Utah Resources Intern., Inc. v. Utah Bd. of State Lands, 12131

• Citation: 489 P.2d 615,26 Utah 2d 342
• Decision Date: 30 September 1971
• Docket Number: No. 12131,12131
• Parties: d 342, 61 A.L.R.3d 1101 UTAH RESOURCES INTERNATIONAL, INC., a Utah corporation, et al., Plaintiffs and Respondents. v. UTAH BOARD OF STATE LANDS et al., Defendants and Appellants.
• Court: Supreme Court of Utah

Page 615

489 P.2d 615

26 Utah 2d 342, 61 A.L.R.3d 1101

UTAH RESOURCES INTERNATIONAL, INC., a Utah corporation, et al., Plaintiffs and Respondents. v. UTAH BOARD OF STATE LANDS et al., Defendants and Appellants.

No. 12131.

Supreme Court of Utah.

Sept. 30, 1971.

Vernon B. Romney, Atty. Gen., Sheridan L. McGarry and Joseph P. McCarthy, Asst. Attys. Gen., Salt Lake City, for defendants and appellants.

Adam M. Duncan, Salt Lake City, for plaintiffs and respondents.

James R. Brown, and Robert G. Pruitt, Jr., of Neslen & Mock, Salt Lake City, for Gas Producing Enterprises, Inc., amicus curiae.

On Rehearing

HENRIOD, Justice:

Appeal from an injunction preventing the Board from granting an 'oil shale' lease on land on which plaintiffs had an 'oil, gas and hydrocarbon' lease. We said the injunction was proper in this case, reported in 25 Utah 2d 344, 481 P.2d 677, (which we shall call the second Morgan case) by a split decision, in which one justice concurred in the main opinion, one concurred in the result (the author here) and two dissented. On petition for rehearing a majority of the court saw fit to grant it and to re-examine the case,--which now we do,--reversing that decision, with no costs awarded.

The present case is a sequel to Morgan v. Utah Board of State Lands, 21 Utah 2d 364, 445 P.2d 776 (1968), which we will call the first Morgan case, and which plaintiffs say is dispositive here. In our decision from whence this rehearing springs, and with come confusion, we technically agreed with plaintiffs, but now, on rehearing and upon further examination, we recant,--and doing so do not equivocate,--since the first Morgan case factually was somewhat different, and whose reasons for its result equally were somewhat debatable.

There are two reasons why we must conclude other than we did previously in this case:

I. The plaintiffs, in equity and at law, are impaled upon the horns of a dilemma which we did not discern: That they are seeking equity to relieve themselves of a conscious, intelligent, knowledgeable and experience-inspired promise to accept and subscribe to a lease specifically excluding 'oil shale,'--which they now negate. That subscription should have ended this case on a simple motion to dismiss, because it is most obvious that if these experienced people deliberately agreed for the exclusion of oil shale they cannot under the simplest principles of contract say they didn't mean what they said and signed--and it would make no difference whether oil shale had hidden in it kerogen, cabbages, coal oil or kings,--and with our present decision we spare them the invalidation of their lease on any grounds anent lack of manifestation of mutual assent, mutuality of intention, or meeting of the minds, whichever phrase one wishes to use. Deciding as we do, the plaintiffs have lost nothing which they specifically and apodictically agreed to get, and the State has lost nothing that it equally and as apodictically agreed to give. It is almost unthinkable that the parties here, under the plain, unambiguous terms of the lease, either individually or collectively could have intended the phrase 'excluding coal and oil shale' to mean 'including coal and oil shale,'--upon which matter hereinafter we will elaborate. This, although this phase of the case was not made a numbered point by respondent on appeal, it being however in the argument because of the very nature of this litigation and arguments pertinent thereto.

II. The instant case which was argued and almost entirely bottomed by plaintiffs on our decision in Morgan v. Utah Board of State Lands, 21 Utah 2d 364, 445 P.2d 776 (1968), wherein the controversy was between the same parties as those in the instant case, is clearly distinguishable. That suit was to enjoin the Board from issuing an 'oil and gas' lease to a third party while there was a subsisting 'bituminous sand' lease in favor of the plaintiffs there. The issue in that case was restrictive and was said by Mr. Justice Tuckett to be as follows:

'We are here concerned chiefly with the issue as to whether or not the oil recoverable under the bituminous sand lease is the same mineral as that recoverable under an oil and gas lease,'

and we unanimously concluded that it was, and we were justified, so doing, because the record reflected that it was. ¹

Nothing was said in that case about oil shale, which is not a liquid in its natural state, and is not porous in the sense that bituminous sand is. It produces 'shale oil,' which respected authority says is a different natural material than, and contains a different substance produced from the pool of liquid oil or that found in the porous bituminous sands. The record reflects that unlike the material found in the last two formations, the material in oil shale is 'shale oil' and not 'oil' or 'petroleum' in the accepted sense, and respected authority also classifies the two types differently as to chemical composition, chemical reaction, insolubility, and synthesis characteristics. ²

It would appear that plaintiffs must have agreed with the facts and conclusions above, since one of the plaintiffs, Mr. Morgan, Jr., testified that 'We were helpful and instrumental in getting Senate Bill 77 passed in the year 1967 and the reason was because we knew that because of the enactment of this bill, we would eliminate conflict.' Two years later he signed a lease that specifically excluded coal and oil shale. Consistency and logic certainly call for the conclusion that under such circumstances to 'eliminate conflict' and at the same time to subscribe to an exclusion of 'coal and oil shale' two years later resolved any doubts as to elimination of conflict in favor of the inescapable conclusion that oil shale clearly was intended by him and the Land Board not to have been included in a conventional 'oil and gas' or its twin 'bituminous sands' lease (First Morgan case). Carrying the logic a wee bit further, inescapably would mean that Mr. Morgan, signer of the lease, recognized that the 1967 legislature in Title 65--1--18, as amended (Chap. 183, Sec. 2, Laws of Utah 1967), also intended that oil shale was not included in a conventional 'oil and gas' or its twin 'bituminous sands' lease (First Morgan case).

Some other significant circumstances point to a recognition that oil shale is something different from, and the subject of different regulatory and taxing authority of governmental units. ³

Although the distinction is significant, it would seem to be irrelevant under the clear terms of the lease. If the Land Board, under the 1967 legislation, was of the frame of mind to lease state land to someone for the purpose of prospecting for and developing petroleum in a natural liquid state, but insisted on excluding oil to be extracted from bituminous sands, as is the case here with respect to 'oil shale,' it would be an over-the-counter, take-it-leave-it deal, and if a lessee acceded to such terms, but later said, as is argued here, that the bituminous sand or oil and gas exclusion was void since it already was included in the oil-in-liquid state category, his lease would be worthless as lacking a manifestation of mutual assent, and a representation of unconscionability hardly in consonance with the length of the Chancellor's foot.

We point out these differences, not in extenso, but simply to illustrate that the first Morgan case of 1968, had to do only with the issue of whether 'oil and gas' leases covered the same mineral as 'bituminous sands' leases,--not whether either or both covered 'oil shale' leases, which were not before the court. The records reflect, in our opinion, that it is evident that oil and gas, and bituminous sands leases have to do with a mineral in place containing an identical substance, while an oil shale lease does not cover that same substance, and that two separate minerals are involved. Gas and oil leases historically have been considered mineral, as have oil shale leases, and we are inclined to the opinion and we conclude that each is a 'license to hunt' for the minerals in their natural state and not a fishing license for an end product that might be oil, coal oil, synthetic fuel or lubricants, diamonds, nylons, cosmetics or other items of a purely synthetic nature.

It would seem that plaintiffs here who were the plaintiffs in the first Morgan case of 1968, hardly can quarrel with such a conclusion when they said:

'The propriety of the Land Board's distinguishing between oil and coal or gilsonite or kerogen (the organic component of oil shale) was never an issue in the lawsuit' and that 'Morgan is aware of no reason why these various substances should not be classified as different minerals; each one has a different molecular structure from each of the others; no one of them occurs in close physical or chemical association with any of the others, and there is no evidence that the recovery of any one of these substances would necessarily entail recovery or destruction of the others.'

We believe and hold that the quoted statement made in plaintiffs' brief in the...