CHAPTER 9 MINERAL LEASING ACT OF 1920

• Jurisdiction: United States

Rights of Access and Surface Use
(Nov 1984)
CHAPTER 9
MINERAL LEASING ACT OF 1920
James A. Holtkamp
Van Cott, Bagley, Cornwall & McCarthy
Salt Lake City, Utah

I. INTRODUCTION.

Under the common law of property, an easement is a nonpossessory interest in land under which the owner of the easement has the right to use the land of another for a specified purpose, as distinguished from a right to possess that land. As to privately held lands and as between private parties, easements are created either by agreement or by implication.

Congress, having ultimate constitutional authority over the public lands, has created a system for granting rights or licenses in federal lands which are similar but not identical to grants of common law property easements. The two major sources of this grant of authority are found in Sections 28 and 29 of the Mineral Leasing Act of 1920¹ and in Title V of the Federal Land Policy and Management Act of 1976² ("FLPMA"). This paper will focus primarily on the right-of-way provisions of the Mineral Leasing Act, along with a brief examination of the Right-of-Way Leasing Act and access to federal leases across private land. Access rights for roads, power lines, and other non-pipeline uses were the subject of other Congressional enactments and are examined in more detail in other papers presented in this Special Institute.

Prior to the passage of the Mineral Leasing Act of 1920, oil and gas rights on public lands could be acquired only through the location of placer claims.³ The use of mining claims for the development of oil and gas rights proved to be unsatisfactory, both from the point of view of the federal government as land manager and from that of the users of the public lands. Oil and gas was not well suited to a system designed for fixed minerals, since by its nature it is a fugacious substance. In addition, the implied right of access to mining claims, which was recognized more as a practical matter and less as a legal matter in the early days of mining law, resulted in abuses of use of the public lands in connection with the development of those claims.⁴

In developing a system to deal with the extraction of oil and gas from federal public lands, thereby creating a benefit to the federal government in the form of royalties and rentals from the granting of rights to the oil and gas, Congress created a statutory right-of-way for pipelines through and across those lands.

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Specifically, Section 28 of the Mineral Leasing Act of 1920⁵ grants authority to the Secretary of the Interior ("Secretary") to issue rights-of-way under certain conditions for pipelines in connection with federal oil and gas leases. Section 29⁶ of the same Act reserves to the Secretary the right to permit easements or rights-of-way upon, through, or in lands leased, occupied, or used under the Mineral Leasing Act.

II. SECTION 28 EASEMENTS.

A. Conditions.

Section 28(a) authorizes the Secretary "or appropriate agency head" to grant rights-of-way or temporary use permits on "any Federal lands" "for pipeline purposes for the transportation of oil, natural gas, synthetic liquid or gaseous fuels, or any refined product produced therefrom."⁷ The term "Federal lands," as defined in Section 28, includes "all lands owned by the United States except lands in the National Park System, lands held in trust for an Indian or Indian tribe, and lands on the Outer Continental Shelf."⁸

The granting of a Section 28 right-of-way or temporary use permit is now subject to certain statutory conditions. These are:

1. The applicant for such a right-of-way must possess the qualifications provided in Section 1 of the Act⁹ . Section 1 provides that land subject to disposition under the Leasing Act may be leased "to citizens of the United States, or to associations of such citizens, or to any corporation organized under the laws of the United States, or of any State or Territory thereof, or in the case of coal, oil, oil shale, or gas, to municipalities." If the applicant is a business entity, including a corporation or partnership, it must disclose the identity of participants in the entity.¹⁰

2. The width of the right-of-way may not exceed fifty feet plus the ground occupied by the pipeline and its related facilities, which include but are not limited to valves, pump stations, supporting structures, bridges, monitoring and communication devices, surge and storage tanks, terminals, roads, airstrips,

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and campsites. The Secretary may, however, grant a wider right-of-way if necessary for operation and maintenance of the pipeline or to protect the environment or public safety.¹¹

3. The Secretary is required to impose requirements relating to protection of health and safety of the workers and the public¹² and protection of the environment.¹³

4. The applicant must demonstrate technical and financial capability to construct, operate, maintain and terminate the project for which the right-of-way is granted.¹⁴

5. The applicant is required to reimburse the United States for the "administrative and other costs" incurred in processing the application and the costs for monitoring the construction, operation, maintenance, and termination of the pipeline or any related facilities.¹⁵

6. The applicant is required to pay annually in advance the fair market rental value of the right-of-way.¹⁶

7. The holder of a right-of-way may be required to furnish a bond or other security to secure any or all of the obligations of the right-of-way or applicable regulations.¹⁷

8. The term of the right-of-way may not exceed thirty years subject to renewal if the project is in commercial operation and operated and maintained in accordance with applicable regulatory requirements.¹⁸

9. Any domestically produced crude oil transported by pipeline over a Section 28 right-of-way is subject to limitations on its export to foreign states. Specifically, before any crude oil transported by a Section 28 right-of-way pipeline may be exported, the President must make an express finding that any such export will not diminish the total quantity or quality of petroleum available to the United States, is in the national interest, and is in accord with the

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provisions of the Export Administration Act of 1969.¹⁹ There are exceptions to this restriction relating to the exchange of crude oil or the transport of crude oil across adjacent foreign states where it reenters the United States.²⁰

10. The pipelines and related facilities authorized under Section 28 are to be "constructed, operated, and maintained as common carriers"²¹ and "shall accept, convey, transport, or purchase without discrimination all oil or gas delivered to the pipeline without regard to whether such oil or gas was produced on Federal or non-Federal lands."²²

11. Where there is an application for a right-of-way for a pipeline of twenty-four inches or more in diameter, Section 28(w)(2)²³ requires the Secretary to notify and prepare a report to the House and Senate Committees on Interior and Insular Affairs. Section 28(w)(2) further provides that the right-of-way will not be granted until sixty days following the Secretary's submittal of the notification and a report on the application to the Committees.

B. Wilderness Society Decision.

Historically, Interior, in considering right-of-way applications, had engaged in the practice of supplementing the pipeline right-of-way with special land use permits where, for construction or other purposes, it was necessary to use land in excess of the land within the width limitation of Section 28. This practice as applied to the permit for construction of the Trans-Alaska Pipeline was struck down in 1973 by the District of Columbia Court of Appeals in Wilderness Society v. Morton.²⁴

In the Wilderness Society case, the Interior Department had granted a Section 28 right-of-way and associated special land use permits in connection with the construction of the Trans-Alaska Pipeline. The Wilderness Society contested the issuance of the right-of-way and permits on a number of grounds, including the argument that the issuance of the special land use permits was not authorized. The District of Columbia Court of Appeals agreed with the Wilderness Society,

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and held that the special land use permits issued by Interior are, in effect, rights-of-way and, therefore, must comply with Section 28²⁵ . After the United States Supreme Court denied the government's petition for certiorari²⁶ , Congress extensively amended Section 28.²⁷ These amendments are discussed in detail below.

C. Authorized Facilities.

As noted above, Section 28(d)²⁸ contains a comprehensive yet non-exclusive list of facilities allowed on a pipeline right-of-way. It is apparent from the language of Section 28(d) that Congress intends that pipeline rights-of-way allow for a broad range of facilities as long as they are necessary for the construction, operation, maintenance, or termination of the pipeline.²⁹ With such broad language, questions have arisen as to which facilities are in fact authorized under a Section 28 right-of-way.

In P&O Falco, Inc. ³⁰ , the Interior Board of Land Appeals ("IBLA"), in reversing a Bureau of Land Management ("BLM") decision, held that under certain circumstances, a residential trailer falls within the authorized facilities language of Section 28(d). BLM had rejected Falco's application to amend its natural gas pipeline right-of-way to include a residential trailer to house one of its employees. The pipeline right-of-way originally included a LPG truck unloading station. Falco subsequently applied to amend the right-of-way to provide for a residential trailer at the truck unloading station because of the need to have an employee available to monitor a 24-hour audible alarm system on an automatic injection pump, to prevent vandalism and fraud, to allow for a one-shift instead of three-shift operation, and to ensure...