## Facts

- Arkansas created Crater of Diamonds State Park after purchasing approximately 887 acres in 1972, including a 37-acre diamond-bearing formation open to public diamond hunting.
- In 1976 Arkansas received Land and Water Conservation Fund Act (LWCF) assistance for park land acquisition, subjecting the park to LWCF Act § 6(f)(3) restrictions against “conversion” from public outdoor recreation use without federal approval and substitute land.
- In the mid-1980s Arkansas explored the park’s commercial diamond-mining potential; in 1987 state law authorized leasing for commercial exploration.
- Arkansas proposed “Phase I” feasibility testing: drilling about 25–30 small-diameter core holes (up to roughly 1,000 feet deep) within an area about 50 by 100 feet, temporarily fenced off for roughly 10–12 weeks, followed by refilling and surface restoration.
- Because the park received LWCF funding, Arkansas sought National Park Service (NPS) review on whether Phase I would be a prohibited conversion.
- NPS initially denied Phase I as a conversion, then reversed and approved it as a “temporary nonconforming use,” expressly limiting approval to Phase I and reserving separate review for later testing or mining under LWCF and environmental laws.
- Environmental groups sued to enjoin Phase I as an unlawful conversion; mining companies intervened supporting the agencies.
- The district court held Phase I testing was “inextricably intertwined” with mining, treated it as a conversion, and issued a permanent injunction; it denied the mining companies’ claim for damages.
- The mining companies and state and federal officials appealed; the Eighth Circuit reviewed the NPS decision under the Administrative Procedure Act (APA) arbitrary-and-capricious standard.

## Issues

1. Whether limited, temporary Phase I exploratory drilling in an LWCF-assisted state park constituted a “conversion” to other than public outdoor recreation use under LWCF Act § 6(f)(3).
2. Whether NPS permissibly interpreted and applied § 6(f)(3) by approving Phase I as a “temporary nonconforming use” under the APA.
3. Whether the intervenor mining companies were entitled to damages resulting from delay and injunction-related disruption.

## Decision

- The Eighth Circuit reversed the district court’s ruling that Phase I constituted a conversion under § 6(f)(3).
- The court held NPS lawfully treated Phase I as a temporary nonconforming use and that the approval was not arbitrary, capricious, or contrary to law.
- The court reversed the permanent injunction barring Phase I (and comparable limited testing).
- The court affirmed the denial of damages to the mining companies.

## Legal Principles

- When a statute administered by an agency does not define a key term (here, “conversion”), courts may uphold the agency’s reasonable interpretation if it is consistent with the statute and supported by the record under APA review.
- A temporary, limited, and reversible nonrecreational intrusion on LWCF-funded parkland that does not materially impair overall public outdoor recreation use may be treated as a nonconforming use rather than a § 6(f)(3) conversion.
- The conversion inquiry focuses on actual effects on recreational use and the character of the protected land, not merely on an activity’s ultimate commercial purpose.
- Agencies may reasonably evaluate an exploratory step separately from later, more consequential proposals, where later phases remain subject to independent LWCF § 6(f)(3) review and other applicable environmental requirements.
- Damages are not warranted where private participants proceed with a project despite known litigation risk and the possibility that agency approvals may be judicially invalidated.

## Conclusion

The Eighth Circuit held that NPS reasonably concluded Phase I exploratory drilling in an LWCF-funded state park was a temporary, reversible use that did not amount to a § 6(f)(3) conversion, requiring reversal of the district court’s injunction, while leaving in place the denial of damages to the mining companies.


Sierra Club v. Davies, 955 F.2d 1188 (8th Cir. 1992)