Courts & Oil

The U. S. Supreme Court soundly rebuked the Governor of the biggest State last fortnight. In a unanimous decision handed down by Chief Justice Hughes the Court held that Ross Shaw Sterling, Governor-reject of Texas, has exceeded his authority in declaring martial law in the gushing oil fields of East Texas and in jamming proration down the throats of oil operators at the point of his militia's bayonets. Although Governor Sterling's straight-from-the-hip action, together with that of his neighbor Governor William Henry ("Alfalfa Bill") Murray of Oklahoma, skyrocketed crude oil prices from loc a barrel last year to more than $1, he had to defy a Federal Court to do it. Three Federal judges had ordered the Texas Rail-road Commission to cease & desist from enforcing its proration regulations until the conservation law could be reviewed. Governor Sterling, eying the chaos around him, set about enforcing proration come what might. He maintained that his edict could not be reviewed by Federal judges. "But." said the Supreme Court, "if this extreme position could be deemed to be well taken, it is manifest that the fiat of a State Governor, and not the Constitution of the U. S., would be the supreme law of the land. . . . When there is a substantial showing that exertion of State power has overridden private rights . . . the subject is necessarily one for judicial inquiry. ... To such a case the Federal judicial power extends." Chief Justice Hughes would not discuss the use of military force: "The question ... is simply with respect to the Governor's attempt to regulate by executive order the lawful use of complainants' property. . . ." The decision was the signal for a general slashing of crude prices throughout the Mid-Continent area last week. Texas Co., which led the way, downed its posted price from $1.10 to 75-c- a barrel. Oilmen had seen the cut coming for some time, for injunctions against proration agreements were piling up and gasoline stocks had become unwieldy. An abortive effort was made last October to boost the price of crude, but two Standard units refused to follow suit. Now the price is well under October levels. Though such stout proration-ists as President Charles Bismark Ames of American Petroleum Institute insisted that the Supreme Court decision does not impair the power of states to regulate production, most of the industry saw evil days ahead. Governor Sterling reluctantly demobilized his little army, declaring: "Serious trouble is threatened in many quarters. . . . Prospects are that if disorderly production increases at its present rate without State Governmental intervention, it soon will lead to disaster." Admitting no defeat, he promptly had his Railroad Commission order all production in the East Texas fields shut down until Jan. 1. At the end of the week more than 90% of the 9,300 wells flowed no more. The Commission's excuse is to enable it to determine more scientifically the production allowable for each well.

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