OFFICE OF THE COUNTY ATTORNEY
STILLWATER COUNTY, MONTANA

544 N. Diamond
PO. Box 1?9
Columbus, Montana 59019

Telephone: (406) 322-4333
Facsimile: (406) 322-4688

Amanda O?Shea Tiernan

Nancy L. Rohde Scott Pederson
County Attorney Deputy County Attorneys

September 29, 2017

Attorney General Tim Fox
Montana Attorney General?s Of?ce
215 North Sanders Street

Helena, MT 59601

Re: Montana Attorney General?s Opinion
Dear Attorney General ox:
I am writing to request an Opinion on the following issue:

Whether ?mineral right owners? are ?real property owners? for the purposes of ?76-2-101,
MCA, more commonly known as citizen initiated Part I zoning and how should they be included
when establishing 60% of surface and subsurface real property?

Within Stillwater County, a citizen group named ?The Stillwater Protective Association?
(hereinafter SPA) submitted a Part 1 Zoning petition. The proposed zoning district seeks to regulate
potential adverse impacts that could result ?om oil and gas activities, speci?cally (I) coalbed methane
exploration and development and (2) oil and gas exploration and development, including the process of
fracking.

Part 1 zoning pursuant to MCA provides that:

Subject to the provision of subsection 5, (the protest provision), whenever the public interest or
convenience may require and upon petition of 60% of the affected real property owners (emphasis
added) in the proposed district, the board of county commissioners may create a planning and zoning
district and appoint a planning and zoning commission consisting of seven members.

Section 76-2-101(5) states:

If real property owners representing 50% of the titled property ownership in the district protest
the establishment of the district within 30 days of its creation, the board of county may
not create the district.

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During the past two years, the SPA obtained 60% of the affected owners of surface real
property rights in the proposed district. However, the situation exists where there are persons that are
mineral right owners within the proposed district but are not surface real property owners within the
proposed district. Thus, the mineral right owners that are not surface real property owners were not
given the chance to either support or oppose the proposed new zoning district in the gathering of
signatures for the petition which directly affects their right to develop the mineral interests.
Additionally, these mineral right owners would not be given the opportunity to oppose the proposed
new zoning district, if created, through the protest period set forth by subsection 5.

The statutory de?nition of real pmperty is found at ?70-15-101, MCA, which states real or
immovable property consists of 1) land; 2) that which is af?xed to land; 3) that which is incidental or
appurtenant to land; or 4) that which is immovable by law. Land is further de?ned by ?70?15-102,
MCA as the solid material of the earth, whatever may be the ingredients of which it is composed,
whether soil, rock, or other substance. These de?nitions lend credence to the consideration of mineral

rights as real property.

Looking to case law, the Montana Supreme Court did a thorough analysis of property rights
and reviewed the characterization of mineral rights, speci?cally whether fractional mineral interests
were interests in real property in Libby Placer Mining Co. v. Noranda Minerals Corp, 346 Mont. 436,
197 P.3d 924, 2008 MT 367 (2008). Libby Placer Mining Company (Libby Placer) ?led suit against
Noranda seeking a declaratory judgment that the fractional mineral interest that Noranda acquired from
it in 1991 through eminent domain had reverted to Libby Placer by operation of MCA,
resulting from Noranda?s abandonment of the mining operations. Libby, 346 Mont. 436, 1] 16. Section
MCA requires that an interest in property, other than a fee simple interest, in property
that had been acquired for a public purpose by right of eminent domain, or otherwise, is abandoned or
when the purpose for which it was acquired is terminated, the property reverts to the original owner or
the original owner?s successor in interest. Libby Placer argued Noranda had abandoned its use, and
further argued that one cannot hold a fee simple interest in a mineral interest separated from the surface
estate, and, alternatively, if a mineral interest can be legally classi?ed as a fee simple estate, a
fractional interest in the minerals cannot. Libby, 1d. at 11 19.

Noranda countered with a general denial and counterclaimed to quiet title both the surface and
mineral interests of the real property based upon a 1993 transfer of land from another company that
vested Noranda with all surface and mineral rights except the timber. Id. at 11 13 and 16. Noranda
prevailed with the district court and the appeal followed challenging the district court?s ?nding that
Libby Placer did not have a reversionary right to a previously condemned mineral interest and the
subsequent quiet title to Noranda.

The Montana Supreme Court asserted the lower court had the correct result but incorrect
analysis because the lower court did not determine whether one may own a fee simple interest in a
fractional mineral interest prompting the Court to engage in the in-depth analysis of property rights.
For ease of reading, I am pasting the analysis portion directly from the Libby PZacer opinion into this
letter as it is very instructional and informative. It begins with Libby, 346 Mont. 436 1] 35 and ends

with 1] 43.

A. Characteristics of Real Property Interests
1] 35 Property interests in land have at least four major characteristics: (1) duration, (2) right to
possession, (3) degree of bene?cial enjoyment conferred on the owner, and (4) type of ownership.
Richard R. Powell, Powell on Real Property vol. 1, 1 1.01 (Michael Allan Wolf ed., Lexis 2007). The
duration of a real property interest is denoted by ?estate? and (1) may be in?nite or perpetual, as in fee

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simple; (2) may last for a speci?ed period, such as life or a term of years; or (3) may end at any time,
as in sufferance. Powell, Powell on Real Property vol. 1 at 1 1.01. A right to possession may take the
form of a present right to possession, a future right to possession, or no right to possession at all, such
as with an easement or franchise. Powell, Powell on Real Property vol. 1 at 11.01. The bene?t
conferred by an interest to its owner may be an unadulterated bene?t, or only a partial or conditional
bene?t, as *444 in a security interest. Powell, Powell on Real Property vol. 1 at 11.01. Finally,
ownership of a real property interest may be by a single person or entity, or by two or more persons or
entities in concurrent ownership. Powell, Powell on Real Property vol. 1, 1 1.01.

?930 B. Fee Simple Estate
11 36 An ?estate? is ?an interest in land which is or may become possessory; and is ownership
measured in terms of duration.? Restatement (First) of'PrOperry, 9. Freehold estates, which under the
common law include fee simple and life estates, are estates of indeterminate duration and are generally
characterized by ownership. 28 Am..1ur.2d Estates 11, 146 (2000). Non?eehold estates, which
include term, periodic tenancy, tenancy at will, and tenancy at sufferance, are estates of less than
freehold and are generally characterized by possession through lease. 28 Am.Jur.2d Estates 1 1, 146.
Permissible freehold and nonfreehold estates in Montana real property are codi?ed at 70?15?202,

MCA.

17' 11 37 The words ?fee simple? indicate ?an absolute title or estate in lands wholly unquali?ed by any
reversion, reservation, condition or limitation, or possibility of any such thing present or future, or
precedent or subsequent.? Thompson on Real Property vol. 2, 17.02, 612 (David A. Thomas ed.,
Matthew Bender 2000). The freehold estate of fee simple absolute is the highest form of ownership
that can be held in real property. Thompson on Real Property vol. 2, 17.01 at 599. It is ?the estate
that never ends but continues into in?nity.? Thompson on Real Property vol. 2, 17.01 at 599. 
has no restrictions on its use or enjoyment except those imposed by public policy for the common
good.? Thompson on Real PrOperty vol. 2, 17.01 at 599. fee-simple title is ?a freehold estate of
inheritance absolute and unquali?ed. It stands at the head of estates as highest in dignity and the most
ample in extent; since every other kind of estate is derivable thereout, and mergeable therein.? Gantt
v. Harper, 82 Mont. 393, 404, 267 P. 296, 298 (1928) (citation omitted).

C. Division of Real Property Interests

11 38 Real property interests are generally subject to division. Robert G. Natelson, Modern Law of
Deeds to Real Property, 16?1 7 (Little, Brown and Company 1992). An interest may be divided
temporally into present and future estates. Natelson, hereinafter Modern Law ofDeeds, 2.3.1 at 16.
An interest may be divided vertically, by splitting land into smaller tracts, each conveyed to a different
grantee; or horizontally, by dividing the air space into blocks as contemplated in condominiums or
severing surface interests ?om *445 the mineral interests below. Natelson, Modern Law of Deeds, 
at 16. Finally, an interest may be divided as to ownership, an interest may be held by one
person or entity, or by two or more as tenants in common or joint tenants. Natelson, Modern Law of
Deeds. 2.3.1 at 16?17, 2.7 at 30?31; Powell, Powell on Real Property vol. 1 at 11.01.

11 39 A fee simple estate may be had in minerals beneath the surface of the ground separate and apart

from the surface. Thompson on Real Property vol. 2, 17.02 at 613.
Since minerals are severable portions of the land, they are proper subjects of an

exception or reservation in grants or conveyances. A grantee of the land other than
the minerals or with the minerals reserved or excepted from the grant gets title to all

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the surface, and the grantor has a fee simple in the minerals retained.

53A Am..1ur.2d Mines and Minerals 181 (2006). See also 58 C.J.S. Mines and Minerals 166
(1998). (Emphasis added.)

After the mineral is conveyed apart from the land, or vice versa, two separate estates exist, each of
which is distinct from the The surface and the mineral rights are held by separate and
distinct titles in severalty, and each is separate from, and independent of, the other.

The owner of each estate has the right to exercise with respect thereto all the incidents of ownership
in the same manner as over other property he or she may possess, subject only to such rights or
servitudes as exist in favor of the other owner. The owners are free separately to convey their
interests. The estate in the minerals may be conveyed by deed in the same manner as other real estate
is conveyed, may be devised by will, may pass by inheritance, and, unless the grant otherwise
provides, ?931 the mineral estate may be leased, and  is subject to taxation.

58 C.J.S. Mines and Minerals 164.

When, by appropriate conveyance, the mineral estate in lands is severed from the surface, separate
and distinct estates are thereby created which are held by separate and distinct titles, and each is a
freehold estate of inheritance subject to the laws of descent, devise, and conveyance 

A grantee of the minerals underlying the land becomes the owner of them; his or her interest is not a
mere mining privilege. The minerals thus severed become a separate corporeal hereditament. Their
ownership is attended with all the attributes and incidents peculiar to ownership of land, and they
may be embraced in the terms ?land? or ?real property? in a subsequent conveyance. *446 Mineral
interests are treated as real property interests, and are subject to the rules related to real property. The
duration of a mineral interest is like that of common law estates, namely, in fee simple, in fee simple
determinable, for life, or for a fixed term of years. ?Mineral interests? are interests in real estate
which are vested immediately when created and which remain vested for whatever term is stipulated.

53A Am..1ur.2d Mines and Minerals 159. (Emphasis added.)

11 40 ?Where a deed reserves 3 fraction of the minerals conveyed, the deed effectively reserves a fee-
simple fraction of the mineral estate under the entire tract.? 53A Am.Jur.2d Mines and Minerals 178.

D. Montana Law Regarding Divisions of Real Property Interests
13] 1] 41 A property owner has the right ?to carve out of his property as many estates or interests
(perpendicular or horizontal, perpetual or limited) as it may be able to sustain.? RM. obban Realty
Co. v. Donlan, 51 Mont. 58, 66, 149 P. 484, 487 (1915) (citations omitted).

[91 1] 42 We have long recognized that title to mineral interests in land may be segregated in whole
or in part from the rest of the fee simple title. See Carbon County v. Union Reserve Coal Co., 271
Mont. 459, 473, 898 P.2d 680, 688 (1995); Wyrick v. Hoe?e, 136 Mont. 172, 175, 346 P.2d 563, 565
(1959); Stokes v. Tutvei, 134 Mont. 250, 256, 328 P.2d 1096, 1099 (1958); Voyta v. Clonts, 134 Mont.
156, 162, 328 P.2d 655, 659 (1958); and Rist v. Toole County, 117 Mont. 426, 432, 159 P.2d 340, 342
(1945) (citing Krutzfeld v. Stevenson. 86 Mont. 463, 284 P. 553 (1930); Broderick v. 
Consolidated Oil Co, 88 Mont. 34, 290 P. 244 (1930); Hodgkiss v. North/and Petroleum
Consolidated, 104 Mont. 328, 67 P.2d 81 1 (1937)). A division of the mineral interest from the surface

interest is a horizontal division.

1] 43 We have also recognized that mineral interests, like surface interests, may be divided vertically
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into fractional interests. The Rist Court cited Broderick, Ki'utzfeld, and Marias River Stindr'eate Big
West Oil Co, 98 Mont. 254, 38 P.2d 599 (1934), as examples in which mineral deeds expressly

conveyed fractional interests in minerals. Risa 117 Mont. at 437?38, 159 P.2d at 345. ?The extent of
the interest conveyed, reserved, or excepted by a grant, reservation, or exception of a fractional interest
in minerals or mineral rights depends on the particular terms of the instrument.? 58 C.J.S. Mines and

Minerals 178.

The Court acknowledged that mineral interests may be severed horizontally from the surface
interest and vertically into fractional interests. Libby, 346 Mont. 436, ?llO and 1111. The Court also
found that the fact that Libby?s interest was a fractional interest had no bearing on the quality of its
estate and that Libby held the fractional mineral interest in fee simple when it was condemned by
Noranda. Id at 1146. The Court further said that fee simple refers not to a quantity of real preperty, but
to the in?nite or perpetual duration of ownership of the interest. Id at 1147. The Court acknowledged
that ?Mineral interests are treated as real property interests, and are subject to the rules related to real

property.? Id at 113 9.

Based upon the above analysis and ?nding, and given the fact that there are persons who are
mineral right owners but not surface real property owners in this proposed zoning district, and in
consideration of the stated purpose of the proposed zoning district, I believe this poses a possible issue
with an identi?ed and speci?c group of real property owners that are unable to participate in a Part 1
zoning petition process even if they do know and an unspeci?ed amount of persons that are lacking
proper notice and due process with regard to their real preperty interests.

I understand that Part 1 zoning petitions are common throughout the State of Montana and oil
and gas exploration and development may be regulated. Nonetheless, I would assert this appears to be
a case of ?rst impression considering mineral rights and fractional interests as a ?real pmperty
interest? in the Part 1 zoning process. I informed the SPA, through their attorney, Mr. David K.W.
Wilson, Jr. that this issue of concern has arisen. I stated I would be seeking an opinion because
this speci?c issue has not been addressed directly by statute, legislative action or case law. I feel it is
an issue that could have a signi?cant impact on Part I zoning as a whole, or for that matter, any zoning

considerations.

I would further assert this issue could raise a potential second issue, that being whether there
would need to be an analysis of a ?taking? of one?s real property interest when owning a subsurface
mineral interest. County governments have attempted to regulate below surface land use through
zoning, as was recently reviewed in Helena Sand and Gravel, Inc. v. Lewis and Clark County Planning
and Zoning Commission, 367 Mont. 130, 290 P.3d 691, 2012 MT 272 (2012). Helena Sand and
Gravel (HSG) proposed to prohibit mining and industrial activities in the zone, including mining of
sand and gravel. Helena Sand and Gravel, 367 Mont. 130, 1] 7. In upholding the District Court?s
decision to endorse the County?s proposed zone prohibiting mining, the Supreme Court mainly
analyzed whether the preposed zone comported with the County?s existing growth policy. Id at 1l23 -
26.

However, the Court remanded the matter to the district court for the parties to ?brief the Penn
Central takings under the second prong of the takings analysis, narrowly limited to whether the
County?s adoption of the zoning pattern and regulation in District 43 constituted a taking of real
property interest without just compensation. The Court, in citing Animas Valley Sand and Gravel, Inc.
v. Bd. Of Co. Comm ?rs of the Co. ofLa Plata, 38 P.3d 59, 65 (Colo.2001), recognized that ?[z]oning
regulations rarely amount to a taking of property on the ground that they affect some property owners
more severely than others, ??because a landowner is not entitled to the highest and best use of [its]

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property.?? (citing Penn Central, 438 U.S. at 125, 98 at 2659-60). However, the Court also
recognizes that a ?plaintiff may assert a takings claim, even if not entirely deprived of the established
property interest.? Helena Sand and Gravel, 367 Mont. I30, 1] 47, citing Kafka v. Montana Dep ?r of
Fish, Wildlife and Parks, 2008 MT 460, 1] 66, 348 Mont. 80, 201 P.3d 8 at ?69, (quoting Penn Central,
438 U.S. at 124, 98 at 2659).

The Helena Sand and Gravel case was not a unanimous decision by the Court. Two Justices
wrote concurring and dissenting opinions that raise some interesting questions regarding zoning, illegal
reverse spot zoning and the takings issues.

After being advised of my concerns, Mr. Wilson responded in writing with the following ?ve
contentions from his clients:

1) Zoning is about the regulation of surface use, which means the proposed zone addresses the
surface impact of oil and gas development, not the actual subsurface extraction process;

2) No Montana case law exists that indicates that mineral rights holders should be counted
toward the 60% total; and in fact, the SPA claims there are at least 110 citizen-initiated zones that have
been created which did not consider mineral rights.

3) The Legislature did not intend to include mineral rights holders in the 60% count because
the Legislature did not include rules as to how the interests should be counted. For example, should
the owners of the surface and mineral rights have two votes if they are one in the same?

4) The Carbon County attorney has recently indicated that there is no precedent for including
mineral rights holders in a proposed Part 1 zoning initiative.

5) Stillwater County has an existing zone, created in 1979, where only surface freeholders
were counted, not those holding mineral interests.

The SPA asserts that there is no statute or case law that would indicate that mineral right
holders should be counted as part of the 60% of land owners for purposes of zoning. As I?ve indicated,
I have not discovered any case law where this issue has yet been addressed and do not dispute the
claim that no prior zoning petition counted mineral right holders as part of the 60% of landholders for
zoning purposes, unless the surface and mineral owners were one in the same.

Was the Legislative intent such that mineral owners were intended to be counted in the 60%
number when no method was given for determining the number of votes per parcel land should be
counted if there is a split estate? The legislature does not specify how to count affected property
owners beyond the verbiage ?upon petition of 60% of the affected real property owners in a proposed
district, the board of county commissioners may create a planning and zoning district and appoint a
planning and zoning commission consisting of seven members.? Though the statute and legislative
history do not describe a method for counting split estate real property owners, mineral rights owners
are without question ?affected? real property owners.

Mineral interests, including fractional mineral interests, are real property interests and should
be considered for purposes of obtaining 60% of owners. While ?76-2-101, MCA does not provide a
method for counting property owners of split estates, it also does not distinguish real property interests
for the purposes of reaching the 60% threshold. This is an important issue wherein I need direction
and respectfully seek your Opinion in these matters.

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The SPA disagrees with my concerns and remains disappointed that I have sought an 
opinion. Thus, I reSpectfully submit that time is of the essence as their petition has been placed on
hold pending the outcome of your decision.

Thank you in advance for your input on this matter. If there is any ?thher information or
research I can provide, please direct me as to such.

Sincer ly, .

?rs/(ML

Na cy L. Rohde
Stillwater County Attorney

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