## Facts

- The Texas Railroad Commission issued a proration order governing oil production in the Fairway (James Lime) Field in Anderson and Henderson Counties, Texas.   
- The order allocated allowable production among wells by a formula that: (1) allocated half of the field’s total allowable based on each well’s assigned surface acreage as a proportion of total field acreage, and (2) allocated the other half based on each well’s acre‑feet (volume of productive subsurface) as a proportion of total field acre‑feet.   
- W.L. Pickens and other well owners argued that the 50/50 surface‑acre/acre‑feet formula failed to protect their correlative rights because they owned relatively greater acre‑feet of productive formation than others; they contended the allocation should be based solely on net acre‑feet of productive pay.   
- Plaintiffs’ expert testified that the Commission’s formula would cause uncompensated drainage from their tracts, given the distribution of productive thickness.   
- The Commission’s expert testified that because of a water drive, net drainage would actually be toward plaintiffs’ wells: as oil is produced, water would encroach and rise into the thinner, outer portions of the reservoir, reducing recoverable oil there and functionally favoring the thicker, central portions (including plaintiffs’ tracts).   
- Plaintiffs also argued that any formula not based solely on acre‑feet was unreasonable, failed to protect correlative rights, and amounted to a deprivation of property without due process of law.   
- The district court held that the Commission’s order was reasonably supported by substantial evidence and upheld the order. Plaintiffs brought a direct appeal to the Supreme Court of Texas.   

## Issues

1. Whether the Railroad Commission’s proration order for the Fairway (James Lime) Field, which allocated allowable production 50 percent by surface acreage and 50 percent by acre‑feet of productive sand, was reasonably supported by substantial evidence.   
2. Whether a proration formula that is not based solely on net acre‑feet of productive pay fails to protect operators’ correlative rights and deprives them of property without due process of law.   

## Decision

- The Supreme Court of Texas held that the Commission’s proration order was reasonably supported by substantial evidence.   
- The court rejected the contention that the Texas Constitution or statutes require proration formulas to be based exclusively on acre‑feet of productive formation.   
- The court concluded that the 50/50 surface‑acre/acre‑feet formula did not violate plaintiffs’ correlative rights and did not deprive them of property without due process of law.   
- The judgment of the district court upholding the Commission’s order was affirmed.   

## Legal Principles

- Courts do not substitute their judgment for that of the Railroad Commission on the wisdom or policy of proration orders; the Commission has primary authority to regulate oil and gas production in Texas.   
- A Commission order will be sustained if it is reasonably supported by substantial evidence; the reviewing court asks whether some reasonable basis in the record supports the order, not whether a different formula might be more equitable.   
- The evidence heard before the Commission itself is not determinative on judicial review; what matters is the evidence introduced in the trial court challenging or supporting the order.   
- Correlative rights in a common reservoir require that each owner have an opportunity to produce a fair share of the recoverable oil or gas, but the law does not dictate a single mandatory mathematical formula (such as pure acre‑feet) for allocating allowables.   
- A proration formula that reflects both surface acreage and volume of productive formation can be consistent with correlative rights and due process when supported by substantial evidence of reservoir behavior (such as water‑drive and drainage patterns).   

## Conclusion

The Texas Supreme Court affirmed the Railroad Commission’s proration order for the Fairway (James Lime) Field, holding that a 50/50 surface‑acre/acre‑feet allocation formula was supported by substantial evidence and did not violate operators’ correlative rights or due process, thereby reinforcing broad Commission discretion in designing proration schemes so long as they rest on a reasonable evidentiary basis.


Pickens v. Railroad Commission, 387 S.W.2d 35 (Tex. 1965)