Andrus v. Shell Oil Company

Citation446 U.S. 657,64 L.Ed.2d 593,100 S.Ct. 1932
Decision Date02 June 1980
Docket NumberNo. 78-1815,78-1815
PartiesCecil D. ANDRUS, Secretary of Interior, Petitioner, v. SHELL OIL COMPANY et al
CourtUnited States Supreme Court
Syllabus

The general mining law of 1872 permits citizens to explore the public domain and search for minerals and, if they discover "valuable mineral deposits," to obtain title to the land on which such deposits are located. The Mineral Leasing Act (Act), enacted in 1920, withdrew oil shale from the general mining law and provided that thereafter oil shale would be subject to disposition only through leases, except that a savings clause preserved valid claims existent at the date of passage of the Act. Upon complaints by the Department of the Interior (Department) alleging that respondents' claims for oil shale deposits located prior to the Act were invalid, a hearing examiner ruled the claims valid on the ground that the Department's 1927 decision in Freeman v. Summers, 52 L.D. 201, wherein it was held that "present marketability" is not a prerequisite to the patentability of oil shale deposits as "valuable mineral deposits," compelled the conclusion that oil shale is a valuable mineral subject to appropriation under the mining laws, despite substantial evidence that oil shale operations were commercially infeasible. The Board of Land Appeals reversed, holding that oil shale claims located prior to 1920 failed the test of value because at the time of location there did not appear as a present fact a reasonable prospect of success in developing an operating mine that would yield a reasonable profit. It rejected prior departmental precedent, particularly Freeman v. Summers, as being inconsistent with the general mining law and therefore unsound. On appeal, the District Court reversed and held the claims valid, finding that Congress had implicitly "ratified" the rule of Freeman v. Summers, and that in any event the Department was estopped from departing from the longstanding Freeman standard. The Court of Appeals affirmed.

Held : The oil shale deposits in question are "valuable mineral deposits" patentable under the Act's savings clause. The Act's history and the developments subsequent to its passage indicate that the Government should not be permitted to invalidate pre-1920 oil shale claims by imposing a present marketability requirement on such claims. The Department's original position, as set forth in Instructions, issued shortly after the Act became law, authorizing the General Land Office to begin adjudicating applications for patents for pre-1920 oil shale claims, and later enunciated in Freeman v. Summers, is the correct view of the Act as it applies to the patentability of pre-1920 oil shale claims. Pp. 663-673.

591 F.2d 597, 10 Cir., affirmed.

Lawrence G. Wallace, Washington, D.C., for petitioner.

Fowler Hamilton, New York City, for respondents.

Mr. CHIEF JUSTICE BURGER delivered the opinion of the Court.

The general mining law of 1872, 30 U.S.C. § 22 et seq., provides that citizens may enter and explore the public domain, and search for minerals; if they discover "valuable mineral deposits," they may obtain title to the land on which such deposits are located.1 In 1920 Congress altered this program with the enactment of the Mineral Leasing Act. 41 Stat. 437, as amended, 30 U.S.C. § 181 et seq. The Act withdrew oil shale and several other minerals from the general mining law and provided that thereafter these minerals would be subject to disposition only through leases. A savings clause, however, preserved "valid claims existent at date of the passage of this Act and thereafter maintained in compliance with the laws under which initiated, which claims may be perfected under such laws, including discovery." 2

The question presented is whether oil shale deposits located prior to the 1920 Act are "valuable mineral deposits" patentable under the savings clause of the Act.

I

The action involves two groups of oil shale claims located by claimants on public lands in Garfield County, Colo., prior to the enactment of the Mineral Leasing Act.3 The first group of claims, designated Mountain Boys Nos. 6 and 7, was located in 1918. In 1920, a business trust purchased the claims for $25,000, and in 1924 an application for patent was filed with the Department of the Interior. Some 20 years later, after extended investigative and adjudicatory proceedings, the patent was rejected "without prejudice" on the ground that it was not then vigorously pursued. In 1958, Frank W. Winegar acquired the claims and filed a new patent application. In 1964, Winegar conveyed his interests in the claims to respondent Shell Oil Company.

The second group of claims, known as Harold Shoup Nos. 1-4, was located in 1917. In 1923, the claims were acquired by Karl C. Schuyler who in 1933 bequeathed them to his surviving spouse. In 1960, Mrs. Schuyler incorporated respondent D. A. Shale, Inc., and transferred title to the claims to the corporation. Three months later, the corporation filed patent applications.

In 1964, the Department issued administrative complaints alleging that the Mountain Boys claims and the Shoup claims were invalid. The complaints alleged, inter alia, that oil shale was not a "valuable mineral" prior to the enactment of the 1920 Mineral Leasing Act.

The complaints were consolidated and tried by a hearing examiner who in 1970 ruled the claims valid. The hearing examiner observed that under established case law the test for determining a "valuable mineral deposit" was whether the deposit was one justifying present expenditures with a reasonable prospect of developing a profitable mine. See United States v. Coleman, 390 U.S. 599, 88 S.Ct. 1327, 20 L.Ed.2d 170 (1968); Castle v. Womble, 19 L.D. 455 (1894).4 He then reviewed the history of oil shale operations in this country and found that every attempted operation had failed to show profitable production. On the basis of this finding and other evidence showing commercial infeasibility, the hearing examiner reasoned that "[i]f this were a case of first impression," oil shale would fail the "valuable mineral deposit" test. However, he deemed himself bound by the Department's contrary decision in Freeman v. Summers, 52 L.D. 201 (1927). There, the Secretary had written:

"While at the present time there has been no considerable production of oil from shales, due to the fact that abundant quantities of oil have been produced more cheaply from wells, there is no possible doubt of its value and of the fact that it constitutes an enormously valuable resource for future use by the American people.

"It is not necessary, in order to constitute a valid discovery under the general mining laws sufficient to support an application for patent, that the mineral in its present situation can be immediately disposed of at a profit." Id., at 206. (Emphasis added.)

The hearing examiner ruled that Freeman v. Summers compelled the conclusion that oil shale is a valuable mineral subject to appropriation under the mining laws, and he upheld the Mountain Boys and Shoup claims as valid and patentable.

The Board of Land Appeals reversed. Adopting the findings of the hearing examiner, the Board concluded that oil shale claims located prior to 1920 failed the test of value because at the time of location there did not appear "as a present fact . . . a reasonable prospect of success in developing an operating mine that would yield a reasonable profit." (Emphasis in original.) The Board recognized that this conclusion was at odds with prior departmental precedent, and particularly with Freeman v. Summers ; but it rejected that precedent as inconsistent with the general mining law and therefore unsound. The Board then considered whether its newly enunciated interpretation should be given only prospective effect. It found that respondents' reliance on prior rulings was minimal and that the Department's responsibility as trustee of public lands required it to correct a plainly erroneous decision.5 Accordingly, it ruled that its new interpretation applied to the Mountain Boys and Shoup claims, and that those claims were invalid.

Respondents appealed the Board's ruling to the United States District Court for the District of Colorado. The District Court agreed with the Board that by not requiring proof of "present marketability" the decision in Freeman v. Summers had liberalized the traditional valuable mineral test. But it found that Congress in 1931 and again in 1956 had considered the patentability of oil shale and had implicitly "ratified" that liberalized rule. Alternatively, the District Court concluded that the Department was estopped now from departing from the Freeman standard which investors had "relied upon . . . for the past half-century." Shell Oil Co. v. Kleppe, 426 F.Supp. 894, 907 (1977). On these grounds, it reversed the Board's ruling and held that the claims at issue were valid.

The Court of Appeals for the Tenth Circuit affirmed. 591 F.2d 597 (1979). It agreed with the District Court that the "different treatment afforded all oil shale claims as to the 'valuable mineral deposit' element of a location became a part of the general mining laws by reason of its adoption and approval by both Houses of Congress" in the years after 1920. Id., at 604. And it held that the Department now must adhere to the Freeman rule. We granted certiorari because of the importance of the question to the management of the public lands. 444 U.S. 822, 100 S.Ct. 42, 62 L.Ed.2d 29 (1979). We affirm.

II

The legislative history of the 1920 Mineral Leasing Act shows that Congress did not consider "present marketability" a prerequisite to the patentability of oil shale.6 In the extensive hearings and debates that preceded the passage of the 1920 Act, there is no intimation that Congress contemplated such a requirement; indeed, the contrary appears. During the 1919 floor debates in the House of Representatives, an amendment...

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