State v. Thrift Oil & Gas Co. ( 1926 )

Section 3 of Act 252 of 1924, "An Act to conserve the natural gas resources of the state of Louisiana," provides that:

"The percentage of the open-flow capacity that gas wells may be allowed to produce or that may be drawn from each gas well shall depend upon the acreage upon which the well is drilled."

A schedule of percentages is fixed in this section of the act ranging from 24 per cent. of the open-flow capacity of a well drilled on a tract of 160 acres or more to less than 7 per cent. of the open-flow capacity of a well drilled on a 5-acre tract.

It is declared in this section that, "Where the percentages hereinabove provided applied to any well reduces the amount allowed below one million cubic feet, there may be taken from such well a total of one million cubic feet, provided the back pressure, as elsewhere herein provided for, shall be maintained" — i.e., "provided that the working pressure of any well cannot be reduced below 200 pounds regardless of what the closed pressure is." Paragraph 2, § 4, Act 252 of 1924, p. 657.

It is expressly provided in section 3 of said act:

"That the percentage of the open-flow capacity of each well as fixed in this section depending on location, shall not apply to any well or wells heretofore drilled."

It is conceded that defendant company's well was completed before the passage of Act 252 of 1924. The testimony in the case shows that at no time have the acreage percentages fixed by the act of 1924 been applied to the well of defendant company, which has been operated all the time under the percentages of Act 91 of 1922 of not less than 15 nor more than 20 per cent. of the open-flow capacity of the well.

It is not possible to apply the acreage percentages of Act 252 of 1924 to any well that has been drilled prior to the adoption of that act. As defendant company's well is not one that has been reduced by the application of the acreage percentages of Act 252 of 1924, this company is clearly debarred from claiming under that act the benefit of the million cubic feet of gas, which it claims in the present prosecution. If it were necessary to make the case plainer, a mere citation of section 5 of Act 252 of 1924 is all that is needed. Section 5 of the act of 1924 provides in clear and unmistakable terms that:

"The commissioner of conservation may grant permits for the building of plants to burn natural gas into carbon black under the conditions and provisions of Act No. 91 of 1922, except that the percentage of the open-flow capacity of gas wells that may be utilized in burning carbon black shall be controlled by this act [Act 252 of 1924], when the production of such well is controlled by this act [Act 252 of 1924], and by Act 91 of 1922 when the percentage that such wells may produce is controlled by said Act 91 of 1922."

Section 2 of Act 91 of 1922 declares:

"That the commissioner of conservation is authorized, directed, and empowered to fix and determine on the 1st day of October, 1922, and semiannually thereafter, what percentage of consumption of natural gas produced by each gas well may be used in the manufacture of carbon black, said percentage of consumption to be based upon the potential capacity of such gas well, and which percentage shall not be less than fifteen per cent. and not more than twenty per cent. of the potential capacity of such well, provided that in fixing such basis of consumption the same rule, as far as possible, shall be applied to all gas wells in any producing gas area, and provided further, that the percentage of consumption may be increased in any particular well when the safety of such well may demand such increase."

It is manifest that it is only where the acreage percentages provided for in Act 252 of 1924 are applied to wells drilled under that act and reduce the amount allowed below 1,000,000 cubic feet that there may be taken from such wells a total of 1,000,000 cubic feet, provided the back or working pressure of any well is not reduced below 200 pounds regardless of what the closed pressure is.

Section 3 of Act 252 of 1924 has expressly so declared, and the language of this section cannot be construed logically into meaning that this million cubic feet of gas may be allowed when the percentages provided for in Act 91 of 1922 are applied to wells drilled under that act, as under section 2 of Act 91 of 1922 the increase in any particular well may be made only when the safety of such well demands it. It cannot be seriously argued that section 2 of Act 91 of 1922 has been repealed by Act 252 of 1924, when this section as to percentages has been written into section 5 of the Act of 1924 and thereby retained in the later act.

It is clear that there can be no practical classification whatever under the police power of the state based upon mere capacity of gas wells, as this varies in each well when brought in, as well as at different periods of production in the same well. Necessarily, a fixed percentage of the capacity of each well must be made the basis of regulation as to the quantity to be taken.

This is what the Legislature has done under Act 91 of 1922 and Act 252 of 1924.

The percentage of gas to be pulled under Act 91 of 1922 is fixed at not less than 15 per cent. nor more than 20 per cent. of the potential, or open flow, capacity of the well; and an increase is allowed under that act only when the safety of the well requires it.

Under Act 252 of 1924 an entirely different basis of percentage is adopted, as it is predicated upon acreage, or proportionate ownership of the surface, as to all new wells to be drilled under that act. It is therefore impossible to substitute the percentages of production provided for in Act 91 of 1922 for those provided for in Act 252 of 1924.

It is plain that the owner of a 5-acre tract, or less, may exhaust the gas under an adjoining tract of 160 acres or more. The right of the owner of a small tract to take gas from the common reservoir would be, therefore, out of all proportion to the extent of his ownership, unless restricted.

That acreage, or proportionate ownership of the surface, is a fair and reasonable basis for the computation of the percentage of gas to be taken must be admitted.

Under section 3 of Act 252 of 1924 the owners of 5, 10, 20, 40, 80, and 160 acre tracts are entitled respectively to 9, 12, 15, 18, 21, and 24 per cent. of the open-flow capacity of the well. Ownership of the surface is based under the act upon governmental subdivisions of a section of land and parts thereof. Thus far it is seen that there is no discrimination between members of the same class as to percentage, whether they be owners of old wells under Act 91 of 1922, or owners of new wells under Act 252 of 1924.

The equal protection clause of the Fourteenth Amendment does not take from the state the power to classify in the adoption of police laws, but admits of the exercise of a wide scope of discretion in that regard, and avoids what is done only when it is without any reasonable basis and therefore is purely arbitrary. When the classification in such a law is called in question, if any state of facts reasonably can be conceived that would sustain it, the existence of that state of facts at the time the law was enacted must be assumed. One who assails the classification in such a law must carry the burden of showing that it does not rest upon any reasonable basis, but is essentially arbitrary. Lindsley v. Natural Carbonic Gas Co., 220 U.S. 78, 31 S. Ct. 337,55 L. Ed. 369, Ann. Cas. 1912C, 160; State v. City of New Orleans,154 La. 271, 97 So. 440, 33 A.L.R. 260.

This burden has not been discharged by defendant company in the case at bar. Defendant company's well was drilled prior to Act252 of 1924, and is classified as an old well by the state conservation department.

It must be assumed that the Legislature was aware of the average capacity of old gas wells at the time of the passage of Act 252 of 1924. A most natural and excellent reason for excluding such wells from the provision in section 3 of that act as to the 1,000,000 cubic feet is that such provision would not be applicable, as a general rule or regulation, to old gas wells, because of diminution of production caused by long operation.

The impracticability, if not impossibility, of adjusting old gas wells to the same condition as that of new wells is apparent, and must have been well known to the General Assembly of this state at the date of the adoption of Act 252 of 1924. Assuming that the Legislature acted with full knowledge as to the average condition of the production of old gas wells, and for this reason, among others, did not include these wells within the provision in section 3 of Act 252 of 1924 as to 1,000,000 cubic feet of gas, it is unimportant that the old well of defendant company may prove to be an exception in the matter of production, and may be capable of producing 1,000,000 cubic feet of gas, without reducing the back or working pressure of the well below 200 pounds, as the classification made in section 5 of Act 252 of 1924 of old wells and new wells rests upon a reasonable basis, and is not essentially an arbitrary discrimination against defendant company, a member of the old well class. Due process of law and equal protection of the laws are had when laws affect alike all persons similarly situated.

For these reasons, I respectfully dissent from the opinion of the majority of the court as to the holding that defendant company is entitled to claim the 1,000,000 cubic feet of gas in this case, and therefore is not guilty of violating Act 252 of 1924, because said company did not overpull its well to that extent.

I adhere, therefore, to our original decree affirming the conviction of defendant company in the lower court.