H.G. Sledge

The issue before us concerns the proper scope of the notice provision of the Railroad Commission's rule 37 related to well spacing. See 16 Tex. Admin. Code § 3.37(a)(2) (2000). This dispute arose when the Railroad Commission ("the Commission") denied a complaint filed by The Prospective Investment and Trading Company, Ltd. ("PITCO"), which challenged the validity of a drilling permit granted to H.G. Sledge, Inc. ("Sledge"). When Sledge filed its application for a drilling permit under a rule 37 exception with the Commission, Sledge did not notify PITCO, an overriding royalty holder on an adjacent tract. PITCO challenged the validity of Sledge's permit in a complaint, which the Commission denied. PITCO contested the Commission's denial by filing suit. The district court agreed with PITCO and set aside Sledge's drilling permit. The Commission and Sledge appeal the district court's judgment. We affirm in part and reverse in part the district court's judgment, rendering judgment that affirms the Commission's order, which held PITCO was not an "affected person" entitled to notice of the rule 37 exception application.