Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - US Geothermal Inc. - Exhibit 10.9

 GEOTHERMAL 

  LEASE AND AGREEMENT 

This Lease and Agreement is made and entered into as of this 1st day of December, 2004, by and between: 

 Reid S. Stewart and Ruth O. Stewart, Party of the first
  part, 

  hereinafter referred to as “Lessor” 

 and 

 US Geothermal Inc., an Idaho corporation, 

  Party of the second part, 

  hereinafter referred to as “Lessee” 

 who are referred to in the plural as the “Parties”.

 Recitals 

 WHEREAS Lessor is the owner of certain land and geothermal
  rights situated in Cassia County, in the State of Idaho, which the Parties believe
  are suited for the development of Hot Water, Steam and Thermal Energy for use
  as such and/or the conversion of such geothermal energy to the production of
  electric power, or for any purpose other than the generation of electric power,
  and

 WHEREAS It is the desire of Lessor and Lessee to enter
  into an agreement which will enable the development of said Hot Water, Steam
  and Thermal Energy for any of the aforesaid purposes for the mutual profit of
  the Parties, 

 BE IT THEREFORE HEREBY AGREED AS FOLLOWS: 

 1.           Purpose.
  For and in consideration of the sum of Ten Dollars ($10.00) and other valuable
  consideration set forth in clauses (4.) and (5.) below, receipt of which initial
  sum and sufficiency is hereby acknowledged, and in consideration of the covenants
  and agreements hereinafter contained, Lessor has granted, leased, let and demised
  to Lessee, its grantees, successors and assigns, upon and subject to the terms
  and conditions contained herein, the land hereinafter described, the sole and
  exclusive right to drill for, produce, extract, take, remove and sell geothermal
  heat energy including , Hot Water, Steam, or Thermal Energy therefrom, and to
  store, utilize, process, convert and otherwise treat such geothermal energy
  upon said land, during the term hereof, with the right of entry thereon and
  use and occupancy thereof at all times for said purposes and the furtherance
  thereof, including the right to construct, use and maintain thereon and to remove
  therefrom structures, facilities and installations, pipelines, utility and power
  transmission lines. 

 1

 The possession by Lessee of said land shall be sole and exclusive
  for the purposes hereof and for the purposes incident or related thereto, excepting
  that Lessor reserves the right to use and occupy said land, or to lease or otherwise
  deal with the same, without interference with Lessee rights, for residential,
  agricultural, commercial, or grazing uses, or for any and all uses other than
  the uses and rights permitted to Lessee herein.

 2.          Lands.
  The land which is the subject of this lease is situated in the county and state
  above first named consisting of approximately 317.54 acres and which is described
  in Exhibit A attached hereto and incorporated as if more fully set forth herein,
  including also in the leased land all rights of Lessor, presently owned, in
  and under roads, ditches, and rights of way traversing or adjacent to said land,
  (hereinafter referred to as “Lands”).

 3.          Term.
  This lease shall be for a term of Thirty (30) years from and after the date
  hereof. If Leased Substances are still being produced from the Lands or if the
  Lands are being used in conjunction with Lessee’s Commercial operation
  at the end of the term, Lessor and Lessee agree to enter good faith negotiations
  to extend the lease on fair terms to both parties. 

 4.           Consideration.
  It is understood and agreed that the initial consideration of $8,000.00
  paid upon the execution hereof, covers all costs incurred by Lessor to evaluate
  this lease, the rental in full hereunder for a period of one (1) year from the
  date of this Lease and for all other rights conferred hereunder. Thereafter,
  for the remainder of the lease, on or before said anniversary date, Lessee shall
  pay to Lessor an annual rental in the amount of $5,000.00 for the second
  year, increasing each year thereafter at the rate of 5% per year.

 . Should lessee fail to make any annual payment herein provided
  for on or before a particular anniversary date, Lessor may at its option, consider
  lessee in default hereunder. 

 5.           Geothermal
  Royalty. Royalties shall be payable as follows: 

Parcel 1, Exhibit A:

          (a)
            With respect to
  Hot Water, Steam or Thermal Energy produced (collectively to be referred to
  as “Energy Produced), saved and sold by Lessee and then used by the purchaser
  for the generation of electric power Lessee shall pay to Lessor as a royalty
  Ten Percent (10%) of the market value of such Energy Produced from the well
  or in exercise of the leased rights on the Lands, which market value shall be
  deemed to be the gross proceeds received by Lessee from such sale at the point
  of origin. 

          (b)
            With respect to
  Energy Produced, saved and used by Lessee for the generation of electric power
  which is then sold by Lessee, Lessee shall pay to Lessor as a royalty Three
  (3.0%) of the market value of such electric power which is sold by Lessee, which
  market value shall be deemed to be the gross proceeds received by Lessee from
  such sale. 

 2

          (c)
            With respect to
  Energy Produced, saved and sold by Lessee and which is used for any purpose
  other than the generation of electric power, Lessee shall pay to Lessor as royalty
  Five Percent (5%) of the gross proceeds received by Lessee from the sale of
  Energy Produced, as such, produced from the well or in exercise of the leased
  rights at and as of the point of origin on the Lands associated with the well
  or the leased rights. 

          (d)
            With respect to
  Extractable Minerals, Lessor expressly retains ownership of all extractable
  minerals, gases, or effluents (containing minerals and/or minerals in solution).
  If commercial quantities of such extractable minerals gases or effluents are
  found as a result of Lessee’s operations, Lessor and Lessee may choose
  to enter good faith negotiations to modify this lease to enable Lessee to extract
  and sell such extractable minerals, gases, or effluents and pay a reasonable
  royalty to Lessor.

For Parcel 2, Exhibit A: 

In accordance with the Memorandum Agreement
  RE: Sale and Purchase of Real Property and Personal Property, entered into on
  December 29, 1977 between Harlan B. Jensen and Bette J. Jensen, husband and
  wife, and Reid S. Stewart and Ruth O. Stewart, husband and wife, Lessor is entitled
  to 10% of royalties paid for any mineral and under-the-surface rights to include
  all minerals, oil, gas, geothermal steam, and all other under-the-surface rights.
  Royalties will be paid in accordance to the Geothermal Lease signed between
  Sergene Jensen, personal representative of the Estate of Harlan B. Jensen and
  U.S. Geothermal Inc. dated July 11th, 2002. 

          Lessee
  shall pay to Lessor on or before the twenty-fifth day of the quarter next following
  that in which Lessee receives payment from the purchaser thereof, and in making
  such royalty payments Lessee shall deliver to Lessor statements setting forth
  the basis for computation and determination of such royalty. 

          Lessee
  shall not be required to account to Lessor for or to pay any royalty on Hot
  Water, Steam, Thermal Energy produced by Lessee on the leased land which is
  not utilized, saved and sold.

          Lessee
  shall have the right from time to time and at any time to commingle (for purposes
  of storing, transporting, utilizing, selling and processing, or any of them)
  the Leased Substances, or any of them, that are produced or extracted from the
  leased land or lands pooled, unitized or combined therewith, with Geothermal
  Resources, or any of them, produced from other lands or units in the vicinity
  of the leased land, and in the event of such commingling, Lessee shall meter,
  gauge, or measure the production from the leased land, or from the unit or units,
  including leased and other units or lands, as the case may be, and compute and
  pay Lessor’s royalty payable under the provisions hereof on the basis
  of such production so determined or allocated, as the case may be. 

 3

 From the time when Lessee shall commence Commercial production
  from said Lands, Lessee shall then pay Lessor the geothermal royalty set forth
  herein, or the annual payments, whichever shall be the larger. This change from
  annual lease payments to geothermal royalty payments shall occur at the time
  when geothermal royalties exceed annual lease payments in any given quarter.

 6.           Commingled
  and Unit Operations. Lessee shall have the right to commingle, or unitize said
  leased land, for the purpose of utilizing, selling, processing, the Leased Substances
  produced from the lease land with the steam or heat energy produced from other
  lands, and to meter or gauge the production of steam or heat energy from leased
  land and to compute and pay Lessor royalty on the basis of such production as
  so determined. 

 In the event that the production of Leased Substances from
  the leased lands or from lands in the general area of the leased land should
  at any time exceed the demand for the facility use thereof in the opinion of
  Lessee and the Lessee elects to reduce the total amount of steam produced or
  consumed, then in that event each well participating on a commingling basis
  shall be reduced in percentage amount equal to its proportion of the whole.

 7.           Use
  Of Lease. Lessee shall have the right to drill such wells on leased land as
  Lessee may deem desirable for the purposes hereof including the exploration
  and production of Geothermal Resources for heat or electric power production
  purposes and any reinjection of fluids thereof. Lessee shall have the right
  to construct upon leased land such equipment and structures as Lessee may deem
  desirable for the purpose of utilizing Leased Substances including geothermal
  power plants, access and piping and transmission equipment related thereto.

 Lessee shall provide Lessor with at least two months (60 days)
  advance notice of its intent to conduct exploration activities or to construct
  any facilities on the leased lands, and shall seek prior consent from Lessor,
  not to be unreasonably withheld, regarding the location of such facilities.
  To the extent reasonably possible, Lessee shall schedule its drilling, construction
  and other activities to allow Lessor to harvest prior to the commencement of
  such activities, and to allow Lessor to plan for the necessary vacation of portions
  of normally farmed areas of the leased lands. 

 8.           Exclusive
  Rights. Lessee shall have exclusively the rights to all Leased Substances and
  to all power production from Leased Substances on and/or from leased land during
  the term hereof, subject only to payment of the royalties to Lessor as is set
  forth herein.

 9.           Land
  Compensation. In return for actual surface use of leased land required for well
  site, pipeline, transmission and plant operations hereunder, or if producing
  agricultural lands are required by Lessee to be taken out of production, either
  temporarily or permanently for Lessee’s operations, including but not
  limited to as a result of Lessee’s use of water from the leased lands,
  Lessee shall compensate Lessor at the annual rate of $ 200 per acre for
  such lands so affected for the duration of their use. For greater 

 4

 clarity, if Lessee requires 2 acres of producing agricultural
  land, but its use impacts 10 acres, the rate would apply to the 10 acres. For
  these purposes any pipelines or transmission lines shall be deemed to require
  a 10 foot wide ground area. All pipelines shall be insulated as per typical
  project specifications and shall be colored according to industry norms or permit
  requirements as may be imposed. Lessee shall further be responsible for any
  costs associated with the redesign and/or relocation of structures or sprinkling
  equipment affected by Lessee’s operations. 

 10.          Bond.
  Lessee shall provide either a cash or surety bond, payable to Lessor that will
  cover the cost of reclamation for any surface disturbance on lands used by Lessee
  or any other cost arising from any material breach of this agreement by Lessee.
  If a cash bond, it will be held by an escrow agent to be mutually agreed to
  by Lessor and Lessee. Any interest on escrowed funds will be payable to the
  Lessee on an annual basis. The amount of the bond is to be computed on an actual
  cost basis for the surface disturbance. If any activity on leased lands is covered
  by a reclamation bond in an amount equal to or greater than the actual cost
  basis of the disturbance, as required by any county, state or federal agency,
  Lessee will not be required to post a second bond to Lessor. 

 11.          Minimize
  Use. Notwithstanding any provisions of this lease to the contrary, Lessee shall
  utilize for such purpose only so much of the leased land as shall be reasonably
  necessary for Lessee activities and operations thereon and shall interfere as
  little as reasonably possible with the use and occupancy of the leased land
  by the Lessor. 

 Lessee agrees to replace all fences which the Lessee may have
  removed for its purposes and repair all fences which Lessee may have damaged,
  and if and when so required by the Lessor, will provide a proper livestock guard
  at any point of entry upon lands used by Lessee. 

 In the event this Lease terminates as to a portion of either
  the leased land or rights granted hereunder, it shall continue in full force
  and effect as to those facilities necessary to the permitted use of the remaining
  leased lands or rights hereunder. 

 Lessee shall have the right at any time and from time to time
  to remove from the leased land any and all casing, machinery, equipment, structures,
  installations and property of every kind and character placed upon said leased
  land by or pursuant to permission of Lessee, provided that if such removal should
  occur after termination of all rights granted herein, it shall be completed
  within one hundred eighty (180) days after which all casing, machinery, equipment,
  structures, installations and property of every kind and character shall belong
  to the Lessor. Actual removal cost, if any, will be deducted from the Bond in
  Section 10 above.. 

 12.          Water.
  Lessee shall have reasonable access to and use of water from the leased land
  for Lessee’s drilling, testing and exploration operations thereon, in
  the vicinity thereof, or on land or lands pooled, unitized or combined therewith,
  provided that such use is in compliance with Lessee’s notice and consultation
  obligations as set forth in Section 7, above, and provided that such use shall
  not interfere with Lessor’s own use for domestic, commercial, stock or
  agricultural purposes, nor interfere with any legal or 

 5

 contractual commitments of Lessor relating thereto and existing
  on the date hereof. Lessee shall purchase such water owned by Lessor at standard
  commercial rates for the area and will reimburse Lessor for the use of any water
  which is being purchased by Lessor. 

 13.          Permits.
  Any wells drilled by Lessee hereunder shall only be drilled after first obtaining
  any relevant governmental agency permits regarding geothermal well drilling
  on the leased land and in conformance with approved well design by relevant
  agencies. Power plant structures shall be engineered and constructed in conformance
  with and only after obtaining any relevant governmental agency permits regarding
  geothermal or biomass power plants. Lessor agrees to cooperate with Lessee’s
  application for governmental licenses, permits, and approvals, the cost of which
  shall be borne by Lessee. 

 14.          Project
  Costs. All labor to be performed and materials to be furnished in operations
  of Lessee hereunder shall be at the cost and expense of Lessee, and Lessor shall
  not be chargeable with, or liable for, any part thereof. Lessee shall protect
  the leased land against liens arising from its operations thereon. Upon commencement
  of operations upon leased land, Lessee shall protect Lessor against damages
  of every kind and character which may be occasioned to any of the parties hereto
  or to any other person by reason of the operations or workings of the Lessee
  upon said leased land. The protection of Lessor shall include maintenance of
  workman’s compensation insurance typical for geothermal drilling and power
  plant construction projects and good and safe drilling, construction and power
  plant operations designed by competent drilling and power plant engineering
  experts. If and when Lessee conducts operations on leased land, Lessor shall
  be named as an additional insured on those insurance policy(s) directly related
  to the work on the leased lands. 

 15.          Partial
  Ownership Interests. In the event Lessor at the time of making this Lease owns
  an interest in the leased land less than One Hundred Percent (100%) of the right,
  title and interest purportedly granted or leased hereby to Lessee, then any
  payments due Lessor hereunder shall be paid to Lessor only in the proportion
  which Lessor’s Interest bears to a One Hundred Percent (100%) interest
  in the leased land. Notwithstanding the foregoing, should Lessor hereafter acquire
  any additional right, title or interest in or to the leased land, it shall be
  subject to the provisions hereof to the same extent as if owned by Lessor at
  the date hereof, and any increase in payments of money hereunder necessitated
  thereby shall commence with the payment next following receipt by Lessee of
  satisfactory evidence of Lessor’s acquisition of such additional interest.
  In the event Lessor has no interest in the Leased Substances produced hereunder,
  but has an interest in said land, Lessee shall pay Lessor an overriding royalty
  of One Percent (1%) of the Net Proceeds received by Lessee from the sale of
  Leased Substances produced from the leased land, as rental for the surface thereof.

 16.          Assignment.
  There is hereby expressly reserved to Lessor and to Lessee the right and privilege
  to convey, transfer or assign, in whole or in part, or to deal with in any manner,
  subject to the provisions hereof, their respective rights and interests in and
  under this Lease and Agreement or in the leased land, or the Leased Substances
  produced on or 

 6

 from the leased land but in the event Lessor shall sell or
  transfer any part or parts of the leased land or any interest in the aforesaid
  Leased Substances therefrom then Lessees obligations hereunder shall not thereby
  be altered, increased or enlarged, but Lessee may continue to operate the leased
  land and to pay and settle rents and royalties as an entirety.

 17.          Force
  Majeure. The obligation of the Lessee hereunder shall be suspended and the terms
  of this Lease shall be extended as the case may be, while Lessee is prevented
  from complying therewith, in whole or in part, by strikes, lockouts, riots,
  war or the results thereof, acts of God or the elements, fire, flood, accidents,
  delays in transportation, inability to secure labor or material in the open
  market, laws, orders, rules, or regulations of Federal, State, County, Municipal,
  or other governmental agencies, authority, or representative, or any other matter
  or condition beyond reasonable control of Lessee, whether or not similar to
  the conditions or matters herein specifically enumerated, or while litigation
  contesting Lessor’s title to the leased land or the rights granted Lessee
  hereunder or litigation involving Lessee’s operations hereunder shall
  be pending and undetermined or during any period when Lessee has no market for
  the products it is then capable of producing from the leased land or the market
  price then available for such products will not produce an acceptable profit.
  For so long as any of the above circumstances continue to exist, Lessee, without
  impairment of its rights hereunder, shall be excused from performance of all
  obligations hereunder except annual rental payments as described in Section
  4, payment of taxes and protection of the leased land. It is expressly agreed
  that the prevention of settlement of any litigation or strike or labor disturbance
  shall not be considered a matter subject to Lessee’s control within the
  meaning of this Paragraph.

 18.          Tax
  Payments. Lessee shall pay all taxes on Lessee structures and improvements placed
  upon the leased land by Lessee and shall pay taxes levied and assessed against
  products of Lessee operations hereunder and taxes levied and assessed against
  the right to produce steam and heat energy from leased lands. Lessor shall pay
  all taxes levied and assessed against leased land not covered by this lease
  and/or Lessee tax payment requirements herein. 

 19.          Default
  Notice. Upon violation of any of the terms and conditions of this lease by Lessee
  and the failure of Lessee to begin in good faith to remedy same within 30 days
  after written notice from Lessor to do so, specifying in said notice the nature
  of such default, then at the option of Lessor this lease shall forthwith cease
  and terminate and all rights of Lessee in and to said leased land shall be at
  an end, except that in the event of such termination Lessee shall have the right
  to remove from the leased land all surface facilities and improvements of whatsoever
  kind and character placed upon leased land by Lessee. Upon default, if any,
  Lessee shall remove from leased land any and all machinery and structures placed
  upon leased land within one hundred eighty (180) days thereof after which ownership
  transfers to the Lessor.

 20.          Title.
  Lessor hereby warrants and agrees to defend title to the leased land and agrees
  that Lessee, at its option, may pay and discharge any taxes, mortgages, trust
  deeds or other liens or encumbrances existing, levied or assessed on or against
  leased land, and in the event Lessee exercises such option, Lessee shall be
  subrogated to the rights of any 

 7

 holder or holders thereof, and shall have the right to reimburse
  itself by applying to the discharge of any such mortgage, tax or other lien
  or encumbrance any royalties or rentals accruing to Lessor hereunder.

 21.         
  Notice. Any notice or other communication hereunder from Lessor to Lessee shall
  be given in writing by delivering same personally to Lessee or by sending same
  by registered or certified mail postage prepaid or Federal Express to Lessee
  at 1509 Tyrell Lane, Suite B, Boise, Idaho 83706. Any notice or other communication
  hereunder from Lessee to Lessor shall be given in writing by delivering same
  personally to Lessor or by sending same by registered or certified mail postage
  prepaid or Federal Express to Lessor at the Lessor address set forth on the
  signature page of this lease. Any notice so sent shall be deemed to have been
  given and received within 96 hours of deposit thereof in the United States mail
  or within 48 hours of deposit thereof with Federal Express, providing that Lessor
  has provided and street address and telephone number. The parties may upon written
  notice to the other party, at any time and from time to time change their respective
  addresses for the purposes hereof. 

 22.          Lessor,
  or its agents, at Lessor’s sole cost and risk, may during normal hours
  of operation examine any working, installations, structures or operations of
  Lessee constructed or undertaken pursuant to the leased rights, and may at reasonable
  times inspect the books and records of Lessee with respect to matters pertaining
  directly to the payment of royalties to Lessor.

 23.          Definitions.
  For the purposes of this Lease the following definitions shall apply:

                               (a)
            The terms “Hot
  Water”, “Steam” and “Thermal Energy”, collectively
  referred to as Energy Produced, each shall mean natural geothermal water and/or
  steam, and shall also mean the natural heat of the earth and the energy present
  in, resulting from or created by, or which may be extracted from, the natural
  heat of the earth or the heat present below the surface of the earth, in whatever
  form such heat or energy naturally occurs;

                               (b)
            The term “Leased
  Substances” shall collectively mean the matter, substances and resources
  defined in subparagraph 23(a) that are subject to this Lease;

                               (c)
            The term “Geothermal
  Resources” shall collectively mean the matter, substances and resources
  defined in subparagraphs 23(a) and 23(b) that are not subject to this Lease
  but are located on adjacent land or lands in reasonable proximity thereto;

                               (d)
            The term “Power
  Potential” shall mean, when used herein with respect to any well or wells,
  the quantity, or units, of energy capable of being recovered from the Hot Water,
  Steam or Thermal Energy produced therefrom by means of any energy conversion
  or utilization facility (including, but not limited to, electrical generating
  facilities) or equipment designed for use thereof;

 8

                               (e)          
  The term “Sufficient Power Potential” shall mean that Power Potential
  which, in the sole judgment of Lessee shall be sufficient for the Commercial
  sale or utilization thereof, or shall warrant the construction of facilities
  for the Commercial sale or other utilization thereof, or shall justify additional
  drilling or other operations on the leased land;

                               (f)
            The term “Commercial”
  shall mean those qualities of Leased Substances produced, sold or used, the
  value of which, after determining Lessee’s direct operating costs will
  be capable of providing a sufficient return to cause Lessee, in its sole judgment,
  to continue production thereof or to elect to proceed with further development
  or exploratory operations on the leased land. 

 23.          Severability.
  In the event that any part or portion or provision of this instrument shall
  be found or declared to be null, void, or unenforceable for any reason whatsoever
  by any court of competent jurisdiction or any governmental agency having authority
  thereover, then and in such event only such part, portion or provision shall
  be affected thereby, and such finding, ruling or decision shall not in any way
  affect the remainder of this instrument or any of the other terms or conditions
  hereof, or any Lessor rights or obligations are not, or would not be so held
  to be, void or unenforceable, which said remaining terms and conditions and
  such Lessor rights or obligations, as aforesaid, of this instrument shall remain
  binding, valid and subsisting and in full force and effect between the parties
  hereto, it being specifically understood and agreed that the provisions hereof,
  and the Lessor rights or obligations embraced within such provisions, are severable
  for the purposes of the provisions of this clause.

 24.          Governing
  Law. This lease and agreement shall be interpreted, governed by and construed
  under the laws of the state of Idaho, without consideration of any conflicts
  of law between the location of the parties or states of domicile thereof.

 25.          Execution
  Authority. The signatories hereto represent that they are the proper person
  to execute this Lease and Agreement on behalf of the parties hereto.

 26.          Binding
  Effect. This Lease and Agreement and all of the terms, covenants and conditions
  hereof shall extend to the benefit of and be binding upon the respective successors
  and assigns of the parties hereto. 

 IN WITNESS WHEREOF, the parties have caused this instrument
  to be duly executed as of the date hereinabove first written. 

	 U. S. Geothermal Inc.  	 	  
	  	 	 Reid S. Stewart - Lessor  
	  	 	 
	  	 	 
	  	 	 
	 By: Douglas J. Glaspey, COO - Lessee  	 	 Ruth O. Stewart – Lessor  
	  	 	 3014 North 1600 East  
	  	 	 North Logan, UT 84341  

 9

 

	 State of Utah  	 ) On this  ________ day of December
      2004, before me,  
	  	 )  	  
	 County of  _________________	 )  	  
	  	          
                  	the undersigned Notary Public, personally appeared 
    
	  	          
                   	Reid S. Stewart and Ruth O. Stewart
	  	 	 (   )  personally known
      to me
	  	 	 (   )  proved to me
      on the basis of satisfactory  
	  	          
                   	evidence to be the person(s) whole name(s) Reid
      S.
	  	          
                   	Stewart and Ruth O. Stewart subscribed to the
	  	          
                   	within instrument, and acknowledged that they
	  	          
                   	executed it.
	  	 	 
	  	 	 
	  	 	 
	  	 	 
	  	          
                    	WITNESS my hand and official seal.  
	 	 	 
	 	 	 
	 	 	 
	  	          
                    	Notary’s
      Signature  
	  	 	 
	  	 	 
	  	 	 
	  	 	 
	 State of Idaho  	 ) On this ________ day of December
      2004, before me  
	  	 )	  
	 County of Ada  	 )	  
	  	          
                   	the undersigned Notary Public, personally appeared 
    
	  	          
                   	Douglas J. Glaspey  
	  	  	(   )  personally known
      to me  
	  	  	(   )  proved to me on
      the basis of satisfactory  
	  	          
                   	evidence to be the person(s) whole name
	  	          
                   	Douglas J. Glaspey subscribed to the within
	  	          
                   	Instrument, and acknowledged that he executed
      it.
	  	 	 
	  	          
                   	WITNESS my hand and official seal.
	  	 	 
	  	 	 
	  	 	 
	  	          
                   	Notary’s Signature

 10

 Exhibit A

 317.54 acres more or less 

	Parcel 1 -100% Surface, Minerals and Geothermal:
        
	 
	 	 	 
	 	 Township 15 South, Range 26 East 
    	  
	 	 Section 23:  	 N1⁄2SE1⁄4SE1⁄4, SE1⁄4SE1⁄4SE1⁄4, 
    	  
	 	  	 SW1⁄4SE1⁄4SE1⁄4  	 40.00 acs. 
	 	 Section 24:  	 W1⁄2SW1⁄4, SE1⁄4SW1⁄4 less portions, 
    	  
	 	  	 Part of the SE1⁄4SW1⁄4  	 119.04 acs. 
	 	 ACRES:  	  	 159.04 acs. 
	 	 	 	 
	 	 
	 	 
	Parcel 2 – Surface Ownership with 10%
      Interest in Jensen Royalty 	 
	 	 
	 	Township 15 South, Range 26 East  	 
	 	Section 26:  	NE1⁄4 less portion	158.50 acs.  

 11Filed by Automated Filing Services Inc. (604) 609-0244 - US Geothermal Inc. - Exhibit 10.11

 EMPLOYMENT AGREEMENT 

  
    
        THIS AGREEMENT made as of the 1st day of October 2004 

    

  

BETWEEN: 

  
    
        US Geothermal Inc., a body corporate having an office at Suite
        B 1509 Tyrell Lane Boise, Idaho 83706

        (the "Company") 

    

  

AND: 

  
    
        Kevin Kitz of 1509 Tyrell Lane, Suite B, Boise, Idaho 83706
        (the "Employee") 

    

  

WHEREAS: 

 (A)                          the
  Company is in the business of developing its Raft River geothermal property;

 (B)                          the
  Company wishes to engage the Employee as Vice President – Project Development;
  and 

 (C)                          the
  parties hereto wish to enter into this Agreement for the purpose of fixing the
  compensation and terms applicable to the employment of the Employee during the
  period hereinafter set out. 

                                  NOW
  THEREFORE THIS AGREEMENT WITNESSES that the parties hereto, in consideration
  of the respective covenants and agreements on the part of each of them herein
  contained, do hereby covenant and agree as follows: 

 1.                            Employment
  

                                  The
  Company hereby engages the Employee as Vice President – Project Development
  of the Company, and the Employee hereby accepts such employment, upon the terms
  and conditions hereinafter set out. 

 2.                             Term
  

                                 This
  Agreement will be effective from October 1, 2004 and will remain in full force
  and effect for 2 years or until terminated as hereinafter provided. Employee
  will be subject to a right by the Company to extend this employment agreement
  one additional year for a total of 3 years.

 - 2 - 

 3.                             Responsibility
  

                                 The
  Employee will devote one hundred percent of his working time to his Employment
  hereunder, and while engaged in his employment will have the authority and duty
  to perform and carry out such duties and responsibilities as are customarily
  carried out by persons holding similar positions in other geothermal companies
  comparable in size to the Company and such additional and related duties as
  may from time to time be assigned, delegated, limited or determined by the President.

 4.                             Other
  Business Activities 

                                 It
  is agreed that the Employee's employment hereunder shall constitute one hundred
  percent of his working time which shall be devoted exclusively for the benefit
  of the Company, and therefore, the Employee may not engage in any other business
  activities, that would interfere with, or impede, in any significant manner
  the performance of his duties as Vice President - Project Development. 

 5.                             Compensation
  

                                 In
  consideration of the performance by the Employee of his responsibilities and
  duties as Vice President – Project Development hereunder: 

	 	 (a)      	 the Company will pay Employee the sum of US$84,000
        per annum, payable in monthly installments. The Employee may elect to
        have any compensation payable hereunder paid into any jurisdiction of
        his choice, but the Company may decline to pay such compensation to the
        Employee at the place specified if the Company determines that such payment
        in such jurisdiction would violate the laws of the jurisdiction of the
        place of payment specified by the Employee or the laws of any other country
        or if the Company otherwise determines that payment to the Employee or
        for his account in such place would be prejudicial to the Company; 

	 
	 	 (b)      	 In addition to the 50,000 options already granted
        to Employee, the Company will, subject to TSX Venture Exchange approval,
        grant Employee 166,667 incentive stock options at 80% of market price
        on the execution date of this agreement; 

	 
	 	 (c)      	 the Company will provide the Employee and his immediate
        family (consisting of spouse and children) with medical, dental and related
        coverages as are or may become available to the other employees of the
        Company; 

	 
	 	 (d)      	 The Company will grant 200,000 Performance Shares
        to Employee to be allocated from the existing pool of Performance Shares
        already established and granted to the founder and executive management
        group. Exhibit A, attached, shows the Performance Share distribution from
        the founder and executive 

 - 3 - 

	 	 	 management group to the Employee. Distribution is subject to achievement
      of established performance objectives; and, 
	 
	 	 (e)      	 Upon execution of this agreement, the Company shall
        grant Employee a signing bonus of 120,000 shares of stock. The shares
        will be subject to the TSX Venture Exchange approval and will be held
        in escrow subject to the following vesting events: 80,000 shares on signing
        employment agreement; 40,000 shares upon closing of the project financing
        agreement for the first phase of the Raft River project, or 6 months from
        the effective date of this agreement, whichever occurs first. 

 6.                             Death
  or Disability 

                                 For
  purposes hereof “total and permanent disability” means inability
  to perform the services required hereunder due to physical or mental disability.
  Evidence of such disability shall be certified by a physician acceptable to
  both the Company and Employee. All signing bonus shares will become fully vested
  and payable to Employee, or to his beneficiaries, if Employee suffers death
  or total and permanent disability on or before April 1, 2006. 

 7.                          Expenses
  

                                The
  Company will reimburse the Employee for any and all reasonable and documented
  expenses actually and necessarily incurred by the Employee in connection with
  the performance of his duties under this Agreement. The Employee will furnish
  the Company with an itemized account of his expenses in such form or forms as
  may reasonably be required by the Company and at such times or intervals as
  may be required by the Company. 

 8.                          Vacation
  

                                 The
  Employee will be entitled to a paid vacation of three weeks within each 12-month
  period under the terms of this Agreement, to be calculated from the date of
  commencement of employment set forth in Section 2 herein. This vacation must
  be taken on dates that do not adversely compromise the Employee’s performance
  of his duties under this Agreement. 

 9.                          Termination
  

                                This
  Agreement and the Employee's employment may be terminated by the Company summarily
  and without notice, payment in lieu of notice, severance payments, benefits,
  damages or any sums whatsoever, on the occurrence of any one or more of the
  following events: 

 - 4 - 

	 	 (a)      	 the Employee’s failure to carry out his duties
        hereunder in a competent and professional manner; 

	 
	 	 (b)      	 the Employee’s appropriation of corporate
        opportunities for the Employee’s direct or indirect benefit or his
        failure to disclose any material conflict of interest; 

	 
	 	 (c)      	 the Employee’s plea of guilty to, or conviction
        of, an indictable offence once all appeals (if any) have been completed
        without such conviction having been reversed; 

	 
	 	 (d)      	 the existence of cause for termination of the Employee
        at common law including but not limited to cause related to fraud, dishonesty,
        illegality, breach of statute or regulation, or gross incompetence; 

	 
	 	 (e)      	 failure on the part of the Employee to disclose
        material facts concerning his business interests or employment outside
        of his employment by the Company, provided such facts relate to the Employee’s
        duties hereunder; 

	 
	 	 (f)      	 refusal on the part of the Employee to follow the
        reasonable and lawful directions of the Company; 

	 
	 	 (g)      	 breach of fiduciary duty to the Company on the part
        of the Employee; 

	 
	 	 (h)      	 material breach of this Agreement or gross negligence
        on the part of the Employee in carrying out his duties under this Agreement;
        or 

	 
	 	 (i)      	 a declaration of bankruptcy on the part of the Employee
        by a court of competent jurisdiction. 

 9.1                           In
  the event of the early termination of the Agreement for any reason set out in
  Section 8 above, the Employee shall only be entitled to such compensation as
  would otherwise be payable to the Employee hereunder up to and including such
  date of termination, as the case may be.

 9.2                           This
  Agreement and the Employee's employment may be terminated on notice by the Company
  to the Employee for any reason other than for the reasons set out in Section
  8 above of this Agreement upon one month notice to the Employee. In such event,
  the Employee will be entitled to payment of salary and expenses until the date
  one month after which notice was given. 

 9.3                           This
  Agreement and the Employee's employment may be terminated on notice by the Employee
  to the Company for any reason upon one month notice to the Company. In such
  event, the Employee will be entitled to payment of salary and expenses until
  the date one month after which notice was given. In the event of early termination
  of employment under this article, 

 - 5 - 

 if the termination is within 12 months of effective date of
  this agreement then Employee will forfeit 75% of the Performance Shares that
  may be payable to the Employee under Section 5(d); if the termination is after
  12 months from the effective date of this agreement but before 24 months then
  Employee will forfeit 25% of the Performance Shares that may be payable to Employee;
  and, if the termination is after 24 months from effective date of this agreement
  then Employee will not forfeit any of the Performance Shares that may be payable
  to the Employee under Section 5 (d).. 

 10.                          Confidential
  Information 

                                  The
  Employee agrees to keep the affairs and Confidential Information (as defined
  below) of the Company strictly confidential and shall not disclose the same
  to any person, company or firm, directly or indirectly, during or after his
  employment by the Company except as authorized in writing by the Board. "Confidential
  Information" includes, without limitation, the following types of information
  or material, both existing and contemplated, regarding the Company or its parent,
  affiliated or subsidiary companies: corporate information, including contractual
  licensing arrangements, plans, strategies, tactics, policies, resolutions, patent,
  trademark and trade name applications; any litigation or negotiations; information
  concerning suppliers; marketing information, including sales, investment and
  product plans, customer lists, strategies, methods, customers, prospects and
  market research data; financial information, including cost and performance
  data, debt arrangements, equity structure, investors and holdings; operational
  and scientific information, including trade secrets; technical information,
  including technical drawings and designs; any information relating to any mineral
  projects in which the Company has an actual or potential interest; and personnel
  information, including personnel lists, resumes, personnel data, organizational
  structure and performance evaluations. The Employee agrees not to use such information,
  directly or indirectly, for his own interests, or any interests other than those
  of the Company, whether or not those interests conflict with the interests of
  the Company during or after his employment by the Company. The Employee expressly
  acknowledges and agrees that all information relating to the Company, whether
  financial, technical or otherwise shall, upon execution of this Agreement and
  thereafter, as the case may be, be the sole property of the Company, whether
  arising before or after the execution of this Agreement. The Employee expressly
  agrees not to divulge any of the foregoing information to any person, partnership,
  Company or other legal entity or to assist in the disclosure or divulging of
  any such information, directly or indirectly, except as required by law or as
  otherwise authorized in writing by the Board. The provisions of this Section
  9 and Section 9.1 below shall survive the termination of this Agreement.

 10.1                           The
  Employee agrees that all documents of any nature pertaining to the activities
  of the Company or its related corporate entities, including Confidential Information,
  in the Employee's possession now or at any time during the Employee's period
  of employment, are and shall be the property of the Company and that all such
  documents and copies of them shall be surrendered to the Company when requested
  by the Company. 

 - 6 - 

 11.                            Non-Competition

                                   During
  the Non-Competition Period (as defined below), the Employee shall not, either
  individually or in partnership or jointly or in conjunction with any other person,
  entity or organization, as principal, agent, consultant, lender, contractor,
  employer, employee, investor, shareholder or in any other manner, directly or
  indirectly, advise, manage, carry on, establish, control, engage in, invest
  in, offer financial assistance or services to, or permit the Employee's name
  or any part thereof to be used by, any business in geothermal resources that
  is in direct competition with the business of the Company, its parent, affiliated
  or subsidiary companies, or any business in which the Company, its parent, affiliated
  or subsidiary companies is engaged. For purposes of this Agreement, “Non-Competition
  Period” means a period ending twelve (12) months after the end of the
  termination of this Agreement. 

 12.                          Acknowledgement
  

                                  The
  Employee acknowledges that damages would be an insufficient remedy for a breach
  by him of this Agreement and agrees that the Company may apply for and obtain
  any relief available to it in a court of law or equity, including injunctive
  relief, to restrain breach or threat of breach of this Agreement by the Employee
  or to enforce the covenants contained therein and, in particular, the covenants
  contained in Sections 9 and 10, in addition to rights the Company may have to
  damages arising from said breach or threat of breach. 

 13.                          Representations
  and Warranties 

                                  The
  Employee represents and warrants to the Company that the execution and performance
  of this Agreement will not result in or constitute a default, breach, or violation,
  or an event that, with notice or lapse of time or both, would be a default,
  breach, or violation, of any understanding, agreement or commitment, written
  or oral, express or implied, to which the Employee is currently a party or by
  which the Employee or Employee's property is currently bound. 

 14.                          Governing
  Law 

                                  This
  Agreement shall be construed and enforced in accordance with the laws of the
  State of Idaho, USA. 

 15.                          Entire
  Agreement 

                                  This
  Agreement constitutes the entire agreement between the parties hereto with respect
  to the relationship between the Company and the Employee and supersedes all
  prior arrangements and agreements, whether oral or in writing between the parties
  hereto with respect to the subject matter hereof. 

 16.                          Amendments
  

                                  No
  amendment to or variation of the terms of this Agreement will be effective or

 - 7 - 

 binding upon the parties hereto unless made in writing and signed by both
  of the parties hereto. 

 17.                          Assignment
  

                                 This
  Agreement is not assignable by the Employee. This Agreement is assignable by
  the Company to any other company that controls, is controlled by, or is under
  common control with the Company. This Agreement shall enure to the benefit of
  and be binding upon the Company and its successors and permitted assigns and
  the Employee and his heirs, executors and administrators. 

 18.                          Severability
  

                                 Any
  provision of this Agreement that is prohibited or unenforceable in any jurisdiction
  shall, as to that jurisdiction, be ineffective to the extent of the prohibition
  or unenforceability and shall be severed from the balance of this Agreement,
  all without affecting the remaining provisions of this Agreement or affecting
  the validity or enforceability of such provision in any other jurisdiction.

 19.                          Headings
  

                                 The
  division of this Agreement into Sections and the insertion of headings are for
  convenience or reference only and shall not affect the construction or interpretation
  of this Agreement. 

 20.                          Time
  of Essence 

                                 Time
  shall be of the essence in all respects of this Agreement. 

 21.                          Independent
  Legal Advice 

                                 The
  Employee agrees that he has had, or has had the opportunity to obtain, independent
  legal advice in connection with the execution of this Agreement and has read
  this Agreement in its entirety, understands its contents and is signing this
  Agreement freely and voluntarily, without duress or undue influence from any
  party. 

 22.                          Notice
  

                                 Any
  notice required or permitted to be made or given under this Agreement to either
  party shall be in writing and shall be sufficiently given if delivered personally,
  by electronic transmission, or if sent by prepaid registered mail to the intended
  recipient of such notice at their respective addresses set forth below or to
  such other address as may, from time to time, be designated by notice given
  in the manner provided in this Section: 

                                 in
  the case of Company: 

 - 8 - 

	 	 US Geothermal Inc.  	  
	 	 1509 Tyrell Lane, Suite B  	  
	 	 Boise, Idaho 83706  	  
	 	 Attention: Corporate Secretary  	  
	 	 Fax No.: 208 424 1030  	  
	 	  	 
	 	  	 
	 	  	 
	 	 in the case of Employee:  	 Or if no longer an Employee:  
	 	  	 
	 	 Kevin Kitz  	 Kevin Kitz  
	 	 1509 Tyrell Lane, Suite B  	 PO Box 170240  
	 	 Boise, Idaho 83706  	 Boise, Idaho 83717  
	 	 Fax No.: 208 424 1030  	 Phone No: 208 336 6065  

 22.1                          Any
  notice delivered to the party to whom it is addressed shall be deemed to have
  been given and received on the day it is so delivered or, if such day is not
  a business day, then on the next business day following any such day. Any notice
  mailed shall be deemed to have been given and received on the 10th business
  day following the date of mailing. In the case of facsimile transmission, notice
  is deemed to have been given or served on the party to whom it was sent at the
  time of dispatch if, following transmission, the sender receives a transmission
  confirmation report or, if the sender’s facsimile machine is not equipped
  to issue a transmission confirmation report, the recipient confirms in writing
  that the notice has been received. 

                                  IN
  WITNESS WHEREOF the parties hereto have executed this Agreement as of the
  day and year first above written. 

US GEOTHERMAL INC. 

	 By:  	  	 
	  	 Authorized Signatory  	 

SIGNED by the Employee in the presence of: 

	 	 	 
	 Witness  	 	 Kevin Kitz  
	 	 	 
	 	 	 
	Printed Name of Witness 	 	 

 - 9 - 

 EXHIBIT A

PERFORMANCE SHARE DISTRIBUTION 

	 Original  	 First  	 Second  	 Total  
	 Daniel Kunz  	 235,750  	 78,540  	 314,290  
	 Doug Glaspey  	 214,300  	 71,420  	  285,720  
	 Paul Larkin  	 128,560  	 42,865  	 171,425  
	 Ron Bourgeois  	 128,560  	 42,865  	  171,425  
	 John Walker  	 42,830  	 14,310  	 57,140  
	Total 	 750,000  	 250,000  	 1,000,000  
	  	 	 	 
	 New Distribution  	  	  	  
	 Daniel Kunz  	 172,000  	 59,970  	 231,970  
	 Doug Glaspey  	 178,050  	 57,136  	  235,186  
	 Paul Larkin  	 103,560  	 34,292  	 137,852  
	 Ron Bourgeois  	 103,560  	 34,292  	  137,852  
	 John Walker  	 42,830  	 14,310  	 57,140  
	 Kevin Kitz  	 150,000  	 50,000  	 200,000  
	Total 	 750,000  	 250,000  	 1,000,000

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