OFFICE OF THE ATTORNEY GENERAL       OF TEXAS
                  AUSTIN




Gil dLGas Divirlon
Rrllrord Comlrrloa of Taxar
Austin, Tama




                                    f 31, 19@, in
                                    at facta, and

                              934, th8 Railrowl
                              la f7 prrait or-
                              r to drill 8od op-
                              Todd-stinohoomb
                            County, Tora8, ea
                 maw                   of
                   wea riid   by Stanolind Oil
                  and Mr~nolia Fatroloum
                 at IEdgarand thr OOS&~OA
                  validity o r luoh pen&t or-
              District Court upon final hsar-
    f$$,~$&r&     raid parad order ta be un-
    rraboaabl~ and InvalId and rnjoindl pro-
    duction fret mid Wall HO. 3. UpOn appO111~
    tha Dirtrlot Court Ju&mrnt ma afiirmd br
    the court of clril App6ale. (mger t*.
    ~.tsnollndOil k GacrOompny, et al, 90
    s. w. (26) 636). The appallate 0plr110n
    reolted that:
                                                                    _L,
                                                                     .,

                                                         ” .- 812




Hmora bla John 8. Taylor, 98~8 2


          “1. Th4 Comn~osIori CIQ Mt hdlV8jurla-
     6i0tion to isrlissuch RUl8 37 permit ort!ari
          "2. Tbr ?Xper f~+s88 in o_uertion oon-
     8tItutod e ~voluntaryrubdivlaion in viola-
     tion ef Fuls 37';
         "3. Es Zdgor leaca alraedy had reaaoa-
    able devalopmrntanb an equal opportunity
                                       to rooowr
    o4th that OC adjoining lsrsrrholdsr8
    tha 011 beneath 8ach tract.
            %A S~ptambrr.11, 1936, 8fter now appli-
    oation, proper notio88, sti h88rlngo, the Con-
    mir8ion again grantrd ldear a Rulr 37 permit
    ordrr authorizingproductionoi rpoh wrll Ho. 3,
    the wall havim pr8vlounly been drilled under
    authority of the p-it order &ted Septomb8r
    2&,    1934. An urlpinal $roo88dIngMI fileb
    by Stanoltidand Ya&nolIa In #he Court.of Civil
    Appesla #asking write vi pr,roblbltion,  injuno-
    tion, and othrr mllaf to rsrrtralnEQrr ?rom
    opersting    said well end to prohibit thr Gomir-
    8Ian from mrsltting the produotlon OS 8aid
    wall and frm i88uiag t8adarr for ray all pro-
    euorb therefrun. The a0m or Civil Apprle
    dsnlsa thla ralief (stanolin&VI. 'xtl&ar,   98
    S. &. (20) 222) upon tbr ground tit an lcl8cpmt8
    la&al raaad,y8rIat8d; but t!i*Court 8nnouno.d.
    theta
         "1.   mob  baas  or ita prior jud8mclt   ad-
               fudging tha inval.ldityof thr Baptrn-
               bar 21, 193L, permit order worst lffao-
               tIv8 aridcontrolllasof the lwat per-
               mit trlsr;
          "2. The Comalabion*a ordrr and eef t888ra
              i8s\ud th8rrunderar8 toId, being In
              violat Iaa or fbe juQa*at Of rush
              Court in OQUIO No. 8292, @onmqrntly
              any further rrstrcriningOT prohIbItory
              ordrra vwld ba aUp@r8rtW+tOry.
Honorabl8 John 8, Taylor, page 3


          wEdgar arQll*d to the suprrs8 Court for
    a writ of srror, but the Suprena Court eeni#d
    the applio~tlon for lack of jurlrcliofilon cm
    January 6, 1937. Edgarr'sraatlonfor rshesrlng
    w.8 OV#rrUl#d by the SU~r*n# Court. Rdp,arwae
    th8rruponoOmp8~18d to c1088 in his well and
    O8668  plPdUOti,71L th#r#fWX.
             “~4~?&il#, StenolInd 8Id ~&lOli. b#Bd
    filed an original proQ88din&,inth8 Court o?
    citil App~al8 t0 #IIfO~# th8 $Idg#6UAt#    Or that
    Court in eeusee No. 8292 (90 s. t?.(26) 656)
    and No. 8580 (98 8. IF. (26) 222), 8nd t0 $X-O-
    hlbit and enjoin Edgar trm produolng      oil
    fl?cP86i't HI11 NO. 3, t0 $lU~ it, 65d t0 bold
    Mdgar In contempt 0r courtfir riolating lua h
    jUdgIll8Ilt6.  Ths Court of Civil Appssls  d#Bi#(L
    all of the raiief #ought    by relatorr. (St8nolInd
    te. Edgar, 107 5. K. (24zd)  631.1 Edgar tlwn
    a@iB 6omaenord Op#IWtiOB Of SSid W811 Utnd8C
    authorityOf ?ih#&3RE&i@iMl'sQ#mit Order
    dated Srpteabar 11, 1936.
           *Th#r8aft8r,stano1lBd @ml M8unolia ii184
    silt Weti#t &i&Or #IL4 the Crarni##IOnillth8
    Dletrfot COUrt of Tr8?i8 &U~iity,Ott@Okilrg8814
    order of SeptWiIbor  11, 19%. On I;hy27, 1939,
    final jUd#l#IIt  was rendemd    by the Dietrid
    court 8U#tainIU& an4 upholdlipgth8 r8lld:tf or
    said ardor, the Court     In lt8 judgment 1ik*wl**
    fiajudgine,  that *all part an6 fusurr Qrodoetlon
    Of Oil   from SOid WSll 18 ill dL1 l'#.$60t#hld’ll.’
    No appeal 0::writ or error from raid judeimat
    VMS Q@rf#Ot#d.
           "By lW#SOflOf th8 fOr#~Oin~ f6Ot8 .;PbQl'O-
    oeadingr,Edgar ~88 prohibit& and pr#+#nt#d
    frm opercatln~a614 well xO. 3 for 8 Q#rIOd of
    103 day8 froai January 22, 1937, to,Yey 6, 1937.
    DurIq( said period the al&OUbl# pFo&OtiOIla@-
    COP386 to said well by the Ql'OntiOn 8ChsdU10
    and order of the mIBiUI@#~O~  -8 25 b.rl’@l*$*r
    day, aggregatlqga total of 2,575 barr814, for
    8uoh period which lCd$ar ~8s. 88 I tlnd8r@t*n~ th8
    fOOt8,   m#dy, xlllin& 8nd 8ble t0 pMdUO8, but
                                                                       814


Bonorabla John 1E.Taylor, peea 4


        an hemFnmbova        pointad cut, was prsoantad
        ?roa pn,dualng         sam by vlrka   of the pra-
        orsdingc       trar~~~naOove act forth.
             "Sdgar MW m&a      suthority from the
        Ooaalaalon tc produoa Ohi8 oil in euoh
        da.ilyqusntltlssand a~poantsabove the our-
        rant sllovmbla praduotlou  aro&gn&   to add
        ~611 by the praretlon ~6h6dulesof the Com-
        miralon in sny amamr tbst th6 Coaaiadon
        asayluthori66.
              "Undar Lba raats haraiaobova eat roe&
        will you planer a&ire whaUhu or not tha pro-
        duction of the amount of oil haraizmbova~a-
        Monad   iany, br pmalttrd by the Crollllrrlan?”

           Srcn the Isots 88 stated in fotw  18ttar,
ltrppr6r8 that tha final dao%alon oi the oourt ~68
that tha ~611 In qu66tlon vm6 16@61, and that tba par-
atttar 6houl.dhsoa bean allond to produo@ the allew-
6bla uhioh war aralgnad  to t&i6 wall under the proxa-
8lon 8oh6dul66 Of tha Rail-d Cofad66ion     of Taua for
8h4 z44di~9x48 raid.    The quartion, 8harafoxa,nsolv66
it66u     intO     4   d4t434IPin:
                                 tl0n or tjh4thhrr the ad.m~a   cop-
rle6ioa hr tha authority to ahJo6t the aUowa~la from
this ~011 in the preaczt8and iotdta allouicrblalohadulaa
for tha Ea8t Taxer flald 50 a6 to grant Sflgar *brok
sllowablr”; in otbrr nuxde, to pm4f.t Edgar to lnorarra
hi6 produotitn trim thlr *all 60 66 to ,neka up for tk
uaount ot allowabla produotim whloh ka lost dudag
tha tlm6 wkn hi6 w6llwa6 olo6ad do-.
            Oanarally apesking, tba erithority  of ehs R6il-
road Oo~ieelon to promulg6t6 ruha relating to tha pro-
duatlon or oil and gs8 dap4nd8 upon the right or the
mete or Taxsa and it6 eganolma to pravent the phfsioal
waste of 011 and 866,lithar andar~rouad or OVergxOUdl,
mhioh r a a ulte lithar f?on lsmtilclsntsethAs at prodno-
tlon or produatdon in a%0668 ot aarkat Qalaund. Sac
Artlolaa   603.4, 6023, 6029, 6042 end 60490, Bernonqs Anno-
teted Tax68 Civil Statutar. Th6 Railroad Caactl6sfon t6
6p66lflcallygiven mthorlty to limit the 9IWduotionof
oil, ~bPr6 tt rind6 thst      %66ta is taking 91506, or $6
r#as~ably    imr&lsCit,,*Utl34F  tha ~XOVilliOiu
                                               Of 6Ootion 7
of-article   60~90.
             J




Honorable J,:~hn
              B. Taylor, peea 5


          The liialtstlon or the production rrom En
011 field n~~oaararlly carrier;with lt tha prcblam
of,dlvldin& tm allowable prcduotion   among the vsrlour
produoare in thu tie ld. The 6tatutaa  or Trxen prorid
no ep4cifio rorraularor tha dirtribution 0r the fmorr-
6bl4 produotlon,but mrroly provide in grnual tarma
that, "tha Comilselonshall dlatrlbuts,promtm, or
otherwiea apportion or allocate tha sllow6bl6 produo-
tlon amqc the varlouo prodnoara ou a rsaeonabla basis.*
Artlcla   60~90,   Saation   7.

          while there hava barn go roportrd   court   dr-
cirion6 on tha mbjaot, the quaetlonof thr authxltp
or the R6ilmed COmmiaalonto permit en operator to
produor "beak 6110wablawh6s bean praviouely paaaad
upon in opinions or this dspsrtmnt. In e lattrr
opinion dated May 27, 1935, to Senator Arthur P.
Du(JP(an,
        by Han. Soott hinas,   Firat A68i4~nt   Attorney
Gen4ra1, it was atatrd that  thbrRaILroad COmta.la6lon
doer not have authority to pemlt an operator    to pro-
duoa "beck ellowabla.* Th6 mama oonolu6lonwe6 raaohad
in an opinion by A66i.atantAttornay G6nar61 V. 3. (Diok)
b$lt, sddrersrd to thr Railroad Co3mi66iOa of Taxas,
dated Ncveabar 2C, 1935. Cop166 of these o9lnlons
ara attached hereto.
          The Railroad Com618(lion     ha6 sated upon thr
conetructlonof it6 pmarf! by tha .AttornayGansral'4
Deprtmnt, end hss oonsistentlytakan tha position
that 1: do46 not have the suthoritfto pamit 61n op-
crater to !w!kaup by present    produotion    hi6 fsilura to
pm&co hia (LLlOPlBblil  in thr peat.      It Is a inetterof Ron-
are1 lznowledga~thet at the!tim the o,pinionsof thi6 da-
perta*nt war4 written In 1933, varlow parson6 war4 aarart-
REP th4 right t0 produc6 large cyentities 0r oil a4
"back sllwabla," and tke mrmlmCant dapartmantaloon-
atrnctlon of the RailrO6d Coanl~~ion~sauthority by thi8
dapartmnt and by the Railroad Oo~~lsslon ha6 directly
Orfsotd important   property  rl@ifs.

          In the reoa of thie aspart3cntslconstruction,
the Leginl5turrbee not aesn rit to 8aand the conasm-
tlon statutes 21008 to confer on the Railr0rU CCmmi6Sl0n
,




    Honoreble John B. Taylor, p-8 6


    the euthorltr to grant "beak allowable.* Section 7
    of what     is    now Artlole    6049~1, V~rnoa.1’8 Annotated Cirll
    StatuteP,        wns aaondrtl   by Chapter 76, Aotr L4th Legla-
    letun, gegular Sesrlcn, r!ratlon6, atrsotirr April
    13, 1935, anO thatcontainedthe mxe rorlslon8a8
    to the powers or the Railroad CoamirrPon to prorete thr
    produotlonof 011 a8 hereinbefore    quoted. Dndrr Seotlon
    20 of thla act, Its provl8loa8 teminet86 S8ptubw      1,
    1937. Ry Chapter 15, Act8 1937, 45th Leg1618tur8,Bog-
    ular Se88lon, Se&ion 1, the liio o tlte term of thl8 aot
    was extended to septeaber 1, 1939, and bl Hoc188 Bill
    851, P,otm46th Legislaturrr, Regular 888eion, 8eotIon 1,
    the 8rr80tiw tfim or the sot wa r 8g a inlxt8ndad,  to
    srptenber 1, 19&l. Roth Of the88 lXt8B8iOB8 WeF8 rlth-
    Cut any asennOla8nt
                      t0 the 8t8nitiryprOtiaiOn8 relating
    to the proration powar8 of the Railroad Commi88i0n.
               Y;heP8886tUtOr~ pmV181OIU al.8$eB8r81 ti
    thrlr t8rm.    the aapmllwnt81 oonstruotlon    pb erd
    upon the rtatutr,   ii reoaonable, till b8 iollowd    by
    the oourta. Th18 18 pertlonlarlytF\i8 where the OOB-
    structlon dimotlj arrrOt8 importantproparty       ri@ittr.
    31 followingthe drparts8ntalcocn88ruCtion by th8
    Rdhad        caParf88iOn Of Eh8 OOB8emtiOB                  8tatUt88    in
    another aonneotion,th8               8upnme   Court raid In W&8
    08118 Of lie&nOlia       PatlQl.rUB      i?QaWBt   VI.   w8W hod888
    Froductlon Co., 12?- ox. 617, 625,                 104 s.     w. ml--
    n06 a
                  "iineraainetionof our oonrarvatI0n
            etRtUt.8 dieOlOSca8that they d0 SiOtIn
            any manner directly deel'v?lth such quer-
            tion,  but are opsn to constructionin re-
            gard thereto. Under such a reoord n-8
            think in thie Instenor wa should eU8tein
            the depmtmentel.ruling. ZOsubartv.
            Chloaeo, csto.,iiy.Co., 116 Texar bu,
            296 S. w. 10903 Moon&en v. Terrell,
            Comptroller,If,9Tixar 173, 202 8. K. 7271
            Tolleson v. ??og,an, Lend Conuolesloner,
                                                   96
            ':‘exa8424, 73 8. %. 520.”
Eonorabl8 Jnhn B. Taylor, pa+?87


          There Is additional reason for adopting
ths ds;zzt%sntalo~netruotiznwhere, subeeguant to
the Qerert7entalconatFUOtiOB,the Legia18turrhas
re-em&tad or nxtssded the e%tuta without char&o,
th8 preeu~ptlonbeing that the Leqislsturrkn8W
of tts Ee~9rtsantalcsnstruotlonand wea eatl8flad
with it. Federal Crude 011 Go. 18. Youat-La8 011
                21 52        (<a) 56; Bt?Bh;n& 801
%k&yl:~. -g&et' lldSi'e:*,   &7 ‘16 s   #+
 ~6 r-d Coaaisa& of Taxi8 re: T. &'N.'O. 2. CO.!
42 s.  .   d) 1091 (error refU8ed).
            ?c'~
               en of the Opinion  that f&hi8depart!IWIb
ehoulC a&here to ths construotionherstorom oolllris-
tently follow86 by thle Urpartmaatand the Railroad
Conmisaim,    and we thereforeare cf the opinion thet
the RallroradColr~laslon  fims na have authority to
parmlt a?car tc produos thr "baok ellowable~ xhlah
h8 %?6,8FrsV8Zlt8b trOn p1.0uOiB@ ttB68rtha trot8 8tat8d
in your letter.
                             Yours very truly




                                     Jama8    F.   R8rt
                                             k88i6tbnt




     APPROVEDOCT 3, 1940
       /biL&L&.d
