In the United States v. Gulf Refining Company case of 1924, the Supreme Court ruled on a dispute involving oil reserves in California. The U.S government had leased land to Southern Pacific Railroad with an agreement that any minerals found would be shared between them. However, when oil was discovered and subsequently refined by Gulf Refining Company (a third party), it led to a legal conflict over who should receive profits from this venture. The court held that under the leasing act of 1875, mineral rights were reserved for the federal government even if they weren't explicitly mentioned in contracts or deeds at later dates; thus ruling against both Southern Pacific and Gulf Refining Company's claims to exclusive ownership of these resources. This decision established important precedent regarding property rights and resource extraction on public lands.

In the dissenting opinion for United States v. Gulf Refining Company, Justice McReynolds disagreed with the majority's interpretation of Section 4 of the Leasing Act. He argued that this section did not grant authority to impose penalties on oil companies who failed to comply with regulations regarding production rates and prices set by a government agency. According to him, such an interpretation would mean that Congress had delegated its legislative power in violation of constitutional principles. Furthermore, he contended that if Congress intended to authorize such penalties, it should have done so explicitly rather than leaving it up to implication or inference from ambiguous language in the statute. Therefore, he concluded that Gulf Refining Company could not be penalized under Section 4 for non-compliance with these regulations.