Wagner v. Chevron Oil Co., CV-N-03-0504-ECR.

• Decision Date: 07 June 2004
• Docket Number: No. CV-N-03-0504-ECR.,CV-N-03-0504-ECR.
• Citation: 321 F.Supp.2d 1195
• Parties: Emma WAGNER, Plaintiff, v. CHEVRON OIL COMPANY, a Delaware corporation, et al., Defendants.
• Court: U.S. District Court — District of Nevada

321 F.Supp.2d 1195

Emma WAGNER, Plaintiff, v. CHEVRON OIL COMPANY, a Delaware corporation, et al., Defendants.

No. CV-N-03-0504-ECR.

United States District Court, D. Nevada.

June 7, 2004.

COPYRIGHT MATERIAL OMITTED

Wallace D. Stephens, Stephens, Knight & Edwards, Reno, NV, for Plaintiff.

W.C. Wicker, Woodburn & Wedge, Reno, NV, Dale E. Ferguson, W.C. Wicker, Woodburn & Wedge, Reno, NV, Craig D. Galli, Lindsay L. Hola (Pro Hac Vice Firm), Holland & Hart, LLP, Salt Lake City, UT, T.R. Guy, Weil, Gotshal & Manges, Dallas, TX, Brent T. Kolvet, Thorndal Armstrong Delk, et al., Reno, NV, for Defendants.

ORDER

EDWARD C. REED, JR., District Judge.

On August 7, 2003, Plaintiff Emma Wagner ("Plaintiff") filed a 171-page complaint (attached to doc. # 1) in the Third Judicial District Court of the State of Nevada in and for the County of Churchill. The complaint alleges that Plaintiff has not received her fair share of the proceeds from the Soda Lake Unit Area ("Soda Lake Unit" or the "Unit"), which was created in 1977. Although the complaint is not entirely clear as to what Plaintiff claims, it appears that Plaintiff is alleging that her parcels of land (specifically the geothermal resources underlying her land) were joined in the Unit and are currently being used to produce electricity, but were improperly excluded from the Participating Area.

On September 12, 2003, the Defendants that had been served in the above-entitled action — Chevron USA, Inc., Western States Geothermal Company, Ormat Nevada, Inc., Daniel Schochet, OESI Power Corporation, Amor III Corporation, AMOR 17 Corporation, Nevada Operations, Inc., Geor III Corporation, Soda Lake Resource Partnership, Soda Lake Limited Partnership, Amor IX Corporation, CD Soda SLR, Inc., CD Soda I, Inc., CD Soda II, Inc., Constellation Energy Group, Inc., Constellation Holdings, Inc., Constellation Investments, Inc., Constellation Operating Services, Inc., Constellation Operating Services, COSI-ULTRA, Inc., COSI-ULTRA II, Inc., Constellation Power, Inc., Steven King, Harbinger Soda Lake Holdings LLC, Harbinger Soda Lake I LLC, Harbinger Soda Lake II LLC (collectively the "Defendants") — filed a notice of removal (# 1) pursuant to 28 U.S.C. § 1441(b).¹ Soon thereafter, Defendant Prudential Insurance Company of America ("Prudential"), which did not join in the notice of removal (# 1), filed its consent (# 2) to the removal of the action to this court. Once defendant U.S. Bank National Association, the successor by merger to U.S. Bank Trust National Association, was finally served, it filed a separate consent (# 22) to removal.

On September 19, 2003, Defendants filed an answer and three counterclaims (# 3).² Then, on October 9, 2003, Plaintiff filed a motion to remand (# 14), a motion to dismiss (# 15) the counterclaim, and a memorandum (# 16) in support of the motion to remand and the motion to dismiss. Defendants filed an opposition (# 26) to the motion to remand, which defendant Prudential joined (# 29), and Plaintiff replied (# 27) to said opposition (# 26). Plaintiff's motion to remand (# 14), which asserts that we are without federal-question jurisdiction to decide Plaintiff's state-law causes of action, is now ripe. We now rule on said motion.³

I. BACKGROUND INFORMATION

A. What is a Geothermal Resource?

The Ninth Circuit has summarized various authorities and explained the nature of geothermal resources as follows:

Various elements cooperate to produce geothermal power accessible for use on the surface of the earth. Magma or molten rock from the core of the earth intrudes into the earth's crust. The magma heats porous rock containing water. The water in turn is heated to temperatures as high as 500 degrees Fahrenheit. As the heated water rises to the surface through a natural vent, or well, it flashes into steam. Geothermal steam is used to produce electricity by turning generators.

United States v. Union Oil Co. of Cal., 549 F.2d 1271, 1272 (9th Cir.1977). (citing Reich v. Comm'r, of Internal Revenue, 52 T.C. 700, 704-05, 1969 WL 1674 (1969), aff'd, 454 F.2d 1157 (9th Cir.1972); H.R.Rep. No. 91-1544, reprinted in 3 U.S.C.C.A.N. 5113, 5114 (1970); Brooks, Legal Problems of the Geothermal Industry, 6 Nat. Resources J. 511, 514-15 (1966); Barnea, Geothermal Power, Sci. Am., Jan. 1972, at 70, 74). Nevada Revised Statutes ("NRS") 534A.010 similarly defines a "geothermal resource" as "the natural heat of the earth and the energy associated with that natural heat, pressure and all dissolved or entrained minerals that may be obtained from the medium used to transfer that heat, but excluding hydrocarbons and helium."

Unlike mineral deposits and oil and gas resources, a geothermal resource is not a portable, physical commodity that can be easily removed; therefore, geothermal energy must be exploited on the lands from which it is removed. However, many of the opportunities for development of geothermal resources are found on public lands, under the authority of either federal or state officials. See Robert B. Keiter, The Old Faithful Protection Act, 14 Pub. Land L.Rev. 5, 9-10 (1993). Prior to the passage of the Geothermal Steam Act in 1970, the Department of the Interior ("DOI") took the position that it lacked authority to dispose of geothermal resources under its jurisdiction. H.R.Rep. No. 91-1544 (1970), reprinted in 3 U.S.C.C.A.N. 5113, 5115. Since no existing law authorized the exploration or development of lands owned by the United States, the DOI had a policy that any attempt to exploit geothermal rights on lands owned by the United States constituted trespass against the United States. Keiter, supra, at 9-10. This policy and the lack of DOI authority seriously impaired the development of geothermal resources. H.R.Rep. No. 91-1544 (1970), reprinted in 3 U.S.C.C.A.N. 5113, 5115.

Eventually, Congress passed the Geothermal Steam Act of 1970 ("Geothermal Steam Act" or the "Act"), thereby recognizing that it was in the public interest to enact federal law to create a legal framework to permit the development of geothermal resources on federal lands. See Steven R. McNutt, Rosette, Inc. v. United States: Is the United States Full of Hot Air When it Comes to the Reservation of Geothermal Resources as a "Mineral?", 8 Great Plains Nat. Resources J. 44, 47 (2003). Congress recognized that "geothermal power stands out as a potentially invaluable untapped natural resource" and that "[t]he Nation's geothermal resources promise to be a relatively pollution-free source of energy, and their development should be encouraged." H.R.Rep. No. 91-1544 (1970), reprinted in 3 U.S.C.C.A.N. 5113, 5115.

Although the main thrust of the Geothermal Steam Act is to empower the DOI with the authority to lease federal land to develop geothermal resources, 30 U.S.C. § 1002, the Act also permits federal lessees to join a "cooperative or unit plan of development or operation" with each other or "others" (privately-owned or state-owned land) for the purpose of "properly conserving the natural resources of any geothermal pool, field, or like area ... whenever this is determined and certified by the Secretary to be necessary or advisable in the public interest." 30 U.S.C. § 1017; see H.R.Rep. No. 91-1544 (1970), reprinted in 3 U.S.C.C.A.N. 5113, 5116 ("[The Geothermal Steam Act] provides statutory authority for the Secretary of the Interior to issue leases for the development of geothermal steam and the associated geothermal steam resources underlying the public lands ...."). Nevada state law does not either expressly authorize or prohibit the formation or operation of such cooperative units. See NRS 534A.010 to .090.

B. Plaintiff's Complaint

Plaintiff alleges that she owns approximately 860 acres of land that was committed to the Soda Lake Unit, a geothermal cooperative unit located in Churchill County, Nevada, and formed in 1977. Plaintiff allegedly owned the different parcels of land either (1) as community property with her husband, Warren O. Wagner, (2) through her community property interest in two corporations, American Market Research Corporation ("AMR") and Prosit, Inc., or (3) as the beneficiary of a trust administered by University of South Florida Foundation, Inc. ("USFF") as trustee. After the administration of Warren Wagner's estate was completed sometime in 2000 or 2001, Plaintiff alleges that she became the sole owner of the subject parcels of land because she either owned or succeeded to the following interests: (1) her community property interest in the subject properties, (2) her late husband's community property interest in the subject properties, (3) the interest held by both her corporations (AMR and Prosit), and (4) the interest held in the trust administered by USFF, to which she was a beneficiary. Thereafter, Plaintiff allegedly became the outright owner of all 860 acres of land, including the geothermal resources that are the subject matter of this dispute.

Warren Wagner, AMR, and USSF (as trustee) allegedly leased the working interests in the geothermal resources underlying Plaintiff's land to Phillips pursuant to separate lease agreements, which were executed in 1973. In 1977, Phillips then allegedly joined the Soda Lake Unit and committed Plaintiff's land to the Unit by signing the Unit Agreement with the written consent of Warren Wagner. Plaintiff alleges that neither she nor any other interested party withdrew her land from the Unit and, therefore, her land is still joined in the Unit. A 1978 DOI memorandum, which was addressed to the Bureau of Land Management ("BLM"), allegedly indicates that Plaintiff's land was "fully committed" to the Unit.

The complaint further alleges that exploratory wells were drilled from 1977 through 1982 to search for a well capable of commercial productivity. Phillips which held the working interest share in Plaintiff's geothermal resources at that time, allegedly paid its proportionate share of the exploratory costs. In ...