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Geothermal Royalties Not So Hot in Idaho

by Zach Hagadone & Brad Carlson
Idaho Business Review, February 2, 2009

Eighty-seven bucks doesn't go very far these days, so it's understandable that Bonneville County Clerk Ron Longmore wouldn't immediately remember where it came from.

After some checking, he found out it was related to geothermal leasing in fiscal years 2007 and 2008, but the amount was so small he couldn't say exactly why Bonneville got it in the first place.

"Eighty-seven dollars over a two year period? I'm not familiar with it," he said. "Obviously, there's some very small (geothermal) operation that I'm not aware of."

In neighboring Bingham County it was a similar story. Clerk Anne Staub had to do some digging to nail down the specifics on $60 the county received from the State Treasurer, also for geothermal leasing.

It turns out that Bingham and Bonneville counties share a so-far undeveloped lease purchased by Burley-based geothermal developer Idatherm, and the checks represented their share of revenue from the sale – part of changes to the Energy Policy Act of 2005 which help states and counties shoulder the costs of geothermal development on federal lands.

The changes, which were enacted in 2007, allow the federal government to keep 25 percent of the revenue from lease sales. States receive 50 percent and counties get the remaining 25 percent. According to a report issued by the Geothermal Energy Association last month, the new revenue-sharing program has distributed $27 million to the six most active geothermal states, and more than $13 million directly to counties.

That money has helped states invest in energy infrastructure, bolster general funds and support the expansion of renewable resources.

It has also helped counties repair roads, settle debts and weather budget holdbacks.

But, while Idaho is famous for its geothermally-heated capitol mall and regarded as having one of the highest potentials for geothermal development in the country, its share of leasing royalties pales in comparison to most of its neighbors.

According to the GEA report, the State of Idaho has received a little over $2.9 million from the royalties program in the last two fiscal years, with its counties getting about $1.4 million. Bingham and Bonneville received the smallest amounts of any county in the geothermal states, except Iron County in Utah, which got $57.

The State of California, however, received more than $14.5 million over the past two fiscal years and its counties got more than $7 million. The State of Nevada received $9 million from the program, and its counties got about $4.5 million.

According to a joint Bureau of Land Management-Forest Service study, Idaho could be cashing in. The study estimates that as much as 885 megawatts of commercially developed geothermal energy could be generated in the state by 2015 – enough to power more than a half-million homes. By 2025, the study estimates as much as 1,670 MW could be on-line – enough to power more than 1 million.

But the state only has one commercially operated geothermal power plant, owned by U.S. Geothermal and located on private property southeast of Boise.

One of the main reasons Idaho hasn't developed its geothermal potential: Cheap hydro power.

"For states like Idaho, Washington and Oregon, which are dominated by relatively cheap hydro power, the competition is low-cost power," said Doug Glaspey, COO of Boise-based U.S. Geothermal. "In California, energy costs are around $100 per megawatt. In Idaho, people don't want to pay any more than $60 or $70 per megawatt."

Glaspey said competing with some of the nation's lowest-cost power is challenging not just on a per-megawatt basis, but because it's held back exploration of Idaho's geothermal resources. Without an accurate picture of where to drill, developers have to take on the additional risk of exploration.

"We have to go where the resources are," Glaspey said, pointing to the company's Neal Hot Springs site near Vail, Ore., and its San Emidio site in northern Nevada, both of which came with proven resources.

Idaho Office of Energy Resources Administrator Paul Kjellander said the state recognizes geothermal's potential and is working on a mapping project to pinpoint hotspots around the state. However, he said the agency already knows that the majority of geothermal sites are going to be on federal land, which requires developers to undergo lengthy environmental reviews and puts them in areas far from transmission lines.

"'Potential' is an interesting word," Kjellander said. "When you look at potential you have to look at it with that eye of pragmatism."

"Obviously if you're looking at geothermal resources that are in the middle of wilderness or roadless areas, or nestled amongst various threatened or endangered species, you're either not going to be able to develop that resource or it's going to be hard," he added.

Glaspey agreed that developing on federal land presents additional challenges – environmental impact statements can take years and cost millions of dollars – but he's hopeful that state and federal lawmakers will consider investment tax credits or other support to help offset costs.

"I don't think geothermal in Idaho has come into its own yet," he said. "If they really want to see geothermal developed, they really have to start doing something rather than talking."

U.S. Sen. Mike Crapo (R-Idaho), is one of those interested in seeing geothermal development supported at the federal level. According to press secretary Lindsay Nothern, Crapo and other members of Idaho's congressional delegation will be working on legislation this year to increase financing capabilities for geothermal projects, give developers more control of the resource and help speed the process of development.

"Some of the things we've talked bout are tax credits, things to make geothermal development more lucrative," Nothern said. "The odds are that given the current political makeup, we feel pretty confident that geothermal is on the rise. Everything points to it. There's interest at the state level, there's interest in D.C."

Zach Hagadone & Brad Carlson
Geothermal Royalties Not So Hot in Idaho
Idaho Business Review, February 2, 2009

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