McCabe Petroleum Corp. v. Easement & Right-Of-Way Across Township 12 North, Range 23 East

CORPORATION, McCABE PETROLEUM Plaintiff, Right-of-Way Across Easement Range North, Township PMM East. County, Fergus 16-19, Montana, Sections OWNERS, and UNKNOWN RANCH, LLC, N BAR Defendants. No. 03-452. Briefs

Submitted on October 2003. Decided March 2004 MT 73.

320 Mont. 384. 87 P.3d 479. For Jr.; Hanson, Plaintiff: Mangen, Crowley, Haughey, Chris Dietrich, Toole & Billings. Barry O’Connell; Moore,

For Defendants: Refling, O’Connell & Bozeman.

CHIEF Opinion JUSTICE GRAYdelivered the of the Court. Corporation McCabe Petroleum filed an action in the United ¶1 States seeking District for the District Montana condemn right-of-way an access easement and N Bar across lands owned Ranch, LLC. Pursuant Rule M.R.App.P., United States questions us, District Court certified law to which two we restate as follows: 1. Is exploration development gas of a federal oil and lease a

¶2 70-30-102(33), “public “mine” which constitutes a use” under MCA? § MCA, grant gas owner of federal Does power “mining right-of- owner of a claim” to condemn lease explore develop for access to the oil way across land of another gas lease? and, “no” question Our certified reasons answer to first question. we do not address the second apparent,

which will become

BACKGROUND covering lands in holds United States oil and leases McCabe property adjacent N Bar Ranch Fergus County, Montana. owns action, In its court McCabe land covered McCabe’s leases. federal the property over right-of-way seeks to condemn an easement operate to drill and oil wells. by N Bar Ranch to allow it access owned on action N Bar Ranch moved to dismiss McCabe’scondemnation relief can complaint upon to state a claim the basis that fails 12(b)(6), N Bar Ranch contended under Rule Fed.R.Civ.P. granted meaning within the McCabe’s activities use” proposed 82-2-201, MCA, grant does not and that § briefing, United power Following of eminent domain. McCabe questions to States District Court certified the above-restated for accepted response. Court and we them

DISCUSSION lease a gas of a federal development Is exploration ¶7 70-30-102(33), MCA? use” under “public which § “mine” constitutes private the take right domain is the state to Eminent ¶8 70-30-101, MCA. Private individuals use. Section public power of corporations, have no inherent agencies, like state domain, from authority condemn must derive and their (1987), 229 Corp. Cyprus Talc Co. v. Mines legislative grant. Montana 491, 495, 748 P.2d 447. has Legislature the Montana uses which general public ¶9 70-30-102, eminent domain are enumerated granted power § the. an access argues that MCA, a enacted 1877. McCabe statute first a is leases landlocked federal oil explore develop road to may be exercised of eminent domain power use” for which the “roads, tunnels, and 70-30-102(33),MCA, provides that under § mines, mills, for the reduction or smelters working dumping places for wells that potential asserts public are a use. McCabe ores” its Talc for It relies on Montana above statute. “mines” under the uses public the and also for contention argument substantive MCA, 70-30-102, broadly. delineated in should We interpreted § turn first to latter contention. Mont, decision, In P.2d at ¶10 Montana Talc any judicial stated it was not aware decision 70-30-102, MCA, declaring public that the uses set forth in are to be strictly technically may construed. While the Court have been correct “strictly authority subject about on language, prior construed” apparently was overlooked. appropriate statutory We addressed the interpretation

uses State v. Aitchison 30 P.2d 805. In that case, seeking power the plaintiffs to exercise the of eminent domain existing authority conceded-based on case law-that to condemn must be “expressly given necessarily They or implied.” sought proceed on Aitchison, “necessarily implied” theory. 337-38, 30 Mont. at P.2d (citation omitted). at 806 In discussing powers, eminent domain we cited to authorities

stating clearly against that the eminent domain power being common right, vague it cannot be or implied inferred from language, doubtful right and that the power to exercise that does exist when made out only by Aitchison, argument or inference. 96 Mont. at 30 P.2d at 807. We also observed that all prior extending cases had held against the right theory of eminent domain power under a been had granted Aitchison, by implication. 96 Mont. at 2d at (citations omitted). Thus, using “strictly while not construed” language, it is clear prior that case law to Montana took Talc a narrow approach interpreting statutorily-delineated public uses. Montana Talc Court on to went reference and, addition, effect that statutes are liberally to be construed interpretation “[n]o required plain is when the can be meaning Talc, derived from the words of the statute.” Montana 229 Mont. at difficult mesh Montana Talc Court’s use of “plain meaning” terminology. both the”liberal construction” and law, subsequent however, unnecessary Because of case it is to attempt to do so. City Bozeman Vaniman There, we the a again power addressed of eminent domain. clearly equivocation “[t]he

unanimous Court stated and without that legislature’s grant power strictly the eminent domain ... must be (citation Vaniman, construed.” at at P.2d omitted). Because private property ownership real is fundamental right Constitution, the “any [the under Montana statute allows given plain interpretation, must its

taking person’s property of] a be Mont, Vaniman, 264 at favoring person’s rights.” fundamental issue, Thus, involving “public use” P.2d at 792. while not regarding statement Vaniman is this Court’s latest clearest therefore, conclude, domain. interpretation power ofthe ofeminent We rights that uses” property require that fundamental real granted interpreted must be power which the of eminent domain by and cannot Legislature set pursuant plain language to forth implied. is is that Montana Talc argument McCabe’s first substantive ¶15 wells are authority potential controlling proposition disagree. “mines.” We Talc, power of eminent In we addressed whether the talc mine. We open pit to condemn land for an

domain could be used 70-30-102(15), that, (1985), an open-pit under MCA determined § necessary mining body an ore is an “backslope” excavation Talc, at See Montana 229 Mont. public authorized use. 70-30-102(15), now recodified at 447. MCA is Section 70-30-102(44), MCA, which substantially language in § similar “projects that authorized uses are provides pertinent part ores, metals, owned the condemnor extract or minerals mine and title to the where the upon located surface beneath surface vests in others.” Talc, seeking condemnation was company In Montana ore; mine body sought open-pit of the of talc ore and

owner mine over so, “backslope” necessary company for the do merely Corporation. Minerals Cypress land owned that, it, “[f]or and concluded the statute the facts before applied has the body, ore Montana Talc therefore purpose mining Talc, at power of eminent domain.” Montana case, rely on present McCabe does not not involve Thus, in facts that Montana Talc did MCA. addition to the gas exploration hold that oil and leases or wells and did not statutes, the entire basis domain “mining” is under Montana’s eminent subsection of analysis was different ofthe Montana Talc here. For applicable is not That subsection than now issue. nor reasons, controlling particularly Montana Talc is neither those relevant here. in Mid-Northern on this Court’s statements McCabe also relies 353, 356, 414, 427, and Rice Co. v. Walker

Oil

389 145, County (1930), 427, 431, 146, Oil Co. v. Toole mineral, mine[,]” an respectively, that “oil is a oil well is a ... the process extracting “[o]il is a mineral and of it from the rocks is mining.” McCabe, According support these statements its contention mine, 70-30-102(33), MCA, a in as the term is includes an used result, and, proceed oil well as a it is authorized to condemn road develop pursuant needed to oil wells federal leases N Bar across property. Ranch’s McCabe’s reliance on Mid-Northern and Rice is misplaced. Mid-Northern, company an oil an sought injunction restraining enforcing

the state from equalization board an annual license tax Mont, Mid-Northern, 420-21,211P. against it. at 354. Rice involved portion an action to recover a an oil net proceeds paid well tax Mont, County. Rice, 430,284 Thus, cases, Toole at 145. P. both our of an characterizations oil well as a mine were made within the litigation, context of tax expressly eminent domain statutes which enumerate the uses for which condemnation can proceedings from readily impoi'ted maintained. Definitions other sources are not Rose, into the eminent domain arena. See Richter v. MT 165 ¶¶ 18-20, 18-20, 583,¶¶ ¶¶ 18-20. One of the reasons, course, is the property rights clash between real power of eminent domain. Moreover, the statements both Mid-Northern Rice

premised on Burke v. Southern Pac. R. Co. 234 U.S.

S.Ct. 58 L.Ed. a case in Supreme which the United States Court questions addressed several concerning the Southern Pacific Company’s Railroad title patented to mineral lands under authority aof railroad land grant. One of the issues was whether petroleum or mineral was included meaning within the of the term “mineral” it was reserving used acts of land Congress mineral grants. Burke, from railroad 234 U.S. at 34 S.Ct. at 58 L.Ed. at 1543. Supreme analyzed addressing the issue manner in term “mineral” had been used in the federal laws reserving Burke, grants. mineral lands from railroad land 234 U.S. at S.Ct. 58 L.Ed. at 1544. No federal statutes are at issue Furthermore, 70-30-102(44), here. unlike § MCA, does not contain the word “mineral.” 1979), (Wyo. McCabe also relies on Coronado Oil Co. v. Grieves Wyoming in which the held that the Supreme Court interests federal lessee gas permit of a lessee condemn private gas to its landlocked oil and right-of-way obtain I, noted that Article Section

leases. The Coronado court private property private for taking allows the Wyoming Constitution Wyoming necessity. It private ways determined use enough proposed to cover the provision constitutional is broad Then, reaching activity gas the oil and lessee. condemnation out “a construction which carries what termed reasonable and sound statutes,” the and related court the intent of constitution roadways condemnation of interpreted Wyoming allowing statute roadways for the allowing to include condemnation “mining” Coronado, gas under a federal oil and lease. exploration for oil and legal compelling is “a 603 P.2d at 410-11. McCabe asserts Coronado precedent.” and common sense Constitution, Article The eminent ofMontana’s provision domain

II, 29, provision Wyoming to the of the Section at all similar not Montana’s Constitution does allow Constitution cited in Coronado: Indeed, necessity. of taking private ways of for private only by ways necessity may in Montana be obtained private of See, Skyline Homeowners satisfying e.g., criteria. Kullick v. several Ass’n, 137, 21; Inc., 21, 146, 21, 225, MT ¶ ¶ 2003 ¶ 51, Luraski, 51, 478, 223, MT 36 Loomis v. 2001 ¶ ¶ 862, 51. ¶ in provision provides, eminent domain Montana’s constitutional damaged not be taken or part, “[pjrivate property shall

pertinent loss compensation to the full extent of the just use public for without II, Art. Sec. having into court for the owner.” paid first been made or use” are The foci of the constitution primary Mont. Const. in the “public uses” are contained “just specific No compensation.” and expressly implication. either or Montana Constitution eminent domain procedural and general, Montana’s substantive 30, of Montana Code Chapter in Title statutes are codified 70-30-102, MCA, for public 45 uses enumerates Annotated. Section use public The may be exercised. right of eminent domain enacted in 1877 relies, was first McCabe subsection upon which essentially the same present forward to and has been carried A Territorial Laws of 1877. p. form. See Section the notion that history supports knowledge of Montana general in 1877 was subsection enacted mining-related intent of no presents McCabe mining, “ore” and “hard rock” or encompass Indeed, language or otherwise. argument suggesting evidence working “roads, tunnels, places for dumping and subsection mills, legislative mines, ores” reflects smelters the reduction or mining-related necessary focus on the kind of roads to continue the 70-30-102(33), then-existing Montana. See MCA mining (emphasis § added). use, “outlets, public natural or next-enumerated flow, otherwise, deposit, for the or tailings conduct matter refuse mines, mills and smelters reduction ores”reinforces from added). enumerated (emphasis intent. See MCA No § 70-30-102, MCA, explicit language relating uses contain gas and wells. Oil, “Minerals, Title ofMontana CodeAnnotated is entitled f Provisions,” Gas.” 1 of Chapter Title “General contains no eminent Thereafter, provisions. domain mining gas exploration are separate addressed in statutory relating frameworks. Statutes to ore mining, including rights-of-way eminent domain for work roads to mines, Chapters are codified in and 4 Title MCA. gas Oil and governed by Chapters only and 15 Title MCA. eminent domain provisions gas chapters oil and involve underground storage gas. -305, of natural through See 82-10-302 §§ MCA. Had the Montana Legislature intended to the power extend encompass wells, domain to the development easily of oil

could portions have done so in the of Title which apply the oil industry. Indeed, also could done have so in MCA. the Legislature 70-30-102, MCA, added new public numerous uses to § during session and another in the 2003 session. See 2001 125; Mont. Laws Laws 451.

¶28 ^[3] Finally, McCabe relies on Montana Talc, 229 Mont. at 497, 748 P.2d .at (citing Butte Railway Anaconda and Co. v. Pacific Railway (1895), 232), Montana Union Co. the that it proposition long public has been policy Montana to foster and encourage development every of mineral resources in reasonable way. We observe that the discussion to which McCabe refers occurred 70-30-102, MCA, in the real context aof different subsection of § in the factual of an construing context ore mine. A court’s role in therein; to what statutes is declare is in terms or substance contained 1-2-101, Moreover, not to insert what has been omitted. Section MCA. because eminent domain interferes with the of right fundamental private ownership property, of real statute which a any allows construed, person’s strictly condemnor to take a must be giving plain interpretation, favoring but person’s statute its Vaniman, rights. fundamental Mont. at 869 P.2d used, a of we plain meaning legislative language Under ¶29 70-30-102(33), “mines” under conclude that oil wells not § may be obtained via eminent domain rights-of-way for roads which of exploration development proceedings. We further conclude a gas “public federal oil and lease is not a “mine” constitutes a Therefore, first MCA. our answer to the use” under § reasoning apply no. would question certified Because similar lease question, whether the owner of an oil second certified claim”-to “mining under MCA-as the owner a power has question separately. do right-of-way, a we not address condemn COTTER, REGNIER and LEAPHART concur. JUSTICES dissenting. RICE JUSTICE I dissent. right that there is no of eminent domain The Court here declares a it is not use.” To arrive gas production,

for oil and because decision, Cyprus that Montana Talc Co. v. Court concludes is “neither Corp. Mines 18. The Court further controlling particularly nor relevant here.” ¶ plain not to relief under the that McCabe is entitled concludes general language “[a] of the eminent domain statutes on basis history.” 25. The Court dismisses other knowledge of Montana ¶ McCabe, concludes, then without reference authority offered agree “mines.” I cannot with authority, that “oilwells” are not specific opposition any of these The Court’s decision stands conclusions. commercial, law, tax and as well as sum ofour our domain as “mines.” recognize resource “oil wells” natural law-all of which is, easily It as McCabe Talc not be so discarded. Montana should on Montana’s complete statement correctly recognizes, our most statutory which we also language eminent domain law. discusses away being irrelevant. interpret herein and should be tossed applied has First, Talc illustrates that the Court relies statutory interpretation herein. Court wrong standard heavily City v. Vaniman on Bozeman “any statute which allows condemnor proposition for the (emphasis strictly must construed.” person’s property ¶ take added). standard then uses this “strict construction” meaning under 70-30- of“mines” general consideration avoid differently: However, instructs 102(33), quite Montana Talc MCA. are aware declares that we judicial No Montana decision 70-30-102,MCA,must be in Section public that the uses described uses which construction strictly construed.... If strict law, by the common required may be had were eminent domain statute, by where law may applied is declared common law be only 1-1-108, if with the By not conflict statutes. Section MCA. law the the law of state respecting statutes establish this subjects they provisions relate their and all proceedings liberally under them are to be construed awith view objects justice. to effect their and to promote Section MCA. Talc, 498-499, (emphasis

Montana 229 Mont. at at P.2d 448-49 added). seeming conflict between Talc and Montana the Court’s easily citation to Vaniman is understanding resolved that Vaniman but, nothing use,” rather, had to do with the determination of procedure by addressed the which eminent is implemented, domain completely different issue. explained Montana Talc this difference in construction, statutory that, noting although would “public uses” be construed, have, however, liberally vigorous compliance “[w]e held that procedures required with for eminent domain is commanded.” Talc, Here, Montana 229 Mont. at 748 P.2d at 448. the Court imports procedural the “strict construction” standard from domain, erroneously applies it to a substantive issue of eminent of public domain-the determination use. The Court also preeminent statutory omits the rule of legislative instructs,

construction: intent. As “[statutes Montana Talc may interpreted object not be defeat purpose, object their and the sought to be legislature achieved is prime consideration Talc, them.” interpreting Montana 229 Mont. at P.2d (citing Dover Ranch v. County Yellowstone 711). we Fortunately, need not look far to determine the

Legislature’s “object” case, Sheehy, in this for the because Justice Court, length Legislature’s explained Talc intent in enacting stated, interpreting today. part: the statute we are He legislature encourage

[TJhe [was] intention the Montana so, industry. development mining Understandably ofthe because State, huge mineral wealth of this named Treasure so taken, yet prime store of minerals taken and is a springhead past keeping and future increase for economic Montanans. outlook, legislature mining with given has concerns power private property awesome to condemn use in just compensation ownership return for where the ofthe minerals and of So it to the the surface do coincide. is that addition power [the of condemnation for the mine itself under identical predecessor provision], power there further for the construction roads, necessary to tunnels, appurtenances ditches and other restriction, Expansion, to be mining appears effort.... and not legislative watchword. added). Talc, 497, (emphasis P.2d at Montana 229 Mont. 748 448 Thus, legislative intent the Court in Montana Talc concluded from this construction, by great sustained appropriate “rule of use” authority” “public for determination weight of well-considered regard mining, to as follows: only so far as must be exercised and can be exercised [PJublic use extends, itself, expressed by terms the law authority either in by implication satisfactory. or clear and Talc, 498, (citing 748 P.2d at 448 Butte Montana 229 Mont. at Co. Railway Railway and Co. v. Montana Union Anaconda Pacific added). 243) (1895), 504, 536-37, P. (emphasis 16 Mont. by sidestep holding in Montana Talc attempts The Court (1934), v. 96 Mont. holding to the in State Aitchison reference “strictly apply a Although that Aitchison did not admitting P.2d 805. statutes, the “public use” interpretation standard to the construed” asserts, erroneously, stands for the that Aitchison Court nonetheless statutory granted by principle that domain cannot be expressed reluctance to extend the implication. The Aitchison by implication, but reiterated that right eminent domain “The must exactly authority condemn correct allowed that: standard necessarily All of our decisions have given implied. or ... expressly ....’’Aitchison, Thus, as Mont. at been accord use eminent domain correctly recognized, public Talc requires a rale of has determined construction purposes been itself, clear and by implication expressed the law “terms satisfactory” since 1895. a fish Further, sought the State create the statute under which completely in Aitchison was silent

rearing eminent domain pond by “implication” out of thin argue rights-requiring State to such clearly not the Aitchison, 30 P.2d at 807. That Mont. at air. here. case then, what is “mine” rule ofconstruction Considering the correct meaning of plain MCA? common

under § excavation used obtain underground simply “[a]n “mine” is (7th Dictionary ores, Law minerals, substances.” Black’s or other 1999). definition, considering common On this ed. rev. regard mining, with intent for uses” expansive Legislature’s minimum, “by or at necessarily, “mine” I conclude that would satisfactory,” implication clear and includes “oil wells.” is, course, statutory Such a with our conclusion consistent Walker, case law: “In the case Mid-Northern Oil Co. v.

211 Pac. this court held that an oil-well is a mine.” v. Callender (1929), 263, 272, Syndicate 273, 276-77; Oil 275 P. Crossfield “Oil is a mineral the process extracting it from the rocks is mining.” County 427, 431, Rice Oil v. Toole Co. 145, 146 (citing Burke Southern Pac. R. R. Co. 234 U.S. “ 1527); 34 S.Ct. 58 L.Ed. Mineral’ gas, means ... oil...” 15-38- 103(3), (Chapter Indemnity MCA Resource Trust and Ground “[0]il, Assessment); Water other personal minerals ... become 30-9A-102, eligible (goods) and to be collateral ...” MCA (annotations) (Uniform Code); specific Commercial see also exclusion of oil and gas from mineral definition in governing statutes metal “ mines, ore, any rock, substance, oil, Mineral’ means or other than (Part Reclamation) 3, ...” (emphasis MCA Metal Mine added). I would answer the two certified questions affirmatively.

¶39

JUSTICE dissenting. WARNER I agree with separately Justice Rice’sdissent. I write to illustrate I what believe is error in the interpretation Court’s of § MCA. The first oil well drilled in the United States was drilled in

Pennsylvania fuel, in 1859. As a originally was used as kerosene and later in furnaces. With the of invention the internal combustion 1800's, engine in the later it became clear that highly oil would be a sought-after commodity. 1914, Supreme U.S. Court upon was called to decide grant

whether a federal land company to railroad included mineral lands. issue plaintiff arose when his associates discovered petroleum attempted placer mining upon to locate claims patented lands to the railroad. Burke v. Southern Railroad Pacific (1914), Company 669, 907, U.S. 234 34 S.Ct. 58 L.Ed. 1527. The Burke Court determined that all the in the upon issues case turned question, petroleum meaning the term “[i]s mineral within of ‘mineral’ in said of land Congress reserving used acts mineral Burke, 676, grants?” from the railroad land 243 U.S. at 34 at 910. S.Ct. Court Burke reviewed both scientific and historical evidence. courts, culled the decisions several state various other acts lands,” Congress utilizing the terms “mineral” and “mineral Department, decisions ofthe Land all of had determined that in 396 Ultimately, understanding, petroleum is a mineral. usage and

common "chiefly all lands valuable Court determined that mineral lands are character, arts deposits their of a mineral which are useful manufacture,” Burke, 243 at 34 U.S. purposes or valuable Railway Soderberg Co. v. (quoting S.Ct. Northern Pacific 575), (1903), petroleum and that 23 S.Ct. 47 L.Ed. 188 U.S. Burke, 679, 34 The Court further 243 U.S. at S.Ct. 911. is a mineral. Pennsylvania’s statement Supreme approvingly noted ‘mining [is] extracting containing [oil]from the rocks that “the work of ” v. Burke, (quoting 243 34 S.Ct. at Funk for oil.’ U.S. at 229). (Pa. 1867), 53 Pa. Haldeman law, conveyancing royalty include citing Cases Burke issues law, taxation, And term ‘mineral’

law, “[t]he etc. while real litigation law confusion mineral has been the source considerable (1995),270 & Co. nationwide,”Farley v.Booth Brothers Land Livestock popularly 1, 5, 377, 379, conclusion that oil 890 P.2d Burke’s Mont. mineral, for the entire nation. See precedent set understood (S.D. 1937), 427; Lovelace v. F.Supp. Cal. 20 U.S. v. Standard Oil Co. (E.D. 1919), 504; Ky. 267 F. Amoco Co. Southwestern Petroleum 1978), 279; v. F.Supp. U.S. (D.Wyo. Co. v. Guild Trust Production 47; Oil Co. 40 S.Ct. Union Co. 251 U.S. Southern Pacific 308; v. v. 249 U.S. S.Ct. Rowe Smith California Chesapeake (6th 1946), 752; 156 F.2d General Cir. Mineral Co. (S.D.Cal. 1938), 285; 24 Supp. F. Corp. v. U.S. Petroleum of California (D.Colo. 1966), 12; Long v. Madison F.Supp. Brennan v. Udall 1954), U.S. 937; v. (W.D.Ky. F.Supp. Corp. Coal Estate of Fairbank (Ark. 1920), 171; (Ct.Cl.1964), ;Lee Straughan S.W. 164 Ct.Cl. Stoddard, 1938), 516; Mid- (Cal.App. v. Buck & Inc. Cornwell (Mont. 1922), P. v. Walker Northern Oil Co. well-established gas industry and was By the oil 1920, 30 Leasing U.S.C. Mineral Act of The federal nationwide.1 oil, coal, oil mining phosphate, seq., passed “promote et was domain,” and shale, 41 Stat. 437 gas, on the sodium gas deposits in orderly development of the oil and “promote the through private enterprise.” publicly ofthe United States owned land (10th 1967), passing 885. In Harvey Cir. 384 F.2d v. Udall 21(a), Congress Policy Act of 30 U.S.C. Mining Minerals “foster and country’s interest to in the best clearly stated that was Lands, Jr., L.Rev. Malone, Mont. Leases on Federal L. Oil Gas Ross (1953). (1) encourage enterprise development economically private minerals, mining, and stable and mineral sound domestic metal (2) industries, orderly reclamation and economic [and] 21(a). developmentof domestic mineral resources30 U.S.C. Section 21(a) goes on to define “minerals” as “all mineral fuels minerals and oil, coal, including gas, oil shale and uranium.” Montana, meanwhile, experience did not first its commercial quantity discovery of oil until 1913.2 Legislature the Montana separate chapters enacted a license tax scheme which included mines, covering mines, distributors, coal gasoline metalliferous and oil (1921). 182, 183, 185, 186, producers. Chapters See RCM next year, Supreme the Montana upon interpret Court was called Mid-Northern, new company laws. In the oil balked at the prospect paying the license tax to the state of Montana under a statute that read follows:

Every person engaging or carrying on the business state, producing, petroleum, within this or other mineral or crude oil, or in or engaging carrying on the of owning, business controlling, state, managing, leasing or operating, any within this well any or wells from which merchantable or marketable petroleum or other mineral or oil produced crude is extracted or pay ... must... to the state treasurer engaging ... license tax for and carrying on such business .... (1921).

Section RCM implicated recently The case also enacted federal Mineral Act Leasing company argued 1920. because it government was lessee the federal under the federal Leasing Mineral agent Act of it was an ofthe government federal by and could be company taxed a state. This Court held merely private dealing contractor the United with States proprietary character; that it was not elevated to status of agent Mid-Northern, virtue of its lease. 211 P. at In so holding, cited Burke and stated: must conceded that the of the in the interests United States plaintiffs character;

lands covered leases are mineral in mineral, oil is a mining and that an well is a mine .... But is not a public utility. private industry, It is a exploitation development governmental of mines are no more than functions the cultivation machinery. soil or manufacture of farm 2Id.

398 Mid-Northern, 427, 211 P. at 356. The Court then went on 65 Mont. at company required pay to that the oil was to the license tax. conclude it clear Contrary present interpretation, to the Court’s is that not, by terms, licensing attempting statute its to limit state was It also that the Court in or define the terms "oil” and "well.” is clear interpret the terms “oil” and attempting Mid-Northern was not Rather, clearly comfortable “well”as in the statute. Court was used “mine” clearly and was utilizing interchangeably, the terms and “well” understanding common that “oil”is a “mineral.” perplexed Mid-Northern has been cited for this publication Since its courts, reviews,3 treatises, and and until premise by numerous law status of oil as a mineral today, questioned general no one has under Montana law. however, “[a] At the Court states that Today, things change. ¶ history that supports notion

general knowledge Montana in 1877 was mining-related enacted intent that subsection presents and McCabe no encompass mining, ‘hard rock’ or ‘ore’ The Court is correct argument suggesting or evidence otherwise.” place To mining. on hard rock Legislature was focused however, context, must remembered that Montana it statement discovery thirty-six until major oil experience did not first Legislature unreasonable did not years later. is not time, industry that did not exist at prospectively provide an paying attention Legislature that the reasonable conclude is law, law, including trend in the to the nationwide 70- a also states that classify Paragraph “[§ as mineral. generally 30-102(33)] essentially to the present ... been carried forward has decision, the however, the Mid-Northern Clearly, after the same form.” is to amend what now § had no reason Legislature provisions specific domain laws to include in wells, this Court had stated because needed for roads access land Mid-Northern, the Based on that an oil well is a mine. unequivocally provision adding special certainly concluded that Legislature almost be redundant. for oil wells would acknowledges prior this Court’s 19-20, At ¶¶ (10th 1942), 1; Oil Co. v. 125 F.2d Carter Co. v. Jones Cir. See Ozark Chemical (S.D.W.Va. 1983), (Ala. 64; Mining 1951), & v. J. Co. Inc. U.S. H.G.D. Blair So.2d (Nev. 1978), 118; 315; F.Supp. Pastorino Oil Co. Standard of California (3d 1939); E. Tiffany, Tiffany Property ed. Robert on Real Thorndike Herbert and Gas Sullivan, Survey as it Relates to the Oil Law in Montana A Oil and Gas (1955).

Lease, 16 Mont.L.Rev. mineral, and... an declarations in Mid-Northern Rice “oilis rely mine.” wrong oil well is a It then tells McCabe that it on that is definition, well only because an oil mine when taxes are issue. changes eighty-two years The Court this decision of settled law in Rice, In oil plaintiff drilling adjoining Montana. the was for on two separate plaintiff tracts of land under The operating agreements. two efficiency, tracts as unit when operated the one to maximize and it taxes, time treat pay attempted came to to both tracts as one “mine.” attempt long-standing This rested on the habit miners ofmetalliferous consolidating In adjoining of claims for such convenience. circumstances, claims, if continuity there in the were interest and if the work the performed on claims tended to benefit all of the claims Rice, in the the group, then claims could be assessed as one “mine.” 432, at 146. separate at The Court did not allow the claims in to be purposes Rice consolidated into one “mine” for tax interest, because the continuity lessors the two tracts did not have expected and fact lessee keep output the the of the two tracts separate royalty However, purposes. there was indication no Court, whatsoever the any question from that there was an oil Burke, well was not a mine. drew upon Rice which was not a taxation case, Mid-Northern, and authority postulate that oil is a mineral well and a is a mine. Apparently, looking the Rice court was issue, for some guidance on the Supreme and determined that the U.S. Supreme Court and the Court ofMontana were guides. reasonable case, however, Court discounts Mid-Northern and Rice because they cases, are Burke, tax and also concluding discounts is not precedent valuable because it construed federal law not Montana law. interpretation is, strained, say least, Court’s of these cases view, in my incorrect. Additionally, Mid-Northern, 1922, Rice, decided decided in 1930, are only not the authorities to follow oil-as-mineral (1935), In standard. Forbes v. Mid-Northern Oil Co. 100 Mont. Chapters P.2d the Court was construing 140 of Laws 1927. gross yields 139 dealt with Chapter the statement of mines discussion, proceeds, they and net computed. how In its mine, stating, made no distinction between an oil well and a “[tjhis (or oil-well) Act requires the of a mine out and operator make deliver to Equalization gross the State Board of a statement of Forbes, yield of the such ... .” at minerals from mine 100 Mont. Byrne P.2d also v. See Fulton Oil Co. 85 Mont. 514 (construing

P. “Every Ch.140 the Laws of 1927 which read gold ... any containing ... mine whatsoever

person mining ... from ...”). County valuable minerals Rist Toole petroleum or other question whether rights by in oil could lose his tax royalty lands grantee of landowner’s opinion the Court cited Throughout against grantor. sale XII, Constitution statutes, Article Section of Montana including lands,” only “mineral but referred to “mines” or and cases that concerning royalties, questions and cases applied those statutes distinction between any possible semantic seemingly oblivious Mid-Northern, and quoted The dissent went further “mine” and “well.” Rist, an well mine.” that “oilis a mineral and conceding P.2d at 347. efficiently policy properly of this state is the declared terribly interpretation Only a strained our natural resources. develop today, I and dissent. can the result Court reaches of our laws reach

Case Details

Case Name: McCabe Petroleum Corp. v. Easement & Right-Of-Way Across Township 12 North, Range 23 East

Court Name: Montana Supreme Court

Date Published: Mar 26, 2004

Citation: 87 P.3d 479

Docket Number: 03-452

Court Abbreviation: Mont.