Shell Oil Co. v. Railroad Commission

133 S.W.2d 791, 1939 Tex. App. LEXIS 869
CourtCourt of Appeals of Texas
DecidedOctober 18, 1939
DocketNo. 8932.
StatusPublished
Cited by7 cases

This text of 133 S.W.2d 791 (Shell Oil Co. v. Railroad Commission) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Shell Oil Co. v. Railroad Commission, 133 S.W.2d 791, 1939 Tex. App. LEXIS 869 (Tex. Ct. App. 1939).

Opinion

BAUGH, Justice.

This is a Rule 37 case. The Shell sued to set aside a permit granted by the Railroad Commission to the Kingwood Oil Company on May 4, 1937, to drill well No. 11 on its 30-acre lease in the fairway of the East Texas field in Gregg County, as an exception to Rule 37 to prevent confiscation of property. Trial was to the court and at the close of plaintiff’s evidence, upon motion made, judgment rendered for the defendants; hence this appeal.

The issue of waste is not involved. While other contentions are made by appellant which will be hereinafter discussed, the controlling question presented is whether there was substantial evidence before the Railroad Commission to sustain its order on the ground that such well was needed to prevent confiscation of permittee’s (Kingwood Oil Company) property. We have reached the conclusion that there was, and that the trial court’s judgment should be affirmed.

*792 The attached map, introduced by the Shell, discloses the general situation presented to the Railroad Commission at the time the permit was granted. The well involved is near the N. E. corner of the Kingwood 30-acre tract. The eight times area, or 240 acres, surrounding this tract is delineated both by a circle and a polygon. It is not controverted that this area is one of the best producing parts of the field; that the potentials, underground conditions, bottom hole pressure, sand thickness, and daily allowable per well are practically the same over the area shown on the attached map. It is the contention of the Shell that if all the wells on the eight times area, excluding the Kingwood 30-acre tract, be considered, as shown by the circle (probably the most accurate method of testing drainage), there are 61 wells, or an average density on the 240 acres of 3.94 acres per well; that the King-wood tract with 11 wells, not including the well in question, has a density of 2.73 acres per well, thus giving the Kingwood tract a density advantage over the surrounding eight times area without the additional well. And further, that any drainage from the Kingwood tract by wells to the west, northwest, north, and northeast was compensated by drainage to it by its own wells to the east and south.

Consideration of the eight times area surrounding a given tract has frequently been resorted to in determining the issue of drainage, or confiscation, and in determining whether a leaseholder has been given a fair opportunity to recover his fair share of oil originally in place beneath his tract. But it manifestly cannot be taken as a conclusive criterion. Where the tract involved is small, and the surrounding eight times area is developed by reasonably uniform spacing of wells over the entire area, such a criterion may be reasonably accurate. But where the tract taken as- a basis of comparison is of such size and dimensions that the outer boundaries of such eight times area are so far removed from the boundaries of the tract involved that the outlying wells in the eight times area exert no drainage influence on such tract, then the average density of the whole may have little bearing on the question of drainage of the particular tract. That issue may then best be determined, not by the average density of the whole, but by the number and proximity of wells immediately surrounding the tract in question. This, we think, is clearly demonstrated in the instant case.

Taking the circular eight times area and excluding the Kingwood 30-acre tract, a diameter drawn east and west shows the south half of such circle to contain 23 wells; and the north half to contain 38 wells. And, as above stated, drainage from the Kingwood, the underground conditions conceded to be uniform in the area, was necessarily affected by the number and proximity of wells to the King-wood's boundaries. The 330-660-foot spacing^ provided in Rule 37 manifestly imply that a well will drain oil at least 330 feet. In the Stanolind Oil & Gas Company v. Midas Oil Co., Tex.Civ.App., 123 S.W.2d 911, cited by appellant in support of its drainage compensation contention, it was shown that in an area in the field very similar to the one here involved, tests disclosed that a key well at open flow, with surrounding wells closed, affected bottom hole pressure of surrounding wells from 1,000 to 1,500 feet away from it. It is not controverted, and the proof, as the map demonstrates, clearly shows that northeast, north, and northwest of the King-wood, and within drainage distance of it, there is a much greater density of wells than on the Kingwood tract. On the west, not only were the three Kingwood wells offset by 3 wells on the adjacent narrow 7-acre tract; but those 3 offset wells were in turn also offset by 3 other wells, making 6 wells on the west of the Kingwood within 330 feet of its boundary.

On the question of compensatory drainage to the Kingwood on the south and east, while a petroleum engineer for the Shell did testify that there was drainage to the Kingwood on these sides, the record shows, and the attached map 1 demonstrates, that every Kingwood well on these sides of its tract was definitely offset by wells on the adjacent leases, its well No. 4 in the southeast corner being offset by 2 wells, 1 on the Shell lease and 1 on the Gulf. Under these circumstances and conditions the Railroad Commission could manifestly conclude either that there was no drainage to the Kingwood on the south and east, or that if so it was negligible; and not sufficient to compensate the Kingwood for the drainage from its tract on the north and *793 west; and that it was therefore entitled to an additional well in the area being drained to protect it. Consequently, there was substantial evidence before the Commission to sustain its order on this ground. See Humble Oil & Ref. Co. v. Railroad Commission, Tex.Civ.App., 99 S.W.2d 401; Gulf Land Co. v. Atlantic Ref. Co., Tex.Sup., 131 S.W.2d 73.

Appellant next asserts error of the trial court in sustaining said permit on the ground that pleadings of the appellee Kingwood Oil Company, and the evidence upon the trial, presented a different fact situation from that presented to the Commission. This on the ground that in its application the Kingwood represented to the Commission that the Ketal Oil Company’s well No. 2 was located 75 feet and the Kingwood No. 2 well 225 feet from the common boundary line between these two tracts; whereas on the trial a dispute was presented as to the true location of such boundary line, or that in any event it was shown to be 117 feet south of the Ketal well, or 42 feet farther than represented to the Commission, thus materially affecting the relative distances of wells to the north from the Kingwood’s tract, and consequently the issue of drainage in that direction. This contention is not sustained. The Railroad Commission had no authority to determine a boundary dispute, if such there was, and the district court of Travis County did not have venue of such issue. In any event, in its second motion for a rehearing filed with the Commission, the Shell alleged that the distances shown in the Kingwood’s application were erroneous, and that the common boundary line was in fact located 117 feet, instead of 75 feet, south of Ketal’s well No. 2.

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133 S.W.2d 791, 1939 Tex. App. LEXIS 869, Counsel Stack Legal Research, https://law.counselstack.com/opinion/shell-oil-co-v-railroad-commission-texapp-1939.