Geothermal Site Aquisition and Early Development: Key Legal Issues and Emerging Strategies

Abstract

This paper surveys the recent surge of interest in early-stage geothermal energy project development, describes some of the key legal issues that must be faced by developers of such projects, and recommends strategies for resolving these issues with an eye to facilitating geothermal development in the western United States. The paper includes an assessment of the impacts of geothermal leasing and permitting reform at the Bureau of Land Management and the U.S. Forest Service for projects on federal land. It also reviews the status and efficacy of programs for leasing and permitting exploration of geothermal resources on state owned lands, in particular California, Nevada and Utah. The paper covers key legal issues that have emerged in various states to complicate development (for example, the uneven state treatment of geothermal resources as mineral rights, water rights or neither, and uneven rules regarding their ownership by surface owners, mineral owners, or both). The paper also covers state differences in environmental permitting regimes for geothermal development, as permitting issues have been a substantial cost and time issue, if not a fatal one, for many otherwise attractive projects. Finally, since much geothermal site acquisition occurs through contractual arrangements between larger, well-funded players and smaller, existing developers with rights to the resource at a given site, the paper also focuses on successful, and not so successful, structures for the financing and joint exploration and power plant development on geothermal properties. Structures covered include joint development partnership structures, convertible development loans, and resource unitization under federal and state regulations.