## Facts

- Stearns Coal and Lumber Company, later Stearns Co., Ltd. (Stearns), conveyed the surface estate in tens of thousands of acres of Kentucky land to the United States for national forest purposes.
- In the conveyances, Stearns reserved the mineral estate (including coal) and reserved mining rights “subject to federal rules and regulations.”
- Under Kentucky law, the mineral estate was treated as the dominant estate and carried an implied easement to use the surface as reasonably necessary to access and extract the minerals.
- For decades after the conveyances, Stearns conducted mining operations on the property in a manner consistent with the federal rules and regulations then applicable to national forest lands.
- In 1977, Congress enacted the Surface Mining Control and Reclamation Act (SMCRA), which regulated surface coal mining and certain surface activities associated with underground mining.
- After SMCRA’s enactment, Stearns sought to have a lessee undertake underground coal mining that would require use of the United States’ surface estate (such as access and support facilities) to reach and remove coal.
- The government determined that because Stearns (and its lessee) sought the permits after SMCRA, they did not possess “valid existing rights” (VER) that would allow the proposed operations under SMCRA’s restrictions.
- Although the government indicated the Secretary could, in his discretion, authorize mining despite the lack of VER, the government did not recognize Stearns as having an enforceable right to use the surface to carry out the proposed mining.
- Stearns filed suit in the U.S. Court of Federal Claims under the Tucker Act, alleging that the government’s actions effected a taking of its property without just compensation in violation of the Fifth Amendment.

## Issues

1. Whether Stearns’ reserved mineral estate and the Kentucky-law implied surface-access easement were protected property interests for Fifth Amendment takings purposes.
2. Whether the government’s application of SMCRA—particularly its determination that Stearns lacked “valid existing rights” because permits were sought after SMCRA—so restricted Stearns’ ability to use its implied easement that it amounted to a compensable taking.
3. Whether converting Stearns’ ability to use the surface from an easement exercisable as of right into an activity allowed only by the Secretary’s discretion constituted a taking requiring just compensation.

## Decision

- The Court of Federal Claims held that Stearns possessed compensable property interests, including the dominant mineral estate and an implied easement to use the surface as reasonably necessary to access the minerals.
- The court concluded that the government’s implementation of SMCRA as applied to Stearns—through the VER determination and related agency actions—substantially limited and effectively nullified Stearns’ ability to exercise its access rights to develop the reserved coal.
- The court treated the interference with Stearns’ access rights as a compensable taking and determined that the availability of discretionary permission did not preserve Stearns’ preexisting property rights.
- The court entered judgment awarding just compensation based on the value of the taken interests as found at trial.

## Legal Principles

- Property interests protected by the Fifth Amendment are defined by state law; a reserved mineral estate may include an implied easement over the surface estate to the extent reasonably necessary for mineral development.
- A government action can result in a taking when it effectively destroys or appropriates a recognized property right, including an easement necessary to make use of a dominant mineral estate.
- The fact that a government official retains discretion to allow the otherwise barred use does not, by itself, prevent a finding that the owner’s enforceable property right has been taken when the owner can no longer exercise that right as of entitlement.
- When the government’s action is found to have taken the owner’s property interest, the Fifth Amendment requires payment of just compensation measured by the value of what was taken.

## Conclusion

The Court of Federal Claims held that Stearns’ reserved Kentucky mineral estate included an implied surface-access easement and that the government’s post‑SMCRA VER determination and related restrictions prevented Stearns from exercising those rights except by discretionary permission, which the court found amounted to a compensable taking requiring an award of just compensation.


Stearns Co., Ltd. v. United States, 53 Fed. Cl. 446 (2002)