The United States Supreme Court case, UNITED STATES v. SOUTHERN PACIFIC COMPANY et al., 1921, revolved around the issue of land grants given to Southern Pacific Company by the federal government for railroad construction in California. The U.S. government claimed that certain lands were wrongfully patented to Southern Pacific because they fell within a mineral zone and thus should not have been included in the grant under an 1875 Act of Congress which excluded such lands from being granted for railway purposes. However, Southern Pacific argued that these lands were not known to be mineral-rich at the time of patenting and therefore their inclusion was valid. The Supreme Court ruled in favor of Southern Pacific stating that if a piece of land is not known or declared as valuable for minerals at the time it is listed or selected by a railroad company under any granting act, then it cannot later be classified as mineral land based on subsequent discoveries or developments.

In the dissenting opinion for United States v. Southern Pacific Company et al., Justice McReynolds disagreed with the majority's interpretation of the Act of 1866, which granted lands to railroad companies for construction purposes. He argued that this act did not grant rights to oil and mineral resources beneath these lands, as it was primarily intended to facilitate transportation development rather than resource extraction. Furthermore, he contended that subsequent legislation in 1875 clarified Congress' intent by explicitly excluding mineral rights from land grants made after its passage. Therefore, according to Justice McReynolds' interpretation, since Southern Pacific received its land grant prior to this clarification but had not begun significant drilling operations until afterwards, they should be subject only to regulations existing at the time of their initial grant and thus retain no claim over subterranean minerals or oils on their property.