Court Opinion

ID: 5011857
Source: CourtListenerOpinion
Date Created: 2021-10-01 02:54:22.767474+00
Date Added: 2024-06-11T08:17:27.565861
License: Public Domain

On Appellee’s Motion for Rehearing.
We modify our former judgment in response to appellee’s complaint that it limits its right of application to the Commission for a general field proration order to a potential instead of a per well basis. We did not have in mind placing any restriction either upon such right or upon the powers of the Commission. Appellee’s only complaint against the general field order was that the Commission had violated its own rule which prescribed a potential formula. That complaint was predicated upon the proposition that the Commission was bound by its own rules, and could not legally transgress them. The per well formula (it was contended) did transgress its general field proration formula rule, consequently it was invalid. We naturally assumed that it was contended that the Commission could apply only its general rule (potential) formula, at least so long as that rule remained in effect. There was no attack on the rule; consequently it would seem to follow that (under appellee’s contention) the rule must be applied under the only theory upon which the general field per well formula was attacked.
We see no valid reason for not adhering to our holding to the effect that appellee has not shown itself entitled, at this time, to have the general field proration order set aside, for each of the two reasons given in our original opinion.
As to the first of these reasons appel-lee challenges our statement that no complaint was ever made to the Commission concerning it general field proration order. We • carefully perused all the evidence bearing upon this issue; and we reiterate our statement that no such complaint was ever made, and no application was ever made to the Commission to change its general field order from a per well to a potential basis. Excerpts from the evidence in support of this contention were copied in appellee’s brief. We carefully considered these excerpts as well as the entire evidence regarding what transpired before the Commission, and we fail to find anything which supports appellee’s contention or which militates against our statement in this regard. The complaint that the Commission was violating its own rule was made for the first time in this suit in so far as the record before us discloses.
In reply to the second of these reasons— that no injury was shown to result from not applying the potential formula' — the motion reads:
“Our complaint against the per well formula of the Commission is based upon the undisputed fact that it is contrary to the Commission’s own published rules; and hence irrespective of whether or not the potential method would be beneficial or detrimental to appellee, it is illegal per se. No injury need be shown in order to be relieved from unauthorized regulation.”
Where there is no authority to regulate, regulation is illegal and may be prevented or ignored. But where, as here, the power to regulate exists — in fact is conceded, and invoked — and only the manner . of regulation is challenged as viola-tive of some asserted rule, we think it essential to show that some advantage would accrue or some detriment be averted by following the letter of the rule as against the formula employed. There was no attempt by appellee to show whether or what change either to appellee alone or to the field as a whole would flow from applying the potential formula as against the per well formula. The only evidence upon this subject was that introduced by appellants to the effect stated in our original opinion — which statement is not challenged.
Upon appellee’s second ground of attack upon the order:
The motion levels a great deal of criticism at our summation of the effect of the evidence as to sand thickness and other underground conditions in the WRR and MPCo leases. We endeavored to give a faithful general picture of what the evidence showed in this regard. We still think we have done so by and large. We did not base our conclusions upon this evi-dentiary statement, however, but assumed a substantial disparity in withdrawals rel*360atively between these two leases under the per well formula of proration. We think it would serve no useful purpose to discuss the several criticisms in this respect. We note that our statement that the drainage area of a well was testified to as from IS to 20 acres is challenged, the assertion being that the figure was “between 10 and 20 acres.” We accept this version. The point is not important.
A vigorous protest is made to our holding that appellee is estopped by the agreement of its predecessors in title to complain of the disparity in withdrawals between its lease and that of WRR. An amicus curiae argument has also been filed challenging this holding. In view of the latter, and in order to remove any misapprehension as to the scope of our holding, some clarification may not be amiss.
We did not and do not hold that any agreement between leaseholders could in any way affect the powers or duties of the Commission in administering the conservation laws of the state. Nor did we nor do we hold that the Commission could bind itself by agreement in that regard. The Commission did, we think, acquiesce in the agreement, at least to the extent that it substituted for the nine-well permit, permits for only three wells. Upon the hearing as to well No. 3 the examiner’s memorandum states:
“* * * -the Commission granted this applicant permission to drill nine wells on the bed of the Mission River. The case was hotly protested by the offset lease and fee owners, and after the Commission granted the wells they prepared to file suit to have the permit set aside. A compromise was reached between the operator of the river bed and the owners of the offset leases whereby it was agreed that the offset operators would allow this applicant to have three drilling sites on their leases on the north bank of the river, the three wells to be started on that offset lease but to be bottomed under the river bed. On June 9, 1938, the Commission entered an order granting two wells in line with that arrangement and cancelling the former order granting 9 wells. The present application covers the third location agreed upon as a part of the compromise reached. All the interested parties were present at the hearing and there was no protest to the application.”
We attach no importance whatever to acquiescence of the Commission in this agreement. It merely shows that the Commission placed no impediment in the way of executing the agreement in accordance with its express terms. The nine-well permit was canceled and permits granted for the three wells in the specific locations provided by the agreement.
Our holding that the agreement constitutes a waiver and estoppel in so far as concerns correlative rights of the parties thereto is of course limited to the particular agreement before us. Consequently fears as to its effect upon other agreements of different import (per curiam argument) are groundless.
We can see no valid reason why adjoining lease owners may not contract with regard to their correlative rights with the same freedom, after as well as before the enactment of our conservation laws, so long as such contracts are limited to correlative rights, and in no way infringe upon the proper administration of the conservation laws of the state. To the extent of any such infringement and to that extent only they are invalid. Our conservation laws do not require development or production, they simply put limitations thereon. To the extent that they do place such limitations the theretofore unrestricted right of self-help is curtailed. Such curtailment imposes the duty to protect correlative rights — in the respect in which they curtail self-help — as far as practical, consistent with effectuating the objectives of the conservation laws. Where the parties have themselves by contract provided for such protection there is no occasion to resort therefor to the Commission. It follows that where the parties have so contracted orders of -the Commission are immune from attack where the sole ground therefor is that such orders do not protect purely correlative rights. And that is the basis of the attack here in so far as concerns relative disparity in withdrawals as between these two tracts.
That this agreement did determine the correlative rights of the parties, in so far as that could be done by contract, we think is clear. At the time of its execution there were two points of dispute between them, which concern (1) title to the river bed and (2) the number of wells the river bed tract was entitled to as a separate tract. The Commission had already granted nine wells. The agreement adjusted both controversies; it limited the number of wells that might be drilled on the river bed tract, but placed no limita*361tion on development on the MPCo tract; from these wells MPCo (lessor and lessee) was to receive a very substantial portion (6/32) of the production delivered free of operation costs; it was further provided that if WRR were required to drill additional wells on the tract MPCo’s percentage of production should be raised from 6/32 to 8/32. Thus it seems that every reasonable foreseeable contingency concerning WRR lease withdrawals was provided for. It is not important whether or to what extent other considerations than adjustment of correlative rights entered into the contract. Under the spacing rule then in vogue the WRR lease as a separate tract was entitled to at least six wells. The agreement limited it to three, in the production from which MPCo lease was to share. If WRR should be required to drill additional wells to protect its interest, the proportionate share of MPCo in the production was to be augmented by 1/16. On the other hand MPCo.’s right of self-help, if such were needed, was- not curtailed. Thus clearly the adjustment or protection of purely correlative rights was withdrawn from the otherwise incidental duty of the Commission and adjusted by agreement of the parties instead. The powers and duties of the Commission are legislative and administrative, except in so far as quasi-judicial function of fact finding may be incidental to its proper functions. See Sun Oil Co. v. Potter, Tex.Civ.App., 182 S.W. 2d 923. Error refused W. O. M. Its powers and duties to protect correlative rights are incidental to its functions in administering the conservation laws. To attempt to adjust purely correlative rights, where the parties have contracted in regard thereto, would require the exercise of judicial functions involved in determining the effect of the contract upon such correlative rights. We do not, of course, hold that the powers and duties of the Commission are in any manner curtailed as regards fixing relative withdrawals from the two tracts when deemed essential in the interest of conservation.
The motion states: “This Court ignores cm essential and fundamental difference between a spacing rule and a proration formula and fails to realize that the Commission and the court have always recognized a difference between a well unit for spacing purposes and a well unit for proration purposes.” In this connection our recent decision in Chenoweth v. Railroad Commission, 184 S.W.2d 711, error re-fused W. O. M., is cited. The controversy there arose between a producer and a buyer (pipe line company) in a gas field, under a contract by which the buyer had agreed to endeavor to take gas from the seller’s lands “in the same equitable or' ratable portions that it takes gas from the lands and leaseholds of others” in the field. See Chenoweth v. Nordan & Morris, Tex.Civ. App., 171 S.W.2d 386, error refused W. O. M. There was a 20-acre spacing rule in effect in the field and the seller applied to the Commission for a field proration order based solely upon a per well allowable with 20 acres as a unit. As we have seen, there has been no application to the Commission for a change in the general field proration order; nor is there any showing of inequity in the per well formula as applied to the field as a whole. The contest here is between two adjacent leases; as to which the owners have already contracted. In such situation the complaining party should be relegated to his right of self-help. We are not here concerned with the powers and duties generally of the Commission to adjust relative withdrawals upon an equitable basis through proration differentials. Many “thorny problems” have arisen and others no doubt will arise from situations created by intensive drilling in other fields. We have' for consideration here only the specific situation presented by the record in this case, as to which our decision is limited namely; that appellee has not shown itself entitled to have the per well formula set aside as between the two leases in order to adjust their correlative rights.
We upheld the third ground of attack upon the order upon the fourth assigned reason, our holdings overruling the first three reasons may therefore not be important. See Sun Oil Co. v. Potter, above. Since these holdings are also vigorously attacked we will briefly consider some of the grounds of attack.
Our holding that “the fact that a well would cease to produce under the allowable, while other wells in the field continued to produce under the allowable, would, in and of itself, show a difference of some character in underground conditions,” was predicated upon what we understand to be a generally accepted theory of causation — like causes produce like effects. The effects being known and being unlike it would follow that the causes were unlike. Underground conditions might not be the 'Sole cause for the difference in *362known results; but in the absence of evidence pf other contributing factors, the presumption of validity of the orders would favor some difference in underground conditions, if such were necessary to support its validity.
Our action in overruling reasons 2 and 3 because the evidence thereon was, at most, conflicting is attacked on tihe ground that we are bound by the trial court's judgment upon disputed fact issues. If we correctly construe the holding in the Marrs case on the one hand and that in the Trem Carr case (Railroad Comm. v. Shell Oil Co., 139 Tex. 66, 161 S.W.2d 1022) on the other, the factual findings of the Commission, when supported by substantial evidence are not subject to judicial review, except when they .involve questions of invasion of constitutional rights (due process through confiscation). The record before us does not present the issue of confiscation.
It is further contended that our decision, in so far as it is predicated upon the power of the Commission to grant greater allowables to wells 2 and 3, is in conflict with our prior holding in Railroad Commission v. Fain, 161 S.W.2d 498, error refused W. O. M. That was an appeal from an order of the Commission refusing to grant an increased allowable to certain wells in order to prevent waste to the leases upon which those wells were located. It was shown, however, that to permit the increased allowables would result in waste to the field as a whole; and the holding was that it was the province of the Commission to resolve “the problem as to how conservation as to the entire field would best be subserved.” We do not understand that the opinion militates against the proposition that discrimination is not shown where all wells of similar conditions are upon application and proper showing treated alike. Of course (as held in our original opinion) to sustain the exception, it is necessary to show additionally that the policy to preserve flowing wells has a reasonable factual conservation basis, and that such preservation is practical only by granting the increased allowable.
Our judgment is modified by substituting for the words “based upon potential instead of the existing per well allowable” (first sentence, last paragraph of the opinion) the words, “based upon potential or any other appropriate formula.” In all other respects the motion is overruled.
Granted in part; otherwise overruled.