State ex rel. Hughes v. State Bd. of Land Com'rs, 10152

• Decision Date: 17 June 1960
• Docket Number: No. 10152,10152
• Citation: 353 P.2d 331,137 Mont. 510
• Parties: STATE of Montana ex rel. Thomas W. HUGHES, Plaintiff, v. STATE BOARD OF LAND COMMISSIONERS of the State of Montana, J. Hugo Aronson, Forrest H. Anderson, Frank Murray, and Harriet E. Miller, as the members of the State Board of Land Commissioners, J. Hugo Aronson, as the President of the State Board of Land Commissioners, and Lou E. Bretzke as the Commissioner of State Lands and Investments and ex officio the Secretary of State Board of Land Commissioners, The State of Montana, and The Montana Power Company, a corporation, Defendants.
• Court: Montana Supreme Court

Page 331

353 P.2d 331

137 Mont. 510

STATE of Montana ex rel. Thomas W. HUGHES, Plaintiff, v. STATE BOARD OF LAND COMMISSIONERS of the State of Montana,

J. Hugo Aronson, Forrest H. Anderson, Frank Murray, and

Harriet E. Miller, as the members of the State Board of Land

Commissioners, J. Hugo Aronson, as the President of the

State Board of Land Commissioners, and Lou E. Bretzke as the

Commissioner of State Lands and Investments and ex officio

the Secretary of State Board of Land Commissioners, The

State of Montana, and The Montana Power Company, a

corporation, Defendants.

No. 10152.

Supreme Court of Montana.

Submitted May 18, 1960.

Decided June 17, 1960.

Toomey & Hughes, Helena, for plaintiff. Edmond G. Toomey, Helena, argued orally.

Forrest H. Anderson, Atty. Gen., William F. Crowley, First Asst. Atty. Gen., Corette, Smith & Dean, Sam B. Chase, Jr., Butte, for respondent. William F. Crowley, First Asst. Atty. Gen., and Samuel B. Chase, Jr., and Robert D. Corette, Butte, argued orally.

ANGSTMAN, Justice.

This is an action to enjoin the defendant Board of Land Commissioners from leasing to the defendant Montana Power Company certain described state lands for underground natural gas storage purposes, and to enjoin the Board from selling to the Montana Power Company the native gas remaining in the lands described.

The contract which the Board proposes to make, unless restrained, has the approval of the Attorney General, is set forth in the complaint as an exhibit, and in substance contains the following provisions:

That the lease shall operate for a period of twenty years, and covers any and all formations down to the top of the Ellis formation, which is usually encountered in the area at a depth of about 2,800 feet. It gives the Power Company an express grant to inject and store gas in and under the surface of the ground and to withdraw the gas therefrom. It gives the Lessee the preferential right to renew the lease for an additional twenty-year period subject to such terms and conditions as the defendant Land Board may impose. The Power Company obligates itself to pay the sum of $4,800 per annum for the use of the premises for storage purposes. The Lessee is obliged to furnish a bond in the sum of $20,000 to be approved by the commissioner of State Lands and Investments, to indemnify the State against loss, damage or detriment by reason of failure of the Lessee to fully discharge the obligations contained in the lease.

It appears that all of the land involved herein had been leased by the State for oil and gas purposes, the State retaining a 12 1/2 percent interest in and to the gas and oil produced.

The Power Company, either by direct lease from the Lessor, or by assignment by other Lessees, is now the owner of the right to explore for and produce gas from all of the land involved. The State of Montana, the Lessor, is offered the sum of $50,183.52 as the value of the gas in place on the land, and in lieu of the State's royalty interest.

The record reveals that this latter figure was arrived at by having the Oil and Gas Conservation Board appraise the value of the interest of the State of Montana to the native gas remaining in the zones and formations wherein gas is proposed to be stored. The Oil and Gas Conservation Commission fixed the value in the sum of $50,183.52.

In threatening to make this contract, the Land Board is acting under Chapter 213, Laws of 1955. Section 1 of this Act specifically authorizes the Board of Land Commissioners to lease 'upon such terms as it may determine, not inconsistent with the enabling act and the constitution, state lands * * * for the underground storage of natural gas * * * to any natural gas public utility authorized to do business in this state'. That section contains this clause:

'State lands which may be leased shall include lands in which the deposit of native gas shall have been depleted, provided the lessee pays to the state the amount specified by the state board of land commissioners for the native gas then remaining in the lands to be leased.'

Other provisions of the statute will be alluded to later.

Plaintiff contends that Chapter 213 conflicts with section 11 of the Enabling Act which, after providing for the granting of easements or rights in state lands, contains this limitation:

'* * * provided, however, that none of such lands, nor any estate or interest therein, shall ever be disposed of except in pursuance of general laws providing for such disposition, nor unless the full market value of the estate or interest disposed of, to be ascertained in such manner as may be provided by law, has been paid or safely secured to the state.'

Plaintiff also contends that it conflicts with that part of section 1 of Article XVII of the Montana Constitution, reading as follows:

'* * * and none of such land, nor any estate or interest therein, shall ever be disposed of except in pursuance of general laws providing for such disposition, nor unless the full market value of the estate or interest disposed of, to be ascertained in such manner as may be provided by law, be paid or safely secured to the state'.

Briefly, it is plaintiff's contention that Chapter 213 is not a general but a special law, and for that reason conflicts with the above-cited provisions of the Enabling Act and the Constitution.

The statute is presumed to be constitutional and valid, Rider v. Cooney, 94 Mont. 295, 23 P.2d 261; State ex rel. James v. Aronson, 132 Mont. 120, 314 P.2d 849; Cottingham v. State Board of Examiners, 134 Mont. 1, 328 P.2d 907.

A like contention was made in Leuthold v. Brandjord, 100 Mont. 96, 105, 47 P.2d 41, 44, and this court pointed out the distinction between a general and a special law as follows: 'However, a law is general and uniform in its operation when it applies equally to all persons embraced within the class to which it is addressed, provided such classification is made upon some natural, intrinsic or constitutional distinction between the persons within the class and others not embraced within it, but is not 'general' and makes an improper discrimination if it confers particular privileges or imposes peculiar disabilities upon a class of persons arbitrarily selected from a larger number of persons all of whom stand in the same relation to the privileges conferred or the disabilities imposed. The difference on which the classification is based must be such as, in some reasonable degree, will account for and justify the particular legislation.' Other cases reaching the same ultimate conclusion are Rutherford v. City of Great Falls, 107 Mont. 512, 86 P.2d 656; Blackford v. Judith Basin County, 109 Mont. 578, 98 P.2d 872, 126 A.L.R. 639, and State ex rel. Sparling v. Hitsman, 99 Mont. 521, 44 P.2d 747.

Chapter 213 applies to all persons within the class defined in the Act. It includes all persons engaged in the natural gas transmission or distribution business, and reaches everyone in that class who has a reasonable need for storage facilities for natural gas.

There is nothing in the case of Sjostrum v. State Highway Commission, 124 Mont. 562, 228 P.2d 238, so strongly relied upon by plaintiff, which militates against this view. Every individual or corporation engaged as a natural gas public utility and having any reasonable need for storing gas may have the benefit afforded by this statute.

The next contention made by plaintiff is that the legislature by Chapter 213 unlawfully attempted to delegate to the defendant Land Board the power and authority to make rules and regulations relative to the leasing of State lands for underground natural gas storage purposes contrary to section 11 of the Enabling Act which, in part, provides:

'Except as otherwise provided herein, the said lands may be leased under such regulations as the legislature may prescribe.'

Plaintiff contends, in substance, that the legislature must make the regulations, and that it is unlawful for it to delegate such authority to the Land Board. Chapter 213 contains these clauses: 'The state board of land commissioners is hereby authorized and empowered to lease in such manner and upon such terms as it may determine, not inconsistent with the enabling act and the constitution, state lands * * * for the underground storage of natural gas * * *.

'The state board of land commissioners shall have the power and authority to prescribe such rules and regulations and to do and perform all acts and things * * * as it may deem necessary and proper relating to the leasing of state lands for the underground storage of natural gas and the sale of the gas remaining in state lands in a gas field wherein native gas deposits have been depleted.'

In substance, plaintiff contends that the legislature in delegating powers to an administrative Board must itself prescribe the policy, standard or rule for the guidance of the administrative body, and cannot vest that board with arbitrary and uncontrolled discretion. He relies upon the general statement in 73 C.J.S. Public Administrative Bodies and Procedure § 29, p. 322. But a careful reading of Chapter 213 will disclose that the legislature did prescribe the policy and rules for the guidance of the board and did set limits on the authority of the Board. In no sense did it give the Board arbitrary or uncontrolled authority. It comes well within the rule stated in Forbes v. United States, 9 Cir., 1942, 125 F.2d 404, 408, where the court said:

'* * * To provide for the use of the Government lands by the public, Congress has enacted statutes conferring upon executive officers power to handle the administrative details, to prescribe rules and regulations governing the use of the lands in the various localities in order to carry out and fulfill the purposes of the statutes. Such authorizations are not unlawful delegations of legislative power, but amount merely to a conferring of administrative functions upon agents. United States v. Grimaud, 220...