Untitled Texas Attorney General Opinion ( 1987 )

March 30, 1987
Eonorable Mack Wallace Opinion No. JM-660
Chairman
Railroad Conmission of Texas Re: Confiscation of production
P. 0. Drawer 12967 related equipment at abandoned
Austin, Texas 78711 well sites by agents of the
Railroad Commission
Dear Mr. Wallace:
The questions you ask involve construction of section 89.085 of
the Natural Resources Code, “Confiscation of Equipment to Cover
Plugging Costs,” which provides as follows:
(a) If a person acting as agent for the com-
mission plugs or replugs a well, the comission
may authorize the agent to confiscate any produc-
tion-related equipment at the abandoned well site
(abandoned by the operator of the well as defined
in this chapter) for the purpose of wholly or
partially compensating the agent for plugging or
replugging the well.
(b) The commission shall adopt reasonable
rules (including a provision for a public hearing)
for determining whether production-related equip-
ment at a well site is abandoned and for esta-
blishing the value of production-related equipment
for purposes of compensating the agent.
To set the stage for your questions, you provide the following
fact situations:
The Railroad Commission, after notice to the
operator. holds a hearing pursuant to section
89.085 of the Natural Resources Code to determine
whether production-related equipment at a well
site is abandoned and to establish the value of
production-related equipment for purposes of
compensating the agent. The operator does not
appear at the hearing.
a. The Conmission does not know whether
there are any lienholders nor If the operator
is insolvent or in bankruptcy. The comuls-
sion determines that the production-related
equipment at the well site is abandoned and
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Eonorable Mack Wallace - Page 2 (JN-660)
establishes the value of the equipment. The
established value exceeds the cost the agent
incurs to plug the well.
b. The operator is in bankruptcy and a
trustee in bankruptcy has been appointed. The
trustee has invoked 11 U.S.C. section 362 which
automatically stays any and all activities
against the debtor or against the property of
the debtor.
c. The production-related equipment does
have prior liens on it. Some of these liens
are perfected and some are not.
You state that the Railroad Commission “is presented with the
fact situations as stated” and the commission poses the following
questions:
1. What & ‘production-related equipment’ as
referred to in section 89.085?
2. Does the mere non-appearance by the
operator at the hearing establish that such
operator has abandoned the production-related
equipment at the well site and, as a result,
authorize a taking of such property by the
commission’s agent?
3. Section 89.085 states that ‘abandoned by
the operator of the well’ will mean that as
defined in chapter 89. However, ‘abandoned by the
operator of the well’ is not statutorily defined
In chapter 89. Should the commission apply case
law to interpret the meaning of ‘abandonment’?
What does it take to prove abandonment? If the
operator has abandoned the equipment, does the
lessor or landowner have a right to the equipment?
If so, whose right is superior? Since title to
equipment which k abandoned vests in the first
person to reduce it to possession; what consti-
tutes ‘reduced to possession?’
4. Is notice to the operator adequate notice,
considering that the commission may not have
jurisdiction over all lienholders of the produc-
tion related equipment?
5. In the case where the value of the
production-related equipment exceeds the cost
incurred by the commission’s agent to plug the
well. should the comission retain the excess
money? If more production-related equipment
exists than is needed to compensate the agent,
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does the commission have the duty to confiscate
the additional equipment and safeguard It?
6. Would the cotmission or the agent who
plugs the well or both be the subject of a suit
for conversion once the equipment Is confiscated
and sold? If so, would the damages be confined to
the value of the salvageable equipment minus the
cost of plugging? Would the cotmissioners or any
Railroad Commission employee(s) be liable as
individuals for damages?
7. Is the commission precluded by federal law
concerning bankruptcy from authorizing its agent
to confiscate property which is in bankruptcy?
Does the commission have a duty to find out if the
operator has filed for bankruptcy?
8. Does the statutory authorization provided
for by section 89.085 give an agent a superior
right to production-related equipment than a prior
lienholder? Would securing a statutory lien,
under section 89.083 of the Natural Resources
Code, be beneficial? If so, what is required to
secure it (filings, time periods, etc.) and does
the statutory lien have priority over other liens?
Would it have priority over a materialman’s lien
or a prior lessor? Would the Railroad Commission
be required to have a court foreclose on the lien?
If SO, would the Attorney General represent the
Railroad Commission and where would venue lie? Is
article 5473 et seq. applicable to a Railroad
Commission lien under section 89.083?
9. Would a chapter 89 lien apply to an
operator who is not within the chapter 89 defini-
tion but who has assumed responsibility for
plugging?
10. Is a constitutional lien available to the
Railroad Commission?
11. Does the fact that a wellbore Is covered
by a performance bond or a letter of credit change
the procedure that should be’ followed by the
Railroad Comeission? Does the comeission have a
duty in such an instance. to secure a lien and
seek foreclosure?
Upon reviewing the language embodied in section 89.085 it was our
initial reaction that the statute was facially unconstitutional under
the due process clause of the Fourteenth Amendment to the United
States Constitution. Our examination in light of your questions only
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served to strengthen our opinion that section 89.085 would not pass
constitutional muster under due process requirements.
In Fuentes v. Shevin, 407 U.S. 67 (1972) the United States
Supreme Court held that prejudgment provisions which deprived one of
property without the right to be heard or without the participation of
a judicial officer are a violation of the due process clause. In
order to seize property before final judgment an adversary hearing was
mandated.
Mitchell v. W.T. Grant Company. 416 U.S. 600 (1974). afforded the
United States Supreme Court the vehicle to clarify its holding in
Fuentes relative to prejudgment seizure of property. In Lincoln Ten,
Ltd. v. White, 706 S.W.2d 125 (Tex. App. - Houston [14th Dist.] 1986,
no writ). the court reviewed the foregoing Supreme Court opinions in
passing on the validity of the seizure of property under a distress
warrant pending the outcome of a suit for rent. The court applied the
following standards set forth in Mitchell in determining the validity
of the prejudgment seizure. Such writs are valid if
(1) issued by judicial officers;
(2) the affidavits and documents in support of
said motion set out the facts relied on and are
more than conclusion;
(3) the debtor has an immediate right to a
hearing; and
(4) dissolution of the writ will be granted
absent proof at the hearing.
Lincoln Ten, Ltd. v. White, 706 S.W.Zd at 128. -See Attorney General
Opinion JM-510 (1986).
The court of appeals found that the issue at this stage of the
proceeding "concerns possession pending trial and turns on the
existence of the debt, the lien, and the delinquency." A determina-
tion of issues under section 89.085 clearly involves questions of
debt, lien and abandonment. More importantly, Mitchell. Fuentes and
Lincoln Ten, Ltd. address the minimal standards to satisfy due process
requirements in prejudgment seizures. Section 89.085 provides for
confiscation of property to satisfy a $sbt without regard to a future
judicial determination of the issues. "Confiscation" and "seizure"
1. The fact that the Railroad Commission may employ some of the
most attractive and orderly means of arriving at its conclusions in
the administration of Its duties cannot be construed to mean that it
is a court within the contemplation of the Texas Constitution. Carr
v. Stringer, 171 S.W.Zd 920, 922 (Tex. Civ. App. - Fort Worth 1943.
writ ref'd). While its findings are quasi-judicial in nature, they
can not be characterized as judicial determinations.
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are not necessarily synonymous term. It is our opinion that even
more stringent requirements may be necessary for a "confiscation" to
meet due process standards than are required for a "seizure." See
Black's Law Dictionary 271, 1219 (5th ed. 1979). It is our 0pinT;;;;
that section 89.085 is unconstitutional in that it does not facially
satisfy due process requirements for an adequate hearing to justify
eveu a prejudgment seizure.
Our finding that section 89.085 is unconstitutional precludes the
necessity of answering your specific questions.
SUMMARY
Section 89.085 of the Natural Resources Code,
Confiscation of Equipment to cover Plugging Costs,
is facially unconstitutional under the due process
clause of the Fourteenth Amendment to the United
States Constitution in that it fails to provide for
an adequate hearing to determine the issues
requisite to a confiscation and sale of the well
operators equipment.
JIM MATTOX
Attorney General of Texas
JACK HIGHTOWER
First Assistant Attorney General
NARYKELLER
Executive Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Tom G. Davis
Assistant Attorney General
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