Pickens v. Railroad Commission

The Texas Railroad Commission (Commission) (defendant) issued an order that prorated the amount of oil that could be produced in a field as follows: “one half of the oil is allocated to the wells in that proportion which their assigned surface acreage in the oil field . . . bears to the total acreage in the field . . . and the other half is distributed among the same wells in that proportion which their [acre-feet] bears to the total acre-feet in the field.” In other words, for each well, the Commission order evenly split the amount of oil that could be produced between (1) a well’s surface acreage and (2) a well’s acre-feet (i.e., the volume of vertical productive subsurface), both in proportion to the field’s overall surface acreage and acre-feet, respectively. W.L. Pickens and other well owners in the field (plaintiffs) brought suit, arguing that the Commission’s order failed to properly account for the plaintiffs’ correlative rights. Specifically, the plaintiffs contended that the order improperly discriminated against well owners that owned more acre-feet of productive subsurface. The plaintiffs preferred an allocation that was completely based on a well’s acre-feet. The plaintiffs’ witness testified that the plaintiffs would suffer uncompensated drainage under the Commission’s formula. However, the Commission’s witness testified that net drainage would actually be toward the plaintiffs’ wells due to surrounding water entering the field. This witness testified that when oil was drained from the field, water would enter the field and rise to the thinner, outer parts of the field, thus replacing the oil under those wells and reducing the amounts of oil that those wells can produce. The trial court upheld the Commission’s order. The plaintiffs appealed.