## Facts

- Rosette and related corporations owned the surface estate of Hidalgo County, New Mexico lands patented in 1933 and 1935 under the Stock-Raising Homestead Act (SRHA).
- The SRHA patents reserved to the United States “all the coal and other minerals” in the patented lands.
- Wells drilled in the 1940s–1950s encountered very hot water; Rosette later used subsurface heat to warm commercial rose-growing greenhouses.
- Under the Geothermal Steam Act of 1970, the Secretary of the Interior leased geothermal rights on the lands to third parties.
- The federal geothermal leases designated Rosette as an operator, required royalty payments, and barred drilling deeper than 1,000 feet without prior written consent.
- Rosette filed a federal quiet-title action asserting geothermal resources were not “minerals” reserved by the SRHA; the United States counterclaimed for unpaid lease royalties.
- The quiet-title claim was dismissed as time-barred; thereafter Rosette reopened a capped well and used it to heat greenhouses without obtaining required consent, even though the well exceeded 1,000 feet.
- The United States amended its counterclaim to seek an injunction against unauthorized geothermal use below 1,000 feet and to confirm federal title to the geothermal resources.

## Issues

1. Whether geothermal resources (steam, hot water, and subsurface heat) are “minerals” reserved to the United States under SRHA patent reservations of “all the coal and other minerals.”
2. If geothermal resources are reserved minerals, whether an SRHA surface owner has an implied right to use those resources for agricultural operations without federal consent and notwithstanding federal leases.

## Decision

- The Tenth Circuit affirmed summary judgment for the United States.
- The court held the geothermal resources at issue are “minerals” within the SRHA reservation and therefore belong to the United States.
- The court held Rosette had no independent right, as surface owner, to exploit federally reserved geothermal resources in a manner inconsistent with federal ownership and lease limits.
- The court affirmed injunctive relief barring Rosette from using geothermal resources below 1,000 feet without required federal/lessee consent and compliance with lease terms.

## Legal Principles

- SRHA patents sever the surface estate from a federally reserved mineral estate; the reservation of “all the coal and other minerals” can include commercially exploitable geothermal resources.
- Geothermal resources may be treated as part of the federal mineral estate when they are valuable subsurface resources subject to separate development and federal leasing.
- Surface ownership under the SRHA does not confer a right to appropriate or develop federally reserved minerals; surface use must yield to the mineral owner’s rights and applicable federal leasing regimes.
- Federal geothermal leases and regulatory conditions may lawfully restrict operations (including depth limits and royalty obligations), and unauthorized development can be enjoined.

## Conclusion

The Tenth Circuit concluded that geothermal resources beneath SRHA-patented lands are reserved “minerals” owned by the United States and that SRHA surface owners cannot use or develop those resources contrary to federal leasing requirements, including depth restrictions and royalty obligations.


Rosette Inc. v. United States, 277 F.3d 1222 (10th Cir. 2002)