Opinion ID: 877181
Heading Depth: 1
Heading Rank: 4

Heading: the federal mineral lands leasing act of 1920

Text: Here, plaintiffs assert that the severance tax violates the Supremacy Clause of the United States Constitution on the ground that the tax grossly distorts the compromise between the federal government and the states expressed in the Mineral Lands Leasing Act of 1920, Chapter 85, 41 Stat. 437, as amended by the Federal Coal Leasing Amendments Act of 1975, Pub. Law No. 94-377, 90 Stat. 1083. Plaintiffs contend the federal legislation is a result of a longstanding debate concerning the ownership, disposition and use of federally owned mineral reserves in the western territories and states. The result, claim plaintiffs, is that the federal government retained the minerals for the people of the nation, subject to the payment of a share of the mineral royalties to the states in which the minerals were located. Under the Act of 1920, as amended, fifty percent of amounts received by the federal government from sales, bonuses, royalties and rental of public lands thereunder are returned to the respective states wherein the leased lands or deposits are located, for uses specified in the Act. Plaintiffs claim Montana is without power, because it substantially frustrates national policy, to tax the economic rents remaining over and above the rents and royalty payments. Economic rents are defined as the difference between the costs of production, including an acceptable profit, and the price which the products could obtain in the market place. Plaintiffs state that Montana has appropriated the economic rents, which plaintiffs find to be a fundamental frustration of federal policy. Here again, plaintiffs argue that they are not required to show an express prohibition under federal law; rather they contend that substantial frustration of the fulfillment of national policy is sufficient to render the state law unconstitutional under the supremacy clause. The principal factor militating against plaintiffs' position on this part of their complaint is that Congress specifically allowed state taxation under the Mineral Lands Leasing Act of 1920. The Act contains this provision (30 U.S.C. § 189): ... Nothing in this chapter shall be construed or held to affect the rights of the States or other local authority to exercise any rights which they may have, including the right to levy and collect taxes upon improvements, output of mines, or other rights, property, or assets of any lessee of the United States. If indeed, a compromise was reached with respect to the leasing of federally-owned mineral interests in public lands, that compromise included, under 30 U.S.C. § 189, the right of states to tax the output of mines. This indeed is a clear expression of federal policy and Montana's coal severance tax is within that policy. In Mid-Northern Oil Co. v. Walker (Montana) (1925), 268 U.S. 45, 45 S.Ct. 440, 69 L.Ed. 841, affirming Mid-Northern Oil Co. v. Walker (1922), 65 Mont. 414, 211 P. 353, the Supreme Court said: ... [A]lthough the act deals with the letting of public lands and the relations of the government to the lessees thereof, nothing in it shall be so construed as to affect the rights of the states, in respect of such private persons and corporations, to levy and collect taxes as though the government were not concerned. 268 U.S. at 49, 45 S.Ct. at 441, 69 L.Ed. at 843. The Supreme Court also said: No doubt, what Congress immediately had in mind was the necessity of making it clear that, notwithstanding the interest of the government in leased lands, the rights of the states to tax improvements thereon and the output thereof shall not be in doubt... . We think the proviso plainly discloses the intention of Congress that persons in corporations contracting with the United States under that act, should not, for that reason, be exempt from any form of state taxation otherwise lawful. 268 U.S. at 50, 45 S.Ct. at 441, 69 L.Ed. at 843. Again the District Court was correct in dismissing plaintiffs complaints under count 3 as a matter of law, for no justiciable controversy is presented by such count.