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RAILROAD COMM'N OF TEXAS V. ROWAN & NICHOLS OIL CO., 310 U. S. 573 (1940)

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U.S. Supreme Court

Railroad Comm'n of Texas v. Rowan & Nichols Oil Co., 310 U.S. 573 (1940)

Railroad Commission of Texas v. Rowan & Nichols Oil Co.

No. 81

Argued April 24, 25, 1940

Decided June 3, 1940

310 U.S. 573

Syllabus

An order of a state commission for limiting and prorating the production of an oil field fixed the maximum allowable to any well at 2.32% of its "hourly potential," but gave to "marginal" wells -- those which, if their low capacity were curtailed, would have to be prematurely abandoned -- a special status, allowing each of them production up to twenty barrels per day. Because of the large number of such low-capacity wells, approximately 385,000 barrels, out of a total daily "allowable" of 522,000 barrels for the entire field, were exempt from the "hourly potential" formula. A company whose wells were favorably situated and capable of large production, but were allowed by the formula a daily production of but twenty-two barrels each, claimed that the regulation disregarded its right to the oil in place within its ground; that it permitted others undue opportunity to capture oil draining from its ground; that the "potential" method failed to give sufficient weight to relevant factors in the measurement of oil in place, especially to the depth of the company's reserves; that only an allocation based upon acre feet of the oil sand, or its equivalent, would be reasonable; that the order was, in effect, an allocation on a flat per-well basis, regardless of great variation in the capacity of wells and the density of well drilling on different tracts; that excessive drillings allowed by the commission as exceptions to its general spacing rule enabled densely drilled tracts, by virtue of the "marginal" allowances, to drain away the company's reserves, and that, for these reasons, the company's property was taken without due process of law.

Held: chanroblesvirtualawlibrary

Page 310 U. S. 574

1. That, in view of the difficulties of the problem of fair allocation, the speculation involved in an approach to its solution, and the special function of the commission, a federal court should not undertake to determine it upon the conflicting testimony of experts. P. 310 U. S. 580.

2. In a controversy such as this, courts must not substitute their notions of expediency and fairness for those which have guided the agencies to whom the formulation and execution of policy have been entrusted. Pp. 310 U. S. 580-581.

3. Whether a system of proration based upon hourly potential is as fair as one based upon estimated recoverable reserves or some other factor or combination of factors, is, in itself, a question for administrative, and not judicial, judgment. P. 310 U. S. 581.

In a domain of knowledge still shifting and growing, and in a field where judgment is therefore necessarily beset by the necessity of inferences bordering on conjecture even for those learned in the art, it would be presumptuous for courts, on the basis of conflicting expert testimony, to deem the view of the administrative tribunal, acting under legislative authority, offensive to the Fourteenth Amendment.

4. In making exceptions to its general spacing rule and general restrictive production formula in favor of small, irregularly shaped tracts that otherwise might lose their oil by failure to drill or inability to operate at a profit, the commission was entitled to take into account not only the individual interests of these small owners, but also effects on the State's economy. P. 310 U. S. 582.

5. It is not for the federal courts to supplant the commission's judgment, even in the face of convincing proof that a different result would have been better. P. 310 U. S. 583.

107 F.2d 70 reversed.

Certiorari, 309 U.S. 646, to review the affirmance of a decree (28 F.Supp. 131) enjoining the enforcement of an oil proration order. chanroblesvirtualawlibrary

Page 310 U. S. 577





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