The Securities and Exchange Commission

[thepennyking]

Mineral Rights . Pittman Act . Reservation to United States of Rights to Sand and Gravel. The Pittman Underground Water Act of 1919 (the "Pittman Act"), 43 U.S.C. §§ 351-359 (repealed 1964), authorized grants, or "patents," of up to 640 acres of federal public land in Nevada to applicants who successfully developed underground water sources, but required that such patents reserve to the United States "all the coal and other valuable minerals" on the patented land. The Supreme Court granted certiorari in BedRoc Ltd., LLC v. United States, No. 02-1593, to decide whether the statutory reservation of "valuable minerals" includes common materials such as sand and gravel that had no market value when the patent was issued.

In 1940, Newton and Mabel Butler secured a patent under the Pittman Act for 560 acres in Lincoln County, Nevada. At that time, there was no local market for the abundant sand and gravel on the property. In the early 1990s, after the growth of the city of Las Vegas created demand for the material, the lessee of a successor owner began to extract and sell sand and gravel from the property. Petitoner BedRoc Limited, LLC, acquired the property in 1995 and has continued the sand and gravel operation.

On March 26, 1993, the Bureau of Land Management ("BLM") issued a trespass notice to then-owner Earl Williams, claiming that the sand and gravel on the property were reserved to the United States. Shortly thereafter, the BLM issued a decision finding Williams in trespass, and in 1997 the Interior Board of Land Appeals ("IBLA") affirmed. Earl Williams, 140 I.B.L.A. 295 (1997). BedRoc and Williams brought an action to quiet title in federal district court. The district court granted summary judgment to the United States, ruling that sand and gravel are "valuable materials" reserved to the United States under the Pittman Act. 50 F. Supp. 2d 1001 (D. Nev. 1999).

The Ninth Circuit affirmed. 314 F.3d 1080 (2002). Concluding that the statutory text is ambiguous, the court turned to legislative history and other sources to determine whether Congress intended to include sand and gravel within the reservation of "valuable minerals." As evidence that it did, the court cited congressional debate indicating that all minerals were reserved (id. at 1087-1088), and pointed to contemporaneous federal publications describing sand and gravel as among the country’s "mineral resources" (id. at 1088-1089). The court also relied on Watt v. Western Nuclear, Inc., 462 U.S. 36, 103 (1983), in which the Supreme Court determined that gravel was reserved to the United States in grants made under the Stock-Raising Homestead Act, which was enacted three years before the Pittman Act. The court rejected BedRoc’s argument that the question whether sand and gravel were "valuable minerals" was factual and site-specific, deciding instead that "the question is a straightforward legal one regarding congressional intent as to the scope of the mineral reservation contained in the statute." 314 F.3d at 1090.

This case is of obvious interest to businesses holding interests in land patented under the Pittman Act. Because the Ninth Circuit’s ruling that sand and gravel are "valuable minerals" may be applied to other grants of federal land, the Supreme Court’s decision also may affect other businesses across the western United States that extract sand and gravel or rely on their abundant supply for construction projects.