Title: UNICORN DRILLING, INC. v. HEART MT. IRRIGATION DIST.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

UNICORN DRILLING, INC. v. HEART MT. IRRIGATION DIST.2000 WY 793 P.3d 857Case Number: 98-122Decided: 04/07/2000Supreme Court of Wyoming
 
UNICORN DRILLING, INC., a 
Wyoming corporation, Appellant (Plaintiff), v.HEART MOUNTAIN 
IRRIGATION DISTRICT; THE BOARD OF DIRECTORS AND COMMISSIONERS OF THE HEART 
MOUNTAIN IRRIGATION DISTRICT; and DEAN HOUSE, Appellees (Defendants).

Appeal from the District 
Court of Park County, The Honorable Elizabeth A. Kail, Judge, 
Retired.

R.E. Rauchfuss 
and Frank R. Chapman of Beech Street Law Offices, Casper, Wyoming, 
representing appellant.Mark L. Carman of Williams, Porter, Day & 
Neville, P.C., Casper, Wyoming, and Michael McCarty and Mary Helen Reed of 
McCarty & Reed, Cody, Wyoming, representing appellees. 

Before 
LEHMAN, C.J., and THOMAS, MACY, GOLDEN, and HILL, JJ.

THOMAS, 
Justice.

[¶1] The major 
issue in this case is whether Unicorn Drilling, Inc. (Unicorn) has the right to 
use a section of a road, which is part of the canal works operated by Heart 
Mountain Irrigation District (the District), for access to its oil and gas 
operations. The district court granted a Motion for Summary Judgment presented 
by the District, and, at the same time denied a Motion for Summary Judgment 
presented by Unicorn. The district court concluded that Unicorn had failed, as a 
matter of law, to establish its right to use the road. The district court 
specifically ruled that Unicorn had failed to sustain its theories of easement 
by prescription, implied easement, and/or a license coupled with an interest 
because all of the theories would result in a private entity obtaining a right 
or interest in land held by a governmental entity through operation of law. We 
hold that the record encompasses genuine issues of material fact relating to the 
contractual rights of Unicorn to use the road; the acquisition of a right of use 
as a matter of law against the District; and the facts relating to the historic 
use of the road so that the entry of a summary judgment was not appropriate. The 
Order Granting Defendants' Motion for Summary Judgment and Denying Plaintiff's 
Motion for Summary Judgment is reversed, and the case is remanded for further 
proceedings in accordance with this opinion.

[¶2] This 
statement of the issues is found in the Appellant's Brief:

A. Is Plaintiff entitled 
to access because an express, implied or quasi easement by grant or implication 
for ingress and egress into its Federal Oil and Gas Lease existed pursuant to 
Mountain Fuel Supply Co. v. Smith, 472 F.2d 594 (10th Cir. 1973); Kinney-Coastal 
Oil Company v. Kieffer, 277 U.S. 488, 48 S. Ct. 580, 72 L. Ed. 961 (1928); and 
Transwestern Pipeline Co. v. Kerr-McGee Corp., 492 F.2d 878 (10th Cir. 
1974)?

B. Does the trial court 
lack jurisdiction and is it preempted from taking away Plaintiff's right-of-way 
to a federal lease approved by the Department of the 
Interior?

C. Did the trial court 
err in granting summary judgment denying Plaintiff access to its federal oil and 
gas lease pursuant to the 1890 Canal Act (43 U.S.C. § 945) without evidence in 
the record that Plaintiff's use of the canal road interfered with or was 
inconsistent with the operation and maintenance of the canal or its delivery of 
water and only upon a finding that the fears of Defendants were 
"reasonable?"

D. Did the trial court 
err in granting summary judgment to Defendants since the locked gate and a major 
portion of the road are located on private property and an irrevocable license 
coupled with an interest was acquired by Plaintiff?

E. Did the trial court 
err in granting summary judgment to Defendants as Defendant Heart Mountain 
Irrigation District approved access or waived their rights to close the road, 
which equitably estops them from blocking Plaintiff's access and are they barred 
by the statute of limitations or laches in blocking Plaintiff's usage of the 
canal road?

F. Did the trial court 
err in granting summary judgment to Defendants since the locked gate and the 
road are located on private property and a prescriptive easement 
exists?

G. Did the trial court 
err in granting summary judgment to Defendants because a county road or 
right-of-way across public lands exists pursuant to 43 U.S.C. § 
932?

H. Did the trial court 
err in its finding that:

1. "Each of the legal 
theories propounded by Plaintiff would result in a private entity obtaining a 
right or interest in land held by a government entity?"

2. "Plaintiff has not 
established necessity for usage of the canal road?"

3. "The concerns of the 
Irrigation District are reasonable?"

I. Based on the record, 
is either party entitled to summary judgment as a matter of 
law?

[¶3] This 
Statement of the Issues is found in the Appellees' Brief:

I. Did the district court 
have subject matter jurisdiction?

II. Do governmental 
statutes or regulations give Unicorn the right to use the canal road to access 
its federal mineral lease?

A. Mineral Leasing Act of 
1920, 30 U.S.C. § 181, et seq.;

B. Canal Act of 1890, 43 
U.S.C. § 945;

C. Unlawful Inclosures 
Act, 43 U.S.C. § 1061, et seq.; and

D. 43 U.S.C. § 932, (R.S. 
2477) Repealed by Act Oct. 21, 1976, 90 Stat. 2793, and COUNTY 
ROAD.

III. Do the actions of 
Unicorn or Heart Mountain give Unicorn the right to use the canal road to access 
its federal mineral lease?

A. Express, implied or 
quasi easement.

B. Irrevocable license 
coupled with an interest.

C. Equitable estoppel, 
waiver, laches.

[¶4] This 
dispute developed between the lessee under a federal oil and gas lease, Unicorn, 
and an irrigation district, Heart Mountain, which has contracted with the United 
States to operate and maintain, and eventually to acquire, the reclamation and 
irrigation project. The history of the competing interests, both deriving their 
rights from the same sovereign, is of assistance in gaining a perspective for 
the contentions of the parties.

[¶5] Early in 
the twentieth century, the United States Congress authorized reclamation and 
irrigation projects in the Reclamation Act of 1902. In 1916, the Secretary of 
the Interior withdrew Sections 7 and 8 of Township 53 North, Range 101 West, the 
land that encompasses the road and the oil wells in this case, from public 
entry. These lands were withdrawn in connection with the implementation of the 
Shoshone Reclamation Project. In 1938, the United States built the Heart 
Mountain Canal, a part of the Shoshone Reclamation Project, through Sections 7 
and 8. The section of the canal road at issue closely parallels part of the 
canal, and it also was constructed in 1938. Since its construction, the road has 
been used in the operation and maintenance of the canal. On December 1, 1958, 
the United States and the District signed a contract for the operation and 
maintenance of the Heart Mountain Canal, which also provided for its eventual 
transfer to the District.

[¶6] In 1920, 
the United States issued a prospecting permit to a group of individuals, 
allowing them to search for oil and gas on the subject land. On July 18, 1938, 
the same year that the Heart Mountain Canal and the canal road were built, the 
United States issued the first oil and gas lease on the subject land to one of 
the individuals named in the prospecting permit. That person, in turn, sold his 
interest in the lease to Husky Oil Co. on August 25, 1943. Husky Oil completed a 
well in 1962, and another in 1963. Husky Oil then sold its interest to Marathon 
Oil, which sold its interest to Unicorn on August 7, 1992. The section of the 
road in dispute lies entirely within the boundaries of Unicorn's lease. Since 
1962, Unicorn and its predecessors have driven tanker trucks over the canal road 
to reach the wells and transport oil from them. It is the only road that has 
been used by the oil and gas lessees.

[¶7] By two 
separate patents, one in 1956 and one in 1957, the United States granted parcels 
of land in Sections 7 and 8 to a homesteader, reserving the oil and gas, the 
right to prospect and remove the oil and gas, and a right of way for canals. 
Those two parcels, after intervening conveyances, were acquired by the present 
owner on January 23, 1978. Portions of the canal road and a second road that 
reaches Unicorn's wells and storage tanks road, alluded to as the alternate 
road, are located on that land. On October 21, 1988, the current owner granted 
the District an easement to use the canal road for operation and maintenance of 
the canal.

[¶8] District 
officials asserted that they first became aware that Unicorn was using the canal 
road to haul crude oil in tanker trucks in the summer of 1994. That information 
led to a concern that a tanker truck accident might result in an oil spill in 
the canal and contamination of thousands of acres of crops. A District employee 
contacted Unicorn to ask that the trucks use the alternate road, but Unicorn 
refused, saying the alternate road had two sharp turns the heavy trucks could 
not safely negotiate, was blocked by snow much of the winter, and was under 
water when the property owner irrigated. The District was not able to negotiate 
a satisfactory solution with Unicorn, and the District constructed a gate across 
the road, which it locked in October of 1995. The gate was located on the land 
of the present surface owners, apparently because it was the most convenient 
site. Unicorn and its predecessors in interest had a lease agreement with the 
surface owners which permitted the use of the land for all purposes necessary or 
convenient with the exercise and enjoyment of its rights under the federal 
lease.

[¶9] Unicorn 
filed a Petition for Preliminary and Permanent Injunction on November 20, 1995, 
asking the district court to enjoin the District from barring Unicorn's access 
to the canal road. The district court issued a temporary restraining order on 
March 6, 1996. After extensive briefing, a hearing, and a viewing, the district 
court granted summary judgment to the District. The district court determined 
that there were no issues of material fact, and that each theory upon which 
Unicorn sought relief would impermissibly result in Unicorn obtaining a right or 
interest in land held by a governmental entity. The district court also found as 
a fact that the District's concerns over a possible oil spill into the canal 
were reasonable. Unicorn filed a timely appeal with this 
Court.

[¶10] Recently, 
we summarized our review function in cases involving summary judgments in this 
way:

Summary judgment is 
proper only when there are no genuine issues of material fact and the prevailing 
party is entitled to judgment as a matter of law. Mountain Cement Co. v. 
Johnson, 884 P.2d 30, 32 (Wyo. 1994); W.R.C.P. 56(c). We review a summary 
judgment in the same light as the district court, using the same materials and 
following the same standards. "We examine the record from the vantage point most 
favorable to the party opposing the motion, and we give that party the benefit 
of all favorable inferences which may fairly be drawn from the record." Four 
Nines Gold, Inc. v. 71 Constr., Inc., 809 P.2d 236, 238 (Wyo. 1991). Summary 
judgment serves the purpose of eliminating formal trials where only questions of 
law are involved. Blagrove v. JB Mechanical, Inc., 934 P.2d 1273, 1275 (Wyo. 
1997); England v. Simmons, 728 P.2d 1137, 1141 (Wyo. 1986). We review a grant of 
summary judgment by deciding a question of law de novo and afford no deference 
to the district court's ruling on that question. Sammons v. American Auto. 
Ass'n, 912 P.2d 1103, 1105 (Wyo. 1996); Blagrove, 934 P.2d  at 
1275.

[¶11] Gray v. 
Norwest Bank Wyoming, N.A., 984 P.2d 1088, 1091 (Wyo. 1999). A material fact is 
any fact that, if proved, would have the effect of establishing or refuting an 
essential element of a claim or defense asserted by a party. Century Ready-Mix 
Co. v. Campbell County School Dist., 816 P.2d 795, 799 (Wyo. 
1991).

[¶12] This case 
is an unusual real property dispute because neither party claims to own the 
surface of the land. Instead, Unicorn and the District each claim a 
non-possessory interest in private land each of which originated from the 
federal government. Pursuant to 43 U.S.C. § 945,1 the United States has a perpetual 
easement over the private owner's land for construction, maintenance, and 
operation of the canal. Northern Pac. Ry. Co. v. United States, 277 F.2d 615, 
618, appeal dismissed, 287 F.2d 884 (10th Cir. 1960); Green v. Wilhite, 14 Idaho 
238, 93 P. 971, 973 (1908). The United States has assigned its right of way 
under 43 U.S.C. § 945 to the District. The parties agree that, pursuant to 43 
C.F.R. § 3101.1-2,2 Unicorn has the right to access its 
oil and gas lease and to transport the oil. The dispute places in question the 
District's right to prevent Unicorn from using the canal 
road.

[¶13] The 
District's right-of-way is not exclusive; the landowners and third parties with 
the landowners' permission may use the road if their use is not inconsistent 
with the operation and maintenance of the canal. The United States Department of 
the Interior also has the right to reach the canal for inspections. As a matter 
of law, we hold that Unicorn, as a federal lessee, is within the class of 
parties who may use the canal road, provided they do so in a manner consistent 
with the operation and maintenance of the canal. Thus, the question becomes not 
whether Unicorn can acquire an easement against the federal government, but 
whether Unicorn's use of the road is consistent with the operation and 
maintenance of the canal.

[¶14] That 
question is an issue of fact, and it concerns a material fact. The question 
cannot be resolved merely because the District says Unicorn's use is not 
consistent with the operation and maintenance of the Heart Mountain Canal. The 
district judge went to the land in question to view the canal road and made a 
factual finding that the District's concerns about an oil spill were reasonable. 
The record, however, contains substantial evidence, admissible at a trial, that 
Unicorn and its predecessors in interest had used the canal road for the same 
purpose for a long number of years without any adverse consequences. The 
district court did not explain how its viewing, or any of the evidence 
presented, supported the finding that the concerns of the District were 
reasonable. We find nothing in the record demonstrating the reasonableness of 
the concern. The only evidence presented on the potential for an oil spill was 
to the effect that there is "no real probability that an oil truck would go into 
the canal" and that in the unlikely event one did, there is "no reasonable 
probability the vessel would rupture or spill oil into the 
canal."

[¶15] Since an 
unresolved genuine issue of material fact exists as to whether the continued use 
of the canal road by Unicorn is consistent with the operation and maintenance of 
the canal, we hold that summary judgment was not appropriate in this case. The 
Order Granting Defendant's Motion for Summary Judgment and Denying Plaintiff's 
Motion for Summary Judgment is reversed, and the case is remanded to the 
district court for further proceedings consistent with this 
opinion.

Footnotes

1 43 U.S.C. § 
945 reads:

In all 
patents for lands taken up after August 30, 1890, under any of the land laws of 
the United States or on entries or claims validated by this act west of the one 
hundredth meridian, it shall be expressed that there is reserved from the lands 
in said patent described, a right of way thereon for ditches or canals 
constructed by the authority of the United States.

2 43 C.F.R. § 
3101.1-2 reads, in relevant part:

A lessee 
shall have the right to use so much of the leased lands as is necessary to 
explore for, drill for, mine, extract, remove and dispose of all the leased 
resource in a leasehold[.]