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States regulate the methods by which mineral leases are made and to specify any additional terms in those leases that are thought necessary or desirable, as long as the leases comply with the dispositional requirements set forth in the New Mexico-Arizona Enabling Act, 65 Stat. 51(1951).
The New Mexico-Arizona Enabling Act of 1910 (the "Enabling Act") (36 Stat 557) (later amended), which allowed the peoples of those federal territories to form state governments, also granted to Arizona certain public lands subject to specified conditions, including the requirements that (1) with an exception for leases for a term of 5 years or less, the granted lands generally could not be sold or leased except to the highest bidder at a public auction following notice by advertisements in two newspapers weekly for 10 weeks; (2) the granted lands could not be sold or leased for less than the value set by a required appraisal; and (3) all proceeds derived from the lands would go to a permanent segregated fund, whose interest, but not principal, was to be spent for the support of public schools. Arizona incorporated the conditions in its proposed constitution and was admitted to the Union in 1912. The Enabling Act's school grants specifically excluded mineral lands, but some grants similar to the Enabling Act's were interpreted to include lands on which minerals were not discovered until after such a grant, and Congress in 1927 passed the Jones Act (44 Stat 1026), which extended the terms of the original grant of lands in the Western states to encompass mineral lands. Later, in the Act of June 5, 1936 (the "1936 Act") (49 Stat 1477) and the Act of June 2, 1951 (the "1951 Act") (65 Stat 51), Congress amended the Enabling Act twice with respect to the procedures for leasing granted lands for specific purposes. Also, Arizona passed its own statute which, with respect to the leasing of state mineral lands, (1) required every such lease to provide for payments to the state by the lessee of a royalty of 5 percent of the net value of the minerals produced from the claim; but (2) did not require those lands to be advertised or appraised before they were leased; and (3) did not require the lands to be leased at their full appraised value. Some individual taxpayers and an association of public school teachers brought suit in an Arizona state court against the Arizona state land department and others, and sought declaratory and injunctive relief, on the ground that the state statute violated the leasing methods prescribed by the Enabling Act and repeated in the state constitution. Several mineral lessees of state school lands were permitted to intervene as defendants. The trial court upheld the state statute on cross motions for summary judgment, but, on appeal by the plaintiffs, the Supreme Court of Arizona (1) reversed, on the ground that the statute was unconstitutional and invalid as the statute pertained to nonhydrocarbon mineral leases; and (2) remanded the case to the trial court with instructions to enter summary judgment for the original plaintiffs, to enter a judgment declaring the state statute invalid, and to consider what further relief, if any, might be appropriate. Some mineral lessees then filed a petition for certiorari.
Was Arizona's statute governing mineral leases on state lands void because it does not conform with the federal laws that originally granted those lands from the United States to Arizona?
The court held that it had jurisdiction. Specifically, the judgment below was appealable under an exception to the 28 U.S.C.S. § 1257. Although the case would have been dismissed from federal court for lack of standing, U.S. Const. art. III did not apply to the state courts. The matter was a justiciable case or controversy based on the specific injury that would result from the state court's judgment, which was based on federal law, not an independent an adequate state ground. As to Ariz. Rev. Stat. Ann. § 27-234(B) (Supp. 1988), that statute was invalid as to nonhydrocarbon mineral leases. Rather, the private sales and leases of government granted mineral lands had to substantially comply with the Enabling Act and the Jones Act.