Shell Oil Co. v. Andrus

Decision Date25 January 1979
Docket NumberNo. 77-1346,77-1346
Citation591 F.2d 597
Parties9 Envtl. L. Rep. 20,530 SHELL OIL COMPANY and D. A. Shale, Inc., Plaintiffs-Appellees, v. Cecil D. ANDRUS, Secretary of the Interior, Defendant-Appellant.
CourtU.S. Court of Appeals — Tenth Circuit

Robert L. Klarquist, Atty., Dept. of Justice, Washington, D. C. (Sanford Sagalkin, Acting Asst. Atty. Gen., Washington, D. C., Cathlin Donnell, U. S. Atty., Albert V. Witham, Sp. Asst. U. S. Atty., Denver, Colo., and Edmund B. Clark, Atty., Dept. of Justice, Washington, D C., with him on brief), for defendant-appellant.

Fowler Hamilton, of Cleary, Gottlieb, Steen & Hamilton, New York City (H. Michael Spence, of Mosley, Wells & Spence, Denver, Colo., Richard W. Hulbert of Cleary, Gottlieb, Steen & Hamilton, New York City and Donald L. Morgan, of Cleary, Gottlieb, Steen & Hamilton, Washington, D. C., with him on brief), for plaintiff-appellee, Shell Oil Co.

Claron C. Spencer of Senior & Senior, Salt Lake City, Utah (Norma L. Comstock, Denver, Colo., with him on brief), for plaintiff-appellee, D. A. Shale, Inc.

Robert B. Hansen, Atty. Gen., Michael L. Deamer, Deputy Atty. Gen. and Paul E. Reimann, Asst. Atty. Gen., Salt Lake City, Utah, on brief for amicus curiae, State of Utah.

Before SETH, Chief Judge, and LOGAN, Circuit Judge, and STANLEY, District Judge. *

SETH, Chief Judge.

The Secretary of the Interior issued in September of 1964 an administrative complaint asserting that the shale oil placer mining claims here in issue were invalid. The grounds advanced for the contest were that they did not contain valuable minerals on February 25, 1920, nor do such minerals now exist on the claims. There were also applications for patent then pending. The contest proceedings were heard over a five-month period by Administrative Law Judge Dalby in 1967, and he announced his decision in 1970. Twenty-six witnesses appeared; there were some 1700 exhibits, and over 5000 pages of transcript. The Administrative Law Judge concluded that the claims were valid, and that patents should issue.

The Government took an appeal to the Interior Board of Land Appeals (IBLA) in the Department which reversed in 1974 and held the claims to be invalid. (16 IBLA 112). The Secretary of the Interior then ordered the claims to be cancelled. The owners then obtained review of the Secretary's order in the United States District Court for the District of Colorado by these proceedings. The trial court on cross-motions for summary judgment entered judgment for the owners of the claims, and thus held the claims to be valid.

This appeal was then taken by the Government on the administrative record and the judgment of the trial court.

What constitutes a "discovery" and what may be a "valuable mineral deposit" has been the subject of many administrative proceedings and litigation. The "valuable" element has been considered under many interrelated "tests" including intrinsic value, prudent man, and marketability. It would not seem necessary to discuss the many variations. Reference should be made however to the early "prudent man" decision, Castle v. Womble, 19 L.D. 455 (1894), to United States v. Coleman, 390 U.S. 599, 88 S.Ct. 1327, 20 L.Ed.2d 170; Enfield v. Kleppe, 566 F.2d 1139 (10th Cir.); United States v. Zweifel, 508 F.2d 1150 (10th Cir.); Adams v. United States, 318 F.2d 861 (9th Cir.); United States v. Strauss, 58 I.D. 567 (1943); Jefferson-Montana Copper Mines Co., 41 L.D. 320 (1912); United States v. Black, 64 I.D. 93 (1957); United States v. Heirs of Stack, A-28157 (1960). See also 7 Rocky Mountain Mineral Law Institute 263; 1 American Law of Mining § 4.31; and 1 Lindley Mines § 98 (3d Ed.).

Under the mining laws, Act of July 4, 1866, Act of May 10, 1872, and Act of June 22, 1874, now generally 30 U.S.C. § 22, public lands of the United States not withdrawn from entry and containing valuable mineral deposits are open for location with some exceptions not here concerned. Nonmineral entries cannot be made on public lands deemed valuable for minerals. 30 U.S.C. § 23 relates to lode claims and § 35 provides that placer claims should be located under like circumstances and conditions and upon similar proceedings as are provided for lode claims. For lode claims there must be a discovery of a vein or lode and also a discovery of a valuable mineral deposit. For a placer claim there need only be a discovery of a valuable mineral deposit. We are here concerned with placer claims located for oil shale before the Mineral Leasing Act of 1920, 30 U.S.C. § 181.

Everything considered, it must be concluded that the "valuable mineral deposit" standard or requirement was not met as to oil shale claims of the type here considered before 1920 as the standards were applied to the metallic minerals. The lack of conformance came about as to the immediate salability of the oil shale or profitability as compared to other minerals. The shale was obviously different in this regard, and for the claims here concerned to be valid as found by the District Court and the Administrative Law Judge, it must be established that oil shale deposits were treated differently by the then General Land Office and the Secretary for the location of placer claims for oil shale.

The record before us does demonstrate that the value element attributed to substantial oil shale deposits to support claims was expressly treated differently than for metallic minerals by the Department of the Interior for the period 1915 to 1960. This was clearly the case as to the Green River Formation on which the subject oil shale claims are located. The mining laws were thus interpreted differently for oil shale by departmental practice, official instructions and decisions.

The record shows the ebb and flow of interest in oil shale during the period 1915 to the present time. It shows the intense interest in it as a source of oil for the Navy and to replace "foreign" oil in 1918. This was a period of decline in domestic crude oil production relative to demand, and dependence on foreign oil increased. The Department of the Interior by its publications and policies strongly encouraged the location of claims on oil shale deposits in the pre-1920 period. In 1913 there was a USGS Bulletin published on the Green River Formation oil shale, and others followed. It was a period of the creation of Naval reserves for oil, and for oil shale. The oil shale reserves for the Navy were created in Colorado and Utah by presidential order in 1916. There was then in Great Britain a method in use for extracting oil from the shale, and no problems were contemplated.

During the period 1918 to 1920 Congress was holding hearings on what became the Mineral Leasing Act of 1920, and eventually placed oil and gas and oil shale under a system of leasing rather than by placer locations. This Act made special reference to existing oil shale claims and did nothing to impair their validity. 30 U.S.C. § 193.

The Department by 1920 had thus determined that oil shale deposits, if demonstrated to contain sufficient oil, were "valuable mineral deposits" although there was no immediate market.

The Government in these proceedings has acknowledged that these claims met the discovery requirements under the 1916 to 1920 standards applied by the Department of the Interior. This was because there had been an administrative determination that valid locations could then be made on the Green River Formation oil shale beds if all other elements of a proper location were present. The geology was obviously well known, uncomplicated, and the beds were conspicuous.

After 1920 the Department of the Interior continued to patent pre-1920 oil shale claims, and the record shows that there was a careful examination of patent applications for compliance with the mining laws and to determine whether substantial oil reserves were present. There is nothing in the record before us to indicate any routine approval of such claims.

In 1927 the departmental decision in a contest between a homestead entry and an oil shale claim was issued, captioned in part Freeman v. Summers, 52 L.D. 201. This decision referred to Castle v. Womble, 19 L.D. 455, and held in substance what had been the prior administrative determination that oil shale could be considered a valuable mineral deposit.

Freeman v. Summers in part says:

"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."

And also:

"The evidence in this case shows that in this particular area of Colorado the lands contain the Green River formation, and that this formation carries oil shales in large and valuable quantities; that while the beds vary in the richness of their content, the formation is one upon which the miner may rely as carrying oil shale which, while yielding at places comparatively small quantities of oil, in other places yields larger and richer quantities of this valuable mineral.

"In other words, having made his initial discovery at or near the surface, he may with assurance follow the formation through the lean to the richer beds.

"There can be no question whatever as to the greater value of the lands for their oil-shale deposits than for other purposes. Their agricultural value is negligible; their value for grazing purposes is nominal, and the real and principal value is the mineral deposit."

This determination as to value continued from 1916 to 1960, and patents were issued for oil shale claims. Some 2326 patents so issued. The Freeman decision...

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