No. 03-452
IN THE SUPREME COURT OF THE STATE OF MONTANA
2004 MT 73
McCABE PETROLEUM CORPORATION,
Plaintiff,
v.
Easement and Right-of-Way Across
Township 12 North, Range 23 East, PMM
Sections 16-19, Fergus County, Montana,
N BAR RANCH, LLC, and UNKNOWN OWNERS,
Defendants.
CERTIFIED QUESTION FROM: The United States District Court,
District of Montana, Great Falls Division
The Honorable Sam Haddon, United States District Judge.
COUNSEL OF RECORD:
For Plaintiff:
Chris Mangen, Jr.; Crowley, Haughey, Hanson, Toole & Dietrich,
Billings, Montana
For Defendants:
Barry O’Connell; Moore, O’Connell & Refling, Bozeman, Montana
Submitted on Briefs: October 30, 2003
Decided: March 26, 2004
Filed:
__________________________________________
Clerk
Chief Justice Karla M. Gray delivered the Opinion of the Court.
¶1 McCabe Petroleum Corporation filed an action in the United States District Court for
the District of Montana seeking to condemn an access easement and right-of-way across
lands owned by N Bar Ranch, LLC. Pursuant to Rule 44, M.R.App.P., the United States
District Court certified two questions of Montana law to us, which we restate as follows:
¶2 1. Is exploration and development of a federal oil and gas lease a "mine" which
constitutes a "public use" under § 70-30-102(33), MCA?
¶3 2. Does § 82-2-201, MCA, grant the owner of a federal oil and gas lease power as
the owner of a "mining claim" to condemn a right-of-way across land of another for access
to explore and develop the oil and gas lease?
¶4 Our answer to the first certified question is "no" and, for reasons which will become
apparent, we do not address the second question.
BACKGROUND
¶5 McCabe holds United States oil and gas leases covering lands in Fergus County,
Montana. N Bar Ranch owns property adjacent to the land covered by McCabe's leases. In
its federal court action, McCabe seeks to condemn an easement and right-of-way over the
property owned by N Bar Ranch to allow it access to drill and operate oil wells.
¶6 N Bar Ranch moved to dismiss McCabe's condemnation action on the basis that the
complaint fails to state a claim upon which relief can be granted under Rule 12(b)(6),
Fed.R.Civ.P. N Bar Ranch contended McCabe's proposed activities are not a "public use"
within the meaning of § 70-30-102(33), MCA, and that § 82-2-201, MCA, does not grant
2
McCabe the power of eminent domain. Following briefing, the United States District Court
certified the above-restated questions to this Court and we accepted them for response.
DISCUSSION
¶7 Is exploration and development of a federal oil and gas lease a "mine" which
constitutes a "public use" under § 70-30-102(33), MCA?
¶8 Eminent domain is the right of the state to take private property for public use.
Section 70-30-101, MCA. Private individuals and corporations, like state agencies, have no
inherent power of eminent domain, and their authority to condemn must derive from
legislative grant. Montana Talc Co. v. Cyprus Mines Corp. (1987), 229 Mont. 491, 495, 748
P.2d 444, 447.
¶9 The general public uses for which the Montana Legislature has granted the power of
eminent domain are enumerated in § 70-30-102, MCA, a statute first enacted in 1877.
McCabe argues that an access road to explore and develop landlocked federal oil and gas
leases is a "public use" for which the power of eminent domain may be exercised under § 70-
30-102(33), MCA, which provides that "roads, tunnels, and dumping places for working
mines, mills, or smelters for the reduction of ores" are a public use. McCabe asserts that
potential oil wells are "mines" under the above statute. It relies on Montana Talc for its
substantive argument and also for its contention that the public uses delineated in § 70-30-
102, MCA, should be interpreted broadly. We turn first to the latter contention.
¶10 In the 1987 Montana Talc decision, 229 Mont. at 498, 748 P.2d at 448, the Court
stated it was not aware of any Montana judicial decision declaring that the public uses set
3
forth in § 70-30-102, MCA, are to be strictly construed. While the Court technically may
have been correct about the "strictly construed" language, prior authority on the subject
apparently was overlooked.
¶11 We addressed the appropriate interpretation of statutory public uses in State v.
Aitchison (1934), 96 Mont. 335, 30 P.2d 805. In that case, the plaintiffs seeking to exercise
the power of eminent domain conceded--based on existing case law--that authority to
condemn must be "expressly given or necessarily implied." They sought to proceed on the
"necessarily implied" theory. Aitchison, 96 Mont. at 337-38, 30 P.2d at 806 (citation
omitted).
¶12 In discussing eminent domain powers, we cited to authorities stating clearly that the
eminent domain power being against common right, it cannot be implied or inferred from
vague or doubtful language, and that the right to exercise that power does not exist when
made out only by argument or inference. Aitchison, 96 Mont. at 339, 30 P.2d at 807. We
also observed that all prior cases had held against extending the right of eminent domain
under a theory that the power had been granted by implication. Aitchison, 96 Mont. at 340,
30 P. 2d at 807 (citations omitted). Thus, while not using the "strictly construed" language,
it is clear that case law prior to Montana Talc took a narrow approach to interpreting the
statutorily-delineated public uses.
¶13 The Montana Talc Court went on to reference § 1-2-103, MCA, to the effect that
statutes are to be liberally construed and, in addition, that "[n]o interpretation is required
when the plain meaning can be derived from the words of the statute." Montana Talc, 229
4
Mont. at 498, 748 P.2d at 449. It is difficult to mesh the Montana Talc Court’s use of both
the"liberal construction" and "plain meaning" terminology. Because of subsequent case law,
however, it is unnecessary to attempt to do so.
¶14 In City of Bozeman v. Vaniman (1994), 264 Mont. 76, 869 P.2d 790, we again
addressed the power of eminent domain. There, a unanimous Court stated clearly and
without equivocation that "[t]he legislature's grant of the eminent domain power . . . must
be strictly construed." Vaniman, 264 Mont. at 79, 869 P.2d at 792 (citation omitted).
Because private real property ownership is a fundamental right under the Montana
Constitution, "any statute which allows [the taking of] a person's property must be given its
plain interpretation, favoring the person's fundamental rights." Vaniman, 264 Mont. at 79,
869 P.2d at 792. Thus, while not involving a "public use" issue, Vaniman is this Court's
latest and clearest statement regarding the interpretation of the power of eminent domain.
We conclude, therefore, that fundamental real property rights require that "public uses" for
which the power of eminent domain are granted must be interpreted pursuant to the plain
language set forth by the Legislature and cannot be implied.
¶15 McCabe’s first substantive argument is that Montana Talc is controlling authority for
its proposition that potential oil wells are "mines." We disagree.
¶16 In Montana Talc, we addressed whether the power of eminent domain could be used
to condemn land for an open pit talc mine. We determined that, under § 70-30-102(15),
MCA (1985), an open-pit excavation necessary to "backslope" the mining of an ore body is
an authorized public use. See Montana Talc, 229 Mont. at 496, 748 P.2d at 447. Section
5
70-30-102(15), MCA (1985), is now recodified in substantially similar language in § 70-30-
102(44), MCA, which provides in pertinent part that authorized public uses are "projects to
mine and extract ores, metals, or minerals owned by the condemnor located beneath or upon
the surface of property where the title to the surface vests in others."
¶17 In Montana Talc, the company seeking condemnation was the owner of the body of
talc ore and sought to open-pit mine that ore; to do so, it was necessary for the company to
"backslope" the mine over land owned by Cypress Minerals Corporation. The Court merely
applied the statute to the facts before it, and concluded that, "[f]or the purpose of mining that
ore body, Montana Talc therefore has the power of eminent domain." Montana Talc, 229
Mont. at 496, 748 P.2d at 447.
¶18 In the present case, McCabe does not rely on § 70-30-102(44), MCA. Thus, in
addition to the facts that Montana Talc did not involve oil and gas leases or wells and did
not hold that oil and gas exploration is "mining" under Montana's eminent domain statutes,
the entire basis of the Montana Talc analysis was a different subsection of § 70-30-102,
MCA, than is now at issue. That subsection is not applicable here. For those reasons,
Montana Talc is neither controlling nor particularly relevant here.
¶19 McCabe also relies on this Court's statements in Mid-Northern Oil Co. v. Walker
(1922), 65 Mont. 414, 427, 211 P. 353, 356, and Rice Oil Co. v. Toole County (1930), 86
Mont. 427, 431, 284 P. 145, 146, respectively, that "oil is a mineral, and . . . an oil well is
a mine[,]" and "[o]il is a mineral and the process of extracting it from the rocks is mining."
According to McCabe, these statements support its contention that a mine, as the term is used
6
in § 70-30-102(33), MCA, includes an oil well and, as a result, it is authorized to proceed
to condemn a road needed to develop oil wells pursuant to its federal leases across N Bar
Ranch's property. McCabe's reliance on Mid-Northern and Rice is misplaced.
¶20 In Mid-Northern, an oil company sought an injunction restraining the state board of
equalization from enforcing an annual license tax against it. Mid-Northern, 65 Mont. at 420-
21, 211 P. 354. Rice involved an action to recover a portion of an oil well net proceeds tax
paid to Toole County. Rice, 86 Mont. at 430, 284 P. at 145. Thus, in both cases, our
characterizations of an oil well as a mine were made within the context of tax litigation, not
eminent domain statutes which expressly enumerate the public uses for which condemnation
proceedings can be maintained. Definitions from other sources are not readily imported into
the eminent domain arena. See Richter v. Rose, 1998 MT 165 ¶¶ 18-20, 289 Mont. 379, ¶¶
18-20, 962 P.2d 583,¶¶ 18-20. One of the reasons, of course, is the clash between real
property rights and the power of eminent domain.
¶21 Moreover, the statements in both Mid-Northern and Rice are premised on Burke v.
Southern Pac. R. Co. (1914), 234 U.S. 669, 34 S.Ct. 907, 58 L.Ed. 1527, a case in which the
United States Supreme Court addressed several questions concerning the Southern Pacific
Railroad Company's title to mineral lands patented under the authority of a railroad land
grant. One of the issues was whether petroleum or mineral oil was included within the
meaning of the term "mineral" as it was used in acts of Congress reserving mineral land from
railroad grants. Burke, 234 U.S. at 676, 34 S.Ct. at 910, 58 L.Ed. at 1543. The Supreme
Court analyzed the issue by addressing the manner in which the term "mineral" had been
7
used in the federal laws reserving mineral lands from railroad land grants. Burke, 234 U.S.
at 679, 34 S.Ct. at 911, 58 L.Ed. at 1544. No federal statutes are at issue here. Furthermore,
§ 70-30-102(33), MCA, unlike § 70-30-102(44), MCA, does not contain the word "mineral."
¶22 McCabe also relies on Coronado Oil Co. v. Grieves (Wyo. 1979), 603 P.2d 406, in
which the Wyoming Supreme Court held that the interests of a federal oil and gas lessee
permit the lessee to condemn private property to obtain a right-of-way to its landlocked oil
and gas leases. The Coronado court noted that Article I, Section 32 of the Wyoming
Constitution allows the taking of private property for private use for private ways of
necessity. It determined the Wyoming constitutional provision is broad enough to cover the
proposed condemnation activity by the oil and gas lessee. Then, in reaching what it termed
"a reasonable and sound construction which carries out the intent of the constitution and
related statutes," the court interpreted a Wyoming statute allowing condemnation of
roadways for "mining" to include allowing condemnation of roadways for the exploration
for oil and gas under a federal oil and gas lease. Coronado, 603 P.2d at 410-11. McCabe
asserts Coronado is "a compelling legal and common sense precedent."
¶23 The eminent domain provision of Montana's Constitution, Article II, Section 29, is not
at all similar to the provision of the Wyoming Constitution cited in Coronado: Montana's
Constitution does not allow the taking of private property for private ways of necessity.
Indeed, private ways of necessity in Montana may be obtained only by satisfying several
criteria. See, e.g., Kullick v. Skyline Homeowners Ass'n, Inc., 2003 MT 137, ¶ 21, 316
8
Mont. 146, ¶ 21, 69 P.3d 225, ¶ 21; Loomis v. Luraski, 2001 MT 223, ¶ 51, 306 Mont. 478,
¶ 51, 36 P.3d 862, ¶ 51.
¶24 Montana’s constitutional eminent domain provision provides, in pertinent part, that
"[p]rivate property shall not be taken or damaged for public use without just compensation
to the full extent of the loss having first been made to or paid into court for the owner." Art.
II, Sec. 29, Mont. Const. The primary foci of the constitution are "public use" and "just
compensation." No specific "public uses" are contained in the Montana Constitution either
expressly or by implication.
¶25 Montana's general, substantive and procedural eminent domain statutes are codified
in Title 70, Chapter 30, of the Montana Code Annotated. Section 70-30-102, MCA,
enumerates 45 public uses for which the right of eminent domain may be exercised. The
public use upon which McCabe relies, subsection 33, was first enacted in 1877 and has been
carried forward to the present in essentially the same form. See Section 580, p. 189,
Montana Territorial Laws of 1877. A general knowledge of Montana history supports the
notion that the intent of that mining-related subsection enacted in 1877 was to encompass
"hard rock" or "ore" mining, and McCabe presents no argument or evidence suggesting
otherwise. Indeed, the language of subsection (33), "roads, tunnels, and dumping places for
working mines, mills, or smelters for the reduction of ores" reflects a legislative focus on the
kind of mining-related roads necessary to continue the then-existing mining in Montana. See
§ 70-30-102(33), MCA (emphasis added). The next-enumerated public use, "outlets, natural
or otherwise, for the flow, deposit, or conduct of tailings or refuse matter from mines, mills
9
and smelters for the reduction of ores" reinforces that intent. See § 70-30-102(34), MCA
(emphasis added). No enumerated public uses in § 70-30-102, MCA, contain explicit
language relating to oil and gas wells.
¶26 Title 82 of Montana Code Annotated is entitled "Minerals, Oil, and Gas." Chapter
1 of Title 82, "General Provisions," contains no eminent domain provisions. Thereafter,
mining and oil and gas exploration are addressed in separate statutory frameworks. Statutes
relating to ore mining, including rights-of-way and eminent domain for roads to work mines,
are codified in Chapters 2 and 4 of Title 82, MCA. Oil and gas are governed by Chapters
10, 11 and 15 of Title 82, MCA. The only eminent domain provisions in the oil and gas
chapters involve underground storage of natural gas. See §§ 82-10-302 through -305, MCA.
¶27 Had the Montana Legislature intended to extend the power of eminent domain to
encompass the development of oil wells, it easily could have done so in the portions of Title
82 which apply to the oil and gas industry. It also could have done so in § 70-30-102, MCA.
Indeed, the Legislature added numerous new public uses to § 70-30-102, MCA, during the
2001 session and another in the 2003 session. See 2001 Mont. Laws 125; 2003 Mont. Laws
451.
¶28 Finally, McCabe relies on Montana Talc, 229 Mont. at 497, 748 P.2d at 448 (citing
Butte Anaconda and Pacific Railway Co. v. Montana Union Railway Co. (1895), 16 Mont.
504, 41 P. 232), for the proposition that it has long been Montana public policy to foster and
encourage the development of mineral resources in every reasonable way. We observe that
10
the discussion to which McCabe refers occurred in the real context of a different subsection
of § 70-30-102, MCA, and in the factual context of an ore mine. A court's role in construing
statutes is to declare what is in terms or substance contained therein; not to insert what has
been omitted. Section 1-2-101, MCA. Moreover, because eminent domain interferes with
the fundamental right of private ownership of real property, any statute which allows a
condemnor to take a person's property must be strictly construed, giving the statute its plain
interpretation, but favoring the person's fundamental rights. Vaniman, 264 Mont. at 79, 869
P.2d at 792.
¶29 Under a plain meaning of the legislative language used, we conclude that oil wells are
not "mines" under § 70-30-102(33), MCA, to which rights-of-way for roads may be obtained
via eminent domain proceedings. We further conclude that exploration and development of
a federal oil and gas lease is not a "mine" which constitutes a "public use" under § 70-30-
102(33), MCA. Therefore, our answer to the first certified question is no. Because similar
reasoning would apply to the second certified question, whether the owner of an oil and gas
lease has power under § 82-2-201, MCA--as the owner of a "mining claim"--to condemn a
right-of-way, we do not address that question separately.
/S/ KARLA M. GRAY
We concur:
/S/ PATRICIA O. COTTER
/S/ JIM REGNIER
/S/ W. WILLIAM LEAPHART
11
Justice Jim Rice dissenting.
¶30 I dissent.
¶31 The Court here declares that there is no right of eminent domain for oil and gas
production, because it is not a “public use.” To arrive at this decision, the Court concludes
that Montana Talc Co. v. Cyprus Mines Corp. (1987), 229 Mont. 491, 748 P.2d 444, is
“neither controlling nor particularly relevant here.” ¶ 18. The Court further concludes that
McCabe is not entitled to relief under the plain language of the eminent domain statutes on
the basis of “[a] general knowledge of Montana history.” ¶ 25. The Court dismisses the
other authority offered by McCabe, and then concludes, without reference to specific
authority, that “oil wells” are not “mines.” I cannot agree with any of these conclusions.
The Court’s decision stands in opposition to our eminent domain law, as well as the sum of
our commercial, tax and natural resource law–all of which recognize “oil wells” as “mines.”
¶32 Montana Talc should not be so easily discarded. It is, as McCabe correctly
recognizes, our most complete statement on Montana’s eminent domain law. It discusses
statutory language which we also interpret herein and should not be tossed away as being
irrelevant.
¶33 First, Montana Talc illustrates that the Court has applied the wrong standard of
statutory interpretation herein. The Court relies heavily on City of Bozeman v. Vaniman
(1994), 264 Mont. 76, 869 P.2d 790, for the proposition that “any statute which allows a
condemnor to take a person’s property must be strictly construed.” ¶ 28 (emphasis added).
The Court then uses this “strict construction” standard to avoid a general consideration of
12
the meaning of “mines” under § 70-30-102(33), MCA. However, Montana Talc instructs
quite differently:
No Montana judicial decision that we are aware of declares that the
public uses described in Section 70-30-102, MCA, must be strictly construed.
. . . If strict construction of public uses for which eminent domain may be had
were required by the common law, where the law is declared by statute,
common law may be applied only if not in conflict with the statutes. Section
1-1-108, MCA. By law the statutes establish the law of this state respecting
the subjects to which they relate and their provisions and all proceedings under
them are to be liberally construed with a view to effect their objects and to
promote justice. Section 1-2-103, MCA.
Montana Talc, 229 Mont. at 498-499, 748 P.2d at 448-49 (emphasis added). The seeming
conflict between Montana Talc and the Court’s citation to Vaniman is easily resolved by
understanding that Vaniman had nothing to do with the determination of “public use,” but,
rather, addressed the procedure by which eminent domain is implemented, a completely
different issue. Montana Talc explained this difference in statutory construction, noting that,
although “public uses” would be liberally construed, “[w]e have, however, held that vigorous
compliance with procedures required for eminent domain is commanded.” Montana Talc,
229 Mont. at 498, 748 P.2d at 448. Here, the Court imports the “strict construction” standard
from procedural eminent domain, and erroneously applies it to a substantive issue of eminent
domain–the determination of public use.
¶34 The Court also omits the preeminent rule of statutory construction: legislative intent.
As Montana Talc instructs, “[s]tatutes may not be interpreted to defeat their object or
purpose, and the object sought to be achieved by the legislature is of prime consideration in
interpreting them.” Montana Talc, 229 Mont. at 498, 748 P.2d at 449 (citing Dover Ranch
13
v. Yellowstone County (1980), 187 Mont. 276, 609 P.2d 711). Fortunately, we need not look
far to determine the Legislature’s “object” in this case, because Justice Sheehy, for the
Montana Talc Court, explained at length the Legislature’s intent in enacting the statute we
are interpreting today. He stated, in part:
[T]he intention of the Montana legislature [was] to encourage the development
of the mining industry. Understandably so, because the mineral wealth of this
Treasure State, so named for its huge store of minerals taken and yet to be
taken, is a prime springhead of past and future economic increase for
Montanans. In keeping with this outlook, the legislature has given to mining
concerns the awesome power to condemn private property for public use in
return for just compensation where the ownership of the minerals and of the
surface do not coincide. So it is that in addition to the power of condemnation
for the mine itself under [the identical predecessor provision], there is further
power for the construction of roads, tunnels, ditches and other appurtenances
necessary to the mining effort. . . . Expansion, and not restriction, appears to
be the legislative watchword.
Montana Talc, 229 Mont. at 497, 748 P.2d at 448 (emphasis added). Thus, the Court in
Montana Talc concluded from this legislative intent that the appropriate “rule of construc-
tion, sustained by the great weight of well-considered authority” for determination of “public
use” in regard to mining, was as follows:
[P]ublic use must be exercised and can be exercised only so far as the
authority extends, either in terms expressed by the law itself, or by implication
clear and satisfactory.
Montana Talc, 229 Mont. at 498, 748 P.2d at 448 (citing Butte Anaconda and Pacific
Railway Co. v. Montana Union Railway Co. (1895), 16 Mont. 504, 536-37, 41 P. 232, 243)
(emphasis added).
¶35 The Court attempts to sidestep the holding in Montana Talc by reference to the
holding in State v. Aitchison (1934), 96 Mont. 335, 30 P.2d 805. Although admitting that
14
Aitchison did not apply a “strictly construed” standard to the interpretation of “public use”
statutes, the Court nonetheless asserts, erroneously, that Aitchison stands for the principle
that eminent domain cannot be granted by statutory implication. The Aitchison Court
expressed its reluctance to extend the right of eminent domain by implication, but it
reiterated that the correct standard allowed exactly that: “The authority to condemn must be
expressly given or necessarily implied. . . . All of our decisions have been in accord . . . .”
Aitchison, 96 Mont. at 339, 30 P.2d at 807. Thus, as Montana Talc correctly recognized,
public use for eminent domain purposes has been determined by a rule of construction which
requires “terms expressed by the law itself, or by implication clear and satisfactory” since
1895.
¶36 Further, the statute under which the State sought to create a fish rearing pond by
eminent domain in Aitchison was completely silent as to such rights–requiring the State to
argue “implication” out of thin air. Aitchison, 96 Mont. at 339, 30 P.2d at 807. That is
clearly not the case here.
¶37 Considering the correct rule of construction then, what is a “mine” under § 70-30-
102(33), MCA? The common and plain meaning of “mine” is simply “[a]n underground
excavation used to obtain minerals, ores, or other substances.” Black’s Law Dictionary 1009
(7th ed. rev. 1999). On this common definition, and considering the Legislature’s expansive
intent for “public uses” with regard to mining, I would conclude that “mine” necessarily, or
at a minimum, “by implication clear and satisfactory,” includes “oil wells.”
15
¶38 Such a conclusion is, of course, consistent with our statutory and case law: “In the
case of Mid-Northern Oil Co. v. Walker, 65 Mont. 414, 211 Pac. 353, this court held that an
oil-well is a mine.” Callender v. Crossfield Oil Syndicate (1929), 84 Mont. 263, 272, 275
P. 273, 276-77; “Oil is a mineral and the process of extracting it from the rocks is mining.”
Rice Oil Co. v. Toole County (1930), 86 Mont. 427, 431, 284 P. 145, 146 (citing Burke v.
Southern Pac. R. R. Co. (1914), 234 U.S. 669, 34 S.Ct. 907, 58 L.Ed. 1527); “‘Mineral’
means . . . gas, oil . . .” § 15-38-103(3), MCA (Chapter 38, Resource Indemnity Trust and
Ground Water Assessment); “[O]il, gas and other minerals . . . become personal property
(goods) and eligible to be collateral . . .” § 30-9A-102, MCA (annotations) (Uniform
Commercial Code); see also specific exclusion of oil and gas from mineral definition in
statutes governing metal mines, “‘Mineral’ means any ore, rock, or substance, other than
oil, gas . . .” § 82-4-303(8), MCA (Part 3, Metal Mine Reclamation) (emphasis added).
¶39 I would answer the two certified questions affirmatively.
/S/ JIM RICE
16
Justice John Warner dissenting.
¶40 I agree with Justice Rice’s dissent. I write separately to illustrate what I believe is
error in the Court’s interpretation of § 70-30-102, MCA.
¶41 The first oil well drilled in the United States was drilled in Pennsylvania in 1859. As
a fuel, oil was originally used as kerosene and later in furnaces. With the invention of the
internal combustion engine in the later 1800's, it became clear that oil would be a highly
sought-after commodity.
¶42 In 1914, the U.S. Supreme Court was called upon to decide whether a federal land
grant to a railroad company included mineral lands. The issue arose when plaintiff and his
associates discovered petroleum and attempted to locate placer mining claims upon the lands
patented to the railroad. Burke v. Southern Pacific Railroad Company (1914), 234 U.S. 669,
34 S.Ct. 907, 58 L.Ed. 1527. The Burke Court determined that all the issues in the case
turned upon the question, “[i]s petroleum or mineral oil within the meaning of the term
‘mineral’ as it was used in said acts of Congress reserving mineral land from the railroad
land grants?” Burke, 243 U.S. at 676, 34 S.Ct. at 910. The Burke Court reviewed both
scientific and historical evidence. It culled the decisions of several state courts, various other
acts of Congress utilizing the terms “mineral” and “mineral lands,” and decisions of the Land
Department, all of which had determined that in common usage and understanding,
petroleum is a mineral. Ultimately, the Court determined that mineral lands are all lands
“chiefly valuable for their deposits of a mineral character, which are useful in the arts or
valuable for purposes of manufacture,” Burke, 243 U.S. at 676, 34 S.Ct. at 910, (quoting
17
Northern Pacific Railway Co. v. Soderberg (1903), 188 U.S. 526, 23 S.Ct. 365, 47 L.Ed.
575), and that petroleum is a mineral. Burke, 243 U.S. at 679, 34 S.Ct. at 911. The Court
further noted approvingly the Supreme Court of Pennsylvania’s statement that “the work of
extracting [oil] from the containing rocks [is] ‘mining for oil.’” Burke, 243 U.S. at 676, 34
S.Ct. at 910, (quoting Funk v. Haldeman (Pa. 1867), 53 Pa. 229).
¶43 Cases citing Burke include issues of royalty law, conveyancing law, real property law,
taxation, etc. And while “[t]he term ‘mineral’ has been the source of considerable confusion
in mineral law litigation nationwide,” Farley v. Booth Brothers Land & Livestock Co.
(1995), 270 Mont. 1, 5, 890 P.2d 377, 379, Burke’s conclusion that oil is popularly
understood to be a mineral, set precedent for the entire nation. See U.S. v. Standard Oil Co.
(S.D. Cal. 1937), 20 F.Supp. 427; Lovelace v. Southwestern Petroleum Co. (E.D. Ky. 1919),
267 F. 504; Amoco Production Co. v. Guild Trust (D.Wyo. 1978), 461 F.Supp. 279; U.S. v.
Southern Pacific Co. (1919), 251 U.S. 1, 40 S.Ct. 47; Union Oil Co. of California v. Smith
(1919), 249 U.S. 337, 39 S.Ct. 308; Rowe v. Chesapeake Mineral Co. (6th Cir. 1946), 156
F.2d 752; General Petroleum Corp. of California v. U.S. (S.D.Cal. 1938), 24 F. Supp. 285;
Brennan v. Udall (D.Colo. 1966), 251 F.Supp. 12; Long v. Madison Coal Corp. (W.D.Ky.
1954), 125 F.Supp. 937; Estate of Fairbank v. U.S. (Ct.Cl.1964), 164 Ct.Cl. 1; Lee v.
Straughan (Ark. 1920), 226 S.W. 171; Cornwell v. Buck & Stoddard, Inc. (Cal.App. 1938),
82 P.2d 516; Mid-Northern Oil Co. v. Walker (Mont. 1922), 65 Mont. 414, 211 P. 353.
18
¶44 By 1920, the oil and gas industry was well-established nationwide.1 The federal
Mineral Leasing Act of 1920, 30 U.S.C. § 181, et seq., was passed to “promote the mining
of coal, phosphate, oil, oil shale, gas, and sodium on the public domain,” 41 Stat. 437 (1920),
and to “promote the orderly development of the oil and gas deposits in the publicly owned
land of the United States through private enterprise.” Harvey v. Udall (10th Cir. 1967), 384
F.2d 883, 885. In passing the Mining and Minerals Policy Act of 1970, 30 U.S.C. 21(a),
Congress clearly stated that it was in the country’s best interest to “foster and encourage
private enterprise in (1) the development of economically sound and stable domestic mining,
minerals, metal and mineral reclamation industries, [and] (2) the orderly and economic
development of domestic mineral resources . . . .” 30 U.S.C. 21(a). Section 21(a) goes on
to define “minerals” as “all minerals and mineral fuels including oil, gas, coal, oil shale and
uranium.”
¶45 Montana, meanwhile, did not experience its first commercial quantity discovery of
oil until 1913.2 In 1921, the Montana Legislature enacted a license tax scheme which
included separate chapters covering coal mines, metalliferous mines, gasoline distributors,
and oil producers. See Chapters 182, 183, 185, 186, RCM (1921). The next year, the
Montana Supreme Court was called upon to interpret the new laws. In Mid-Northern, the
1
Ross L. Malone, Jr., Oil and Gas Leases on Federal Lands, 14 Mont. L.Rev. 20, 20
(1953).
2
Id.
19
oil company balked at the prospect of paying the license tax to the state of Montana under
a statute that read as follows:
Every person engaging in or carrying on the business of producing, within this
state, petroleum, or other mineral or crude oil, or engaging in or carrying on
the business of owning, controlling, managing, leasing or operating, within this
state, any well or wells from which any merchantable or marketable petroleum
or other mineral or crude oil is extracted or produced . . . must . . . pay to the
state treasurer . . . license tax for engaging in and carrying on such business .
...
Section 2398, RCM (1921). The case also implicated the recently enacted federal Mineral
Leasing Act of 1920. The company argued that because it was a lessee of the federal
government under the federal Mineral Leasing Act of 1920, it was an agent of the federal
government and could not be taxed by a state. This Court held that the oil company was
merely a private contractor dealing with the United States in its proprietary character; that
it was not elevated to status of agent by virtue of its lease. Mid-Northern, 65 Mont. at 427,
211 P. at 356. In so holding, this Court cited Burke and stated:
It must be conceded that the interests of the United States in the lands covered
by plaintiff’s leases are mineral in character; that oil is a mineral, and that an
oil well is a mine . . . . But mining is not a public utility. It is a private
industry, and the exploitation and development of mines are no more
governmental functions than the cultivation of the soil or the manufacture of
farm machinery.
Mid-Northern, 65 Mont. at 427, 211 P. at 356. The Court then went on to conclude that
the oil company was required to pay the license tax.
¶46 Contrary to the Court’s present interpretation, it is clear that the 1921 state licensing
statute was not, by its terms, attempting to limit or define the terms “oil” and “well.” It is
also clear that the Court in Mid-Northern was not attempting to interpret the terms “oil” and
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“well” as used in the statute. Rather, the Court was clearly comfortable utilizing the terms
“mine” and “well” interchangeably, and was clearly not perplexed by the common
understanding that “oil” is a “mineral.” Since its publication in 1922, Mid-Northern has
been cited for this premise by numerous courts, treatises, and law reviews,3 and until today,
no one has questioned the general status of oil as a mineral under Montana law.
¶47 Today, however, things change. At ¶ 25, the Court states that “[a] general knowledge
of Montana history supports the notion that the intent of that mining-related subsection
enacted in 1877 was to encompass ‘hard rock’ or ‘ore’ mining, and McCabe presents no
argument or evidence suggesting otherwise.” The Court is correct that in 1877, the
Legislature was focused on hard rock mining. To place this statement in context, however,
it must be remembered that Montana did not experience its first major oil discovery until
1913, thirty-six years later. It is not unreasonable that the Legislature did not prospectively
provide for an industry that did not exist at the time, and it is reasonable to conclude that the
Legislature was paying attention to the nationwide trend in the law, including Montana law,
to generally classify oil as a mineral. Paragraph 25 also states that “[§ 70-30-102(33)] . . .
has been carried forward to the present in essentially the same form.” Clearly, however, after
the Mid-Northern decision, the Legislature had no reason to amend what is now § 70-30-
102(33), MCA, to include in the eminent domain laws specific provisions for land needed
3
See Ozark Chemical Co. v. Jones (10th Cir. 1942), 125 F.2d 1; Carter Oil Co. v. Blair
(Ala. 1951), 57 So.2d 64; U.S. v. H.G.D. & J. Mining Co. Inc. (S.D.W.Va. 1983), 561 F.Supp.
315; Standard Oil Co. of California v. Pastorino (Nev. 1978), 580 P.2d 118; Herbert Thorndike
Tiffany, Tiffany on Real Property § 589 (3d ed. 1939); Robert E. Sullivan, A Survey of Oil and
Gas Law in Montana as it Relates to the Oil and Gas Lease, 16 Mont.L.Rev. 1 (1955).
21
for roads to access oil wells, because this Court had stated unequivocally that an oil well is
a mine. Based on Mid-Northern, the Legislature almost certainly concluded that adding a
special provision for oil wells would be redundant.
¶48 At ¶¶ 19-20, the Court acknowledges this Court’s prior declarations in Mid-Northern
and Rice that “oil is a mineral, and . . . an oil well is a mine.” It then tells McCabe that it
is wrong to rely on that definition, because an oil well is only a mine when taxes are at issue.
The Court by this decision changes eighty-two years of settled law in Montana. In Rice, the
plaintiff was drilling for oil on two adjoining tracts of land under two separate operating
agreements. The plaintiff operated the tracts as one unit to maximize efficiency, and when
it came time to pay taxes, attempted to treat both tracts as one “mine.” This attempt rested
on the long-standing habit of metalliferous miners of consolidating adjoining claims for
convenience. In such circumstances, if there were continuity of interest in the claims, and
if the work performed on the claims tended to benefit all of the claims in the group, then the
claims could be assessed as one “mine.” Rice, 86 Mont. at 432, 284 P. at 146. The Court
did not allow the separate claims in Rice to be consolidated into one “mine” for tax purposes
because the lessors of the two tracts did not have continuity of interest, and in fact expected
the lessee to keep the output of the two tracts separate for royalty purposes. However, there
was no indication whatsoever from the Court, that there was any question that an oil well
was not a mine. Rice drew upon Burke, which was not a taxation case, and Mid-Northern,
as authority for the postulate that oil is a mineral and a well is a mine. Apparently, the Rice
court was looking for some guidance on the issue, and determined that the U.S. Supreme
22
Court and the Supreme Court of Montana were reasonable guides. The Court in this case,
however, discounts Mid-Northern and Rice because they are tax cases, and also discounts
Burke, concluding that it is not valuable precedent because it construed federal law not
Montana law. The Court’s interpretation of these cases is, to say the least, strained, and in
my view, incorrect.
¶49 Additionally, Mid-Northern, decided in 1922, and Rice, decided in 1930, are not the
only Montana authorities to follow the oil-as-mineral standard. In Forbes v. Mid-Northern
Oil Co. (1935), 100 Mont. 10, 45 P.2d 673, the Court was construing Chapters 139 and 140
of the Laws of 1927. Chapter 139 dealt with the statement of gross yields of mines and net
proceeds, and how they are computed. In its discussion, the Court made no distinction
between an oil well and a mine, stating, “[t]his Act requires the operator of a mine (or oil-
well) to make out and deliver to the State Board of Equalization a statement of the gross
yield of the minerals from such mine . . . .” Forbes, 100 Mont. at 13, 45 P.2d at 675. See
also Byrne v. Fulton Oil Co. (1929), 85 Mont. 329, 278 P. 514 (construing Ch.140 of the
Laws of 1927 which read “Every person . . . mining from . . . any mine whatsoever
containing gold . . . petroleum or other valuable minerals . . .). In Rist v. Toole County
(1945), 117 Mont. 426, 159 P.2d 340, the question was whether a grantee of a landowner’s
royalty in oil lands could lose his rights by tax sale against the grantor. Throughout the
opinion the Court cited statutes, including Article XII, Section 3, of the Montana
Constitution of 1889, and cases that referred only to “mines” or “mineral lands,” but applied
those statutes and cases to questions concerning oil royalties, seemingly oblivious to any
23
possible semantic distinction between “mine” and “well.” The dissent went further and
quoted Mid-Northern, conceding that “oil is a mineral and an oil well a mine.” Rist, 117
Mont. at 443, 159 P.2d at 347.
¶50 It is the declared policy of this state to properly and efficiently develop our natural
resources. Only a terribly strained interpretation of our laws can reach the result the Court
reaches today, and I dissent.
/S/ JOHN WARNER
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