Summary
In Gulf Refining Co. v. Stone, 197 Miss. 713, 21 So.2d 19, 21, we said: "There is not to be gathered from what has been said herein that an oil or gas lease is not separately assessable, ad valorem.
Summary of this case from Stern v. ParkerOpinion
No. 35769.
February 26, 1945.
1. TAXATION.
"Corporeal property" taxable, under constitutional provision that property shall be assessed for taxes at its true value, must be capable of inspection, and after inspection of estimate and appraisal, and of being made subject to a tax lien, and to sale and delivery of the identical property, to make the tax money in case of default in payment (Const. 1890, sec. 112).
2. TAXATION.
The rule that judgments may not be based upon conjecture applies to a judgment in an approved assessment roll.
3. CONSTITUTIONAL LAW. Statutes.
That which is impossible or thoroughly impracticable is not within a constitutional or statutory requirement.
4. LICENSES.
Statute levying annual privilege tax on every group, acting as a unit, engaged in business of producing or severing oil for commercial purposes does not violate constitutional provision that tax shall be uniform and equal throughout state and that property shall be assessed for taxes under general laws and by uniform rules according, and in proportion, to its true value (Laws 1944, ch. 134, secs. 1, 2, 11; Const. 1890, sec. 112).
5. LICENSES.
An oil severance tax imposed against royalty holders, who took no personal part in the severance occupation, was valid and was not objectionable as an arbitrary legislative fiat (Laws 1944, ch. 134, secs. 1, 2, 11).
6. TAXATION.
An oil or gas lease with right of entry is an estate in land, subject to ad valorem taxation, but not including the oil or gas as a separate item of valuation (Code 1942, sec. 9759).
ROBERDS, J., dissenting in part; and SMITH, C.J., dissenting.
APPEAL from the circuit court of Hinds county, HON. H.B. GILLESPIE, Judge.
Green Green, of Jackson, T.W. Davis, Jr., of Purvis, and J.S. Atkinson, of Shreveport, La., for appellant.
Chapter 134, Laws of 1944, imposing the oil severance tax, so-called, violates Section 112 of Mississippi's Constitution in that owners of royalty do no business upon which occupation tax may be levied.
Fox v. Pearl River Lumber Co., 80 Miss. 1, 31 So. 583; Moss v. Jourdan, 129 Miss. 598, 92 So. 689; Stern v. Great Southern Land Co., 148 Miss. 649, 114 So. 739; Federal Land Bank of New Orleans v. Cooper, 190 Miss. 490, 200 So. 729; Pace v. State ex rel. Rice, 191 Miss. 780, 4 So.2d 270; Merrill Engineering Co. v. Capital Nat. Bank, 192 Miss. 378, 5 So.2d 666; Wight v. Ingram-Day Lumber Co., 195 Miss. 823, 17 So.2d 196; Lloyd's Estate v. Mullen Tractor Equipment Co., 192 Miss. 62, 4 So.2d 282; Gulf Refining Co. v. Terry, 163 Miss. 869, 142 So. 457; Stone v. General Contract Purchase Corporation, 193 Miss. 301, 7 So.2d 806; Southern Package Corporation v. State Tax Commission, 174 Miss. 212, 164 So. 45; Stokely v. State, 149 Miss. 435, 115 So. 563; Stern v. Great Southern Land Co., 148 Miss. 649, 114 So. 739, 740; Thompson v. Kreutzer, 112 Miss. 165, 72 So. 891; Chicago, R.I. P.R. Co. v. Robertson, 122 Miss. 417, 84 So. 449; Cudahy Packing Co. v. Stovall, 112 Miss. 106, 72 So. 870; Thompson v. McLeod, 112 Miss. 383, 73 So. 193, 195; Hancock County v. Imperial Naval Stores Co., 93 Miss. 822, 829, 47 So. 177; Jones v. Adams, 104 Miss. 397, 61 So. 420; Newton v. Long, 107 Miss. 349, 65 So. 460; Puffer Mfg. Co. v. Dearman, 97 Miss. 622, 54 So. 310; Robertson v. Puffer Mfg. Co., 112 Miss. 890, 73 So. 804, 805; Wood v. Morath, 128 Miss. 143, 90 So. 714, 716; Locke v. L.N. Dantzler Lumber Co., 119 Miss. 783, 81 So. 175; Hattiesburg Grocery Co. v. Robertson, 126 Miss. 34, 88 So. 4, 6, 89 So. 369; Barnes v. Jones, 139 Miss. 675, 103 So. 773; State ex rel. Knox v. Gulf, M. N.R. Co., 138 Miss. 70, 104 So. 689, 690; City of Jackson v. Deposit Guaranty Bank Trust Co., 160 Miss. 752, 133 So. 195, 205; Simpson v. United Gas Pipe Line Co., 196 Miss. 356, 17 So.2d 200; Bachrach v. Nelson, 349 Ill. 579; Opinion of the Justices, 220 Mass. 613, 108 N.E. 570; Stewart Dry Goods Co. v. Lewis, 294 U.S. 550, 556, 79 L.Ed. 1054, 1057; State ex rel. Porterie v. Hunt, 182 La. 1073, 162 So. 777, 780; Ohio Oil Co. v. Wright, 386 Ill. 206, 53 N.E.2d 966, 970; Group No. 1 Oil Corporation v. Shepard (Tex.), 89 S.W.2d 1021; Flynn, Welch Yates v. State Tax Commission, 38 N.M. 131, 28 P.2d 889; State v. Stiles, 137 La. 539, 68 So. 947, 948; Gulf Refining Co. v. McFarland, 154 La. 251, 97 So. 433; Norum v. Ohio Oil Co., 83 Mont. 353, 272 P. 534, 536; Floyd v. Miller Lumber Co., 160 Ark. 17, 254 S.W. 450, 32 A.L.R. 811; Miller v. Buck Creek Oil Co., 38 Wyo. 505, 269 P. 43, 73 A.L.R. 821; Large Oil Co. v. Howard, 63 Okla. 143, 163 P. 537, 32 A.L.R. 827; Malin v. La Moure County, 27 N.D. 140, 145 N.W. 582, 50 L.R.A. (N.S.) 997; Sims v. Ahrens, 167 Ark. 557, 271 S.W. 720; Redfield v. Fisher, 135 Or. 180, 292 P. 713, 73 A.L.R. 721, 728; Lake Superior Consolidated Iron Mines v. Lord, 271 U.S. 577, 70 L.Ed. 1093; Reser v. Umatilla County, 48 Or. 326, 86 P. 595, 120 Am. St. Rep. 815; Eastern Gulf Oil Co. v. Kentucky State Tax Commission, 17 F.2d 394; United Mercury Mines Co. v. Viley, Collector, 20 F. Supp. 734; Hercules Mining Co. v. United States, 34 F. Supp. 103; Ambergris Consol. Mining Co. v. United States, 27 F. Supp. 968; Hixon v. School District (Ark.), 60 S.W.2d 1027, 1028; Constitution of 1890, Sec. 112; Laws of 1944, ch. 134; 33 Am. Jur. 327; 103 A.L.R. 35.
Chapter 134, Laws of 1944, violates Section 112 of Mississippi's Constitution in that no occupation tax may be imposed thereby upon plaintiff, the producer.
County Com'rs of Anne Arundel County v. English (Md.), 35 A.2d 135.
Chapter 134, Laws of 1944, violates Section 112 of Mississippi's Constitution in that the legislature may not, by virtue of the imposition of a privlege tax upon severance, grant immunity from ad valorem taxation.
Attala County v. Kelly, 68 Miss. 40, 44, 8 So. 376; Vicksburg Bank v. Worrell, 67 Miss. 47, 7 So. 219; Chicago, R.I. P.R. Co. v. Robertson, supra; Yazoo M.V.R. Co. v. Adams, 77 Miss. 194, 24 So. 317; Thompson v. Kreutzer, supra; Thompson v. McLeod, supra; Barnes v. Jones, supra; Clements v. Stone, 195 Miss. 774, 15 So.2d 517, 519; Board of Supervisors of Lee County v. Mid-South Mfg. Co., 190 Miss. 812, 1 So.2d 802, 803; Stone v. General Contract Purchase Corporation, supra; Southern Package Corporation v. State Tax Commission, supra; Swiss Oil Corporation v. Shanks (Ky.), 270 S.W. 478, 482; Clearfield Bituminous Coal Corporation v. Thomas (Pa.), 9 A.2d 727, 126 A.L.R. 716; Laws of 1944, Ch. 134, Sec. 11; 33 Am. Jur. 327, Sec. 3; 51 Am. Jur., Secs. 30, 34, 1259; 77 A.L.R. 1078; 126 A.L.R. 724.
This so-called privilege tax is not a privilege tax, but a property tax, and being a property tax, contravenes Section 112 under Thompson v. Kreutzer, supra, and Thompson v. McLeod, supra, but if therein we err and this is a privilege tax upon an independent occupation fixed as to amount by the pleasure of the legislature, then it is beyond the power of the legislature to provide that certain lands precisely similarly situated and similarly valued as to other lands, as to oil content, shall be exempt from ad valorem taxation by reason of there being conducted thereon an entirely separate and distinct business, which business has naught to do with ad valorem property taxes. So that, it necessarily results that under either aspect, Section 112 strikes this tax down, and the judgment of the circuit court sustaining the demurrer should be reversed.
The learned Attorney General says that Thompson v. McLeod, supra, should be overruled outright because it is confusing, mischievous and misleading. This case so thus attacked has had in Mississippi naught but approval, elsewhere more approval than criticism.
Locke v. Dantzler Lumber Co., supra, Hattiesburg Grocery Co. v. Robertson, supra; Barnes v. Jones, supra; State ex rel. Knox v. Gulf, M. N.R. Co., supra; City of Jackson v. Deposit Guaranty Bank Trust Co., supra; Southern Package Corporation v. State Tax Commission, supra; Stone v. General Contract Purchase Corporation, supra; Dawson v. Kentucky Distilleries W. Co., 255 U.S. 294, 65 L.Ed. 646; Union Sulphur Co. v. Reed, 249 F. 172; Freiberg Co. v. Dawson, 274 F. 420; Northern Commercial Co. of Alaska v. Territory of Alaska, 289 F. 786; Ohio Oil Co. v. Wright, supra; Sheip Co. v. Amos, 100 Fla. 863, 130 So. 699, 705; Floyd Fruit Co. v. Florida Citrus Com., 128 Fla. 565, 175 So. 248, 250; Florida Sugar Distributors v. Wood, 135 Fla. 126, 184 So. 641, 644; Lionel's Cigar Store v. McFarland, 162 La. 956, 111 So. 341, 344; Fleischmann Co. v. Conway, 168 La. 547, 122 So. 845, 848; State ex rel. Porterie v. Hunt, supra; Republic Iron Steel Co. v. State, 204 Ala. 469, 86 So. 65, 68; Redfield v. Fisher, supra; Flynn v. City County of San Francisco, 18 Cal.2d 10, 115 P.2d 3, 6; Diefendorf v. Gallet, 51 Idaho 619, 10 P.2d 307, 311; Foster Creighton Co. v. Graham, 154 Tenn. 412, 285 S.W. 570; Floyd v. Miller Lumber Co., 160 Ark. 17, 254 S.W. 451, 458, 32 A.L.R. 811, 817; Sims v. Ahrens, supra; Craig v. E.H. Taylor Sons, 192 Ky. 36, 232 S.W. 395; County Com'rs. v. English (Md.), 35 A.2d 135, 142; Peoples Natural Gas Co. v. Pittsburgh, 317 Pa. 1, 175 A. 691; Reif v. Barrett, 355 Ill. 104, 188 N.E. 889, 892; Flynn, Welch Yates v. State Tax Commission, supra.
Compare, Chicago, R.I. P.R. Co. v. Robertson, supra; Barnes v. Jones, supra; Mississippi State Tax Commission v. Brown, 188 Miss. 483, 193 So. 794, 195 So. 465, 127 A.L.R. 919; Hoskins v. Ames, 78 Miss. 986, 29 So. 828; Jensen v. Henneford, 185 Wn. 209; 11 Am. Jur. 659, Sec. 50; 16 C.J.S. 48, Sec. 12; United States Law Week, June 13, 1944.
Thompson v. Kreutzer, 112 Miss. 165, 73 So. 891, distinguished. Compare Merrell Engineering Co. v. Bank, supra; State of Wisconsin v. J.C. Penney Co., 311 U.S. 434, 85 L.Ed. 267; International Harvester Co. v. Wisconsin, 88 L.Ed. 1027; Lake Superior Con. Mining Co. v. Lord, 271 U.S. 577, 70 L.Ed. 1093, 1101.
Barwise et al. v. Sheppard, 299 U.S. 33-41, 81 L.Ed. 23, 27, distinguished. Compare McCoach v. Minehill S.H.R. Co., 228 U.S. 295, 57 L.Ed. 842; United Mercury Mines Co. v. Viley, 20 F. Supp. 734; Jensen v. Henneford, supra; Oliver Iron Mining Co. v. Lord, 262 U.S. 172, 43 S.Ct. 526, 67 L.Ed. 929; Lake Superior Con. Iron Mines v. Lord, supra.
Note to Floyd v. Miller Lumber Co., supra; distinguished. Compare Chicago, R.I. P.R. Co. v. Robertson, supra; Barnes v. Jones, supra; Oliver Iron Min. Co. v. Lord, supra; Large Oil Co. v. Howard, 63 Okla. 143, 163 P. 537; State v. Stiles, 137 La. 540, 68 So. 947.
33 Am. Jur. 327, distinguished. Compare Thompson v. McLeod, supra; Miller v. Buck Creek Oil Co., supra; 32 A.L.R. 828; 103 A.L.R. 39; L.R.A. 1918C, 898; Ann. Cas. 1918A, 678.
Chicago, R.I. P.R. Co. v. Robertson, supra, Barnes v. Jones, supra; not distinguished by Attorney General.
Greek L. Rice, Attorney General, by Geo. H. Ethridge, Assistant Attorney General, and J.H. Sumrall, of Jackson, for appellee.
In applying the statute here involved the court is bound by the definitions or terms used in the act, the legislature having the power to define words.
Mathison v. Brister, 166 Miss. 67, 145 So. 358; Stone v. General Contract Purchase Corporation, 193 Miss. 301, 7 So.2d 806; Prairie Oil Gas Co. v. Moter, 1 F. Supp. 464; Candado Stevedoring Corporation v. Locke, 1 F. Supp. 456; Schweizer v. Mager, 297 F. 334; Karnuth v. United States, 279 U.S. 231, 73 L.Ed. 677, 682.
This being true and the legislature having defined the terms pertinent to this case in Chapter 134, the court must determine in accordance with legislative definition as to the character of the tax, whether it was an excise or an ad valorem property tax.
Section 33 of the Constitution of 1890 grants all legislative power of the state to the state legislature. The grant is without stint, limit, or limitation in itself.
Hinton v. Board of Sup'rs of Perry County, 84 Miss. 536, 36 So. 565.
I desire to call the Court's attention to the difference in our Constitution and that of many of the states of the Union because many of the decisions turn upon the grant in the Constitution of the power to tax. Many of the states make the specific grant to tax certain subjects, whereas powers are limited by restrictions on the general grant contained in other sections of the state Constitution and of the Federal Constitution.
State ex rel. Knox v. Board of Sup'rs of Grenada County, 141 Miss. 701, 105 So. 541; Annotations in Constitution of 1890, Sec. 33.
This power of taxation is one of the great divisions of power of the legislature being equally comprehensive and co-extensive with the police power. The state can, therefore, tax any privilege, occupation or business that it may see proper to tax, as distinguished from ad valorem tax which is regulated and limited by Section 112 of the Constitution.
See Seven Springs Water Co. v. Kennedy, 229 S.W. 792, 56 A.L.R. 496; State ex rel. Porterie v. Hunt, 182 La. 1073, 162 So. 777, 103 A.L.R. 9; Ingels v. Riley, 53 P.2d 939, 103 A.L.R. 1, 18.
Section 112 of the Constitution does not apply in this case to the property itself as it lies under the land, invisible to the human senses.
Daily v. Swope, 47 Miss. 367; Clarksdale Ins. Agency v. Cole, 87 Miss. 637, 40 So. 228; Notgrass Drug Co. v. State ex rel. Rice, 175 Miss. 358, 165 So. 884; State ex rel. Rice v. Allen, 180 Miss. 659, 177 So. 763; Hattiesburg Grocery Co. v. Robertson, 126 Miss. 34, 88 So. 4, 25 A.L.R. 748; State ex rel. Knox v. Gulf, M. N.R. Co., 138 Miss. 70, 104 So. 689; Postal Telegraph-Cable Co. v. Robertson, 116 Miss. 204, 76 So. 560; Coca Cola Co. v. Skillman, 91 Miss. 677, 44 So. 985; Barataria Canning Co. v. State, 101 Miss. 890, 58 So. 769; Enochs v. State, 133 Miss. 107, 97 So. 534; Nelson v. Sears, Roebuck Co., 312 U.S. 359, 85 L.Ed. 888; American Mfg. Co. v. St. Louis, 250 U.S. 449, 39 S.Ct. 522, 63 L.Ed. 1084; State of Wisconsin v. J.C. Penney Co., 311 U.S. 434, 85 L.Ed. 267; Stone v. Interstate National Gas Corporation, 103 F.2d 544, 308 U.S. 522, 60 S.Ct. 292, 84 L.Ed. 442.
According to the weight of authority a tax imposed on persons engaged in severing from the soil natural resources, such as timber, oil, natural gas, ore, or the like, based on the quantity or the value of the product thus severed, is valid. Such a tax is deemed a privilege or occupation tax, a proper exercise of the power to impose such taxes, and not within constitutional requirements relating to the imposition of property taxes.
Oliver Iron Mining Co. v. Lord, 262 U.S. 172, 43 S.Ct. 526, 67 L.Ed. 929; Stanton v. Baltic Min. Co., 240 U.S. 103, 36 S.Ct. 278, 60 L.Ed. 546; Choctaw, O. G.R. Co. v. Harrison, 235 U.S. 292, 35 S.Ct. 27, 59 L.Ed. 234; Floyd v. Miller Lumber Co., 160 Ark. 17, 254 S.W. 450, 32 A.L.R. 811, 273 U.S. 672, 47 S.Ct. 475, 71 L.Ed. 833; Group No. 1 Oil Corporation v. Sheppard (Tex.), 89 S.W.2d 1021-1026; Barwise et al. v. Sheppard, 89 S.W.2d 1026, 299 U.S. 34-41, 81 L.Ed. 23-27; Flynn, Welch Yates v. State Tax Commission, 38 N.M. 131, 28 P.2d 889; 33 Am. Jur. 327.
The decision of a court of a sister state is not binding upon the courts of Mississippi, but is given such consideration as it may be entitled.
New York Life Ins. Co. v. Ware, 171 Miss. 341, 157 So. 894; Black's Law of Judicial Precedent, pp. 380-428; 21 C.J.S. 354, Secs. 204, 205; 33 Words and Phrases 248.
Under the laws of this state enacted in 1932 prior to the plaintiff acquiring the property involved here, the state provided for the regulation of the oil and gas business, giving valuable rights to all interested persons in protecting their property, and prohibiting waste and giving the benefit of supervision of state agencies to regulate and control operations in oil and gas which are highly beneficial to both the producing companies and the lessors or owners of the oil and gas lying under the surface of the earth in this state. See also Sections 6132 to 6179, bringing forward Chapter 117, Laws of 1932, and amendments thereto. The state also made available to persons interested in mineral development in the state its own lands and gave access to its own minerals lying under its lands. This additional advantage is contained in Sections 5947-5956, Code of 1942. These afford ample basis for the state's taxation made under the statutes here involved.
Compare Ohio Oil Co. v. Wright et al., 386 Ill. 206, 53 N.E.2d 966.
Request by the Court for additional briefs.
The Court desires briefs from counsel addressed and confined to the following questions:
1. Is oil under the surface in its natural state the subject of individual ownership in such measure as to be within the purview of Section 112 Const.? In this connection see cases collected in the notes in 24 Am. Jur., pp. 520 et seq.; also the decisions of this Court holding that oil in land is a part thereof and is susceptible of separate ownership.
2. If that question be answered in the negative, is not an oil lease, such as in this case, which confers the possession and use of the land and the appurtenant right to capture the oil, as interest in land equivalent to an estate therein so as to be separately assessable under Section 112 of the Constitution?
3. And if that question is answered in the affirmative, is the exemption of the lease on producing property as provided in Section 11, chap. 134, Laws 1944, a real exemption, or is it a device by which to substitute an excise tax in place of that required by Section 112 of the Constitution?
4. If the next foregoing question is answered in the affirmative, is appellant harmed by it so as to enable appellant to raise the question?
5. If the lease on "producing properties" is to be exempt from ad valorem taxation under Section 11 of the Act in question without regard to its value, and a lease on an adjoining non-producing tract which may be worth on the market at least $100,000 is not to be exempt, but is to be assessed according to its true value under Section 112 of the Constitution, then, does not Section 11, by its failure to define "producing properties" as related to the area of land covered by the lease that is to be exempt, permit the owner of a lease on as much as 500 acres of land or more, with only one producing well thereon, to claim an exemption on the entire lease, though it may likewise be worth $100,000, and at the same time pay in lieu thereof a very small production privilege tax on the output of the one well as compared with the ad valorem taxes paid by the owner of a lease on the adjoining nonproducing tract worth $100,000? If so, please discuss whether or not this supposed discrimination between the two leaseholders is violative of Section 112 of the Constitution requiring equality and uniformity in ad valorem taxation.
6. If the ad valorem assessment on the suggested 500-acre area of land, mentioned in paragraph 5, and which may have been previously assessed at only $5.00 land value per acre, cannot be raised because of the fact that it is under an oil-producing lease, and if the adjoining non-producing 500-acre tract, mentioned in said paragraph 5, which may or may not be under a lease, is actually worth on the market $100,000 and must be assessed at its true value for ad valorem taxes under Section 112 of the Constitution, then, is there not presented the question as to whether or not there is a discrimination between the two landowners in the matter of land ad valorem tax assessment, in that the owner of the 500-acre tract on which there may be only one well is to pay tax only on his royalty interest in production as compared with the ad valorem taxes to be assessed against the owner of such a valuable, but nonproducing tract?
Green Green, of Jackson, and J.S. Atkinson, of Shreveport, La., for appellant, in reply to questions propounded by the Court.
Our answer to Question One propounded by the Court is yes, unconditionally, because Section 112, Constitution of 1890, provides: "Taxation shall be uniform and equal throughout the state. Property shall be taxed . . . But all such property shall be assessed . . . and no county shall be denied the right to levy county and special taxes upon such assessment."
Property, as herein used, must mean all property. No exception is made.
Adams v. Kuykendall, 83 Miss. 571, 35 So. 830; Hawkins v. Mangrum, 78 Miss. 97, 28 So. 872; Adams v. Bank of Oxford, 78 Miss. 532, 29 So. 402; authorities cited in original brief.
Compare, as to taxation, 4 Summers Oil Gas (Per. Ed.), Sec. 783, p. 204, et seq.; Mills and Willingham Law of Oil and Gas, p. 378 et seq.; Thornton Oil and Gas, Sec. 1237 et seq.
Oil is property unquestionably, while its status might theoretically be questioned. In Mississippi it is "land" before severance.
Stokely v. State, 149 Miss. 435, 115 So. 563, 566; Stephens County v. Mid-Kansas Oil Gas Co., 113 Tex. 160, 254 S.W. 290, 29 A.L.R. 566, and note 586.
Compare Board of Sup'rs of Clarke County v. Mississippi Lumber Co., 80 Miss. 535, 31 So. 905; Gulf Refining Co. of Louisiana v. Terry, 163 Miss. 869, 142 So. 457; Dresser v. Hathorn, 144 Miss. 24, 109 So. 23; Edward Hines Yellow Pine Trustees v. Martin (Miss.), 99 So. 825; Lloyd's Estate v. Mullen Tractor Equipment Co., 192 Miss. 62, 4 So.2d 282, 288; Pace v. State ex rel. Rice, 191 Miss. 780, 4 So.2d 270; Merrill Engineering Co. v. Capital Nat. Bank of Jackson, 192 Miss. 378, 5 So.2d 666; Stern v. Great Southern Land Co., 148 Miss. 649, 114 So. 739, 740; Moss v. Jourdan, 129 Miss. 598, 92 So. 689; Wight v. Ingram-Day Lumber Co., 195 Miss. 823, 17 So.2d 196; Liverpool London Globe Ins. Co. v. Delaney, 190 Miss. 404, 200 So. 440; Federal Land Bank of New Orleans v. Cooper, 190 Miss. 490, 200 So. 729; Cummings v. Midstates Oil Corporation, 193 Miss. 675, 9 So.2d 648; Harleston v. West Louisiana Bank, 129 Miss. 111, 91 So. 423; Love Petroleum Co. v. Atlantic Oil Producing Co., 169 Miss. 259, 152 So. 829; Chism v. Hollis, 152 Miss. 772, 118 So. 713; Cook v. Farley, 195 Miss. 638, 15 So.2d 352; Hancock County v. Imperial Naval Stores Co., 93 Miss. 822, 829, 47 So. 177; Jones v. Adams, 104 Miss. 397, 61 So. 420; Newton v. Long, 107 Miss. 349, 65 So. 460; Jackson County v. Worth, 127 Miss. 813, 90 So. 588; Wisconsin Lumber Co. v. State, 97 Miss. 571, 54 So. 247; Fox v. Pearl River Lumber Co., 80 Miss. 1, 31 So. 583; Davis v. Butler, 128 Miss. 847, 91 So. 279; Wilson v. Vincennes-Mississippi Land Lumber Co., 114 Miss. 190, 74 So. 825; L.N. Dantzler Lumber Co. v. State, 97 Miss. 355, 53 So. 1; Butterfield Lumber Co. v. Guy, 92 Miss. 361, 46 So. 78; Caston v. Pine Lumber Co., 110 Miss. 165, 69 So. 668; Mathison v. Brister, 166 Miss. 67, 145 So. 358; Darnell v. Johnston, 109 Miss. 570, 68 So. 780, 784; Gully v. Newman Lumber Co., 176 Miss. 48, 164 So. 891, 168 So. 258; Stone v. General Contract Purchase Corporation, 193 Miss. 301, 7 So.2d 806, 809; People's Warehouse Co. v. Yazoo City, 97 Miss. 500, 52 So. 481; Sample v. Romine, 193 Miss. 706, 8 So.2d 257; Whelan v. Johnston, 192 Miss. 673, 6 So.2d 300; Brown v. Spilman, 155 U.S. 665, 39 L.Ed. 304; Jilek v. Chicago, W. F. Coal Co., 382 Ill. 241, 47 N.E.2d 96, 146 A.L.R. 871, and note 880; Callahan v. Martin, 3 Cal.2d 110, 43 P.2d 788, 101 A.L.R. 883; Morrow v. Scoffield (5 Cir.), 116 F.2d 17; Code of 1930, Sec. 3146; Mississippi Digest, Key No. 99, Water Water Courses; 1 Summers Oil Gas (Per. Ed.), Sec. 8, p. 26; Mills Willingham, Laws of Oil and Gas, p. 20; 1 Thornton, Oil Gas, Sec. 34, p. 63, Sec. 152, p. 366; Mississippi Law Journal, March 1941, p. 431; 24 Am. Jur. 520; 40 C.J. 903, Sec. 441; 29 A.L.R. 586; 16 A.L.R. 514.
We unhesitatingly answer that oil is "land" and may be separately owned with divers estates therein, but even if it be not "land," then it is property, capable of ownership and well within the purview of Section 112; in fact, inescapably within the mandate of this section.
Having answered Question One affirmatively, under the direction of the Court, we assume we are not to answer this further than to say that, in our opinion, unquestionably it can and has, and when so doing, acted constitutionally. Compare, especially, the A.L.R. Notes, supra.
Our answer to Question Three is that Chapter 134, Laws of 1944, violates Section 112 of Mississippi's Constitution in that the legislature may not, by virtue of the imposition of a privilege tax upon severance, grant immunity from ad valorem taxation.
Chicago, R.I. P.R. Co. v. Robertson, 122 Miss. 417, 84 So. 449, 450; Barnes v. Jones, 139 Miss. 675, 103 So. 773, 43 A.L.R. 673; Adams v. Kuykendall, 83 Miss. 571, 583, 35 So. 830; Mayor and Aldermen of City of Vicksburg v. Crichlow, 196 Miss. 259, 16 So.2d 749, 751; Adams v. Mississippi Lumber Co., 84 Miss. 23, 36 So. 68; City of Jackson v. Mississippi Fire Ins. Co., 132 Miss. 415, 95 So. 845, 847; Adams v. Mississippi State Bank, 75 Miss. 701, 718, 23 So. 395; Adams v. Bank of Oxford, 78 Miss. 532, 29 So. 402; Hawkins v. Mangrum, supra; Constitution of 1890, Secs. 181, 182.
In view of the severance tax imposition, as shown in the principal brief, and under these additional authorities, it was not competent for the legislature, notwithstanding its power to exempt, to tax a part of the oil in a subterranean reservoir and leave untaxed the other portion therein. Uniformity of imposition is the requirement of Section 112.
Question Four propounded by the Court is, "4. If the next foregoing question is answered in the affirmative, is appellant harmed by it so as to enable appellant to raise the question?" Our answer is yes. Appellant obtained an oil lease where through it became obligated to a royalty holder — the landowner — for the payment of one-eighth royalty. This statute compels the appellant thus to pay. Having thus been required to pay the royalty under its contract with the landowner, if the statute is void, the appellant will be obligated in such a wise as that the royalty holder may hold appellant responsible therefor.
Independent Linen Service Co. v. Stone, 192 Miss. 832, 6 So.2d 110; Newman v. Jackson, 59 Miss. 390; Vicksburg v. Butler, 56 Miss. 72; Miller v. Columbus G.R. Co., 154 Miss. 317, 122 So. 366; Code of 1930, Sec. 420; Laws of 1944, Ch. 134, Sec. 4 (d).
Our answer to Question Five propounded by the Court is that it is so, for the reasons specifically set forth in the original brief and reply, as well as in the answer to Question Six, infra. It is to be noted especially that the Constitution requires equality and uniformity.
Compare Knox v. Southern Paper Co., 143 Miss. 870, 108 So. 288, 290; Stuart v. Board of Supervisors, 195 Miss. 1, 11 So.2d 212; Mobile Ohio v. Schnipper, 31 F.2d 587; Hanover Fire Ins. Co. v. Harding, 272 U.S. 494, 71 L.Ed. 372, 49 A.L.R. 713; Greene v. L. I.R. Co., 244 U.S. 499, 61 L.Ed. 1280.
There is to be noted the breadth of the exemption as hereinabove quoted, and, furthermore, there must be noted the fact that the oil content in no way coordinates with the surface ownership. In certain areas the pool underlies, as at Heidelberg, urban property in small individual lots, and production is had under so-called unitization whereby the separate owners combined, as was done in the Merill Engineering Co. v. Capital National Bank, 192 Miss. 378, 5 So.2d 666, and participated pro rata in the proceeds derived. Exemption statutes are to be strictly construed. There is no uniformity as to leases. Each surface owner acquired the land owned entirely independently of any thought that at any time oil would be discovered, having acquired for the purpose of residence or agriculture, the acquisition in no wise correlated with production. To make a producing lease the admeasurement of title exemption is not on any standard or reasonable basis because, as shown, leases conform to surface ownership and surface ownerhip had to do not with oil production or productivity, but solely and only with other and different purposes and the basis of classification, as shown, must be, if applicable at all, such a basis as coordinates to and with that which will sustain the legislative classification. Authorities, supra.
Our answer to Question Six propounded by the Court is yes. Section 112 of the Constitution provides: "Taxation shall be uniform and equal throughout the state. Property shall be taxed in proportion to its value. . . . But all such property shall be assessed at its true value, and no county shall be denied the right to levy county and special taxes upon such assessment as in other cases of property situated and assessed in the county."
Stokely v. State, supra; Adams v. Kuykendall, supra; Adams v. Bank of Oxford, supra; Robertson v. Chicago, R.I. P.R. Co., supra; Ohio Oil Co. v. Indiana, 177 U.S. 190, 20 S.Ct. 576, 44 L.Ed. 729, 737; Constitution of 1890, Secs. 112, 182; Laws of 1944, Ch. 134, Secs. 11, 14.
Greek L. Rice, Attorney General, by Geo. H. Ethridge, Assistant Attorney General, and J.H. Sumrall, of Jackson, for appellee, in answer to questions propounded by the Court.
Section 112 of the Constitution of 1890 is not applicable to oil in place under the ground, because there is no reasonable way to find its existence, or quality, quantity and value thereof.
Gift v. Love, 164 Miss. 442, 144 So. 562, 86 A.L.R. 63; Boyd v. Coleman, 146 Miss. 449, 111 So. 600; Robertson v. Texas Oil Co., 141 Miss. 356, 106 So. 449; Canal Bank Trust Co. v. Brewer, 147 Miss. 885, 113 So. 552; Miers v. Miers, 160 Miss. 746, 133 So. 133; L.H. Conard Furniture Co. v. Mississippi State Tax Commission, 160 Miss. 185, 133 So. 652; Zeigler v. Zeigler, 174 Miss. 302, 164 So. 768; Ingraham v. Speed, 30 Miss. 410; Gunter v. City of Jackson, 130 Miss. 637, 94 So. 844; 25 R.C.L. 1019, Sec. 257.
The ownership of oil in place under the land in susceptible to separate ownership, but owing to its fugacious nature, is not subject of absolute ownership but is subject to be defeated by the oil escaping or by adjacent owners drilling and securing the oil under the law of capture.
Stokely v. State, 149 Miss. 435, 115 So. 563; Pace v. State ex rel. Rice, 191 Miss. 780, 4 So.2d 270; Stern v. Great Southern Land Co., 148 Miss. 649, 114 So. 739; Moss v. Jourdan, 129 Miss. 598, 92 So. 689; 13 Miss. Law Journal, pp. 353, 355, 356, 381, 386.
Section 112 of the Constitution of Mississippi authorizes classification based on reasonable grounds as to taxation, and on account of the uncertainty and impossibility of finding any reasonable rule by which oil may be assessed underground, the legislature may exempt it.
The legislature has the power to tax, based upon any reasonable difference appurtenant to any governmental power, and while appellant under his contract has the right to drill on the leased property, it is impossible to assess that right fully and completely or with any degree of certainty. The legislative power to classify for purpose of taxation, having some reasonable relation to the public welfare, is upheld by many authorities.
Board of Sup'rs of Harrison County v. Gulf Coast Military Academy, 126 Miss. 729, 89 So. 617; City of Jackson v. Deposit Guaranty Bank Trust Co., 160 Miss. 752, 133 So. 195; Magnolia Bank v. Board of Sup'rs of Pike County, 111 Miss. 857, 72 So. 697, 3 A.L.R. 1365; First National Bank v. Board of Sup'rs of Harrison County, 157 Miss. 197, 127 So. 686; Attala County v. Kelly, 68 Miss. 40, 8 So. 376; Vicksburg Bank v. Worrell, 67 Miss. 47, 7 So. 219; Mississippi Mills v. Cook, 56 Miss. 40; City of Jackson v. Mississippi Fire Ins. Co., 132 Miss. 415, 95 So. 845; Miller v. Lamar Life Ins. Co., 158 Miss. 753, 131 So. 282; State ex rel. Rice, Attorney General, v. Evans-Terry Co., 173 Miss. 526, 159 So. 658; Hudson v. Stuart, 166 Miss. 339, 145 So. 611; Russell Investment Corporation v. Russell, 182 Miss. 385, 182 So. 102; Mississippi State Tax Commission v. Flora Drug Co., 167 Miss. 1, 148 So. 373.
On Proposition No. Three of the Court's request for briefs concerning exemption in Section 11, Chapter 134, Laws of 1944, see authorities already cited and the case of Brennan v. Mississippi Home Insurance Co., 70 Miss. 531, 13 So. 228.
On Proposition No. Four, propounded by the Court, it is submitted that exemption being favorable to the appellant, that he cannot raise the question as to constitutionality of the act.
See Dunn v. Love, 172 Miss. 342, 155 So. 331, 92 A.L.R. 1323; Federal Land Bank v. Mississippi Power Light Co., 157 Miss. 737, 128 So. 98; City of Jackson v. Deposit Guaranty Bank Trust Co., supra; City of Jackson v. Mississippi Fire Ins. Co., supra; Miller v. Lamar Life Ins. Co., supra.
On Proposition No. Five, it is submitted that under Section 11, Chapter 134, exempting oil and gas underground where the lands are in production, or lands leased for production on which the production is carried forward, does not violate equality and uniformity clause of Section 112 for the reason that the state had a right to encourage production to supply the needs of the state and county and had the power to classify as to lands in production and lands not in production. Furthermore, the owner of lands not in production can secure the exemption at any time by placing the lands in production himself, or leasing it for production to others who are willing and able to produce and who will put them in production.
The Court will take judicial notice of the rules of the Oil and Gas Board, a state agency, for drilling.
See Witherspoon v. State, 138 Miss. 310, 103 So. 134; Briscoe v. Buzbee, 163 Miss. 574, 143 So. 407.
For construction of exemption statutes and power to exempt, see Code of 1942, Sections 6132-6179; Stone v. Martin Veneer Corporation, 183 Miss. 712, 184 So. 435, and authorities already cited in this brief, and in the original brief, filed by appellee in this case. Also, Board of Supervisors, Warren County, v. Vicksburg Hospital, 173 Miss. 805, 163 So. 382; Leaf Hotel Corporation v. City of Hattiesburg, 168 Miss. 304, 150 So. 779; Rush Hospital Benev. Ass'n. v. Board of Sup'rs of Lauderdale County, 187 Miss. 204, 192 So. 829; Board of Sup'rs. of Hinds County v. Jackson Hospital Benev. Ass'n., 180 Miss. 129, 177 So. 27; City of Natchez v. Natchez Sanatorium Benev. Ass'n., 191 Miss. 91, 2 So.2d 798.
On Proposition No. Six, see authorities already cited in this brief, and the original brief in this case. See also, numerous tax exemptions provided by statute but not directly involved in this case; Code of 1942, Secs. 5463-6489, 9404-9405, 9416, 9697, 9698, 9699, 9700, 9701, 9702, 9703; Laws of 1940, Ch. 114, Laws of 1942, Ch. 128, Laws of 1944, Ch. 135.
Watkins Eager, of Jackson, amicus curiae.
Gas or oil beneath the surface of the ground is not susceptible to that uniform assessment for ad valorem taxes as contemplated and required by Section 112 of the Constitution.
Osborn v. Arkansas Territorial Oil Gas Co., 103 Ark. 175, 146 S.W. 122; Henry v. Gulf Refining Co., 2 S.W.2d 687, 689; Rowland v. Griffin, 16 S.W.2d 457, 460, 461; Segars v. Goodwin, 117 S.W.2d 43; Standard Oil Co. of La. v. Oilwell Salvage Co., 170 Ark. 729, 281 S.W. 360; State v. Arkansas Fuel Oil Co., 18 S.W.2d 906; Quality Coal Co. v. Guthrie, 157 S.W.2d 756; Goodson v. Comet Coal Co., 31 S.W.2d 293; Hammonds v. Central Kentucky Natural Gas Co., 255 Ky. 685, 75 S.W.2d 204; Stanley v. Slone, 287 S.W. 360; Warfield Natural Gas Co. v. Cassady, 266 Ky. 217, 98 S.W.2d 495; Voorhies v. Pere Marquetta, 263 Mich. 431, 238 N.W. 860, 94 A.L.R. 520; Eadus v. Hunter, 249 Mich. 190, 228 N.W. 782; Gas Product Co. v. Rankin, 63 Mont. 372, 207 P. 993, 24 A.L.R. 294; Homestake Exploration Corporation v. Schoregge, 264 P. 388; Sochsprung v. Stevenson, 266 P. 406; Krutzfield v. Stevenson, 284 P. 553; Broderick v. Stevenson Consolidated Oil Co., 290 P. 244; Williard v. Federal Security Co., 8 P.2d 633; Terry v. Humphreys et al., 203 P. 539; Jones-Noland Drilling Co. v. Bixby, 282 P. 382; Staplin v. Vesley, Commissioner of Public Lands, 72 P.2d 7; Sims v. Vosburg et al., 91 P.2d 434; Kelly v. Ohio Oil Co., 49 N.E. 399; Northwestern Ohio Natural Gas Co. v. Ullery, 67 N.E. 494; Nonamaker et al. v. Amos et al., 76 N.E. 948; Pure Oil Co. v. Kindall, 156 N.E. 119; Fourth Central Trust Co. v. Wooley et al., 165 N.E. 742; Blakeley v. Marshall, 34 A. 564; Marshall v. Mellon, 36 A. 201; Westmoreland Cambria Natural Gas Co. v. DeWitt, 18 A. 724; Jones v. Forest Oil Co., 44 A. 1074; Hamilton v. Foster, 116 A. 50; Smith v. Brown, 143 A. 913; Rockwell v. Warren County, 77 A. 665; City of Erie v. Public Service Com., 123 A. 471; Texas Co. v. Daugherty, 176 S.W. 717; Pierce Fordyce Oil Ass'n. v. Woodrum, 188 S.W. 245; Stephens County v. Mid-Kansas Oil Gas Co., 254 S.W. 290; Martin v. Dial, 57 S.W.2d 75; Andrews v. Brown, 10 S.W.2d 707; Ehlinger v. Clark, 8 S.W.2d 666; W.T. Waggoner Estate v. Sigler Oil Co., 19 S.W.2d 27; Hager v. Stakes, 294 S.W. 835; Preston v. White, 50 S.E. 236; Williamson v. Jones, 19 S.E. 436; Rymer v. South Penn Oil Co., 46 S.E. 559; Murphy v. Van Voorhis et al., 119 S.E. 297; State v. Low et al., 33 S.E. 271; Manufacturers' Light and Heat Co. v. Knapp et al., 135 S.E. 1; Eastern Oil Co. v. Coulehan, 64 S.E. 836; Campbell v. Lynch, 94 S.E. 739; Waddell v. Shelton Gasoline Co., 133 S.E. 75; Johnson et al. v. Armstrong et al., 94 S.E. 753; Ford v. Ball, 86 S.E. 562; State v. Snyder, 212 P. 758; Denver Joint Stock Land Bank of Denver v. Dixon, 122 P.2d 842; Boatman v. Andre, 12 P.2d 370-373; Southport Petroleum Co. v. Fithian, 203 La. 49, 13 So.2d 382; Smith v. Kennon, 188 La. 101, 175 So. 763; Gulf Refining Co. of Louisiana v. Glassell, 180 La. 190, 171 So. 846; White v. Hodges, 201 La. 1, 9 So.2d 433; Callahan v. Martin, 3 Cal.2d 110, 43 P.2d 788, 101 A.L.R. 871; La Laguna Ranch Co. v. Dodge, 18 Cal.2d 107, 114 P.2d 351, 135 A.L.R. 546; Jilek v. Chicago, Wilmington Franklin Coal Co., 382 Ill. 241, 47 N.E.2d 96; Ohio Oil Co. v. Wright, 386 Ill. 206, 53 N.E.2d 966; Lanvach v. Town of Mason, 386 Ill. 41, 53 N.E.2d 601; Carter Oil Co. v. Liggett, 371 Ill. 482, 21 N.E.2d 569; Shell Oil Co. v. Moore, 382 Ill. 556, 48 N.E.2d 400; Ford v. Witwer, 383 Ill. 511, 50 N.E.2d 714; Rupel v. Ohio Oil Co., 176 Ind. 4, 95 N.E. 225; State v. Ohio Oil Co., 150 Ind. 21, 49 N.E. 809, 47 L.R.A. 627; Ohio Oil Co. v. Indiana, 177 U.S. 190, 20 S.Ct. 576, 44 L.Ed. 729; Burden v. Gypsy Oil Co., 40 P.2d 463; Hardcastle v. McCluskey, 33 P.2d 127; Rich v. Doneghey, 177 P. 86; Ewert v. Robinson, 289 F. 740, 35 A.L.R. 219; In re Indian Territory Illuminating Oil Co., 142 P. 997; Alexander v. Continental Petroleum Co., 63 F.2d 927; Hall v. Haer, 16 P.2d 83; Corporation Commission of the State of Oklahoma v. Champlin Refining Co., 286 U.S. 210, 76 L.Ed. 1062; Constitution of 1890, Sec. 112; 1 Summers, Oil and Gas, pp. 8, 14, 26, 30 (Par. 22), 131, Chs. 1, 2, 3.
Section 112 of the State Constitution requires uniform assessment for taxation, and oil and gas beneath the surface does not lend itself to equal and uniform taxation. The purpose of Section 112 is to guarantee that where property is subject to ad valorem taxes and not legally exempted for any purpose therefrom, the same shall be assessed according to uniform rules and values. This Court has held that Section 112 requires rather that property be assessed at uniform values than that the property be assessed at its full value; that there is a uniform assessment for taxes in keeping with Section 112 of the Constitution whenever property is uniformly assessed, that is to say each piece of property assessed at the same value as other property similarly situated, whether the value be the true value or less than the true value. The all important thing, however, is uniformity of value and not discrimination therein.
Knox v. Southern Paper Co., 143 Miss. 870, 108 So. 288; First National Bank of Biloxi v. Harrison County, 157 Miss. 197, 127 So. 686; Chicago, R.I. P.R. Co. v. Robertson, 122 Miss. 417, 84 So. 449; Edward Hines Yellow Pine Trustees v. Stewart, 46 F.2d 910.
Even if it be true that mineral leases and interest in lands are taxable under Section 112 of the Constitution, said section did not require that all property, real or personal, be assessed for ad valorem taxation.
Brennan v. Mississippi Home Ins. Co., 70 Miss. 531, 13 So. 228; Johnston v. Reeves Co., 112 Miss. 227, 72 So. 925; Miller v. State, 130 Miss. 564, 94 So. 706; L.N. Dantzler Lumber Co. v. State, 97 Miss. 355, 53 So. 1; Easterling Lumber Co. v. Pierce, 106 Miss. 672, 64 So. 461; Marshall v. Grimes, 41 Miss. 27; Hart v. State, 87 Miss. 171, 39 So. 523; Chassanoil v. City of Greenwood, 166 Miss. 848, 148 So. 781, aff. 291 U.S. 584, 54 S.Ct. 541, 78 L.Ed. 1004; Russell Investment Corporation v. Russell, 182 Miss. 385, 419, 178 So. 815; State ex rel. Greaves v. Henry, 87 Miss. 125, 40 So. 152; University of Mississippi v. Waugh, 105 Miss. 623, 62 So. 827; State ex rel. Jordan v. Gilmer Grocery Co., 156 Miss. 99, 125 So. 710; Mississippi Mills v. Cook, 56 Miss. 40; Board of Supervisors of Harrison County v. Gulf Coast Military Academy, 126 Miss. 729, 89 So. 617; Board of Supervisors of Attala County v. Kelly, 68 Miss. 40, 8 So. 376; City of Jackson v. Mississippi Fire Ins. Co., 132 Miss. 415, 95 So. 845; Adams v. Yazoo M.V.R. Co., 77 Miss. 194, 24 So. 200; City of Jackson v. Deposit Guaranty Bank Trust Co., 160 Miss. 752, 133 So. 195; Miller v. Lamar Life Ins. Co., 158 Miss. 753, 131 So. 282; Albritton v. City of Winona, 181 Miss. 75, 178 So. 799; State ex rel. Knox v. Gulf, M. N.R. Co., 138 Miss. 70, 104 So. 689; Mississippi State Tax Commission v. Flora Drug Co., 167 Miss. 1, 148 So. 373; Clark v. State, 169 Miss. 369, 152 So. 820; State ex rel. Rice v. Evans-Terry Co., 173 Miss. 526, 159 So. 658; Hudson v. Stuart, 166 Miss. 339, 145 So. 611; Notgrass Drug Co. v. State ex rel. Rice, 175 Miss. 358, 165 So. 884; Adams v. Standard Oil Co., 97 Miss. 879, 53 So. 692; Millsaps College v. City of Jackson, 136 Miss. 795, 101 So. 574, aff. 275 U.S. 129, 48 S.Ct. 94, 72 L.Ed. 196; City of Jackson v. Preston, 93 Miss. 366, 47 So. 547; Chandler v. Presbyterian Church, 165 Miss. 690, 146 So. 597; Equitable Finance Co. v. Board of Supervisors of Lee County, 146 Miss. 734, 111 So. 871; Board of Sup'rs of Bolivar County v. Merck Alston, 153 Miss. 346, 120 So. 839; Hollandale Ice Co. v. Board of Sup'rs of Washington County, 171 Miss. 515, 157 So. 689; Greenville Ice Coal Co. v. City of Greenville, 69 Miss. 86, 10 So. 574; Clarksdale Building Loan Association v. Board of Levy Commissioners for Yazoo Mississippi Delta, 168 Miss. 326, 150 So. 783; Adams County v. Catholic Diocese of Natchez, 110 Miss. 890, 71 So. 17; City of Vicksburg v. Vicksburg Sanitarium, 117 Miss. 709, 78 So. 702; Rush Hospital Benev. Ass'n v. Board of Supervisors of Lauderdale County, 187 Miss. 204, 192 So. 829; City of Natchez v. Natchez Sanatorium Benev. Ass'n, 191 Miss. 91, 2 So.2d 798; Board of Supervisors, Warren County, v. Vicksburg Hospital, 173 Miss. 805, 163 So. 382; Board of Sup'rs of Hinds County v. Jackson Hospital Benev. Assn., 180 Miss. 129, 177 So. 27; Clay County v. Hogan, 145 Miss. 857, 111 So. 373; Meador v. Mac-Smith Garment Co., 188 Miss. 98, 191 So. 129; Adams v. Tombigbee Mills, 78 Miss. 676, 29 So. 470; Adams v. Winona Cotton Mills, 92 Miss. 743, 46 So. 401; Mobile O.R. Co. v. Moseley, 52 Miss. 127; McCulloch v. Stone, 64 Miss. 378, 8 So. 236; Robertson v. Mississippi Packing Co., 134 Miss. 837, 98 So. 539; Gully v. Wilmut Gas Oil Co., 174 Miss. 794, 165 So. 620; Adams v. Kuykendall, 83 Miss. 571, 35 So. 830; Rast v. Van Deman, 240 U.S. 342, 60 L.Ed. 679; Lawrence v. State Tax Commission, 286 U.S. 276, 76 L.Ed. 1102; Columbus Greenville R. Co. v. Miller, 75 L.Ed. 861; Interstate Natural Gas Co. v. Gully, 292 U.S. 16, 78 L.Ed. 1088, 4 F. Supp. 697; Memphis Natural Gas Co. v. Gully, 8 F. Supp. 169, 82 F.2d 150; Gully v. Interstate Natural Gas Co., 82 F.2d 145, 8 F. Supp. 174, 80 L.Ed. 1407; Constitution of 1890, Secs. 112, 182; Constitution of United States, 14th Amendment; Code of 1942, Sec. 9697; Laws of 1926, Ch. 261; Laws of 1930, Ch. 22; Laws of 1944, Ch. 134, Sec. 11.
Assuming that oil under the surface is subject to taxation thereof, the taxing authorities would have no method of arriving at the quantity or value of such minerals and uniformity could not possibly be produced, but assuming that such property interests of the surface owner are susceptible of uniform ad valorem taxes in conformity to Section 112 of the Constitution, Chapter 134, Section 11, is as real and genuine an exemption as the legislature of the State of Mississippi has ever passed or this Court has construed in any of the preceding cases.
Knox v. Southern Paper Co., supra; Constitution of 1890, Sec. 112.
The legislature has classified the exempt mineral leases as "producing properties," leaving the non-producing leases subject to ad valorem taxes. The question presented is as to whether or not the difference between leases in "producing property" and leases in non-producing property presents a reasonable classification. The basic difference of classification, however, is that leases in production are one thing, leases not in production are another and a different thing and form the basis for classification in this case.
Board of Supervisors of Harrison County v. Gulf Coast Military Academy, supra; Miller v. Lamar Life Ins. Co., supra; City of Jackson v. Deposit Guaranty Bank Trust Co., supra; City of Jackson v. Mississippi Fire Ins. Co., supra; Board of Supervisors of Attala County v. Kelly, supra; Constitution of 1890, Sec. 112.
Whenever the right to exemption is claimed from ad valorem taxes it would be necessary for the property owner claiming and asserting his right to exemption to claim the exemption and to prove that such leaseholder is entitled thereto. Every presumption will be against the exemption and it will be the duty of such leaseholder to demonstrate that the property claimed to be exempt is producing property within the meaning of the act. The authorities are well settled that the right to exemption must be clearly established and every presumption must be to the contrary.
Gulfport Building Loan Association v. City of Gulfport, 155 Miss. 498, 124 So. 658; New Standard Club v. McRaven, 111 Miss. 92, 71 So. 289; Currie-Finch Brick Lumber Co. v. Miller, 123 Miss. 850, 86 So. 579; Adams County v. National Box Co., 125 Miss. 598, 88 So. 168; Leaf Hotel Corporation v. City of Hattiesburg, 168 Miss. 304, 150 So. 779; Parker v. Mississippi State Tax Commission, 178 Miss. 680, 174 So. 567; Jackson Fertilizer Co. v. Stone, 173 Miss. 183, 162 So. 170; Magnolia Building Loan Association v. Miller (Miss.), 128 So. 585, 282 U.S. 803, 51 S.Ct. 86, 75 L.Ed. 722.
Assuming the law to be valid, the taxpayer must bring himself within the provisions of the statute expressly so and nothing will be added thereto by construction. That being true, it is not necessary for the court to determine on this record what is meant by "producing properties."
The Court's enquiry No. Six is based upon the assumption that a 500-acre tract with one well on it is producing property, whereas, as a matter of fact, such may not be found to be true. This is an administrative question to be determined in each case and will be open to the authorities to contest each and every claim for exemption, and the burden of proof will be upon the taxpayer to establish that the property is "producing property," whether it be 40 acres or 500 acres. That being true, there is a difference between producing and non-producing properties which justifies the classification and is a sufficient basis for the exemption, especially in view of the fact that the non-producing adjoining lands may be made productive or demonstrated to be non-productive, which would remove any element of advantage. The law is well settled that before an individual or corporation may assert the constitutionality of an act of the legislature or an act of Congress on account of discrimination, such person must set out the specific facts showing the discrimination and consequent damage. The appellant in this case does not allege in its petition that it owns any non-productive leases and is being and will be discriminated against by reason of the Act. It does ont allege any damage whatsoever which it is about to sustain.
No one except that person or party claiming under him whose right is affected by an act of the legislature can complain of its unconstitutionality.
Dejarnett v. Haynes, 23 Miss. 600; New Orleans, M. C.R. Co. v. State, 110 Miss. 290, 70 So. 355; Gully v. Lumbermen's Mutual Casualty Co., 176 Miss. 388, 168 So. 609; Dunn v. Love, 172 Miss. 342, 155 So. 331, 92 A.L.R. 1323; Adams v. Board of Supervisors of Union County, 177 Miss. 403, 170 So. 684; Gibbs v. Green, 54 Miss. 592; Stingily v. City of Jackson and Central Cotton Oil Co. v. City of Jackson, 140 Miss. 19, 104 So. 465; State ex rel. Knox v. Gulf, M. N.R. Co., 138 Miss. 70, 104 So. 689; Clark v. State, 169 Miss. 369, 152 So. 820; Russell Investment Corporation v. Russell, 182 Miss. 385, 178 So. 815; Doty et al. v. Love, Superintendent of Banks, 295 U.S. 64, 70 L.Ed. 1303, 96 A.L.R. 1438.
See also City of Jackson v. Mississippi Fire Ins. Co., 132 Miss. 415, 95 So. 845; Miller v. Columbus G.R. Co., 154 Miss. 317, 122 So. 366; Miller v. Lamar Life Ins. Co., 158 Miss. 753, 131 So. 282; City of Jackson v. Deposit Guaranty Bank Trust Co., 160 Miss. 752, 133 So. 195; Adams v. Clarke, 80 Miss. 134, 31 So. 216; Concordia Fire Ins. Co. v. People of the State of Illinois, 292 U.S. 535, 78 L.Ed. 1411; Constitution of 1890, Sec. 112; 11 Am. Jur. 748-754.
Argued orally by Garner Green, for appellant, and by Geo. H. Ethridge, for appellee.
By Secs. 1 and 2, Chap. 134, Laws 1944, there is levied an annual privilege tax upon every group, acting as a unit, engaged in the business of producing or severing oil for commercial purposes, the tax being six cents per barrel, or 6% of the value, whichever is greater. The severance tax is expressly defined by the Act as a business or occupation tax, and we accept the definition without pause to inquire whether it is rather an excise tax more nearly like an income, or sales, tax. And Sec. 1(i) expressly provides further that the taxed activity "shall include any person owning any royalty or other interest in any oil or its value, whether produced by him, or by some other person in his behalf, either by lease contract or otherwise."
By Sec. 11 it is enacted that: "All oil produced or under the ground on producing properties . . . and all producing oil equipment, including wells, connections, pumps, derricks and other appurtenances actually owned by . . . the producer, and all leases in production, including mineral rights in producing properties, shall be exempt from all ad valorem taxes," etc.
Appellant is a lease holder, and in its operations in the production of oil under its leases it had extracted oil which amounted in severance taxes to $3,740.33, and this sum was paid, including that part assessed to the royalty holder, to the State Tax Commissioner under protest, and this action is to recover it from the state, on the complaint that the tax imposed is not a lawful charge — that the Act is unconstitutional.
Appellant's contention are in brief (1) that oil under the land is the property of the landowner or his transferee; that a tax upon its severance is a property tax and, for that reason, violates Sec. 112, Constitution of 1890, citing Thompson v. McLeod, 112 Miss. 383, 73 So. 193, L.R.A. 1918C, 893, Ann. Cas. 1918A 674. (2) That the exemptions contained in Sec. 11 of the Act evidence that the entire Act is an effort to levy a severance tax in lieu of an ad valorem tax, which appellant insists cannot be done, citing Chicago, R.I. P.P. Co. v. Robertson, 122 Miss. 417, 84 So. 449, and that (3) even if the severance tax is valid as an occupation tax it cannot be imposed in part on the royalty holder who takes no personal part in the severance occupation.
It is apparent, upon mature consideration, that unless appellant's points (1) and (2) may find foundation in Sec. 112, Const., it has, so far as it is concerned, no case. The pertinent provisions of Sec. 112 are that taxation shall be uniform and equal throughout the state, and that property shall be assessed for taxes under general laws and by uniform rules according, and in proportion, to its true value.
We are of the opinion that, with the exception hereinafter mentioned, Sec. 112 has no application to the taxation of oil and gas, as separate property. In order that property may be taxable under that section it must be capable of assessment, which means that when corporeal property is involved it must be capable (1) of inspection, and after inspection of estimate and appraisal, and (2) of being made subject to a tax lien, and to a sale and delivery of the identical property, and not some other, to make the tax money in case of default in payment.
No man knows whether there is any oil under a particular tract of land, or if so how much and the quality thereof. To attempt to separately assess oil under the surface, or to add the supposed value thereof to a land assessment, would be to embark upon a pure speculation, and the rule that judgments may not be based upon conjecture applies as well to a judgment in an approved assessment roll as to any other.
It is not until the oil is brought to the surface, and being severed becomes personal property, that any opportunity of inspection and appraisal is afforded, and even then the oil seeks to escape so that it must be confined, wherefore, it goes immediately from the well through a pipe which conducts it to a pipeline, or to a temporary reservoir for speedy loading into tank cars, or directly to a local refinery or some other immediate local consumption, or else to a storage tank awaiting sale, where for the first time it attains any such a state of permanency that it may be made the subject of an ad valorem tax, and of a lien for the payment thereof. But when that state has been reached all, or practically all, the activities for which the tax here involved is imposed have been performed, and even then only a part of the product ever finds a resting place in a storage tank for the length of time requisite to the ad valorem process. As a matter of fact no oil has been held in this state in storage tanks.
There is no present statute by which an ad valorem tax could be enforced against oil as separate property until it has reached a resting place of appreciable permanency in a storage tank, and we can think of no practicable plan by which it could be reached by the ad valorem process prior to that time; and as already mentioned, only a part of the product of the well ever comes to a permanent rest in a storage tank, and none has been so stored in this state. Constitutional and statutory provisions do not require to be done that which is impossible or thoroughly impracticable, Boyd v. Coleman, 146 Miss. 449, 463, 111 So. 600, which is another way of saying that what is impossible or thoroughly impracticable is not within a constitutional or statutory requirement.
It follows, therefore, that Sec. 112, Const., presents no impediment to the imposition of the occupation tax here involved — not intimating that it forms an impediment to such a tax upon other business occupations, but dealing only with the precise situation before us — and that Thompson v. McLeod and Chicago R.I. P.R. Co. v. Robertson, supra, based as they are on Sec. 112, are not in point on our present inquiry. And for the same reason it follows that questions of ad valorem exemptions, and several others of the interesting matters discussed in the arguments, are not here material.
There is left, however, the stated contention under the foregoing numeral (3). In support of the contention in behalf of the royalty holder appellant relies chiefly on the recent case, Ohio Oil Co. v. Wright, 386 Ill. 206, 53 N.E.2d 966. This subject was fully considered in Texas in Group No. 1 Oil Corporation v. Sheppard (Tex. Civ. App.), 89 S.W.2d 1021, and Trustees of Cook's Estate v. Sheppard (Tex. Civ. App.), 89 S.W.2d 1026, under a statute substantially similar to ours as regards the royalty holder, and there, as well as in Barwise v. Sheppard, 299 U.S. 33, 57 S.Ct. 70, 81 L.Ed. 23, the courts rejected the contention now made by appellant, and we concur in and follow those cases. It is only by means of the activities of the lessee in raising the oil to the surface that the royalty holder gets anything from the oil, and being thus essentially associated with the activities in the proceeds thereof, he is not to disassociate himself from the state's exactions in the identical operations by which the proceeds are realized. The protection to these operations afforded by the laws of the state, and their enforcement, extends to the benefit of the royalty holder as well as the operator himself. And inasmuch as the legislative declaration that the royalty holder shall share in the burden of the tax is based upon reason, it is not subject to rejection by a court on the contention that it is an arbitrary legislative fiat.
There is not to be gathered from what has been said herein that an oil or gas lease is not separately assessable, ad valorem. Such a lease or conveyance with the right of entry is an estate in land, subject to ad valorem taxation, but not including the oil or gas as a separate item of valuation. Nor are we saying, the question not being before us, that the cash value of land or leases for assessment purposes is to be reduced because the owners and others generally, in estimating its value, take into consideration its oil prospects. We may note, however, that the possible, as well as the probable, use to which it may be put in the future is always an imporant consideration in arriving at an appraisal of the over-all present value of any property, even though it is presently well known that it may turn out that the property may never be used for any such contemplated purpose. We may take light in this regard from the formula laid down for assessment purposes by Sec. 9759, Code 1942 — as it has been for more than fifty years — as follows: "It shall be the duty of each person fixing the value of his property to estimate the same at its cash value at the time of valuation, and not what it might sell for at a forced sale, but what he would be willing and would expect to accept for it if he were disposed to sell it." See also Sec. 9769, Code 1942. What we are saying is that any supposed quantity or quality oil under the surface is not to be taken into consideration as a specific item of valuation such for instance as is done with visible improvements on the land under the section last cited.
Affirmed.
PARTIALLY DISSENTING OPINION.
I agree that the tax in question is valid as to the Gulf Refining Company itself, but not for the reasons stated in the majority opinion. For centuries the term "land" has included not only the surface of the soil but everything beneath it in its natural state. This includes all minerals under the surface. Fox v. Pearl River Lumber Co., 80 Miss. 1, 31 So. 583; Moss v. Jourdan, 129 Miss. 598, 92 So. 689; Stern v. Great Southern Land Co., 148 Miss. 649, 114 So. 739; Federal Land Bank of New Orleans v. Cooper, 190 Miss. 490, 200 So. 729; Pace v. State ex rel. Rice, 191 Miss. 780, 4 So.2d 270; Merrell Engineering, etc., Co. v. Capital Nat. Bank, 192 Miss. 378, 5 So.2d 666; Wight v. Ingram Day Lumber Co., 195 Miss. 823, 17 So.2d 196. That has always been the rule in this state and as to other jurisdictions it was said in the Merrell case, supra [5 So.2d 670]: "Moreover, it is well settled by the great weight of authority from other jurisdictions that until brought to the surface and reduced to possession, oil or gas constitute an interest in real estate and not personal property." 1 Summers Oil Gas, Perm. Ed., sec. 21, p. 26. When a landowner pays taxes on his land he has paid the taxes on all the minerals in place thereunder, whether such minerals are known or not. If this were not true no landowner would ever know he had paid his taxes. No person knows, without exploration, what is under the surface of a particular tract of land. If lack of knowledge of the substance of the under-earth prevents the under-earth from being taxed, then the landowner is liable for reassessment and repayment of taxes every time later developments disclose some information not known to the tax assessor when he made the assessment. The original opinion says, "No man knows whether there is any oil under a particular tract of land, or if so how much and the quality thereof." Neither does he know the existence, quantity, and quality of rock, ore, lime, coal, bauxite, or any other material thereunder. It will indeed be confusion confounded if landowners who have paid the tax assessments on their lands are liable to reassessment each time some unknown material thereunder is later brought to light. Again, when oil is discovered it is then known as a fact it does exist under that tract, and the payment of ad valorem taxes on that land is payment on the oil thereunder. In other words, if the oil is there, the taxes thereon have been paid.
Nor does the nature of oil call for a different rule. Oil is and must needs be confined in pools. It does not percolate or run like water under the earth. It is confined and imprisoned in a folded stratum. It cannot escape from this natural reservoir because of impenetrable rock and it is held there under great pressure. "From the very nature of the conditions under which it has been formed, under which it is preserved, its migrating movements are checked and hindered in almost all directions." 1 Summers Oil Gas (Perm. Ed.), sec. 4, p. 12. It is because of this pressure that the oil comes to the top of the earth when the overlying rock which has confined it is penetrated. Of course, this pool may cover a considerable area but the migration is confined to the pool and to the rock enclosure about it.
But regardless of this, it is settled with certainty in Mississippi that oil is taxable in place. This Court has many times held that the fee in realty may be horizontally severed into (1) the timber above the surface, (2) the surface, and (3) the minerals beneath. In the timber, the surface and the minerals separate fees may exist. See Mississippi cases cited above, especially the Pace and Wight cases. Indeed, the legislature itself has settled that question. By section 3146, Code 1930 (Section 9770, Code 1942), it is provided that whenever ". . . mineral, gas [coal], oil, timber or similar interests in real estate, . . . are owned separately and apart from . . ." the ownership of the surface, "all of such interests shall be assessed and taxed separately from such surface rights and interests in said real estate, and shall be sold for taxes in the same manner and with the same effect as other interests in real estate are sold for taxes." If oil rights are not assessable, then the state is under duty to repay every dime which it has received as taxes under such assessments.
However, as stated, I agree that the tax is valid as to the Gulf Refining Company, not for the reason stated, but because this is a privilege or occupation tax, and the legislature had the right and power to impose such tax for the privilege of engaging in the oil business in this state. The Act itself designates the tax as an "annual privilege tax upon every person engaging . . . in the business of producing, or severing oil . . . from the soil . . ." Sec. 2. The bill, in this case, alleges that the Refining Company "is engaged in the business of discovering, producing, and marketing crude oil."
It is true the Act exempts from ad valorem taxes certain property owned by the Refining Company. Whether it, as a beneficiary of the exemption, is, or is not, thereby precluded from challenging the validity of the law on the ground of the exemption (see Dunn et al. v. Love, 172 Miss. 342, 155 So. 331, 92 A.L.R. 1323; City of Jackson v. Mississippi Fire Ins. Co., 132 Miss. 415, 95 So. 845; Miller v. Lamar Life Ins. Co., 158 Miss. 753, 131 So. 282), the Act is not, in my opinion, unconstitutional because of it, since the legislature had the power to impose the tax without the exemption.
However, I cannot agree that the tax is valid as to the lessor — land, or royalty, owner, whom I will call the owner. Under no theory can such owner be liable for this tax.
If the tax here levied is considered a property tax, as is claimed by the appellant Refining Company and denied by appellee, then, as shown above, the taxes have already been paid and this levy, as to the owner, is double taxation on such property.
If it is a privilege tax, as the Act so designates it, then the legislature has no power to tax the owner for the privilege of producing the oil from his own land. In the case of Thompson v. McLeod, 112 Miss. 383, 73 So. 193, 194, L.R.A. 1918C, 893, Ann. Cas. 1918A, 674, this Court held that a law undertaking to impose an annual privilege tax upon a person extracting turpentine from standing timber on his own land was invalid. The Court said: "This act strikes down the inherent right of the property owner to lay hand upon his own property. Every owner of a pine tree enjoys the same natural right to extract gum from the tree as the owner of a vineyard has to pluck his own grapes. It would be the same thing to require a privilege tax as a precedent right of the owner to pull the ripe pecans from his pecan orchard or to enjoy a drink of pure water from the cool spring of the old homestead." To this might be added, that if this tax is valid, the legislature has the same right to tax a landowner for the privilege of picking and ginning the cotton grown upon his land for the purpose of sale, or for the privilege of cutting and baling his hay for such purpose. As was well said in Thompson v. Kreutzer, 112 Miss. 165, 72 So. 891, "Ownership is not a privilege conferred by government, but is one of the rights which governments were organized to protect." See also Dawson v. Kentucky Distillery Warehouse, 255 U.S. 288, 41 S.Ct. 272, 65 L.Ed. 638; State ex rel. Knox v. Gulf, M. N.R. Co., 138 Miss. 70, 104 So. 689; Barnes v. Jones, 139 Miss. 675, 103 So. 773, 43 A.L.R. 673; Stone v. General Contract Purchase Corporation, 193 Miss. 301, 7 So.2d 806, 140 A.L.R. 1029; Ohio Oil Co. v. Wright, 386 Ill. 206, 53 N.E.2d 966; State v. Stiles, 137 La. 540, 68 So. 947; Hixon v. School Dist. of Marion, 187 Ark. 554, 60 S.W.2d 1027; Jensen v. Henneford, 185 Wn. 209, 53 P.2d 607. This tax is not to be confused with a sales tax.
The McLeod case, supra, is much stronger in support of the validity of the tax than the case at bar. In that case there is no question that the landowner was himself engaged in the business of extracting the turpentine for sale on the market. In the case at bar the owner admittedly is not himself actually engaged in the oil business. If he is so engaged, it is because the Refining Company is either his agent or there is a joint enterprise.
There is no agency. The landowner has no control or power whatever over the method, manner, or means of production. To constitute the Refining Company his agent, he must have such power or authority. The lessee simply agrees that for his lease he will deliver to the owner on the premises one eighth of the oil produced. This is payment for the lease. The Refining Company furnishes all machinery and equipment and labor and produces the oil in its own way, under its own methods, and by its own means. The owner has no say-so whatever. Can it be said that if the Refining Company negligently caused the death of an employee during such operation that the owner would be liable for such negligence? Suppose the owner died leaving as his only heir a child just born. Is that child engaged in the oil business? It is clear to me the oil company is not the agent of the owner.
Nor are they engaged in a joint enterprise. It is one of the absolute essentials of such enterprise that all members thereof have mutual control and authority over the operations. Sample v. Romine, 193 Miss. 706, 8 So.2d 257, 9 So.2d 643, 10 So.2d 346. It is not claimed in this case that the owner has any control or authority over the method, means, or manner of producing the oil.
In my opinion the case should be affirmed as to the Refining Company, but reversed and judgment here as to the owner.
DISSENTING OPINION.
Oil produced (i.e. taken from the earth or water, section 1, Par. i of the statute we are considering) and oil producing machinery are, of course, property. So, also, is oil "under the ground," as it is a part of the land in which it lies. It is owned, either by the landowner, or separately by another who has been invested with title thereto. Consequently, all of this property must be taxed, under section 112 of our Constitution, if taxed at all, in proportion to its value uniformly and equally with other property. Our statutes other than the one we are now considering contemplate that oil, while in the ground, shall be taxed as a part of the land in which it lies; or separately from the land if separately owned, section 9770, Code 1942.
The pertinent portions of section 11 of Chap. 134, Laws 1944, which we are now considering, are set forth in the majority opinion herein; and section 14 thereof is as follows: "If any clause, sentence, paragraph or part of this act shall, for any reason, be adjudged by any court of competent jurisdiction to be invalid, which changes or materially affects the scheme and method of taxation herein provided for, or which in anywise prevents or modifies the exemptions provided for under section 11 hereof, then the whole of the act shall be invalid, and every law which this act amends, modifies or repeals shall become operative and in full force and effect." (Italics mine.)
It is manifest from these two sections of the statute that the privilege tax levied by section 2 thereof on persons producing oil, for profit, or commercial purposes, was adopted by the legislature as a substitute for the ad valorem tax on oil in and produced from land. Such a tax violates section 112 of the Constitution, and is void. Adams v. Mississippi State Bank, 75 Miss. 701, 23 So. 395; Adams v. Bank of Oxford, 78 Miss. 532, 29 So. 402; Thompson v. Kreutzer, 112 Miss. 165, 72 So. 891; Chicago, etc., R. Co. v. Robertson, 122 Miss. 417, 84 So. 449; Reed Bros., Inc. v. Board of Supervisors, 126 Miss. 162, 88 So. 504.
Counsel for the state admit that this would be true ordinarily, but they say that section 112 of the Constitution does not apply here, for the reason, as they say, that oil beneath the surface of the ground cannot be assessed for taxation, either as a part of the land in which it lies, or separately therefrom, for the reason that prior to its removal from the land its existence vel non, and its amount and value, cannot be ascertained. All of this may be true, as to which I am not in position to express an intelligent opinion; but this is a question of fact, to be determined on evidence, the answer to which was for the legislature when enacting this statute. Whether the answer which the legislature made thereto is right or wrong, the constitutionality vel non of this statute which it enacted pursuant thereto, must be tested thereby. What the legislature intended to do, and thought it had done by section 11 of the statute, was to relieve the property described therein from the burden of ad valorem taxes, under which the legislature thought it then rested, but substituting a privilege tax therefor; and by section 14 of the statute it expressly declared that if section 11 thereof is invalid — i.e. has no force or effect — then neither shall section 2 thereof have any force or effect. Each is tied to the other, and both are to be effective, or neither shall be. The statute is lengthy and carefully drawn, and it is manifest therefrom that the legislature did not intend to impose the privilege tax set forth in section 2 thereof, unless at the same time it had relieved oil in, and produced from, land from the burden of ad valorem taxes under which it then rested; and there is nothing in the statute to indicate that the legislature would have enacted section 2 thereof if no necessity existed for section 11 thereof, in order to relieve this property from the burden of ad valorem taxes.
All of this discussion as to whether oil can be taxed while in the ground would seem to be beside the mark, for the state's land assessment rolls are so ruled as to require the return of oil and gas beneath the surface of the ground by the owner thereof for taxation; such returns are being made, and ad valorem taxes are being collected thereon. But oil, while in the ground, is not the only property exempted from ad valorem taxes by section 11 of the statute. Oil that has been produced — extracted from the ground — is also exempted, as is also oil production equipment. No claim is made that the latter cannot be assessed for taxation; but as to the first, it is said it is impossible to assess oil after it has been extracted from the ground for the reason that the producers do not permit it to come to rest after reaching the surface of the ground, and remain there long enough for the tax assessor to assess it. I do not know whether this is being done or not; but I do know that the legislature can prohibit it from being done; and, also, that provision can be made for measuring the quantity and value of the oil as it leaves the well and begins its journey to its ultimate destination. This is being done under sections 6 and 11 of the statute we are now considering, and the tax collected under section 2 of the statute is based thereon.