Amarillo Oil Co. v. Energy-Agri Products, Inc.

794 S.W.2d 20, 33 Tex. Sup. Ct. J. 623, 109 Oil & Gas Rep. 524, 1990 Tex. LEXIS 102, 1990 WL 93252

• Court: Texas Supreme Court
• Decided: June 27, 1990
• Docket: C-6649
• Status: Published

Opinions

OPINION ON MOTION FOR REHEARING

RAY, Justice.

This court’s opinion and judgment of March 8, 1989, are withdrawn and the following substituted.

At issue in this phase severance, oil and gas case is the ownership of gas produced from two wells, classified by the Railroad Commission as oil wells and operated by Energy-Agri Products, Inc. Amarillo Oil Company, the owner of the gas rights, sued to quiet title to the natural gas produced from these wells, and for temporary and permanent injunctions. Based on jury findings, the trial court rendered judgment that Amarillo Oil take nothing. The court of appeals dismissed the cause for want of jurisdiction, holding that the Railroad Commission had primary jurisdiction over the matter. 731 S.W.2d 113 (1987). We reverse the judgment of the court of appeals and render judgment quieting title to certain specified gas in Amarillo Oil. We hold Amarillo Oil is not entitled to injunctive relief. Having found error in the judgment of the trial court, we remand the cause in the interest of justice for a determination of Amarillo Oil’s damages.

Amarillo Oil owns the gas rights under an assignment of a lease covering 61.42 acres of land located in Carson County. Energy-Agri owns the right to produce oil and casinghead gas under a farm-out agreement on the same acreage. This separation of oil rights from gas rights is common in the Panhandle Field and is known as phase severance. See Note, Phase Severance of Gas Rights from Oil Rights, 63 Texas L.Rev. 133, 133-37 (1984).

In 1952 Amarillo Oil’s predecessors in interest drilled and completed the Hodges number one well in the brown dolomite formation, the uppermost producing formation of the Panhandle Field. Since that time the Hodges number one well has produced gas. In early 1982 Energy-Agri drilled and completed the Kimberlin number two well in the granite wash formation, one of the deepest producing formations of the Panhandle Field. This well, which was classified as an oil well by the Railroad Commission, produced only very small amounts of crude oil and casinghead gas.

In an attempt to increase production from the Kimberlin number two well, Energy-Agri perforated the casing higher in the well so it could produce from the brown dolomite formation. This allowed Energy-Agri to boost its rate of gas production from the Kimberlin number two well from an original “amount too small to measure” to 375,000 cubic feet a day. Production from the brown dolomite formation occurred with the knowledge and approval of the Railroad Commission. Energy-Agri also proceeded to drill and complete the Kimberlin number three well on the lease. Energy-Agri intended to perforate this well into the brown dolomite formation as it had the Kimberlin number two.

Amarillo Oil, however, filed suit to enjoin Energy-Agri from producing gas from the brown dolomite formation through its Kim-berlin numbers two and three wells, Amarillo Oil additionally sought to quiet title to all the gas in the brown dolomite formation. It further pleaded for damages for the taking of its gas.

The action was tried to a jury. Amarillo Oil moved for an instructed verdict, urging that since Energy-Agri had no oil well completed in the brown dolomite, the gas it produced from that formation could not be casinghead gas. The trial court denied this motion and submitted the case to the jury on Amarillo Oil’s alternative theory that the gas from the brown dolomite stratum could not be casinghead gas because no oil well could possibly be completed in that formation. Amarillo Oil failed to request any jury questions on the amount of damages. The jury answered the questions adversely to Amarillo Oil, and based on this verdict, the trial court rendered judgment that Amarillo Oil take nothing. Amarillo Oil appealed. The court of appeals dismissed the cause for want of jurisdiction, holding that Amarillo Oil’s suit was an impermissible collateral attack on matters over which the Railroad Commission had the exclusive original jurisdiction.

The title documents in this case confirm that Amarillo Oil owns the gas rights and Energy-Agri owns the oil and casinghead gas rights. The dispute is over what is included in Energy-Agri’s ownership of the “casinghead gas.”

Definition of “Casinghead Gas”

The term “casinghead gas” is not defined in the pertinent title documents. At the time of the phase severance, however, there was a statutory definition of casinghead gas which had been in effect for many years. By failing to insert in the lease their own definition of the term “cas-inghead gas,” the predecessors in interest to our present parties evidenced their intent to incorporate the statutory definition of “casinghead gas.” See Von Hoffman v. City of Quincy, 71 U.S. (4 Wall.) 535, 550, 18 L.Ed. 403 (1866), quoted in Smith v. Elliott & Deats, 39 Tex. 201, 212 (1873) (“laws which subsist at the time and place of the making of a contract ... enter into and form a part of it, as if they were expressly referred to or incorporated in its terms”); see also Wessely Energy Corp. v. Jennings, 736 S.W.2d 624, 626 (Tex.1987). Energy-Agri and Amarillo Oil, however, attribute different meanings to the statutory definition of “casinghead gas.”

The Natural Resources Code defines the term 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) (Vernon 1988); see also Tex.R.R.Comm’n, 16 Tex.Admin.Code § 3.69 (West 1988). This definition is essentially identical to that existing at the time of the phase severance in this case. Cf Act of Apr. 26, 1935, ch. 120, § 2(i), 44th Leg., 1935 Tex.Gen. & Spec. Laws 318, 319 (emphasis added), repealed by Natural Resources Code, ch. 871, art. I, sec. 2(a)(2), 65th Leg., 1977 Tex.Gen.Laws 2345, 2689 (“any gas and/or vapor indigenous to an oil stratum and produced from such stratum with oil”) (emphasis added).¹

Energy-Agri argues that the term “cas-inghead gas,” as defined by the Natural Resources Code, simply means any gas produced from a well that has been classified by the Railroad Commission as an oil well. Because the Railroad Commission has classified the Kimberlin numbers two and three wells as oil wells, Energy-Agri concludes that any gas produced from these wells is casinghead gas as a matter of law. Amarillo Oil counters that determining title to gas based on the classification of a well is inconsistent with the statutory definition of casinghead gas and ignores the key elements of the statutory definition, i.e., that the gas be “indigenous to” and “produced from” an “oil stratum.” Tex.Nat.Res.Code Ann. § 86.002(10) (Vernon 1988).

The Natural Resources Code does not define the term “oil stratum.” It does, however, define “oil well” 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) (Vernon 1978); see also Tex.R.R.Comm’n, 16 Tex.Admin.Code § 3.69 (West 1988). Reading this definition together with that of “casinghead gas” we see that the legislature has defined casing-head gas as any gas or vapor which is indigenous to and produced from a stratum that produces one barrel or more of crude petroleum oil to each one hundred thousand cubic feet of natural gas. Nevertheless, we must have a definition of “oil stratum” in order to apply the statutory definition of casinghead gas.

Energy-Agri argues that since this court has used the terms “horizon,” “reservoir,” “stratum” and “field” interchangeably, they must all be the same and therefore all mean the same as a “common reservoir.” Energy-Agri then concludes that since it introduced in evidence a Railroad Commission document from 1935 stating the Commission’s then-finding that the whole Panhandle Field is one “common reservoir,” it may produce gas from any of the separate formations in the field from its oil well and have it meet the statutory definition of “casinghead gas.” We disagree.

Energy-Agri’s argument overlooks the distinct geological facts of the cases it cites. For example, in Bolton v. Coats, 533 S.W.2d 914 (Tex.1975), it was alleged that there were separate oil productive horizons or segments of the Burnett sand (one formation) which were “each [a] physically separate productive stratum.” 533 S.W.2d at 917. Under such geological facts, the terms “horizon,” “stratum,” “field” and “reservoir” would all coincide. Similarly, in Benz-Stoddard v. Aluminum Company of America, 368 S.W.2d 94 (Tex.1963), the allegation was that there were ten distinct “gas reservoirs, or horizons,” that were “separated” and “among which there is no communication of gas.” 368 S.W.2d at 96. Under such geological facts, the terms “horizons,” “reservoirs” and “fields” may be used interchangeably. Such opinions do not state, and do not mean, that the terms always coincide.

The term “stratum” has a fixed meaning in petroleum geology, much like the terms “producing horizon,” and “horizons” which appear in the Code.² A “stratum” is a single layer of rock deposited at roughly the same geological period of time which normally contains only one kind of rock. 1 H. Williams & C. Meyers, Oil and Gas Law § 102, at 3 (1989). Depending upon the particular geological facts, it may be the same as a “formation” if there is only one type and layer of rock that was deposited continuously and under the same general conditions, or it may be a part (one layer) of a formation.³

A “reservoir” refers to an underground formation favorable to the accumulation of oil and gas and in which oil or gas, or both, is trapped. It is a term generally “better illustrated than defined.” 1 H. Williams & C. Meyers, Oil and Gas Law § 102, at 4 (1989). A reservoir may be created by a single “cap” layer of impermeable rock that prevents the hydrocarbons from moving further upward, by a geological fault that traps the oil and gas, or by a combination of faults and geological formations (including salt domes) which trap the oil and gas; the oil may be trapped in a single stratum (in which case the reservoir and the “stratum” are synonymous), or the reservoir may be comprised of several distinct strata. Id. at 4-5 (Figures 1-5 and accompanying text). If the geological structures comprising the reservoir are of the simpler “cap rock” form and contain several strata, then absent individual “trap” areas and similar complexities, the gas collects at the top of the fold in the upper strata, the oil collects on the sides, and water collects at the bottom. 1 W. Summers, The Law of Oil and Gas § 4, at 9 (1954). A reservoir is generally synonymous with a “field.” Benz-Stoddard, 368 S.W.2d at 97. The main characteristic of a “reservoir” or “field” is that it is “physically separate” in the sense that there is no communication of the hydrocarbons with the surrounding geological structures. Bolton v. Coats, 533 S.W.2d at 917; Benz-Stoddard, 368 S.W.2d at 96. Starting from the petroleum geology definition for “reservoir,” the legislature has defined a “common reservoir” to be “all or any part of any oil or gas field or oil and gas field that comprises and includes any area that is underlaid or that, from geological or other scientific data or experiments or from drilling operations or other evidence, appears to be underlaid by a common pool or accumulation of oil or gas or oil and gas.” Tex.Nat.Res.Code Ann. § 86.002(4) (Vernon 1988).

The term “horizon” refers to a plane of stratification assumed to have been once horizontal and continuous, or it may refer to a zone of a particular formation, such as the reservoir horizon, which is the portion of a formation that is of sufficient porosity and permeability to form a petroleum reservoir. H. Williams & C. Meyers, Manual of Oil and Gas Terms 442 (1987). A “producing horizon” is the same as a “pay horizon,” meaning the geological deposit in which oil and gas is found in commercial paying quantities. Id. at 696. Once again, depending on the particular geological facts, the horizon or producing horizon may coincide with the whole reservoir or field, or the reservoir may have several distinct producing horizons. By using the term “stratum,” which is a potentially smaller geological unit than field or reservoir, the legislature indicated its intent to limit the definition of “casinghead gas” to gas found in association with oil in an “oil stratum”.⁴

Energy-Agri, however, also relies on a 1940 opinion in which the attorney general found the statutory definition of casing-head gas ambiguous and concluded:

the term “casinghead gas” applies to all gas produced from any “oil well.” ... Since ... the term “oil well” includes any well which produces one barrel or more of crude petroleum oil to each 100,000 cubic feet of natural gas, a well producing oil at a gas-oil ratio of 100,000 cubic feet of gas or less per barrel of oil would be an “oil well,” and under our construction of the term “casinghead gas,” the gas from such well would be “casinghead gas”....

Op.Tex.Att’y Gen. No. 0-1760, at 3 (1940). As we have explained, the statutory definition of casinghead gas is not ambiguous. Because the intent of the legislature is apparent from the face of the statute, the attorney general opinion fails to adhere to the plain meaning rule. See Cail v. Service Motors, Inc. 660 S.W.2d 814, 815 (Tex.1983); Board of Land Comm’rs v. Weede, Dallam 361, 361 (Tex.1840); see also Tex. Gov’t Code Ann. § 311.011 (Vernon 1988). Furthermore, it is clear from the opinion that the attorney general did not address the case of a well’s completion in more than one stratum, as we have in the present case. The ambiguity referred to in the attorney general opinion was whether the statutory definitions of “sweet gas” and “sour gas” also applied to “casinghead gas.” Energy-Agri’s reliance on the portion of the opinion quoted above is seriously misleading because it is taken out of the context of the opinion. The concluding sentence in the paragraph immediately preceding the definition Energy-Agri quotes states:

On the other hand, the Legislature evidently considered that where gas is produced as a necessary incident to the production of oil from an oil well, the value of the oil produced would warrant the use of the casinghead gas “for any beneficial purpose.” (Subsection 3, section 7, Article 6008).

Id. Thus the attorney general concluded that restrictions on the use of “sweet gas” and “sour gas” were not meant to apply to “casinghead gas.” One reading the opinion in context could not reasonably conclude that it meant that gas produced from a perforation in a different stratum higher up the casing was casinghead gas solely because the well was classified as an oil well.

In determining whether Energy-Agri is producing gas or casinghead gas from the Kimberlin wells, we must look at each completion in the brown dolomite and determine whether the production from that stratum, at that particular location, is sufficient to define it as an “oil stratum,” i.e., a gas-oil ratio of 100,000 cubic feet of gas or less per barrel of oil. If it is an oil stratum, then the gas produced therefrom is casinghead gas. We have previously held that the statutes recognize “the possibility of a gas well and an oil well producing from different horizons of the same sand at different subsurface locations.” Bolton v. Coats, 533 S.W.2d at 917. The fact that there is oil production sufficient for an oil well classification as to a location on a neighboring lease a significant distance away does not make the brown dolomite an “oil stratum” as to either of the Kimberlin wells. To be “casinghead gas,” the statute requires that it be “produced from the stratum with oil." By that language the legislature meant gas “produced as a necessary incident to the production of oil.”⁵

We hold that Energy-Agri owns only the oil right to “casinghead gas” as defined by statute. Tex.Nat.Res.Code Ann. § 86.002(10) (Vernon 1978). When oil rights are severed from gas rights in a phase severance, and the parties do not otherwise specify in the conveying instrument, the party who owns the rights to casinghead gas owns only that gas or vapor which is indigenous to an oil stratum and is produced from that stratum along with oil, as contrasted to gas produced from a separate gas stratum through an oil well. Accordingly, Amarillo Oil is entitled to judgment quieting its title as against Energy-Agri to gas, other than casinghead gas as defined above, produced from the brown dolomite stratum through the Kim-berlin numbers two and three wells.

Jurisdiction

Energy-Agri claims that the trial court had no jurisdiction over the cause because it involves the classification of oil and gas wells, a matter within the exclusive jurisdiction of the Railroad Commission. Because classification of a well is a matter to be determined by the Commission, Energy-Agri argues that this suit is a collateral attack upon the Commission’s classification. Energy-Agri, therefore, concludes that under the doctrine of primary jurisdiction, the district court lacked jurisdiction as Amarillo Oil did not first seek relief from the Commission. See generally Gregg v. Delhi-Taylor Oil Corp., 162 Tex. 26, 29-31 & n. 5, 344 S.W.2d 411, 413-14 & n. 5 (1961); Kavanaugh v. Underwriters Life Ins. Co,, 231 S.W.2d 753, 755-56 (Tex.Civ.App.—Waco 1950, writ ref’d).

From the inception of its suit, Amarillo Oil has sought judgment quieting title to the gas from the brown dolomite formation. Energy-Agri advanced the position that either gas produced from a well classified as an oil well by the Railroad Commission was “casinghead gas” within the meaning of the conveyance as a matter of law, or the term was ambiguous and the evidence established such was the intended meaning. Amarillo Oil took the position that the Kimberlin wells could not possibly be classified as oil wells as to the brown dolomite formation. The trial court submitted Amarillo Oil’s proposed charge, which consisted of six questions relating to such potential or hypothetical well classification. Because the issues submitted to the jury addressed whether the wells, if limited to the brown dolomite formation, met the statutory definition for oil wells, Energy-Agri argued, and the court of appeals agreed, that the whole suit amounted to an impermissible collateral attack on the Railroad Commission’s classification. Such a limited view of the case cannot be reconciled with what this court has held concerning the Railroad Commission’s primary jurisdiction.

This dispute has always been over the ownership of the gas being produced from the brown dolomite formation. The cause is properly within the jurisdiction of the courts because the Railroad Commission has no authority to determine title to land or property rights. Railroad Comm’n v. City of Austin, 524 S.W.2d 262, 267-68 (Tex.1975); Jones v. Killingsworth, 403 S.W.2d 325, 328 (Tex.1965); Nale v. Carroll, 155 Tex. 555, 559, 289 S.W.2d 743, 745 (1956); Ryan Consol. Petroleum Corp. v. Pickens, 155 Tex. 221, 230, 285 S.W.2d 201, 207 (1955), cert. denied, 351 U.S. 933, 76 S.Ct. 790, 100 L.Ed. 1462 (1956); Magnolia Petroleum Co. v. Railroad Comm’n, 141 Tex. 96, 99-100, 170 S.W.2d 189, 191 (1943). Furthermore, even if the Railroad Commission had applied the statutory definition of casinghead gas which we hold to be determinative of Amarillo Oil’s claims, it could not grant the injunctive and quiet title relief Amarillo Oil seeks.

We have addressed the issue of the Railroad Commission’s primary jurisdiction on several occasions, and found it not to be so broad-sweeping as to oust the courts of jurisdiction just because the Commission might have jurisdiction to determine some facts related to the controversy. In Gregg v. Delhi-Taylor Oil Corp., 162 Tex. 26, 344 S.W.2d 411 (1961), we stated the rule that when an action is inherently judicial in nature, the courts retain jurisdiction to determine the controversy unless the legislature by valid statute has expressly granted exclusive jurisdiction to the administrative body. We therefore concluded that the Railroad Commission’s primary jurisdiction did not prevent the courts from entertaining the suit to enjoin a trespass by the “sand fracking” technique, when it was alleged the cracks produced would extend into an adjacent owner’s property, although the Commission would obviously have jurisdiction over the use of techniques to enhance production and protect correlative rights. In Foree v. Crown Petroleum Corp., 431 S.W.2d 312, 316 (Tex.1968), we announced the further rule that the courts have jurisdiction when the Railroad Commission is powerless to grant the relief sought and to make incidental findings necessary to justify the relief. Thus we concluded the courts could entertain a suit for damages for violations of certain Commission rules and regulations, although the rules to protect correlative rights were within the jurisdiction of the Commission. We have further held that the courts have jurisdiction over a suit for damages from oil drainage alleged to be from overproduction by an adjacent mineral interest landowner who allegedly used false test data and information to get the Railroad Commission to set his allowable too high. Zimmerman v. Texaco, Inc., 413 S.W.2d 387 (Tex.1967). We have further expressly approved an opinion and holding that the construction of an oil and gas lease is a matter for the courts, notwithstanding the involvement of the Railroad Commission’s jurisdiction as to facts relating to production. Biskamp v. General Crude Oil Co., 452 S.W.2d 515 (Tex.App.—San Antonio 1970, writ ref’d).

The present case involves title and property rights, the legal construction of a lease, and a claim of entitlement to an injunction. Consequently, the courts have jurisdiction over this suit notwithstanding the primary jurisdiction doctrine. We reverse the court of appeals’ judgment which incorrectly dismissed this cause for want of jurisdiction.

Evidence of “White Oil” Production

We have rejected the major premise on which the submission of the case to the jury was based. Casinghead gas must be produced with oil from an oil stratum. The question is not whether oil production from the brown dolomite was possible, but whether actual production or test results from the Kimberlin wells showed they would actually produce the required quantities of oil from that stratum. There was further error concerning the status of “white oil” production that should be avoided on retrial.

The trial court, over Energy-Agri’s objection but as requested by Amarillo Oil, gave the jury a definition of oil that did not expressly include the so-called “white oil” produced by condensing gas into liquids by using low temperature extraction (LTX) units.⁶ The definition did not expressly state that LTX products were not included in “oil” production. The District Director for the Railroad Commission overseeing the Panhandle Field was allowed to testify, over objection by Amarillo Oil, that the Commission commonly included the LTX products in calculating the oil produced for well classification purposes. Other witnesses were also allowed to testify, over objection, that LTX products counted as “crude oil” for well classification purposes. At the time this case was tried, the practices of the Commission with respect to “white oil” were inconsistent and not based on court decisions construing the statute. Both the Railroad Commission and the courts have subsequently determined that the relevant Natural Resources Code provisions do not allow “white oil” to be counted as oil for well classification purposes. Hufo Oils v. Railroad Commission, 717 5.W.2d 405 (Tex.App.—Austin 1986, writ denied). Therefore LTX products also should be excluded from oil production to determine whether gas is produced from an “oil stratum.” After excluding LTX production, the Kimberlin wells apparently would not even qualify as oil wells as to the granite wash formation.⁷ On remand, the definitions, instructions, and evidentia-ry rulings should be consistent with what has now been settled — that LTX products are not “crude oil” for determining whether sufficient oil is produced to make the stratum an “oil stratum.”

Injunctive Relief

Although we agree that under the present record Amarillo Oil has established its title to the gas produced by Energy-Agri from the brown dolomite formation, we are unable to agree that Amarillo Oil is entitled to injunctive relief as a matter of law. In Gregg v. Delhi-Taylor Oil Corp. we held that the sand-fracturing technique that would extend cracks into adjacent landowners’ property was a legal “trespass,” but we noted that the Railroad Commission had not expressly approved the use of this technique at this well. In the subsequent case of Railroad Commission v. Manziel, 361 S.W.2d 560, 567-69 (Tex.1962), we held that a salt water injection secondary recovery system expressly approved by the Railroad Commission did not amount to a “trespass,” even though the salt water would physically invade the property of neighboring mineral interest owners. Later we described our holding in Manziel as a balancing of interests of the oil and gas industry as a whole against the interest of the individual operator, indicating our deference to the Railroad Commission’s determinations on such competing factors. Humble Oil and Refining Co. v. West, 508 S.W.2d 812, 816 (Tex.1974). In Railroad Commission v. City of Austin, 524 S.W.2d 262, 280 (Tex.1975), we expressly recognized the right of the Railroad Commission to allocate the gas in the pipes during a gas shortage, even though the courts had exclusive jurisdiction to determine the dispute over contractual rights and actual ownership of the gas in the pipes.

We draw a distinction between the right of possession through the Railroad Commission-granted right to produce, and the right of ownership. In the present case the Railroad Commission expressly approved Energy-Agri’s production of gas from the brown dolomite formation. That decision must be respected. But it does not mean Energy-Agri owned the gas. Amarillo Oil pursued an improper remedy for its legal damage, but our reported cases did not resolve the conflicting lines of cases as to whether injunctive relief should be allowed. Also, the case was tried while the status of white oil production was unsettled, and its inclusion or exclusion from production for the calculation of damages was unclear.⁸ Because we have clarified the law as to entitlement to injunctive relief, but the state of the record makes it impossible for us to render a just judgment as to damages in. lieu of an injunction, we choose to remand this cause in the interest of justice on that issue. Tex.R.App.P. 180.

Our opinion today holds that Energy-Agri owns only the rights to oil and casing-head gas as defined by statute. We render judgment quieting title in Amarillo Oil to gas in the brown dolomite formation at the Kimberlin wells. How much, if any, of the gas removed from the Kimberlin numbers two and three wells has been casinghead gas, is a question of fact to be determined on remand. On remand Amarillo Oil will be limited to damages for its remedy, unless it shows the Railroad Commission has withdrawn its express approval of Energy-Agri’s production of gas from the brown dolomite formation. Accordingly, we reverse the judgment of the court of appeals and remand this cause to the trial court for further proceedings consistent with this opinion.

1 . For purposes of this opinion, we identify the two definitions and refer to the current codification, Tex.Nat.Res.Code Ann. § 86.002(10) (Vernon 1988), in textual references.

2 . The term "producing horizon,” without express statutory definition, appears in Tex.Nat. Res.Code Ann. § 86.003 (Vernon 1988), relating to what shall be regarded as separate wells in the same well bore, as follows:

If oil or gas, or both, is produced through different strings of casing set in the same well bore, the inner string through which oil or gas, or both, is produced shall be regarded as one well, and each successive additional string of casing through which oil or gas, or both, is produced from a different producing horizon through the same well bore shall be regarded as another well.

See also Tex.Nat.Res.Code Ann. § 86.002(5)(B), (C) (Vernon 1988).

3 . A "formation” has been defined and explained in these terms:

A succession of sedimentary beds that were deposited continuously and under the same general conditions. It may consist of one type of rock or of alterations of types. An individual bed or group of beds distinct in character from the rest of the formation and persisting over a large area is called a “member” of the formation. Formations are usually named for the town or area in which they were first recognized and described, often at a place where the formation outcrops. For example, the Austin chalk formation outcrops at Austin, Texas.

H. Williams & C. Meyers, Manual of Oil and Gas Terms 373 (1987).

4 . As noted above, in the simplest "cap rock” formation, gas would tend to collect in the upper strata, which would in that sense be “gas indigenous” strata of the formation. See generally 1 W. Summers, The Law of Oil and Gas § 4, at 9, 15 (1954).

5 . Op.Tex.Att’y Gen. No. 0-1760, at 3 (1940). We have borrowed the quoted language but applied it to a different provision and in a context slightly different from that addressed in the opinion.

6 . Many legal controversies involving the Panhandle Field arise from two practices by oil operators. One is the high perforations practice. Oil operators have been shooting perforations in the well casings into the gas formations, higher up in the hole. The second practice is producing white oil, which is accomplished by condensing gas into liquids by using low temperature extraction (LTX) units. For a more detailed discussion of white oil, see Dowl-ing, White Oil and Greenback Dollars: An Overview of Controversies Surrounding Production of Gas from the Panhandle Field of Texas, 19 St. Mary’s L.J. 81, 84 & n. 7 (1987). The instant case presents the high perforations practice, but it also involves the white oil production practice through the production test results admitted in evidence.

7 . The Railroad Commission classification was apparently based upon production of "white oil,” which is not crude petroleum oil.

8 . By failing to submit a jury issue on the amount of damages, Amarillo Oil waived its claim for damages up to the date of judgment. Tex.R.Civ.P. 279. Amarillo Oil admits such in its response to the motion for rehearing in this cause.