Congressional Agreement Offers New Life for Geothermal

The House-Senate Conference Committee meeting on national energy legislation approved sweeping changes to the nation’s geothermal energy laws. The provisions, titled the John Rishel Geothermal Steam Act Amendments, represent the first major overhaul of the Geothermal Steam Act since 1970.

“The geothermal provisions adopted by the Conference Committee are a dramatic improvement in the law,” said Karl Gawell, executive director of the Geothermal Energy Association (GEA). “They will encourage the rapid expansion of geothermal energy use in the West.” Gawell said the bill streamlines some of the most bureaucratic aspects of the law, provides clear direction for the agencies to make geothermal a priority, gives local governments more funding to mitigate impacts, and ensures that the federal agencies will have the resources needed to implement the new law and quickly work-off a 30 year backlog of unfinished studies and ignored lease applications. GEA outlined some of the key provisions of the new law: Leasing New Law : There will be regular lease sales at least every two years in states with geothermal resources, and all leases will be subject to competitive bidding. Old Law: BLM often failed to process lease applications or hold lease sales. For example, despite its significant geothermal resources, there have been no geothermal leases issued in California in over a decade. In other states, a significant number of lease applications submitted as long as 20 and 30 years ago still wait to be processed. Also, under the old law, most leases were sold non- competitively. Royalties New Law : New regulations establishing royalties on a “gross proceeds” basis (percentage of total income) will be written, leases will start paying royalties in their first year of production, and county governments will receive 25 percent of the royalty income to help mitigate impacts. According to agency experts, a gross proceeds royalty is simpler, more verifiable, and provides revenue stability. (Very similar changes were recently recommended by the MMS Royalty Advisory Committee.) Royalty changes are expected to cut administrative costs substantially for both geothermal power producers and the government. MMS is directed to keep the changes revenue neutral. Old Law: Royalties were based upon a percentage of the “value of the steam or hot water” used. Since companies don’t sell steam this required complex calculations and record keeping for each lease to determine its unique royalty value. To ensure that the complex records were accurate each lease was required to be audited and most audits occurred years later resulting in significant administrative costs for both the government and companies. Direct Use Geothermal (Use of geothermal energy by ranchers, communities and others for purposes other than electricity production.) New Law: So-called direct uses of geothermal energy are encouraged under the legislation by allowing simpler procedures for leasing, establishing a fee schedule instead of royalties payments, and allowing state and local governments to use geothermal resources for public purposes at a nominal charge. Old Law: The previous law made no distinction between electricity production by a major power company and geothermal use by a community for heating schools or by a rancher to improve agricultural output. As a result, while hundreds of direct use operations exist on state and private land — ranging from greenhouses and fish farming to heating the State Capitol Building in Boise, Idaho — on all of the hundreds of millions of acres of federal land in the West there are only two direct use operations today. The extensive administrative requirements and high royalty charges associated with federal leases were cited as fundamental barriers in congressional testimony. “Geothermal energy represents a largely untapped, clean energy source that can be used to produce electricity and displace oil, gas and propane in homes, businesses, and public buildings throughout the West,” said Gawell. “This new geothermal title, coupled with the tax incentives and technology research and development provisions in the energy bill, will revolutionize geothermal use in the U.S.” With an agreement from the House-Senate Conference Committee, the provisions of the new law will be included in the final energy bill. Overall agreement and passage of the energy bill is far from certain. “We can make real headway towards energy independence this year if Congress moves the energy bill to the President’s desk for signature into law this summer,” Gawell added. “We will see new power plants that will help ease the West’ power crisis, and new direct use projects that will reduce dependence on imported fossil fuels, spring up across the West.”
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