Transcript of Record — British-American Oil Producing Co. v. Board of Equalization of Mont.

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TRANSCRIPT OF RECORD

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| Supreme Court of the United States

+. QOTOBER TERM, “1986 ne

No. 37

THE BRITISH- AMERICAN om PRODUCING CoM-

PANY, PETITIONER, |

v8.

“THE BOARD OF EQUALIZATION OF THE STATE

'- OF MONTANA ET AL,

ON WRIT OF CERTIORARI TO THE SUPREME COURT OF THE STATE

OF MONTANA

[PEYVTION FOR CERTIORARI FILED APRIL. #3, 1994

| " CERTIORARI GRANTED: JUNE 1, 1906 ‘

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Supreme Court of the United States

OOTOBER TERM, 1935

No.

THE BRITISH-AMERICAN OIL PRODUCING

co COMPANY, PETITIONER,

‘ . vs.

THE BOARD OF EQUALIZATION OF THE STATE

OF MONTANA ET AL. ©

ON‘PETITION FOR A WRIT OF CERTIORARI TO .THE SUPREME

COURT OF THE STATE OF MONTANA

INDEX. .

\__-+ Original Print

Proceedings in Supreme Court of Montana................. a 1

GEE 90.066 0600660606600600060006006642 06002 0eecbice 1 - 1

Exhibit “A”—Oil and gas mining lease................. -8 6

Exhibit “B”—Assignment of oil and gas mining lease. 18 14

MED ccc ancenhabheeseeedabaeabesasccsicc 2r 17

Complaint in intervention of The Blackfeet Indian Tribe... 22 17

Demurrer to complaint .........ccccccecccccccsccccess >: 28 21 .

Demurrer to complaint in intervention ................... 29 21°

Stipulation re amendment of complaint .................... 30 22

Exhibit “A”—Patent and certificate................... 31 23:

Opinion, Anderson, J................0.. cunhatey Rieesas 33 25

ee St On. cecccaskdbaesscecnesapenoce 48 36

Objection of defendants to petition for icteesion lg Pee 56° 45

Order denying petition for rehearing...................... 61 49

Judgment and decree ... ...5.....cccccceees obcanan rer 62 $

See MED ccccccoatuccecces (omitted.in printing) .. 4 ;

Order allowing cartiorari ....... SSererrrire TTT TTYL TTT Te ' 66 50.

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{fol.1} °

IN SUPREME COURT OF MONTANA

THe Baitisn-American Or. Propuctye Company, a Cor-

poration, Plaintiff,

vs.

Tae Boarp or Equvatization or tHE Strate or Montana

and James H. Stewart, John J. Greene and Sam D.

Goza, members of the State Board of Equalization of

the State of Montana, Defendants” ; .

Comptaint—Filed ‘Nov. 8, 1935

Plaintiff complaining of defendants for cause of action

alleges :

I ’

That at-all of the times hereinafter mentioned the plain-

tiff has been and now is a corporation duly organized,

created and existing under and by virtue of the laws of the

State of Delaware, and qualified to do and doing business

in the State of Montana. '

That at all of+the times hereinafter mentioned the de-

ants James H. Stewart, John J: Greene, and Sam D: Goza

have been and now are the duly appointed, qualified and

acting members of the State Board of Equalization of the

State of Montana.

™ Ill

That on and prior to the 10th day of July 1934, the

United States of America, for the benefit of the Blackfeet

Tribe of Indians of the Blackfeet Indian Reservation in

Glacier County, Montana, was the owner of all of the oil,

gas and other minerals in and under and that might be

produced from the following described lands situated on

the Blackfeet Indian Reservation in Glacier County, Mon-

tana, to-wit:

Lots Five (5), Six (6), and Seven (7) of Section Ten

(10), Township neta om North of Range Six (6)

est;

1—7688-C .

Lot Eight (8), South half of the southwest quarter

(S¥%SW%4) of Section Ten (10), Township Thirty-four

(34) North, Range Six (6) West;

(fol. 2] “Lot Five (5), Northeast quarter of the northwest

quarter (NE%4,NW14) of Section Thirty-four (34), Town-

ship Thirty-four (34) North, Range (6) West; | -

Lots Sit (6) and Seven (7), Southeast quarter of the

Northwest quarter (SE44NW%), Northeast quarter of the

southwest quarter (NE%4,SW4) of Section Thirty-four

(34), Township Thirty-five (35) North, Range Six (6)

West; :

Lot Eight (8), Southeast quarter of the southwest quar-

ter (SE%4SW) of Section Thirty-four (34), Township

Thirty-five (35) North, Range Six (6) West;

Lots Five (5) and Six (6) Section Three (3), Township

Thirty-four (34) North, Range Six (6) West, M. P. M.

That on the 10th day of July, 1934, acting in accord-

ance with a resolution of’ the Blackfeet Tribal Council

dated June 4th, 1934, and in accordance with the provi-

sions of law and the regulations of the Department of the

Interior of the United States, and for a good and valuable

consideration, Forrest R. Stone, Superintendent of the

Blackfeet Indian- Reservation, as lessor, made, executed

and delivered to Consolidated Gas Company, a corporation,

of Shelby, Montana, as lessee, a certain oil and gas min-

* ing lease in writing covering and including the herein-

above described lands, by the terms of which said lease

there. was demised, granted, leased and let unto the said

lessee for a period of five (5) years from the date of the

approval of said lease, and as long thereafter as oil or

. gas is found in paying quantities, all of the oil and gas

deposits in ar under the said described iands, a copy of

which said oil and gas mining lease, marked Exhibit ‘‘A’’

is attached hereto and by such reference Yhade a part

nereof. That thereafter and on the 5th day of October,

1934, the said oil and gas mining lease was duly approved

by the First Assistant Secretary of the Interior of the

United States, as required by law‘and the regulations of

the Department of the Interior. |

That thereafter and for a good and valuable considera-

tion the said Consolidated Gas Company, the lessee named

in said lease, by an instrument in writing duly sold, dé-

signed, transferred and set over unto the plaintiff herein

the said oil and ‘gas minihg lease and all right, title and

interest therein and thereto, together -with the privileges

and benefits thereunder, -a copy of which said assignment

is hereto annexed, marked Exhibit $B’’, and by such ref-

erence made a part of this complaint; that said assign-

(fol. 3] ment was thereafter, to-wit:.on the 15th day of

August, 1935, duly approved by the Assistant Secretary

of the Interior of the Gnited States, as required by law and

the regulations of the Department of the Interior of the

United States of America. .

That pursuant to the terms and provisions of the oil and

- gas mining lease hereinabove referred to, a copy of which

is hereto annexed, marked Exhibit ‘CA’? the plaintiff en-

tered upon the hereinabove described lands and proceeded

_ to develop the same for oil and gas purposes and for the

production of crude oil, and during the years 1934 and 1935

drilled to completion ten (10)-oil and gas wells thereon, all

of which wells were productive of and still produce crude

oil in-paying quantities,

That in the acceptance of said oil and gas mining lease

and in the development and operation of the oil and gas

welis drilled on said described lands, pursuant to the terms

and conditions and provisions of said lease, the plaintiff

was and now is acting as and has been and is an instru-

méntality and an instrument and agent of the United States

of America, and as such js not taxable by the State of Mon-

tana, and its license or permit to develop and operate said

~ land under said oil and gas lease for the production of oi! ©

and gas cannot be taxed by the State of Montana, and that

the said State of Montana and its instrumentalities and

agents, including the defendants, are wholly without power

to tax this plaintiff on its said business of developirf& said

leased lands for production of oil and gas therefrom,

either as to the gross production of erude oil from said

lands, or the net proceeds derived from the development

and operation of said lands for oil and gas or its income

from said leased lands by way of corporation license taxes,

or taxes on royalty interest on such production, and any

2—7688-C ; | es x

attempted assessments, levies or collections of such taxes

. bere proceeds or income or royalty are wholly invalid,

illegal and unauthorized.

vil

That under and pursuant to the provisions of Sections

2088 to 2096, inclusive, Revised Codes of Montana 1921, as

amended, it is the duty of the defendants.to compute and ~

assess the net proceeds of all mines and mining claims

(fol. 4] in the State of Montana, including the proceeds of

all oil wells for the purpose. of taxation; that in the com-

puting and assessing of said net proceeds the interest of

this plaintiff as lessee is assessed and the royalty interest

of the Blackfeet Tribe of Indians is assessed and the taxes

on said royalty interest, if assessed and collected are

required by law to be paid by this plaintiff.

Vill

. That under and pursuant to the provisions of Sections

9397 to 2405, inclusive, Revised Codes of Montana, 1921,

as amended, the defendants are required to’ compute, assess

and collect from every person engaged in or carrying on

the business of preducing within the State of Montana,

petroleum or other mineral or crude oil, or engaged in or

carrying on the business of owning, controlling, manxging,

leasing or operation within this State any well or wells

from which any merchantable or marketable petroleum or

other mineral or crude oil is extracted or produced, an an-

‘nual license tax for engaging in and carrying on such busi-

ness in an amount equal to two percentum of the total gross

value of all petroleum and other mineral or crude oil pro-

duced by such person within the State of Montana..

That under. and pursuant to the provisions of Sections

2088 to 2096, inclusive, Revised Codes of Montana, 1921,

as amended, the defendants are required to prepare and

submit to the Clerk and Recorder of each County in which

mines and mining claims, including oil wells are located,

royalty lists or schedules setting forth the names of the

royalty owners and the amount of royalty oil which each

of them are entitled to and thereupon.the County Clerk:

and Recorder is required to prepare from such schedule a

——

tax-rell which shall be by him furnished by the County

Treasurer; and the County Clerk is required to enter such

assessments in the Personal Property Assessment Book

under the name of the operator of such mine or oil well,

and the operator of such mine or oil well is liable for the

payment of such taxes and the County Treasurer is re-

quired to collect the same from such operator.

[fol.5] That under and pursuant to the provisions of

Sections 2296-to 2304, inclusive, Revised Codes of Mon-

tana, 1921, as amended, the defendants are required to com-

pute, assess and collect against this plaintiff a license fee

of two percentum of its total net income received during

the preceding year from all sources from within the State

of Montana, including its net income derived from the ex- a

ploring, developing and production of oil from lands upon

which it owns oil and gas leases, including the aforesaid

described leased lands.

| aL

That the defendants, acting for the State of Montana,

have attempted and are still attempting and threatening

to compute, assess, levy and @ollect the taxes mentioned

and set forth in paragraphs VII, VIII and IX herein, that.

each and all of said taxes so described are based in whole

upon the oil and gas produced by this plaintiff as an in-

strumentality and agent of the United States of America

from the aforesaid described leased lands and unless re-

strained by an order of this Court will continue to and at-

tempt to compute, assess, levy and collect said taxes on

said crude oil produced from said leased lands.

XII

That the assessment, levy and collection of -such taxes

upon such crude oil produced will eonstitute and cause an

irreparable injury and damage to the plaintiff, and will re-

sult in a multiplicity of judicial proceedings, in that if the

said taxes are computed, levied. and assessed it will be

necessary for this plaintiff to pay the said taxes under

protest and within the time prescribed by law and to com-

mence actions for the recovery of such taxes and each of

said payments in the District Court of the county in which

said: lands are located, and plaintiff therefore alleges that

a restraint of the computing, levying, assessment and col-

lection of said taxes is necessary to prevent a- multiplicity

of judicial proceedings. ,

XIil

That the defendants in this action are agents or instru-'

mentalities of the State of Montana; that the public is in-

‘ terested in the outcome of this action; and the rights of the

[fol. 6] public arg involved in this action.

Wherefere, Plaintiff prays for judgment:

(1) That the defendants be restrained by an injunction

of this court from proceeding with the computing, assess-

ment, levying and collection of any of the taxes mentioned

and set forth in this Complaint, insofar as the same are

based upon crude oil produced or to be produced by this

plaintiff from the leased lands described herein; and from

taking any action toward such computing, levying, dssess-

ment or collection, including the transmittal of assessment.

reports to the officials of Glacier County, Montana.

(2) For such and other and further relief as to the Court

may seem equitable. ;

E. K. Cheadle, Jr., G. S. Frary, Attorneys for Plain-

’ tiff.

(fol.7] Duly sworn to by E. K. Cheadle, Jr. Jurat omit-

ted in printing. . ;

[File endorsement omitted. ]

[fol. 8] Exarsit ‘‘A’’ To CoMPLAINT

O. & G. No. 107. Cont. 15-ind-6191.

' Article No. 1

Oil and Gas Mining Lease

_ Tribal Indian Land

This Lease made and entered into, in triplicate on this:

10th day of July A. D., 1934 by and between Supt. For-

rest ft. Stone, acting for and in behalf of the Blackfeet Tribe

dians, in accordance with the resolution dated June

4tlf, 1934, of the Blackfeet. Tribal Council, party of the

st part, designated as lessor, and Consolidated Gas Com-"

pany of Shelby, Montana, party of the second part, desig-

nated as lessee, under and i in pursuance of Section 3 of the

Act approved February 28, 1891 (26 Stat. L., 795), as

amended by the Act approved May 29, 1924 (Public No.

158, 68th Congress),

Witnesseth:

1. The lessor, in consideration of one dollar, the receipt

whereof is acknowledged, and of the royalties, covenants,

stipulations and conditions herein contained, and hereby

agreed to be paid, observed, and performed by the lessee,

does hereby demise, grant, lease,'and let unto the lessee,

for five years from the date of approval hereof, and 4s

long thereafter as oil or gas is found in paying quantities,

all the oil and gas deposits in or under the lands de-

scribed as follows, to-wit: : -

Lots 5, 6, and 7 section ten, township Gunty four north,

range six west, M.M.

Lots 8, S/2 SW/4, section ten, township thirty four north,

range six West, M.M.

Lots 5, NE/4 NW/4, section thirty four, township thirty

four north range six west, M.M.

Lots 6 & 7, SE/4, NE/4, SW/4, section thirty four, town-

ship thirty five range six West, M.M. totalling 687.26 acres, .

more or less.

[fol.9] 2. The lessee hereby agrees to pay or cause to

be paid to the officer of the United States having jurisdic-

- tion over the leased premises, hereinafter called the officer

in charge, for the use and benefit of the lessor, as royalty

124%4% of the gross proceeds of all crude oil extracted from

the saie lands unless the lessor with the approval of the

Secretary of the Interior, shall elect to take the royalty in

/ oil, such payment to be made at the time of sale or removal

4 of the oil.

Should the lessor, with the approval of the Secretary of

the Interior, elect to take the royalty in oil, the lessee shall

furnish free storage for the royalty oil for not exceeding

thirty sg

In time of war or other public emergency any of the

executive departments of the United States Government

shall have the option to purchasé.at the highest posted mar-

ket price on the date of sale all or any part of the oil pro-

duced under this lease. . )

The ‘royalty on gas, whether it shall be gas from which

the casing-head gasoline has been extracted or otherwise,

shall be 1214% of the value thereof in the field where pro-

duced when the average daily production for the calendar

month from the land leased is less than 3,000,000 cubic

feet, and 16 2/3 per cent of the value thereof when the

average daily production for the calendar month is 3,000,000

cubic feet or more: Provided, That where well- produce

both oil and gas or oil and gas and water to such an extent

that the gas is unfit for ordinary domestic purposes, but is

used temporarily in connection with drilling and pumping

operations on adjacent or near-by tracts, the lessee shall

pay royalty at the rate of 12% per cent of the gross pro-

ceeds of the sale of gas from such wells. Failure on the

part of the lessee to use a gas-producing well which eannot

profitably be utilized at the rate herein named shall not

_work a forfeiture of this lease so far as it relates to mining

oil, but if the lessee desires to retain gas-producing privi-

leges he shall pay a rental of $100 per annum in advance,

calculated from the date of the discovery of gas on each

[fol. 10] gas-producing well, the gas from which is not mar-

Sosy nor utilized other than for operations under this

lease. ws,

On casing-head gas used or sold for the manufacture of

casing-head gasoline, the rate of royalty shall be 12% per

cent of the value of the casing-head gas, which value shall

be determined and computed on the basis and in the man-

nef provided in the regulations governing the utilization of

casing-head gas produced from oil wells on restricted In-

dian lands. In cases where gas produced‘and sold has a

value for drip gasoline, casing-head gasoline content,-and

as dry gas from which the casing-head gasoline has been ex-

tracted, then the royalties above provided shall be paid on

all such values. The lessor shall have the right to the use

of gas delivered at the well or at the nearest trunk line

for any desired school or other building belonging to the

‘tribe, but the lessee shall not he required to pay royalty

on gas so used. Payments of annual gas royalties shall

. .

‘

9 .

’ be made within 25 days from the date such royalties be-

come due, other royalty payments to be made monthly on

or before the 25th day of the month succeeding that for

which such payment is to » be made, supported by sworn

statements.

5. The lessee shall carry on development and operations

in a workmanlike manner, commit no waste on: the said

land and suffer none to be committed upon the portion in

his occupancy or use, take good care of the same, and

promptly surrender and return the premises upon the

termination of this lease to lessor or to whomsoever shall

be lawfully entitled thereto, unavoidable casualties ex-

cepted; shall not remove any casings in producing wells,

or, without the written consent of the lessor, remove there-

from any buildings or permanent improvements erected

thereon during the said term by the said lessee, excepting

tools, derricks, boiler houses, pipe lines, pumping and drill-

ing. outfits, tanks, engines, and machinery, and the casing

of all dry or exhausted wells which shall remain the prop-

erty°of the lessee and may be:removed at any time prior

ffol. 11] to sixty days after the termination of the lease

by forfeiture or otherwise; and shall not permit any nuis-

ance. to be maintained on the premises under lessee’s con-

trol, nor allow any intoxicating liquors to. be sold or given

away for any purposes on such premises; shall not use such

premises for any other purposes than those authorized in

the lease, and before abandoning any well shall securely

plug same so as effectually to shut off all water from the

oil or gas bearing strata. Failure to so plug a well as to

effectually shut .off the water from the oil or gas strata

shall be a violation of one of the material and substantial

terms and conditions of this lease. The leassee agrees that

if a non-producing oil and gas well develops usable water

it may be turned over to the reservation without plugging

and on such terms as may be agreed upon by. the contract-

ing: parties, it being, however, definitely understood that

the lessor shall in no case be required to pay ‘more than

the actual market value of whatever casing is left in the

well in order to secure the same for the reservation.

6. The lessee shall keep an accurate account of all oil

mining operations showing the sales, prices, dates, pur-

chases, and’ the whole amount of oil mined or removed;

and all sums due as royalty shall be a lief on all imple-

ments, tools, movable machinery, and all other personal

chattels used in operating said property, and also upon all

the aouggs oil obtained from the land herein leased, ds

security for payment of said royalty. ;

7. The lessee may, with consent of the Secretary of the

Interior, surrender this lease in whole or in part by paying

to the officer in charge all amounts then due as provided

herein and the farther sum of one dollar and have this

lease cancelled as to the part or. parts surrerfdered and be

relieved’ from all further obligations or liabilities there-

under; Provided, That if this lease has been recorded,

- lessee shall execute a release and record the same in the

proper recording office. | .

[fol.12] 8. This lease shall be subject to the regulations

of the Secretary of the Interior now or ‘ereafter in force

relative to such leases, all of which regulations are made

a part and condition of this lease: Provided, That no regu-

lations made after the approval of this lease shall operate

to affect the term of lease, rate of royalty, rextal or acre-

age, unless agreed to by both parties.

9. The lessee hereby agrees that he will not assign or

sublet any part of the lands herein leased without the writ-

ten consent of the Secretary of the Interior being first ob-

tained. The assignment of this lease or any interest herein

without such written consent shall constitute a violation

of one of the material and substantial terms and condi-

tions of this lease and be cause for cancellation thereof.

10. In the event of failure or neglect of the lessee to per-

form any obligations under this lease, the Secretary of the

Interior shall have the right, at any time after thirty days’

notice to the lessee specifying the terms and conditions vio-

lated, to cancel this lease.

11. The lessee agrees that he will keep all highways on

the reservation used by him in as gqod state of repair as

he’ finds the same.

42. This lease is made and. accepted subject to existing

law and any laws hereafter enacted by Congress as to the —

said lands, also the regulations relative to such leases here-

tofore or hereafter prescribed by the Secretary of the In-

;

terior, and in no event shall the United States or the Sec-

retary of the Interior be liable for damages or otherwise

under the provisions hereof, and before this lease shall

_become effective the lessee shall furnish a satisfactory bond

as required by the regulations. The obligations and agree-

ments hereinbefore expressed shall extend to and be bind-

ing upon the successors in the interest of the parties hereto.

[fol.13] In Witness Whereof, the said parties have here-

~ unto subscribed their names and ‘affixed their seals. on the

day and year first above mentioned.

Forrest R. Stone. (Seal.) ——_——. (Seal. )

Witnesses: Two Witnesses to Lessor: .

—, a

Consolidated Gas Co., (Seal.) By James W. John-

son, Président. (Seal.)

Two Witnesses to Lessee: ——- ——.._ Attest: P. R. Mac-

Hale, Secretary. (Seal.)

Acknowledgment of aneenae

STATE OF Monrama, ; s

County of Toole, ss: ae

Before me, a.notary public in and for said county and

State, on this 23rd day of July, 1934, personally appeared

James S.- Johnson and P. R. MacHale known to me to be

the identical persons who executed the within arid forego-

ing lease, as President and Secretary of Consolidated Gas

Company respectively and acknowledge- to me that such

“Corporation executed the same as its free and voluntary

act and deed for the uses and purposes therein set forth.

- E. K. Cheadle, Jr., Notary Public. My commission

expires January 14, 1935. (Seal.)

[fol. 14] Amendments to Form 5-157

Approved:

(3) Until a producing well is completed on aid premises,

the lessee shall pay, or cause to be paid, to the Superinten-

- dent of the Blackfeet Agency, for the use and benefit of the

lessor, as advance rentals one dollar per acre per annum

3—7688-C

12.

from the date of approval of this lense. It is ‘uhennied

and agreed that such sum of money so paid shall be a

credit on stipulated royalties for the year for which the ,

payment of advance rentals is made, and the lessee hereby

agrees that said advance rentals when paid shall not be

refunded to the lessee because of any subsequent surrender

or cancellation hereof; nor shail the lessee be relieved from

the obligation to pay said advance rental annually, when

it becomes due, by reason of any subsequent. surrender or

cancellation of this lease. ¢

Proposed: ~

(4) The lessee agrees to begin drilling operations on the :

land covered by this lease within ninety (90) days after

date of approval hereof by the Secretary of the Interior,

and to drill at least ten (10) wells on the premises within

one year from date of such approval; and thereafter to

diligently drill such additional wells as may be necessary

and proper in the judgment of the Secretary of the Interior

to fully develop the land and extract the oil and gas there-

from in accordance with the most approved methods of drill-

ing development in the field where these lands are located.

It is further understood and agreed that the completion of ©

a well is to be considered a minimum depth of one hundred

(106) feet into the Madison limestone, unless production in

paying quakties is found at a lesser depth. If the lessee

shall fail to drill any or all of the wells as herein provided,

[fol. 15] such’failure.shall be a violation of one of the mate-

rial and substantial terms and conditions of this lease and

be sufficient cause for cancellation of this leage; but such

cancellation shaltnot in any way serve to release or relieve

the lessee or surety from the covenants and obligations to pay

any accrued obligation; Provided that if the lessee desires

to continue possession of said lease he must, within thirty

days ,of the completion of one well, commence the drilling

of a/second well, or such well as the case may be and con-

tinue drilling same diligently until completed; Provided

further, however, That the Secretary of the Interior may,

in his discretion, upon application of the lessee, extend the

- time within which any well shall be commenced, upon the

payment.of annual rental of one dollar per acre, for each

whole year the beginning of such well is delayed. For the

guidance of the Secretary of the Interior, the Blackfeet

Tribal Business Council will be consulted as to its opinion

in this matter. It is further understood and agreed that if

the lessee shall fail or or refuse to drill as provided herein,

or fail to obtain an extension of time within which to drill,

he shall pay to the officer in charge, for the benefit of the’

Blackfeet Tribe of Indians, the full amount for which this

lease is bonded. ~ °

Approved:

(4a) The lessee or assignee, in consideration of the

rights herein granted, agrees to abide by the Code of Fair

Competition for the Petroleum Industry as approved by the

President of the United States on August 19, 1933, and any

‘modification thereof made heretofore or hereafter, so long

as such code shall remain in effect, and to abide by the

provisions of any Act of Congress heretofore or hereafter

enacted, or any code or regulatory.

[fol.16] _ Acknowledgment o Corporation

State or ——,

County of ——, ss:

On this — day of ——, A. D., 19—, before me a ——

within and for the state and county,aforesaid, personally

appeared —— and —— to me personally known, who

being by me duly sworn, did each day that -—— is the

president and —— ig the secretary of ——, a corporation,

and that the sea) affixed to the aforegoing and annexed

instrument is the corporate seal of said corporation, and

that said instrument was signed and sealed in behalf of

said corporation by authority of its board of directors ; and

said and —— duly acknowledged that they had in

their said official capacities executed the foregoing instru-

ment as the act and deed of the said company for the con-

sideration and purposes therein mentioned and set forth.

Witness my hand and official seal this — day of —— 19—.

My commission expires —— —, ——.

Department of the ‘Interior

United States Indian Service

Blackfeet Agency, SIOTENS, Montana

September 26, 1934.

The within lease is forwarded to the Commissioner of

_ Indian Affairs with recommendation that it be ——. See

my .report of even date.

Forrest R. Stone, Superintendent.

Tfol. 17] Office of Indian Affairs

Washington, D. C., Oct. 2, 1934.

Respectfully submitted to the ee of the Interior

with the recommendation that it be approved.

’ - William Zimmerman, Jr., Assistant Commissioner.

(Stamp.) |

Washington, D. C., Oct. 5, 1934.

The within lease is approved.

T. A. Walters, First Assistant Secretary of the In-

terior.

(Stamp.)

’

{fol. 18] Exursrr ‘‘B’’ to Cosrtanré

5-154e

(Must be Executed in Quadruplicate)

Assignment of Oil and Gas Mining Lease

Whereas the Secretary of the Interior has heretofore

approved oil and gas mining lease, dated July 10th, 1934, .

entered into by-and between Consplidated Gee Company,

lessee, and Supt. Forrest R? -tone, acting for Blackfeet

Tribe of Indians, lessor, covering the following-described _

land in the Blackfeet Reservation, State of Montana

Lots 5, 6, & 7, Sec. H, Twp. 34N, Rge. 6 W, M.M.

Lot 8, S4%2SW, Sec. 10, Twp. 34N, Ree. GW, M.M.

Lot 5, NEYNW%, Sec. 34, Twp. 35N, Ree. 6W, M.M.

Lots 6 & 7, SE4NWY%, NEYSW%, Sec. 34-25N-6W,

MM. os

Lot 8, SEY%4SW, Sec. 34, Twp. 35N, Rge. 6W, M.M.

Lots 5 & 6, Sec. 3, Twp. 34N, Rge. 6W, M.M.

Now, therefore, for and in consideration of One Dollar

($1.00) dollars, the receipt of which is hereby acknowledged,

the said Consolidated Gas Company, the lessee in the above-.

described lease, hereby bargains, sells, transfers, assigns,

- and conveys all its right, title, and interest of the lessee

in and to said lease, subject to the approVval of the Secretary

of the Interior, to The British American Oil Producin

Company. — ack 3 .

In witness whereof the said lessee has hereunto caused

its corporate name to be subscribed and seal affixed by its

duly authorized officers this 23rd day of March, 1935. :

Consolidated Gas Company, by James ‘W. Johnson,

President.

Attest: P. R. MacHale, Secretary. ( Corporate Seal.) -

° 7 2

[fol. 19] Acknowledgment of Corporation

State or Montana,

County of Toole, ss:

On this Brd day of March, A. D. 1935, before me, a

Notary Public within and for the State and county afore-

‘said, personally appeared James W. Johnson and P. R. Mac-’

Hale to me personally known, who, being by me duly sworn,

did each say that James W. Johnson is the president and P. R.

MacHale is the secretary of Consolidated ‘Gas Company, ~

a corporation, and that the seal affixed to the foregoing and

annexed instrument is the corporate seal of said corpora-

tion, and that:said instrument was ‘signed and sealed in

behalf of said corporation by authority of its board of

‘directors; and said James W. Johnson and P. R. MacHale

duly acknowledged that _* each had in their said official

capacities executed the foregoing instrument as the act and |

deed ef the said company for the consideration and pur-

poses therein mentioned and set forth; and I do hereby so

certify. : ;

16 aa oy

i Witness my hand and seal on this 23rd day of March

| 1935. * |

M. L. Gilroy, Notary Public for the State of Montana,

Residing at Shelby, Montana. My commission ex-

pires March 20, 1932. (Notarial Seal.)

| Acceptance by Assignee

The assignee in the above and foregoing assignment,

made subject to the approval of the Secretary of the In-

terior hereby accepts such assignment and agrees to fulfill

all the obligations, conditions, and stipulations in said-de-

scribed indenture of lease, when assigned and the rules

and regulations of the Secretary of the Interior, so far as

-applicable thereto, and to furnish proper bond guarantee- a

ing a faithful compliance with the said lease and this agree-

[fol. 20] ment.

In witness whereof the said assignee has. hereunto set

its hand and seal this twelfth day of April, 1935.

The British American Oil Producing Company, by

W. K: Whiteford, Vice-President.

Attest: R. M. Pitcher, Secretary.

Consent of Surety

The Central Surety and Insurance Corporation, of Kan-

p sas City, Missouri surety for Consolidated Gas Company

on the-bond accompanying the lease above described, hereby

consents to the assignment. and transfer of said lease as

above made and agrees that bond shall remain in force and

effect covering obligations of assignee.

Dated at Tulsa, Oklahoma, this 15th day of April, 1935.

Central Surety and Insurance Corporation, by G. B.

Gilliland, Attorney in Fact.

| Department of the Interior, Washington, D. C., August

\ | 15, 1935. ° e |

Approved: Oscar L. Chapmen, Assistant Secretary of

the Interior.

-- @Stamp.) ° ; |

[fol. 21] oy SUPREME Court of Montana

)

;

[Title omitted ]

a to SHow Cause—Filed Nov. 8, 1935

The above named plaintiff, having filed in the office of the

Clerk of the above entitled Court, its complaint praying for

an order of this Court that the above named defendants be

-restrained by injunction of this Court from proceeding

with the computing assessment levying and collecting of

any of the taxes mentioned and set forth in said complaint.

And it appearing that said complaint was filed herein

‘with the permission and consent of the Court.

Jt is hereby ordered that the above named defendants

appear before the above Court at the Court Room thereof

at Helena, Montana, on the 9th day of December, 1935, at

10 o ‘elock A. M. and show cause if any there by why ‘the

injunction prayed for in said complaint should not be issued.

Dated this 8th day of November, 1935. .

A. T. Porter, Clerk.

[File endorsemen* eT

[fol. 22] In SuPREME Court oF MontTANA

[Title omitted ]

CoMPLAINT IN Intervention—Filed Dee. 10, 1935

Comes now The Blackfeet Indian Tribe, through its Tri-

bal Business Council, in such matter duly authorized, and,

leave of this Honorable Court first had and attained, for-its

Complaint in Intervention respectfully shows the Court:

f I

That Complainant in Intervention is an Indian Tribe

whose members, duly enrolled in accordance with the laws

of the United States reside within the confines of the Black-

‘feet Indian Reservation in the State of Montana pursuant

to and under the provisions of treaties between said Tribe

and the United States of America. That Complainant is a

body politic duly constituted by.the laws of the United

_ States, and is governed by its Tribal Business Council under

the Supervisiow of the Secretary of the Interior of the

United States.

[fol. 23] | II

That all of the lands which are embraced within the

| confines of said Tribal Reservation, except lands upon which

Hl patents in fee have issued, are held and owned by the United

4 States of America in trust either for the benefit of the

| Blackfeet Indian Tribe or for the benefit of individual mem-

pers of such Tribe to whom rae patents’’ have been is-

sued.

Fo EEN SRR mee Tee

Ill

That on or about the 17th day of October, 1955, a treaty

was entered into between the United States and said Black-

feet Tribe, therein designated as the Blackfeet Nation,

whereunder said Tribe or Nation was given exclusive juris-

diction over the territory extending from the Continental

Divide east to the point where the Milk River empties into

the Missouri River.

That thereafter and in consideration of the payment of-

®monies and the making of further promises by the United

States the territory of such Reservation was reduced by —

agreement between the United States and said Tribe, and

| : that pursuant to said agreements, and in consideration of

the relinquishment of a large area of land by said Tribe it

was understood by said Tribe and the members thereof that

the lands embraced within,said Reservation should be for-

ever free from taxes levied by any local or state authority. ‘

That said agreément and understanding was~in full force

and.effect at the time of the admission of the State of Mon-

tana into the Union and at the time of the adoption of a

Constitution by the State of Montana.

That subsequent to the year 1896 it, was agreed that the

lands embraced within said Reservation should so far as

necessary to furnish the members of said Tribe with lands

should be allotted in severalty, under the existing laws of

the United States, and that the title to the lands so allotted

should be held by the United States for a period of 25 years

in trust for the benefit of such individual allottees, and that

[fol. 24] as long as the title to said lands should be held in

trust, as aforesaid, said lands should be free from the levy

of any tax by local or state authorities. That no‘allotments

under trust patents have been made upon lands within said

Reservation since the year 1919.

. VI

That upon lands embraced within the confines of said

Reservation and held in trust, as aforesaid, by the United

States for the benefit of said Tribe or individual members

thereof, oil and gas leases have been given under the author-

ity of the United States and with the consent of said Tribe

and said individual members thereof. That said leases are

upon lands with respect to which no taxes may be assessed

or levied by the State of Montana.

VII

That.upon a portion of said lands, under lease as afore-

said, oil wells have been drilled which said wells, for a period

of more than one year have been producing oil in commercial

quantities. :

| Vill

That by said oil and gas leases aforesaid it is provided

that said Tribe or said individual ‘allottee as the case may

be shall be entitled to receive from the lessees named therein

a 12/4 per cent royalty payable in money from all oil pro-

duced and saved from said lands, and at all times since

the production of oil from said wells said royalties have

-been and now are being paid to the United States for the

- benefit of said Tribe or said individual allottees as the case

may be. | |

; Ix

That despite the fact that said oil is being and has been

produced from tax exempt lands, as aforesaid, and despite

the fact that the royalties derived from the production of

said lands are held and owned by the United States in trust,

as aforesaid, the State Board of Equalization and the mem.

bers thereof have threatened and do now threaten to, and

will unless enjoined by order of this Honorable Court, pro-

4—7688-C

ceed: to levy the net proceeds tax provided for under the

provisions of section 2088 to 2096 R. C. M. 1921 inclusive, as

amended as a license tax upon the business of producing

(fol. 25] oil from said leases aforesaid.

That by reason of the fact that said lands and leases, and

the oil produced therefrom, are exempt from taxation, as

aforesaid, said lands, and the leases thereon, have for a long

period of time, had a value in excess of leases upon lands

- outside of said Reservation upon which said taxes have been

and now are levied. That should said Board be permitted

to levy said taxes upon the lands within said Reservation, -

aforesaid, said lands will become greatly reduced in value

for leasing purposes, and said taxes will constitute a direct

burden upon lands and property owned by the United States,

in violation of said treaties and agreements and of the pro-

visions of the Constitution and Statutes of the State of

Montana.

- Be

That by reason of the treaties, ‘agreements and statutes

of the United States, and the Enabling Act, the Constitution

and the statutes of the State of Montana said lands, the oil

and gas produced therefrom and the royalties derived there-

from are exempt from taxation, and that said Tribe and

the individual members thereof have a vested property right

in such tax exemption, and that to permit the levy of such

tax upon said oil and gas so produced and upon said royal-

ties would deprive said Tribe and said members of property

without due process of law, in violation of the provisions of

the Constitution of the United States and would impair the

obligations of contracts, treaties and agreements between

said Tribe and said individual members and the United

States, and between the State of Montana, and the United

States in violation of the provisions of the Constitution of

the United States and the State of Montana.

Wherefore, Complainant in intervention respectfully

prays: ,

1. That said defendants be restrained by order and decree

of this Court from computing, assessing, levying or collect-

_ ing any of said tax or taxes described in this complaint ;

2. For such other and further relief as to the Court may

[fol. 26] seem equitable, proper and just.

Hall & McCabe, Great — Montana, Attorneys for

Intervener. ,

(fol. 27] Duly sworn to by H.C. Hall, Jurat omitted in

printing.

{File ssiliecnemsent omitted. ]

' [fol. 28] In SuprEME Court oF MontTANA

[Title omitted]

DEMURRER OF DEFENDANTS TO CompLaInt—Filed Dec. 10,

1935

Come now the defendants above nemed and demur to

the complaint of plaintiff on file herein upon the following

grounds, to-wit:

1. That said complaint does not state facts sufficient to

constitute a cause of action. ™~

Sew

2. That said complaint does not state facts sufficient to

entitle the plaintiff to the relief sought or any relief.

Raymond T. Nagle, Attorney General; Jeremiah J.

Lynch, First Assistant Attorney General, Attor-

neys for Defendants.

Sr tS eee

[File endorsement omitted. ]

[fol. 29] In SupreME Court or Montana

/ [Title omitted]

DEMUH#RER OF DEFENDANTS TO COMPLAINT IN INTERVENTION—

Filed Dec. 13, 1935

Come now the defendants above named and demur to the

complaint in intervention of the Blackfeet Indian Tribe on

file herein upon the following grounds, to-wit:

1. That said complaint does not state facts sufficient to

constitute a cause of action.

2. That-said complaint does not state facts sufficient to

entitle the plaintiff to the relief sought or any relief.

Raymond T. Nagle, Attorney General ;-Jeremiah J.

Lynch, First Assistant Attorney General , Attor-

neys for Defyndants.

[File endorsement “omitted.}

[ fol. 30] In Suprzme Court or Montana

{Title omitted]

STIPULATION RE AMENDMENT or CompLaInt—Filed Dec. 10,

1936

It is hereby stipulated by and between counsel for the

respective parties to the above-entitled action:

I. That the Complaint heréin may be amended by insert-

ing after the word ‘‘the’’ (the last word in bine one of Para-

graph III) the following:

‘‘United States of America, for the benefit of.’’

II. That the copy of Patent and certificate attached there-

to, which are attached to this stipulation as Exhibit ‘‘A’’,

may be considered by this Court for every purpose in the

determination of this action; and that all of the lands em-

braced in the oil'and gas lease described in the Complaint

herein were granted to various Indians in’ the Blackfeet

Indian Reservation by Paten® in form identical with that

contained in said Exhibit ‘‘A’’, which said Exhibit ‘‘A’’

may be deemed attached to and made a part of said com-

plaint. .

E. K. Cheadle, Jr., G. S. Frary, Attorneys for Plain-

tiff. Raymond T. Nagle, Jeremiah J. Lynch, At-

torneys for Defendants.

[File endorsement omitted. ]

~ [fol. 31] Exausrr ‘A’? ro Strpuation

"1037035.

25338-21. 1.0.

702,° ~

The United States of America to all to whom these presents

shall come, Greeting: %

Whereas, a schedule of allotments approved by the Sec-

retary of the Interior has been deposited in the General

Land Office, whereby it appears that Susan Rider, an Indian

of the Blackfeet Reservation, has been allotted the follow-

ing-described land: ;

The southwest quarter of the northwest quarter of Sec-

tion five in Township thirty north and the lot five of Section .

ten in Township thirty-four north all in Range six b ay of

_ the Montana Meridian, Montana, containing eighty-five

acres and twenty-five hundredths of an acre; |

Now Know Ye, That the United States of America, in

consideration of the premises, has allotted, and by these

presents does allot, unto the said Indian the land above

described, and hereby declares that it does and will hold

the land thus allotted (subject to all statutory provisions

and restrictions) for the period of twenty-five years in trust

for the sole use and benefit of the said Indian and at the

expiration of said period the United States will convey the

same by patent to said Indian in fee, discharged of said

trust and free from all charge and incumbrance whatsoever ;

but in the event said Indian dies before the expiration of

said trust pggiod, the Secretary of the Interior shall ascer-

fain the legal heirs of said Indian and either issue to them

in their- names a patent in fee for said Land, or cause said

Land to be sold for the benefit of said heirs as provided by

law; and there is reserved from the lands hereby allotted,

a right of way thereon for ditches or canals constructed: by

the authority of the United States. Also reserving, to the

United States, in accordance with the provisions of the Act

of June 30, 1919 (41 Stat., 17), all minerals, including coal,

oil and gas, for the benefit of the Blackfeet Tribe of Indians

until Congress shall otherwise direct.

In testimony whereof, I, Warren G. Harding, President of

the United States of America, have caused these letters to

be made Patent; and the Seal of the General Land Office to

be hereunto affixed.

Given under my hand, at the City of Washington, the

Eleventh day of August in the year of our Lord one thou-

sand nine hundred and Twenty-Two and of the Indepen-

dence of the United States the one hundred ‘and nae

Seventh.

By the President: (Signed) Warren G. Hacding.. By

( Signed) Ada Braddick,# Assistant Secretary.

(Signed) John O’Connell, (Acting) Recorder uf

the General Land Office.

Recorded: Patent Number 875783.

[fol. 32] SratTE oF Mouwaxs,

County of Glacier, ss:

I hereby certify that the foregoing is a full, true, exact and

correct copy of the original Patent covering the SW/4

NW /4, Section 5, Township 30, North, and Lot 5, Section 10,

Township 34, North, all in Range 6, West of the Montana

Meridian, Montana, containing eighty-five acres and twenty-

‘ five hundredths of an acre on record in the Office of the

Indian Department of the Department of the Interior of

the United States at Browning, Montana, and that said

Patent is a part of the Original records of said office. And

_I further certify that all of the land described in and cov- .

ered by that certain Oil and Gas Lease executed by Forrest

R. Stone, Lessor to Consolidated Gas Company, dated July .

10, 1935, No. 107, is allotted land-in the Blackfeet Indian

Reservation, allotted to various Indians by Patents in form

identical with the above. .

H. M. Knutson, Acting Sessneintanitent of the Black-

feet Indian Reservation.

[fol. 33]. [File endorsement omitted. ]

Iw Supreme Court or Montana, December Term, 1935

No. 7605

Tye British-American Or Propuctnc Company, a Cor-

poration, Plaintiff, .

Tue Boarp op EQuaLizaTION OF THE STATE OF Montana, and

James H. Stewart, John J. Greene and Sam D. Goza,

Members of Said Board, Defendants

Submitted December 10, 1935. Decided January 22, 1936

Oprnton—Filed January 22, 1936

(fol. 34] Mr. Justice Anperson delivered the Opinion of the

Court: ;

Plaintiff, the owner of a producing oil and gas lease on

certain lands within the Blackfeet Indian Reservation,

brought this original proceeding to secure an injunction

_ against the State Board of Equalization and the individual

members of the board in their official capacity, to enjoin

them from collecting the ‘‘corporation license tax,’’ the

‘operators’ net proceeds tax,’’ the ‘‘gross production tax,”’’

and the ‘‘royalty owners’ net proveeds tax’’ arising out of

the production and recovery of oil from the leased lands

and premises.

In its complaint plaintiff alleges its corporate capacity

and the official capacity of the defendant board. It is then

alleged that prior to July 10, 1934, the Blackfeet Tribe of

Indians, of the reservation bearing the same name in Gla-

cier county, was the owner of all the oil and gas and other

minerals in and under certain described lands, and that on

the latter date, acting in accordance with a resolution of

the Blackfeet Tribal Council dated June 10, 1934, and in

accordance with the provisions of the laws of the United

States and the regulations of the Department of the In-

terior, and for a good consideration, the superintendent of

this Indian reservation as lessor made and delivered to

Consolidated Gas Company, a corporation, as lessee, a cer-

tain oil and gas lease describing these lands, for a term of

five years from the date of the approval of the lease and.

as long thereafter as oil or gas was found in paying quan-

tities. Thereafter, on October 5, 1934, this oil and gas lease

was duly approved by the First Assistant Secretary of the

Interior as required by law and the regulations of the De-

partment of the Interior. It is then alleged that thereafter,

and for a good and valuable consideration, the lessee sold,

assigned and transferred to the plaintiff the lease and all

[fol. 35] right, title and interest therein, which assignment

‘was on August 5, 1935, duly approved by the Assistant Sec-

retary of the Interior as required by the laws of the United

States and the regulations of the Department of the ‘In-

terior, and that pursuant to the terms and provisions of the

lease plaintiff entered upon the lands, and during the years.

1934 and 1935 drilled to completion ten oil and gas wells,

all of which were productive of oil or gas in paying quan- -

tities.

It is further alleged that the plaintiff in the development

and operation of these oil and gas wells is acting as an in-

strumentality and agent of the United States of America,

and as such is not taxable by the State of Montana, and

that the State of Montana and its officers are wholly with-

out power to tax the plaintiff in the particulars mentioned

supra.

The plaintiff alleges the nature of and the statutory au-

thority for each of the taxes, and that the defendants are

attempting and threatening to-assess, levy and collect these

taxes on the crude oil produced on these lands. The com-

plaint contains other allegations necessary to invoke the

original jurisdiction of this court.

The Blackfeet Tribe have by leave of this court filed a

complaint in intervention, which alleges that its members

are duly enrolled in accordance with the laws of the United

States; that they reside within the Blackfeet Indian Reser-

vation pursuant to and’ under the provisions of treaties

between the tribe and the United States of America; that

the complainant is a body politic duly constituted by the

laws of the United States, and is governed by the tribal

council under the supervision of the Secretary of the In-

terior, and that all of the lands embraced within the con-

fines of the reservation, except those upon which patents in

fee have been issued, are held and owned by the United

States of America in trust for the benefit of the tribe. It

is then alleged that on October 17, 1935, a treaty was en-

[fol. 36] tered into between the United States and the mem-

bers of this tribe whereunder the tribe or nation was given

exclusive jurisdiction over certain territory; that there-

after, in consideration of payments of money, the area of

_this reservation was reduced pursuant to an agreement, and

in consideration of the relinquishment of a large tract of

land by the tribe it was ‘‘understood by said tribe and the

members thereof that the lands embraced within said reser-

- vation should be forever free from taxes levied by any

local or state authority,’’ which agreement was in effect at

the time of the admission of the State of Montana into the

Union and the adoption of its Constitution; that subsequent

to the year 1896 it was agreed that the lands embraced

within the reservation should be allotted in severalty under

the existing laws, the title to the lands so allotted to be held

for a period of twenty-five years in trust for the benefit of

the individual allotiees,” and that as long as the lands were

so held in trust no taxes should be levied by local or state

authorities; that upon lands embraced within the reserva-

tion and held in trust for the benefit of the tribe oil and

gas leases have been given under the: authority of the

United States with the consent of the tribe, upon and under

which leases wells have heen drilled which produce oil and

gas in commercial quantities, and that the oil and gas Jeases

provide for the payment of a royalty of 12% per cent, pay-

able in money to the United States for the “enefit of the

tribe. It is then alleged that the oil so produced from tax-

exempt lands, and the royalty derived from the production

of the oil are being attempted to be subjected to thé oil —

royalty tax pursuant to certain statutory provisions of the

State of Montana, which will be hereafter noted, and that

unless the taxing authorities are restrained and enjoined

they will proceed to levy, collect and impose these taxes.

It is further alleged that ‘‘by reason of the treaties, agree-

ments and statutes of the United States, and the Enabling

Act, the Constitution and the statutes of the State of Mon-

[fol. 377 tana, said-lands, the oil and gas produced there-

from and the royalties derived therefrom are exempt from

taxation, and that said tribe and the individual members

thereof have a vested property right in such tax exemption,

and that to permit the levy of such. tax upon said oil and

“gas so produced and upon said royalties, would deprive said

tribe and said members of property without due process of *

ith Matt BEB 2. , ‘ ee oe aoe “ty

. ae ze

H é

law, in violation of the provisions of the Constitution of the

United States and would impair the obligations of con-

tracts, treaties and agreements between said tribe and said

individual members and the United States, and between the

State of Montana and the United States in violation of the ;

provisions of the Constitution of the United States and the :

State of Montana.’’ 3

The defendants have- interposed Aaiiiiieiite to both com-

plaints challenging their sufficiency for substance. It was

stipulated between the plaintiff and defendants that the

complaint should be amended to sHow that all of the lands

described in the oil and gas leases mentioned in the com-

plaint were lands on which trust patents had been issued to

individual Indian allottees, but all of which trust-patents

contained the following reservation: ‘‘ Also reserving, to the

United States, in accordance with the provisions of the Act

of June 30, 1919 (41 Stat. 17), all minerals, including coal,

oil and gas, for the benefit of the Blackfeet Tribe of In-

dians until Congress shall otherwise direct.’’

In the brief filed by the state subsequent to oral argu-

ment on thgse demurrers, it is asserted that this court is

without jurisdiction to entertain the complaint -in interven- ;

tion of the Blackfeet Tribe and they without capacity to sue. :

This argument presents a serious question. (United States

v. Candelaria, 271 U: S. 432.) However, in view of the con-

clusion which we have reached—the net result being the ;

same as if we had sustained this contention—we shall ex-*- |

press no opinion on it, but treat the complaint in interven- :

tion as though it was one over which we had jurisdiction

[fol. 38] without doubt.

The corporation license tax law provides (secs. 2296 to

7 2304, inclusive, as amended by Chapter 166, Laws of 1933)

i for a tax ‘of 2 per coum upon the total net income re-

ceived by such corporattwa@s in the preceding fiscal year

from all sources within the State of Montana.’’ Certain

corporations are without the provisions of the act, none of

which are here involved. The Act contains numerous pro-

visions with reference to the manner of computing the tax,

and provides for deductions, etc., not here important. Sec-

tion 2398, as amended by Chapter 67 of the Laws of 1923,

provides in part as follows: ‘‘Every person engaging in or

| carrying on the business of producing, within this state,

|. ~~ + petroleum, or other mineral or crude oil, or engaging in-or

| carrying on the business of owning, controlling, managing,

pe: 29

leasing or operating within this state any well or wells from

which any merchantable or marketable petroleum or other

mineral or crnde oil is extracted or produced, sufficient in

quantity to justify the marketing of the same, must, for

the-year 1923, and each year thereafter, when engaged in

or cafrying on any such business in this‘ state, pay to the

state treasurer, for the exclusive use and benefit of the

State of Montana, a license tax for engaging in or carrying

on such business in an amount equal to two per centum of

the total gross value of all petroleum and other mineral or

crude oil produced by such person within this state during

such. year.’? We will refer to this hereafter in the opinion

as the gross production tax.

Section 2089, Revised Codes 1921, as amended by Chap-

ter 188 of the Laws of 1935, provides: ‘‘Every person, part-

nership, corporation, or association engaged in mining

_** * from or upon any mine whatsoever containing

petroleum, natural gas, or other valuable mineral

or mineral deposits, must on or before the 31st day of

March in each year make out a statement of the gross yield

of the above-named metals or minerals'from* each mine

owned-or worked by such corporation.’’ The statement is

to be made by the proper officer to the defendant board and

[fol. 39] is to‘contain the various matters enumerated in

the section. oo

By the terms of section 2090, as amended by section 2 of

Chapter 188 of the Laws of 1933, it is made the duty of the

defendant board to compute the gross value of the product

in dollars and cents so reported and to calculate and com-

putethe net proceeds by making certain deductions from the

gross product as provided in the section. |

Under the terms of section 1 of Chapter 188 of the Laws

_ of 1935, the operator is required to furnish the defendant

board with the names and addresses of any and all persons

owning-or claiming any royalty interest in the product of

the mine and the proceeds derived from its sale, and the

amounts paid or yielded as royalty to each of such persons

during the period covered by the statement. By section 3

of the chapter the board is directed, on receipt’ of the sched-

ule setting forth the names and addresses of persons own-

ing or claiming royalty, to assess the same at the full cash

value of the money or product vielded during the preced-

ing year, to be taxed on the same basis as the net proceeds

of mines as provided by sectiov. 1999, Revised Codes of

a er

-1921. By section 5 of the chapter the board is directed to

‘transmit at a specified. time the valuation of the net pro-

ceeds of mines and mining claims for the purposes of taxa-

tion, to the county clerks of the respective counties, . to be

placed on the assessment roll of net proceeds of mines. By

section 6 of the same Act the defendant board is directed

to transmit the royalty lists to the county clerks of the re-

spective counties who must prepare a tax roll in the per-

sonal property assessment book in the nameé of the operator

of the mine, ‘‘and such assessments when entered shall have

all the foree and effect as if made in the names of the own-

ers of such royalty individually as well as against the op-

erator. The county treasuver shall proceed to give full no-

tiee thereof to such operator and. to collect the same in

manner provided by law. The operator or producer shall

be liable for the payment of said taxes, and same shall be

[fol. 40] payable by, and shall be collected from, such op-

erators in the same manner and under the same penalties

as provided for the collection of taxes upon net proceeds

of mines; provided, however, that after payment of such

tax such operator may recover or withhold from any pro-

ceeds of royalty interest, either in kind or in money, com-

ing into his hands, the amount of any tax paid by him upon

such royalty or royalty interest.’’

The first contention of the defendants is that the ation, |

- feet Indian Reservation is an executive order reservation,

and that Congress by the Act of March 3, 1927 (44 Stat.

_ 1347, secs. 398a, 398b, and 398c, 25 U. S. C. A. Cum. Supp.

28), has given its consent to the imposition of these taxes.

The same contention was made by the same defendants in

the case of Santa Rita Oil Co. v. The Board, this day de-

cided. We there held that this contention on behalf ef the

state was without merit, and for the reasons there recorded;

and upon the authorities there cited, we again decide the ;

contention adversely to the defendants.

Plaintiff bases its entire argument on the premise that

these lands included within the leases in question are all

allotted Indian Reservation lands, and argues on the au-

thority of United States v. Rickert, 188 U. S. 432, 47 L. Ed.

532, 23 Sup. Ct. 478; Indian Territory Oil Co. v. Oklahoma,

240 U. S. 522, 60 L. Ed. 779; Choctaw O. & G. R. R. Co. v.

Harrison, 235 U. S. 292, 59 L. Ed. 234, 35 Sup. Ct. 27;

Gillespie v. Oklahoma, 257 U. 8S. 501, 66 L. Ed. 338, 42 Sup.

Ct. 171; Jaybird Min. Co. v. Weir, 971 U. S. 609, 70 L. Ed.

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1112, 46 Sup. Ct. 592, that the State.of Montana is without

authority to levy and impose these taxes. Certain other

cases dre cited by it which apply peculiarly to the royalty.

‘tax which we shall hereafter during the course of the opin-

ion notice more in detail. We have given consideration to

these decisions by the Supreme Court of the United States

in the opinion in the Santa Rita Oil Company case, supra,

and if the premise on which plaintiff founds its argument

were sound, we should on the authority of that decision

[fol. 41] hold that the imposing, levying and collecting of

the gross production tax and the operators’ net proceeds

tax should be enjoined.

As to the corporation license tax, however, we now hold,

for the reasons stated in the opinion just referred to—the

facts applicable to that tax here being identical—that the

contention is without merit. .

It therefore becomes necessary for us to examine into

and determine whether the premise on which plaintiff

’ founds its argument is sound. True, trust patents have

been issued to individual allottees covering all of the lands

described in the lease, but in each of these patents the pro-

vision is found reserving the oil and gas for the benefit of

the Blackfeet Tribe of Indians until Congress shall direct

otherwise. It is noteworthy, in passing, that the lease, a

copy of which is attached to the exhibit, after reciting the

dates and the names of the parties. declares that it is exe-

cuted under and in pursuance of section 3 of the Act ap-

proved February 28, 1891 (26 Stat. 795), as amended by

the Act approved May 29, 1924 (Public No. 458, 68th Con-

gress). The amendment there referred to js section 398

of Title 25, U.S. C. A., providing as follows: ‘‘Unallotted

lands on Indian reservations other than lands of the Five

Civilized Tribes and the Osage Reservation subject to lease

for mining purposes fer a period of ten years under the

preceding section may be leased at public auction by the

Secretary of the Interior, with the consent of the council

speaking for such Indians, for oil and gas mining purposes

for a period of not to exceed ten years, and as much longer

as oil or gas shall be found in paying quantities, and the

terms of any existing oil and gas mining lease may in like

manner be amended by extending the term thereof for as

long as oil or gas shall be found in paying quantities: Pro-

vided, that the production of oil and gas and other minerals

te te gece cree Sere ie ott Situ. Satins Haid Lisdledei, asiorih eklaN miles atl a w

on such lands may. be taxed by the state in which said

lands are located in all respects the same as production

| on unrestricted lands, and the Secretary of the Interior

[fol. 42] is authorized and directed to cause to be paid the

tax so assessed against the royalty interests on said lands:

Provided, however, that such tax shall not become a lien

or charge of any kind or character against the land or the

property of the Indian owner.’’. The foregoing section ap-

plies only to unallotted lands. =

As we view the situation, when the trust patents were is- ;

sued containing the reservation of the oil and gas as well

as other minerals, including coal, pursuant to 41 Stat. 17,

a distinct estate was thereby carved out or created con-

sisting of the reserved minerals which the United States

thereafter held in trust for the benefit of the Blackfeet

Tribe; this estate was distinct, separate and apart from the

estate or interest which the United States held in trust for

the benefit of the individual Indian allottees (Superior Coal

Co. v. Musselshell County, 98 Mont. 501, 41 Pac. (2d) 14);

and it follows that, as to the minerals, coal and gas, there

was no allotment of these lands: This construction, as we

have already pointed out, is in accord with that adopted

by the original parties to this lease which was approved

by the Department of the Interior, the construction of which

is not to be overturned unless clearly wrong, or unless a

different construction is plainly required: (Hawley v. Dil-

ler, 178 U. S. 476, 488, 44 L. Ed. 1157, 20 Sup. Ct. 986;

United States v. Johnston, 124 U. S. 236, 31:L. Ed. 389,

8 Sup. Ct. 446; Miller Insuranee Agency v. Porter, 93 Mont.

567, 20 Pace. (2d) 643.) 3

Under the provisions of section 398, Title 25, U. S. C.

A., Congress has sented that the production of oil and

gas on nnallotted IStds on Indian reservations, such as this,

may be taxed by the state in which the lands are located in

all respects as the same production on unrestricted lands

- would be taxed; and with this congressional consent there

is no objection—so far as the federal Constitution and stat-

: | utes are concerned—to the imposition of either the gross

ej [fol. 43] production tax or the operator’s net proceeds tax

(see Jaybird Mining Co. v. Weir, supra; Mid-Northern Co.

v. Walker, 265 U. S. 45, 45 Sup. Ct. 440), unless Congress

has violated the treaty with the Blackfeet Tribe, or some of

the agreements between the United States and this Indian

tribe which were approved by Congress—to which we have

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‘referred in our opinion this day promulgated in the case

of Santa Rita Oil Co. v. The Board—and then only pro-

vided Congress by such changes has violated some consti-

tutional right. We shall, however, consider these questions,

with others in connection with our treatment of the royalty

‘owners’ tax.

Passing now to that question, it will be noted that con-

gréssional consent by section 398 of Title 25, U. S. C. A.,

extends not only to ordinary taxes, but to taxation of

royalty interests on the lands. It is urged most strenuously

by counsel on behalf of the tribe that the taxing of the

royalties, if permitted to stand, is in violation of the treaties

and agreements between the Indians and the United States,

and also in violation of our state Constitution. Counsel

rely on the cases of Choate v. Trapp, 224 U. S. 665, 56 L.

Ed. 941, 32 Sup. Ct. 565; Carpenter v. Shaw, 280 U. S. 363,

74 L. Ed. 478, 50 Sup. Ct. 121; Morrow v. United States,

243 Fed. 854, and Carter Oil Co. v. Tax Commission, 166

Okla. 1, 25 Pac. (2d) 1092. It was held in those cases that

where lands were allotted to individual Indians under an

agreement that they were to remain tax-exempt for a stip-

ulated period, on the acceptance of the allotment patent by the

Individual Indian a right was vested in him which Congress

was powerless to invade, in that such right was within the

protection of the Fifth Amendment to the federal Consti- -

tution; but in this case the right that is invaded, if any,

is a right belonging to the tribe. If it is true that the im.

position of taxes on the royalties, the property of the In-

dian, is in violation of a treaty or agreement between the

Indians and the United States confirmed by Act of Con-

gress, that body did not exceed its power in so violating the

treaty or agreement. In the case of Lone Wolf v. Hitch-

[fol. 44] cock, 187 U. 8. 553, 47 L. Ed. 299, 23 Sup. Ct. 216,

the court said: ‘‘ ‘Article 12. No treaty for the cession of

any portion or part of the reservation herein described,

_which may be held in common, shall be of any validity or

force as against the said Indians, unless executed and -

signed by at least three-fourths of all the adult male In-

dians occupying the same, and no cession by the tribe shall

be understood ur construed in such manner as to deprive,

_ Without his consent, any individual member of the tribe of

lis rights to any tract of land selected by him as provided

in Article III (VI) of this treaty.’ The appellants base

their right to relief on the proposition that by the effect of

the Article just quoted the confederated tribes of Kiowas,

Comanches and Apaches were vested with an interest in

the lands held in common within the reservation, which in- _ 7

terest could not be divested by Congress in any other mode

than that specified in said twelfth Article and that as a

result of the said stipulation the interest of the Indians in

the common lands fell within the protection of the Fifth

Amendment to the Constitution of the United States, and

such interest—indirectly at leasi—came under the control

of the judicial branch of the government. We are unable

to yield our assent to this view. |

‘The contention in effect ignores the status of the con-

tracting Indians and the relation of dependency they bore -

and continue to bear towards the government of the United

States. To uphold the claim would be to adjudge that the

indirect operation of the treaty was to materially limit and

qualify the controlling authority of Congress in respect to

_ the care and protection of the Indians, and to deprive Con-

gress, in a possible emergendy, when the necessity might be

urgent for a partition and disposal. of the tribal lands, of

all power to act, if the assent of the Indians could not be

obtained.”’ .

Again, in the same opinion, it was said: ‘‘Plenary au-

thority over the trival relations of the Indians has been

(fol. 45] exercised by Congress from the beginning, and

the power has always been deemed a political one, not sub-

ject to be controlled by the judicial department of the gov-

ernment. Until the year 1871-the policy was pursued of

dealing with the Indian tribes by-means of treaties, and,

of course, a moral obligation rested upon Congress to act

in good faith in performing the stipulations entered into

on its behalf. But, as with treaties made with foreign na-

tions (Chinese Exclusion Case, 130 U. 8. 581, 600), the legis-

lative power might pass laws in conflict with treaties made

with the Indians. (Thmas v. Gay, 169 U. S. 264, 270; Ward

v. Race Horse, 163 U. S. 503, 511; Spalding’ v. Chandler,

160 U. 8. 394, 405; Missouri, Kansas & Texas Ry. Co. v.

Roberts, 152 U. S. 114, 117; The Cherokee Tobacco, 11 Wall.

616.)

‘‘The power exists to abrogate the provisions of an In-:

dian treaty, though presumably such power will be exer-

cised only when circumstances arise which will not only

justify the government in disregarding the stipulations of

EEE 85

the treaty, but may demand, in the interest of the country

and the Indians themselves, that it should do so. When,

tnerefore, treaties were entered into between the United |

States and a tribe of Indians, it was never doubted that the

power to abrogate existed. in Congress, and that in a con-

tingency such power might be availed of from considera-

tions of governmental policy, particularly if consistent with

perfect good faith towards the Indians.”’

-This decision of the Supreme Court of the United States —

has not been departed from. An examination.of the de-

cisions on which counsel rely and a comparison thereof

with the decision in Lone Wolf v. Hitchcock, supra, and

other decisions following that one, suggest that there is a

broad distinction between tribal property and private prop-

erty, and between the power to abrogate a statute or treaty

and the authority to destroy individual rights acquired

under a law.

It is urged that the tax may not be imposed under our

[fol. 46] own Constitution—section 2 of Article XII—which

provides that the property of the United States shall be ~

exempt, and under a portion of the second section of Ordi-

nance No. 1, which is but a copy of. the second provision

of section 4 of our Enabling Act, wherein it is provided

‘*that no taxes shall be imposed by the said state of Mon-

tana on lands or property therein belonging to, or which

may hereafter be purchased by the United States-or re-

served for its use. But nothing herein cohtained shall pre-

clude the said state of Montana from taxing as other lands

are taxed any lands owned or held by any Indian who has

severed his tribal relations and has obtained from the

United States or from any person a title thereto by patent

or other grant,-save and except such lands as have been or

may be granted to any Indian or Indians under any Act

of Congress containing a provision exempting the lands

thus granted from taxation, but said last named lands shall

be exempt from taxation by said state of Montana so long

- and to such extent as such Act of Congress may prescribe.’’

_ The lands under the second section of the Ordinance,

which refers. specifically to Indian lands, are only exempt

from taxation until congressional consent to taxation is had.

Trve, the title to these lands is held in trust by the United

States, and to that extent the lands are its property; and

if section 2 of Article XII stgod alone, it would perhaps

be sufficient to exempt these lan s from taxation. The pro-

vision therein contained, however, is general, whereas the

provision @ontained in the Ordinance relates specifically

to Indian lands. In the construction of Constitutions, as’

well as statutes, broad and general provisions which tend

“in some measure to conflict with a specific one, are con-

trolled bythe specific provision. (Martien v. Porter, 68

Mont. 450, 219 Pac. 817; State ex rel. Corry v. Cooney, 70

Mont. 355, 225 Pac. 1007.)

In view of the congressional consent expressly .authoriz-

ing all of these taxes found in section 398, Title 25,

[fol. 47] U. S. C. A., we find no objection to the imposition

and levy of these various taxes on lands such as are de-

scribed in plaintiff’s complaint. Accordingly, the demur-

rers to plaintiff’s complaint and to the complaint in inter-

vention of the Blackfeet Tribe are sustained, and the pro-

ceeding is dismissed.

Ralph J. Anderson, Associate Justice.

We concur: W. B. Sands, Chief Justice. John A. Matt-

hews, S. V. Stewart, C. F. Morris, Associate Justices.

[fol. 48] je SuPREME Court or Montana

[Title omitted]

_ Perition ror Reneartnc—Filed Jan. 31, 1936

Comes now the above named plaintiff, British-American

Producing Company, a corporation, and respectfully peti-

tions this Honorable Court to grant a rehearing in con-

nection with the above proceeding, and in this behalf re-

spectfully shows the Court: oe.

In the proceeding brought by the plaintiff it was urged

upon behalf of the plaintiff that so far as concerns produc-

tion of oil and gas from leases in which plaintiff was the

lessee and covering lands situated upon the Blackfeet In-

dian Reservation the d@endant State Board of Equaliza-

tion was without power or authority under the laws of the

United States and the laws and Constitution of the State

of Montana to assess or levy against plaintiff either the

corporation license tax, the gross production tax, or the

net proceeds tax including the royalty tax. By its decision

rendered on the 22nd day of January, 1936, this Court

As eee SE Be CN ee

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—

. De hele oe tine nate ahd” oh

———_ 37

determined that the plaintiff and royalty owners under

leases held by the plaintiff were subject to the payment of

the three above mentioned taxes.

_ In this petition for rehearing we shall not enter into any

controversy with the Court with respect to the corporation

license tax, but shall assume that the decision of the Court

is proper under the authorities. The petition will, there-

fore, deal only with questions arising under the gross pro-

duction tax (Section- 2397 to 2408, R.C.M. 1921, Laws of

1923, Chapter 67), and the net proceeds tax (Section- 2088

[fol. 49] to 2096, R.C.M. 1921, Laws of 1925, Chapter 191,

Laws of 1927; Chapter- 139 and 140 Laws of 1933, Chapter - =

161 Laws of 1935, Chapter 188).

It is the theory of the plaintiff and the plaintiff earnestly

contends herein, that the Supreme Court in rendering its

decision with respect to the liability of plaintiff under the

last above mentioned sections overlooked entirely statutes

of the United States as well as provisions of the Constitu-

tion and laws of the State of Montana which are decisive

of the questions presented to this Court.

The trust patents which this Caurt had under considera-

tion in this proceeding contained a reservation of the oil

and gas well as other minerals in the United States. This

reservation was made pursuant to the provisions of 41

Statutes at large page 17. This is expressly recognized by

the decision of this Court at page 4, paragraph 2. For the

-purpose of this proceeding it must be assumed that the pro-

visions of this statute govern so far as concerns the leas-

ing of the lands here under consideration for eil and gas.

41 Statutes 17 contains the following provisions:

| ‘“‘That any and all mineral including oil and gas are

hereby reserved for the benefit of the Blackfeet Tribe of

_ Indians until Congress shall otherwise direct and patents

hereafter issued shall contain a reservation accordingly;

Provided that the land containing said minerals may be

leased under such rules and regulations and upon such

terms and conditions as the Seeretary of the Interior may

prescribe.’’

41 Statutes page 17 is Section 10 9f Chapter 4 of the Act

of Juné 30, 1919. As a part of the e chapter enacted at

_ the same time appears Section 26 also cited as 41 Stat. 31

_ which provides for the leasing of unallotted lands “‘for the

purpose of mining for deposits of gold, silver, copper and

other valuable metalliferous minerals.’’ Section 26 is not

an amendment of Section 10, but is a part of the same

chapter and Act of Congress enacted at the same time. It

will be observed therefore ‘that the only provision for leas-

ing for oil and gas purposes is the general provision which

appears in Section 10 (41 Stat. 17) heretofore quoted.

In order to more particularly define the meaning of the

word ‘‘metalliferous’’ Section 26 Chapter 4 (41 Stat. 31)

was amended by the Act of March 3, 1921, (41 Stat. 1231),

[fol. 50] as follows:

. ‘Wherever the term ‘metalliferous’ is used in this sec-

tion it shall be defined and construed by the Secretary of

Interior to include magnesite, gypsum, limestone and as-

bestos.’’

Again on December 16th, 1926 (44 Stat. 922) Paragraphs ~—

1 and 2 of Section 26 of the Act of June 30, 1919, were»

amended, but such amendment again only applies to leases

for the purpose of mining for gold, silver and other metals.

See U. S. C. A., Title 25, Section 399.

Section 399, U. S. C. A. Title 25 as it originally appears

in the United States Codes Annotated is not a complete

a section, but is merely section 26 of Chapter 4 of the Act

of June 30, 1919. So far as we can determine Section 10

of Chapter 4 (41 Stat. 17) which is the section under which

the oil, gas and other minerals were reserved and under

which the leases here under consideration were given has

been omitted from the United States Code Annotated. We

have been unable to find where Section 10 of Chapter 4 of

7 the Act of June 30, 1919, has been either amended or re-

pealed. We must assume, therefore as did the Supreme

Court in its decision in this case that Section 10 (41 Stat.

17) at the time of the execution and delivery of the leases

here under ¢onsideration was in full force and effect. Un- |

der such circumstances it appears to the plaintiff that the |

rights of plaintiff and the owners of royalty under leases

held by the plaintiff must be measured by the provisions of

Section 10, Chapter 4 of the Act of June 30th, 1919 (41

Stat. 17) rather than by the provision of Section 398 U.S.

2. A. Title 25, (Act of May 29, 1934, 43 Stat. 244). That

this is a logical deduction from the various provisions of

the United States statutes seems élear upon an analysis of

the provisions of such statutes.

ae NE Re a eT ee ee amok SU ee

BARA Nth. “4

OE eA a rt Y

| 39

At the outset it is apparent that so far as concerns lands

upon the Blackfeet Indian Reservation there are three

classes to be dealt with: (1) unallotted tribal lands; (2)

lands allotted in trust; (3) lands allotted in trust as to which

the oil, gas and other minerals have been reserved under the

provisions of 41 Stat. 17. When we make this classification

of the lands to be dealt with herein we find express pro-

visions of the United States statutes with reference to oil

and gas leases upon each of such classes. Thus lands allotted

{fol. 51] in trust without a reservation of the mineral oil

and gas in the United States are authorized to be leased

under the provisions of Section 396 U. S. C. A. Title 25

(35 Stat. 783).

-Santa Rita Oil & Gas Co. v. State Board of Equali-

zation, decided January 22, 1936:

The leasing of unallotted lands on Indian Reservations

is provided for in Section 398 U.S. C. A., Title 25, (43 Stat.

244), and the leasing of lands for oil and gas purposes as

_ well as for the purpose of mining metals is provided for by

the Act of June 30, 1919, Chapter 4, Section 10, 41 Stat.

17, and Section 26, 41 Stat. 31. Unless we make the above

classification of Indian lands and apply the several statutes

to the different classes as above set forth then the pro-

visions of Section 399 U. S. C. A., Title 25, and the Pro-

visions of Section 10, Chapter 4, Act of June 30, 1919,

(44 Stat. 17) are meaningless.

In its decision this Court assumed that the leass in ques-

tion were executed under the provisions of Section 398

which relates only to unallotted Indian lands. The Court

arrives at this conclusion by: reason of certain references

appearing in the lease which is made a part of the plain-

tiff’s complaint herein. This lease which appears as Ex-

hibit ‘‘A’’ to plaintiff’s complaint appears upon its face

to be a lease of tribal Indian land. That is to say a lease

under the first of the above classifications. In the first para-

graph of such lease the Act of May 29, 1924, which is Sec- .

- tion 398 U.S. C. A., Title 25, is referred to as being the

law under which the lease is given. From a reading of the

lease, however, it is most apparent that a form prepared

for use in leasing tribal Indian lands was used in connec-

tion with the leases here under consideration and that the

reference to Section 398 is in reality without meaning.

rms ae eeeeetetea es ce Ci gh Sle RL BL <p Cat niad Tet DAB it Boe

: S

‘ Thus it must be assumed that in a lease granted by the

United States upon land as to which the surface title was

in an individual allottee provision would be made with ref-

erence ‘to protection of buildings, crops, ete. , belonging to

the owner of the surface.” No “such provision is made in

the form used herein and appearing as Exhibit A. The lease

appears to assume that the title to both the surface and

the minerals is in the United States, and thaf no individual

Indian has’any right, title or interest in the surface of the |.

lands described in the jease. It is apparent, therefore, that

[fol. 52] Exhibit ‘‘A’’ is a mere form used not only for the :

leasing of tribal Indian lands, but for allotted lands as to

which “the oil, gas and other minerals have been reserved

to the United States. 7 ee

Thus interpreted the reference to the Act of May 29,

1924* (Section 391 U. S. C. A.) cannot be used as the con-

struction placed upon the provisions of the United States

statutes by the Secretary of the Interior. We agree with

this Court that the oil and gas was reserved under the

provisions of 41 Stat. 17. That by that reservation a dis-

tinct estate was carved out or created consisting of the

reserved minerals which the United States thereafter held

in trust for the benefit of the Blackfeet Tribe.

Our only controversy with the Court is with respect to

its assumption that the lease was granted under the pro-

visions of Section 398, or that the provisions of such sec-

tion have any application to the lease in question or to

any lease covering land allotted in trust as to which a

reservation of the minerals:had been made to the United ~

States. As we have heretofore pointed out unless the lands

are classified as above set forth and the proper statutes

applied to éach of such classes Section 10 of Chapter 4 of ~

There can be no controversy herein but that Section 10

(41 Stat. 17) is still in full force and effect.

That Section which authorized and directed the reserva- .

tion of the oil, gas and other minerals to the United States %

also specifically provides for the method under which such =

lands and minerals should be leased by the United States.

Clearly, by the various statutes above noted a distinction «4

has been made by the United States between unallotted ‘*

tribal lands and lands which have been allotted in trust with @

a reservation of oil, gas and other minerals in the United &

States. It is the theory and contention of the plaintiff

herein that this distinction has not been noted by the Court

in its decision, but that the Court has allowed itself to be

mislead by the reference contained in the form of lease in-

advertently used by the Department of the Interior with

respect to the lands herein in question. |

We are not without authority to support our contentions

herein. In a letter bearing date July 15, 1935, and signed

by the Commissioner of Indian Affairs, the following state-

[fol. 53] ment appears: ‘‘The leases on this réservation are

authorized by provisions contained in the Act of June 30,

1919 (41 Stats. 3-17) which reserved the minerals, for the

benefit of the tribe, in any lands thereafter allotted. This

act contains no authorization of a state tax on the produc-

- tion of minerals.’’

“In addition to the Act of March 3, 1927 (44 Stat. 13-47)

cited in your letter, there are certain other acts of Con-

gress which authorize: the levy and collection of a produc-

tion tax by the states. None of these acts, however, applica-

ble to the Blackfeet Reservation. The act of March 3, 1927,

supra, relates to reservations created by Executive Order.

The Blackfeet Reservation was created by treaty dated

October 17, 1855 (11 Stat. 657).”’

For the purpose of informing the Court as to the actual

cougtruction placed upon the leases in question by the

Department of the Interior and the Commissioner of In-

dian Affairs we attach hereto and make a part of this peti-

tion the letter above referred to.

In its decision herein the Court assumed that the lease

should be construed as coming within the provision of Sec-

tion 398 by reason of the reference to that section con-

tained in the fdrm used by some clerk in that department.

The letter from the Commissioner of Indian Affairs js

attached so that the actual and true: construction placed

‘upon the leases in question by the Department of the In-

terior may be readily ascertained. The Court’s decision

is based entirely upon the proposition that the provisions

of Section 398 apply. Under the above construction the

Department of the Interior as well as oy reason of the only

_ logical classification of the lands here under consideration

and the application of the various statutes thereto, it must

be apparent that with respect to leases upon lands which

have been allotted in trust with a reservation to the United

Sgt eine Kae icseate atthe wpe eo a xe ae aa 2 a a

States of the oil, gas and other minerals Section 10 of -

Chapter 4 of the Act of June 30, 1919, is the only law ap-

plicable and that Section 398 has no bearing upon the is-

sues presenied in this proceeding. If this be true then Sec-

tion 10 which is still in force and effect contains no pro-

vision either directly or by inference allowing the taxation |

by the State of Montana of the oil or gas produced under

such leases and under the holding of this Court in the case |

(fol. 54] of Santa Rita Oil and Gas Company vs. State

—

Board of Equalization, the State Board should be enjoined

- from levying, assessing, or collecting either the gross pro-

duction tax or the net proceeds tax. | | :

As was pointed out by this Court in its decision both in

the Santa Rita Oil and Gas case and its decision in the in-

stant case express authoritly and consent must be given

by the United States before the taxes in question can be

assessed, levied or collected. Section 10 gives no such con-

sent either expressly or by implication and its follows, |

therefore, taat the taxes may not be levied. In other words

upon a proper construction of the leases in question end the

statutes applicable thereto the same result should be reached -

as in the Santa Rita Oil and Gas Company case.

In closing this petition it should also be noticed that Sec-

tion 398 U. S. C. A., Title 25, consents to the levy and col-

lection of a tax upon the production of oil and gas. This

consent.has been construed by the Supreme Court of Okla-

homa (41 Pac. (2nd) 918) and the Supreme Court of the

United ‘States to be limited to a tax in the nature of a

property tax.

In the case of State of Oklahoma ex rel Tax Commission

vs. Barnsdall Refineries, 80 Law Ed. —, Advance Opinions

6 p. 331, decided by the Supreme Court of the United States

on January 6, 1936, the Supreme Court had before it -the

question whether an excise tax of one-eighth cent per barrel

on all oil produged was within the consent of Congress

production of oil and gas produced from Indian lands. The

Supreme Court in holding that such tax was an excise tax

as distinguished from a property tax held that the consent

of Congress must be strictly construed. Under such circum-

stances it would appear tuat the gross production tax is

not even within the consent of the Congress as evidenced

cal Si a si I A

by Section 398 should such section be deemed applicable

herein. .

Under the statutes above set forth, it is respectfully sub-

mitted that a re-hearing should be granted herein, and that

the defendants should be enjoined from assessing, levying

or collecting the net proceeds tax or the gross production

tax against the plaintiff hexein or the owners of royalty

under the leases in question.

Respectfully submitted, E. K. Cheadle, Jr., G. S.

Frary, Attorney¥ fox Plaintiff. Hali & McCabe,

Amicus Curiae. |

[File “endorsement omitted. ]

[fol. 55] United States Department of the Interior,

Office of Indian Affairs, |

Washington

xia

Jul. 15, 1935.

K. K. Cheadle, Jr., Esq., Shelby, Montana.

My Dear Mr. CHEADLE:

There has been referred to this office for answer your

letter of June 7 directed to the Secretary of the Interior

relative to the authority of the State of Montana to tax

the lessee’s share of proceeds received from oil and gas

mining leases covering tribal lands within the Blackfeet

Reservation in Montana. |

Aside from provisions contained in treaties with the

Indians, their tribal lands are generally regarded as exempt

from taxation by the State or Federal Government, ex-

cept where Congress specifically provides for taxation. See

annotations to Section 348, Title 25, United States Code

Annotated. eave

It follows that specific authorization of Congress is neces-

sary before a State can levy and collect a production tax .

on minerals obtained from tribal Indians lands. The leases

on this reservation are authorized by provisions contained

in the Act of June 30, 1919 (41 Stats. 3-17) which reserved

the minerads, for the benefit of the tribe, in any lands there-

after allotted. This act contains no authorization of a state

tax on the production of minerals.

——

In addition to the Act of March 3, 1927 (44 Stat. 1347)

cited in your letter, there are certain other acts of Congress

which authorize the levy and collection of a production tax

by the states. None of these acts are, however, applicable

to the Blackfeet Reservation. The Act of March 3, 1927

supra, relates to reservations created by Executive Order.

The BlAckfeet Reservation was created by treaty dated

October 17, 1855 (11 Stat. 657).

7 The treaty mentioned does not contain any provision

La specifically exempting from taxation minerals obtained from

Blackfeet tribal lands. If the production tax authorized un-

der the laws of the State of Montana were levied on the

; lessee’s share of the proceeds received from oil and gas

‘ mining leases covering Blackfeet tribal lands, the question

would then arise whether this amounts to a tax upon a

Federal instrumentality and an interference by the State

with the jurisdiction of the Federal Government over. re-

‘ stricted property of the Indian. In this connection your at-

tention is called io thé case of Gillespie v. Oklahoma (257

U.S. 501) wherein the Supreme Court of the United States

held the income received by: a lessee from his share of the

proceeds of the oil and gas under leases of restricted In-

dian lands was exempt from taxation by the State.

Your attention is also called to the ease of Schermerhorn-

Ardmore Company v. Roy Ashley, et al., Equity No. 4053,

wherein the United States District Court for the Eastern

District of Oklahoma held that the equipment of an oil

. lessee is not subject to local taxation when used in the de-

velopment of restricted Indian lands on the theory that it

is when so used an instrumentality of the Federal Govern-

: ment in pursuing its general policy in the protection and

$ advancement of the welfare of the Indians. The decree

was entered in that case February 13, 1931, enjoining the ~

defendants*from collecting taxes on property used in con-

nection with an oil and gas mining lease covering an allot-

ment of restricted Indians land in Oklahoma. |

This office does not have available for distribution a copy

of the Treaty of October 17, 1855 with the Blackfeet In-

dians. If you desire to examine the treaty, it is suggested

that you refer to Volume .1 of the United States Statutes

at large p. 657. Copy of the tribal leasing regulations is

enclosed. _ |

Sincerely yours, (Sgd.) John Collier, Commissioner.

Enclosure 647524.

’

BRE aN —

SRE Bees hut re eid Sh oe ME SRA in ees

| |

[fol. 56] In SupreMe Court or Montana

[ Title omitted ]

OBJECTIONS OF DEFENDANTS TO PETITION FOR REHEARING—

- Filed Feb. 8, 1936

- Come now the defendants and object to the petition of

plaintiff for a rehearing herein on the following grounds,

to-wit :

That no question decisive of the case submitted by counsel

was overlooked by the court in its decision.

II.

That the decision is not in conflict with any express stat-

ute or controlling decision to which the attention of the

court was not directed.

The court in its opinion in this case, as well as in its

opinion in the Santa Rita Oil and Gas Company case, so

fully and convincingly covered the law relating to the taxa-

tion of lessees of Indian lands and so ably and exhaustively

dealt with every question which was presented that it would

be nothing less supererogation on our part to attempt to

justify the decision.

In the petition for a rehearing counsel for plaintiff use

: this language: : |

‘“‘At the outset it is apparent that so far as concerns

lands upon the Blackfeet Indian Reservation there are

(fol. 57] three classes to be dealt with: (1) unallotted tribal

i lands; (2) lands allotted in trust; -(3) lands allotted in

‘rust as to which the oil, gas and other minerals have been

: reserved under the provisions of 41 Stat. 17. When we

make this classification of the lands to be dealt with herein

we find express provisions of the United States with refer-

ence to oil and gas leases upon eaeh of such classes. Thus

lands allotted in trust without a reservation of the mineral

oil and gas in the United States are authorized to be leased

under the provisions of Section 396 U. S. C. A. Title 25 (35

Stat. 783).

Santa Rita Oil & Gas Co. v. State Board of Equaliza-

tion, decided January 22, 1936.

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‘‘The leasing of unallotted lands on Indian Reservations

is provided for in Section 398 U. S. C. A., Title 25, (43 Stat.

244), and the leasing of lands for oil and gas purposes as

well as for the purpose of mining metals is provided for by

the Act of Sune 30, 1919, Chapter 4, Section 10, 41 Stat. 17,

and Section 26, 41 Stat. 31. Unless we make the above

classification of Indian lands and apply the several stat-

utes to the different classes as above set forth then the.

provisions of Section 399 U. S. C. A: Title 25, and the

provisions of Section 10, Chapter 4, Act of June 30, 1919,

(41 Stat. 17) are meaningless.’’

They are willing to tie section 399, Title 25,.U.S. C. A., to

section 10 of Chapter 4, Act of June 30, 1919 (41 Stat. 17),

but unwilling to tie section 398, Title 25, U. S. C. A., to see-

tion 10 of Chapter 4, Act of June 30, 1919. Oil and gas in

place are minerals but they’are not metalliferous minerals.

(Northern Pacific Railway Co. v. Soderberg, 188 U. S. 526,

47.L. Ed. 575; Morgan v. United States, 169 Fed. 242; 40.

C. J. 737.) Therefore, section 399 does not cover leases of

unallotted lands for oil and gas mining purposes. The same

is true of section 396, Title 25, U.S.C. A. But if, as counsel

must concede, in view of the position they have taken, sec-

tion 399 does cover leases of unallotted lands withdrawn

from entry under mining laws for the purpose of mining for

deposits of gold, silver, copper, and other valuable metal-

liferous minerals, including magnesite, gypsum, limestone,

and asbestos, in what section must the oil and gas leases

[fol. 58] considered in this case find a place? The question

has been admirably answered Wy the court itself

“Tt therefore becomes necessary for us to examine into

and determine whether the premise on which plaintiff founds

its argument is sound. Trye, trust patents have been issued

to individual allottees covéring all of the lands described

in the lease, but in each of these patents the provision ‘is

found reserving the oil and gas for the benefit of the Black-

feet Tribe of Indians until Congress shall direct otherwise.

It is noteworthy, in passing, that the lease, a copy of which

‘s attached to the exhibit, after reciting the dates and the

names of the parties, declares that it is executed under and

in pursuance of section 3 of the Act approved February

28, 1891 (26 Stat. 795), as amended by the Act approved

May 29, 1924 (Public No. 458, 68th Congress). The amend-

ment there referred to is section 398 of Title 25, U. S. C. A.,

providing as follows:

‘Unallotted lands on Indian reservations other than lands

of the Five Civilized Tribes and the Osage Reservation sub-

ject to lease for mining purposes for a period of ten years

under the preceding section may be leased at public auction

by the Secretary of the Interior, with the consent of the

council speaking for such Indians, for oil and gas mining

purposes for a period of not to’ exceed ten years, and as

much longer as oil or gas shall be found in paying quanti-

ties, and the terms of any existing oil and gas mining lease

may in like manner be amended by extending the term

thereof for as long as oil-or gas shall be found in paying

quantities : Provided, that the production of oil and gas and

other minerals on such lands may be taxed by the state

in which gaid lands are located in all respects the same as .

production on unrestricted lands, and the Secretary of the

Interior is authorized and directed to cause to be paid the

tax so assessed against the royalty interests on said lands:

Provided, however, that such tax shall not become a lien or

charge of any kind. or character against thé land or the

property of the Indian owner.’ The forégoing section ap-

plies only to unallotted lands. -

‘*As we view the situation, when the trust patents were

issued containing the reservation of the oil and gas as well

(fol. 59] as other minerals, including coal, pursuant to 41

Stat. 17, a distinct estate was thereby carved out of created

consisting of the reserved minerals which the United States

thereafter held in trust for the benefit of the Blackfeet

Tribe; this estate was distinct, separate and apart from the

estate or interest which the United States held in trust for

the benefit of the individual Indian allottees (Superior Coal

Co. v. Musselshell County, 98 Mont. 501, 41 Pac. (2d) 14);

and.it follows that, as to the minerals, coal; oil and gas,

there was no allotment of these lands. This construction,

as we have already pointed out, is in accord with that

adopted by the original parties to this es which was ap-

proved by the Department of the Interior, the construction

of which is not to be overturned unless clearly wrong, or

unless a different construction is plainly required.’’

Under the Act of June 7, 1897 (30 Stat. 62, 72), Quapaw

Indians were empowered to lease their lands for farming

Mie

AS I OL Sa 9 be aber Be A = Mla OL A 2 —

i aaa

48 : :

or grazing purposes for a term of three years or for mining

purposes for a term of ten years. Under the Act of March

3, 1909 (25. U. S.-C. A..396), Indians generally, except mem-

bers of the Five Civjlized Tribes and Osage Indians in

Oklahoma, were empowered to lease their lands for mining

purposes for any term of years, with the consent of the

Secretary of the Interior. In Hallam v. Commerce Mining

& Royalty Co., 49 Fed. (2d) 103, cert. denied 284 U. S. 643,

; it was held that Quapaw Indians were entitled to the benefit

: of section 396 and so authorized to lease their lands for

mining purposes under its provisions with the consent of

the Secretary of the Interior. :

vat See Seemann |

The letter of the Commissioner of Indian Affairs which

4 is attached to the petition for a rehearing giyes no consider-

ation whatever to section 398. Besides, it states nothing

new so far as the taxation of Indian lands is concerned.

In the petition for a rehearing it is broadly intimated

that in Barnsdall Refineries v. Oklahoma Tax Commission,

41:Pac. (2d) 918, and in State of Oklahoma v. Barnsdall

Refineries, 296 U. S. —, 80 L. Ed. —, affirming the judg-

ment in the former, both the Supreme Court of Oklahoma

and the Supreme Court of the United States construed

@ (fol. 60] section 398 as consenting to a tax in the nature ofa

property tax. Asa matter of fact these courts did not con-

strue section 398 at all, but did construe the Act of Congress

of March 3, 1921, 5 (41 Stat. 1250), authorizing the levy and

collection of a gross production tax upon. all oil and gas pro-

duced in Osage County, Oklahoma, and the gross production

tax law and an excise tax law of Oklahoma. : It was held that

the Act of Congress was not broad enough to-cover an

\\f excise tax. In its opinion the Supreme Court of the United

States said: ‘‘The Supreme Court of Oklahoma emphasized

the fact that the % of a cent per barrel tax, denominated

by the statute an ‘excise’, is an excise tax distinguishable

from a property tax in liéu of which the gross production

: tax is levied.’? Counsel for plaintiff in their brief and the

i Supreme Court in its opinion refer to the tax provided by

section 2398, Revised Codes 1921, as amended by section 1

of Chapter 67, Laws of 1923, as the ‘gross production tax.’’

- It is similar in its scope to the gross production tax pro-

vided by section 12434, Oklahoma Statutes 1931.

| 7 49

We submit the petition for a rehearing should be denied.

Raymond T. Nagle, Attorney General; Jeremiah J.

Lynch, First Assistant Attorney General, Attor-

j neys for Defendants.

| File endorsement omitted. |

fol. 61] Iw Supreme Court or Montana

[Title omitted]

Orper Denyino Petition For Renearinc—Feb. 8, 1936

Motion for rehearing read, considered and denied.

John A. Matthews; Presiding-Chief Justice.

Attest: A. T. Porter, Clerk.

| fol. 62] In Supreme Court oF Montana

Tue British-AMERIcaN Ort Propuctne Compayy,

a Corporation, Plaintiff,

vs.

Tue Boarp or EQuaALiIzaTION OF THE STaTE OF Montana and

James H. Stewart,gJohn J. Greene and Sam D. Goza,

Members of the te Board of Equalization of the State

of Montana, Defendants.

JUDGMENT AND Decree—Filed Feb. 19, 1936

This matter came regularly on for hearing before the

above entitled Court on the 10th day of December, 1935,

upon the verified complaint of the plaintiff, The British-

American Oil Producing Company, a corporation, the veri-

fied complaint in intervention of the Blackfeet Indian Tribe,

and the demurrers of the deferidants, the Board of Equali-

zation of the State of Montana, James H. Stewart, John

J. Greene and Sam D. Goza, members of the State Board

of Equalization of the State of Montana, Messrs. E. K.

Cheadle, Jr., and G. §. Frary appearing as counsel for said

Biotin netsiawrnives ACR bg Bm

plaintiff, the Honorable Raymond T. Nagle, Attorney Gen-

eral, and the Honorable J. J. Lynch, Assistant Attorney

General, appearing on behalf of the defendants, and H. C.

Hall appearing as counsel for The Blackfeet Indian Tribe.

Whereupon oral argument was presented to the Court

and briefs*were filed by the respective parties and said

matter was submitted to the Court.

Wherefore this Court having considered said argument

and said briefs and pleadings herein and the law applicable

thereto and being in all things duly advised in the premises

ordered that the demurrers of said defendants to the com-

plaint of plaintiff and the complaint in intervention of The

Blackfeet Indian Tribe be sustained upon the merits and

(fol. 63] said complaint and complaint in intervention be

dismissed. P

Wherefore by reason of the law and the premises, it is

hereby ordered, adjudged and decreed that the demurrers

of the defendants the Board of Equalization of the State

of Montana, and James H. Stewart, John J. Greene and

Sam D. Goza, members of the State Board of Equalization

of the State of Montana to the complaint of plaintiff and

the complaint in intervention of the Blackfeet Indian Tribe

be and the same are hereby in all respects sustained and .

said complaint of plaintiff and the complaint in intervention

of The Blackfeet Indian Tribe be and they are hereby in

all respects dismissed upon the merits.

Dated this 19th day of February, 1936.

By the Court.

‘John A. Mathews, Acting Chief J ustice.

[File endorsement omitted. ]

[fols. 64 &65] Clerk’s certificate to foregoing transcript

- omitted in printing.

(fol. 66] Supreme Court or THE UnirTep STATES

Orper ALLOWING Certiorartr—Filed June 1, 1936

The pétition herein for a’ writ of certiorari to the Su-

preme Court of the State of Montana is granted. And it

is.further ordered that the duly ¢ertified copy of the tran-

script of the proceedings below which accompanied the

petition shall be treated as though filed in response to suchi

ond ae aN a Hak Rarer ne Sed us Natio an edit tia Snleina, Sani Ca at

-_—- + “+ - ? pe — SS

: . h salah: see eis sae PR ek Ant eee Ee er b] . = ee ee eee

ee ee ee ee ait span ™ saves sasiccn Nabe ts —

st Oot

nee

ten»

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.