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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. City of Kenai v. Cook Inlet Natural Gas Storage Alaska, LLC (5/6/2016) sp-7101

City of Kenai v. Cook Inlet Natural Gas Storage Alaska, LLC (5/6/2016) sp-7101

           Notice:   This opinion is subject to correction before publication in the P                    ACIFIC  REPORTER.  

           Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,  


           303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email  



                       THE SUPREME COURT OF THE STATE OF ALASKA                                      

CITY  OF  KENAI,                                                )  

                                                                )          Supreme  Court  No.  S-15682  

                                Appellant,                      )  


                                                                )          Superior Court No. 3KN-12-00338 CI  


           v.                                                   )  


                                                                )          O P I N I O N  


COOK INLET NATURAL GAS                                          )  




OF ALASKA, DEPARTMENT OF                                                                                   

                                                                )          No. 7101 - May 6, 2016  


NATURAL RESOURCES; and                                          )  


COOK INLET REGION, INC.,                                        )  


                                Appellees.                      )  



                     Appeal from the Superior Court of the State of Alaska, Third  


                      Judicial District, Kenai, Carl Bauman, Judge.  


                     Appearances:  Bruce E. Falconer and Patrick W. Munson,  


                      Boyd, Chandler & Falconer, LLP, Anchorage, for Appellant.  


                      Matthew Findley and Eva R. Gardner, Ashburn & Mason,  


                      P.C.,  Anchorage,  for  Appellee  Cook  Inlet  Natural  Gas  


                      Storage Alaska, LLC.  John C. Hutchins, Assistant Attorney  


                      General, and Craig W. Richards, Attorney General,  Juneau,  


                      for   Appellee   State   of   Alaska,   Department   of   Natural  


                      Resources. Jahna M. Lindemuth and Katherine E. Demarest,  


                      Dorsey & Whitney LLP, Anchorage, for Appellee Cook Inlet  


                      Region, Inc.  


                      Before:         Stowers,  Chief  Justice,  Winfree,  Maassen,  and  


                      Bolger, Justices.  [Fabe, Justice, not participating.]  


                      MAASSEN, Justice.  

----------------------- Page 2-----------------------

I.                          INTRODUCTION  

                                                         This case involves competing claims of right to the pore space in a large                                                                                                                                                                                                                 

limestone formation about a mile underground. Cook Inlet Natural Gas Storage Alaska,                                                                                                                                                                                                                                                         

LLC (CINGSA) has leases with the holders of the mineral rights - the State of Alaska  


and Cook Inlet Region, Inc. (CIRI) - that allow it to use the porous formation as a                                                                                                                                                                                                                                                                                    

reservoir for storing injected natural gas. But the City of Kenai, which owns a significant                                                                                                                                                                                                                                  

part of the surface estate above the reservoir, claims an ownership interest in the storage                                                                                                                                                                                                                                                    

rights and sought compensation from CINGSA.  CINGSA filed an interpleader action  


asking the court to decide who owns the storage rights and which party CINGSA should                                                                                                                                                                                                                                                             

compensate for its use of the pore space.                                                                                                                                    On summary judgment CINGSA argued that                                                                                                                                          

CIRI and the State own the pore space and attendant storage rights because of the State's                                                                                                                                                                                                                                                        

reservation of certain subsurface interests as required by AS 38.05.125(a). The superior                                                                                                                                                                                                                                                   

court granted CINGSA's motion. The City appeals both the grant of summary judgment                                                                                                                                                                                                                                                    

and the superior court's award of attorney's fees to CIRI.                                                                                                                                                                                             

                                                        We affirm, concluding that the State and CIRI own the pore space and the                                                                                                                                                                                                                                

gas storage rights and that the superior court's award of attorney's fees to CIRI was                                                                                                                                                                                                                                                                      

within its discretion.                    

II.                         FACTS AND PROCEEDINGS                                          

                            A.                           Facts  


                                                         1.                          The Cannery Loop Sterling C Reservoir Gas Storage Facility  


                                                         The Cannery Loop Sterling C Gas Reservoir is located approximately a  


mile below the Kenai River. The reservoir began producing natural gas in 2000; gas was  


extracted from the "microscopic spaces between or within rocks" in the reservoir and  


                                                                                                                                                                               - 2 -                                                                                                                                                                     7101

----------------------- Page 3-----------------------

from natural pools contained by "[s]urrounding formations of denser, nonporous rock."                                                                                                                 


The reservoir's gas supply was eventually depleted.                                                                       

                              Once gas is extracted from sedimentary rock, the emptied pore space -  


"microscopic spaces between or within rocks" - can be used to store "non-native gas,"  


gas that has been extracted elsewhere.  This method of gas storage can help stabilize  


supply and accommodate seasonal fluctuations in demand; utilities can store non-native  


gas in the summer and withdraw it in the winter when demand is higher.  When the  


Sterling  C  Reservoir  had  been  economically  depleted,  CINGSA,  a  public  utility,  


proposed to convert the gas field into a storage facility for non-native gas owned by other  


gas and electric utilities in Southcentral Alaska.  


                              CINGSA first had to acquire the necessary property rights from the owners  


of different interests in the surface and subsurface.  It acquired many of those rights  


through negotiation and, where necessary, the process of eminent domain, available to  


CINGSA as a public utility. The only surface estate at issue here is that belonging to the  


                                                                                                                       2  The rights to minerals underlying  

City of Kenai, amounting to approximately 576 acres.                                                                                                                        


the property belong to the State of Alaska and Cook Inlet Region, Inc. because of mineral  


               1              The reservoir has been described as "nearly" or "mostly depleted."                                                                                        This  

case   is   not   concerned   with  the   level   of   native   gas   left   in   the   reservoir;   the   City's  

argument is that                        it  owned   the pore-space rights once the reservoir                                                                   was "no               longer  

economi[cally productive]."                                       A gas field is said to be economically depleted when there                                                             

is not enough pressure left in the field to produce the gas economically given current                                                                                              


               2              The City owns mineral rights and storage rights in other, smaller parcels in  


the reservoir, but those rights are not at issue in this case, which involves only those  


claims that compete with the interests of CIRI and the State.  


                                                                                             - 3 -                                                                                       7101


----------------------- Page 4-----------------------

reservations required by the Alaska Land Act.                                                                               3  CINGSA concluded that the State and                                                             

CIRI held title to the pore space because they owned the mineral rights, and in 2011 it                                                                                                                                              

therefore sought and obtained leases from those entities.                                                                                                 

                                    2.                Ownership of the surface and mineral estates                                                                   

                                                      a.                The surface estate                                    

                                    The City of Kenai received a patent for the relevant surface acreage in                                                                                                                        

 1964, subject to the reservation of rights to the State required by AS 38.05.125(a) for all                                                                                                                                       


conveyances of State land.                                                                                                                                                                                       

                                                                              The mineral reservation in the patent recites the statutory  


language almost verbatim.  


                                    In 1973 the State granted oil and gas leases in the property and other  


surrounding lands to Marathon Oil Company.  The leases reserved the State's right to  

                                                                            5  as well as the State's "right [as the Lessor] to authorize the  


dispose of the surface estate, 

subsurface storage of oil or gas . . . in order to avoid waste or to promote conservation  


of natural resources."  


                                                      b.                The mineral estate  


                                    CIRI  received  its  rights  to  the  subsurface  estate  under  a  three-way  


agreement with the State and the federal government pursuant to the Alaska Native  


                  3                 See  AS 38.05.125(a) ("Each contract for the sale, lease, or grant of state                                                                                                              

land, and each deed to state land, properties, or interest in state land, . . . is subject to the                                                                                                                                

following reservations . . . .").                                    

                  4                 The State had acquired both the surface and subsurface rights from the  


federal government under the Alaska Statehood Act in 1963.  The federal land patent to  


the State was subject to three preexisting oil and gas leases covering the CIRI property.  


                  5                 As relevant here, that right had already been conveyed to the City.  


                                                                                                               - 4 -                                                                                                        7101


----------------------- Page 5-----------------------


Claims Settlement Act (ANCSA).                                                                                                                                  The ANCSA-related land transfers, whichtook                                                                                                                                                                              place  

in 1980, had as a predicate step the State's reconveyance to the United States of "all of                                                                                                                                                                                                                                                                                                               

the [State's] right, title and interest, to the subsurface estate" in the property.                                                                                                                                                                                                                                                                                            A few   

months later the United States conveyed "the subsurface estate" of the property to CIRI.                                                                                                                                                                                                                                                                                                                              

Both deeds - first from the State to the federal government, then from the federal                                                                                                                                                                                                                                                                                              

government   to   CIRI   -   were   subject   to  "all  valid   existing   rights   therein,   if   any,"  

 specifically listing the Marathon oil and gas leases.                                                                                                                                                                                          

                                                              Accordingly, CIRI received the lands subject to the City's preexisting                                                                                                                                                                                                                        

interest in the surface estate.                                                                                                     As successor lessor of the Marathon leases, CIRI received                                                                                                                                                                             

royalties from the gas Marathon extracted.                                                                                                             

                                                              3.	                            The City of Kenai's claim that it owned the gas storage rights in                                                                                                                                                                                                                                          

                                                                                             the property   

                                                              After CINGSA secured its leases of gas storage rights in the Sterling C                                                                                                                                                                                                                                                                    

Reservoir from the State and CIRI, the City asserted its own claim to the ownership of                                                                                                                                                                                                                                                                                                                 

those   rights.     But   the   City  allowed  the   storage   project   to   go   forward   pending  

negotiations, granting CINGSA a conditional right of entry in the meantime.                                                                                                                                                                                                                                                                                        The right   

of   entry   provided   that   should   "either   the   City   of   Kenai   or   CINGSA,   in   its   sole  

discretion,"   determine   that   the   parties   were   not   making   progress   in   negotiations,  

CINGSA would file an action in eminent domain and allow the courts to decide the                                                                                                                                                                                                                                                                                                                  

ownership issue.                                                                

                               B.	                            Proceedings  

                                                              The parties were unable to resolve their disagreement about gas storage                                                                                                                                                                                                                                          

rights,   and   CINGSA   filed   a   complaint   against   the   City   in   March   2012,   seeking  

alternative forms of relief. In the first count of its complaint, CINGSA sought to acquire                                                                                                                                                                                                                                                                                     

                               6                              43  U.S.C.     1601-1629h  (2015).   

                                                                                                                                                                                                - 5 -                                                                                                                                                                                                           7101  

----------------------- Page 6-----------------------


by condemnation "a gas storage easement and an easement upon the mineral interests"  


owned by the City in the Sterling C Reservoir.  In another count, CINGSA interpleaded  


CIRI and the State as defendants in order "[t]o prevent double or multiple liability" given  


the "overlapping claims for compensation by CINGSA for use of the [property] for  


natural gas storage," and it asked the court to decide the party or parties CINGSA owed  


compensation.  CINGSA also sought a "declaratory judgment confirming that the City  


[held] no property interest in the [gas storage rights]"; an alternative judgment that if the  


City did hold those rights CINGSA should be granted an easement by condemnation,  


with just compensation to the City; and - as an alternative to condemnation if the City  


held those rights - reformation of CINGSA's leases with the State and CIRI so that  


CINGSA was not obliged to pay those entities for rights that were legally the City's.  


                    1.        Summary judgment  


                    CIRI and the City cross-moved for summary judgment on whether the City  


owned the gas storage rights.  The State and CINGSA joined CIRI's motion, endorsing  


CIRI's position that the storage rights belonged to the State and CIRI rather than the  


City. The superior court granted summary judgment in favor of CINGSA, the State, and  

CIRI.  It concluded that "the State reserved to itself the mineral estate, which includes  


the underground storage rights," and that "[t]he rights the City received [from the State]  


regarding the property in question were surface estate rights."  


                    CINGSA and the City filed a stipulation - later approved by the superior  


court -to resolveallremainingcondemnationissues "regardingauthority andnecessity,  


possession and just compensation and entry of final judgment against the property rights  


held by the City."  The superior court entered final judgment in favor of CINGSA, the  


State, and CIRI.  


                                                              - 6 -                                                        7101

----------------------- Page 7-----------------------

                                                              2.                            Attorney's fees   

                                                              CIRI moved for an award of attorney's fees against the City, seeking 20%                                                                                                                                                                                                                                                  

of its reasonable actual fees under Alaska Civil Rule 82(b)(2).                                                                                                                                                                                                                                      The City opposed the                                                                      

motion, arguing that CINGSA had initiated the suit, bringing in CIRI as a party "in its                                                                                                                                                                                                                                                           

 sole discretion," and that the City had not alleged any claims against CIRI that could                                                                                                                                                                                                                                                                                            

make the City liable for CIRI's fees.                                                                                                                                       But the superior court concluded that CIRI was                                                                                                                                                                 

entitled to attorney's fees under Rule 82(b)(2) because it prevailed on the main issue in                                                                                                                                                                                                                                                                                                           

the case:                                   "that CIRI owns the subsurface gas storage pore spaces in dispute."                                                                                                                                                                                                                                                                        The  

 superior court found that the amount of work done by CIRI's attorneys was reasonable,                                                                                                                                                                                                                                                                   

but it awarded an amount less than the scheduled 20% because it found that CIRI's                                                                                                                                                                                                                                                                                            

Anchorage-based attorneys charged at rates higher than those customarily charged in                                                                                                                                                                                                                                                                                                                

Kenai Peninsula communities.                                                 

                                                              The City appeals the superior court's decision on summary judgment and                                                                                                                                                                                                                                                         

its award of attorney's fees and costs to CIRI.                                                                                                                                         

III.                           STANDARDS OF REVIEW                                                                        

                                                              "We review a superior court's decision on summary judgment de novo,                                                                                                                                                                                                                                                  

drawing all inferences in favor of, and viewing the facts in the record in the light most                                                                                                                                                                                                                                                                      

 favorable to, the non-moving party."                                                                                                                                     7                                                                                                                  

                                                                                                                                                                               We review "a superior court's determination of  



prevailing party status and attorney's fees for abuse of discretion."                                                                                                                                                                                                                                                              We will find an  


abuse of discretion "if the award is 'arbitrary, capricious, manifestly unreasonable, or  

                               7                             Pebble Ltd. P'ship ex rel. Pebble Mines Corp. v. Parnell                                                                                                                                                                                                              , 215 P.3d 1064,                                

 1072 (Alaska 2009).                                                                             

                               8                             BP Pipelines (Alaska) Inc. v. State, Dep't of Revenue, 327 P.3d 185, 189  


 (Alaska 2014) (quoting State v. Jacob, 214 P.3d 353, 358 (Alaska 2009)).  


                                                                                                                                                                                              - 7 -                                                                                                                                                                                     7101

----------------------- Page 8-----------------------


stemmed from improper motive.' "                              "We review the interpretation of Alaska Civil Rules                              

governing the award of costs and attorney's fees de novo."                                             10  

IV.         DISCUSSION  


                       The central issue in this case is the ownership of the pore space when the  


mineral and surface estates have been severed, as they commonly are under Alaska's  



mineral reservation statute, AS 38.05.125, a provision of the Alaska Land Act.                                                               There  

            9           Wagner v. Wagner                , 183 P.3d 1265, 1266-67 (Alaska 2008) (quoting                                       Ware  

v.   Ware, 161 P.3d 1188, 1192 (Alaska 2007)).                                     

            10         R &Y, Inc. v. Municipality of Anchorage, 34 P.3d 289, 300 (Alaska 2001).  


            11         The specific language of the reservation is important to the discussion that  


follows.  AS 38.05.125(a) states in full:  


                       Each contract for the sale, lease, or grant of state land, and  


                       each deed to state land, properties, or interest in state land,  


                       made           under          AS        38.05.045-38.05.120,                          38.05.321,  


                       38.05.810-38.05.825,  AS  38.08,  or  AS  38.50  except  as  


                       provided  in  AS  38.50.050  is  subject  to  the  following  


                       reservations:   "The party of the first part, Alaska, hereby  


                       expressly saves, excepts and reserves out of the grant hereby  


                       made, unto itself, its lessees, successors, and assigns forever,  


                       all  oils,  gases,  coal,  ores,  minerals,  fissionable  materials,  


                       geothermal  resources,  and  fossils  of  every  name,  kind  or  


                       description, and which may be in or upon said land above  


                       described, or any part thereof, and the right to explore the  


                        same for such oils, gases, coal, ores, minerals, fissionable  


                       materials,  geothermal  resources,  and  fossils,  and  it  also  


                       hereby expressly saves and reserves out of the grant hereby  


                       made, unto itself, its lessees, successors, and assigns forever,  


                       the right to enter by itself, its or their agents, attorneys, and  


                        servants upon said land, or any part or parts thereof, at any  


                       and all times for the purpose of opening, developing, drilling,  


                       and working mines or wells on these or other land and taking  



                                                                        - 8 -                                                                  7101

----------------------- Page 9-----------------------

is a notable lack of consensus in the courts and among legal scholars on the issue of                                                              

            11	        (...continued)  


                       out and removing therefrom all such oils, gases, coal, ores,  


                       minerals,  fissionable materials,  geothermal resources, and  


                       fossils, and to that end it further expressly reserves out of the  


                       grant hereby made, unto itself, its lessees, successors, and  

                       assigns forever, the right by its or their agents, servants and  


                       attorneys at any and all times to erect, construct, maintain,  


                       and  use  all  such  buildings,  machinery,  roads,  pipelines,  


                       powerlines, and railroads, sink such shafts, drill such wells,  


                       remove such soil, and to remain on said land or any part  


                       thereof for the foregoing purposes and to occupy as much of  


                       said  land  as  may  be  necessary  or  convenient  for  such  


                       purposes  hereby  expressly  reserving  to  itself,  its  lessees,  


                       successors, and assigns, as aforesaid, generally all rights and  


                       power in, to, and over said land, whether herein expressed or  


                       not, reasonably necessary or convenient to render beneficial  


                       and efficient the complete enjoyment of the property and  


                       rights hereby expressly reserved.  


                                                                        - 9 -	                                                                7101

----------------------- Page 10-----------------------


pore-space ownership.                                                                                                            This is our first opportunity to address the issue; we do it in the                                                                                                                                                                                                                                                    

unique context of Alaska's land laws.                                                                                                                                      

                                   A.	                                 The Superior Court Properly Granted Summary Judgment To CIRI,                                                                                                                                                                                                                                                                                                    

                                                                       The   State,   And   CINGSA   Because   AS   38.05.125(a)   Reserves   The  

                                                                       Natural Gas Storage Rights To The State.                                                                                                                                                                  

                                                                       The   City   contends   that   as   the   owner  of   the   surface   it   also   owns   the  

underlying pore space or natural gas storage rights.                                                                                                                                                                                                                          According to the City, the superior                                                                                                           

 court erred when, in granting summary judgment to the other parties, it reasoned that (1)                                                                                                                                                                                                                                                                                                                                                               

determining ownership of the storage rights is a question of statutory rather than deed                                                                                                                                                                                                                                                                                                                                                       

interpretation; (2) the reserved rights under AS 38.05.125(a) include natural gas storage                                                                                                                                                                                                                                                                                                                                         

rights; and (3) the "American rule" - by which the surface owner owns the rights to                                                                                                                                                                                                                                                                                                                                                                          

underground spaces that have been depleted of their minerals - did not apply.                                                                                                                                                                                                                                                                                                                   

                                    12                                 See  James Robert Zadick, Note,                                                                                                                                       The Public Pore Space: Enabling Carbon                                                                                                                                             

 Capture and Sequestration by Reconceptualizing Subsurface Property Rights                                                                                                                                                                                                                                                                                                                                                , 36 W                             M.  

                            ARY   ENVTL.    L.    &    POL'Y   REV.    257,   270   (2011)   ("Courts   and   scholars   have  

 &  M 

infrequently and inconsistently treated the pore spaces." (footnotes omitted)); Victor B.                                                                                                                                                                                                                                                                                                                                                                   

Flatt,  Paving the Legal Path for Carbon Sequestration from Coal                                                                                                                                                                                                                                                                                           , 19 D                          UKE  ENVTL. L.                                                                  

                    OL'Y F. 211, 233 (2009) ("There is no clear consensus on whether the ownership of                                                                                                                                                                                                                                                                                                                                                        


 & P 

the pore space lies with the surface estate or the mineral estate, and consideration of these                                                                                                                                                                                                                                                                                                                                                

rights varies significantly from state to state."); 4 N                                                                                                                                                                                                                    ANCY  SAINT-PAUL, S   UMMERS  OIL  &  

 GAS   53:13, 418-20 (West 2009) ("Regardless whether underground gas storage rights                                                                                                                                                                                                                                                                                                                                                      

 are acquired by voluntary conveyance or by condemnation of the land, control and                                                                                                                                                                                                                                                                                                                                                                  

 ownership rights involving the depleted storage reservoir . . . have often been the subject                                                                                                                                                                                                                                                                                                                                       

 of litigation." (footnote omitted));                                                                                                                                                     see also                                          1 HOWARD   R. W                                                                                   ILLIAMS   & C                                                        HARLES   J.  

MEYERS, O                                                     IL  & G                            AS  LAW    222, 335-36 & n.11 (Lexis 2015) ("We urge . . . adoption   

 of the view that the mineral severance should be construed as granting exclusive rights                                                                                                                                                                                                                                                                                                                                                  

to subterranean strata for all purposes relating to minerals, whether 'native' or 'injected,'                                                                                                                                                                                                                                                                                                                     

 absent contrary language in the instrument severing such minerals.").                                                                                                                                                                                                                                          

                                                                                                                                                                                                                       -  10  -	                                                                                                                                                                                                               7101

----------------------- Page 11-----------------------

                                                1.	                    The superior court properly addressed the ownership of storage                                                                                                                                                   

                                                                       rights as a question of statutory interpretation.                                                                                                                                    

                                                The State patents conveying the land at issue to the City recited verbatim                                                                                                                                                          

the reservation of mineral rights that AS 38.05.125(a) generally requires.                                                                                                                                                                                                        The City   

argues that the superior court, when determining whether the parties intended to convey                                                                                                                                                                                                   

or to reserve the pore-space rights, should have interpreted these reservations using rules                                                                                                                                                                                                        

of deed interpretation rather than statutory interpretation.                                                                                                                                                We interpret the language of                                                                    

a deed using a three-step process:                                                                                       We first "look at the four corners of the document to                                                                                                                               

see if it unambiguously presents the parties' intent"; if it is ambiguous, we next "consider                                                                                                                                                                                      

 'the facts and circumstances surrounding the conveyance' to discern the parties' intent";                                                                                                                                                                                               

and finally, "[i]n the event that the parties' intent cannot be determined, we rely on rules                                                                                                                                                                                                       


of construction."                                                                                                                                                                                                                                                        

                                                                     As for statutes, we interpret them "according to reason, practicality,  


and common sense, taking into account the plain meaning and purpose of the law as well  



as the intent of the drafters." 

                                                   We  conclude  that  statutory  reservation  language  in  an  instrument  of  


conveyance is governed by the rules of statutory interpretation. "A patent cannot convey  


what has been reserved by law."15   Because patents "are to be given effect according to  


                        13                     McCarrey v. Kaylor                                                       , 301 P.3d 559, 563 (Alaska 2013) (quoting                                                                                                                 Estate of   

Smith v. Spinelli                                          , 216 P.3d 524, 529 (Alaska 2009)).                                                                                              

                        14                     Marathon Oil Co. v. State, Dep't of Nat. Res., 254 P.3d 1078, 1082 (Alaska  


2011) (quoting Native Vill. of Elim v. State, 990 P.2d 1, 5 (Alaska 1999)).  


                        15                     Leo Sheep Co. v. United States, 570 F.2d 881, 888 (10th Cir. 1977) rev'd  


on other grounds, 440 U.S. 668 (1979) ("The absence of an express reservation in the  


patent did not negative the implied reservation in the earlier grant.  A patent is merely  


evidence of a grant, and the issuing officer acts ministerially, not judicially."); see also  


Swendig v. Wash. Water Power Co., 265 U.S. 322, 332 (1924) (holding that patents  


issued "without a reservation did not convey what the law reserved"); Chugach Natives,  



                                                                                                                                                 -  11  -	                                                                                                                                        7101

----------------------- Page 12-----------------------


the laws and regulations under which they were issued,"                                                       courts have consistently   

applied rules ofstatutoryinterpretation                              to determinethescopeofcontractualreservations                    

                                    17  Accordingly, mineral reservations required by federal statutes are  

required by statutes.                                                                                                                                 

interpreted in light of the apparent intent of Congress, not the intent of the parties to the  




                        The language of AS 38.05.125(a) relevant here - that "[e]ach contract for  


the sale, lease, or grant of state land, and each deed to state land, . . . is subject to" the  


            15          (...continued)  


Inc. v. Doyon, Ltd., 588 F.2d 723, 727 n.13 (9th Cir. 1978) (noting that "the conveyance  


of public land by a deed from the United States requires a different analysis than would  


be the case with private parties contracting for the conveyance of private land in which  


the seller reserves the subsurface or mineral estate"); Proctor v. Painter, 15 F.2d 974,  


975 (9th Cir. 1926) (holding that although the patent did not include language reserving  


coal, it did not convey coal because Congress did not authorize it).  

            16          Swendig, 265 U.S. at 332.  


            17          See,  e.g., BedRoc  Ltd.  v.  United  States,  541  U.S.  176,  183-87  (2004)  


(reserving to the United States all coal and other "valuable minerals" in lands under the  


Pittman Underground Water Act); Watt v. W. Nuclear, Inc., 462 U.S. 36, 55-60 (1983)  


(reserving to the United States all "minerals" under the Stock-Raising Homestead Act);  


Crow Tribe of Indians v. Peters, 835 F. Supp. 2d 985, 990 (D. Mont. 2011) ("Because  


neither the patent nor the statute pursuant to which it was issued expressly addresses the  


mineral owner's use of the surface, the Court looks to rules of statutory construction for  




            18          See, e.g., Amoco Prod. Co. v. S. Ute Indian Tribe, 526 U.S. 865, 875-78  


(1999)  (interpreting  a  statutory  reservation  of  coal  based  on  Congress's  intent);  


McCarrey, 301 P.3d at 564-67 & n.18 (looking to the statute's language and purpose in  


a dispute between private parties about whether a reserved right of way required by  


federal statute survived the statute's repeal); see also Tracy Bateman Farrell et al., 53A  


AM. J      UR. 2     D   Mines and Minerals                      38 (2016) ("The proper inquiry in interpreting                     

mineral   reservations   in   land   grant   statutes   focuses   on   the   ordinary   meaning   of   the  

reservation at the time such statutes are enacted by Congress.").                                                   

                                                                         -  12  -                                                                 7101

----------------------- Page 13-----------------------


statutory reservation - is mandatory.                                                                                            A court attempting to discern only the parties'                                                                               

intent with regard to the meaning of the reservation of rights could well fail to effectuate                                                                                                                                                            

                                                                                                                                                                                                                                              20         We must  

the legislative purpose behind the statute that requires that reservation.                                                                                                                                                                                            

therefore consider AS 38.05.125(a) in determining the scope of the rights reserved in the  


 State's patent to the City.  


                                           2.	                   Interpreting  AS  38.05.125(a)  to  include  the  reservation  of  


                                                                 natural gas storage rights is consistent with the statute's plain  


                                                                 language and purpose.  


                                           AlaskaStatute38.05.125(a) requires that "[e]achcontract for thesale, lease,  


or grant of state land, and each deed to state land, properties, or interest in state land" be  


made subject to the State's reservation of the rights to listed natural resources:  "all oils,  


gases, coal, ores, minerals, fissionable materials, geothermal resources, and fossils of  


every  name,  kind  or  description,  and  which  may  be  in  or  upon  said  land  above  


described."  The statute also requires the reservation of rights of entry for exploration  


and the extraction of minerals, the reservation of surface rights necessary to support  


extraction, and a catchall reservation of "generally all rights and power in, to, and over  


                      19                   See Hayes v. A.J. Assocs.                                                        , 960 P.2d 556, 559 (Alaska 1998) ("As required                                                                                 

by AS 38.05.125(a), the patent expressly reserved mineral rights to the State.");                                                                                                                                                                               Parker  

v.  Alaska Power Auth.                                                  , 913 P.2d 1089, 1090 (Alaska 1996) ("Alaska Statute 38.05.125                                                                                                                 

reserves minerals from every land grant.").                                                                     

                      20                   See  Elizabeth  A.  McClanahan  et  al.,  Title  Issues:                                                                                                                       Beyond  Amoco  v.  


 Southern Ute, REG.&D                                                       EV.O             F  COALBED  METHANE  3-1, 2-8 (Rocky Mtn. Min. L. Found.                                                                                                            


2002) ("The primary difference between the federal land and private land cases is that   

the federal land cases involve interpretation of patent language and congressional intent.                                                                                                                                                                                                

The   private   land   cases   look   to   intent   of   the   parties   and   the   more   traditional   legal  

doctrines within the courts' jurisdictions."); 3 AMERICAN  LAW  OF  MINING  61.05[7],   

at 61-26 (Rocky Mtn. Min. L. Found. 2d ed. 2015) (noting that in addressing the issue                                                                                                                                                                                  

of whether a resource is a mineral reserved to the state "[t]he general rule is that the                                                                                                                                                                                     

intent of the legislature will be dispositive").                                                                                                  

                                                                                                                                   -  13  -	                                                                                                                           7101

----------------------- Page 14-----------------------

said land, whether herein expressed or not, reasonably necessary or convenient to render                                                         

beneficial   and   efficient   the   complete   enjoyment   of   the   property   and   rights   hereby  


expressly reserved."                     


                        The City contends that gas storage rights are unambiguously outside the  


scope of the statutory reservation because the statute reserves only "specific, identified  


natural resources" and the "various rights that facilitate exploitation of those [identified]  


natural resources." The City argues further that use of the pore space to store non-native  


gas does not further "exploration, development or removal of oil, gas, coal or other  


minerals reserved by the State." In short, according to the City, the statute reserves only  


"specifically identified natural resources in the land and the right to make use of the land  


to aid in the development and extraction of those resources," not "a place or location -  




the 'subsurface' " - that would include non-mineral pore space. 

                        "To establish the meaning of a statute, we examine both its text and its  


                  23   We give statutory language a " 'reasonable or common sense construction,  


consonant with the objectives of the legislature.'   The intent of the legislature must  


            21          AS 38.05.125(a).   

            22          The  City  also  relies  on  AS  34.15.070(a),  which  provides  that  "[a]  


conveyance of real estate passes all the real estate of the grantor, unless the intent to pass  


a less estate appears by express terms or is necessarily implied in the terms of the grant."  


But a conveyance containing the statutory reservation very obviously intends to pass less  


than  "all  the  real  estate  of  the  grantor."                                The  question  we  face  is  thus  one  that  


AS  34.15.070(a)  does  not  help  answer  - one  that  depends  instead  on  the  proper  


interpretation of AS 34.05.125(a).  


            23          Marathon Oil Co. v. State, Dep't of Nat. Res., 254 P.3d 1078, 1083 (Alaska  



                                                                         - 14 -                                                                    7101



----------------------- Page 15-----------------------


govern and the policies and purposes of the statute should not be defeated."                                                                                        We  

"presume[] that the legislature intended every word, sentence, or provision of a statute                                                                       

to   have   some   purpose,   force,   and   effect,   and   that   no   words   or   provisions   are  

                           25   We also apply the rule of statutory interpretation that "[a]mbiguities in  


public  land  grants  are  'resolved  strictly  against  the  grantee  and  in  favor  of  the  


government.' "26  This interpretive rule again highlights the distinction between statutory  


and  deed  interpretation:                             "Public  legislation  is  construed  broadly  in  favor  of  the  


government which made the grant; no rights pass by implication," while "[c]onversely,  


ambiguities in private deeds reserving mineral rights are construed strictly against the  


grantor, who is also normally the draftsman."27  


                           Examining the text and purpose of AS 38.05.125(a), we reject the City's  


argument that rights to the pore space were not reserved to the State.  We conclude that  


pore space is mineral and therefore within the express reach of the statutory reservation  


of "all . . . minerals . . . of every name, kind or description."  And storage rights in a  


"specific[] identified natural resource[]" are included by the statute's further reservation  


"generally [of] all rights and power in, to, and over said land, whether herein expressed  


             24           Mech. Contractors of Alaska, Inc. v. State, Dep't of Pub. Safety                                                                , 91 P.3d     

240, 248 (Alaska 2004) (quoting                                      Mack v. State               , 900 P.2d 1202, 1205 (Alaska App.                               


             25           Nelson v. Municipality of Anchorage, 267 P.3d 636, 642 (Alaska 2011)  


(quoting Mech. Contractors of Alaska, Inc., 91 P.3d at 248).  


             26           McCarrey v. Kaylor, 301 P.3d 559, 563 (Alaska 2013) (quoting State,  


Dep't of Highways v. Green, 586 P.2d 595, 603 n.24 (Alaska 1978)).  


             27            Loren L. Mall, Federal Mineral Reservations, 20 ROCKY   MTN. M                                                                        IN. L.   


  NST . 399, 410 (1975) (footnote omitted).                      


                                                                                 -  15  -                                                                         7101

----------------------- Page 16-----------------------

or not, reasonablynecessary                                                            or convenient to render beneficial and efficient thecomplete                                                                                              

enjoyment of the property and rights hereby expressly reserved."                                                                                                                                            

                                          "Minerals" are not defined by the Alaska Land Act.                                                                                                              Nor have we defined                        

the term in the context of AS 38.05.125(a), though we have stated that "[t]he question                                                                                                      

                                                                                                                         28   Other courts have concluded that the meaning  

of what is a mineral is a vexatious one."                                                                                                                                                                                                         

of  "minerals"  is  ambiguous  and  have  interpreted  the  term  broadly,29                                                                                                                                                         an  approach  


consistent with the breadth of AS 38.01.125(a) generally.30  


                     28                  Norken Corp. v. McGahan                                                             , 823 P.2d 622, 627 (Alaska 1991).                                                       

                     29                   See, e.g., Watt v. W. Nuclear, Inc., 462 U.S. 36, 43-47 (1983) (noting that  


"mineral" was a broad and ambiguous term that could be interpreted as including "every  


description of stone and rock deposit" and concluding that gravel constituted a mineral  


reserved to the United States in a patent); id. at 42-43 ("[T]he word 'minerals' is 'used  


in so many senses, dependent upon the context, that the ordinary definitions of the  


dictionary throw but little light upon its signification in a given case.' " (quoting N. Pac.  


R.R. Co. v. Soderberg, 188 U.S. 526, 530 (1903)); United States v. Union Oil Co. of Cal.,  


 549 F.2d 1271,1273-74 (9th Cir. 1977) (broadly defining "mineral" to encompass "[a]ll  


elements of a geothermal system," including "magma, porous rock strata, even water  


                                                               MERICAN  LAW OF                                       MINING,  84.01[2], at 84-5 (Rocky Mtn. Min. L.                                                                                                  

itself"); see also 3 A 


Found.   2d   ed.   2015)   ("It  is  futile   to   search   for   a   universally   applied   definition   of  

 'minerals,' as the word is used in grants and reservations. . . .                                                                                                                         Thus, in most cases, the                                                

answer to a dispute cannot be found simply by compiling a list of cases in which a                                                                                                                                                                                      

particular substance has been held to have been included, or not to have been included,                                                                                                                                                         

in grants and reservations by other persons, at other times, under other circumstances."                                                                                                                                   

 (footnotes omitted)).                                            But see Bumpus v. United States                                                                      , 325 F.2d 264, 266-67 (10th Cir.                                                         

 1963) (finding the term "minerals" ambiguous in a declaration of taking by the United                                                                                                                                                                 

 States and concluding that gravel was not reserved as part of "other minerals" when the                                                                                                                                                                           

declaration reserved to the owners of the subsurface estate "all oil, gas and other minerals                                                                                                                                                      

in and under said land").                               

                     30                   See Hayes v. A.J. Assocs., 960 P.2d 556, 566 (Alaska 1998) (Shortell, J. pro  


tem, concurring) (recognizing "[t]he breadth and completeness of the rights reserved and  


activities authorized" by Alaska's statutory reservation).  


                                                                                                                              - 16 -                                                                                                                         7101



----------------------- Page 17-----------------------

                     "Pore   space"   is   defined   as   "microscopic   voids   within   rocks   that   are  


unoccupied by solid material";                                                                                            

                                                 pore space alone might thus be thought of not as mineral  

                                                                                                                            32  But  



but as "the absence of something - a void constituted by surrounding structures." 

such an interpretation is too simplistic. Pore space is defined by and an inextricable part  


of the rock strata in which it is found:  "The matrices that create pore space and give it  


form - such as dolomite, limestone, lignite, and sandstone - are certainly mineral in  


character.  Without these minerals, the pore space would not exist."33  Because porous  


rock formations are mineral, the parts that make them up are also mineral, including the  


microscopic  pore  space  that  constitutes  much  of  these  formations.34                                     And  because  


AS 38.05.125(a) broadly reserves "all . . . minerals," it reserves the constituent parts of  


those minerals.  


                     Such an interpretation is supported by the statute's apparent purpose.  We  


have recognized that "the overall purpose of the Alaska Land Act is to maximize revenue  


                    35  and have interpreted sections of it as intended "to provide for orderly oil  

for the state"                                                                                                                    


          31         Kevin L.  Doran  &  Angela M.  Cifor,  Does  the Federal  Government  Own  

the  Pore   Space   under  Private  Lands   in   the   West?  Implications   of   the   Stock-Raising  

Homestead  Act  of  1916  for  Geologic  Storage  of  Carbon  Dioxide,  42  ENVTL. L. 527, 530  


          32        Id.  at  541.  

          33        Id.  (footnote  omitted).   

          34        Id.  at  541-42  ("An  additional  absurdity  would  also  arise  if  we  consider  pore  

space   to   be   a   discrete   property   interest   capable   of   being   separated   from   its   mineral  

structure  because  then  every  substance  treated  as  a  mineral .  . .  could  not  be extracted  

without  destroying  the  nonreserved  property  interest  in  the  pore  space").  

          35        Marathon Oil Co. v. State, Dep't of Nat. Res., 254 P.3d 1078, 1085 (Alaska  



                                                              - 17 -                                                         7101


----------------------- Page 18-----------------------


and gas leasing that maximizes state return on its oil and gas resources."                                                                        The State   

identifies   other   statutory   directives   that   imply   a   legislative   concern   with   managing  

surface and subsurface uses for the maximum development of each use with minimal                                                                      

                                                     37   CIRI and the State thus argue that interpreting "minerals"  

interference from the others.                                                                                                                     

to include pore-space rights better serves various legislative goals:  Pore space itself is  


a valuable State resource, its ownership is unnecessary to full enjoyment of the surface  


estate, and treating pore space differently from the rest of the mineral estate would be  


problematic for purposes of planning, leasing, and management.38                                                                We agree that these  


are relevant statutory purposes and that they are better served by interpreting the term  


"mineral" to include the pore space in rock formations.  


                          As CIRI points out, a number of federal cases have interpreted the term  


"minerals" in the context of statutory mineral reservations.  In Watt v. Western Nuclear,  


Inc., the United States Supreme Court held that gravel found on lands patented under the  


             36           Chevron U.S.A. Inc. v. LeResche                              , 663 P.2d 923, 931 (Alaska 1983) (citing                          

AS 38.05.180(a)).   

             37           The State cites AS 38.04.005(b) (stating as policy that "the director . . .  


shall seek to minimize the adverse effect of private settlement on wildlife, fishery,  


mineral,  timber,  and  other  significant  resources  of  the  land"  (emphasis  added));  


AS 38.04.015(2) (stating that one of "[t]he primary public interests in retaining areas of  


state land surface in public ownership" is "to facilitate mining and mineral leasing by  


managing appropriate public land for surface uses which are compatible with subsurface  


uses"); and AS 38.04.065(b)(1) (directing the commissioner to "use and observe the  


principles of multiple use and sustained yield").  


             38           Forexample, AS38.05.180(u) allows theDepartment ofNatural Resources  


to "authorize the subsurface storage of oil or gas, whether or not produced from state  


land,  in  land  leased  or  subject  to  lease  under  this  section,"  which  authorizes  and  


encourages development of oil and gas resources on State lands.  It also provides for  


certain exemptions from lease payments otherwise due the State, for offsets against the  


price charged for storage, and for reporting to the Regulatory Commission of Alaska.  


                                                                              - 18 -                                                                        7101



----------------------- Page 19-----------------------

Stock-Raising Homestead Act (SRHA) was a "mineral" reserved to the United States by                                                                   



                  The Court began its analysis by observing that "the word 'minerals' is 'used  


in so many senses, dependent upon the context, that the ordinary definitions of the  

                                                                                                                                  40   The Court  



dictionary throw but little light upon its signification in a given case.' " 

recognized narrow, broad, and potentially unlimited definitions of the term that would  


lead to absurd results in the context of the SRHA.41                                           Ultimately, it concluded that the  


term's definition could only be determined by reference to congressional intent.42                                                                     It  


observed that "Congress' underlying purpose in severing the surface estate from the  


mineral  estate  was  to  facilitate  the  concurrent  development  of  both  surface  and  


subsurfaceresources,"andthat"[w]hileCongress expectedthat homesteaders woulduse  


the surface of SRHA lands for stockraising and raising crops, it sought to ensure that  


valuable subsurface resources would remain subject to disposition by the United States,  


under the general mining laws or otherwise, to persons interested in exploiting them."43  


It concluded that "Congress could not have expected that stock-raising and raising crops  


would  entail  the  extraction  of  gravel  deposits  from  the  land";  therefore  "the  


congressional purpose of facilitating the concurrent development of both surface and  


            39          462 U.S. 36, 60 (1983).                      

            40         Id.   at 42-43 (quoting                 N. Pac. Ry. Co. v. Soderberg                          , 188 U.S. 526, 530           


            41         Id. at 43-44.  


            42         Id. at 46-47.  


            43         Id. at 47.  


                                                                        -  19  -                                                                 7101

----------------------- Page 20-----------------------

subsurface resources is best served by construing the mineral reservation to encompass                                                                                                            


                                   Western  Nuclear is  instructive  to  the  extent  it  shows  how  legislative  


                                                                                                                                                                                                45      Like the  

purpose drives the definition of "minerals" in different statutory contexts.                                                                                                                                         


SRHA, the Alaska Land Act contemplates retained State control over potential mineral  


wealth even as the surface estate passes to other parties for productive surface uses.  


Because the statutory text and persuasive authority suggest a broad interpretation of the  


term"minerals" in AS 38.05.125(a), and because interpreting "minerals" to include pore  


                 44               Id. ;  see also Rosette Inc. v. United States                                                             , 277 F.3d 1222, 1229-30 (10th                                      

Cir. 2002) (holding that the SHRA mineral reservation reserved geothermal resources                                                                                                                  

even though they were not specifically named in the statute);                                                                                             United States v. Union Oil                                  

Co. of Cal.                  , 549 F.2d 1271, 1273-74 (9th Cir. 1977) (holding that under the SRHA's                                                                                                    

mineral reservation statute, "[a]ll of the elements of a geothermal system - magma,                                                                                                                      

porous rock strata, even water                                                     itself - may be classified as 'minerals' " (footnote                                                              

omitted));  cf. BedRoc Ltd. v. United States                                                                 , 541 U.S. 176, 181-86 (2004) (holding that                                     

mineral   reservation   in   Pittman   Underground   Water   Act,   which  reserved   "valuable  

minerals," did not extend to sand and gravel; unlike the SRHA reservation language at                                                                                                                                    

issue in            Western Nuclear                            , Congress in the Pittman Act "textually narrowed the scope of                                                                                           

 [minerals] by using the modifier 'valuable' ").                                                                

                 45               The City seeks to distinguish  Western Nuclear on a number of grounds,  


contending that Hayes v. A.J. Assocs., 960 P.2d 556, 566 (Alaska 1998) rejected federal  


law as an aid to interpreting AS 38.05.125(a).  The section of Hayes on which the City  


relies was joined by two justices of a four-member court.  It found that the superior  


court's analysis of the relationship between two federal statutes, the SRHA and the  


Agricultural Entry Act of 1914, 30 U.S.C.  121-22 (1988), was "not helpful" as a tool  


to  the  interpretation  of  AS  38.05.125(a)  and  AS  38.05.130,  "largely  because  we  


consider[ed] Alaska's statutory scheme sufficiently clear" on the point at issue:   the  


viability of trespass claims by someone who has staked a mining claim but failed to  


proceed with exploration or discovery. Id. at 565-66. Federal law continues to be useful  


by analogy where Alaska law is less clear.  And our reliance on  Western Nuclear, as  


noted above, is simply for its observation that courts' interpretation of "minerals" as a  


statutory term depends on context and must be guided by the legislative purpose.  


                                                                                                        - 20 -                                                                                                   7101



----------------------- Page 21-----------------------

 space is consistent with both the language and the purposes of the statute, we conclude                                                                                                                                                    

that pore-space ownership is reserved as part of the mineral rights reserved.                                                                                                                                                        And use of                  

that pore space as storage, even for non-native natural gas, is reserved as part of the                                                                                                                                                                       

"rights and power in, to, and over said land . . . reasonably necessary or convenient to     

render beneficial and efficient the complete enjoyment" of the State's other reserved                                                                                                                                                        

mineral rights.                              46  

                                         3.                  The "American rule" does not apply.  


                                         Courtsfacingtheissueofpore-spaceownership haveconsidered "two main  


theories": the American rule and the English rule.47  


                                                                                                                                                              "[I]n the absence of language in the  


 severing deed dictating a different construction, the English and Canadian rule is that the  


cavern which remains in the land after the hard minerals are mined is owned by the  


mineral  interest  owner;  the  American  view is  that  the  cavern  is  owned  by  surface  



owners."                           The City urges us to adopt the American rule. But we agree with the superior  


court  that  case  law  applying  the  American  rule  is  readily  distinguishable  and  that  

                     46                  AS 38.05.125(a).   

                     47                   1 H       OWARD R. W                                ILLIAMS   & C                          HARLES  J. M                           YERS, O                  IL   & G             AS  LAW    222,   

331-33 (Lexis 2015) (citing as the "leading reported cases dealing with this matter":                                                                                                                                                                                      

 Cent. Ky. Gas Co. v. Smallwood                                                                 , 252 S.W.2d 866 (Ky. App. 1952) (applying the English                                                                                           

rule),  overruled on other grounds by Tex. Am. Energy Corp. v. Citizens Fid. Bank &                                                                                                                                                                              

 Trust Co.                   , 736 S.W.2d 25, 28 (Ky. 1987);                                                                     Dep't of Transp. v. Goike                                                       , 560 N.W.2d 365     

(Mich. App. 1996) (applying the American rule);                                                                                                    Tate v. United Fuel Gas Co.                                                         , 71 S.E.2d     

 65 (W. Va. 1952) (applying the American rule)); Thomas R. Decesar, Comment,                                                                                                                                                                                  An  

Evaluation   of   Eminent   Domain   and   a   National   Carbon   Capture   and   Geologic  

                                                                                                                                                                                         AKE  FOREST  L. R                                    EV. 261,   

Sequestration Program: Redefining the Space Below                                                                                                                  , 45         W 


277  (2010)  ("There  is  a  split  in  the  law  between  the  American  and  English  rules  


regarding the ownership of pore space for natural-gas storage.").  

                     48                  Ellis v. Ark. La. Gas Co., 450 F. Supp. 412, 421 (E.D. Okla. 1978) aff'd,  


 609 F.2d 436 (10th Cir. 1979).  


                                                                                                                            - 2 1  -                                                                                                                     7101

----------------------- Page 22-----------------------

applying the rule in this case is both unnecessary and inconsistent with AS 38.05.125(a).                                                                                                                      

                                The City cites                  Ellis v. Arkansas Louisiana Gas Co.                                                 as illustrating the proper                

application of the American rule to gas storage rights.                                                                             But the court in                        Ellis, with no             

statutory reservation at issue,                                           looked first and primarily to the intent of the private                                                           

parties as reflected in "the deeds which effect[ed] the severance" of the mineral estate;                                                                         

the deeds used only words denoting "exploration, production and development," not                                                                                                                    

                                                                               49     The court did cite the American rule as consistent  

injection, occupation, or storage.                                                                                                                                                   

with  the  parties'  intent  to  reserve  to  the  surface  owner  everything  other  than  the  


expressly granted right to prospect for and produce natural gas, but it recognized that the  


need to apply one of the presumptive rules arose only "in the absence of language in the  


severing deed dictating a different construction."50   Other cases the City cites in support  



of the American rule also turned on the specific terms of the particular conveyance.                                                                                                                       


                49             Id.  at  420.  

                50             Id.  at  421.  

                51              See   Emeny   v.    United   States,   412   F.2d    1319,    1323   (Ct.   Cl.    1969)  

(interpreting   leases  that   granted   only   "specified  mineral exploration   and  production"  

rights   (oil   and   gas)   "for   the   sole   and   only   purpose   of   mining   and   operating,"   and  

deciding  that the  "clear  and  unambiguous"  leases  did  not  grant  a  right  of  storage;  the  

landowners  still  owned  "everything  in  such  lands,  except  the  oil  and  gas  deposits[,]  .  .  .  

 [which]  included  the  geological  structures  beneath  the  surface");  Goike,  560  N.W.2d  at  

366   (applying  "plain  and  ordinary  meaning"  of   statutory  term  "fluid  mineral  and gas  

rights" to determine that  defendant  landowners  did  not retain gas storage rights following  

condemnation  of  their  property  for  highway  improvements);  Burlington  Res.  Oil  & Gas  

Co.  v.  Lang  &  Sons,  Inc.,  259  P.3d  766,  770  (Mont.  2011)  ("We  analyze  the  deeds  and  

severance  documents to determine  who  owns t  he  pore  space.");   Tate,  71  S.E.2d  at  71  

(deciding   ownership   of   vacant   space   in   limestone   stratum   by   determining   owner   of  

stratum,   "[c]onsidering   the   entire   deed   with   special   attention   to   the   language   of   the  

exception   and   giving   such   language   its  plain  meaning");  see   also  S.  Nat.   Gas   Co.   v.  

Sutton,   406   So.2d   669,   671   (La.   App.   1981)   (stating   that   "[s]urface   ownership   .   .   .  


                                                                                                - 22  -                                                                                          7101

----------------------- Page 23-----------------------

                                                                We   reject  the   City's   argument   that   the   American   rule   applies   to   a  

determination of the ownership of pore-space storage rights in a case, like this one,                                                                                                                                                                                                                                                                                                                   

involving a reservation of rights to the State under AS 38.05.125(a).                                                                                                                                                                                                                                                                Because the rights                                            

at issue are governed by the terms of the statutory reservation, and because we interpret                                                                                                                                                                                                                                                                                            

that   reservation   as   including   pore-space   storage   rights,   the   superior   court   properly  

determined that those rights belong to CIRI and the State as owners of the minerals rather                                                                                                                                                                                                                                                                                                        

than the City as owner of the surface estate.                                                                                                                                     

                                B.	                             The   Superior   Court   Did   Not   Abuse   Its   Discretion   In   Awarding  

                                                                Attorney's Fees To CIRI As A Prevailing Party.                                                                                                                                                                       

                                                                AlaskaCivil                                                Rule82(b)(2) provides                                                                                         that incases                                             resolved withouttrial"[i]n                                                                             

which the prevailing party recovers no money judgment," the court may award the                                                                                                                                                                                                                                                                                            

prevailing party 20% of the party's reasonable attorney's fees actually incurred.                                                                                                                                                                                                                                                                                                                      The  

 superior court in this case concluded that CIRI was a prevailing party and entitled to                                                                                                                                                                                                                                                                                                                            

attorney's fees from the City because CIRI was granted summary judgment on its claim                                                                                                                                                                                                                                                                                                                

to ownership of the disputed pore-space storage rights, which the City opposed.                                                                                                                                                                                                                                                                                                                  

                                                                The City contends this was error for two reasons. The City first argues that                                                                                                                                                                                                                                                                 

Rule 82 does not apply to this case, but rather Civil Rule 72, which prohibits an award                                                                                                                                                                                                                                                                                                         

of fees and costs against the condemnee in a condemnation action "[a]s a general rule."                                                                                                                                                                                                                                                                                                                                            

 Second, the City maintains that CIRI cannot recover attorney's fees even under Rule 82                                                                                                                                                                                                                                                                                                                           

because "the City did not assert any . . . claims against CIRI," which was nominally                                                                                                                                                                                                                                                                                       

aligned as its co-defendant in CINGSA's suit to determine the respective rights of all the                                                                                                                                                                                                                                                                                                                      


                                51                              (...continued)  


includes  the  right  to  the  use  of  the  reservoir  underlying  the  two  acres  for  storage  


purposes," but not citing any source or rationale for this conclusion, as the only issue on  


appeal is the amount of compensation).  

                                                                                                                                                                                                   - 23  -	                                                                                                                                                                                            7101

----------------------- Page 24-----------------------

                                We conclude that Rule 82 governs CIRI's claim for attorney's fees.                                                                                                    We  

have recognized Rule 72 as "creat[ing] a narrow exception" to the general applicability                                                                                           

of Rule 82 for "those cases involving 'the condemnation of property under the power of                                                                                                                     

                                               52    But the existence of a condemnation count does not mandate the  

eminent domain.' "                                                                                                                                                                                       

application of Rule 72.  In City of Anchorage v. Scavenius, for example, although we  


affirmed  the  superior  court's  denial  of  Rule  82  attorney's  fees  to  the  City  as  a  


condemning entity, we held that the City was properly awarded Rule 82 attorney's fees  


for its successful defense against a common-law counterclaim.53                                                                                                      In R & Y, Inc. v.  


Municipality  of  Anchorage,  where  landowners  asserted  an  unsuccessful  inverse  


condemnation  claim,  we  concluded  that  the  Municipality  was  entitled  to  Rule  82  


attorney's fees as the prevailing party.54                                                             We have also affirmed awards of Rule 82  


attorney's fees for a party's successful defense of issues  "unrelated to the eminent  


domain action."55  


                52              R & Y, Inc. v. Municipality of Anchorage                                                         , 34 P.3d 289, 301 (Alaska 2001)                                 

(quoting Alaska R. Civ. P. 72(a));                                                  see also City of Anchorage v. Scavenius                                                            , 539 P.2d     

 1169, 1173-74 (Alaska 1975) (holding that Civil Rule 72(k) trumps Rule 82 absent                                                                                                               

"clear legislative intent").               

                53              539 P.2d at 1172-79; see also Stewart v. State, Dep't of Transp. & Pub.  


Facilities, 693 P.2d 827, 831 (Alaska 1984) (summarizing our holding in Scavenius: a  


"condemnor cannot get attorney's fees under Civil Rule 82 in the initial determination  


of a condemnation action").  


                54              34 P.3d at 301.  


                55              Stewart,  693  P.2d  at  831  (concluding  that  the  condemnee's  efforts  to  


acquire a temporary restraining order and preliminary injunction on the State's property  


were issues "unrelated" to the State's action to condemn the condemnee's property); see  


also Scavenius, 539 P.2d at 1178-79 (concluding that the condemning entity could be  


awarded Rule 82 fees as prevailing party in actions not considered part of the eminent  


domain action).  


                                                                                                  - 24 -                                                                                            7101



----------------------- Page 25-----------------------

                         In this case, Rule 72 does not supersede CIRI's right to Rule 82 attorney's                                             

fees because CIRI's successful defense of the City's claimto ownership of the pore space                                                                  

                                                                                              56     The  condemning  authority  was  

was   "unrelated   to   the   eminent   domain   action."                                                                               

CINGSA, not CIRI.  And other than with regard to minor interests not relevant here,  


CINGSA's complaint sought to condemn the City's rights to pore-space storage only as  


an alternative to a declaration that the City did not own those rights at all; the latter claim  




                         Even with Rule 82 as the applicable standard, the City contends that CIRI  


should have pursued attorney's fees "against the party that sued it - CINGSA."  It  


argues that CIRI cannot be the "prevailing party" because CIRI and the City were co- 


defendants, the City asserted no cross-claims against CIRI, and the City should not be  


"saddled" with an award of attorney's fees based on CINGSA's "unilateral decision" to  


name CIRI as a defendant.  


                         But  we  have  rejected  the  argument  that  a  party  cannot  be  liable  for  


attorney's fees to a party it did not sue.  Recently, in BP Pipelines (Alaska) Inc. v. State,  


Department of Revenue, we reaffirmed the long-established rule that "regardless of how  


parties are formally arranged, fees and costs may be awarded based on actual adversity  


of interests."57  In BP Pipelines, owners of the Trans-Alaska Pipeline System and several  


municipalities brought separate administrative appeals of the State Assessment Review  


Board's valuation of the pipeline for property tax purposes.58   Three subsequent appeals  


to  the  superior  court,  involving  different  combinations  of  the  pipeline  owners  and  


             56          See, e.g.       ,  Stewart, 693 P.2d at 831.              

             57          327 P.3d 185, 191-93 (Alaska 2014) (citing Moses v. McGarvey, 614 P.2d  


 1363, 1373 (Alaska 1980)).  


             58          Id. at 187-88.  


                                                                             - 25  -                                                                      7101

----------------------- Page 26-----------------------


municipalities,   were   consolidated  for   a   single   trial   de   novo.                                            The   central   dispute  

involved competing valuation methods:                                      the owners argued for one approach and the                                  

                                                                                                                             60  No affirmative  

Department of Revenue, Board, and municipalities argued for another.                                                                     

claims  were  asserted  between  the  two  sides.                                        The  superior  court  agreed  with  the  


Department and the municipalities and ordered the owners to pay attorney's fees to them  


as prevailing parties.61                    We affirmed the attorney's fees award, rejecting the owners'  


argument that they could not be liable for the municipalities' fees because the owners'  


appealswere"directed against theDepartmentand the Board, not the [o]wners,"and thus  


the municipalities could not have been "prevailing parties" as against the owners.62   We  


reasoned  that  an  "adversity  of  interests"  existed  between  the  owners  and  the  


municipalitiesbecausethey wereclearly aligned against eachother"on every substantive  


issue. . . . [They] were not just nominally opposing parties; they were the primary  



                        Here,  the City's argument  that  CIRI  should  seek attorney's fees from  


CINGSA lacks merit because the "actual adversity" was between the City and the other  


parties,  not  CIRI  and  CINGSA.                                After  CIRI  moved  for  summary  judgment,  both  


CINGSA and  the State joined  CIRI's motion and  aligned  with  CIRI on all issues,  


including the primary one of whether the City owned the storage rights. Like the owners  


            59          Id.  at 188.   

            60          Id.  

            61          Id.  

            62          Id.  at 191-92.            

            63          Id.  at 193.   

                                                                         - 26  -                                                                   7101

----------------------- Page 27-----------------------


and the municipalities in BP Pipelines, CIRI and the City asserted no claims against each  


other but still acted as the "primary litigants" in arguing opposite sides of the main issue.  


                          We  conclude that  the superior court did not abuse its discretion in its  


determination  that  CIRI  was  a  prevailing  party  against  the  City  or  in  its  award  of  


attorney's fees to CIRI pursuant to Rule 82(b)(2).  

V.           CONCLUSION  

                          We AFFIRM the judgment of the superior court.                                        

                                                                                - 27  -                                                                         7101

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