Mineral Leasing Act of 1920

Mineral Leasing Act of 1920
Long titleAn Act to promote the mining of coal, phosphate, oil, oil shale, gas, and sodium on the public domain.
Enacted bythe 66th United States Congress
EffectiveFebruary 25, 1920
Citations
Public lawPub. L. 66–146
Statutes at Large41 Stat. 437
Codification
Titles amended30 U.S.C.: Mineral Lands and Mining
U.S.C. sections created30 U.S.C. ch. 3A § 181 et seq.
Legislative history
  • Introduced in the Senate as S. 2775 by Reed Smoot (R–UT) on August 15, 1919
  • Committee consideration by Senate Public Lands, House Rules
  • Passed the Senate on September 3, 1919 (Passed)
  • Passed the House on October 30, 1919 (Passed)
  • Reported by the joint conference committee on November 1, 1919; agreed to by the House on February 10, 1920 (287-13) and by the Senate on February 11, 1920 (Agreed)
  • Signed into law by President Woodrow Wilson on February 25, 1920
United States Supreme Court cases

The Mineral Leasing Act of 1920 30 U.S.C. § 181 et seq. is a United States federal law that authorizes and governs leasing of public lands for developing deposits of coal, petroleum, natural gas and other hydrocarbons, in addition to phosphates, sodium, sulfur, and potassium in the United States. Previous to the act, these materials were subject to mining claims under the General Mining Act of 1872.

Background

Previous to the Mineral Leasing Act of 1920, the General Mining Act of 1872 authorized citizens to freely prospect for minerals on public lands and allowed a discoverer to stake claims to both minerals and surrounding lands for development. This open-access policy enabled a major oil rush in the West, in 1909 prompting U.S. Geological Survey Director George Otis Smith to warn Secretary of the Interior Richard A. Ballinger that oil lands were being claimed so quickly they would be unavailable within a few months.[1] Ballinger notified President Taft who promptly created the first American oil reserve by executive order on September 27, 1909, withdrawing 3,041,000 acres (12,310 km2) of public lands in California and Wyoming from further claims, and reserving the oil for use by the United States Navy.[2] Congress ratified the president's authority to set aside federally owned lands with the passing of the Pickett Act (36 Stat. 847) in 1910. The Supreme Court further affirmed the president's constitutional power to withdraw public land from use in United States v. Midwest Oil Co., 236 U.S. 459 (1915).. Following these events, Congress enacted the Mineral Leasing Act of 1920 which dictated a system of leasing and development for mining interests on federally owned lands.

Mineral Leasing Act of 1920

Provisions in the act provide a number of functions:[3]

  • Enables entrance onto public lands to explore for minerals with permission of the government.
  • Enables drilling and extraction of minerals with authority granted by the government.
  • Enables the government to manage the exploitation of leasable minerals.
  • Enables the government to receive compensation from the lessee for the privilege of extracting minerals on federal public lands.

The Bureau of Land Management (BLM), a division of the Department of the Interior (DOI), is the principal administrator of the Mineral Leasing Act. BLM evaluates areas for potential development and awards leases based on whoever pays the highest bonus during a competitive bidding period.

Leasing

The Mineral Leasing Act "establishes qualifications for leases, sets out maximum limits on the number of acres of a particular mineral that can be held by a lessee, and prohibits alien ownership of leases except through stock ownership in a corporation." Conditions of a lease under the Mineral Leasing Act vary based on the type of mineral being extracted. Phosphate and potassium leases have terms and conditions subject to readjustment at the end of each 20-year period. Sodium and sulphur lessee's have the right to renew the lease terms at the end of the first 20-year period and every 10-year period after that.[4] Coal and oil shale leases are generally for 20 year periods, while oil and natural gas leases are generally for 10 year periods.[5]

Royalties

Royalties are payments made from one party to another based on usage of an asset, often in the form of a percentage. The Mineral Leasing Act required monetary gains from the leasing of public lands to be divided three ways, except for Alaska:[6]

  • 50 percent of gross revenues to state where the drilling takes place
  • 40 percent of gross revenues to Reclamation Fund
  • 10 percent of gross revenues to Federal Treasury.

In Alaska, 90 percent of the revenue goes to the state and 10 percent goes to the Federal Treasury.

Petroleum

Under the Mineral Leasing Act and later amendments, the right to produce federally owned petroleum (oil and natural gas) is secured for ten-year periods by competitive bidding, and goes to the party paying the highest bonus. There are three forms of payment to the government: bonus (an initial payment to the government), rental (an annual payment of $2 per acre), and royalty ( a payment of 1/8 or 12.5% of the gross value of the oil and gas produced).[7]

Coal

Under the Mineral Leasing Act as amended and the Mineral Leasing Act for Acquired Lands of 1947 as amended, coal leases are initially obtained for a 20-year period but can be terminated in 10 years if the resources are not sufficiently developed. As with petroleum, an initial bonus must be paid to the government at the time the lease is awarded. Annual rental fees for coal are $3 per acre. Royalties are 12.5% of the gross value for surface mined coal and 8% for coal produced from underground mines.[8]

As of August 2014, BLM lands subject to the Mineral Leasing Act totaled 258 million[9] surface acres and 57 million acres of subsurface (i.e., areas where the federal government owned the mineral rights but not the surface rights). At that time, the BLM regulated leasing of mineral resources on an additional 385 million[10] acres of land managed by other federal agencies.

Producers must pay royalties of at least 12.5%.[11][12][13] In addition, sealed bonus bids are held. The bonus bid is an up-front cash payment.[14][15] The lease is awarded to the bidder who offers the highest price, provided that their bid is deemed adequate.[16] For other fields a noncompetitive leasing system is used; this may be by lottery or on a "first-come, first-served" basis. Royalties must still be paid on all production.[17][18] Typically this rate ranges from 12.5 to 16 percent. Some leaseholders receive payments only every few months if their value is less than $50 per month.[19] Sometimes royalty rates are significantly reduced when the government wants to stimulate production.[20]

References

  1. ^ Hayes, Samuel. Conservation and the Gospel of Efficiency: The Progressive Conservation Movement, 1890–1920 (University of Pittsburgh Press, 1999), pp 89–90
  2. ^ Lita Epstein, C.D. Jaco, and Julianne C. Iwersen-Niemann, The Complete Idiot's Guide to the Politics of Oil (Alpha Books, 2003), pp 131–132
  3. ^ Mineral Leasing Act of 1920 30 U.S.C. § 181 et seq.
  4. ^ Feriancek, Jeanine. Minerals & Mining Law. Holland and Hart LLP. <http://library.findlaw.com/1999/Jan/1/241491.html>.
  5. ^ Gray, Brian. Mineral Leasing Act (1920). <http://www.enotes.com/major-acts-congress/mineral-leasing-act>.
  6. ^ Sally K. Fairfax, Carolyn E. Yale, Council of State Governments. Federal lands: a guide to planning, management, and state revenues (Island Press, 1987), pp 60.
  7. ^ American Petroleum Institute. Oil and Natural Gas Development on Public Lands are an Important Revenue Source for Government. <http://www.api.org/policy/exploration/development.cfm>.
  8. ^ Bureau of Land Management. Coal. <http://www.blm.gov/wo/st/en/prog/energy/coal_and_non-energy.print.html Archived 2012-05-17 at the Wayback Machine>.
  9. ^ "The Bureau of Land Management's Role in the Leasing and Development of the Wayne National Forest" (PDF). www.dmclaw.com. Retrieved 2026-03-16.
  10. ^ "West Virginia Supreme Court Declares that Minimum Royalty Statute Does Not Authorize the Deduction of Post-Production Costs". hh-law.com. Retrieved 2026-03-16.
  11. ^ "Interior Department Advances Energy Dominance through the One Big Beautiful Bill Act". www.doi.gov. Retrieved 2026-03-16.
  12. ^ "Petroleum Royalty Regulations Under Sections 304(2)" (PDF). www.nuprc.gov.ng. Retrieved 2026-03-16.
  13. ^ "Performer payments from streaming" (PDF). www.aepo-artis.org. Retrieved 2026-03-16.
  14. ^ "A Primer on Oil and Gas Leases and Surface Use Agreements for Members of the Western Landowners Alliance" (PDF). westernlandowners.org. Retrieved 2026-03-16.
  15. ^ "Auction of Mineral Resources – an anatomy" (PDF). www.fedmin.com. Retrieved 2026-03-16.
  16. ^ "Mineral Auctions In India: Winner's Curse Or Owner's Pride?" (PDF). www.teriin.org. Retrieved 2026-03-16.
  17. ^ "Frequently Asked Questions - Department of Treasury and Finance". treasury.nt.gov.au. Retrieved 2026-03-16.
  18. ^ "Mineral Royalty Tax" (PDF). www.zra.org.zm. Retrieved 2026-03-16.
  19. ^ "Mineral rights value". texasroyaltybrokers.com. Retrieved 2026-03-16.
  20. ^ "How Recent Government Changes in Canada Impact Oil and Gas Export to Asia?" (PDF). eneken.ieej.or.jp. Retrieved 2026-03-16.
This article is issued from Wikipedia. The text is available under Creative Commons Attribution-Share Alike 4.0 unless otherwise noted. Additional terms may apply for the media files.