Source: http://www.geothermal.bba.is/country/usa
Timestamp: 2019-10-20 21:22:21
Document Index: 183452307

Matched Legal Cases: ['sui generis', '§ 721', 'art 3200', '§ 3200', '§ 3272', '§ 3273', '§ 3274', '§ 3207', '§ 3207', '§ 3207', '§ 3207', '§ 3707', '§ 3207', '§ 3207', '§ 3212', '§ 3213', '§ 3200', '§ 3207', '§ 3200', '§ 3200', 'art 3214', '§ 3200']

9,712,455 km2
326,781,983
Total energy consumption increases by 5% between 2016 and 2040.
1,177183.3 MW (2016)
3804.6 MWe
As of 2016, the total installed capacity is estimated at 501 MWth for installations confirmed in operation, 163 MWth for installations that have been closed, and 30 MWth for installations with unknown status.
9,057 MWe
Five in total, two major and three minor alternating current power grids or interconnections.
Biomasse - 1.60%
Coal - 30.10%
Gas - 32.10%
Geothermal - 0.40%
Hydropower - 7.50%
Nuclear - 20.00%
Other energy sources - 0.50%
Patroleum - 0.50%
Solar - 1.30%
Geothermal resources are regulated by both the federal and state governments. Up to 90% of geothermal resources in the United States are located on lands managed by the federal government. It is possible for a private (non-governmental) party to own geothermal resources, but that is unusual. This Chapter therefore focuses primarily on federally managed geothermal resources. The federal agency charged with managing federal minerals, the U.S. Bureau of Land Management (“BLM”), manages about 58 million acres of split estate lands.
Ownership of interests in real property (known as “estates” in land) may include rights in both the surface estate and the subsurface estate (including subsurface geothermal resources). When the surface and subsurface estates are separately owned, then the ownership is referred to as “split” or “severed.” To understand the current state of geothermal resource ownership in the United States, an understanding of how the surface estate became separated from the subsurface estate is helpful. When land was first acquired by the United States, much of the private ownership of these public lands was established through federal land disposition acts, including railroad land grants, mining laws and homestead acts. The land that was conveyed to private landowners under these initial acts (e.g., the Original Homestead Act of 1862 or the Enlarged Homestead Act of 1909) included mineral (subsurface) rights along with surface rights. It was not until 1910 that the U.S. Congress recognized that some federal land was not only valuable for agriculture, but also subsurface minerals that had a different value. In response, Congress enacted the Stock-Raising Homestead Act (“SRHA”) in 1916, which required that any federal land conveyed expressly reserve mineral rights to the United States—resulting in split estates. The mineral rights reserved under the SRHA have been construed by the courts to include geothermal rights.
In 1970, Congress passed the Geothermal Steam Act of 1970 (“Geothermal Steam Act”), which reserved mineral rights on federal lands to the United States. Any laws passed subsequent to the Geothermal Steam Act in which “mineral rights” are reserved, are construed to include a reservation of geothermal resources.
Apart from federally owned lands, private parties may own geothermal resources depending on how the state in which the geothermal resource is located classifies the resource. In general, the states regulate geothermal resources under one of three classifications as: (i) a mineral, (ii) water, or (iii) something unique (sui generis). Private rights to geothermal resources therefore vary from state to state. States that classify geothermal resources as a mineral generally recognize the surface owner as the presumptive owner, unless the resource has otherwise been severed by deed or some other process and conveyed to another owner. Jurisdictions that regulate geothermal fluids as water under groundwater appropriation systems require an appropriation permit to develop these fluids and may or may not recognize the ownership interest of the surface owner
Under common law in the United States, the mineral estate is the dominant estate. In practice, this means that the owner of the mineral estate has an implied right of access and use of the surface estate as necessary for development and operation of the mineral or other subsurface resource (which may include the geothermal resource). This right is explicitly recognized by federal laws. This right to access the surface estate, however, is not unqualified, and BLM requires the geothermal operator seeking to develop a geothermal resource to make a good faith effort to obtain an agreement with the surface owner for surface access. The operator must engage the surface estate owner in negotiations for: (i) a surface use agreement, (ii) a waiver from surface owner for access, or (iii) an agreement regarding compensation. If an agreement cannot be reached, the mineral owner can post a bond (also known as “bonding-on”) to protect the interests of the surface owner. However, in most cases a bond is not necessary because surface access is granted by mutual negotiation and agreement with the landowner.
There is no per se restriction on foreign investment in the geothermal sector. However, any foreign person or entity investing in a business in the United States may voluntarily submit the transaction for review by the Committee on Foreign Investment in the United States (“CFIUS”). CFIUS review is authorized under § 721 of the Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007, and as implemented by Executive Orders and the regulations published by the U.S. Department of the Treasury. It is not a mandatory requirement to file a notice for review by CFIUS. However, if a notice is not filed, and CFIUS subsequently determines that the transaction raises U.S. national security or critical infrastructure concerns, then CFIUS has the authority to unwind the transaction. A party considering an acquisition of operating geothermal assets (whether a stock or asset acquisition) by a foreign-controlled person should carefully consider whether the acquisition qualifies for CFIUS review. An acquisition of an undeveloped or non-operating lease site may or may not be subject to CFIUS depending on the context of the transaction.
The rights to develop privately and utilize geothermal resources is managed by BLM, which is the delegated authority to issue leases for federal lands.
Public policies play a significant role in shaping geothermal growth and development. Policies that are essential to geothermal development include: state renewable portfolio standards; federal and state tax incentives; geothermal leasing and permitting; research and technology support; and pollution and climate change laws.
Federal tax incentives, loan and grant programs, and research support, drive growth in renewable energy, including geothermal energy. As mentioned in Question 3 below, at the federal level, the Geothermal Steam Act which was amended by the Energy Policy Act of 2005, has shaped the development of geothermal resources. At the state level, renewable portfolio standards (“RPS”) have been a crucial driver for geothermal growth and development because RPS require utility companies to have a growing percentage of renewable power generation as part of their energy consumption.
The rights to develop privately and utilize geothermal resources owned by the federal government may be acquired solely in accordance with the leasing program enabled by the Geothermal Steam Act and amended by the Energy Policy Act of 2005 (“EPAct 2005”). The leasing process is managed by BLM, which is the delegated authority to issue leases for federal lands. BLM issues geothermal leases using one of two processes: (i) either through a competitive auction of lands or (ii) through a non-competitive leasing mechanism. There are two exceptions to this rule: (i) the U.S. Department of Defense may develop geothermal resources on lands within their jurisdiction and, (ii) offshore geothermal leases are authorized and governed by the Outer Continental Shelf Lands Act. BLM’s geothermal resource leasing process is detailed in Title 43, Part 3200 of the Code of Federal Regulations, 43 C.F.R. pt. 3200 (2016).
As discussed above, the mineral estate owner is the dominant estate owner and has an implied right of access to, and reasonable use of, the surface estate. However, BLM has developed policies to protect the rights of surface estate owners and will consider a lease’s effects on private ownership before issuing a lease. Before granting a lease, BLM usually requires the mineral developer to attempt, in good faith, to reach a surface use agreement with the surface owner as to access rights and compensation. The mineral estate owner must show “due regard” for the interests of the surface estate owner and occupy only those portions of the estate that are reasonably necessary to develop the mineral estate. BLM also allows the surface owner to attend and identify development preferences during the reclamation inspection, and to participate in certain onsite inspections and meetings with the geothermal operator. Additionally, BLM will consult with the surface owner prior to approving final reclamation. The private surface owner also has the right to protest and comment on pending lease sales. Notwithstanding these surface owner participation rights, federal law explicitly recognizes the right to exploit geothermal resources without the consent of a surface owner if a bond is posted.
Aside from the mineral estate owner and the surface estate owner, BLM will consult with the Forest Service if the proposed operations are on National Forest System lands. As mentioned in Question #12, if Native American cultural resources will be impacted by the proposed operations, there may be an obligation to consult with the affected tribe(s).
In addition to the BLM process, there are various environmental, health, and safety laws applicable to construction and operation of electric generating facilities, including consideration and issuance of permits dealing with air and water quality, and protected species. A full discussion of applicable environmental laws is beyond the scope of this Chapter, but in many cases there are typically multiple opportunities for various stakeholders, including landowners, to challenge issuance of necessary environmental permits.
As noted elsewhere, no separate license is needed for development or construction of generation plants.
In a split estate situation, the BLM has developed policies to protect the rights of each of the parties. In determining the relative rights of the mineral estate owner and the surface estate owner, many jurisdictions have adopted the “accommodation doctrine” which limits the rights of the mineral owner by requiring “due regard” for the rights of the surface owner.
Under BLM’s current policy, developers must negotiate with surface owners in good faith and attempt to enter a surface use agreement or to obtain a waiver. The agreement should include access rights and provisions that compensate for damage. In the rare situation where an agreement cannot be reached, BLM may permit the posting of a bond to protect the interests of the surface owner. While the amount of bond that must be posted depends on the land disposal statute, the minimum amount is $1000. As mentioned in the previous question, there are various on-site meetings which provide the surface owner an opportunity to identify development preferences.
As noted elsewhere, no separate license is needed for development or construction of generation plants. See Question #10.3
Yes, the terms of land lease agreements are regulated by the BLM. As detailed in Question 6.1, the primary term for a geothermal land lease is 10 years and there are various types of extensions available after the 10-year period depending on the stage of development. The BLM issues extensions on a case-by-case basis.
Decommissioning, or reclamation obligations, typically includes the abandonment of wells (plugging, capping, and reclaiming the wellsite), the removal of facility structures and infrastructure, recontouring the site and access roads to preproduction contours, and environmental clean-up. To facilitate the natural restoration of the site, vegetation must be replanted.
(i) exploration: To conduct exploration on federal land, developers must obtain a Notice of Intent to Conduct Geothermal Resources Exploration Operations (“NOI”) from BLM. “Casual Use” activities, or those that “ordinarily lead to no significant disturbance of federal lands, resources, or improvements” under 43 C.F.R. § 3200.1, do not require a permit. With that said, developers typically submit a NOI even for Casual Use activities. The NOI also allows for more invasive exploration activities such as seismic surveys, electromagnetic surveys, and the drilling of temperature gradient wells. However, any drilling beyond a temperature gradient well will require an approved Geothermal Drilling Permit (Form 3260-002). Upon completion of exploration operations, if the BLM approved the NOI, the developer must send BLM a complete and signed Notice of Completion of Geothermal Resource Exploration Operations (Form 3200-010).
(ii) exploitation: First, the land on which a developer is seeking to conduct geothermal exploitation must be nominated. The land can be nominated by BLM or by the developer themselves using the “Nomination of Lands for Competitive Geothermal Leasing” form. Nominated lands cannot be included in a lease sale until National Environmental Policy Act of 1969 (“NEPA”) (see Question #14) requirements are met and the leasing conforms to the applicable land use plan. After nomination, a developer must complete a Lease for Geothermal Resources (Form 3200-024a) in order to obtain federal geothermal mineral rights. A Geothermal Lease conveys the exclusive right to drill for, extract, produce, remove, utilize, sell, and dispose of all geothermal resources in the lands subject to the lease. As mentioned, any drilling beyond a temperature gradient well will require an approved Geothermal Drilling Permit (Form 3260-002).
(iii) power plant: In order to exploit the geothermal resources and convert them to marketable electricity, developers need an approved Plan of Utilization (“POU”) for the construction of a power plant and related activities. A POU involves a Utilization Plan, Facility Construction Permit (43 C.F.R. § 3272), Site License (43 C.F.R. § 3273), and Commercial Use Permit (43 C.F.R. § 3274). Developers must complete the environmental review process under NEPA before the Site License and Facility Construction Permit will be approved by BLM. The sales of electricity in the wholesale power market (including from geothermal power generation facilities) are largely deregulated and in most cases subject to relatively limited review by the Federal Energy Regulatory Commission (“FERC”) so long as the seller is not able to exercise market power.
(iv) generation license: See Question 10.3.
The time periods and detailed requirements on extensions of license periods can be found in 43 C.F.R. § 3207.5. In general, the primary term of a federal geothermal lease is for a period of ten years. Several different types of extensions are available after the 10-year period depending on the stage of development and BLM issues them on a case-by-case basis:
Initial extension of five years (must meet terms in § 3207.11).
Additional extension available in 15th year of lease (must meet terms in § 3207.12)
Drilling extension up to five years (must meet terms in § 3207.14).
Production extension up to 35 years if producing or utilizing geothermal resources in commercial quantities or in quantities sufficient in volume in terms of flow and temperature to produce a reasonable return after meeting all costs of production (must meet terms in § 3707.15).
A renewal period up to 55 years if producing or utilizing geothermal resources in commercial quantities (must meet terms in § 3207.16).
As a general matter, there is no maximum term for a generation authorization (license) required from the FERC (See Question 10.3).
Under EPAct 2005, a single lease may be as large as 5,120 acres. As noted above, a geothermal lease has an initial 10-year term but the lease can be extended for two additional 5-year terms by making a minimum payment or meeting work requirements. A lease can also be held for an additional 35 years for production or diligent development, or held for an additional 55 years for commercial production. BLM collects revenue from annual rental fees, royalties, and a nominal processing fee ($145). The annual rental fee of a competitive geothermal lease is fixed at $2 per acre for the first year of the lease, $4 per acre for years 2-10, and $5 per acre from the 11th year onward. Royalties are set at 1.75% and are collected if the project reaches commercial operation in the first ten years of production and 3.5% thereafter. These terms and other pro forma terms that are generally included in a lease are set forth in 43 C.F.R. § 3207. Although these terms are generally adhered to, BLM may waive certain provisions. For example, 43 C.F.R. § 3212.16 provides the lessee with the ability to apply to BLM for a reduction, suspension or waiver of the royalty or rent.
With regard to generation authorization (license) required from the FERC (See Question 10.3).
No, a NOI or permit does not automatically convert into a Geothermal Lease. A Form 3200-024a, Lease for Geothermal Resources, must be completed to exploit resources. See Question #4.
Not included, see Question #4.
If the landowner and developer reach an agreement, then part of that agreement may allow the developer to place a surface or subsurface encumbrance on the land in order to further protect the developer’s rights to access and use of the resource. If there is no voluntary agreement, the BLM permit acts, in effect, as an encumbrance on the land.
A lessee can revoke or terminate their lease under 43 C.F.R. § 3213. Only the record title owner may relinquish a lease in full or in part. If there is more than one record title owner for a lease, all record title owners must sign the relinquishment. In order to terminate the lease, the lessee must send BLM a written request that includes the serial number of each lease it is relinquishing. If relinquishing the entire lease, no legal description of the land is required. If relinquishing part of the lease, the request must describe the lands to be relinquished. BLM may require additional information if necessary. It is important to note that there are certain caveats to relinquishing a lease in part: the lease must still contain the 640-acre minimum, all rents/royalties are due before relinquishment, all wells must be plugged and abandoned properly, and the lessee must restore the surface. The applicable regulations do not expressly provide for revision of leases, but this may be subject to negotiation with BLM.
FERC authorizations to sell power at wholesale from a geothermal facility at market based rates are generally conditioned on the seller not having market power in the relevant market. Changes in the seller’s market power analysis could affect the terms of seller’s FERC authorization.
Yes, a federal geothermal lease can be terminated by BLM for failure to pay rent, failure to pay royalties and fees, or the failure to complete any of the other requirements under 43 C.F.R. § 3200.4. BLM may also cancel a lease that was issued in error.
As mentioned in Question #6, the standard terms of a lease are set forth in 43 C.F.R. § 3207. Any deviation from these terms is at BLM’s discretion. To request a waiver, the lessee must contact BLM directly.
If BLM finds a leaseholder is not in compliance with BLM requirements pertaining to utilization operations, drilling, or exploration, BLM will issue a written “Incidence of Noncompliance” directing the leaseholder to take corrective action within a specified amount of time. If the noncompliance continues or is serious in nature, BLM will take one or more of the following actions: enter the lease and correct any deficiencies at the leaseholder’s expense, collect all or part of the bond if one is available, order modification or shutdown of operations, take other enforcement action against a lessee who is ultimately responsible for the noncompliance, or terminate the lease. If the lessee fails to pay rent, fails to pay royalties and fees, or fails to complete any of the other requirements under 43 C.F.R. § 3200.4, BLM can terminate the lease.
The BLM requires a Monthly Report of Geothermal Operations to be prepared for each month beginning with the month in which drilling is initiated, and filed on or before the last day of the month following unless exception is granted by BLM. The Report includes details regarding individual well production such as the total monthly production or injection of steam and water and the average temperature and pressure of steam going in and steam leaving the well. BLM may inspect all operations to ensure compliance with the requirements of 43 C.F.R. § 3200.4. BLM must be given access during normal operating hours to inspect all facilities utilizing federal geothermal resources. All records and operations pertaining to the operation of a utilization facility, royalty, production meters, and safety training must be available for BLM inspection for a period of five years following the time the records and information are created.
As noted above, seller’s FERC authorization is subject to seller not have market power in the relevant market. To that end, FERC typically requires sellers to update their market power analysis every three years. In addition, FERC may initiate its own investigations into market participants at any time.
Wholesale sales of electricity (whether through Power Purchase Agreements (“PPAs”) or simply into organized markets) is largely deregulated and subject to limited review by FERC, as discussed above. Terms and conditions, including prices, of PPAs are not generally regulated as part of the geothermal regulatory regime.
There is no limit on duration of PPAs negotiated and agreed to between buyers and sellers.
As noted above, wholesale of electricity using a PPA is largely deregulated and subject to limited review by FERC. FERC’s review focuses primarily on ensuring that the seller does not have market power that would improperly diminish competition in the relevant markets for wholesale electricity. Apart from that consideration, buyers and sellers of electricity are largely free to negotiate all terms of a PPA.
As a general matter, no. Although from time to time there may be funding available from the US Department of Energy for certain research and demonstration activities, but these are typically pursuant to individual government grant proposal requests.
Generally, no, but if the facility loses its status as a QF or eligible renewable energy technology then it will lose all associated benefits and may be subject to penalties imposed by FERC.
RPS – RPS requires electric utilities to use or acquire (such as through a PPA) renewable energy sources to supply a minimum portion of their retail sales. Geothermal power qualifies as an eligible renewable resource under most RPS programs.
Tax incentives – The federal renewable electricity PTC is an inflation-adjusted per-kilowatt-hour (“kWh”) tax credit for electricity generated by qualified energy resources at a qualified facility during the 10-year period beginning on the date the facility was placed in service and sold by the taxpayer to an unrelated person during the taxable year. Electricity generated using geothermal resources qualifies as an “eligible renewable energy technology” for purposes of the PTC. In 2017, the PTC amounts to $0.024 kWh for electricity produced from geothermal energy. In order to qualify for the PTC, construction on a QF must begin before January 1, 2018. As an alternative, a qualified geothermal energy facility may elect the ITC which provides a tax credit for 30% of the cost of a geothermal energy facility placed in service after 2008 and commencing construction prior to January 1, 2018, and 10% for a geothermal energy facility beginning construction after December 31, 2017. The equipment used to produce geothermal power qualifies up to, but not including, the electric transmission stage. The 10% ITC for a qualified geothermal energy facility has no stated expiration date.
PURPA – A generating facility may be eligible to receive benefits under PURPA if it qualifies under FERC regulations as a small power production facility. A generating facility of 80 MW or less whose primary energy source is a geothermal resource can seek QF status as a small power production facility.
Before the BLM approves an application for Permit to Drill on split estate lands, the BLM must determine if the development is going to affect Native American cultural resources. Native American cultural resources and geothermal resources on tribal lands are regulated by laws such as the National Historic Preservation Act of 1966, NEPA, the Indian Mineral Leasing Act of 1938, and the Indian Mineral Development Act of 1982. Under NEPA review, the impact on cultural resources must be taken into consideration prior to issuance of any applicable federal permits or licenses. Typically, a professional archaeologist will conduct a cultural resource survey and, depending on the survey’s results, the proposed location of the geothermal development may have to be modified to avoid damaging cultural resources. Furthermore, most federal laws impose a federal government trust obligation to consult with an affected tribe.
If the geothermal resources are located on tribal lands, developers will negotiate with the appropriate tribe for a lease, which must be approved by the Bureau of Indian Affairs
Leases that were issued under the Geothermal Steam Act are still honored even though the Act was amended by EPAct 2005 and the process by which a lease is obtained changed from a competitive bid process to an auction process.
Please see Question 11.3. In addition, in 2018 the US enacted significant sweeping reforms to the tax code, some of which may affect geothermal developers, and all of which are still under analysis as to their potential effect.
Please see Question 14.1
Please refer to Question #10 on tax incentives.
The United States has no VAT.
As mentioned in Question #4, nominated lands cannot be included in a lease sale until NEPA requirements are met and the leasing conforms to the applicable land use plan. NEPA requires federal agencies to review the potential environmental impact of proposed actions in order to determine whether the proposed actions will “significantly affect the quality of the human environment.” For purposes of geothermal development, NEPA is usually triggered because the proposed project is on federally managed lands or federal funds are contributed to the project. NEPA review is often conducted multiple times at a given geothermal development project location, including during the BLM’s land use planning and leasing analysis phases, and during a developer’s exploration, drilling, power plant, and transmission project phases. There are various types of NEPA-related reviews and it is not always clear what type of analysis might be required as the decision is made on a project-by-project basis by BLM staff and may change throughout the environmental review process. With that said, either an Environmental Assessment (“EA”) or an Environmental Impact Statement (“EIS”) are the most likely instruments to complete a NEPA review. The analysis considers factors such as: the environmental impact of the proposed action, whether any adverse environmental effects can be avoided through an alternative action and how many resources will have to be committed for the proposed action.
As discussed above, the lease issued by BLM grants the lessee access to the land’s geothermal resources. Other principal licenses and permits are noted above. In addition to the licenses and permits discussed above, there may be other state and local permits required but these are typically obtainable in the ordinary course of business (such as a local building permit) and are omitted from this Chapter.
Under Subpart 3214 of Title 43 in the Code of Federal Regulations, the lessee or operator must post a bond with BLM before exploration, drilling, utilization or associated operations begin. The bond must cover all record title owner, operating rights owners, operators, and any person who conducts operations on your lease. BLM will only accept corporate surety bonds and personal bonds.
BLM will hold all interest owners in a lease jointly and severally liable for compliance with the requirements of 32 CFR § 3200.4 for obligations that accrue while they hold their interest. For example, interest owners may be held jointly and severally liable for plugging and abandoning wells or reclaiming the surface and other resources.
Other than the Geothermal Steam Act that was amended by EPAct 2005, which was mentioned above, there have been no recent amendments to legislation.
As detailed in Question 11, state RPS programs have impacted the production of electricity from geothermal resources by requiring utility companies to have a growing percentage of renewable power generation as part of their energy consumption.
As mentioned, if drilling beyond a specific temperature gradient well, the applicant will have to apply for a Geothermal Drilling Permit which is separate from an NOI. Drilling Plans may sometimes cover several wells, but a separate drilling permit is required for each well.
Not applicable because there is no cascade usage clause.
As noted above, secondary activities would be subject to commercial agreements and any particular federal, state or local laws that govern the particular activity. In the case of water distribution, depending on the state involved, that activity is typically regulated on the local level. A state or local permit or concession may be required, particularly if there exists a current franchise or concession holder for the area. It is unlikely that BLM, as the geothermal resource permitting agency, would have a direct role in that permitting process.