Rosette Inc. v. USA

• Decision Date: 22 January 2002
• Docket Number: No. 00-2453,00-2453
• Citation: 277 F.3d 1222
• Parties: (10th Cir. 2002) ROSETTE INCORPORATED, a New Mexico corporation; BURGETT INVESTMENT, INCORPORATED, a New Mexico corporation; BURGETT GEOTHERMAL GREENHOUSE, INCORPORATED, a New Mexico corporation, Plaintiffs-Counter-Defendants-Appellants, v. UNITED STATES OF AMERICA; JOHN ASHCROFT, as Attorney General; DEPARTMENT OF INTERIOR; GALE A. NORTON, Secretary of Interior of the United States; JAMES BACA, in his official capacity as Director of Bureau of Land Management; WILLIAM CALKINS, in his official capacity as State Director of Bureau of Land Management; LINDA RUNDELL, in her official capacity as Las Cruces District Manager of Bureau of Land Management, Defendants-Counter-Claimants-Appellees
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1222

277 F.3d 1222 (10th Cir. 2002)

ROSETTE INCORPORATED, a New Mexico corporation; BURGETT INVESTMENT, INCORPORATED, a New Mexico corporation; BURGETT GEOTHERMAL GREENHOUSE, INCORPORATED, a New Mexico corporation, Plaintiffs-Counter-Defendants-Appellants, v. UNITED STATES OF AMERICA; JOHN ASHCROFT, as Attorney General; DEPARTMENT OF INTERIOR; GALE A. NORTON, Secretary of Interior of the United States; JAMES BACA, in his official capacity as Director of Bureau of Land Management; WILLIAM CALKINS, in his official capacity as State Director of Bureau of Land Management; LINDA RUNDELL, in her official capacity as Las Cruces District Manager of Bureau of Land Management, Defendants-Counter-Claimants-Appellees.

No. 00-2453

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

January 22, 2002

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO (D.C. No. CIV-93-1379-BB)

[Copyrighted Material Omitted] Stephen E. Hosford, of Martin, Lutz, Roggow, Hosford & Eubanks, P.C., Las Cruces, New Mexico, for the appellants.

Tamara N. Rountree, Assistant United States Attorney (Norman C. Bay, United States Attorney, and John W. Zavitz, Assistant United States Attorney, on the brief), Albuquerque, New Mexico, for the appellees.

Before BRISCOE and MURPHY, Circuit Judges, and OBERDORFER, Senior District Judge.^*

BRISCOE, Circuit Judge.

Plaintiffs Rosette Incorporated, et al. (Rosette), appeal from the district court's grant of summary judgment in favor of the United States as to the ownership of geothermal resources on property obtained pursuant to patents issued under the Stock-Raising Homestead Act of 1916 (SRHA), 43 U.S.C. 291 et seq.; 42 Stat. 1445 (repealed 1976); 39 Stat. 862-64, 65 (repealed 1976). We affirm, agreeing with the district court that the geothermal resources at issue in this case are "minerals" within the reservation of the patents.

I.

Rosette is a collection of related corporations controlled by Dale Burgett or members of his immediate family. Rosette owns the surface estate to certain real property in Section 7, Township 25 South, Range 19 West, Hidalgo County, New Mexico, by virtue of patents issued in 1933 and 1935 under the SRHA. The SRHA permitted any person qualified to acquire land to make a stockraising homestead entry on lands designated by the Secretary of the Interior. 43 U.S.C. 291. Such designated lands were to be

lands the surface of which is, in [the Secretary of the Interior's] opinion, chiefly valuable for grazing and raising forage crops, do not contain merchantable timber, are not susceptible of irrigation from any known source of water supply, and are of such character that six hundred and forty acres are reasonably required for the support of a family.

43 U.S.C. 292.

Under the SRHA, a homesteader could obtain a patent on the land if he resided for three years thereon and made permanent improvements tending to increase the value of the land for stockraising purposes. 43 U.S.C. 293. However, the SRHA required that the patent issued be "subject to and contain a reservation to the United States of all the coal and other minerals in the lands so entered and patented, together with the right to prospect for, mine, and remove the same." 43 U.S.C. 299. Rosette's patents contained a reservation of mineral rights by the United States consistent with 43 U.S.C. 299.

Several wells were drilled in Section 7 in the 1940s and 1950s, one of which encountered water as hot as 240 degrees Fahrenheit. In 1970, Congress enacted the Geothermal Steam Act (hereinafter Steam Act), which granted the Secretary of the Interior the authority to lease geothermal resources, including steam, hot water and hot brines, heat from geothermal foundations and byproducts of geothermal foundations, owned or reserved by the United States. 30 U.S.C. 1001 et seq. The Secretary of the Interior leased the geothermal rights to Section 7 to Amax Exploration, Inc., and later to Lightning Dock Geothermal, Inc. Rosette is a designated operator under the lease through agreements with the various leaseholders, and pays royalties. The lease agreement does not permit Rosette to drill deeper than 1,000 feet without prior written consent.

Rosette is in the business of growing roses in greenhouses for commercial distribution. The roses are planted in the ground. Rosette uses the heat in water from five wells located in Section 7 to heat its greenhouses, after which the water is discharged. No heat is transported off of the surface estate or used to generate other energy. Rosette uses water from wells outside Section 7 for irrigation purposes.

In 1993 Rosette filed an action for quiet title, ejectment, declaratory judgment and permanent injunction against the United States, arguing that geothermal resources are not reserved minerals under the SRHA. The United States filed a counterclaim for past-due royalties and seeking to enjoin Rosette. The district court dismissed Rosette's claims as barred by the statute of limitations, and this court affirmed. Rosette, Inc. v. United States, 141 F.3d 1394 (10th Cir. 1998).

Rosette reopened and installed a pump on a capped well, Well 55-7, located in Section 7, intending to use water from that well for the heating of the greenhouse. The depth of Well 55-7 exceeded 1,000 feet. Rosette did not seek permission from the geothermal leaseholder or the United States to utilize the well. As a result of Rosette's actions in reopening Well 55-7, the United States filed its second amended counterclaim to enjoin Rosette from using geothermal resources on its lease located deeper than 1,000 feet. Rosette's answer asked the district court to quiet title as to the geothermal resources against the United States.

The district court heard the second amended counterclaim on cross-motions for summary judgment after the parties had stipulated to numerous facts. The court analyzed the purpose of the SRHA and concluded that, although the SRHA passed in 1916 made no mention of geothermal resources, the definition of minerals as used in the SRHA was broad enough to encompass geothermal resources. The district court therefore found that title to the geothermal resources in Section 7 was vested in the United States as a matter of law, and issued a preliminary and permanent injunction prohibiting Rosette from utilizing the geothermal resources located deeper than 1,000 feet without authorization from the United States and the lessee. The court further ordered Rosette to remove its pump and recap Well 55-7. The parties stipulated as to damages.

II.

Rosette argues that the district court erred in finding that the United States has title to the geothermal resources under Section 7. Rosette's argument essentially advances three points: 1) Geothermal resources as a whole are not "minerals" under the SRHA; 2) even if geothermal resources as a whole may be "minerals" under the SRHA, the particular geothermal resources under Section 7 do not constitute "minerals" under the SRHA; and 3) even if the geothermal resources under Section 7 are "minerals" under the SRHA, Rosette still has the right to use the resources as surfaceholder to advance the purposes of Rosette's homestead.

This case was decided on summary judgment. This court reviews the district court's grant of summary judgment de novo, applying the same legal standard used by the district court. Under Federal Rule of Civil Procedure 56(c), summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and the admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Simms v. Oklahoma ex rel. Dep't of Mental Health, 165 F.3d 1321, 1326 (10th Cir. 1999). The evidence and reasonable inferences drawn therefrom are viewed in the light most favorable to the nonmoving party. See id.

Geothermal resources as minerals under the SRHA

The determination of whether geothermal resources are minerals under the SRHA requires interpretation of that Act. The construction and applicability of a federal statute is a question of law, which we review de novo. United States v. Telluride Co., 146 F.3d 1241, 1244 (10th Cir. 1998).

The United States Supreme Court examined the scope of the mineral reservation in the SRHA in Watt v. Western Nuclear, Inc., 462 U.S. 36 (1983). The question at issue in that case was whether gravel extracted from the ground of a patented site was a "mineral" and thus the property of the United States. The Court reasoned that, for a substance to be a mineral reserved under the SRHA, it must not only be a mineral within one or more familiar definitions of that term, but also the type of mineral that Congress intended to reserve to the United States in lands patented under the SRHA. Id. at 44. The Court stated that Congress' underlying purpose in severing the surface estate of lands patented from the mineral estate was to facilitate the concurrent development of both surface and subsurface resources, and that while Congress expected homesteaders to use the surface of land for stockraising and raising crops, it sought to ensure that valuable subsurface resources would remain subject to development by other developers who would be more likely to make use of the resources. Id. at 47.

Given the underlying purpose of the SRHA, the Court stated that "the determination of whether a particular substance is included in the surface estate or the mineral estate should be made in light of the use of the surface estate that Congress contemplated," that is, stockraising and the raising of forage crops. Id. at 52. The Court concluded that in order to qualify as a "mineral" under the reservation of the SRHA a substance must be 1) mineral in character, i.e. inorganic, 2) removable from the soil, 3) usable for commercial purposes, 4) and of such a character that there was no reason to suppose Congress...