Kerr-McGee Corp. v. Hodel
630 F.Supp. 621 (D.D.C. 1986)
Under the Mineral Leasing
Act for Acquired Lands (30
U.S.C. §351) the Bureau of Land
Management (BLM) asked Kerr-McGee to prospect on some land they had
acquired for a National Forest.
The idea was that if
Kerr-McGee found something valuable, they could get a preferential
lease, which meant they didn't have
to go through a competitive bidding process.
Kerr-McGee found lots of
phosphate and applied for their lease. The Department of the Interior
(DOI) denied their application. Kerr-McGee sued to force DOI to grant the
DOI felt that Kerr-McGee did
not have an adequate plan for environmental protection and restoration.
DOI and the US Forest
Service performed an Environmental Impact Statement that concluded that
the technology to mine the phosphate without destroying the National
Forest didn't exist.
To get the phosphate, they
would have to strip mine the forest!
DOI argued that since it
would cost a lot to install the equipment to ensure adequate environmental
protection, it wouldn't be worth it for Kerr-McGee to mine, and therefore
Kerr-McGee hadn't discovered a "valuable mineral."
Under the Marketability
Test established in United States
v. Coleman (390 U.S. 599 (1968)), in order to establish a
valid claim, the claimant must show that the mineral can be "extracted,
removed, and marketed at a profit."
Kerr-McGee argued that the
costs of environmental restoration should not be considered when
determining if a lease should be granted or not.
The Trial Court found for DOI
and denied the lease.
The Trial Court found that
when determining if a "valuable mineral" is present, the cost
of compliance with lease terms is an important element that much be
The Court looked to the
language of §352 which required
that leases are made subject to "such conditions as that [Agency]
may prescribe to insure the adequate utilization of the lands for the
primary purpose for which they have been acquired," and took that
as evidence that DOI could factor in the costs of environmental
The Court found that since
the land was acquired specifically to make a National Forest, Congress
couldn't possibly have meant to allow actions that would destroy the
Compare to Natural
Resources Defense Council, Inc. v. Berklund (609 F.2d 553 (1979)), where it was held that DOI did not have the
discretion to deny a preferential lease.