## Facts

- Kerr-McGee Corporation and Global Exploration and Development Corporation held federal phosphate prospecting permits in the Osceola National Forest, an acquired federal forest managed at the surface by the U.S. Forest Service (Department of Agriculture).
- Kerr-McGee filed preference-right lease applications (1969–1972), asserting discovery of “valuable deposits” of phosphate under federal leasing law; the U.S. Geological Survey initially certified value based largely on physical characteristics.
- Federal environmental review (1974 EIS and 1979 supplement) raised substantial doubts that mining sites could be reclaimed to original forest conditions given then-existing technology.
- In February 1982, the Forest Service issued stipulations conditioning any lease on reclamation that would restore plant communities and aquatic systems and return the land to the purposes and historical uses for which the forest was acquired.
- A 1982 interagency task force concluded reclamation technology remained insufficient to reasonably ensure successful restoration to pre-mining condition.
- In 1976, Interior adopted regulations defining “valuable deposit” in economic terms, requiring a reasonable expectation that revenues would exceed development, production, marketing, and necessary compliance costs, including reclamation required by the Forest Service.
- On January 10, 1983, the Secretary of the Interior denied all pending preference-right phosphate lease applications for the Osceola National Forest, concluding that, given mandatory Forest Service conditions and associated reclamation costs, the deposits were not economically “valuable.”
- The companies sued seeking declaratory and injunctive relief and an order compelling issuance of leases; the consolidated cases came before the court on cross-motions for summary judgment, with Florida and multiple environmental organizations intervening for the government.

## Issues

1. Whether prospecting permits and earlier agency “valuable deposit” certifications created vested preference-right lease rights insulated from later economic-value regulations.
2. Whether Interior could consider Forest Service consent conditions for acquired lands and include reclamation feasibility and costs when determining whether “valuable deposits” had been discovered.
3. Whether the lease denials were arbitrary, capricious, an abuse of discretion, or otherwise unlawful under the Administrative Procedure Act.

## Decision

- The court granted summary judgment for the federal defendants and intervenor-defendants and denied plaintiffs’ motions.
- The court held the plaintiffs had no vested right to preference-right leases; issuance remained contingent on a valid “valuable deposit” determination and satisfaction of statutory constraints.
- The court upheld Interior’s application of the 1976 economic “valuable deposit” standard to pending applications, including treating required reclamation as a necessary cost.
- The court held Interior properly accounted for the Forest Service’s consent authority and mandatory stipulations for acquired lands.
- The court found the denial decisions supported by the administrative record and not arbitrary or capricious under the APA.

## Legal Principles

- A preference-right to a federal mineral lease does not vest from a prospecting permit or application alone; it depends on meeting statutory conditions, including discovery of “valuable deposits” under governing law.
- An agency may apply validly adopted regulations to pending applications absent a vested right that would bar such application.
- “Valuable deposit” may be defined and applied in economic terms; required compliance costs, including reclamation imposed as a condition of mining, may be included in the economic analysis.
- For acquired lands subject to a consent statute, the surface-managing department’s consent and prescribed conditions are binding constraints that the leasing agency must consider.
- Under APA review, a lease denial is upheld when the agency considered relevant factors, relied on record support (including technical and environmental findings), and articulated a rational connection between facts found and the decision made.

## Conclusion

The court upheld Interior’s denial of phosphate preference-right leases in the Osceola National Forest because the applicants had no vested entitlement to leases, Interior could apply an economic “valuable deposit” standard that included mandatory reclamation conditions and costs tied to Agriculture’s consent authority, and the denials were reasonable on the administrative record under APA review.


Kerr-McGee Corp. v. Hodel, 630 F. Supp. 621 (D.D.C. 1986)