1. Under the Mineral Lands Leasing Act, the Secretary of the
Interior leased coal mining rights in certain public lands to one
lessee, and now proposes to lease similar rights in other public
lands to a competitor operating coal mines on state lands which are
nearing exhaustion. The first lessee sued to enjoin the proposed
lease to its competitor. Its lease contained no express covenant
not to lease other lands to competitors, but a regulation of the
Secretary directs that leases be recommended
"only in cases where there has been furnished a satisfactory
showing that an additional coal mine is needed and that there is an
actual need for coal which cannot otherwise be reasonably met."
It is assumed that no such showing has been or can be made in
this case.
Held: the complaint stated no cause of action. The
proposed lease does not breach any contract right or invade any
property right of plaintiff, and does not violate any law, but is
within the discretionary power of the Secretary. Pp.
338 U. S.
622-631.
(a) The complaint does not show a cause of action to enforce a
restrictive covenant or property right against leasing other public
lands as authorized by the statute. Pp.
338 U. S.
625-629.
(b) Assuming that the regulation fixes a controlling policy, the
Secretary's interpretation of it as not applying to a lease to keep
an existing coal mine in operation, is a permissible interpretation
which will not be disturbed by the courts. Pp.
338 U. S.
629-631.
2. The Mineral Lands Leasing Act does not authorize anyone to
grant or to obtain exclusive rights of access to coal resources in
public lands, but seems to contemplate the opening of the public
domain to competitive exploitation. Pp.
338 U. S.
628-629.
84 U.S.App.D.C. 288, 172 F.2d 282, reversed.
The proceedings below are stated concisely in the first
paragraph of the opinion. Chapman was substituted for Krug as the
party petitioner. 338 U.S. 898. The judgment of this Court is
reported at p.
338 U. S.
631.
Page 338 U. S. 622
MR. JUSTICE JACKSON delivered the opinion of the Court.
This action by a lessee of coal mining rights in public lands
seeks to prevent leasing of similar rights in other lands to a
competitor. The case is before us only on pleadings. The original
complaint was dismissed by the District Court on several grounds,
but the Court of Appeals affirmed only on the ground that the
complaint showed no standing to sue, there being no allegation of
special injury to any property right of plaintiff.
Sheridan-Wyoming Coal Co. v. Krug, 83 U.S.App.D.C. 162,
168 F.2d 557. It gave leave to apply to the District Court to amend
in this respect. The District Court denied the privilege, however,
holding that the proposed new matter added nothing material, and
that amendment would be idle, and needlessly prolong the
litigation. This, we think, was equivalent in effect to sustaining
a demurrer to the amended complaint, and requires us to treat well
pleaded facts as true. On this basis, the Court of Appeals
reversed, and, in substance, held that the amended complaint does
state a cause of action. 84 U.S.App.D.C. 288, 172 F.2d 282. We
granted certiorari. 338 U.S. 810.
The hypothesis on which the legal issues are to be decided is
this:
At all relevant times, the following regulation, promulgated by
the Secretary of the Interior, has been in effect:
Page 338 U. S. 623
"
Showing required that an additional coal mine is
needed. The General Land Office will make favorable
recommendation that leasing units be segregated, and that auctions
be authorized only in cases where there has been furnished a
satisfactory showing that an additional coal mine is needed and
that there is an actual need for coal which cannot otherwise be
reasonably met."
43 CFR 1938, § 1933. It originated in 1934, when the coal
industry was demoralized by excess production capacity described in
opinions of this Court.
Appalachian Coals, Inc. v. United
States, 288 U. S. 344,
288 U. S. 361;
Carter v. Carter Coal Co., 298 U.
S. 238, opinion of Cardozo, J.,
298 U. S. 324,
298 U. S. 330;
Sunshine Anthracite Coal Co. v. Adkins, 310 U.
S. 381,
310 U. S. 395.
The policy which the Department embodied in this regulation, and to
which it has since adhered, was stated in letters of the Secretary
set forth in the margin.
*
Page 338 U. S. 624
In September, 1943, the Sheridan-Wyoming Coal Company leased
additional lands located in Wyoming for coal mining purposes from
the Government, and, "in reliance upon the Regulation," has
expended large sums in development and built up a prosperous
business in the rather low-grade coal mined and largely consumed in
that region.
In December, 1943, the Big Horn Company applied for a lease of
nearby lands for production of competitive coal, and, in 1945,
applied for additional lands. Meanwhile Big Horn already had
established mines on partially exhausted state-owned lands, and
desired the federal lands to prolong its business. The
Sheridan-Wyoming Company, among others, protested on the basis of
the regulation. The protest, after hearings, was overruled,
and,
Page 338 U. S. 625
unless prevented, the Secretary will lease to Big Horn. The
Secretary has made no finding that there is need for any additional
supply of coal, and in fact there is no such need. If he leases to
Big Horn, the two companies will have capacity to produce in excess
of the demand for that grade of coal in the limited market. The
investment of Sheridan-Wyoming will be substantially impaired, and
its volume of sales decreased, and profitable markets lost. About
these three ultimate facts -- the regulation, the lease, and the
threatened lease to a competitor -- the parties have argued several
intricate and interesting questions as to the standing of the
plaintiff to sue, whether the suit really is one against the United
States without sovereign consent, and whether the Secretary has
abused his power in entertaining the application of Big Horn. These
questions we do not need to discuss, because of the view we take of
more fundamental aspects of the case. We think the facts give rise
to no cause of action, because the proposed lease does not breach
any contract right or invade any property right of plaintiff, and
does not violate any law. Hence, the leasing is within the
discretionary power of the Secretary, and courts will not review
its exercise.
I
. CONTRACT RIGHTS
The court below has sustained the complaint for the principal
reason that a lease to Big Horn would breach the lease to
plaintiff, and that plaintiff has a property right to have the
lands involved withheld from lease.
It is only on this basis of its property rights, created by
contract, that plaintiff has been held to have standing to sue;
for, if it has such rights, the court below truly said, "The
prevention of a breach of a restrictive provision in a contract is
one of equity's most usual functions." Credited with "the status of
one claiming a property right by contract, threatened with
invasion," the plaintiff has been termed by the Court of Appeals
"possessor of
Page 338 U. S. 626
a valuable right, created by contract in the presence of valid
and binding restrictive regulations."
Of course, no express covenant of plaintiff's lease restricts
the Secretary from leasing other lands to other applicants. The
restrictive covenant is sought to be supplied by implication. The
lease, it is reasoned, was expressly made subject to the Mineral
Leasing Act, 41 Stat. 437, as amended, 30 U.S.C. §§ 181
et
seq.; the lease constructively includes the statute; the
regulation which was not referred to in the lease nevertheless had
the force and sanction of statute; hence, the restrictive
regulation was a covenant of the lease. It is said the threatened
lease would violate the regulation. For the purpose of testing the
contract-right theory, we shall assume that it does so.
What is the contract property right assumed? It is a right to
nondevelopment of coal reserves in an indeterminate but substantial
part of the public domain for benefit of its own lease. It is not a
right necessary to the fullest physical development and enjoyment
of all the lands plaintiff acquired for itself, and is one not
normally appurtenant to real estate. The assumed covenant is purely
negative in character, and its whole burden is upon other premises
owned by the United States in which the plaintiff has no other
interest. They are premises, moreover, in which it is doubtful
whether plaintiff could lawfully acquire any other interest in view
of the limited areas which the statute allows to one lessee. By the
assumed covenant, alienation and utilization of public lands in the
manner authorized by Congress is restricted. This is for an
unstated and indeterminable period. And it is accomplished not by a
covenant expressed in the lease itself, but by one read into it
from the regulations.
A competent grantor by appropriate covenants could, of course,
convey the right claimed here, and equity would enforce it. But,
when a right "consists in restraining the
Page 338 U. S. 627
owner from doing that with, and upon, his property which, but
for the grant or covenant, he might lawfully have done," it is an
easement, sometimes called a negative easement, or an amenity.
Trustees of Columbia College v. Lynch, 70 N.Y. 440, 447.
"An equitable restriction" which prevents development of property
by building on it has been said to be "an easement, or servitude in
the nature of an easement," a "right in the nature of an easement,"
and an "interest in a contractual stipulation which is made for
their common benefit." Such "equitable restrictions" are real
estate, part and parcel of the land to which they are attached and
pass by conveyance.
River-bank Improvement Co. v.
Chadwick, 228 Mass. 242, 246, 117 N.E. 244, 245. A contractual
restriction which limits the use one may make of his own lands in
favor of another and his lands is
"sometimes called a negative easement, which is the right in the
owner of the dominant tenement to restrict the owner of the
servient tenement in the exercise of general and natural rights of
property."
It is an interest in lands which can pass only by deed, and is
in every legal sense an incumbrance.
Uihlein v. Matthews,
172 N.Y. 154, 158, 64 N.E. 792, 793.
But whatever we might determine to be the technical nature of
the collateral property right claimed to result from Sheridan's
lease, to any extent that it added a property right to the
plaintiff's lands, it created an incumbrance or subtraction from
the aggregate of rights in the United States. Courts would not
lightly imply against any land owner a covenant which would
restrict alienation or enjoyment of his estate. There are even
stronger reasons against implied covenants imposing easements,
servitudes, amenities, or restrictions upon the public lands.
The Mineral Leasing Acts confer broad powers on the Secretary as
leasing agent for the Government. We find nothing that expressly
prevents him from taking into consideration whether a public
interest will be served or
Page 338 U. S. 628
injured by opening a particular mine. But we find no grant of
authority to create a private contract right that would override
his continuing duty to be governed by the public interest in
deciding to lease or withhold leases.
The leasing Acts strictly limit the area which any one lessee
may acquire, either directly or indirectly. 30 U.S.C. § 184. But
if, in taking up a permitted allotment of public lands, one may
acquire a right that other areas far more extensive must lie fallow
and unused for the benefit of his lands, he is acquiring an
interest in prohibited lands and an interest that may be worth many
times that interest which the statute allows him. And it is
acquired without additional purchase price, rental, or royalty.
Moreover, it is not denied that the effect of sustaining
plaintiff's suit would be to create a monopoly. Of course, it is a
little one, limited to low-grade coal and to an advantageous
shipping zone. Big Horn, if it gets no lease, must eventually go
out of business, leaving its customers to Sheridan. And the United
States could not for some period -- we do not know how long --
admit any other competitor to the field unless it can be shown that
Sheridan's supply is not equal to the market. It may, however,
continue to acquire additional reserves as its own approach
exhaustion. The whole claim of damage here is that competition from
Big Horn will impair this snug little monopoly of the market to
which plaintiff thinks it has acquired a property right.
But the policy of the leasing statute looks the other way.
Besides limiting the leasehold of any one lessee, it prevents
mineral rights, on pain of forfeiture, from passing into the hands
of any unlawful trust or becoming the subject of any contract or
conspiracy in restraint of trade. 30 U.S.C. § 184. Its whole policy
seems to contemplate the opening of the public domain to
competitive exploitation. It nowhere authorizes anyone to grant or
to obtain
Page 338 U. S. 629
exclusive rights of access to these coal resources. What lessees
can acquire from the Government is a supply of coal, not an
exclusive market. We do not say that the Secretary may not
withhold, or by regulation provide for withholding, lands from
lease because the public interest would be injured, through
impairing private business, from excess production capacity. But we
find no authority to freeze this public interest into an
irrevocable private property right.
The allegations of the amended complaint therefore do not show a
cause of action to enforce a restrictive covenant or property right
against leasing other public lands as authorized by statute.
II
. VIOLATION OF LAW OR REGULATION
Since the District Court was overruled by the Court of Appeals
only because of the latter's property rights theory, and since the
complaint, without these allegations, had earlier been held
insufficient, it may be questioned whether other grounds to sustain
the judgment below can be availed of. But even if the allegations
fail to show a property right that equity will protect, they might
be sufficient to show a special injury or interest such as would
enable plaintiff to raise the question of violation of law or
regulation in the proposed leasing. To end a litigation already
pending too long, we assume, without deciding, that plaintiff may
raise this issue, which we now consider.
The only claim of law violation is that the Secretary is
proposing to violate his own regulation, promulgated pursuant to
the Act and hence having the force of law. That it binds him as
well as others while it is in effect is not doubted.
The regulation, on literal reading, does not purport to prohibit
the Secretary from any leasing unless need for new mines be shown.
It does direct the General Land
Page 338 U. S. 630
Office (now the Bureau of Land Management) to find need for
additional capacity before recommending new leasing. Its
recommendation, however, is only advisory, and can be overruled or
disregarded. On its face, therefore, the regulation would seem to
be directed primarily to a procedural matter within the Department
of the Interior. However, it is claimed that the letters of
Secretary Ickes at the time it was adopted, and the uniform
practice since, show it to have been a regulation fixing a
controlling policy. We proceed on that assumption.
In the case before us, the Secretary neither repudiates the
regulation nor stands upon any right to depart from it. He says
that, properly construed, it does not apply to the proposed Big
Horn lease. It only prevents a lease which will introduce a new
competitor to the filed, and not, he says, a lease which would only
enable an existing mine and an established business to continue.
Sheridan argues that this reasoning sanctions an evasion of the
regulation, in that Big Horn opened its mine on partially depleted
state lands knowing it must get federal lands also or quit. The
implication is that state lands were used as a sort of portal in
which to stand while prying a federal lease out from under the
regulation. Plaintiff insists that the Secretary is required to act
in the light of conditions when Big Horn first applied, and not as
of now when it has built up a going business on the inadequate
state leases, aided by war conditions.
But the action is one in equity, and "equity will administer
such relief as the exigencies of the case demand at the close of
the trial."
Bloomquist v. Farson, 222 N.Y. 375, 380, 118
N.E. 855, 856;
Lightfoot v. Davis, 198 N.Y. 261, 273, 91
N.E. 582, 586. The question on injunction is whether the action
threatened will be a violation if it now takes place in light of
conditions shown by the proposed amended complaint. That pleads
findings of the Department which show what has happened
Page 338 U. S. 631
since the Big Horn application was filed. Without recourse to
federal lands, it has established a mine and a business in the face
of Sheridan competition. If time has improved Big Horn's position
in this respect, it must be noted that the delay in acting on its
application has been largely due to plaintiff's protests and
litigations.
We think a court of equity cannot term unreasonable the view of
the Secretary that Big Horn's lease is not for "an additional coal
mine," need for which must be proved. It does not use federal
reserves to add a new competitor to the market. It uses them to
keep one there. We think the distinction is substantial, and the
Secretary's interpretation of the regulation is permissible, even
if not inevitable. The declining market following the war, and the
growing use of oil, may present difficult problems of survival for
government lessees and of fair dealing for the Secretary. But
courts can intervene only where legal rights are invaded or the law
violated.
We think the District Court rightly concluded that the amended
complaint fails to state a legal case for the relief asked.
Accordingly, the judgment below is
Reversed.
MR. JUSTICE DOUGLAS took no part in the consideration or
decision of this case.
*
"
EXHIBIT "A""
"
EXCERPT FROM LETTER OF JANUARY 24, 1934, FROM THE"
"
SECRETARY OF THE INTERIOR TO THE DIRECTOR OF THE"
"
BUREAU OF GEOLOGICAL SURVEY"
"The question of the advisability of withholding new leases of
coal lands of the United States has been presented to me."
"It is clear from the language of section 2 of the leasing act
of February 25, 1920 (41 Stat. 437) and from the interpretation
given to Section 13 of that act, relating to oil and gas, by the
Supreme Court in the case of
United States ex rel. McLennan v.
Wilbur, 283 U. S. 414, that it is within
the discretionary authority of the Secretary of the Interior
whether he shall issue any coal leases and coal prospecting
permits. In the present situation of the coal industry, it is
desirable that very few, if any, new coal leases or prospecting
permits be issued."
"Taking into consideration, however, that there may be some
cases where new small coal mines for local needs are advisable, and
that there may also be cases where leases for shipping mines should
not be denied, it is thought that no general order should be issued
in effect suspending the operation of the leasing act as to new
coal leases and prospecting permits. It is believed that
substantially the same result can be reached by declining to offer
coal lands for lease or to grant prospecting permits unless an
actual need for coal which cannot otherwise be reasonably purchased
or obtained is shown. . . ."
"Hereafter, the offering of coal lands for lease by competitive
bidding or the granting of prospecting permits should not be
recommended unless you have reliable information that there is an
actual need for coal which cannot otherwise be reasonably met."
"
EXHIBIT "B""
"
EXCERPT FROM LETTER OF JANUARY 24, 1934, FROM THE"
"
SECRETARY OF THE INTERIOR TO THE COMMISSIONER"
"
OF THE GENERAL LAND OFFICE"
"In the present situation of the coal industry, it is desirable
that very few, if any, new coal leases or prospecting permits be
issued."
"Taking into consideration, however, that there may be some
cases where new small coal mines for local needs are advisable, and
that there may also be cases where leases for shipping mines should
not be denied, it is thought that no general order should be issued
in effect suspending the leasing act as to new coal leases and
prospecting permits. It is believed that substantially the same
result can be reached by declining to offer coal lands for lease or
to grant prospecting permits unless an actual need is shown for
coal which cannot otherwise be reasonably purchased or obtained. .
. ."
"It is advisable that you, in the first instance, require lease
applicants to show fully the need for additional production of
coal."