National Geothermal Policy and National Geothermal Policy and RegulationRegulation

R. Gordon Bloomquist, Ph.D.R. Gordon Bloomquist, Ph.D.Washington State University Energy ProgramWashington State University Energy Program

Salt Lake City, UtahSalt Lake City, Utah20 January 200420 January 2004

Minerals on federal land were Minerals on federal land were separated by law into two groups:separated by law into two groups:• The locatable minerals obtained by claim, The locatable minerals obtained by claim,

such as gold, silver and copper; andsuch as gold, silver and copper; and

• The leasable minerals that required a lease The leasable minerals that required a lease fee and royalties on production, such as fee and royalties on production, such as petroleum, natural gas and geothermal.petroleum, natural gas and geothermal.

Legal Definition and Legal Definition and Determination of Ownership Determination of Ownership

• Geothermal resources are similar to water, Geothermal resources are similar to water, gas and minerals.gas and minerals.

• They pertain to both the surface and They pertain to both the surface and subsurface estates.subsurface estates.

• Ownership may be assigned to the surface Ownership may be assigned to the surface estate of to the holder of water or mineral estate of to the holder of water or mineral rights.rights.

Geothermal Resources DefinitionGeothermal Resources Definition

• Describing the physical properties that Describing the physical properties that distinguish geothermal resources from other distinguish geothermal resources from other natural resources.natural resources.

• Comparing geothermal resources to Comparing geothermal resources to groundwater, subsurface minerals and other groundwater, subsurface minerals and other established resources.established resources.

The Federal Geothermal Steam The Federal Geothermal Steam Act of 1970Act of 1970

• All products of geothermal processes, All products of geothermal processes, embracing indigenous steam, hot water and embracing indigenous steam, hot water and hot brines;hot brines;

• Steam and other gases, hot water and hot Steam and other gases, hot water and hot brines resulting from water,brines resulting from water,

• Heat or other associated energy, andHeat or other associated energy, and

• Any by-products.Any by-products.

Washington takes a different Washington takes a different approach.approach.

‘‘Geothermal resource’ the natural Geothermal resource’ the natural heat energy of the earth from which it heat energy of the earth from which it

is technologically practical to is technologically practical to produce electricity commercially.produce electricity commercially.

Alaska separates the regulation of high-Alaska separates the regulation of high-temperature geothermal (greater than 120temperature geothermal (greater than 120°C), °C),

from low-temperature resources.from low-temperature resources.

Resource CharacterizationResource Characterization

• Geothermal resources are similar in many Geothermal resources are similar in many respects to water, minerals and gas.respects to water, minerals and gas.

• What is the nature of the resource?What is the nature of the resource?

• Who has ownership rights?Who has ownership rights?

In the case of Federal law, the courts decreed In the case of Federal law, the courts decreed that geothermal resources are mineral in that geothermal resources are mineral in

nature and belong to the mineral estate.nature and belong to the mineral estate.

OwnershipOwnership

• The federal government claims geothermal The federal government claims geothermal ownership wherever it holds the mineral ownership wherever it holds the mineral estate.estate.

• In Washington, geothermal resources are In Washington, geothermal resources are the property of the surface owner.the property of the surface owner.

• In Wyoming, where geothermal is In Wyoming, where geothermal is characterized as water, geothermal characterized as water, geothermal resources are a public resource.resources are a public resource.

Obtaining Access to Geothermal Obtaining Access to Geothermal Resources on Federal LandResources on Federal Land

On federal lands, limited exploration On federal lands, limited exploration involving “casual use” activities, such involving “casual use” activities, such

as geo-logic mapping and spring as geo-logic mapping and spring sampling, may be conducted before sampling, may be conducted before securing a lease upon approval of a securing a lease upon approval of a

“Notice of Intent to Conduct “Notice of Intent to Conduct Resource Exploration Operations.”Resource Exploration Operations.”

Surface access and the priority right to Surface access and the priority right to explore, develop and use geothermal explore, develop and use geothermal

resources on Federal lands are acquired resources on Federal lands are acquired through an “Offer to Lease and Leases for through an “Offer to Lease and Leases for

Geothermal Resources.”Geothermal Resources.”

Exclusive access is provided through either Exclusive access is provided through either noncompetitive leases for lands of unknown noncompetitive leases for lands of unknown potential or through competitive bidding for potential or through competitive bidding for

particularly valuable resource areas, particularly valuable resource areas, designated as Known Geothermal Resource designated as Known Geothermal Resource

Areas (KGRA).Areas (KGRA).

Access to state-owned resources is usually Access to state-owned resources is usually provided through competitive or non-provided through competitive or non-

competitive leasing provisions.competitive leasing provisions.

Environmental ProtectionEnvironmental Protection

• The National Environmental Policy Act of The National Environmental Policy Act of 1969 (NEPA)1969 (NEPA)

• The Endangered Species Act of 1973.The Endangered Species Act of 1973.

• The Geothermal Steam Act of 1970.The Geothermal Steam Act of 1970.

The court concluded that the leasing of The court concluded that the leasing of Federal lands required completing an EIS and Federal lands required completing an EIS and a comprehensive biological study considering a comprehensive biological study considering

all stages of activity.all stages of activity.

The goal is to retain a maximum range of The goal is to retain a maximum range of options.options.

Federal Lease TermsFederal Lease Terms

• Federal leases are issued for a primary term Federal leases are issued for a primary term of ten years for only a filing fee and the first of ten years for only a filing fee and the first year’s lease rental of $1.00 per acre.year’s lease rental of $1.00 per acre.

• Competitive leases are offered in sealed-bid Competitive leases are offered in sealed-bid competitions. competitions.

A geothermal lease cannot exceed 2,560 A geothermal lease cannot exceed 2,560 acres. The minimum lease size is 640 acres. acres. The minimum lease size is 640 acres. No person or corporation may hold more than No person or corporation may hold more than

51,200 acres within any one state.51,200 acres within any one state.

Federal geothermal leases include a due Federal geothermal leases include a due diligence requirement to make sure there is diligence requirement to make sure there is active exploration during the primary lease active exploration during the primary lease

period.period.

Orderly development of a geothermal Orderly development of a geothermal resource involves several major phases. All resource involves several major phases. All post-lease exploration requires an approved post-lease exploration requires an approved

Plan of Operation.Plan of Operation.

Native American LandsNative American Lands

The Native American Tribes, as The Native American Tribes, as governmental entities, have a right to governmental entities, have a right to

manage their resources.manage their resources.

State LeasingState Leasing• Oregon, California and Alaska all have provisions for Oregon, California and Alaska all have provisions for

the issuance of exploration or prospecting permits the issuance of exploration or prospecting permits (providing non-exclusive testing of geothermal (providing non-exclusive testing of geothermal resources) in addition to having both competitive and resources) in addition to having both competitive and non-competitive leases.non-competitive leases.

• Most state leases have a primary term that varies from Most state leases have a primary term that varies from 5 to 10 years. All make provision for an extension of 5 to 10 years. All make provision for an extension of the lease once production in commercial quantities the lease once production in commercial quantities begins. Most have a provision for readjustments of begins. Most have a provision for readjustments of the lease terms and conditions at from 10 to 35 years the lease terms and conditions at from 10 to 35 years after commercial production commences.after commercial production commences.

All states require that developers submit All states require that developers submit exploration and development plans. All exploration and development plans. All

permits to conduct exploration activities and permits to conduct exploration activities and for construction of facilities require a for construction of facilities require a

thorough environmental review before the thorough environmental review before the permit may be granted.permit may be granted.

Private LeasingPrivate Leasing

Access to private land can be Access to private land can be obtained by sale, lease, permit, option obtained by sale, lease, permit, option or any other mutual agreement with or any other mutual agreement with

the owner of the surface property and the owner of the surface property and geothermal estate.geothermal estate.

Geothermal development on state or privately Geothermal development on state or privately owned land usually requires a series of owned land usually requires a series of

permits from state or local agencies for road permits from state or local agencies for road and pipeline construction, water and sewage and pipeline construction, water and sewage

disposal, air emissions and solid waste disposal, air emissions and solid waste disposal.disposal.

TaxationTaxation

• Each geothermal development company will Each geothermal development company will pay federal and state income tax on the profits pay federal and state income tax on the profits of its operations. The royalties paid from of its operations. The royalties paid from production on federal or state land is similar to production on federal or state land is similar to a severance tax.a severance tax.

• In many states, there is a property tax on the In many states, there is a property tax on the value of the geothermal resource in the value of the geothermal resource in the reservoir, and local property taxes are imposed reservoir, and local property taxes are imposed on the value of surface installations and power on the value of surface installations and power plants.plants.

SummarySummary

• The development of the legal and The development of the legal and institutional framework is a difficult and institutional framework is a difficult and often controversial process.often controversial process.

• The Geothermal Steam Act of 1970 The Geothermal Steam Act of 1970 provided the framework necessary and The provided the framework necessary and The National Environmental Policy Act of 1970 National Environmental Policy Act of 1970 provided the guidance.provided the guidance.