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 lease.
    • 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 considered.
      • 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 compliance.
      • 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 National Forest.
  • 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.