## Facts

- In 1937, Stearns conveyed the surface estate of large tracts in Kentucky to the United States (later within the Daniel Boone National Forest) while reserving the mineral estate.
- Under Kentucky law, the mineral estate was treated as dominant and carried an implied right to use the surface reasonably necessary to access minerals.
- The mineral reservation was taken subject to existing and future federal rules and regulations.
- After enactment of the Surface Mining Control and Reclamation Act of 1977 (SMCRA), Stearns leased its minerals to an operator proposing mining that would require surface disturbance of federally owned national forest lands.
- Regulators concluded the operator lacked “valid existing rights” under SMCRA’s grandfathering provisions and denied authorization to proceed as proposed.
- The Court of Federal Claims treated the restrictions and denial as a compensable physical taking of Stearns’s mineral estate and awarded compensation.
- The United States appealed.

## Issues

1. Whether SMCRA restrictions and related permit denials preventing mining that would disturb federal surface land constituted a physical taking of Stearns’s mineral estate under the Fifth Amendment.
2. Whether the restrictions and denials nevertheless established a compensable regulatory taking of Stearns’s property.

## Decision

- The Federal Circuit reversed the Court of Federal Claims.
- The court held the government’s actions were not a physical taking because the government did not occupy, appropriate, or authorize a permanent physical occupation of Stearns’s mineral estate.
- The court concluded the record did not establish a compensable regulatory taking, including because the mineral interest was reserved subject to future federal regulation and the record indicated potential alternative administrative avenues to seek mining authorization.

## Legal Principles

- A physical taking generally requires government occupation or appropriation of a property interest (or authorization of a permanent physical occupation), not merely restrictions on use.
- Government regulation that limits access to or extraction of minerals is analyzed under regulatory-takings doctrine when the government neither seizes the minerals nor physically invades the subsurface estate.
- Property interests reserved subject to existing and future federal regulations carry reduced reasonable investment-backed expectations as to freedom from later environmental and land-use restrictions.
- In regulatory-takings analysis, the existence of lawful alternative means to seek permission for a regulated activity may weigh against a finding that the property has been effectively confiscated.

## Conclusion

The Federal Circuit held that SMCRA-based constraints on mining under federally owned national forest surface lands did not “oust” the mineral owner in a manner constituting a physical taking and, on the record presented, did not establish a compensable regulatory taking of the reserved mineral estate.


Stearns Co. v. United States, 396 F.3d 1354 (Fed. Cir. 2005)