State ex rel. Rausch v. Amerada Petroleum Corp., 7266

Decision Date09 August 1951
Docket NumberNo. 7266,7266
Citation49 N.W.2d 14,78 N.D. 247
PartiesSTATE ex rel. RAUSCH v. AMERADA PETROLEUM CORP. et al.
CourtNorth Dakota Supreme Court

Syllabus by the Court.

1. Oil and natural gas are generally classified as minerals.

2. School and university lands granted to the state by the United States of America are under the control of the Board of University and School Lands, subject to the provisions of Article IX of the North Dakota Constitution and any law passed by the legislature of the state.

3. The primary source of authority of the Board of University and School Lands is Article IX of the North Dakota Constitution. When the legislature acts with respect to the powers of the board it acts in a restrictive capacity and not as a conferrer of authority.

4. The Commissioner of University and School Lands acts as general agent of the Board of University and School Lands under its direction and authority.

5. Under the Enabling Act, NDRC 1943, Vol. 3, p. 1690, Chapter 180, 25 U. S. Statutes at Large, p. 676, the State of North Dakota has full power to provide for the execution of oil and gas leases on school and university lands.

6. The Constitution of the State of North Dakota is not a grant of but a restriction on legislative power and the legislature may enact any law not expressly or inferentially forbidden by the constitution of the state or of the United States.

7. The constitution of the state is subject to construction by the courts, whose duty it is to discover and give effect to the intention of the people who adopted it.

8. It is presumed that the people who adopted a constitutional provision intended a reasonable result and the courts will, if possible, give a constitutional provision a construction that will produce that result.

9. The restrictions contained in Section 161 of the North Dakota Constitution for the leasing of granted lands deal exclusively with leases with respect to pasturage, meadow purposes, and purposes of cultivation and do not embrace or include leases for the purpose of exploring for or exploiting subsurface mineral resources.

Nels G. Johnson, Bismarck, for plaintiff and appellant.

E. T. Christianson, Atty. Gen., and Helgi Johanneson, Asst. Atty. Gen., for respondents, Board of University and School Lands and E. T. Christianson as Atty. Gen.

Cox, Cox, Pearce & Engebretson, Bismarck, and Harry D. Page and Jack Langford, both of Tulsa, Okl., for respondent, Amerada Petroleum Corp.

MORRIS, Chief Justice.

In this action the relator challenges the validity of a lease executed for the State of North Dakota by the Commissioner of University and School Lands, granting to A. M. Fruh and Thomas W. Leach, as lessee, the right, under certain conditions, to explore, mine, and operate for oil and gas upon certain lands belonging to the state, which lease has been assigned to and is now owned by the Amerada Petroleum Corporation.

The relator, after setting forth the corporate capacity of the Amerada Petroleum Corporation, the establishment of the Board of University and School Lands as an agency of the State of North Dakota, the official capacity of the attorney general and his refusal upon demand to institute and maintain this action, and the capacity of the relator as a taxpayer who brings the action for himself and on behalf of other taxpayers similarly situated, pleads facts upon which his asserted right to relief is predicated. He alleges that the State of North Dakota, acting through the Board of University and School Lands and the State Land Commissioner, executed and delivered a lease, dated November 10, 1948, covering the following described lands in Williams County, to-wit: the N 1/2, N 1/2 SE 1/4, SW 1/4 SE 1/4, SW 1/4 Section 36, Township 155 N, Range 96 W, and numerous other oil and gas mining leases in other counties of the state, each of which has been assigned to and is owned by the Amerada Petroleum Corporation. It is also alleged that each of these leases is upon lands in the possession of and owned by the State of North Dakota, which were acquired by it as a part of the lands granted for the support of the common schools by the United States of America to the State of North Dakota, pursuant to the Enabling Act, being an Act of the Congress of the United States of America, approved February 22, 1889, and known as Chapter 180, 25 U. S. Statutes at Large, p. 676, and accepted by the State of North Dakota through the adoption of its constitution. Section 205, N.D. Const.

It is further alleged that the leases in question were made by the Board of University and School Lands and the State Land Commissioner in accordance with the provisions of Chapter 15-05, RCND 1943, and that the law as set forth in that chapter has been complied with.

The complaint further states: 'That the State of North Dakota is the owner of each of said tracts of land, or of one-half of the oil, gas and other minerals thereunder, and in possession thereof, subject only to Amerada Petroleum Corporation's said leases, and that said corporation asserts the validity of its said oil and gas leases and claims the right to exercise the rights and privileges granted thereby.'

It is then further alleged: 'That, however, said oil and gas leases, and each of them, are invalid and of no effect because issued without valid authority of law, and particularly without valid statutory authorization because the said legislative enactments are in conflict with and contrary to the provisions of the Enabling Act and the Constitution of North Dakota, specifically Section 11 of the Enabling Act and Section 161, Article IX of the Constitution.'

The plaintiff then seeks to have the leases of the Amerada Petroleum Corporation adjudged null and void.

The Amerada Petroleum Corporation admits the execution of the leases alleged in the complaint and the assignments thereof to the corporation and alleges that they are lawfully executed on behalf of the State of North Dakota by the Board of University and School Lands and that the corporation has 'complied with each and all of the terms and provisions of said oil and gas leases, including the payment of rentals therein provided for the privilege of deferring commencement of a well; and that each and all of said oil and gas leases were and are valid and subsisting leases.' The Board of University and School Lands and the Attorney General, by joint answer, admit the execution of the leases and allege the regularity and validity of their execution.

The complaint describes but one specific lease and land that it covers. There is on file a stipulation of facts signed by all of the parties admitting the execution and assignment of this lease and identifying photostatic copies of the lease, assignment, and a consent to the assignment signed by the State Land Commissioner. Both the pleadings and the stipulation also set forth that the Amerada Petroleum Corporation is the owner, as assignee, of other oil and gas leases similarly given by the State of North Dakota covering original grant lands which the state still owns, and also lands that were originally granted from the United States Government and which have been sold to private persons, and in which the state has reserved an undivided one-half of the oil, gas, and other minerals. These leases are not described with particularity, nor are the lands which they cover identified. As to those leases covering an interest in the oil and gas of lands that have been sold by the state, the purchasers or the owners are not identified and have not been made parties to the action. The court will not undertake to determine the validity or invalidity of specific leases which may or may not involve rights of persons not parties to this action upon the general allegation that they are similar to the lease set forth and described in detail in the complaint. This decision will be confined to a determination of the validity of the one lease described and identified in the complaint and stipulation.

Oil and natural gas are generally classified as minerals. 24 Am.Jur., Gas and Oil, Sec. 1; 58 C.J.S., Mines and Minerals, Sec. 2. A list of authorities supporting this assertion may be found under the heading 'Mineral' in 27 Words and Phrases, p. 215. The lease in question gives to the lessee the right to explore and exploit the oil and gas resources underlying the land described therein for a term of five years, and as long thereafter as oil or gas or either of them is produced from the land by the lessee. The lease provides for payment to the state, under certain conditions, of one-eighth of the gas and oil produced from the premises, and in event drilling is deferred beyond a certain date, an annual rental of twenty-five cents per acre.

The land covered by the lease is a part of the original land grant by the United States of America to the State of North Dakota for the support of the common schools of the state and, as such, is under the control of the Board of University and School Lands, subject to constitutional and statutory limitations. Section 156 N.D.Const.; Section 15-0102, RCND 1943. The Commissioner of University and School Lands acts as general agent of the board under its direction and authority.

Section 15-0509, RCND 1943 provides that: 'The board of university and school lands may lease any lands under its control believed to contain oil, gas, coal, cement materials, sodium sulfate, sand and gravel, road material, building stone, chemical substances, metallic ores, or colloidal or other clays, and may make and establish rules and regulations for development and drilling operations.'

The execution of the lease by the Board of University and School Lands appears to be in accord with the letter and spirit of the laws enacted by the legislature pertaining to this subject.

The relator challenges the validity of the lease, regardless of statutory law, upon two basic and fundamental grounds. The first is that the...

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26 cases
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    • United States
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    ...State ex rel. Gaulke v. Turner, 37 N.D. 635, 164 N.W. 924; Baird v. Burke County, 53 N.D. 140, 205 N.W. 17; State ex rel. Rausch v. Amerada Petroleum Corp., 78 N.D. 247, 49 N.W.2d 14. The courts will presume in favor of the constitutionality of the law, until the contrary clearly appears. O......
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    ...this Court has relied on contemporaneous interpretations of ambiguous provisions of our Constitution. State ex rel. Rausch v. Amerada Petroleum Corp., 78 N.D. 247, 49 N.W.2d 14, 21 (1951); State ex rel. Linde v. Hall, 35 N.D. 34, 159 N.W. 281, 285-286 (1916); State ex rel. Linde v. Packard,......
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    ...with the constitution when that can be done without doing violence to the language of either." State ex rel. Rausch v. Amerada Petroleum Corp. , 78 N.D. 247, 256, 49 N.W.2d 14, 20 (1951). Under N.D. Const. art. VI, § 4, we "shall not declare a legislative enactment unconstitutional unless a......
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    ...as an aid in determining its meaning and the intent, if it can be gathered from such proceedings. State ex rel. Rausch v. Amerada Petroleum Corp., 78 N.D. 247, 49 N.W.2d 14, 21 (1951). In its 1971 report to the legislature, the Commission discussed the effect that Art. V, Sec. 6 would have ......
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