Untitled Texas Attorney General Opinion ( 1957 )

Senator George Parkhouse Opin. No. WW-29
The Senate of The State of Texas
Austin, Texas Re: Constitutionality of
Committee Su.bstitute
Dear Senator Parkhouse: for Senate Bill, LOI.
Wi.th reference to your letter of February 6, 1957, requesting an
opini.on on the constitu,tionality of the above captioned bi.lll, we tende,r the lollow-
ing opinion:
SUMMARY OF COMMITTEE SUBSTITUTE FOR S. B. NO. 101
Section 1 declares the policy, intention and purposes of the Legislature.
The policy of the Legislature is declared to be to save, protect and preserve the
soi, of thi,s State for posterity. It is stated that in many areas of “.he State there
is a total lack of surface water:> but that in many of such areas there is an ample
supply of underground water whi,ch might be used to water such 1an.d and grow
cover crops that would prevent wind as well. as water erosion due $0 excessi,ve
rainfall, thereby permj.tting soil conservation practices. It is fti,rther stated that
where there exists ample subsurface reservoirs of water, the cost of pumpin.g
such water is prohibitive, but there are great reservoirs of naturai gas prodwed
and sold at prices such as would permit the pumping of water for irrigati~oxn, and
would ai,d in the prevention of soi.1 erosi,on, and would promote the general wel~fare.
Because of their importance, Sections 2 and 3 are quoted in farl,l.,as hollows:
“Sec. 2. From and after the effective date of this act-. every
person owning or operating any gas weI.1,from which natural gas
is produced, sold or used off the premises on which such gas we!l
is located in order to aid in the prevention of soil erosion and the
protecti,on of the soil, shall make available, from the production
of such gas well, to the person or perSons engaged in agricul,tural
acti,vjties u,pon such premises, if requested to do so, gas from the
production of said well, up to an, amount equal to the royalty i,nterest
of the owner of the land on which said well is located, as reflected
by the terms of the oil and gas lease of such person owning or
operating said gas well, for the operation by such person or pesson,s
Senator George Parkhouse, Page 2 (WW-29)
engaged in agricultural activities of pumps necessary for the
pumping of said water, as may be necessary and propar for
the irrigation of such portion of said premises as may be de-
voted to the growth of agricultural products or to pasture or
orchard use, to the end that the soil upon which said agricul-
tural produc~ts are grown shall be preserved and protected
from erosion due to any cause:.”
““Sec. 3, The prices, terms and conditions upon which,
natural gas sha1.l be made available under thi.s act shall be
determined by negotiation between the parties. In the event
of their inability to agree as to any or all of such prices, terms
and conditions, either party to the negotiation may apply to the
Railroad Commission of Texas to fix same. In reaching its
determination, the Railroad Commission shall consider the
necessity of the applicant for the gas for the purposes specified
herein, the value of such gas and its components, the efficient
operation of the gas wells of the producer of the gas, the obliga-
tions assumed by such producer in the sale or other disposition
of such gas, and all other factors relevant to the effectuation of
the policy and purposes of this act with justice to all concerned.”
Sec. 4 provides that under this act, the procedure before the Railroad
Commission shall be that applicable to such proceedings by general law and orders
promulgated by the Commission and provides that appea1.s may be taken from its
decisions in the same manner.
Sec. 5, relates to parties to such proceedings.
Sec. 6 provides that this act shall not create an obligation on the part
of the operator of a gas well to furnish gas for use off the premises from which
it is produced or to assume any public utility duties to the public at large.
Sec. 7 provides that in case of a controversy before the Commission,
the owner or operator of the gas well or wells involved shall make available to
the persons entitled thereto natural gas as prescri.bed in Set, 2 on such tempo-
rary terms and conditions as the Commission shall prescribe by order or gen-
eral rule subject to adjustment retroactively.
Sec. Elprovides for penalties against an owner or operator who fails
to comply with any duty imposed by the act.
Senator George Parkhouse, Page 3 (WW-29)
Sec. 9 declares all laws or parts of laws in conflict with the act
repealed to the extent of such conflict.
Sec. 10 is a standard saving or severability clause.
Sec. 11 delcares an emergency and suspends the constitutional
reading rule, and provides that the act shall take effect from and after its
passage.
We have examined the proposed legislation with particular reference
to a majority decision of the Supreme Court of Oklahoma1 holding a similar bill
violative of Article 2, Section 24, of the Oklahoma Constitution in that the act
constituted a taking of property without due process of law. Phillips Petroleum
Company v. Corporation Commission of Oklahoma, et al., Cause No. 37250,
November 20, 1956, (as yet reported only in an advance sheet, Volume 27, The
Journal, pa 1920).
An opposite result was reached when the validity of the same bill
was questioned before a three-judge Federal District Court. Phillips Petroleum
Company v. Ray C. Jones, et al., December 12, 1955, No. 6794, Civil. Docket,
District Court for United States Western District of Oklahoma, (not yet reported).
The main questions for our determination are (a) whether the bill
is violative of Article 1, Section 17, of the Constitution of Texas, rel.ating to
property taken for public use; (b) whether the bill violates Article 1, Section 16,
of the Constitution of Texas, protecting the obligations of contracts; and (c)
whether the bill. violates substantive due process afforded by Article 1, Section
19, of the Constitution of Texas and the 14th Amendment to the Federal Consti-
tution.
The Constitution of Texas authorizes the conservation of our natural
resources, Article XVI, Section 59~2, Vernon’s Annotated Constitution. That
the State has the constitutional authority to enact reasonable regulatory legis-
lation for the conservation of our natural resources when not otherwise in con-
travention of constitutional principles, is settled law. 31a Tex. Jur., Oil and
Gas, Set, 354. The constitutional provision construed in the Oklahoma case,
w, provided a detailed method for ascertaining compensation for property
taken for a public usee2 This provision differs from the provisions of Article 1,
1. Two Justices dissenting.
2. See Appendix.
Senator George Parkhouse, Page 4 (WW-29)
Section 17, of the Texas Constitution. In our opinion, the duty to make gas
available to irrigators, as created by the Act, constitutes a “taking” within
the meaning of Article 1, Section 17, of the Constitution of Texas.
We must presume that the Railroad Commission, in enforcing the
provisions of this Act, will do so with the provi.sions of Article 1, Section 17,
of the Texas Constitution in mind. We see no reason why the Commission
could not adopt rules and regulations that would fully satisfy this constitutional
requirement. However, since the Act itself does not set up machinery for
determining the question of whether an applicant is entitled to the benefits pro-
vided by the Act, it will be incumbent upon the Railroad Commission to first
determine that a particular applicant will apply the use of the gas to the purpose
of soil conservation. Otherwise, an order of the Commission making gas avail-
able under the Act would be questionable on the ground that the taking was not
for a public purpose. While a particular order of the Commission might be held
violative of Article 1, Section 17, by an appellate court, because that order might
be declared unreasonable, arbitrary, or capricious, 3 this possibility does not
make the bill unconstitutional on its face.
The above quoted language in Section 2 of the bill presents an entirely
different question. While it is true that the Act’s basic objective, soil conserva-
tion, lies within the pale of the state’s police power and authority, the provisions
of Section 2 limiting the amount of gas available to the owner of the surface of
land from which the gas is produced to an amount not more than that owner’s
royalty interest creates a fatal discrimination as between those surface owners
owning royalty interests and those who do not.
Under the provisions of the Fourteenth Amendment of the Federal
Constitution and Arti,cle 1, Section 19, of the Constitution of Texas, the Legis-
lature cannot pass legislation which makes an improper discrimination by con-
ferring the privileges on a class arbitrarily selected from a large number of
pers,ons standing in the same relationship to the pri.vileges and purposes of an
act, without a reasonable distinction of substantial difference, 16a C.J.S., Con-
stitutional Law, Section 489. In order to be valid, a statutory classificati.on
3. For example, see Marrs v, Railroad Commission, 142 Tex. 293, 177 S.W.2d
941, where the court held a proration order of the commission violative of
Article 1, Section 17, of the Constitution of Texas and stated that the order
constituted a ““taking” within the meaning of that provision,
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Senator George Parkhouse, Page 5 (WW-29)
must reasonably promote some proper object of public welfare or interest,
must rest on real and eubstantial differencea, having a natural, reasonable,
and substantial relation to the subject of the legislation, and must affect
alike all persons or things within a particular class, or similarly situated.
Hawaii Brewing Corp. v.-Bowles, Em. App. 148 F.2d 846, Fort Worth and D-C,
Ry. ‘Co. v. Welch, Civ. App. 183 S.W.2d 730, 735, error ref”d. In our opinion,
the discrimination between surface owners owning royalty and such owners
who do not own royalty has no reasonable basis in the declared purpose of the
legislation.
As to the constitutional question of the impairment of the obligations
of contract, it is well settled that the obligations of contracts must yield to a
proper exercise of the police power, and vested rights cannot inhibit the proper
exercise of the police power. Treigle v. Acme Homestead Assn., 297 U.S. 189,
197 (1936). 16 C.J.S. Constitutional Law, Section 175. Where the ‘takingW is
for a public purpose and ‘“due process ” is served by a method for fixing value,
the impairment of contracts becomes immaterial. The true owner of the gas
at the time of taking may be paid for its value whether he owns by contract of
purchase or by holding a mineral title to land.
SUMMARY
It is our opinion that committee substitute for Senate Bill
No. 101 is unconstitutional on the ground that the limita-
tion on gas made available under the bill~to persons having
royalty interests in connection with the surface devoted to
agricultural activities, as provided by Section 2 of the bill,
constitutes an unreasonable classification between persons
similarly situated. We are of the opinion, however, that
the bill is not otherwise unconstitutional.
Very truly yours,
WILL WILSON
Attornev General
HB:tiw
Houghton Brownlee, Jr,
APPROVED: Assistant
OPINION COMMITTEE
H. Grady Chandler, Chairman