U.S. Supreme Court HENDERSON CO. V. THOMPSON , 300 U.S. 258 (1937)

300 U.S. 258

HENDERSON CO.v. THOMPSON et al.No. 397.

Argued Feb. 2, 3, 1937.Decided March 1, 1937.

On Appeal from the District Court of the United States for the Western District of Texas. [ Henderson Co. v. Thompson 300 U.S. 258 (1937) ]

[Page 300 U.S. 258 , 260]

Mr. Justice BRANDEIS delivered the opinion of the Court.

The question for decision is whether the prohibition by Texas of the use of sweet natural gas for the manufacture of carbon black in the Panhandle field is valid.

The suit is brought in the federal court for western Texas by the Henderson Company, a Maine corporation. It challenges the validity of the following provisions of chapter 120 of the Acts of the Legislature of Texas, 1935, Forth-Fourth Regular Session (Vernon's Ann.Civ.St.Tex. art. 6008), commonly known as House Bill 266: subdivisions (g) and (h) of section 2, which define sweet and sour gas;1 subdivision (j) of section 3, which prohibits the use of sweet gas for the manufacture of carbon black;2 and subdivision (1) of section 7, which defines the purposes for which sweet gas may be used. [Footnote 3] See Thompson v. Consolidated Gas Utilities Corporation, 300 U.S. 55, decided by this Court February 1, 1937. The suit challenges, also, the validity of orders entered by the Railroad Commission pursuant to the statute.

[Page 300 U.S. 258 , 267]

as to the title to gas in place, between the law of Wyoming and that of Texas. It is urged that, in the absence of waste, the legislature lacks power to regulate production in Texas, since there the law gives the owner of land title to the gas in place and to that which migrates to formations under his land; whereas in Wyoming regulation for the purpose of protecting correlative rights of other owners in a common pool is permissible. Upon this argument we need not pass. One principle established by the Walls Case is that the Legislature may, for the purpose of conserving natural resources, regulate their production and use. The findings of the district court in this case support the reasonableness of the present statute on that basis. It is also urged that there is this vital difference in the facts: that in the Panhandle field the challenged prohibition will not prevent waste, or conserve the supply of sweet gas, since the sweet gas, if not used, will drain into the sour gas area, because of the lower pressures there. Moreover, it is insisted that, unlike the Walls Case, there is here in the record convincing evidence that the use of sweet gas in the manufacture of carbon black is not wasteful. Our decision in that case rested upon no particular theory of the nature of the carbon black industry. It was based simply upon the determination that the statute in question was not shown to have been an arbitrary exercise of legislative power. Such, likewise, is our judgment here.

Affirmed. Footnotes

Footnote 1 'Sec. 2. * * *'(g) The term 'sour gas' shall mean any natural gas containing more than one and one-half (1 1/2) grains of hydrogen sulphide per one hundred ( 100) cubic feet or more than thirty (30) grains of total sulphur per one hundred (100) cubic feet, or gas which in its natural state is found by the Commission to be unfit for use in generating light or fuel for domestic purposes.'(h) The term 'sweet gas' shall mean all natural gas except 'sour gas' and 'casinghead gas."

Footnote 2 'Sec. 3. The production, transportation, or use of natural gas in such manner, in such amount, or under such conditions as to constitute waste is hereby declared to be unlawful and is prohibited. The term 'waste' among other things shall specifically include: * * *'(j) The use of sweet gas produced from a gas well for the manufacture of carbon black.'

Footnote 3 'Sec. 7. After the expiration of ten (10) days from the time of encountering gas in a gas well, no gas from such well shall be permitted to escape into the air, and all gas produced therefrom shall be utilized for the following purposes:'(1) No sweet gas shall be utilized except for:'(a) Light or fuel.'(b) Efficient chemical manufacturing, other than the manufacture of carbon black.'(c) Bona fide introduction of gas into oil, or gas bearing horizon, in order to maintain or increase the rock pressure or otherwise increase the ultimate recovery of oil or gas from such horizon.'(d) The extraction of natural gasoline therefrom when the residue is returned to the horizon from which it is produced.'