Rudman v. Railroad Commission of Texas

349 S.W.2d 717, 162 Tex. 579, 4 Tex. Sup. Ct. J. 622, 15 Oil & Gas Rep. 174, 1961 Tex. LEXIS 597
CourtTexas Supreme Court
DecidedJuly 26, 1961
DocketA-8352
StatusPublished
Cited by17 cases

This text of 349 S.W.2d 717 (Rudman v. Railroad Commission of Texas) is published on Counsel Stack Legal Research, covering Texas Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Rudman v. Railroad Commission of Texas, 349 S.W.2d 717, 162 Tex. 579, 4 Tex. Sup. Ct. J. 622, 15 Oil & Gas Rep. 174, 1961 Tex. LEXIS 597 (Tex. 1961).

Opinion

MR. JUSTICE STEAKLEY

delivered the opinion of the Court.

Petitioners own and operate the working interest in six gas wells in the Buffalo and South Buffalo Fields in Leon County. Respondents-Intervenors (Lone Star Producing Company and Christie, Mitchell & Mitchell Company) have the other wells *580 in the fields, twenty-eight in number, and are aligned with the respondent Railroad Commission. Petitioners’ wells are connected with the pipeline of Bi-Stone Fuel Company and Respondents-Intervenors are connected with the pipeline of Lone Star Gas Company.

The Railroad Commission by orders' dated August 20, 1959, (effective August 1, 1959) adopted Rules 5 and 7 prorating the production of gas in the Buffalo and South Buffalo Fields. The rules are substantially the same, and Rule 7 is copied in the opinion of the Court of Civil Appeals, 344 S.W. 2d 212, 213. The type of proration embodied in the rules is known in the industry as a “Henze type” order and will be sometimes referred to as such. Thereunder the Commission does not assign allowables, as stated in the rules, “until the month following the month in which monthly production reports * * * are due,” and then upon the basis of “a schedule of factors based on Rule 6(a) which will give each well’s allowable when multiplied by the total production of all prorated wells in the same reservoir.” Further, under the rules, “Any well which becomes overproduced in an amount equal to or more than its allocated allowable for the two months preceding will be shut in until its overproduction has been reduced by subsequent allocation of its monthly share of the field allowable to an amount not exceeding its allowable for the then current month.”

After the total production figures of the fields for August, 1959, became known in October, 1959, the Commisson determined that the wells of petitioners had overproduced during August. Petitioners then applied to the Commission for rescission of Rules 5 and 7, and on December 7, 1959, after hearing, the Commission entered the following order:

“(1) Rescinded Field Rules No. 5 and No. 7 from Special Orders #5-41,166 and #5-41,165 respectively and made the six (6) months balancing rule (Statewide Rule 24(b) applicable to these fields.
“ (2) Denied M. B. Rudman et al’s request to cancel the overproduction and underproduction accrued since August 1, 1959.
“(3) Directed the Gas Department to determine the market demand from these fields each month, utilizing purchaser nominations, past production history, and any other *581 information deemed pertinent including its own judgment.
“(4) (a) Ruled that August 1, 1959, to March 1, 1960, shall be the first balancing period for these fields, and any wells overproduced as of March 1, 1960, must be made up to September 1, 1960.
“(b) Ruled that allowables assigned these fields since August 1, 1959, be revised as prescribed above (3), and that any well found to be overproduced in violation of the Statewide Rule 24(b) must be shut in now until the overproduction is made up.
“Revised gas schedules for August, September, October, November and December 1959, will be forthcoming. Further, formal orders will be forthcoming to amend the existing field rules for these fields.”

The revised allowables were issued by the Commission on December 11, upon the basis of which Petitioners’ wells were found to have overproduced for the preceding months of August —December, and on December 14 Petitioners were ordered to shut in their wells to make up the overproduction.

Thereupon, Petitioners appealed to the courts. The trial court held invalid Rules 5 and 7 of the Railroad Commission orders dated August 20,1959, the order of the Commission dated December 7, 1959, the revised allowables dated December 11, 1959, the shut in orders dated December 14, 1959, and the confirmatory order of the Commission dated February 8, 1960. The trial court further held that Petitioners’ wells were subject to the provisions of Statewide Rule 25 of the Railroad Commission for the months of August —December, 1959.

On appeal the Court of Civil Appeals at Austin held valid the “Henze type” order embodied in Rules 5 and 7 of the Railroad Cojnmission orders of August 20, 1959, and reversed and rendered the case against Petitioners, 344 S.W. 2d 211. The Court of Civil Appeals stated “It is our opinion that this judgment is erroneous, and that the attacked order of the Commission is valid. Our reasons for this conclusion are twofold. One reason is that the validity of a similar order, was adjudicated by this Court and the Supreme Court in Railroad Commission of Texas v. Permian Basin Pipe Line Company, 302 S.W. 2d 238, writ ref., n.r.e. The other reason is that such opinion is correct.” The *582 Court recognized that there are distinctions between Permian and this case, but after discussing the matter at great length was of the view that the distinctions “do not efface the rule of stare decisis nor the obligation of this Court to respect an adjudication by the Supreme Court which we considered to be applicable to the question before us.”

The Permian case referred to by the Court of Civil Appeals involved two causes which were not consolidated for trial but were tried together and had a common record; The Court of Civil. Appeals determined the questions presented in each case in one opinion. Separate applications for writ of error were filed by Permian Basin Pipe Line Company and Phillips Petroleum Company, and this Court refused the applications in each instance with the notation, no reversible error. The primary problem involved the Common Purchaser Act, Article 6049a, and the dominant purpose of the orders of the Railroad Commission was to require Permian Basin Pipe Line Company to take ratably from the well of Atlantic Refining Company and not exclusively from Phillips Petroleum Company. It is correct, however, that the application for writ of error filed by Phillips presented as error the holding of the Court of Civil Appeals that the Commission order of November 1, 1956, which was the same “Henze type” order as here, was valid and in compliance with Section 12 of Article 6008. We therefore reconsider our refusal of the application of Phillips n.r.e. since the factual differences there and here do not control the question of whether or not the orders comply with and are authorized by the statute.

Section 12 of Article 6008 reads as follows:

“It shall be the duty of the Commission to determine the status of gas production from all reservoirs in this state. If and when the Commission finds that waste exists or is imminent in the production of gas from any reservoir, or that the capacity of the wells to produce gas from any reservoir exceeds the market demand for gas from such reservoir, the Commission shall then proceed by proper order to prorate and regulate the gas production from such reservoir on a reasonable basis.

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Bluebook (online)
349 S.W.2d 717, 162 Tex. 579, 4 Tex. Sup. Ct. J. 622, 15 Oil & Gas Rep. 174, 1961 Tex. LEXIS 597, Counsel Stack Legal Research, https://law.counselstack.com/opinion/rudman-v-railroad-commission-of-texas-tex-1961.