The Developable Geothermal Lease

Abstract

The first transaction of a geothermal developer seeking to construct and operate utility scale geothermal facilities is likely to be the conclusion of a geothermal resources lease. Well considered and realistic contractual terms result in landowners and developers working together toward energy generation. A properly structured lease sets the stage for the exploration and development process with provisions for a financeable project, enabling developers to engage in future business structures and lending transactions. For the landowners, a lease will provide performance standards and land use protections in addition to income. The goal of both parties is the revenue / royalty stream from the generation of geothermal power. As the capital markets recover, strong projects with good contractual relationships are receiving favorable financing terms. A few universal guidelines can help potential developers avoid project killer contracts and promote good landowner relationships.