## Facts

- A large tract was divided into a split estate: the surface was conveyed while the grantor reserved the coal and “necessary use of the surface” to extract it.
- Earlier litigation interpreting the same deed language had determined the reserved surface-use rights included strip mining.
- Western Energy Co. held the coal lease from the mineral owner’s successor and sought a permit to strip mine.
- The Montana Department of State Lands denied the strip-mining permit because Western lacked written consent from the surface owner, Genie Land Co., as required by Mont. Code Ann. § 82-4-224 (the “Owner Consent Statute”).
- Western sued, alleging the statute allowed a private veto that destroyed the economic value of its mineral and lease rights and unconstitutionally altered the deed-and-lease framework.

## Issues

1. Whether conditioning strip-mining permits in split estates on surface-owner consent unconstitutionally deprived the mineral lessee of vested property rights without due process and just compensation.
2. Whether the Owner Consent Statute unconstitutionally impaired preexisting contractual rights arising from the mineral lease and deed reservations recognizing strip-mining surface use.

## Decision

- The Montana Supreme Court reversed the district court.
- The Court held the Owner Consent Statute unconstitutional as applied to Western’s established mineral and lease rights.
- The Court concluded the statute violated due process, operated as a taking without just compensation, and substantially impaired contractual rights without sufficient public justification.
- The case was remanded for further proceedings consistent with the ruling.

## Legal Principles

- A state may regulate mining under its police power only through measures reasonably related to public health, safety, morals, or general welfare; a statute that merely grants a private party an absolute veto over vested mineral development exceeds that limit.
- When deeds and leases in a split estate allocate mineral-development and surface-use rights, later legislation that effectively nullifies those vested rights—by making their exercise contingent on uncompensated, unilateral surface-owner consent—can constitute an unconstitutional deprivation of property and a de facto taking.
- Under Contract Clause analysis, a statute that substantially impairs preexisting contractual expectations is invalid absent a significant and legitimate public purpose, and the impairment must be reasonable and necessary to achieve that purpose.

## Conclusion

The Montana Supreme Court invalidated a surface-owner consent requirement as applied to a mineral lessee whose deed-based rights included strip mining, holding that the statute functioned as a private veto that unconstitutionally took property and substantially impaired contracts without adequate public-welfare justification.


W. Energy Co. v. Genie Land Co., 737 P.2d 478 (Mont. 1987)