Asarco Inc. v. Kadish

1989-05-30

Headline: Court affirms that Arizona’s law letting mineral leases skip federal advertising and appraisal rules is invalid, making state school land leases harder for current nonhydrocarbon lessees to keep.

Holding: The Court held that Arizona must follow the Enabling Act’s mandatory leasing procedures for mineral lands and affirmed the Arizona Supreme Court’s invalidation of §27-234(B) for nonhydrocarbon leases.

Real World Impact:

Threatens validity of current nonhydrocarbon mineral leases on Arizona school trust lands.
Requires Arizona to use advertised auctions and appraisals before leasing school mineral lands.
Hydrocarbon leases may remain exempt under later federal amendment.

Topics: mineral leases, state land trusts, federal land grants, standing and jurisdiction, school funding

Summary

Background

Individual taxpayers and the Arizona Education Association sued the Arizona Land Department over a state law, §27-234(B), that governs mineral leases on state school lands. The law required a 5% royalty but did not require public advertising, appraisal, or sale to the highest bidder. Mining companies and current lessees including ASARCO intervened as defendants. The Arizona Supreme Court ruled the statute invalid for nonhydrocarbon mineral leases, and the lessees sought review in this Court.

Reasoning

The central question was whether Arizona must follow the federal statutes that originally granted the lands (the 1910 Enabling Act and the 1927 Jones Act) when leasing mineral lands. The Court held that the federal grants create mandatory conditions for disposal of school lands and that the Jones Act extended the Enabling Act’s reach to mineral lands. Because §27-234(B) allowed mineral leases without the advertising, appraisal, and bidding procedures required by the Enabling Act, it did not substantially conform to the federal statutes and was invalid as to nonhydrocarbon mineral leases. The Court therefore affirmed the Arizona Supreme Court’s judgment.

Real world impact

The ruling means existing nonhydrocarbon mineral leases made under the invalid state statute face a threat to their continuing validity. Arizona and other states holding similar school trust lands must follow federal procedures (advertising, appraisal, highest bid) when leasing those mineral lands. The 1951 amendment that treats hydrocarbon leases differently remains important for oil and gas leases.

Dissents or concurrances

Justices divided on standing and jurisdiction. Justice Brennan would not reach Part II-B-1; Chief Justice Rehnquist argued plaintiffs lacked Article III standing and would have dismissed the appeal.