does not only appear from the evidence introduced in this case that the orders of the commission are grossly discriminatory, but we have the solemn admission of counsel representing the Govemer of the State that the law in its operation under the sanction of the commission is administered under the control of monopoly. Furthermore, it appears from the official pronouncements of the Governor of the State that he assumes the act authorizes price-fixing and on that construction of the act he has fixed a minimum price of $1 per barrel and has closed the oil fields until that price is paid. In addition to the admission of counsel for the Governor that the administration of the law is under the domination of monopoly, the evidence discloses that the umpires, acting as the agents of the defendants in the administration of the law and in violation of the publje policy of the state, are receiving lucrative salaries, one in the sum of $24,000 per year, with a large expense account, and the other in the sum of $7,200 per year, from operating companies in the prorated oil fields^ and that the orders of the commission are based substantially upon information and evidence furnished by such umpires. Section 1570, C. O. S., 1921, makes it an offense for any executive officer to receive any emolument, gratuity, or reward for attempting or deferring the performance of any official duty, and the person violating the same is guilty of a misdemean- or. Section 1561, C. O. S., 1921, makes any person who executes any of the functions of a public office without having taken and duly filed the oath of office as required, guilty of a misdemeanor, and forfeits his right to such office. Umpires acting as agents of the corporation commission are public officers when appointed and selected in the manner required by the act. The manner of selection and payment of the umpires charged with the duty of administering the law is contrary to public policy and sound morals, and sufficient to render the orders of the commission so administered as violative of the constitutional rights of the complainant. To say that the Legislature has been in session since the practice has been followed and has not corrected the evil is no protection to the complainant. See Somerset Bank v. Edmund, 76 Ohio St. 396, 81 N. E. 641, 11 L. R. A. (N. S.) 1171, 10 Ann. Cas. 726.
In Tumey v. Ohio, 273 U. S. 510, 47 S. Ct. 437, 441, 71 L. Ed. 749, 50 A. L. R. 1243, in an opinion by Mr. Justice Taft, the court said: “But it certainly violates the Fourteenth Amendment and deprives a defendant in a criminal case of due process of law to subject his liberty or property to the judgment of a court, the judge of which has a direct, personal, substantial pecuniary interest in reaching a conclusion against him in his ease.” Manifestly it is unfair to the complainant to be controlled by an umpire in the *838production of its oil, selected by and paid by its competitors. Such a course of conduct is unfair and fundamentally unsound, and the orders of the commission authorizing any such course of conduct should be stricken down as violative of due process of law.
The commission’s power under section 4 of the act remains in a state of suspension until a legal gauge of each well has been made as required by section 5 of the act. The commission eannot delegate to the individual operators, private persons, the power to gauge their own wells under the supervision of umpires paid by private persons and corporations. Before the commission can make and enforce any order or rule under section 4, if that section is valid, it must cause a gauge of the wells to be made by some state official or employee of the commission. It eannot delegate that authority to the operators and make the report of the operators to the umpire conclusive evidence of the potential production of the wells. No operator can determine the amount he is permitted to withdraw from the common source of supply “whenever the full production from any common source of supply of crude oil or petroleum * * * can only be obtained under the conditions constituting waste,” or determine what is an equitable and fair taking from a common souree of supply until all the wells in the field have been legally gauged. The commission could not delegate the authority to gauge wells to the Operators’ Committee or to the operators themselves.
In State v. Crawford, 104 Kan. 141, 177 P. 360, 2 A. L. R. 880, the court said that “the Legislature eannot delegate to private individuals and private associations of persons the power to make obligatory rules concerning the management and care of property, nor provide that the breach of such rules shall be a penal offense.”
This principle is upheld in Washington ex rel. Seattle Title Trust Co. v. Roberge, 278 U. S. 116, 49 S. Ct. 50, 73 L. Ed. 210, and Eubank v. Richmond, 226 U. S. 137, 33 S. Ct. 76, 57 L. Ed. 156, 42 L. R. A. (N. S.) 1123.
In my opinion complainant is entitled to a permanent injunction restraining the defendants from enforcing the rules and regulations in so far as they restrict the plaintiff’s right to produce oil from its wells so long as it ean do so without committing actual waste. The consuming public is entitled to purchase the refined products of crude oil in markets free from the control of monopoly and where fair competition prevails.