Trapp v. Shell Oil Co. , 145 Tex. 323 ( 1946 )

This is an appeal from a judgment of the district court of Travis County which set aside a permit to drill an oil well "on the Anderson Crisp 1.77 acre tract in the McAnally and Alexander Surveys, East Texas Oil Field, Gregg County, Texas." The Railroad Commission granted the application for a second well as an exception to Rule 37 in order to prevent waste and confiscation. The Shell Oil Company and Gulf Oil Corporation filed this suit as an appeal for the purpose of canceling the permit. The trial court on the first trial sustained the permit. The Austin Court of Civil Appeals reversed and remanded the cause with instructions to try it in accordance with Railroad Commission v. Shell Oil Company, 139 Tex. 66, 161 S.W.2d 1022, and other cases cited. 169 S.W.2d 1010. This court refused the application for writs of error filed by the Railroad Commission and permittee with the notation "refused for want of merit" (140 Tex. 639). The trial court on second trial canceled the permit. The Austin Court of Civil Appeals affirmed the judgment of the trial court (189 S.W.2d 26) primarily upon the authority of Miller v. Railroad Commission, 185 S.W.2d 223, writ of error refused (143 Tex. 668). This court granted writs of error filed by the Railroad Commission and the permittee.

It is believed, after a careful study of the record in the present case, that the lower courts have proceeded with this case upon the theory of the law as announced by the Supreme Court in each trial and upon each appeal therefrom. The trial court in the first trial evidently tried the case in accordance with the rules announced in the case of Gulf Land Company v. Atlantic Refining Co., 134 Tex. 59, 131 S.W.2d 73, which was decided in 1939. The Austin Court of Civil Appeals undoubtedly reversed the trial court upon this court's opinion in the case of Railroad Commission et al v. Shell Oil Corp. et al, 139 Tex. 66, 161 S.W.2d 1022, generally known as the Trem Carr case, which was decided on March 11, 1942. After the applications for writs of error were refused by this court, the case of Marrs v. Railroad Commission, 142 Tex. 293, 177 S.W.2d 941, was handed down, which was January 5, 1944. In the Marrs case this court said:

"In making this ruling we in nowise question or overrule anything said by this Court in either Railroad Commission of Texas v. Shell Oil Co., 139 Tex. 66, 161 S.W.2d 1022; Gulf Land Co. v. Atlantic Refining Co., (134 Tex. 59, 131 S.W.2d 73); or Railroad Commission of Texas v. Gulf Production So., (134 Tex. 122,132 S.W.2d 254)."

Distinguished counsel in the presentation of this case, both in oral argument and in the briefs, take conflicting views of the law with regard to the correct rule to be applied in a case like the present. We are therefore compelled to consider the prior opinions of this court to ascertain if there be a conflict in them, and if so, to define the correct rule which should govern in such cases. We recognize that it is at best difficult to avoid some uncertainties in the law because of the varying facts attending the different cases. However, it should not be too difficult to apply the same rule with respect to judicial review in each case within the class of cases generally designated as Rule 37 cases. The Supreme Court has heretofore decided the question before us, and but for the conflict our duty would be to follow the prior pronouncements of this court. In such a situation, it is not permissible for the present justices to decide the cases in accordance with their personal views of what the law should be. Our duty is to follow pronouncements of our predecessors. As we have stated, counsel in this case, as well as others in this class of cases, claim the prior opinion of this court to be in conflict. If this be true, it is our duty to settle the conflicts in order that the confusion will as nearly as possible be set at rest and so the lower courts as well as the lawyers may know how to proceed in the trial of this class of cases and to advise their clients with respect to their rights.

In deciding whether there is conflict with prior opinions of the Supreme Court, we shall not indulge in any refinement of language employed by the court, but we shall quote from each of the opinions.

The case of Gulf Land Company et al v. Atlantic Refining Company, 134 Tex. 59, 131 S.W.2d 73, was a suit by Atlantic to set aside a permit which the Railroad Commission had granted the Gulf Land Company to drill a well on a 2.35 acre tract of land in the East Texas Oil Field. The present case is concededly such a suit. Moreover, the Trem Carr case was the same kind of suit. This court said in the Gulf Land case as follows:

"Under our oil and gas conservation statutes ``Any interested person affected * * * by any rule, regulation or order made or promulgated by the Commission thereunder, * * * shall have the right to file a suit in a Court of competent jurisdiction in Travis County, Texas, and not elsewhere, * * * to test the validity of said laws, rules, regulations or orders. * * * In all such trials, the burden of proof shall be upon the party complaining of such laws, rule, regulation or order; and such laws, rule regulation or order so complained of shall be deemed prima facie valid.' Section 8 of Article 6049c, Vernon's Tex. Civ. St. 1936. Under the above statute the suit there provided for must be filed in a district court located in Travis County. It is too plain to admit of debate that, under our oil and gas conservation statutes, the Commission, being the statutory enforcement agency, must, as a general rule, also be the primary, or original statutory fact finding agency. The Commission is given the power and is charged with the duty to make original rules and orders, proper and necessary to carry out and effectuate the aims and purposes of such statutes. Under such a law, the Commission must of necessity ascertain facts and make fact findings. Of course, such fact findings may be made either expressly or by implication. In ascertaining and making fact findings the Commission exercises quasi judicial powers. It should therefore always approach each case with a judicial bearing, with but one purpose and aim in view, and that to make a fair finding.

"As already noted, our oil and gas conservation statutes provide an appeal from the Railroad Commission to the District Court of Travis County, Texas. The action before us here is such an appeal. In ordinary civil actions the district court, or any other trial court, exercises original jurisdiction to find and determine all fact questions, as well as all law questions. The action provided by statute for an appeal to a district court of Travis County to review the rules and orders of the Commission is clearly not an ordinary civil action. To the contrary, it is a special statutory action to enforce a right which exists only by statute, and not under the Constitution or at common law. Alpha Petroleum Co. v. Terrell, 122 Tex. 257, 59 S.W.2d 364; Id.,122 Tex. 257, 59 S.W.2d 372. It is the undoubted intention of the statutes under discussion to clothe the district court with all of its constitutional and statutory jurisdiction in passing on all questions of law which arise in the appeal from the Commission of such court. We encounter no difficulty in reaching this conclusion. The duty of defining the jurisdiction of the court to hear and determine fact questions under our oil and gas conservation statutes has given us very grave concern.

"Administrative boards or commissions have been set up in this State to perform many functions and purposes. We will not here attempt to classify these functions or purposes. The Railroad Commission is constituted the statutory agency to execute and enforce our oil and gas conservation statutes. In enacting such statutes, the State is seeking to regulate a business affected with a public interest. Oil and gas are very vital parts of our national resources, and the public generally is very vitally concerned therein. It follows that the business of producing, storing, and transporting oil and gas is a business affected with a public interest and subject to regulation by the State. Brown v. Humble Oil Refining Co., 126 Tex. 296, 83 S.W.2d 935, 99 A.L.R. 1107; Article 6014, R.C.S. 1925 as amended. It is settled that under our oil and gas conservation statutes Rule 37 is a valid rule. Also, we think the Rule of May 29th is a perfectly valid rule.

"As already indicated, we hold that the appeal provided by Section 8 of Article 6049c, supra, contemplates that the district court shall exercise its general jurisdiction in determining or deciding all questions of law arising under such action. We think, however, that, generally speaking, the law contemplates that the Commission shall be left free to finally determine controverted issues of fact. Rule 37 permits wells to be drilled at lesser distances than the minimum spacing distances named therein to prevent waste and to prevent the confiscation of property. These well permits are generally referred to as exceptions. The rule and the law contemplate that the Commission shall determine any controverted fact question necessary or proper to be determined in passing upon applications for such exceptions. To our minds, the law contemplates that the fact findings made by the Commission in passing upon such applications are subject to review and correction by the courts only to the limited extent hereinafter stated. The court, on appeal from the Commission's order, should not set aside an order of the Commission either granting or refusing to grant a well permit unless such order is illegal, unreasonable, or arbitrary. In so far as the fact findings upon which the order is based are concerned, the order is not illegal, unreasonable, or arbitrary if it is reasonably supported by substantial evidence. Stated in another way, the court does not act as an administrative body to determine whether or not it would have reached the same fact conclusion that the Commission reached, but will consider only whether the action of the Commission in its determination of the facts is reasonably supported by substantial evidence. 34 Tex. Jur., p. 712, sec. 11, and authorities there cited. To permit the court to substitute its fact findings on controverted issues of fact in such instances would add nothing of value to the administration of the law or the rule under discussion, but, to the contrary, would destroy all uniformity of Commission administration thereunder. We here pause to remark that conditions as they existed at the time the Commission acted are the determining factors."

We now quote from Railroad Commission v. Shell Oil Co.,139 Tex. 66, 76, 161 S.W.2d local citation 1022, 1028 (Trem Carr case):

"The Attorney General raises another question which we deem necessary to discuss at this time. He contends that in contesting an action of an administrative agency, such as the Railroad Commission, the testimony should be taken by the administrative agency and the findings of fact made by it, and that the courts should accept such findings without any independent hearing of the evidence anew, and that such findings so made by the administrative agency should be binding upon the court if there is any substantial evidence in the record to support same. We had thought that this question had heretofore been definitely settled by the decision of this Court contrary to the contention of the Attorney General. Magnolia Petroleum Co. v. New Process Production Co., 129 Tex. 617, 104 S.W.2d 1106, par. 9; Railroad Commission of Texas v. Magnolia Petroleum Co., 130 Tex. 484,109 S.W.2d 967, par. 3. Nothing that was said in Gulf Land Co. v. Atlantic Refining Co., 134 Tex. 59,131 S.W.2d 73, was intended to overrule the holding theretofore made on this question. However, in view of the insistence of the Attorney General, we have concluded to further discuss the question.

"The doctrine that the administrative agency should take the testimony and make the findings of fact, and that the findings should be binding upon the court, is foreign to the law of this State. We have found no Texas decision involving review of the orders of an administrative body which so restricts the court in its taking of testimony. Such doctrine seems to have had its origin in the statutory enactments by the Congress of the United States. These statutes usually provide; ``The findings of the Board (or Commission) as to the facts, if supported by evidence, shall be conclusive.' Mr. Stason in his article in 89 Pennsylvania Law Review, p. 1026, lists nineteen such statutes so enacted by the Congress of the United States. In some of these Congress has gone so far as to provide that the review of the ruling of the Board shall not be by a trial court, but shall be by the Circuit Court of Appeals. In this connection, see the National Labor Relations Act, 29 U.S.C.A., Sec. 160 (f).

"Our State Constitution contains the following pertinent provision: ``Article II, Section 1. The powers of the Government of the State of Texas shall be divided into three distinct departments, each of which shall be confided to a separate body of magistracy, to wit: Those which are Legislative to one; those which are Executive to another, and those which are Judicial to another; and no person, or collection of persons, being of one of these departments, shall exercise any power properly attached to either of the others, except in the instances herein expressly permitted.' Vernon's Ann. St. Const., art. 2, sec. 1. The taking of the testimony, including the determination of what evidence shall be admitted and what shall be rejected, and the weight to be given thereto, is an important feature of a trial. It often requires a knowledge of the substantive law as well as the application of the rules of evidence. A lay agency, unfamiliar with these principles, might reject material evidence and admit and rely on other evidence that was inadmissible. No system has been provided in this State for reviewing the action of the administrative agency for procedural error's committed in the taking of the testimony, nor for remanding the cause to the agency for a rehearing because thereof. It would indeed be a sorry trial if an agency could thus reject the material evidence of one side and admit and consider the evidence offered by the other, and bind the court as to the facts by the findings made at such a hearing. In this connection, Chief Justice Hughes in an address before the Federal Bar Association, in 1931, said: ``The power of administrative bodies to make findings of fact which may be treated as conclusive, if there is evidence both ways, is a power of enormous consequence. An unscrupulous administrator might be tempted to say, "Let me find the facts for the people of my country, and I care little who lays down the general principles."'

"In the light of the foregoing constitutional provision, it may well be doubted whether the Legislature of this State would have the authority to transfer from the judicial branch of the government to the administrative branch thereof such an essential part of the trial of a lawsuit as the taking of the testimony and the determination of the facts. But we need not here theorize on that question. It is sufficient to say that the Legislature of this State has not undertaken to do so in this instance. The Act here in question provides for a testing of such orders in the district court in the following language: ``Sec. 8. Any interested person affected by the conservation laws of this State relating to crude petroleum oil or natural gas, and the waste thereof, including this Act, or by any rule, regulation or order made or promulgated by the Commission thereunder, and who may be dissatisfied therewith, shall have the right to file a suit in a Court of competent jurisdiction in Travis County, Texas, and not elsewhere, against the Commission, or the members thereof as defendants, to test the validity of said laws, rules, regulations or orders. Such suit shall be advanced for trial and be determined as expeditiously as possible and no postponement thereof or continuance shall be granted except for reasons deemed imperative by the Court. In all such trials, the burden of proof shall be upon the party complaining of such laws, rule, regulation or order; and such laws, rule, regulation or order so complained of shall be deemed prima facie valid. (As amended Acts 1932, 42nd Leg. 4th C.S., p. 3, Ch. 2, sec. 8; Acts 1935, 44th Leg., p. 180, ch. 76, sec. 14.)' Vernon's Ann. Civ. St. Art. 6049c, sec. 8. It will be noted that the above statute refers to the action as a ``suit.' It further provides that, ``In all such trials, the burden of proof shall be upon the party complaining of such laws, rule, regulation or order.' A trial generally includes a judicial examination of the issues between the parties, whether of law or of fact. 42 Words and Phrases, Perm. Ed., p. 481. Moreover, there would have been no necessity for the placing of the burden of proof if proof was not to be heard. The Act in question clearly contemplated that the evidence shall be taken anew in the district court."

We quote the following from the Marrs case, 142 Tex. 293; 300-302, 177 S.W.2d 941, local citation 946-947:

"In fact, as we construe the opinion of the Court of Civil Appeals, that court does not consider the evidence insufficient to support the judgment of the trial court, if the trial court had a right to make an independent review of the evidence. But apparently the Court of Civil Appeals was of the opinion that the trial court had no such authority. In this connection the court said: ``The trial court's findings of fact and conclusions of law plainly show that it simply weighed the evidence from the viewpoint of a court or jury in its fact finding function in an ordinary civil suit without reference to the findings of the Commission, accepting or disregarding evidence as it might believe or disbelieve the testimony of the several witnesses and the respective theories they advanced, on either the issue of drainage or waste of reservoir energy in producing oil, and in this manner reached the conclusion that the evidence so accepted constituted satisfactory and convincing evidence. This sort of trial of the suit testing the validity of the proration orders is contrary to the rule announced by the Supreme Court in the cases of Railroad Commission of Texas and Trem Carr v. Shell Oil Company, Inc., et al, 139 Tex. 66, 161 S.W.2d 1022; and Cook Drilling Company et al v. Gulf Oil Corporation 139 Tex. 80,161 S.W.2d 1035, * * * wherein the court holds that in a suit attacking the validity of any order of the Commission administering the oil conservation laws, or rules and regulations pertaining thereto, the inquiry is confined to the question of whether or not the order, rule or regulation is sustained by substantial evidence in existence at the time the order, rule or regulation was made, determinable from evidence adduced in the trial court only, the court being required to determine this question of law from a consideration of all the probative evidence adduced and not from a consideration of the evidence as determinative of an original issue of fact, independent of the Commission findings.' 161 S.W.2d 1037, 1042.

"From the above statement we conclude that the Court of Civil Appeals, was of the opinion that the trial court had no right to pass on the credibility of the witnesses or the weight to be given to the testimony or to otherwise exercise the usual fact-finding function of a trial court, but was bound to accept unqualifiedly as true all testimony given upon the trial; and if, when so accepted, there was substantial evidence in the record to support the implied finding of the Commission in favor of its orders, the court was bound to accept such finding. In this we believe the Court of Civil Appeals was in error. The court cited Cook Drilling Company v. Gulf Oil Corporation, 139 Tex. 80,161 S.W.2d 1035, and Railroad Commission of Texas and Trem Carr v. Shell Oil Company, Inc., et al, 139 Tex. 66, 161 S.W.2d 1022, 1028, in support of its holding. The question here under consideration does not appear to have been discussed in the Cook Drilling Company case. In the Trem Carr case we expressly repudiated the doctrine which prevails in some jurisdictions to the effect that an administrative agency can take the testimony and make the findings of fact, and that such findings will be binding on the court. We there pointed out that such doctrine had for its foundation statutory enactments which attempted to confer such authority upon the administrative agency, but that our Legislature had never undertaken to pass such a statute. We also called attention to the fact that our statute provided for a ``suit' to test the validity of orders of the Railroad Commission and for a ``trial' thereof, and that ``the taking of the testimony, including the determination of what evidence shall be admitted and what shall be rejected, and the weight to be given thereto, is an important feature of a trial.'

"It will be noted that the statute here under consideration, Art. 6049c, Section 8, Vernon's Annotated Civil Statutes, authorizes the filing of a ``suit' to test the validity of proration orders issued by the Railroad Commission, and further provides: ``In all such trials, the burden of proof shall be upon the party complaining of such laws, rule, regulation or order; and such laws, rule, regulation or order so complained of shall be deemed prima facie valid.' It is clear from the above that it was intended there should be a ``trial' of the issues in court, and no limitation is placed on the sort of trial to be had, except that it must be one to test the validity of the order, and the burden of proof is on the one complaining thereof. A ``trial' as commonly understood contemplated a judicial examination of all the issues of law and fact. 64 C.J. 31. There cannot be a judicial examination of what the facts are without the right to pass on the credibility of the witnesses and the weight to be given to the evidence. That was the only kind of trial known to the courts at the time the statute was enacted. It would indeed be a very limited trial if the court was not only bound to accept as literally true each term of testimony that was introduced, but was denied the right to determine what weight should be given to the various circumstances in evidence. The very fact that the statute provides that the burden of proof shall be on the party complaining of the order evidences legislative intent that the court should determine whether the burden of proof bad been met, and this cannot be done without weighing the evidence and passing on the credibility of the witnesses.

"In the case of Railroad Commission v. Houston T.C.R.R. Co.,90 Tex. 340, 38 S.W. 750, 756, the court had under consideration statutes which provided as follows:

"``Article 4565. If any railroad company or other party at interest be dissatisfied with the decision of any rate, classification, rule, charge, order, act or regulation adopted by the commission, such dissatisfied company or party may file a petition setting forth the particular cause or causes of objection to such decision, act, rate, rule, charge, classification or order, or to either or all of them, in a court of competent jurisdiction in Travis County, Texas, against said commission as defendant.'

"``Article 4566. In all trials under the foregoing article the burden of proof shall rest upon the plaintiff, who must show by clear and satisfactory evidence that the rates, regulation, order, classification, act or charges complained of are unreasonable and unjust to it or them.'

"After referring to the fact that under the statutes in question a suit could be maintained to test the validity of the order of the Railroad Commission, either on the ground that it was confiscatory or was unreasonable or unjust, the court said: ``Indeed, the conferring of that jurisdiction upon the courts of itself imposed the duty to try the case by the ordinary rules of procedure, unless otherwise provided.'

"As previously stated, this suit was brought both as a statutory suit under Article 6049c, Section 8, Vernon's Annotated Civil Statutes, to test the validity of the Railroad Commission's proration orders and as a bill in equity to restrain the Commission from restricting production in the field in such manner as to constitute a taking of plaintiffs' property without due process of law. It was charged that the orders of the Railroad Commission were invalid because they were unreasonable, arbitrary, and discriminatory, and amounted to a confiscation of petitioners' property. The suit was for the purpose of testing out these issues. The statute authorized the suit, and upon the trial thereof the court had the right to hear evidence as to whether the order amounted to an arbitrary discrimination against the petitioners or unlawfully deprived them of their property. In passing on such issues the court had a right to pass on the credibility of the witnesses and the weight to be given to the evidence."

We deem it necessary to quote from the majority and dissenting opinions of the Austin Court of Civil Appeals in the Trem Carr case, 154 S.W.2d p. 507, local citation 513 and 518. The majority opinion says:

"And when such order is judicially attacked on the grounds that it is not supported by the facts on which it purports to rest, the existence, vel non, of those facts is to be judicially determined upon a trial under the rules of evidence as in other cases, except that the order carries the statutory presumption in support of its validity. If there be no evidence either way, the presumption prevails. Or, as it is sometimes stated, if the evidence pro and con on the issue involved be evenly balanced, the added presumption will control. * * *

"But in the trial of such facts the court, or jury, must, as inother cases, pass upon the credibility of the witnesses and theweight to be given their testimony." (Underscoring ours).

The dissenting opinion states:

"This holding is in direct conflict with the holdings of the Supreme Court in the recent cases of Gulf Land Company v. Atlantic Refining Company, 134 Tex. 59, 131 S.W.2d 73, and Lone Star Gas Company v. State, 153 S.W.2d 681."

It is obvious from a study of the above quoted excerpts of the opinions of this court that the rules applicable to a case like the present are declared to be different in the Gulf-Atlantic case, supra, and those stated in the Trem Carr and Marrs cases, supra. It may be suggested that this court should follow the last pronouncement of this court. This cannot be done with consistency, for the reason that it was stated in the Marrs case that the Trem Carr and Gulf-Atlantic cases were in nowise questioned nor overruled. It may be suggested, as has been heretofore, that much of the opinion of the court in the Gulf-Atlantic case was dictum. The same may be said with regard to the opinion in the Trem Carr case. It certainly cannot be so claimed for the quoted excerpts from the Marrs case.

The same rule announced in the Gulf-Atlantic case had been theretofore declared by the Austin Court of Civil Appeals. Smith County Oil Gas Co. et al v. Humble Oil Refining Company,112 S.W.2d 220, opinion by Justice Baugh, and Humble Oil Refining Company v. Railroad Commission et al, 112 S.W.2d 222, opinion by Justice Blair, both decided in the month of May, 1937. It is true that this court dismissed the applications for writs of error, (130 Tex. 654) but its action in so doing must be considered, inferentially at least, to approve the judgments in each of the cases. In each of those cases the court stated the rule to be:

"Under the repeated holdings of this court and of the Supreme Court, under such circumstances, the only matter with which the courts are concerned is whether or not there was substantial evidence before the Railroad Commission to sustain its order in the premises." 112 S.W.2d 220, 221.

It will be observed that this court cited this case with approval in the Trem Carr case. We further quote from the opinion of the Court of Civil Appeals:

"Under the above-stated rule, the only inquiry in the instant case was whether there was any substantial evidence to sustain the action of the Railroad Commission in granting the permit to drill the second well as an exception to Rule 37, in order to prevent waste and to protect vested rights or to prevent confiscation; and affirmative evidence having been introduced which substantially supports these findings, the court inquiry was at an end." 112 S.W.2d 222, 227.

We do not deem it necessary to review other opinions of the Court of Civil Appeals on the questions involved. It is sufficient to say that in the Gulf-Atlantic case (134 Tex. 59,131 S.W.2d 73) this court, after announcing in no uncertain terms that in a case like the present the review contemplated by the statute is what is denominated as the substantial evidence rule, and in that case it was said:

"In this opinion we have not attempted to discuss and review all of the opinions that have been written by the Courts of Civil Appeals in regard to the matters we have discussed and decided. In regard to such opinions, we will simply say that if there are any conflicts between such opinions and this opinion, the views expressed in this opinion shall prevail."

We conclude that the rules announced in the Gulf-Atlantic case are now the prevailing rules declared by this court, notwithstanding the conflicting statements in the Trem Carr and the Marrs cases. We shall now proceed to apply them to the case before us.

The evidence offered by the protestants of the permit as summarized in the brief is substantially as follows: The potentials of the various wells involved, the sand thicknesses and the allowables, when all of them were flowing in November, 1940, which indicated the presence of water drive and good permeability between this area and the water area; that the permeability of the producing field in the area of the Trapp tract and the surrounding area was high, at least as good as the average of the field; that the sand in the area was very porous and as good as the average of the field; that all other characteristics that affect migration and production of oil were as good or better in the area as that elsewhere in the field. The permeability, porosity and all other characteristics that affect production and migration of oil were substantially similar under the Trapp tract to the average in the eight times area around it in the twenty-seven acre circle and in the forty acre circle. That it was the witness' opinion that there was as much oil under the Trapp lease on November 20, 1940, as there had been when the field was first discovered, each barrel that was withdrawn having been replaced by an equal amount of oil that came in from the west. That the eastward migration is a normal condition in the field and that there is no way it could have been produced without having such migration. The average density of drilling of the East Texas field in the segment west of the Trapp lease over to the west edge of the field in 1940 was about the same as the average of the entire field. The same condition existed as to the east, north and south edge of the Trapp lease. That the Trapp tract has at all times produced more oil per acre than the average of the land to the west or to the east or to the north or to the south of it; that it is not possible for the Trapp tract to have suffered any net loss or drainage of oil up to November 20, 1940. The witness gave his estimate of the recoverable oil and the amount that had been withdrawn from the Trapp tract and said that in his opinion the Trapp tract with one well will continue to produce forty-four years longer, and during that time will yield a total of 220,000 barrels of oil, or 540% of the recoverable oil originally in place thereunder. It was the witness' opinion that after a study of the field that the Trapp tract had an advantage on November 20, 1940, to the surrounding leases. The witness testified that in November, 1940, the wells were permitted to produce twenty-one days and were shut down during the rest of the month; that the highest allowable permitted to any well was twenty-five barrels, and the lowest was twenty. That if the entire East Texas field at that time had been drilled to a uniform density of one well to 1 1/3 acres or one well to two acres, with minimum production of twenty barrels, it would have resulted in a decrease of about a billion barrels of oil in the ultimate production of the field, and that it was his opinion that with that many wells, if production had been held down to a rate that would not cause a diminution in the ultimate production of the field, each well would have been allowed to produce about a barrel and a half of oil per day so that they would not pay the expenses of operation. That the granting of well No. 2 on the Trapp tract would not ultimately increase the production of the East Texas field. The witness further testified that as long as proration remained as it was in November, 1940, the areas on the east side of the field that have more wells per acre are going to produce each day more of the oil that migrates from west to east than wells on land that is less densely drilled. That if the entire field had been drilled with uniform spacing of wells, each tract on the east side of the field would have produced substantially the same amount per acre of the oil that migrates to the east, and that Trapp with one well as of November, 1940, on his tract, would produce more oil per acre than a well in that area would produce per acre if the entire field had been drilled to a uniform density of one well to ten acres, or one well to five acres. The witness further testified, assuming that the Trapp tract contained 1.94 acres, that it was originally underlain with 87,700 barrels of recoverable oil, and that taking 81,000 barrels of oil that had been recovered from the Trapp well up to November, 1940, on the basis of his estimate as to the future life of wells in this area, one well on that size tract of ground would ultimately produce 301,000 barrels of oil, or 343% of the original recoverable oil thereunder, and that was more than would be produced by one well on that tract if the entire East Texas field had been drilled to the same density, and also more than would be produced per acre by ten acres around that area with only one well on it if the entire field were drilled to a density of one well to ten acres. A like estimate was made by the witness if the tract was assumed to contain 2.25 acres, and that one well on such tract would produce more oil per acre than it would have produced per acre if the entire field had been drilled from the beginning to the same density as that to which it was drilled. One well on such 2.25 acre tract would produce more oil per acre with the field drilled as it was in November, 1940, than one well on a ten acre tract centered by that well would have produced per acre if the entire field had been drilled from the beginning to a uniform density of one well to each ten acres, and that would be true whether the tract contained 1 1/3 acres or 1.94 acres or 2.25 acres.

Permittee introduced expert evidence summarized as follows in his application for writ of error: That if the Trapp tract is considered as a 1.94 acre tract, using the center of gravity eight times area which embraces nine wells on 15.55 acres outside the Trapp tract, the density of drilling was 1.72 acres per well as compared with the Trapp tract considered density of 1.94 acres per well. Considering the Trapp tract as 1.94 acres, with the radius point the Trapp well No. 1, a ten acre circle embraces seven wells on 8.06 acres outside the Trapp tract, with a resultant density of 1.15 acres per well as compared to the permittee's tract density of 1.94 acres, per well. That if the Trapp tract is considered as a 1.94 acre tract, with a radius point the Trapp well No. 1, a five acre circle embraces three wells on 3.06 acres outside the Trapp tract, with a resultant density of 1.02 acres per well. Considering the Trapp tract as a 2.25 acre tract, an eight times area circle encloses ten wells on 18 acres outside the Trapp tract, with a resultant density of 1.80 acres as compared to appellant's Trapp tract, with a density of 2.2503 acres per well. Considering the Trapp tract as 2.25 acres, a ten acre circle embraces seven wells on 7.8 acres outside the Trapp tract, with a resultant density of 1.1 acres per well as compared to permittee's tract with a density of 2.25 acres per well. Considering the Trapp tract as the same amount of acreage, a five acre circle embraces three wells on three acres outside the Trapp tract, with a resultant density of one acre per well as compared to the Trapp tract, with a density of one well to two acres.

Another witness testifying as an expert stated that he had made a particular study of oil production and drainage in the Trapp area in connection with the application of M.E. Trapp for well No. 2. Primary importance was placed upon the relative distance of the wells each from the other, and the relative influence that those wells would have upon the drainage of oil from an individual tract caused by the nonuniformity of drilling pattern in this area and the fact that the eight times area aid is a variable one, depending upon the size of the particular tract. The witness stated that the eight times area circle depicted around the tract considered as 1.94 acres is an area which has an influence on the drainage from the tract; that the wells are unevenly spaced acts as an advantage to the area lying outside the Trapp tract. The witness testified that an eight times area circle around the Trapp tract considered as 2.25 acres would enclose an area which would have a greater advantage in density than the density depicted in the 1.94 acres. That the disadvantage of the Trapp tract would be even greater, the drainage being to the area outside of the Trapp tract. The witness stated if you constrict the area more closely to the Trapp tract, making it smaller in area than the eight times area, the drainage influence is greater. It was his opinion that since the spacing program in East Texas is one well to ten acres, which means that one well will drain ten acres, a ten acre circle around the Trapp tract considered as 1.94 acres, using the Trapp well No. 1 as the radius point, the density in the area outside the Trapp tract is one well to 1.15 acres compared to the density of the Trapp tract of one well to 1.94 acres. That since the field is drilled one well to five acres, he had made a five acre circle which showed the Trapp tract to have a density of 1.94 acres and the area outside but within the circle would have a density of 1.02 acres per well, which indicated, in his opinion, that the wells on the adjacent tracts are so located as to afford the offset wells a definite advantage in drainage of oil from the 1.94 acre tract. A similar study was made by the witness considering the tract as a 2.25 acre tract, with similar results. The witness stated that in his opinion that since the relative position of the offsetting wells has a definite influence on drainage, and that in his opinion each well will produce twenty barrels of oil per day, and considering the Trapp tract as a 1.94 acre tract, he took the relative distances of the two wells to the common line and from the offset to the common line, and took their percentage of distances, giving each their percentage, the closest well to the line getting more of the twenty barrels and the well farther removed from the common line getting less; and after computing this the witness found that the Trapp tract is at a disadvantage by reason of drainage due to the spacing of wells in the amount of thirty-two barrels of oil per day. It was his opinion that appellant Trapp with one well, under these circumstances, is not afforded an opportunity to produce his oil as compared with those surrounding leases. A similar study was made considering the Trapp tract as containing 1.77 acres, with the resultant disadvantage of 20.58 barrels of oil per day.

The witness further stated that under the existing conditions as obtained in 1940, it was necessary for appellant Trapp to drill well No. 2 as applied for in order to eliminate the drainage disadvantage which he suffered, and as a direct and equidistant offset to the Gulf No. 2 Neely and to the northwest the Sutton and Hawkins No. 2 Jim Whitaker.

As we have stated, the trial court, on the first trial of this case, sustained the Railroad Commission's action in granting the permit. This action was evidently upon the application of the substantial evidence rule which was, in the Gulf-Atlantic case, said to be the rule applicable to this kind of a case. We have carefully considered the evidence contained in the record and we are of the opinion that there is substantial evidence to sustain the action of the Railroad Commission in granting the permit in review.

1 Paraphrasing the language employed in the Gulf-Atlantic case, we think the record as a whole is reasonably supported by substantial evidence. The permit involved, in so far as the fact findings upon which the order is based are concerned, is not illegal, unreasonable or arbitrary if it is reasonably supported by substantial evidence. The conditions as they existed at the time the Railroad Commission acted are the determining factors. It was the duty of the trial court to exercise its constitutional and statutory jurisdiction in determining all questions of law which arose on the trial of the cause after the appeal from the Railroad Commission to the trial court. The appeal provided for by statute to the district court of Travis County is clearly not an ordinary civil action. In such an appeal it is not the province of the trial court to substitute its judgment for that of the Railroad Commission on controverted issues of fact. Here lies the error of the trial court in the second trial.

While we are here concerned with only cases arising under Article 6049c, Section 8, it is not inappropriate to point out that our predecessors, in the case of Railroad Commission v. Shupee, 123 Tex. 521, 73 S.W.2d 505, 509, gave a similar and perhaps a more compelling statute the same construction which this court gave to Section 8 of Article 6049c in the Gulf-Atlantic case. Nor are we concerned here with a different rule stated in Lone Star Gas Co. v. The State, 153 S.W.2d 681, where the case was turned upon the legislative mandate that such a case "shall be tried and determined as other civil cases in said court." It is sufficient to point out that no such comparable language was employed in the statute concerning the appeal of the present case.

2 This court, in the case of Thomas et al v. Stanolind Oil Gas Co., this day decided, (this volume p. 270, 198 S.W.2d 420) explained the holding in the case of Miller v. Railroad Commission, 185 S.W.2d 223, error refused, wherein it was stated:

"* * * that the eight times area method had never been used as a conclusive criterion and that the applicant was not entitled, as a matter of right, to have his tract drilled in conformity therewith. The court [Austin Court of Civil Appeals] recognized that, because of the peculiar facts of that case, discrimination might result whichever way the Commission resolved the question, and in that situation held that ``it was for the Commission to determine which course would best conserve the natural resources of the State'."

We are of the opinion that in the present case the same rule should apply, and where the Commission, as it did in this instance, granted the permit, its action should be sustained when reasonably supported by substantial evidence.

The most controversial question in this case is the amount of acreage contained in the Trapp tract which should rightly be considered in determining his right to a permit. It seems to be conceded by all that Trapp owns a tract containing 1.366 acres of land. Trapp claimed to own land north and east of his 1.366 tract which would contain 1.77 acres, or 1.94 acres or 2.25 acres, including the 1.366 acres. The application for a second well filed by Trapp before the Commission indicated by the plat filed therewith that the tract contained 3 acres. The order of the Commission described the tract as "the Anderson Crisp 1.77 acres or 3 acres in the McAnally and Alexander Surveys East Texas Field, Gregg County, Texas."

The facts as we view them in connection with the title asserted by Trapp are that Trapp, in 1932, bought a small tract of land from persons who were asserting limitation title thereto. The tract had a house thereon and a yard fence. On the purchase of the tract the yard fence was perhaps used as the out-boundaries by the surveyor. This is the conceded acreage owned by Trapp. Trapp offered evidence tending to support a limitation title by his predecessors in title to more land than was contained in the yard and also tending to prove that he took possession at the time of his purchase for more land than was contained within the yard fence. Apparently, the acreage claimed by Trapp would have to be enlarged to the extent of 2.25 acres before his claim would conflict with adjacent land owners. This is explained by virtue of the protestants' claim that a part of the land sought to be included within the Trapp assertion of ownership consists of a traveled road. Trapp contends that there was no public road, but only a permissive use since he had acquired the tract. The matter is further complicated by the fact of the second well being located on land admittedly owned by Trapp. These facts present a number of complicated problems.

3 The duties of the Railroad Commission as given by law do not encompass the power or authority of deciding the ownership of the title to land. We think it follows that the appeal contemplated by Section 8 of Article 6049c does not include such power, even though the appeal is to a district court of Travis County which, in a proper case, has such jurisdiction. It is also necessary to consider that this land is situated in Gregg County, and the claimants of title thereto have the right to litigate the title in the county where the land is situated under our venue statutes. Moreover, the district court of Gregg County has not jurisdiction to hear and determine the appeal provided under Article 6049c.

4 This question immediately presents itself for decision: Is one desiring a permit to drill a well for oil and gas on land claimed by him compelled to present to the Railroad Commission a perfect paper title to the land involved? Or, perhaps more accurately stated, was it incumbent upon Trapp to show a perfect paper title to land which is to be considered in passing on his right to a second well on land, the title to which is not in dispute? Since we know as a matter of common knowledge that many titles in this state rest upon a limitation title, we have no hesitancy in answering the above question in the negative. We recognize also the unjustness to adjacent land owners or lease-holders if the land considered is not owned by Trapp. However, no doubt, whatever damages may be suffered by them can be settled in the title suit.

We think the applicable rule was stated by this court in the case of Magnolia Petroleum Co. v. Railroad Commission et al,170 S.W.2d 189:

"If the applicant makes a reasonably satisfactory showing of a good-faith claim of ownership in the property, the mere fact that another in good faith disputes his title is not alone sufficient to defeat his right to the permit; neither is it ground for suspending the permit or abating the statutory appeal pending settlement of the title controversy."

Applying those principles to the present case, and after a careful consideration of all the evidence with reference to the title offered by the parties to this appeal, we are of the opinion that Trapp made a reasonably satisfactory showing of a good faith claim of ownership to at least 1.77 acres and 1.94 acres.

It follows from what we have said that the lower courts erred in canceling the permit. The judgments of the lower courts are reversed and judgment is here rendered upholding the permit.

Opinion delivered May 15, 1946.

ON MOTION FOR REHEARING.