Hawaii Administrative Rules › Title 13 - DEPARTMENT OF LAND AND NATURAL RESOURCES › Subtitle 7 - WATER RESOURCES › Chapter 183 - RULES ON LEASING AND DRILLING OF GEOTHERMAL RESOURCES › Subchapter 3 - LEASES GENERALLY › Section 13-183-31 - Royalties on geothermal production

Current through June, 2024
(a) The rate of the
				  royalty to be paid to the State for the production of geothermal resources
				  shall be determined by the board prior to the bidding for or granting of a
				  mining lease, but the rate shall not be less than ten percent nor more than
				  twenty percent of the gross amount or value of the geothermal resources
				  produced under the lease as measured at the wellhead and sold or utilized by
				  the lessee. The board may readjust the rate of royalty of any geothermal mining
				  lease at not less than fifteen-year intervals beginning thirty-five years after
				  the effective date of the lease. In the event of any readjustment, the rate of
				  royalty may not be increased by more than fifty percent over the royalty paid
				  during the preceding period. The board shall give notice of any proposed
				  readjustment of royalties and unless the lessee files with the board objection
				  to the proposed royalties or surrendered the lease within thirty days after
				  receipt of such notice, the lessee shall conclusively be deemed to have agreed
				  with the terms and conditions. If the lessee files objections and no agreement
				  can be reached between the board and the lessee within a period of not less
				  than sixty days, the lease may be terminated by either party. In no event shall
				  the rate of the royalty payable exceed twenty percent of the gross value. In
				  addition to the above, the board may also impose a royalty based on a
				  percentage of the net profit, cash bonus, or otherwise.
(b) For the purpose of computing royalties,
				  the amount or value of geothermal resources produced shall be determined as the
				  gross proceeds received by the mining lessee from the sale or use of geothermal
				  resources produced from the leased land as measured at the wellhead. In the
				  event that geothermal production hereunder is not sold to a third party but
				  used or furnished to a plant owned or controlled by the lessee, the gross
				  proceeds of the production for purposes of computing royalties shall be that
				  which is reasonably equal to the gross proceeds being paid to other geothermal
				  producers for geothermal resources of like quality and quantity under similar
				  conditions after deducting any and all treating, processing, and transportation
				  costs incurred. In the case of furnished geothermal resources, should the board
				  believe that any stated charges imposed and deducted are excessive or that the
				  stated sales price received by the lessee is unreasonable, the lessee shall,
				  upon thirty days notice, provide the board with evidence that the charges or
				  price or both comply with the above requirement of reasonably equal gross
				  proceeds. Gross proceeds shall not be deemed to include excise, production,
				  severance, or sales taxes or other taxes imposed on the lessees by reason of
				  the production, severance, or sale of geothermal resources or geothermal
				  by-products.
(c) The rate of
				  royalty to be paid to the State for any geothermal by-product contained in and
				  extracted from the effluence produced shall be not less than five percent nor
				  more than ten percent of the gross proceeds received by the lessee from the
				  sale of any by-product produced under the lease as measured at the wellhead and
				  sold, exchanged, or otherwise disposed of by the lessee, including
				  demineralized or desalted water, after deducting any treating, processing, and
				  transportation costs incurred. No payment of a royalty shall be required on the
				  water if it is used in plant operation for cooling or generation of electric
				  energy or is reinjected into the sub-surface. No royalty shall be paid for
				  geothermal byproducts used or consumed by lessee in the production operations.
				  The board may readjust the rate of royalties for the production of geothermal
				  by-products in the same manner and under the same terms prescribed in
				  subsection (a) herein; provided that the rate of royalty for geothermal
				  by-products payable shall not exceed ten percent of the gross proceeds. Gross
				  proceeds shall not include the taxes described in subsection (b)
				  herein.
(d) The lessee shall make
				  payment of royalties to the board in Honolulu within thirty days after the end
				  of each calendar month and accompany the payment with a certified true and
				  correct written statement by the lessee, showing the amount of each geothermal
				  resource produced, sold, used, and otherwise disposed of, and the basis for
				  computation and determination of royalties. Lessee shall furnish other data as
				  may be necessary to enable the board to audit and verify all royalties due and
				  payable to the State.
(e) Metering
				  equipment shall be maintained and operated by lessee in a manner that meets
				  acceptable standards of accuracy consistent with geothermal industrial
				  practices. Use of the equipment shall be discontinued at any time upon
				  determination by the chairperson that the standards of accuracy or quality are
				  not being maintained. If the equipment is found defective, the chairperson
				  shall determine the quantity and quality of production.
(f) The lessee shall furnish the chairperson
				  the results of periodic tests showing the content of by-products in the
				  produced geothermal resources. Tests shall be taken as specified by the
				  chairperson and by the method of testing approved by him; provided that tests
				  not consistent with industrial practices shall be conducted at the expense of
				  the State.