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Murphy: Conservation Of Oil And Gas, A Legal History-1948, Michigan Law Review

Michigan Law Review

A Review of CONSERVATION OF OIL AND GAS, A LEGAL HISTORY-1948. Edited by Blakely M. Murphy.

Constitutional Law-State Taxation Of Interstate Commerce -Validity Of Apportioned Capital Tax On Corporation Engaged Solely In Interstate Commerce, R. V. Wellman S.Ed.

Michigan Law Review

Plaintiff gas company, a Delaware corporation, transported gas by pipe line across a section of Mississippi. Its activities in Mississippi admittedly did not constitute intrastate commerce and plaintiff had no agent for service of process in that state. Mississippi imposed a "franchise or excise" tax on all· corporations present in the state, measured by applying a specified rate against the value of the capital employed within its boundaries. This tax was in addition to, and independent of, the locally imposed ad valorem taxes levied against plaintiff's property. Alleging the franchise tax to be invalid under the commerce clause of the …

Quasi-Contracts--Duress--Recovery Of Payments Made Under Economic Pressure, E.C. V. Greenwood

Michigan Law Review

On September 1, 1939, plaintiff company, engaged in the business of refining, purchasing, transporting and selling gasoline and other petroleum products, entered into two written contracts with defendant retailer. One contract provided for purchase by defendant from plaintiff of real property by monthly installments totaling $32,000, and the other stipulated for purchase from plaintiff of all the gasoline and petroleum products handled by defendant for a period of five years from date. Defendant defaulted in the payment of monthly installments on the real estate contract, and plaintiff brought suit to recover the unpaid balance of $15,200 and sought foreclosure of …

Rostow: A National Policy For The Oil Industry., Michigan Law Review

Michigan Law Review

A Review of A NATIONAL POLICY FOR THE OIL INDUSTRY. By Eugene V. Rostow.

Future Interests-Rule Against Perpetuities--Validity Of An Option Incident To A Lease Exercisable After The Expiration Of The Lease, Irving Slifkin S.Ed.

Michigan Law Review

On November 13, 1941, plaintiff entered into a lease with defendant granting defendant the exclusive right to mine and remove coal from plaintiff's mine for twenty years. Incident to the lease defendant was granted the option, "at any time subsequent to November 1st, 1945, to purchase the remaining tonnage of recoverable coal" at a specified price. A deed thereto was placed in escrow. In January, 1946, defendant elected to exercise the option, tendered the price, and received the deed from escrow. Plaintiff refused to recognize the validity of the option and commenced an action in equity to cancel the deed …

Pooling And Unitization Of Oil And Gas Leases, A. Allen King

Michigan Law Review

Not so many years ago the oil industry faced utter collapse and ruin, a situation brought on by operations under legal rules developed in the early days of the industry when knowledge of the physical characteristics of oil and gas and their underground reservoirs was limited as compared with present day knowledge. In the late 1920's and early 1930's discoveries of great new oil fields that were developed and operated under the Rule of Capture and the Offset Drilling Rule caused a flood of oil on a market unable to absorb it. This not only had an adverse effect upon …

Taxation-Income Tax-Depletion-Lessor's Share In Net Income As Subject To Depletion, William H. Buchanan S.Ed.

Michigan Law Review

Taxpayer which owned certain lands leased the same to companies for production of oil and other minerals for a cash bonus, a royalty in the usual form, and an agreement that lessor should receive a percentage of the net money profits realized by the lessees from their operation under the lease. Lessor claimed a right to deduct depletion allowance from the receipts which were a percentage of the net income arising from operating the properties. Held, lessor had a right to depletion deduction in respect to the percentage of net income because it had an "economic interest" in the …

The Demise Of Fair Value, Robert W. Harbeson

Michigan Law Review

Two years ago, in discussing the Natural Gas Pipeline Company case, the writer ventured the opinion that "while it cannot be stated with certainty that the decision marks the demise of that hardy perennial--fair value--since the majority opinion did not explicitly repudiate that doctrine," there was language which indicated that such would nevertheless be the result of the decision. This prophecy now appears to be substantiated by the decision of the Supreme Court on January 3, 1944, in Federal Power Commission v. Hope Natural Gas Company. In the Pipeline Company case Chief Justice Stone stated significantly that "the Constitution …

Public Utilities - Federal Power Commission- Just And Reasonable Rate - Rate Base - Going Value - Original Investment As Amortization Base, Michigan Law Review

Michigan Law Review

Smyth v. Ames, source of the elusive principle that has pestered courts and public utility commissions since 1898, is still not a dead letter. Doubtless the only reason its doctrine stands at this late date is that no recent case has forced the Court to reconsider the "fair value" rule. However, in Federal Power Commission v. Natural Gas Pipeline Company of America, decided by the Court on March 16, 1942, three justices took occasion to "lay the ghost" of the 1898 decision once and for all and to declare that the case "erases much which has been written …

Administrative Law - Judicial Review - Status Of Captive Mines Under The National Bituminous Coal Act -, Eric Stein

Michigan Law Review

Petitioner railroad company held a renewable short-term lease of a coal mine, and engaged an independent contractor to extract the coal for its exclusive use. The lease and the agreement with the contractor were coextensive in time, the railroad having an option to terminate the agreement whenever the contractor failed to meet the prevailing market price. Petitioner applied for an exemption of the coal thus obtained from the provisions of the National Bituminous Coal Act, relying upon the section which excludes coal consumed by the "producer" ("captive coal") from the Coal Code regulations. Held, the order of the commission …

Oil And Gas - Interpretation Of Lease Containing Royalty Provisions, Brooks F. Crabtree

Michigan Law Review

Several of the plaintiffs owned oil-producing land in Oklahoma and had leased it to one Briggs. The lease ran for a fixed term and "so long thereafter as oil or gas may be produced therefrom by the lessee." It provided for a royalty payment to the lessor of one-eighth of the oil or gas produced, and gave the lessee the right "at any time" to remove all machinery and equipment placed on the premises, including the right to draw and remove the casing. Briggs sold the equipment thereon to defendant and later sold the lease itself to one of the …

1941 Law Institute, Michigan Law Review

Michigan Law Review

Following its successful Law Institutes of the past two years, the University of Michigan Law School has arranged for a third annual institute to be held in the Law Quadrangle on Monday and Tuesday, June 23 and 24. As in the other Institutes, the time will be spent in earnest exposition and study of recent developments in certain phases of the law of prime interest to practicing lawyers.

Principal And Surety - Discharge Of Surety For A Lessee By Assignment Of The Lease, H. Martin Peckover

Michigan Law Review

Lands set aside by statute as common property of the Chickasaw and Choctaw Indian tribes were, pursuant to an act of Congress, leased to one Gunther by mining trustees of the tribes. The lease contained covenants to pay "stipulated annual advance royalties," and also provided that no assignment should be made without the consent of the trustees "subject to the approval of the Secretary of the Interior." Defendant surety company executed a bond for the faithful performance of the terms of the lease, and the same was duly approved. Then Gunther, with the consent of the trustees, but not the …

Deeds - Construction - Effect Of Words Showing Purpose Of Grant, Michigan Law Review

Michigan Law Review

Plaintiff sought to enjoin defendants from drilling for oil and gas on a strip of land which defendants claimed through a "right of way deed" conveying and warranting the strip to a railroad company "as and for its right of way'' and describing the land as "across and upon" a certain quarter-section. The deed recited as consideration $250 and the benefits accruing to the grantor through the construction and operation of a railroad on the land. Tracks were never laid on the strip, but the railroad company continued to pay taxes thereon. Held, that under Illinois law a fee …

Railroads -- Extent Of Title Acquired By Railroad By Adverse Possession Of Land Used As Right-Of-Way - Effect On Mineral Rights, Roy L. Rogers

Michigan Law Review

In a recent Michigan case it appeared that for more than the statutory period of limitation the plaintiff railroad had maintained a right-of-way over land to which the defendant held the record title. A decree quieting title in fee simple absolute in the plaintiff railroad was sought in order to determine the ownership of the oil and gas underlying the right-of-way. The court held that the railroad acquired by adverse user of the right-of-way no title to the oil and gas or other minerals beneath the surface of the land.

Measures Of Land Value For Utility Regulation, Lrston R. Barnes

Michigan Law Review

The appraisal of the land of utility corporations presents problems that are not encountered in the valuation of other utility properties. The basic principles and methods of appraisal applicable to other properties are considered inappropriate for the valuation of lands, and certain inconsistencies between the treatment of land and other properties suggest embarrassing questions as to the principles which should guide the regulation of utility rates. Two concrete problems may serve to provide orientation for the discussion which follows: What elements of cost imposed on utilities in the acquisition of real estate are entitled to consideration in establishing rates? To …

Public Utilities - Rates - Constitutionality Of Statutes Prohibiting Minimum Or Service Charges, S. J. Schuman

Michigan Law Review

An Oklahoma statute required that the consumer should be charged only for the gas he used as registered on a meter. The inhabitants of a certain town supplied with gas by petitioner were predominantly small consumers so that on a straight-line meter rate they did not pay for the cost of service. An increase in the rate would not solve the difficulty. The company petitioned the commission for authority to impose either a service charge or a minimum charge. The commission denied the petition. Held, that as applied to this particular case, the statute was unconstitutional and the petition …

Constitutional Law - Oil And Gas - Validity Of Well-Spacing Act - Proportionate Sharing Of Proceeds By Owners Of Land In Statutory Drilling Unit, Leonard D. Verdier Jr.

Michigan Law Review

Acting under the Well-Spacing Act, the Corporation Commission of Oklahoma divided certain rural oil areas into tenacre drilling units. Plaintiff owned six and one-quarter acres of a drilling unit, and the well, located in the center of the unit, was wholly on his land. The statute provided that each of the various owners of tracts making up a drilling unit should share in the oil royalties in the proportion that the acreage of his tract bore to the total acreage of the drilling unit. Plaintiff sought to recover all the royalty on oil produced from the well, contending that the …

Adverse Possession - Severance Of Minerals And Surface - Adverse Possession As Affecting Title To The Minerals, John M. Ulman

Michigan Law Review

The land in question was set aside by the state for school purposes. For some time prior to 1881 one Bailey had been in possession. At that time he and his children, to whom he had deeded parts of the land, conveyed the mineral interests to a grantee from whom plaintiff claims. At the time of the conveyance the evidence was insufficient to show title by adverse possession in Bailey. Bailey and his grantees, from whom defendant claims, remained in possession until this action was brought. The limitation ceased running against the state by an act of the legislature at …

Covenants - Effect Of Change Of Conditions On Equitable Restrictions, Dan K. Cook

Michigan Law Review

Plaintiff was a lot owner in a residential district consisting of twenty-three blocks. Each lot in the district was subject to a restriction, imposed by the grantor, which limited the use of the lots to residence purposes. Subsequent to the imposition of this restriction, numerous oil and gas wells had been drilled in the territory surrounding the district, so that the lots in the district had depreciated in value approximately thirty-five to fifty per cent. By ordinance, the use zoning area which included the district had been changed from a residence use to an oil and gas use. At the …

Contracts - Moral Obligation As Consideration - Promise To Pay For Benefits Previously Received, Michigan Law Review

Michigan Law Review

Plaintiffs, assignees of an oil lease of land, after drilling a dry hole thereon, did not comply with the requirements of their agreement for further development within a stipulated time, in consequence of which there was a formal termination in accordance with the terms of the assignment. An extension of the lease, which the lessees obtained, was assigned to the defendants, who had knowledge of the foregoing circumstances and plaintiffs' claim of a property right in the dry hole. Defendants promised to pay plaintiffs for the use of the dry hole, but subsequently repudiated any liability on the promise. Held …

Depletion Of Oil And Gas Properties For Income Tax Purposes, John W. Beveridge

Michigan Law Review

The Revenue Act of 1936 provides that in computing net income from oil and gas properties there shall be allowed as a deduction from gross income a reasonable allowance for depletion, according to the peculiar conditions in each case. The allowance is made under regulations prescribed by the Commissioner of Internal Revenue.

The first problem is to fix the amount the taxpayer is entitled to recover before he is considered as earning income which is not in essence a mere return of his capital investment. The difficulty of clearly defining the difference between a return of capital and of income …

Taxation - Exemption Of Federal Instrumentality From State Gasoline Tax

Michigan Law Review

An Alabama statute provided that "Every distributor, refiner, retail dealer or storer of gasoline . . . shall pay an excise tax . . . upon the selling, distributing, storing or withdrawing from storage in this State for any use, gasoline . . . ." The plaintiff, a private corporation, sold gasoline to the United States for use in performing governmental functions without reporting it for taxation. When the state demanded payment, the plaintiff brought this suit to restrain collection. Held (Justices Cardozo and Brandeis dissenting), the operation of the statute violates the constitutional principle safeguarding the federal government against …

Constitutional Law - Bituminous Coal Conservation Act Of 1935 - Congressional Power Under The Commerce Clause To Regulate Labor Conditions In Local Industry And Fix The Price Of Sales In Interstate Commerce

Michigan Law Review

By its sweeping decision invalidating the Bituminous Coal Conservation Act of 1935, the Supreme Court precluded any future use of the commerce clause by Congress as a basis for federal regulation of labor conditions in local industry, whether on the theory that production is interstate commerce or that labor conditions directly affect interstate commerce.

Eminent Domain-Validity Of State Statute

Michigan Law Review

As upon certiorari, the New Mexico Supreme Court considered the question, whether it is "within legislative competence to declare a public use in the industry of coal mining, so as to permit taking private property in aid of it." Plaintiff had obtained a judgment of condemnation, and defendant attacked it as offensive to the New Mexico constitutional provision: "Private property shall not be taken or damaged for public use without just compensation." The opinion recognized the existence of an "orthodox" and a "liberal" doctrine of construing "public use." While the court found that, unlike Nevada's or Utah's, New Mexico's well-being …

Controlling The Production Of Oil, Donald H. Ford

Michigan Law Review

The present pressing need for controlling the production of oil is due to a variety of causes. The principal factors that have contributed to the existing situation to "the flood of oil that takes on the proportions of a national disaster'' are: (1) A rapid improvement in exploratory technique, geological and geophysical, which has resulted in "bringing in" too many new oil fields. (2) Enormous advances in the art of drilling, especially as regards rapidity of drilling and the depths attained. (3) Improved methods of refining which furnish an ever-increasing percentage of gasoline from. the crude. (4) The development of …

Railroads-Right To Drill For Oil Or Gas On Right Of Way

Michigan Law Review

A railroad had acquired a one-hundred-foot strip of land through a farm, the deed describing the land granted by metes and bounds, and "for railroad purposes only." For fifty years the defendant has continuously used the strip for railroad purposes. The plaintiff, who became owner of the farm and successor to whatever rights in the strip remained to his grantor, sought to enjoin the defendant from drilling for oil and gas in the strip. Held, that the railroad had purchased a fee simple absolute in the strip and was therefore entitled to develop its own minerals. Quinn v. Pere …

Taxation-Exemption Of Sovereign Instrumentality-Effect Of Imposing Tax

Michigan Law Review

Plaintiff corporation brought suit against the collector of internal revenue for federal income taxes paid under protest. The taxes were assessed upon the net income derived from the sale of oil and gas produced on lands which the plaintiff held under lease from the state of Texas. A legislative act provided for the leasing of the lands to further the development of their natural resources, the lessees paying a royalty on oil and gas. The statutory leases had been previously held to constitute a sale of the minerals. Theisen v. Robison, 117 Tex. 489, 8 S.W. (2d) 646. The statute …

Book Reviews

Michigan Law Review

A collection of book reviews by multiple authors.

The First American Mining Code, Arthur S. Aiton

Michigan Law Review

It is characteristic of Spain's priority in the New; World that the first American mining law should have been developed in Mexico, soon after the conquest by Cortes, as a natural result of the extension of royal authority overseas in the person of the first viceroy, Don Antonio de Mendoza. The surprising fact is that this code, despite recent interest aroused by the Mexican petroleum controversy, extensive American mining investments south of the Rio Grande and its probable influence on early western mining legislation, has remained unknown. Scholars and investigators have been content with later colonial and republican legal sources …