Farmer Oil & Gas Props., LLC v. S. UTE Indian Tribe

• Citation: 899 F.Supp.2d 1097
• Decision Date: 12 October 2012
• Docket Number: Civil No. 12–cv–00313–LTB.
• Parties: FARMER OIL AND GAS PROPERTIES, LLC, an Arizona limited liability company, Plaintiff, v. SOUTHERN UTE INDIAN TRIBE, Defendant.
• Court: U.S. District Court — District of Colorado

899 F.Supp.2d 1097

FARMER OIL AND GAS PROPERTIES, LLC, an Arizona limited liability company, Plaintiff,

v.SOUTHERN UTE INDIAN TRIBE, Defendant.

Civil No. 12–cv–00313–LTB.

United States District Court,

D. Colorado.

Oct. 12, 2012.

Lon W. Abadie, William Edmond Zimsky, Abadie & Shill, PC, Durango, CO, for Plaintiff.

Thomas H. Shipps, Maynes, Bradford, Shipps & Sheftel, LLP, Durango, CO, for Defendant.

MEMORANDUM OPINION AND ORDER

BABCOCK, District Judge.

This matter is before me on Defendant Southern Ute Indian Tribe's (the “Tribe”) Motion to Dismiss for Lack of Subject Matter Jurisdiction Pursuant to Fed.R.Civ.P. 12(b)(1) [Doc # 16]. After considering the parties' arguments, for the reasons below, I GRANT the motion.

I. Background

Plaintiff Farmer Oil and Gas Properties, LLC (“Farmer”), is an Arizona limited liability company. The Tribe is a federally-recognized Indian tribe organized pursuant to the Indian Reorganization Act of 1943, 25 U.S.C. §§ 461–479, occupying a reservation in southwestern Colorado. Its reservation is “a checkerboard” of lands owned by the United States in trust for the Tribe, interests held by the Tribe, and interests held in fee by non-Indians. Southern Ute Indian Tribe v. Amoco Prod. Co., 874 F.Supp. 1142, 1151 (D.Colo.1995).

This case concerns the disputed ownership of the oil and gas estate beneath a certain 80–acre parcel of land within the Tribe's reservation located in the S/2SW/4 of Section 35, Township 33 North, Range 11 West, N.M.P.M., La Plata County Colorado (the “80–Acre Tract”). Specifically, the case involves the ownership of the coalbed methane gas (“CBM gas”) underlying that tract. It is uncontroverted that the Tribe owns the surface estate to all of Section 35, including the 80–Acre Tract. It is also uncontroverted that the Tribe owns the entire subsurface estate of Section 35, except for, of course, the oil and gas estate underlying the 80–Acre Tract. Farmer contends that it and not the Tribe owns the 80–Acre Tract's oil and gas estate. The parties do not dispute that the CBM gas is one stick in the oil and gas estate ownership bundle. Considerable additional background is necessary to couch and evaluate the instant motion, beginning with the disposition of the 80–Acre Tract. The facts below are undisputed unless otherwise noted.

A

The 80–Acre Tract was originally part of a homestead patent issued under the Coal Lands Act of 1910. That patent transferred the 80–Acre Tract to Lewis H. Underwood, but it reserved the tract's coal estate in the United States.

On May 27, 1946, the presumed successors to Underwood—Raymond, Olive, and Laura Farmer—issued a warranty deed to John C. Cameron conveying approximately 2,440 acres of land within the Tribe's reservation, land which included the 80–Acre Tract (the “Cameron Deed”). The Cameron Deed, however, reserved

all minerals including oil, gas and carbonaceous minerals together with the right to prospect for, mine and remove the same, for a period of twenty years at which time such reservations shall terminate unless minerals are being produced from said land at the end of twenty years, in which event said reservations shall continue during production.

First Am. Compl. at ¶ 14. Farmer asserts that when Raymond, Olive, and Laura Farmer executed the Cameron Deed, they owned the 80–Acre Tract's oil, gas, and mineral estate (save the coal, which had been reserved to the United States in patents for those lands, as explained infra ).

Next, on July 8, 1946, John Cameron and his wife conveyed all their right, title, and interest to the lands contained in the Cameron Deed to “the United States of America in trust for the Southern Ute Tribe.” The deed that Cameron and his wife issued to the United States did not contain a reservation, nor did it mention the mineral reservation contained in the Cameron Deed.

B

Fast forward to 1991. That year the Tribe sued those claiming an ownership interest in CBM gas contained in coal strata underlying lands within the Tribe's reservation which had previously been reserved in the federal government under the Coal Lands Acts of 1909 and 1910 (“the Coal Lands Acts”). Amoco, 874 F.Supp. at 1146. The defendants included Amoco Production Company, other oil companies, and individuals, including Farmer's predecessor in interest. Id. The Tribe sought a declaration that it owned the CBM gas underneath the land at issue, land which the parties agree included the 80–Acre Tract. Id. It argued that Congress's reservation of “coal” in the Coal Lands Acts also reserved the CBM gas. Therefore, when the United States restored the coal to the Tribe in 1938 pursuant to the Order of Restoration, see 3 Fed.Reg. 1425 (Sept. 14, 1928), it restored the CBM gas too. Id. at 1151. The “central question” in Amoco was “whether Congress included CBM gas in its reservation of ‘coal’ under the Coal Lands Acts.” Id. at 1151, 1146.

On June 23, 1993, during the pendency of Amoco, the Tribe entered into a settlement agreement (the “PSA”) with Palo Petroleum, Inc. (“Palo”), one of the defendants in Amoco. See First Am. Compl. Ex. 1, Palo Settlement Agreement (hereinafter cited as “PSA”) at 1, Recitals. Palo was mining and intended to mine minerals on certain lands within the Tribe's reservation pursuant to leases from private owners and operating companies. The PSA's purpose was to insulate Palo from the risk that the Tribe could obtain a favorable decision in Amoco. Farmer's predecessor-in-interest ratified the PSA by executing a ratification agreement (the “Ratification”). On August 6, 1993, I approved the PSA and dismissed all of the Tribe's claims against Palo with prejudice. The Amoco case proceeded against the rest of the defendant-class.

On February 5, 1995, nunc pro tunc to September 13, 1994, I held that Congress's reservation of coal in the Coal Lands Acts did not include a reservation of CBM gas. Id. at 1152. “Consequently, title to CBM gas in the lands at issue [in Amoco ] was conveyed by United States patents issued to homesteaders under the 1909 and 1910 Acts upon surplus lands on the Tribe's reservation.” Id. I therefore determined that the Tribe acquired no title to CBM gas in 1938 when the United States restored the coal to the Tribe. Id. The Supreme Court affirmed my ruling. See Amoco Prod. Co. v. Southern Ute Indian Tribe, 526 U.S. 865, 119 S.Ct. 1719, 144 L.Ed.2d 22 (1999). By order dated March 22, 2000, on remand from the Supreme Court, I dismissed all of the Tribe's remaining claims unresolved by my prior order. This closed Amoco.

C

The next background event occurred in 2010. That year the Tribe intervened in a lawsuit filed in Southern Ute Indian Tribal Court styled Three Stars Production Company, LLC v. BP America Production Company, Cause No. 2010 CV 36. As an affirmative defense in that action, the Tribe asserted that it has owned the 80–Acre Tract's oil and gas estate, including the CBM gas therein, since May 27, 1966, on the theory that the terminable mineral interest in the Cameron Deed reverted to the Tribe on that date due to non-production. The case was ultimately dismissed because Three Stars could not join the United States, which the Tribal Court determined was an indispensable party.

Three Stars then filed suit in this Court. See Three Stars Production Company, LLC v. BP America Production Company, Case No. 11–cv–1162–WYD–MUW. That case is pending before Chief Judge Daniel. There, BP filed a motion to dismiss Three Stars's complaint. See id., Doc. 10, 16. Based on the ownership claim that the Tribe asserted in Three Stars's case in Tribal Court, BP argued in its motion that the Tribe was the owner of 80–Acre Tract's mineral estate and, as such, that Three Stars had failed to join the Tribe as an indispensable party. The court granted BP's motion, although it did not decide the merits of BP's assertion regarding the Tribe's ownership claim. See id., Doc # 42 at 8. (“[C]oncerning BP's claim that the 80 mineral acres reverted back to the Tribe prior to Three Stars obtaining leases to those lands, the merits of the claim are irrelevant at this stage of the litigation. Rule 19 is concerned with ‘claimed’ interests; ‘[t]he underlying merits of the litigation are irrelevant’ to the Rule 19 inquiry unless the claimed interest is ‘patently frivolous.’ Because the Tribe asserted title to the minerals under the subject acres in the previous action before the Tribal Court, and as I do not find these claims to be frivolous, I conclude that the Tribe has an interest in the subject mineral acres, and that the Tribe's ability to protect that interest could be impaired if this action was disposed of in the Tribe's absence.”) (internal citations omitted). The court also noted that the Tribe enjoys sovereign immunity. Id. at 12 (Given that the Tribe ... enjoy[s] sovereign immunity, ...”).

D

After learning of the Tribe's asserted ownership of the 80–Acre Tract's oil and gas estate in the Three Stars cases, Farmer filed this suit. Farmer alleges that the terminable mineral estate in the Cameron Deed has been perpetuated by the production of oil or gas on lands subject to the deed's mineral reservation. It further alleges that it has succeeded to an undivided 78.5714286% terminable mineral interest in the 80–Acre Tract's oil and gas estate and that the Tribe has no interest therein.

Farmer brings three claims for relief. The first seeks a declaratory judgment that my ruling in Amoco held that the Tribe did not own the 80–Acre Tract's CBM gas as of March 22, 2000. The second asks for a declaratory judgment that the Tribe's claimed ownership of the CBM gas underneath the 80–Acre Tract is without merit and frivolous. The third is a declaratory judgment in favor of Farmer that in the PSA and Ratification, the Tribe agreed to communitize the 80–Acre Tract's CBM gas with the adjacent 240–acre parcel of Tribe minerals. Farmer asserts that this case presents a federal question and that jurisdiction therefore exists...