Geysers Development P'ship v. Geysers Power Company, LLC

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAR 10 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
GEYSERS DEVELOPMENT No. 18-16654
PARTNERSHIP,
D.C. No. 3:17-cv-06834-WHO
Plaintiff-Appellee,
v. MEMORANDUM*
GEYSERS POWER COMPANY, LLC,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of California
William Horsley Orrick, District Judge, Presiding
Argued and Submitted February 11, 2020
San Francisco, California
Before: RAWLINSON and CALLAHAN, Circuit Judges, and BOLTON,**
District Judge.
This case concerns a lease entitling Geysers Power Company, LLC to
extract steam from and produce geothermal power on Geysers Development
Partnership’s (GDP) land in exchange for royalties. GDP sued for declarations that
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Susan R. Bolton, United States District Judge for the
District of Arizona, sitting by designation.
the lease (1) allows it to grant transmission-line easements to other companies
producing geothermal power in the area and (2) does not allow Geysers Power to
grant such easements. The district court granted summary judgment in GDP’s
favor. We have jurisdiction under 28 U.S.C. § 1291 and affirm.1
California courts treat geothermal resources as minerals, Phillips Petroleum
Co. v. Cty. of Lake, 18 Cal. Rptr. 2d 765, 767-68 (Cal. Ct. App. 1993), and mineral
leases as contracts, San Mateo Cmty. Coll. Dist. v. Half Moon Bay Ltd. P’ship, 76
Cal. Rptr. 2d 287, 291 (Cal. Ct. App. 1998). We therefore construe this lease like
any other contract, giving effect to the parties’ intent, as derived in the first
instance from the instrument’s language. Cal. Civ. Code §§ 1636, 1639. That
said, mineral leases are somewhat unique in that we interpret them “liberally in
favor of the lessor and strictly against the lessee.” San Mateo Cmty. Coll. Dist., 76
Cal. Rptr. 2d at 291 (citation omitted).
Geysers Power reads the lease as broadly granting it the exclusive use of the
surface for any purpose related to geothermal power, even when that power is
produced by a third party on neighboring land. The lease does not support this
reading. It gives Geysers Power the more limited right to extract steam and steam
by-products from GDP’s property. See Phillips Petroleum, 18 Cal. Rptr. 2d at 768
1
Because the parties are familiar with the facts of this case, we do not
discuss them at length here.
2
(describing the interests of a mineral lessee). Geysers Power’s other, incidental
rights are limited to activities necessary for carrying out this purpose. For
example, the lease cabins Geysers Power’s right to build transmission lines to
those that “Lessee may desire . . . in carrying on its business and operations on or
from said land” or with respect to power “developed thereon.”
Geysers Power points out that the lease also allows it to erect plants and
equipment “for the conversion of steam to electric power and for extraction of by-
products from steam produced from said land and/or premises in the vicinity of
said land.” But, like the district court, we read this sole reference to nearby
“premises” as more logically applying only to steam by-products. It fails to
contravene the “well established principle” that a mineral lease “does not carry
with it the right to use the surface in aid of mining or drilling on other lands.”
Russell v. Tex. Co., 238 F.2d 636, 642 (9th Cir. 1956) (citations omitted). The
lease, then, does not give Geysers Power rights over transmission lines for power
produced off-site.
Nor does the lease deprive GDP of these rights. GDP specifically reserved
for itself commercial uses of the land, and transmission lines fall within dictionary
definitions of “commercial.” See, e.g., Commercial Use, Black’s Law Dictionary
(11th ed. 2019) (“A use that is connected with or furthers an ongoing profit-
making activity.”). To be sure, the lease bars GDP from unreasonably interfering
3
with Geysers Power’s rights and operations, but the contemplated transmission
lines would not themselves cause such interference.
Furthermore, the parties’ extrinsic evidence of past easements shows, at
most, an inconclusive course of dealing. The district court therefore rightly relied
solely on the lease in its ruling. See Brobeck, Phleger & Harrison v. Telex Corp.,
602 F.2d 866, 871-72 (9th Cir. 1979). And although Geysers Power contends that
allowing competitors to build transmission lines over the land would violate the
implied covenant of good faith and fair dealing, it waived the argument by failing
to assert it in its opening brief. Accordingly, we conclude that the lease
unambiguously supports GDP’s position.2
AFFIRMED.
2
Geysers Power did not expressly argue below that the lease is ambiguous.
We nonetheless entertain the argument because it is strictly legal and GDP will
suffer no prejudice. See Allen v. Ornoski, 435 F.3d 946, 960 (9th Cir. 2006).
4