Thousands of Oil Shale Mining Claims Affected by Recent Decision: Board of Land Appeals Clears Path for Environmental Protection

In a long-awaited administrative decision regarding privately held rights for oil shale development, the Department of the Interior's Board of Land Appeals has invalidated six unpatented oil shale placer mining claims, clearing the way for similar action as to many thousands more. This recent ruling in United States v. Winegar¹ removes a cloud from federal title to millions of acres of public lands and makes orderly and environmentally conscious development of the nation's oil shale resources a bit more likely.

Prior to 1920, oil shale could be appropriated like any other mineral. By making a discovery of a valuable oil shale deposit, staking a claim, complying with local administrative details, and performing one hundred dollars worth of "assessment work" annually, a prospector could gain possessory title to his claim that was good against all competing claimants. The prospector could then gain patent to his claim by proving a five hundred dollar expenditure inuring to the benefit of the claim and by satisfying the government that he had discovered a valuable mineral deposit.

A valuable mineral deposit has long been defined as minerals of such a character as would justify a person of ordinary prudence in the further expenditure of his labor and means with a reasonable prospect of success in developing a valuable mine. Proving that a miner has met the terms of the "prudent man" test can be complicated, however, involving the balancing of actual mineralization, geological inferences, mineral market values, success of nearby claims, and a multitude of other factors.

Oil shale lands were withdrawn from location and made a leaseable substance by the Mineral Leasing Act of 1920, but by then many thousands of oil shale placer claims had been filed. The fuel needs of World War I had awakened interest in this resource, but commercial production proved uneconomical; most oil shale placer claims were never patented and remain so. Bureau of Land Management (BLM) estimates of their number run well into five figures, and in some areas of the country layers of oil shale claims overlap two and three deep.

Between 1920 and 1960 the Department of the Interior granted 523 patents for oil shale lands totalling 349,088 acres. Generally, these patents were issued on the theory that while oil shale was not a presently valuable mineral resource, there was no doubt that it "constitutes an enormously valuable resource for future use by the American people."² The Department took the position that this speculative value was adequate to satisfy the prudent man test.

In August, 1958, Frank Winegar filed a patent application with the Bureau of Land Management for three oil shale placer mining claims. Winegar had purchased the 160 acre claims from their eight original co-locators and was seeking patent under an agreement whereby Shell Oil Corporation would purchase the patented claims for $60 per acre and reimburse Winegar's expenses up to $12,800. Shell Oil bought out Winegar's interest for $30,000 in November of 1964, shortly after the United States began proceedings contesting the validity of the claims. Those claims, and three others joined with them, have been crawling through administrative contest proceedings since that time. On June 28, 1974, the Board of Land Appeals issued its decision on the six claims, finding them null and void for lack of discovery of a valid mineral deposit.

The board relied heavily upon the 1968 Supreme Court decision in United States v. Coleman³ which firmly established the marketability of a mineral deposit as the primary component of the prudent man test. That is, to be considered valuable, a mineral must be capable of extraction, removal and marketing at a profit. The best indicator of this value is the presence of a working mine, and while proof of actual sales of minerals is not an indispensable element in establishing marketability, lack of development and sales may raise a presumption that the market value of the minerals is not sufficient to justify the cost of extraction.

The board explicitly rejected the speculative value test and decisions relying thereon, and insisted that present value was the only consideration. The board found that oil shale was not a commercially viable substitute for liquid petroleum resources at the time of the filing of the claim, at the time that oil shale was withdrawn from mineral entry, or at the time the claim contest proceedings were begun. Thus, these six claims and all other similar claims were invalid when staked out, were voided by the withdrawal of oil shale in 1920 since only valid claims can survive a withdrawal, and may not be brought to patent now.

The decision is a clear reversal of previous Department policy, explicitly overrules earlier board rulings, and by implication voids the thousands of unpatented oil shale placer claims that still exist. Though the decision is of course subject to appeal to the courts, a reversal there is not likely, especially in light of the board's heavy reliance on Supreme Court precedent. Continuing federal ownership [4 ELR 10136] of these lands means that their development will be subject to the requirements of the National Environmental Policy Act and will be pursued under the Mineral Leasing Act rather than the more permissive General Mining Laws. By quieting title to these lands in the United States, the decision furthers orderly development of a valuable national resource by ensuring that its leasing and development will occur under a coordinated public effort subject to the requirements of federal environmental law, rather than under fragmented and largely self-policed private exploitation.

1. 16 IBLA 112, 4 ELR 30005 (1974).

2. Freeman v. Summers, 52 L.D. 201, 206 (1927).

3. 390 U.S. 599 (1968).