In an update to a story I included in the Weekly Round Up last Friday, the Montana Supreme Court has ruled on the question of whether dinosaur fossils are minerals under state law. [Read Opinion here.]
The case involves farm and ranch land in Montana. The land was initially owned by the Seversons and for approximately 15 years, it was run as a partnership between the Seversons and the Murrays, who worked there as ranchers. In 2005, the Seversons severed the surface estate from the mineral estate. They sold the surface estate to the Murrays, and divided the mineral estate into thirds, with Robert Severson (held by BEJ Minerals), Jerry Severson (held as RTWF), and the Murrays each receiving 1/3 mineral interest. Specifically, the deed provided that the parties would co-own “all right title and interest in and to all of the oil, gas, hydrocarbons, and other minerals, in, on and under, and that may be produced from the property…” together with the right of “mining, drilling, exploring, operating, and developing said lands for oil, gas, hydrocarbons, and minerals.” At the time of this severance and sale, neither party suspected there were dinosaur fossils on the land, considered whether dinosaur fossils would be included in the mineral estate, or expressed any intent about who would be entitled to ownership of any fossils found on the property.
Shortly after the sale, the Murrays discovered numerous fossils on the property, including remains of two dinosaurs in combat referred to as the Dueling Dinosaurs and the nearly complete remains of a Tyrannosaurus rex. These fossils are rare, and the Murrays sold or have offered to sell various pieces for millions of dollars. The proceeds from these sales are being held in escrow pending resolution of this lawsuit.
In 2013, BEJ claimed an ownership interest in the fossils pursuant to its mineral interest. The Murrays sought a declaratory judgment in Garfield County, MT, that the fossils are solely owned by the surface owner. BEJ removed the case to federal court and filed a counterclaim seeking a declaratory judgment that fossils are part of the mineral estate. Both parties moved for summary judgment.
The US District Court for the District of Montana sided with the Murrays, holding that fossils “are not included in the natural and ordinary meaning of mineral” and declaring the Murrays as the sole owners of the fossils.
The US Court of Appeals for the Ninth Circuit reversed and held the fossils were minerals. However, after that decision, the Murrays requested for rehearing en banc (meaning before all of the Judges on the Ninth Circuit, rather than the three-judge panel who issued the initial opinion).
In May, Ninth Circuit issued a stay and certified the following question to the Montana Supreme Court: “Whether, under Montana law, dinosaur fossils constitute ‘minerals’ for the purpose of a mineral reservation?” A certified question is essentially a request by one court to another, often in a different jurisdiction, about an unanswered question of law. Here, since Montana law was unclear on ownership of fossils, the Ninth Circuit sought to have the Montana Supreme Court rule on that question of Montana law. The case remains with the Ninth Circuit for all other proceedings, but it is seeking an answer on the limited question certified from the Montana Supreme Court.
The Montana Supreme Court accepted this certified question in June 2019 and issued its opinion in May 2020.
One other interesting note. In April 2019, the Montana Legislature passed a statute providing that “fossils are not minerals and that fossils belong to the surface estate” unless the transacting document expressly states otherwise. See Montana Code Annotated Section 1-4-111-112. The statute says it is intended to be applied both prospectively and retroactively, but the Court noted that the retroactivity of the statute has not been litigated.
The Montana Supreme Court answered this question in the negative, holding that under Montana law, dinosaur fossils are not considered a mineral for the purpose of a mineral reservation.
The Court noted that under Montana law, a court should interpret a general mineral reservation with an “end goal” of “interpreting the term ‘minerals’ according to its ‘ordinary and natural meaning’ unless the parties manifest a different intention in the transacting document.” In other words, if a deed transfers “minerals,” the court should presume the parties intended the transfer of substances contained in the ordinary and natural meaning of minerals unless the contract says otherwise. The Court also listed three key principals: (1) This question does not turn on whether the substance is “rare and exceptional in character;” instead, that is only one factor to be considered; (2) the material’s inclusion in a scientific definition of ‘mineral’ is not determinative absent a showing of an intention to use that scientific definition in the conveying document; and (3) Courts should consider the relation of the material in question to the surface of the land, and the effect of the material’s removal.
The court then analyzed several factors.
Language of “minerals” as used in the deed. The Court noted the importance of considering the term “minerals” in the context of the deed. Here, the use of the term was in the phrase “oil, gas, hydrocarbons, and other minerals in, on, and under, and that may be produced from the property” together with the right of “mining, drilling, exploring, operating, and developing said lands for oil, gas, hydrocarbons, and minerals.” The Court looked to contractual principles and prior cases addressing mineral reservations. In particular, the Court cited Carbon City v. Union Reserve Coal Co, where the question was whether a reservation of “all coal and all coal rights” included coal seam gas. The Court found that coal and gas were mutually exclusive terms, and that reserving coal rights did not include the right to coal seam gas. In reaching this conclusion, the Court relied in the maxim expressio unius est exclusio alterius, which means the expression of one thing is the exclusion of another. Thus, the express grant of one specific mineral does not imply the grant of all other minerals not referred to in the grant. Thus, because “fossils” were not included in the expression “oil, gas, and hydrocarbons,” they cannot be implied in the general grant of all other minerals.
Similar to the coal versus gas determination, the Court stated that minerals and fossils are “mutually exclusive terms under Montana law.” For example, there are several statutory definitions of “mineral” in Montana going into great detail and including numerous substances, but not ever list fossils as being included. In fact, the only statutory reference to fossils do not occur in the statute titled Minerals, Oil, and Gas, but in the Libraries, Arts, and Antiquities” title. In that title, the terms fossils and minerals are listed separately in a list of items that the historical society can collect and preserve. Similarly, the Recreational Use Statute also separately lists paleontological sites including fossils and dinosaur bones, from minerals. Additionally, the Department of the Interior found that fossils were not minerals within the meaning of public land laws in 1915.
The Court rejected the idea that these specific statutory definitions were inapplicable as they were limited only to the particular statutory schemes. Instead, the court said these references to minerals and fossils give contextual clues about how the terms are understood in the state. Since they were in existence at the time the deed was signed, the Court held they were relevant as to the circumstances under which the deed was made and the matter to which it relates.
Thus, because the terms are mutually exclusive, and because the parties admit they did not intend to include dinosaur bones in the deed as they were not considered at all, the Court held that fossils are not minerals. Had the parties included the term “dinosaur fossils” in the list of substances reserved, then the result would have been different.
Rare and valuable because of mineral composition. The court said the second factor to consider is “whether the mineral content of the material in question renders if rare and valuable.” It is more than the item being rare and valuable that should be considered–but whether it is the mineral content that makes them so. Here, there is no question that the large fossils found on the property are rare and valuable. However, not all dinosaur fossils would be considered so, even small or broken fossils. As the Court explained, “this means that dinosaur fossils are not rare and valuable because of their mineral properties; if that were the case, all dinosaur fossils would be considered rare and valuable. Instead, fossils’ value turns on characteristics other than mineral composition, such as the completeness of the specimen, the species of dinosaur, and how well the fossil is preserved.” Further, unlike minerals, the value of the fossils is not as raw material to be made into fuel or goods, nor are they mined and manufactured into jewelry. In other words, the mineral properties of the dinosaur fossils are not what make them valuable and they do not require further refinement before becoming economically exploitable such as oil, gas, or hydrocarbons. Instead, they are valuable because of their existence.
Relation to and effect on the surface. The next factor looks at the potential damage to the surface of a substance. For example, limestone has been deemed a surface substance because it is found exposed on the surface in places and at shallow depths and is sometimes found at the top of the surface and removed by quarrying. Dinosaur fossils are similar. They are so closely related that erosion and other natural events may cause exposure. Further, the removal of fossils involves stripping the surface estate similar to limestone. Fossils are not mined, but excavated, which would interfere with the surface estate.
Thus, based on these factors, the court concluded that dinosaur fossils are not “minerals” under Montana law.
Justice Laurie McKinnon wrote a concurring opinion to “note that a supplementary interpretative device might aid future courts faced with ascertaining the ‘ordinary and natural meaning’ of the term where the parties’ intentions are otherwise unclear.” Rather than looking to dictionary or statutory definitions alone, Justice McKinnon suggests courts should consider the Corpus of Contemporary American English (COCA) as an additional tool to discover how particular words or phrases are used in written or spoken English. COCA is available online where a person can input a term and receive back the most common words used within four words in its database. For example, the most commonly appearing words surrounding mineral include: resource (389 times), oil (378) right (302) and deposit (212). Conversely, fossil was within four words of mineral only 69 times. Because neither party utilized this tool in their arguments it was not included in the Court’s holding, but Justice McKinnon noted that she wondered if this linguistic tool could have helped inform the inquiry.
Justice Ingrid Gustafson issued a concurrence in which Justices Baker and Rieger joined. She would have found that fossils constitute minerals based on two prior Montana cases. She would apply a two-part test as she reads those cases to utilize: (1) whether minerals comprise the substance at issue; and (2) if the substance is rare and exception in character or does it possess a peculiar property giving it special value? The fossils have a 100% mineral composition. It is undisputed they are rare and exceptional and have special value. Instead of simply applying this test, the Justice writes, the court created a “new, more convoluted, three-part test which bears little resemblance” to the prior cases.
Why We Care?
Why does a case about dinosaur bones in Montana matter to landowners and agricultural producers in Texas? Because this case illustrates a number of important considerations.
First, it is a good reminder that the language in any contract, and especially in a deed, matters. When conveying or purchasing property, it is critical to carefully consider the precise deed language and ensure the deed reflects the parties’ understanding. Deeds must be read, word for word, and parties should try to think of any potential issues that could arise. Here, had the deed expressly referred to “fossils,” the dispute likely could have been avoided altogether. Any substances that a party is particularly interested in should be carefully considered and addressed in a deed.
Second, this case illustrates the confusion that can occur with regard to the term “minerals.” As can be seen in the opinion, courts frequently wrestle with what the ordinary meaning of minerals is, how it should be defined, and whether certain dictionary or statutory definitions are helpful in addressing the meaning. This can be an issue not only in a deed, but in a mineral lease as well. Oftentimes, oil or gas leases will include “oil, gas, and other minerals,” which may be far more broad than the mineral owner understands. Taking care to specifically define this term is important.
Third, this type of dispute could arise in Texas as well. It appears that the specific question–whether dinosaur fossils are considered a mineral–has not been addressed in Texas law. Thus, there is no clear-cut answer on how fossils would be treated.
To determine if something is a mineral or surface substance in Texas, the applicable test will depend on the date of the severance of the surface and mineral estates. For severances occurring after June 8, 1983, courts apply the “ordinary meaning test” and seek to determine whether the substance at issue is ordinary considered a mineral. For substances occurring prior to June 8, 1983, courts are to apply the “surface destruction test” which considers the impact of the extraction of the substance on the surface to determine ownership. The Montana Supreme Court opinion would not be binding on a Texas court, but seems to potentially provide persuasive authority that under either test, fossils would likely be considered as part of the surface, rather than the mineral estate.