# Pan American Petroleum Corp. v. Railroad Commission of Texas

> Court of Appeals of Texas · May 17, 1960 · 335 S.W.2d 425

URL: https://www.frixlaw.com/law-library/cases/9645372

## Case

- **Full name:** PAN AMERICAN PETROLEUM CORPORATION Et Al., Appellants, v. RAILROAD COMMISSION OF TEXAS Et Al., Appellees
- **Court:** Court of Appeals of Texas
- **Decided:** May 17, 1960
- **Citations:** 335 S.W.2d 425; 1960 WL 99268
- **Precedential status:** Published
- **Opinion:** Dissent by Hughes
- **Judges:** Archer, Hughes
- **Cited by:** 4 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9645372

## Opinion text

HUGHES, Justice
(dissenting).
It is my opinion that the Railroad Commission of Texas is not only vested with the power to but is charged with the duty •of regulating the production of natural gas both for the prevention of waste and the protection of correlative rights.
It is also my opinion that this power and duty of the Commission is a continuing one and one which is not to he abridged or impeded by the act of any person and one which the Commission cannot voluntarily abrogate.
It is also my opinion that this power and duty of the Commission and its exercise is not dependent upon so-called change of conditions.
My reason for this last statement is that the Commission should have, and I believe does have, the power and duty to correct its mistakes if, perchance, it should make a mistake. There is authority for statement. In Magnolia Petroleum Co. v. New Process Production Co., 129 Tex. 617 , 104 S.W.2d 1106, 1109 , the Commission had entered an order denying a permit to drill a well and it was contended that the Commission was powerless to reconsider the matter and grant the permit in the 'absence of changed conditions. In overruling this contention the Court stated:
“After a careful study of the pertinent statutes and the rulings of the commission on the question for years, we have reached the conclusion that it ought to be held that the right of review, in • spite of the absence of changed conditions, should be upheld.”
See also Gulf Land Co. v. Atlantic Refining Co., 134 Tex. 59 , 131 S.W.2d 73 .
The effect of granting a permit is shown by the case of Midas Oil Co. v. Stanolind Oil & Gas Co., 142 Tex. 417 , 179 S.W.2d 243 . There a permit to drill was issued to Midas which acted under it. The Court held Stanolind estopped to attack the validity of the permit because of its unreasonable delay in filing suit.
The Midas well was and the Moncrief well here is, in my opinion, subj ect to regulation by the Commission. Our statutes provide:
*432 “In recognition of past, present, and imminent evils occurring in the production and use of natural gas, as a result of waste in the production and use thereof in the absence of correlative opportunities of owners of gas in a common reservoir to produce and use the same, this law is enacted for the protection of public and private interests against such evils by prohibiting waste' and compelling ratable production.” Sec. 1, Art. 6008, V.A.C.S.
“It shall be the duty of the Commission to prorate and regulate the daily gas well production from each common reservoir in the manner and method herein set forth. The Commission shall prorate and regulate such production for the protection of public ■ and private interests:
“(a) In the prevention of waste as ‘waste’ is herein defined.
“(b) In the adjustment of correlative rights and opportunities of each owner of gas in a common reservoir to produce and use or sell such gas as is permitted in this Article.” Sec. 10, Art. 6008.
Commenting upon the authority conferred by these statutes upon the Commission, this Court in Railroad Commission v. Humble Oil & Refining Co., 193 S.W.2d 824, 828 , writ, ref., N.R.E., stated:
■ “The Commission’s power to regulate oil production in the interest both of .conservation and of protecting correlative rights is a continuing one, and its proration orders are subject to change, modification or amendment at any time, upon due notice and hearing, either upon the Commission’s own motion or upon application of an interested party. This principle is now so well established as to require no citation of authority.' It should also be noted that, each of the proration orders- governing the Hawkins- field contained the following provision:
“ ‘It is further ordered that this cause be held open on the docket for such other and further orders as may be necessary and supported by evidence of record.’
“Thus each order carried on its face notice to everyone thereafter dealing with properties in the field, that it was subject to appropriate change.”
Other authorities of similar import are: Railroad Commission v. Marathon Oil Co., Tex.Civ.App. Austin, 89 S.W.2d 517 , writ ref.; Railroad Commission of Texas v. Rowan & Nichols Oil Co., 310 U.S. 573 , 60 S.Ct. 1021 , 84 L.Ed. 1368 ; Id., 311 U.S. 570 , 61 S.Ct. 343 , 85 L.Ed. 358 ; Chenoweth v. Railroad Commission, Tex.Civ.App. Austin, 184 S.W.2d 711 , writ ref., w. o. m.
In the first Rowan case, supra, the Court in sustaining a proration order against the contention that it would cause unlawful drainage adopted the argument of the Railroad Commission in this language [ 310 U.S. 570 , 60 S.Ct. 1025 ]:
“The Commission’s experts insist that the threat,, if existent at all, is speculative,, and that the Commission’s power of continuous oversight is readily available for relief if real danger should arise in the future.”
In the second Rowan case, supra, also a proration case, the Court stated [ 311 U.S. 570 , 61 S.Ct. 346 ]:
“The real answer to any claims of inequity or to any need of adjustment to shifting circumstances is the continuing supervisory power of the expert commission.”
See also Railroad Commission of Texas v. Rowan Oil Co., 152 Tex. 439 , 259 S.W.2d 173, 176 , where-the Court stated:
“Sections 10 and 11, Art. 6008, R.C.S.1925, Vernon's Ann.Civ.Stat, grant the Railroad Commission the power. to-; regulate the flow from .a *433 nonwasteful well in order to protect correlative rights.”
I adopt the following from the brief of Pan American:
“Nearly 25 years ago, the Supreme Court in the case of Brown v. Humble Oil & Refining Co., 126 Tex. 296 , 83 S.W.2d 935, 938 , 99 A.L.R. 1107 (1935), made the following statement:
“ ‘The oil industry in this state has become stupendous. There are now many separate oil fields operated in this state, under varying conditions. Texas is now the leading state in the production of oil and in oil refineries. The handling of this giant industry and its complex problems calls for the services of trained and experienced persons. It is utterly impossible for the Legislature to meet the demands of every detail in the passage of laws relating to the production of oil and gas. The necessities of the situation require that this duty be placed upon some tribunal to carry out some just and reasonable public policy. This duty is placed on the Railroad Commission.’
“Since that opinion was written, hundreds of additional oil and gas fields have been discovered; more than 100,000 additional wells have been drilled; oil and gas reserves have greatly increased; production of oil and gas has increased; an increasing amount of natural gas is being transported in long-distance pipelines and sold in interstate commerce; a vast amount of technical information has been obtained in regard to the performance and most efficient method of operating and producing oil and gas reservoirs; the technique of drilling, operating, producing and marketing has changed and will continue to change, and the appellate ■ courts of this State- have written hundred opinions relative to' these subjects.
“The Legislature certainly had in mind the fact that in numerous respects changes will always take place in the oil and gas industry, thus necessitating the continuous supervision of the Commission.”
Clearly the Railroad Commission has the continuing duty to supervise and regulate the oil and gas industry within the limits of the power granted to it.
The validity of the exercise of this power is sustained under the police power of the State and specific constitutional authority. Brown v. Humble Oil & Refining Co., supra.
It is elemental that all property is held subject to the valid exercise of the police power of a State, and that the right of a legislative body to exercise this power cannot be bargained away or abrogated. Miller v. Letzerich, 121 Tex. 248 , 49 S.W.2d 404 , 85 A.L.R. 451 .
No one has a vested right in the continuance of rules of law beneficial to him, there being no deprivation of vested property rights. Middleton v. Texas Power & Light Co., 249 U.S. 152 , 39 S.Ct. 227 , 63 L.Ed. 527 .
More specifically, no one has a vested right in the continuance of a proration order of the Commission even though its modification may result in economic loss to him.
In Railroad Commission of Texas v. Fain, 161 S.W.2d 498, 500 , writ ref., w. o. m., this Court held:
“Nor is the fact that the Commission’s order will result in economic loss to appellees controlling. Any order of the Commission limiting density of drilling, daily allowable per well, or controlling storage, transportation and marketing necessarily affects property values - and profits from production of oil. But this is necessarily incident to the police power of the State to .regulate any business affected with *434 a public interest, so Ions' as it treats all alike.”
There is a distinction between the regulation of a nonwasteful oil or gas well and its destruction. This was pointed out in Rowan, 152 Tex. 439 , 259 S.W.2d 173 , supra.
The same distinction differentiates the Midas and similar cases cited by the majority to sustain its holding on estoppel.
Midas is authority only for the rule that a private interested party may be estopped by long delay to question the validity of a permit to drill a test well for oil or gas when the permittee has incurred substantial obligations by reason of the permit. It is completely foreign to the authority and duty of the Commission to regulate production from the well once it is completed as a producer.
It- is my opinion that laches and estop-pel are inapplicable to the type of hearing and relief sought by Pan American and that the Commission and the Court below should have determined the matters presented upon their merits, and I would reverse and remand this cause for that purpose.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9645372. Public record. Not legal advice.