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subsection shall be modified in order to reflect the 
provisions of this subsection. 
‘‘(2) FINAL REGULATION.—In issuing any final 
regulation establishing a schedule of fees under this 
subsection, the Secretary shall seek— 
‘‘(A) to provide lessees with a simplified 
administrative system; 
‘‘(B) to encourage development of this un-
derutilized energy resource on the Federal es-
tate; and 
‘‘(C) to contribute to sustainable economic 
development opportunities for host commu-
nities.’’. 
(b) LEASING FOR DIRECT USE.—Section 4 of the 
Geothermal Steam Act of 1970 (30 U.S.C. 1003) is fur-
ther amended by adding at the end the following: 
‘‘(f) LEASING FOR DIRECT USE OF GEOTHERMAL 
RESOURCES.—Lands leased under this Act exclusively for 
direct use of geothermal resources shall be leased to any 
qualified applicant who first applies for such a lease under 
regulations issued by the Secretary, if— 
‘‘(1) the Secretary publishes a notice of the 
lands proposed for leasing 60 days before the date 
of the issuance of the lease; and
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‘‘(2) the Secretary does not receive in the 60- 
day period beginning on the date of such publication 
any nomination to include the lands concerned in the 
next competitive lease sale. 
‘‘(g) AREA SUBJECT TO LEASE FOR DIRECT USE.— 
A geothermal lease for the direct use of geothermal re-
sources shall embrace not more than the amount of acre-
age determined by the Secretary to be reasonably nec-
essary for such proposed utilization.’’. 
(c) EXISTING LEASES WITH A DIRECT USE FACIL-
ITY.— 
(1) APPLICATION
TO
CONVERT.—Any lessee 
under a lease under the Geothermal Steam Act of 
1970 that was issued before the date of enactment 
of this Act may apply to the Secretary of the Inte-
rior, by not later than 18 months after the date of 
enactment of this Act, to convert such lease to a 
lease for direct utilization of geothermal resources in 
accordance with the amendments made by this sec-
tion. 
(2) CONVERSION.—The Secretary shall approve 
such an application and convert such a lease to a 
lease in accordance with the amendments by not 
later than 180 days after receipt of such application,
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unless the Secretary determines that the applicant is 
not a qualified applicant with respect to the lease. 
(3) APPLICATION OF NEW LEASE TERMS.—The 
schedule of fees established under the amendment 
made by subsection (a)(4) shall apply with respect to 
payments under a lease converted under this sub-
section that are due and owing to the United States 
on or after July 16, 2003. 
SEC. 1804. ROYALTIES AND NEAR-TERM PRODUCTION IN-
CENTIVES. 
(a) ROYALTY.—Section 5 of the Geothermal Steam 
Act of 1970 (30 U.S.C. 1004) is further amended— 
(1) in subsection (a) by striking paragraph (1) 
and inserting the following: 
‘‘(1) a royalty on electricity produced using geo-
thermal resources, other than direct use of geo-
thermal resources, that shall be— 
‘‘(A) not less than 1 percent and not more 
than 2.5 percent of the gross proceeds from the 
sale of electricity produced from such resources 
during the first 10 years of production under 
the lease; and 
‘‘(B) not less than 2 and not more than 5 
percent of the gross proceeds from the sale of