Coloma Oil & Gas Corporation v. Railroad Commission

358 S.W.2d 566, 163 Tex. 483, 5 Tex. Sup. Ct. J. 405, 16 Oil & Gas Rep. 1044, 1962 Tex. LEXIS 763

• Court: Texas Supreme Court
• Decided: June 6, 1962
• Docket: A-8625
• Status: Published

Opinions

ASSOCIATE JUSTICE STEAKLEY

delivered the opinion of the Court.

This case reaches us in an exceptional status and under unusual circumstances; in view of its disposition the facts will be noted only briefly.

Respondent Railroad Commission granted Respondent Appell Petroleum Corporation a permit to drill a first well on the tract in question as an exception to Rule 37. The recited basis for the permit to drill was to prevent waste and confiscation. Petitioner, Coloma Oil & Gas Corporation, was a protestant before the Commission and prosecuted its appeal pursuant to Article 6049c, Sec. 8, Vernon’s Annotated Civil Statutes. The trial court and the Court of Civil Appeals sustained the order of the Commission. 348 S.W. 2d 390.

1 The Commission defended its order in the trial court and before the Court of Civil Appeals, and defends it here on the proposition that the tract in question was entitled to “its first well as a matter of law” because it is “separate and non-contiguous”, a voluntary subdivision not being involved. This is apparent in the series of special exceptions filed by the Commission to the pleadings of petitioner, e.g., “Defendant excepts to the balance of paragraph III for the reason that common ownership of the tracts is immaterial and irrelevant since the tract in question is a separate, non-contiguous tract and is entitled to a first well as a matter of law.” Pursuant to its exceptions, the Commission stated the following to the trial court with respect to the offer of evidence by petitioners:

“Your honor, for the sake of the record, we would like the record to show that so far as this evidence is concerned, we object to it insofar as the Rule 37 permit is concerned. We do not require him to prove it up, but we object to it as being immaterial and irrelevant as to this case.”

The following excerpts from the brief of respondents states the same position in this Court:

“Counsel for Appellees timely objected to any evidence offered by Coloma with respect to alleged common underlying reservoirs, costs of operations, quantities of production, conditions of the underlying strata of oil and gas sands and geology with regard to the leases in question, for the reason that such evidence so offered was irrelevant and immaterial to any issue in the case, since such tract was entitled to its first well as a matter of law.

* * *

“Under its present rules, the Commission is obliged to grant a permit to drill one well (the first well) as an exception to Rule 37 as a matter of law, in the absence of a voluntary subdivision and in order to prevent confiscation * * *. So far as we can determine this rule has not been changed, modified, altered or amended.

* * *

“Throughout Appellant’s brief, great stress is placed upon a comparison between the production from the existing Appell well and the existing Coloma well. An attempt is made to draw a comparison between the proposed well, and the existing Appell and Coloma wells. Appellees took the position in the trial court, the Court of Civil Appeals, and take the position here, that such matters are entirely and completely irrelevant and immaterial, since this tract of land in question is unquestionably entitled to its first well as a matter of law and this case in no way involves allocation, but only a well permit.”

We add parenthetically that in view of the foregoing it is not unreasonable to conclude that the hearing before the Railroad Commission was upon the same basis, i.e., that Appell was entitled to the permit as a matter of law and no evidence of waste and confiscation was required.

The decision of this Court in Railroad Commission v. Murel Williams, 163 Texas 370, 356 S.W. 2d 131, intervened after the decision of the Court of Civil Appeals in the instant case, and, indeed, after the filing of the application for writ of error herein. Thereupon petitioner filed a supplemental brief asserting the controlling effect of Murel Williams, to which respondents did not reply; moreover, counsel for respondent Commission in oral argument before us urged that Murel Williams was incorrectly decided and should be overruled and that the position of the Commission in the trial court and before the Court of Civil Appeals in the case at bar is still correct. At no time have respondents contended before us that the permit in question is sustainable upon any basis except as a matter of law in the fact that the tract in question is separate and non-contiguous and a voluntary subdivision is not involved. The decision in Murel Williams settled this to the contrary and is now final.

Our problem is the proper disposition of the case at bar in the light of the circumstance that petitioner here, Coloma, offered evidence in the trial court (although over the objection of respondents that “We do not require him to prove it up” and that the evidence was “completely irrelevant and immaterial”), consisting, in brief, of the relative locations and proximity of an existing Appell well on a separate tract, the second well granted Appell by the permit in question, and an existing Coloma well, together with the fact that all three wells would be in a common reservoir of oil and gas bearing sands of substantially uniform thickness and character and with free communication between the wells. Respondents offered no evidence.

In view of the circumstance that except for the one tract-one well theory, neither the Commission nor Appell attempted to question Coloma’s evidence tending to show that the second Appell well was not necessary to prevent either waste or confiscation, we are constrained to hold that Coloma has discharged the burden placed upon it by Article 6049c, Section 8, V.A.C.S. In other words, we hold that the uncontradicted evidence in the trial court establishes that the order of the Railroad Commission granting Appell a permit to drill on Lot 9, Block 81, is not supported by substantial evidence.

While the majority of the Court is of the opinion that the evidence offered by Coloma was sufficient to overcome the statutory presumption of validity in a case of this nature, there is a minority who is strongly of the view that Coloma did not meet the minimum standards of proof under the substantial evidence rule, although this point was not raised or argued by the parties. The asserted defect in proof lies principally in the supposed failure to establish that there were not other wells which would drain — and thus confiscate — the minerals underlying the Appell tract for which the permit in question was granted.

In view of all the circumstances of the case we are hesitant to reverse and render judgment. In Murel Williams this Court (disapproved the so-called one-tract one-well theory, and we adhere to that holding. We feel, however, that the parties should have further opportunity for development of the facts in the light of the principles of law declared in Murel Williams, and that the judgments below should be reversed and the cause remanded for this purpose. Precedent for this logical disposition under the unusual circumstances before us is found in Cook Drilling Co. v. Gulf Oil Corp., 189 Texas 80, 161 S.W. 2d 1035, in which this Court took action, when confronted with a somewhat similar problem, as follows:

“Apparently the parties misunderstood the character of trial contemplated by the provisions of V.A.C.S. Art. 6049c, Sec. 8, wherein interested parties are authorized to test the validity of an order of the Railroad Commission under the oil conservation act. Upon the trial of the case the only material evidence introduced consisted of the file and transcript of the hearing before the Railroad Commission for the permit, and this was introduced for the limited purpose only of showing what evidence the Commission heard at the time it granted the permit. The defendant introduced no evidence whatever. It was upon this record that the trial court entered judgment cancelling the permit.

***:$$❖

“From what has been said it is apparent that the district court did not have before it sufficient evidence to overcome the prima facie presumption of the validity of the order in question. It is also apparent that the case has not been fully developed.

* * *

“For these reasons the judgments of the trial court and of the Court of Civil Appeals are reversed, and the cause is remanded for a new trial.”

The judgments of the courts below are accordingly reversed and the cause is remanded to the trial court for further proceedings in accordance herewith.

Opinion delivered June 6, 1962.