## Facts

- Royalty owners held a fractional interest in several contiguous, leased tracts; their 1926 leases reserved a 1/8 royalty and did not authorize pooling.
- A proration unit of 642.39 acres covering the interests had been approved by the Railroad Commission of Texas.
- The operator drilled on one of the royalty owners’ tracts in January 1980, completed a producing well in July 1980, and began sales in September 1980.
- After production began, the operator proposed a voluntary pooling agreement for the proration unit on an acreage basis.
- The proposal would have reduced the drillsite royalty owners’ share of the well’s gross production by about two-thirds and extended participation to non-drillsite royalty owners.
- All other interest owners accepted the proposal; the drillsite royalty owners refused.
- The operator applied under the Texas Mineral Interest Pooling Act (MIPA) for a forced-pooling order; the Commission granted the application.
- The trial court and court of appeals upheld the order; the Supreme Court of Texas granted review.

## Issues

1. Whether judicial review of a granted MIPA forced-pooling order is limited to substantial-evidence review or includes jurisdictional review of statutory prerequisites.
2. Whether a post-production, acreage-based pooling proposal that substantially reduced a drillsite royalty owner’s share constituted a “fair and reasonable offer” required for Commission jurisdiction under Tex. Nat. Res. Code § 102.013.

## Decision

- The Supreme Court of Texas reversed the judgments upholding the forced-pooling order.
- The Court held that review of the granting of a forced-pooling application is jurisdictional, requiring courts to determine whether statutory prerequisites to the Commission’s authority were satisfied.
- The Court held the operator’s proposal was not a “fair and reasonable offer” under § 102.013; therefore, the Commission lacked jurisdiction to enter the forced-pooling order.
- The case was remanded to the Commission with instructions to dismiss the operator’s application for want of jurisdiction.

## Legal Principles

- Under MIPA, the requirement that a party first make (and have rejected) a “fair and reasonable offer to pool” under Tex. Nat. Res. Code § 102.013 is a jurisdictional prerequisite to a forced-pooling order.
- Judicial review of the Commission’s granting of forced pooling focuses on whether the Commission had statutory authority to act, not merely whether substantial evidence supports agency findings.
- Section 102.013(c)’s “same yardstick basis” language is not the exclusive measure of fairness; an offer must also be fair in context.
- A fair and reasonable pooling offer must consider the rights an owner would surrender or modify and should approximate terms expected in a voluntary agreement, including timing and allocation of risk and reward.

## Conclusion

The Texas Supreme Court set aside a MIPA forced-pooling order because the operator’s post-production pooling proposal materially diminished the drillsite royalty owners’ preexisting production rights and was not a fair and reasonable offer; without such an offer, the Railroad Commission lacked jurisdiction to compel pooling.


Carson v. R.R. Comm'n of Tex., 669 S.W.2d 315 (Tex. 1984)