Certified Questions from the United States District Court No.
3:17-cv-00127-SLG for the District of Alaska, Sharon Gleason,
Judge, and the United States Bankruptcy Court Bankruptcy Adv.
Nos. 16-90002-GS, 17-90041-GS, Bankruptcy No. 15-00236-GS for
the District of Alaska, Gary Spraker, Judge.
Michael A. Grisham, Dorsey & Whitney LLP, Anchorage, for
All American Oilfield.
Cabot
Christianson, Law Offices of Cabot Christianson, Anchorage,
for Carol Inman.
Elena
Romerdahl, Perkins Coie LLP, Anchorage, and David A.
Zdunkewicz, Hunton Andrews Kurth LLP, Houston, Texas, for
Cook Inlet Energy, LLC.
Kevin
G. Clarkson, Brena, Bell & Clarkson, P.C., Anchorage, and
Aaron M. Guerrero and Carolyn Carollo, Snow Spence Green LLP,
Houston, Texas, for Charles Gebhardt, Trustee.
Laura
Fox, Assistant Attorney General, Anchorage, and Jahna
Lindemuth, Attorney General, Juneau, for Amicus Curiae State
of Alaska.
Before: Bolger, Chief Justice, Winfree, Stowers, Maassen, and
Carney, Justices.
OPINION
WINFREE, JUSTICE.
I.
INTRODUCTION
In 1910
the United States Congress passed Alaska's first mineral
dump lien statute, granting laborers a lien against a
"dump or mass" of hard-rock minerals for their work
creating the dump. After piecemeal revisions, Alaska's
1933 territorial legislature amended the dump lien statute to
include oil and gas development, creating a framework for
technological advances in the state's nascent oil and gas
industries. The mineral dump lien statute has remained
substantively unchanged since, and we have infrequently
addressed it.
We
accepted certified questions from both the United States
District Court and the United States Bankruptcy Court
regarding the scope of the mineral dump lien statute as
applied to natural gas development. For the reasons that
follow, we conclude that the statutory definition of
"dump or mass" reflects that a mineral dump lien
may extend only to gas extracted from its natural reservoir,
that the lien may cover produced gas contained in a pipeline
if certain conditions are met, and that to obtain a dump lien
laborers must demonstrate that their work aided, broadly, in
gas production.
II.
FACTS AND PROCEEDINGS
A.
All American v. Cook Inlet
The
relevant facts of this case are not in dispute.[1] Cook Inlet
Energy, LLC operates oil and gas wells in southcentral
Alaska. In November 2014 Cook Inlet contracted with All
American Oilfield, LLC to "drill, complete, engineer
and/or explore three wells" on Cook Inlet's oil and
gas leaseholds. All American began work soon thereafter,
including drilling rig operations, digging holes, casing, and
completing the gas wells. When All American concluded its
work the following summer, Cook Inlet was unable to pay. In
June 2015 All American recorded liens against Cook Inlet,
including a mine lien under AS 34.35.125 and a mineral dump
lien under AS 34.35.140. In October, after its creditors
filed an involuntary petition for relief, Cook Inlet
consented to Chapter 11 bankruptcy proceedings.
In
January 2016 All American filed an adversary proceeding in
the bankruptcy court "to determine the validity and
priority of its secured claims." The bankruptcy court
found that All American has a valid mine lien against the
three wells.[2]But the court denied All American's
asserted mineral dump lien against unextracted gas remaining
in natural reservoirs.[3] The court also concluded that All
American's mine lien is subordinate to Cook Inlet's
secured creditors' prior liens, which would consume all
of Cook Inlet's assets and leave All American with
nothing.[4] All American appealed to the federal
district court, which, in turn, certified to us questions
regarding the Alaska mineral dump lien statute.
B.
Charles Gebhardt v. Carol Inman
Carol
Inman, d/b/a Starichkof Enterprises, provided equipment,
labor, and services to Cook Inlet. Charles Gebhardt, the
appointed trustee for Cook Inlet's liquidation trust,
[5]
sued Inman to recover payments Cook Inlet made to her before
the bankruptcy. In October 2017 Gebhardt filed a motion for
partial summary judgment, asserting that there was no genuine
issue of material fact that the payments to Inman were
avoidable preferred payments.[6] Inman opposed the motion,
asserting an inchoate lien defense. Inman had not recorded a
mineral dump lien; she asserted that, had she not been paid
for her work, she could have recorded a valid mineral dump
lien that would have attached to property valued in excess of
the amount she was owed. She contended that this inchoate
lien constituted a complete defense to the trustee's
attempt to avoid the payments made to her before the
bankruptcy.
Inman
filed a motion to certify to us the questions interpreting
the mineral dump lien in her case, which the bankruptcy court
granted.
C.
The Certified Questions
We
accepted the following certified questions:
1. Can a "dump lien" under AS 34.35.125 et
seq. apply to gas stored in its natural reservoir; if
so, was a mineral "dump" created under AS 34.35.140
and AS 34.35.170(1) when All American drilled three natural
gas wells at the request of Cook Inlet?
2. Is a mineral "dump" created under AS 34.35.140
and AS 34.35.70(a)(1) each time that Cook Inlet releases
natural gas from the natural reservoir in which the gas was
formed and transports that gas through a pipeline to the
point of sale?
3. Must a dump lien claimant under AS 34.35.140 prove, in
order to have a valid dump lien, that the produced gas was,
in whole or in part, the product of her labor?[7]
The
parties provided full briefing on these issues, and the State
filed an amicus brief at our request. We now hold that the
answer to the first question is "no." The second
question presents factual determinations we leave to the
triers of fact, but we hold that gas in a pipeline may be
subject to a dump lien if other conditions are satisfied. We
hold that the answer to the final question is
"yes."
III.
STANDARD OF REVIEW
Appellate
Rule 407(a) allows us to answer certified questions that
"may be determinative of the cause then pending in the
certifying court and as to which it appears to the certifying
court there is no controlling precedent in [our]
decisions." Answering certified questions requires that
we "stand in the shoes of the certifying court, yet
exercise our independent judgment."[8] "This
entails 'selecting the rule of law that is most
persuasive in light of precedent, reason, and policy.'
"[9]
IV.
DISCUSSION [10]
A.
Unextracted Natural Gas Remaining In Its Natural Reservoir
Cannot Constitute A "Dump" Under The Mineral Dump
Lien Statute.
1.
Statutory framework
Alaska
has three statutes allowing workers to attach liens to mines,
mining equipment, or minerals. Alaska Statute 34.35.125
allows a person who performs work on a mine or oil well to
attach a lien to "the mine or mining claim, oil, gas, or
other claim or well as security for the payment of the
work." Alaska Statute 34.35.130 allows a person who
performs work on a mill or machine used in a mining operation
to have "a lien on the mill or machine, to secure the
payment of the amount due for the work." These two
statutes create preferred liens, with precedent over other
liens excepting those recorded before the work resulting in
the lien claim started.[11]
Alaska
Statute 34.35.140(a), at issue in this case, provides:
A person who, at the instance of another who has the right of
possession of a mine, or mining claim, oil or gas well,
performs upon, in, or about the mine or well any of the kinds
of work mentioned in AS 34.35.125, or who performs any other
kind of work in the production, piling up, or storing of a
dump or mass of mineral, has a lien on the dump or mass, and
the gold, gold dust, or other minerals contained in or
extracted from it, to secure the amount due the laborer in
the production of the minerals.
The
dump lien statute thus describes: (1) the types of work
qualifying "a person" for the lien - "any of
the kinds of work mentioned in [the mine lien statute], or .
. . any other kind of work in the production, piling up, or
storing of a dump or mass of mineral"; (2) the property
to which the lien attaches - "the dump or mass, and the
. . . minerals contained in or extracted from it"; and
(3) the types of debts the lien satisfies - "amount[s]
due the laborer in the production of the
minerals."[12]
A
"dump or mass" is defined in AS 34.35.170(a)(1) as:
[M]ineral-bearing sands, gravel, earth, ore, stone, coal,
oil, gas, other fluids or minerals extracted, hoisted,
and raised from a mine or mining claim, while in mass at
the mine or on the mining claim or adjacent to it, whether it
is deposited in dumps or piles, or placed in hoppers, tanks,
or reservoirs, or in sluice boxes or bunkers or other
receptacles and whether partially or wholly reduced from its
primary state or not. (Emphasis added.)
A dump
or mass thus must: (1) consist of specific types of matter;
(2) be "extracted, hoisted, and raised from a mine or
mining claim"; (3) be "in mass"; and (4) be
"at the mine or on the mining claim or adjacent to
it."[13]
In
contrast to the other two liens over mines and mining
equipment, the dump lien created by AS 34.35.140 is
"prior and preferred" over other liens,
"whether given before or after the work for which the
lien is claimed is started."[14] Because a dump lien has
priority over other liens, [15] a bankruptcy proceeding
creditor would prefer holding a dump lien to increase the
creditor's chance of being paid if the bankruptcy estate
is not large enough to satisfy all obligations.
2.
The dump lien statute's plain language excludes
unextracted gas remaining in its natural reservoir.
All
American argues that the dump lien statute applies to
unextracted gas remaining in its natural reservoir and that
it gained a dump lien by drilling natural gas wells for Cook
Inlet. All American's interpretation primarily relies on
implied legislative history and policy arguments. We conclude
that the history and policy arguments are not sufficient to
overcome the statute's contrary plain language.
The
statutory framework makes clear that for a claimant to obtain
a dump lien, there must be a "dump" to which the
lien can attach.[16] The existence of a dump is a condition
precedent to obtaining a dump lien, and we therefore strictly
construe the statutory definition.[17] Under the statute's
plain meaning, unextracted gas cannot constitute a dump
because it was never "extracted, hoisted, and
raised" as the statutory definition
requires.[18]
All
American's contract contemplated that it would assist
Cook Inlet with natural gas extraction, but All
American's work apparently was limited to establishing
natural gas wells. All American states that it
"performed drilling, exploration, engineering, and other
work to access the natural gas contained" in the
reservoir. All American explains that it "explored,
drilled, managed, and ultimately provided valuable labor in
both finding the gas and creating a mechanism (the well) by
which [Cook Inlet] was able to extract the gas." But the
gas over which All American claims it has a dump lien was not
"extracted, hoisted, and raised."[19]
Although
the certified question asks whether the dump lien applies to
natural gas stored in its native reservoir, All
American instead discusses whether unproduced gas
that has never left its natural reservoir can be subject to a
dump lien. As the State notes, although "unextracted gas
may remain in its reservoir until it is produced, this is not
gas storage." Gas storage specifically "requires
prior production and a separate agreement with the
State."[20] In other words, produced gas reinjected
and stored in a natural reservoir has been "extracted,
hoisted, and raised" and might qualify as a dump.
All
American contends that the words "extracted, hoisted,
and raised" effectively must be ignored to satisfy the
dump lien statute's purpose. But based on this plain
language, because the gas for which All American drilled
wells never was "extracted, hoisted, and raised"
from the mine, it cannot qualify for a dump lien under AS
34.35.140. Although unextracted gas cannot constitute a dump,
All American still may obtain a non-preferred mine lien under
AS 34.35.125, as the definition of "mine" or
"mining claim" broadly includes "all valuable
mineral deposits, including coal, oil, gas, or other
fluid, and all loads, veins, or rock in place containing
minerals.'"[21]
3.
Neither legislative history nor case law extends the
"dump" definition to include unextracted gas
remaining in its natural reservoir.
Despite
a dearth of legislative history, All American argues that we
should liberally interpret the dump lien statute and its
accompanying definition based on AS 34.35.930's provision
that the lien chapter "is remedial and its provisions
shall be liberally construed." All American likens the
dump lien statute to "a legal contraption that has been
significantly amended through patchwork additions, but never
revised" and argues that the "legislative purpose
and intent of the 1933 amendments was to provide companies
like [itself] with [d]ump [l]ien protection." But even
before "dump" was explicitly defined, earlier
versions of the dump lien statute consistently required that
minerals be removed from the ground to qualify as a dump to
which a dump lien could attach.
Alaska's
first dump lien statute was passed in 1910 by the United
States Congress.[22] This earliest iteration granted a lien
to laborers for work performed on "the dump or mass of
mineral-bearing sands, gravels, earth, or rocks, and all gold
and gold dust, or other minerals therein, and all gold and
gold dust extracted therefrom."[23] The statute neither
defined "dump" nor required that all minerals be
"extracted, hoisted, and raised" from the mine
itself.[24] Congressional debate from 1910 - the
only existing legislative history accompanying any version of
the statute - indicates that the statute sought "to
extend the lien of miners greater than it is at
present."[25] At that time Alaska apparently provided
that every "person performing labor or furnishing
material of any kind to be used in the construction,
development, alteration, or repair, either in whole or in
part, of any building, . . . [or] mine, . . . shall have a
lien upon the same for the work or labor
done."[26] But the law did not "give the miner
who digs the ore or the mineral-bearing gravel out of the
earth any lien at all for his labor."[27]
Congress
apparently thought it necessary for the miner to have such a
lien given the "practical operations of mining in
Alaska."[28] The congressional record explains:
[I]n the practical operations of mining in Alaska the
mineral-bearing gravel is removed in the winter time. When
the spring comes, the "dump," as it is called, is
put through a process of washing out the gold and gold dust
and minerals that are contained therein. It very frequently
happens that the person who operates the mine is obliged to
borrow considerable money as he commences to operate the
mine. When spring comes, it may be that the mortgagee then
forecloses his mortgage, on which he has received interest to
the amount of 4 to 6 per cent a month. After his mortgage is
satisfied there is nothing left to go to the miner, who has
produced this dump, there being no law giving him any
security for his labor.[29]
The law
did not "give [the miner] a lien upon the mine, but
[rather] a lien only upon that which his labor has produced,
namely, the dump, and the gold or gold dust contained therein
or extracted therefrom."[30]
Alaska's
territorial district court considered the 1910 dump lien
statute in Donaldson v. Henning.[31] Because the
statute did not define "dump," the court looked to
the term's common usage by miners: "[T]he term
'dump' usually refers to the pile or mass of
gold-bearing earth or gravel hoisted from a mine, prior to
the time that it has been washed and the gold and gold dust
extracted therefrom."[32] Even before a statutory
definition, courts and common usage defined "dump"
as containing only minerals actually "hoisted from a
mine."[33]
Alaska's
territorial district court again considered the dump lien
statute a year later in Nordstrom v. Sivertsen-Johnsen
Mining & Dredging Co.[34] Applying the 1910 version of
the statute, the court looked to the dictionary definition of
"dump" and found that the legislature "meant
the mineral-bearing sands piled up or collected into an
aggregate heap or body, and not the mineral-bearing sands or
dirt that has been only loosened or broken up, but not piled
up on the surface of the ground in some
place."[35]
Alaska's
1913 territorial legislature amended the dump lien
statute.[36] The amended statute provided, in
relevant part, that the "lien shall attach in every case
to such mine, lode, mining claim, deposit, and the ore, gold
bearing earth, rock, gravel, sand, gold, gold dust or other
precious mineral mined, taken and extracted from
such mine, lode, mining claim, deposit."[37] Although the
statute did not use the term "dump," it still
required that minerals be "mined, taken and
extracted" from the mine to be lienable.[38]
Alaska's
1915 territorial legislature again amended the dump lien
statute.[39]This iteration reintroduced the term
"dump" and separated mine liens from dump
liens.[40]The dump lien attached to "the dump
or mass of minerals . . . and gold or gold dust or other
minerals therein."[41] Perhaps more importantly, for the
first time since the lien statute's inception, the
legislature explicitly defined the term "dump" and
required that the materials comprising the "dump"
be "extracted, hoisted, and raised from a
mine."[42]The 1915 statute - like the 1913 statute
- required that ...