In the 1923 case Tidal Oil Company et al. v. Flanagan, the U.S Supreme Court ruled in favor of Flanagan, upholding a lower court's decision that he was entitled to royalties from oil wells drilled on his property by Tidal Oil Company and other defendants. The dispute arose when the oil companies argued they were not required to pay royalties because their leases did not specifically mention oil extraction but only allowed them "to mine for and take away all minerals." However, both the district court and Supreme Court disagreed with this interpretation, ruling that under Texas law at that time (which governed this contract), "minerals" included petroleum products such as oil unless explicitly excluded in lease agreements.

In the dissenting opinion for Tidal Oil Company et al. v. Flanagan, it was argued that the majority's decision to uphold a tax on oil production in Oklahoma violated principles of federalism and property rights. The dissenting justices believed that the state had overstepped its authority by imposing a tax on an industry largely regulated by federal law, thereby infringing upon Congress' power to regulate interstate commerce. They also contended that this taxation constituted an unlawful taking of private property without just compensation, as it significantly diminished the value of oil reserves owned by producers like Tidal Oil Company. Furthermore, they expressed concern about potential negative impacts on economic development and investment in natural resources industries if such taxes were allowed to stand.