Marion Energy, Inc. v. KFJ Ranch P'ship

• Citation: 267 P.3d 863,2011 UT 50
• Decision Date: 19 August 2011
• Docket Number: No. 20090796.,20090796.
• Parties: MARION ENERGY, INC.; State of Utah, School and Institutional Trust Lands Administration, Plaintiffs and Appellants, v. KFJ RANCH PARTNERSHIP, Defendant and Appellee.
• Court: Utah Supreme Court

2011 UT 50

267 P.3d 863

MARION ENERGY, INC.; State of Utah, School and Institutional Trust Lands Administration, Plaintiffs and Appellants,

v.KFJ RANCH PARTNERSHIP, Defendant and Appellee.

No. 20090796.

Supreme Court of Utah.

Aug. 19, 2011.

Jack R. Luellen, Relma M. Miller, Denver, CO, for plaintiff Marion Energy, Inc.

Thomas A. Mitchell, Salt Lake City, for plaintiff School and Institutional Trust Lands Administration.

Joane P. White, Price, Thomas R. Karrenberg, Jon V. Harper, Samantha J. Slark, Salt Lake City, for defendant.Phillip Wm. Lear, Jeffrey R. Taylor, Salt Lake City, for amicus Utah Petroleum Association.

AMENDED OPINION^*

Associate Chief Justice DURRANT, opinion of the Court:

INTRODUCTION

¶ 1 Appellants, Marion Energy, Inc. (Marion) and the State of Utah School and Institutional Trust Lands Administration (the Trust), lease and own oil and gas deposits that lie underneath property owned by the KFJ Ranch Partnership (KFJ). In order to build a road to access these deposits, Marion and the Trust seek to condemn a portion of KFJ's land. To do so, they rely upon a statute that permits the exercise of eminent domain for the construction of “roads ... to facilitate ... the working of ... mineral deposits.” ¹ The question for our resolution is whether the phrase “mineral deposits,” as used in this statute, was intended by the Legislature to encompass oil and gas deposits.

¶ 2 We conclude that the answer to this question is not apparent from the statute's plain language, as is evident from the fact that the phrase “mineral deposits” is defined in some sections of the Utah Code to include oil and gas, but defined in other sections to exclude oil and gas. Because we find that this phrase is susceptible to either of these reasonable interpretations, we conclude that the statute upon which Marion and the Trust rely is ambiguous. When faced with such an ambiguity in a statute purporting to grant the power of eminent domain, we strictly construe the ambiguity against the condemning party.² Accordingly, we hold that Marion and the Trust are not authorized by this statute to condemn KFJ's land. We therefore affirm the district court's dismissal of Marion and the Trust's condemnation action.

BACKGROUND

¶ 3 KFJ is the owner of the KFJ Ranch, which consists of approximately 9,400 acres of land located near Price, Utah. Approximately 6,600 acres of this land are owned by KFJ in fee simple. The remaining 2,800 acres are leased from the state and federal governments.

¶ 4 Marion is the lessee of two oil and gas deposits located in Price, Utah. Marion leased these deposits from the Trust. Both of the leases lie beneath surface land owned or leased by KFJ.

¶ 5 In an effort to exploit its leased oil and gas deposits, Marion wishes to construct two wells on surface lands owned by KFJ. Due to the topography of the land and the proposed well locations, Marion contends that it is “impossible ... to access [its] leases without crossing surface lands owned and/or controlled by” KFJ. To resolve this dilemma, Marion attempted to negotiate an easement with KFJ that would allow Marion to cross KFJ's land to access its oil and gas deposits. KFJ refused these requests.

¶ 6 Following KFJ's refusal, Marion and the Trust brought a condemnation action in the district court seeking to condemn nearly fifteen acres of KFJ's property to construct a four-mile-long road giving Marion access to the proposed well locations. An appraiser hired by Marion estimated that the total value of the land sought to be condemned was $28,000.

¶ 7 In their condemnation action before the district court, Marion and the Trust attempted to invoke what they refer to as the “express rights of eminent domain granted by the legislature and codified as Utah Code [section] 78B–6–501(6)(a).” Section 501(6)(a) permits the exercise of eminent domain for the construction of “roads, railroads, tramways, tunnels, ditches, flumes, pipes, and dumping places to facilitate the milling, smelting, or other reduction of ores, or the working of mines, quarries, coal mines, or mineral deposits including minerals in solution.” ³

¶ 8 After initiation of the condemnation action, KFJ moved to dismiss based on its contention that section 501(6)(a) does not grant Marion and the Trust the power of eminent domain to condemn land to build a road to access leased oil and gas deposits. In response to KFJ's motion, the district court conducted a hearing to determine whether section 501(6)(a) “provide[s] authority to take lands for roads to access oil and gas deposits.”

¶ 9 To resolve this question, the district court began by noting that it was “required to consider the plain language of the statute, to consider that each word has been used advisedly, and to presume any omissions are purposeful.” Looking to the statute's text, the court then observed that section 501(6)(a) “lists the substances for which land can be condemned for roads, and [that] oil and gas are not included.” Additionally, the court determined that the fact that “oil and gas are specifically mentioned in Utah Code [section] 78B–6–501(6)(d) ... shows [that] the legislature purposefully intended to exclude oil and gas from ... [section] 78B–6–501(6)(a).” Based on this analysis, the district court granted KFJ's motion to dismiss, concluding that section 501(6)(a) “does not provide authority to take land for roads to access oil and gas deposits.”

¶ 10 On appeal, Marion and the Trust contend that the district court erred in concluding that section 501(6)(a) does not provide authority to condemn land to build a road to access the leased oil and gas deposits. In support of this position, Marion and the Trust argue that the plain language of section 501(6)(a) and over one hundred years of precedent demonstrate that the phrase “mineral deposits” includes oil and gas. Additionally, Marion and the Trust argue that any interpretation of the phrase “mineral deposits” that excludes oil and gas would create an absurd result.

¶ 11 In contrast, KFJ argues that the plain language of section 501(6)(a) does not authorize Marion to condemn land to build a road to access its leased oil and gas deposits. Alternatively, KFJ contends that section 501(6)(a) is ambiguous and that we must strictly construe this ambiguity against Marion—the party seeking to exercise the power of eminent domain. We have jurisdiction to hear this appeal pursuant to section 78A–3–102(3)(j) of the Utah Code.

STANDARD OF REVIEW

¶ 12 “We review questions of statutory interpretation for correctness, affording no deference to the district court's legal conclusions.” ⁴

ANALYSIS

I. SECTION 501(6)(a) DOES NOT AUTHORIZE MARION TO CONDEMN LAND TO BUILD A ROAD TO ACCESS ITS OIL AND GAS DEPOSITS

¶ 13 In relevant part, section 501(6)(a) of the Utah Code provides that the right of eminent domain may be exercised for the building of “roads ... to ... facilitate the ... working of ... mineral deposits.” ⁵ The central question presented for our review is whether subsection (6)(a)'s use of the phrase “mineral deposits” encompasses the terms “oil” and “gas” and thereby provides Marion with authority to condemn KFJ's property to build a road to access its leased oil and gas deposits. Because we conclude that section 501(6)(a) is ambiguous, and because we strictly construe this ambiguity against the condemning party, we hold that section 501(6)(a) does not provide Marion with authority to condemn KFJ's land.

¶ 14 It is well settled that when faced with a question of statutory interpretation, “our primary goal is to evince the true intent and purpose of the Legislature.” ⁶ “The best evidence of the legislature's intent is ‘the plain language of the statute itself.’ ” ⁷ Thus, “[w]hen interpreting a statute, we assume, absent a contrary indication, that the legislature used each term advisedly according to its ordinary and usually accepted meaning.” ⁸ Additionally, we “presume[ ] that the expression of one [term] should be interpreted as the exclusion of another.” ⁹ We therefore seek to give effect to omissions in statutory language by presuming all omissions to be purposeful.

¶ 15 When the “ ‘meaning of [a] statute can be discerned from its language, no other interpretive tools are needed.’ ” ¹⁰ But when statutory language is ambiguous—in that its terms remain susceptible to two or more reasonable interpretations after we have conducted a plain language analysis—we generally resort to other modes of statutory construction and “seek guidance from legislative history” and other accepted sources. ¹¹ In some specific contexts, however, we have adopted unique rules that guide our construction of ambiguous terms.¹²

¶ 16 For instance, because the exercise of eminent domain results in the derogation of a property owner's right to use and enjoy his land, we have stated that any ambiguity in statutory language purporting to grant the power of eminent domain must be strictly construed in favor of the property owner and against the condemning party.¹³ In that context, we stated in Bertagnoli that “the extent to which the power [of eminent domain] may be exercised is limited to the express terms and clear implication of the statute.” ¹⁴ Not only is this rule of strict construction supported by our precedent, it is also consistent with the “majority rule” for interpreting eminent domain statutes expressed in numerous authorities on this topic. ¹⁵

¶ 17 Given this rule of strict construction, Marion is authorized to condemn KFJ's land to build a road to access its leased oil and gas deposits only if such authority is expressly granted or clearly implied by the plain language of section 501(6)(a).¹⁶ In support of their position that section 501(6)(a) provides this authority, Marion and the Trust contend that “as a matter of law” the phrase “mineral deposits” encompasses oil and gas. They also argue that any interpretation of the phrase “mineral deposits” that does not include oil and gas would...