Court Opinion

ID: 9451117
Source: CourtListenerOpinion
Date Created: 2023-08-04 17:06:59.048726+00
Date Added: 2024-06-11T17:32:34.662984
License: Public Domain

SETH, Circuit Judge
(concurring specially).
It is demonstrated in the foregoing opinion that the applicable statute and the lease provisions, together with the practice over the years, dictate that the royalty is computed on the processed product value at shipment to market. Use of such a value is somewhat unusual in a mining lease, and leads to the problem before us.
The lease and the statute contemplate no alternative products for royalty purposes and no other market. Thus when the ore is severed it may be said that an accountability for royalty then attaches, and is not avoided by the diversion of the severed product prior to processing and marketing as was done in the case at bar.
The use of the historical market for “manure salts” is consistent with this view because there exists an established market for this material which is used for royalty value when the severed product is there disposed of.
In any event, the lease here concerned in Section 2(d) provided that the Secretary was empowered to establish reasonable minimum values for royalty computation. He was empowered by regulation to determine the best market price at the customary place of disposing of the products of the lease. This he did, although not by any means in the clearest manner.
The product of the lease was the ore, the customary market place for these products which started on the refined product route was in the refined product market. The value of the diverted ore in question was determined by its mineral content valued in this customary market using unit values and average results. The formula adopted was a reasonable one based on appellants’ accountability for royalty on the severed product which matured into a liability for royalty when the product was sold as was done here. This formula is described in the letter of the Regional Mining Supervisor dated December 2, 1959, and it fairly determines the value or market price of the severed product.
There is no basis in the record or in law for a forfeiture of the lease as demanded by appellee. There was no more than an honest disagreement in construction of the lease terms as applied to an unusual but entirely good faith disposition of ore. Resort to the courts and administrative procedures should not be discouraged by demands of this nature.
I concur in the reversal and remand of this case.