Under the General Mining
Law of 1872 (30 U.S.C. §22), people were allowed to make claims to
"valuable mineral deposits" they found on Federal lands.
Basically, if you discovered
a valuable mineral (like gold, copper, or even oil) you could "stake
a claim" and get a permit to mine the mineral and keep the profits.
Union Oil and Smith were both
independently searching for oil in a specific area of Federal property.
Union Oil filed a claim first, and based their claim on the fact that they
had discovered oil on a different, nearby claim about 1000 feet away.
Once Union Oil suspected
there was oil in the general area they made lots of claims all over the
place. The idea was to make the claims first, then explore the land to
see if there was really oil in any of the claims.
Smith entered an area claimed
by Union Oil and actually discovered oil. He sued Union Oil in order to
have Union Oil's claim declared void.
Union Oil hadn't actually
gotten around to doing any exploration on that specific claim.
The US Supreme Court found for
Smith and gave them right of possession of the claim.
The US Supreme Court looked
to the Mining Law and found that
in order to stake a claim, you have to have actually discovered the
valuable mineral (in this case oil).
It very clearly states that
discovery must precede claim locations.
However, the Court found
that obviously you have to explore a plot of land before you can discover
valuable minerals on it. Therefore, a miner may hold the place in which
he may be working against all others while he is working towards
That's known as pedis
possessio (aka "walking on
property to establish possession.")
The Court noted that this
possessory right is limited in extent, and possession may be maintained
only by continued actual occupancy by people persistently and diligently
engaged in work discovering the mineral.
In this case Union Oil
wasn't actually looking for oil on the plot in question, they were too
busy drilling for it on other plots they owned in the area, so they lose
Basically, this case says that
explorers do have some, limited possessory rights in a claim, even if they
haven't actually made a discovery just yet.
Btw, soon after this case was
decided, Congress amended the Mining Law and fossil fuels like oil are no longer covered.