United States Court of Appeals for the Federal Circuit
04-5031
THE STEARNS COMPANY, LTD.,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Appellant.
Bruce F. Clark, Stites & Harbison PLLC, of Frankfort, Kentucky, argued for plaintiff-
appellee. With him on the brief were Judith A. Villines and Michele M. Whittington.
Katherine J. Barton, Attorney, Appellate Section, Environment & Natural Resources
Division, United States Department of Justice, of Washington, DC, argued for defendant-
appellant. With her on the brief were Thomas L. Sansonetti, Assistant Attorney General,
Silvia Sepulveda-Hambor and Kathryn E. Kovacs, Attorneys. Of counsel on the brief was
Daniel W. Kilduff, Office of the Solicitor, United States Department of the Interior, of
Washington, DC. Of counsel was Kelly A. Johnson, Deputy Assistant Attorney General.
John D. Echeverria, Georgetown Environmental Law & Policy Institute, Georgetown
University Law Center, of Washington, DC, for amicus curiae Kentucky Resources
Council, Inc.
Timothy J. Dowling, Community Rights Counsel, of Washington, DC, for amici
curiae International Municipal Lawyers Association and The National League of Cities. Of
counsel on the brief was Jason C. Rylander.
Appealed from: United States Court of Federal Claims
Senior Judge Loren A. Smith
United States Court of Appeals for the Federal Circuit
04-5031
THE STEARNS COMPANY, LTD.,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Appellant.
___________________________
DECIDED: January 28, 2005
___________________________
Before CLEVENGER, SCHALL, and GAJARSA, Circuit Judges.
CLEVENGER, Circuit Judge.
The United States appeals the judgment of the Court of Federal Claims that
provisions of the Surface Mining Control and Reclamation Act of 1977 ("SMCRA"), 30
U.S.C. §§ 1201-1328, effected a taking of Appellee's mineral rights. See Stearns Co. v.
United States, 53 Fed. Cl. 446 (2002). Because the Court of Federal Claims erred in
concluding that SMCRA produced a physical taking of Appellee's mineral rights and
because a claim that SMCRA caused a regulatory taking is not ripe, we reverse.
I
This case involves property that is currently part of the Daniel Boone National
Forest. In 1937, Appellee sold the surface rights to the property to the United States.
53 Fed. Cl. at 447. By deed, Appellee retained in perpetuity the mineral rights
consisting of "all metalliferous metals, coal, oil, gas, and limestone," id., which the
parties accept under Kentucky law "carries with it an implied appurtenant easement for
the use of the surface giving the holder the right to access and use the surface for the
purpose of removing [the] minerals." Id. at 452.
Thereafter, in 1977, Congress enacted SMCRA the purpose of which is to
"establish a nationwide program to protect society and the environment from the
adverse effects of surface coal mining operations." 30 U.S.C. § 1202(a); Hodel v. Va.
Surface Mining and Reclamation Ass'n, 452 U.S. 264, 268 (1981). SMCRA is
administered by the Office of Surface Mining Reclamation and Enforcement ("OSM").
Hodel, 452 U.S. at 268-69.
SMCRA prohibits surface mining, including surface activity associated with
underground mining, in national forests unless the party seeking to mine has "valid
existing rights" ("VER") or where "the Secretary finds that there are no significant
recreational, timber, economic, or other values which may be incompatible with such
surface mining operations." 30 U.S.C. § 1272(e)(2) (2000). A party has VER where
permits to conduct mining were secured, or in good faith applied for, before SMCRA
was enacted. 58 Fed. Cl. at 449.
Appellee leased its mineral interest to Ramex Mining Corporation ("Ramex") in
1980. Id. at 448. To access the minerals, Ramex needed to disturb the surface of the
national forest property. OSM advised Ramex that it needed to submit an application so
that OSM could determine whether Ramex had VER, and if not, make a compatibility
determination. Id. Ramex initially sought a compatibility determination, but Appellee,
pursuant to the terms of the lease, demanded that Ramex withdraw the application. Id.
04-5031 2
In 1986, OSM determined that Appellee does not have VER. Id. at 449. Appellee did
not subsequently seek a compatibility determination, deciding instead to bring suit in the
Court of Federal Claims claiming that the denial of VER constituted a taking of their
property.
The Court of Federal Claims agreed with Appellee, concluding that in
implementing SMCRA the United States caused a "physical taking by operation of law."
Id. at 447. According to the Court of Federal Claims, a physical taking occurred when
the United States adopted the "good faith, all permits test" for VER, which, also
according to the Court of Federal Claims, abolished Appellee's surface easement and
therefore its "right to mine." Id. at 450-51. The Court of Federal Claims was
unimpressed with the United States' argument that SMCRA acted only as a regulatory
framework and that the provision permitting mining in the event of a favorable
compatibility determination was a regulatory mechanism for allowing Appellee or its
lessee to mine the property in question. The United States appeals. This court has the
power to hear appeals from final decisions of the Court of Federal Claims pursuant to
28 U.S.C. § 1295(a)(3) (2000).
II
Whether a taking has occurred is a question of law based on factual
underpinnings. Wyatt v. United States, 271 F.3d 1090, 1096 (Fed. Cir. 2001). We
conduct a plenary review of the legal conclusions of the Court of Federal Claims while
reviewing its factual conclusions for clear error. Id. The facts of this case are not in
dispute.
04-5031 3
The United States argues that the facts of this case cannot give rise to a physical
taking and to the extent they might support a regulatory taking, such a claim is not yet
ripe because there is no final administrative decision on whether Appellee can mine.
Appellee counters that the determination by OSM that it did not have VER was the act
that effected the taking because it unilaterally transferred the surface easement from
Appellee to the United States. Accordingly, Appellee argues that there is no need to
seek a compatibility determination, which under Appellee's theory is irrelevant to the
taking inquiry.
A
The application of SMCRA to Appellee's mineral property and accompanying
implied appurtenant easement is not a physical taking. A physical taking occurs "when
the government itself occupies the property or 'requires the landowner to submit to
physical occupation of its land.'" Forest Props., Inc. v. United States, 177 F.3d 1360,
1364 (Fed. Cir. 1999) (quoting Yee v. City of Escondido, 503 U.S. 519, 527 (1992)); see
also Tuthill Ranch, Inc. v. United States, 381 F.3d 1132, 1135 (Fed. Cir. 2004)
(explaining that physical takings require physical possession).
Here, the government has not occupied Appellee's mineral property or the
accompanying implied appurtenant easement. Also, the government has not required
Appellee to accept the physical presence of a third party on any of the property.
Appellee's argument to the contrary is little more than an incredible attempt to transform
a regulatory taking claim into a per se physical taking. Under Appellee's theory, the
implied appurtenant easement that attends the mineral estate creates a power in
04-5031 4
Appellee to be free from regulation that addresses the circumstances of access to that
mineral estate.
It does not. For that reason, Appellee's complaint that it has been ousted from its
easement, or that its easement has been taken or extinguished because Appellee does
not have VER and must submit to a compatibility determination is not tenable. As the
Supreme Court has held, SMCRA is facially constitutional. See Hodel, 452 U.S. at 275-
305. Accordingly, the question is not whether the government can regulate, but whether
government regulation produces a taking. What remains is the question of the extent to
which government regulation interferes with the economic use of the property. This is a
classic example of a regulatory taking problem, not, as the Court of Federal Claims
believed, an example of a physical taking.
B
Once viewed from the proper perspective, i.e., as a claim for a regulatory taking,
it becomes clear that Appellee's claim is not ripe. The mere assertion of regulatory
jurisdiction by a governmental body does not constitute a regulatory taking. See United
States v. Riverside Bayview Homes, Inc., 474 U.S. 121, 126 (1985) (citing Hodel).
When the regulatory framework provides for the procedures through which a property
owner can obtain permission to use the property, the deciding agency may ultimately
permit the property owner to use the property as desired. Id. at 127. Consequently, the
general rule is that a claim that government regulation has taken the economic viability
of a property "is not ripe until the government entity charged with implementing the
regulations has reached a final decision regarding the application of the regulations to
04-5031 5
the property at issue." Williamson County Reg'l Planning Comm'n v. Hamilton Bank,
473 U.S. 172, 186 (1985).
As noted above, the SMCRA regulatory scheme requires that Appellee get
administrative permission to disturb the surface of the national forest. Relevant to this
case, that permission can be obtained by one of two avenues: (1) showing that the
landowner has VER or (2) obtaining a favorable compatibility determination.
Here, Appellee sought and was denied the status of a property owner with VER.
Appellee has decided not to challenge the administrative interpretation of VER or the
application of that interpretation to its property. Failure to obtain VER status has not,
however, defeated Appellee's expectation that it may use the property in question. To
the contrary, Appellee may still obtain permission to use its easement and access the
mineral estate by seeking a compatibility determination. Thus, this is not a case where
a property owner's decision to avoid the remaining administrative procedures can be
excused as futile. See Greenbriar v. United States, 193 F.3d 1348, 1359 (Fed. Cir.
1999). There is no dispute that OSM has the authority, by application of the
compatibility provision, to permit the use that Appellee seeks.
III
In summary, the Court of Federal Claims erred when it determined that a
physical taking occurred when OSM determined that Appellee did not have VER. At no
time was Appellee required to suffer the physical occupation of either the government or
a third party on either the mineral estate or the implied appurtenant easement.
Furthermore, by refusing to seek a compatibility determination, Appellee prevents this
court from knowing whether or to what extent the agency will restrict the use of the
04-5031 6
property at issue. A determination by OSM that Appellee's proposed mining is not
incompatible under 30 U.S.C. § 1272(e) and 30 C.F.R. § 761.5 could allow Appellee to
use its easement and mine its mineral estate. OSM has not made a final determination.
Thus, to the extent the Court of Federal Claims viewed this case as presenting a
regulatory taking, it erred in finding a taking as a claim for a regulatory taking is not ripe
for review.
For the reasons discussed above, the decision of the Court of Federal Claims is
reversed.
REVERSED
04-5031 7