1. An order of the Texas Railroad Commission limiting the daily
allowable production of the East Texas oil field and providing a
method for its distribution among the several well owners,
held:
(1) Consistent with the Fourteenth Amendment, p.
311 U. S.
572.
(2) Not so clearly a violation of a State statute, Vernon's
Texas Annotated Civil Statutes, art. 6049c, § 7, as to warrant an
injunction in the federal courts, p.
311 U. S.
577,
as applied to an operating company which challenged the basis of
the formula and claimed that, by its minimum and maximum
"allowables," it unduly favored wells of small capacity and
impaired the future productivity of wells in high-producing and
"thinly" drilled areas.
Cf. Railroad Commission v. Rowan &
Nichols Oil Co., 310 U. S. 573;
post, p. 614.
2. In matters of this kind, the due process clause does not
require that the judgment of an expert state commission be
supplanted by the individual view of judges based on the
conflicting testimony, prophecies, and impressions of expert
witnesses. P.
311 U. S.
576.
Reversed.
Appeal from a decree of the District Court, of three judges,
which enjoined the enforcement of an order regulating production of
oil in the East Texas field.
Page 311 U. S. 571
MR. JUSTICE FRANKFURTER delivered the opinion of the Court.
In conformity with the regulatory scheme devised by Texas for
exploiting and safeguarding its oil resources, the Railroad
Commission of that state, in 1938, issued an order formulating a
method for distributing among well owners the total amount of oil
which it then allowed to
Page 311 U. S. 572
be produced in the East Texas field. The enforcement of this
order was enjoined by lower federal courts at the suit of the
complainant in the present case, Rowan & Nichols Oil Company,
28 F. Supp.
131; 107 F.2d 70. To avoid the dislocation resulting from this
judicial frustration of its order, the Commission, by an order of
September 11, 1939, had to devise a new plan of proration. Its
action in doing so was again promptly challenged in a federal
district court in Texas. A decree enjoining the Commission
followed, and an appeal from that decree is the matter now before
us. Judicial Code, §§ 238, 266, as amended, 28 U.S.C. §§ 345.
The challenged order of the Commission concededly satisfies all
procedural requirements. It was part of a continuous process of
administrative responsibility, preceded by a specific hearing
affecting the immediate situation, with full opportunity given to
the Oil Company to develop the facts and arguments which it later
renewed below and here.
The Commission's action now in controversy cannot be severed
from the earlier order which it replaced. Both set limits,
incontestably valid,
Champlin Rfg. Co. v. Commission,
286 U. S. 210, on
the daily production of the East Texas field. In both litigations
the Oil Company claimed to be a victim of illegalities in the
method of distributing this total allowable production among the
different classes of oil producers.
So far as relief in the federal courts is concerned, we found in
the prior phase of this continuing litigation that the order of the
Commission was without infirmity.
310 U. S. 573; 311
U.S. 614. In the order which was then before us, each well was
allowed 2.32 percent of its hourly potential production, except
that wells not capable of producing 20 barrels a day at open flow
were, in conformity with the Marginal Well Statute (Vernon's Texas
Annotated Civil Statutes, art. 6049b), allowed full capacity,
Page 311 U. S. 573
and wells which could not produce over 20 barrels a day at 2.32
percent of their hourly potential were allowed 20 barrels a day.
The order distributed, in round numbers, a total allowable of
522,000 barrels as follows: 5,250 a day to 451 wells having a
capacity of less than 20 barrels; 380,640 to 19,032 wells which at
2.32 percent of hourly potential could not produce over 20 barrels;
136,610 to 6,325 wells at the rate of 2.32 percent of hourly
potential. This adjustment by the state's expert agency of what in
our former opinion we called "as thorny a problem as has challenged
the ingenuity and wisdom of legislatures" was attacked on two
grounds. It was claimed that an hourly potential formula fatally
omitted other relevant factors, especially acre feet of sand.
Further, it was urged that the minimum allowance of 20 barrels,
which nearly absorbed the total production, constituted an
illegitimate discrimination against high-producing and thinly
drilled areas. We rejected these arguments as an attempt to
substitute a judicial judgment for the expert process invented by
the state in a field so peculiarly dependent on specialized
judgment. We said, in effect, that the basis of present knowledge
touching proration was so uncertain and developing, that sounder
foundations are only to be achieved through the fruitful empiricism
of a continuous administrative process. Further, that ought not to
be stifled by drawing from the generalities of the Constitution
allegiance to one as against another speculative assumption even
though delusively clothed in formal findings of fact.
In the order now before us, the Commission allowed a total
production of 691,000 barrels, and the formula of allocation took
into consideration two other factors -- bottomhole pressure and the
quality of the surrounding sand of the wells -- as well as hourly
potential. By this formula, 514 wells incapable of producing 20
barrels a day at open flow absorbed 6,245 barrels, 25,456 wells
were
Page 311 U. S. 574
allotted a minimum of 20 barrels, thus absorbing 509,000
barrels, leaving 176,000 barrels to be distributed among these
latter wells according to the new allocation formula. Under the
first order, the minimum per well allowance of 20 barrels accounted
for 98 percent of the limited production; under the later order
only 75 percent was needed to satisfy the 20 barrel allowance. The
lease involved in this litigation was allowed by the first order an
output of 154 barrels a day, or .029 percent of the total
allowable; now it may produce 260 barrels a day, which is .037
percent of the total. This comparison of the practical operation of
the two orders exposes the emptiness of the claim that a
constitutional line can be drawn between them.
The accommodation of conflicting private interests in the East
Texas oil field, with due regard to the public welfare, is beset
with perplexities, both geological and economic. As we read the
records in these cases, this picture emerges. The huge oil
resources of that region, viewed in cross-section from east to
west, are roughly triangular in shape. On the lower western side
the pressure of an oil-water face furnishes the principal energy of
the field. As the oil is withdrawn, the pressure is decreased. The
drive of the water from the west forces the oil eastward, and the
westernmost wells are first exhausted. The reduced pressure in the
field shortens the life of the wells on the extreme eastern edge,
with the result that the wells nearer the center of the field, like
those of the Rowan & Nichols Company, are likely to be most
long lived. Thus it is that a production formula dependent on
current reserves of oil in place -- a consideration which greatly
influenced the court below and was urged before us -- contains
elements of unfairness to wells on the edge of the field by
disregarding the migration of oil from west to east. Other factors
further complicate the situation. The surface is often divided
into
Page 311 U. S. 575
small tracts, and the Commission, acting under the authority of
the Texas statutes, has permitted the drilling of wells by small
owners in order to prevent practical forfeiture of their interests.
Small producers have investments in existing wells with low
capacities, and these wells need a minimum daily production
sufficient to justify their enterprise. In addition to all this,
any scheme of proration duly mindful of all those considerations,
hardly mathematically commensurable, which constitute the total
wellbeing of a society, must assure the continued operation of a
sufficient number of wells for an adequate exploitation of the
state's oil resources.
In achieving a reconciliation of these tangled and partly
conflicting aims, the Commission evidently regarded the 20-barrel
minimum allowance as a guiding factor, taking its cue doubtless in
part from the policy underlying the Texas Marginal Well Statute,
supra. The justification for the Commission's order was
its conviction that the minimum allowance accelerates the rate of
production of the densely drilled areas on the edges of the field
most subject to losses from the migration of the oil, that such
allowance is an appropriate incentive to the drilling of small
tracts, and that thereby investment losses in low-producing wells
are minimized.
Nothing in the Constitution warrants a rejection of these expert
conclusions. Nor, on the basis of intrinsic skills and equipment,
are the federal courts qualified to set their independent judgment
on such matters against that of the chosen state authorities. For
its own good reasons Texas vested authority over these difficult
and delicate problems in its Railroad Commission. Presumably that
Body, as the permanent representative of the state's regulatory
relation to the oil industry equipped to deal with its
ever-changing aspects, possesses an insight and aptitude which can
hardly be matched by judges who are called upon to intervene at
fitful intervals.
Page 311 U. S. 576
Indeed, we are asked to sustain the district court's decree as
though it derived from an ordinary litigation that had its origin
in that court, and as though Texas had not an expert Commission
which already had canvassed and determined the very issues on which
the court formed its own judgment. For it appears that the court
below nullified the Commission's action without even having the
record of the Commission before it. When we consider the limiting
conditions of litigation -- the adaptability of the judicial
process only to issues definitely circumscribed and susceptible of
being judged by the techniques and criteria within the special
competence of lawyers -- it is clear that the Due Process Clause
does not require the feel of the expert to be supplanted by an
independent view of judges on the conflicting testimony and
prophecies and impressions of expert witnesses.
This record gives little justification for confidence in such
testimony as the basis for judicial dogmatism. Take, for instance,
the question of the amount of recoverable oil remaining in the
field. One expert testifying for the Company in this case gave an
estimate of 3,180,000,000 barrels, while, in another case a year
previously, his estimate had been a billion barrels less.
Similarly, in regard to the crucial issue of the 20-barrel minimum,
although it was common ground that some minimum was essential to
avoid fatal losses of investment, what that minimum should be was
clearly not shown to be capable of mathematical ascertainment, and
no expert on behalf of the Oil Company proved that the minimum of
the Commission bore no relation to the legislative policy to be
enforced by the Commission.
The Constitution does not provide that the federal courts shall
strike a balance between ascertainable facts and dubious inferences
underlying such a complicated and elusive situation as is presented
by the Texas oil fields in order to substitute the court's wisdom
for that
Page 311 U. S. 577
of the legislative body.
Standard Oil Co. v.
Marysville, 279 U. S. 582. The
real answer to any claims of inequity or to any need of adjustment
to shifting circumstances is the continuing supervisory power of
the expert commission. In any event, a state's interest in the
conservation and exploitation of a primary natural resource is not
to be achieved through assumption by the federal courts of powers
plainly outside their province and no less plainly beyond their
special competence. The Fourteenth Amendment was not intended for
such ends.
The court below also erred in holding the order a violation of
the Texas statute requiring proration on a "reasonable basis."
Vernon's Texas Annotated Civil Statutes art. 6049c, § 7. In denying
the petition for rehearing in the earlier cases we held that
whatever rights the state statute may afford are to be pursued in
the state courts, 311 U.S. 614.
The decree is vacated, and the case is remanded to the district
court for dismissal of the complaint.
Vacated.
THE CHIEF JUSTICE, MR. JUSTICE McREYNOLDS, and MR. JUSTICE
ROBERTS dissent for the reasons stated in the dissenting opinion in
Railroad Commission of Texas v. Rowan & Nichols Oil
Co., 310 U. S. 573.
They are of opinion that the facts disclosed by the record do not
differ materially from those found in the earlier case and require
the affirmance of the judgment.