RENEWABLE ENERGY:

Geothermal-rich Idaho aims to remove development obstacles

Idaho, sitting atop the nation's third-largest geothermal resource, is working to ease development restrictions on prime state-owned lands with hopes of attracting new interest and investment in what is arguably the nation's least-known renewable energy fuel.

Four bills being floated in the state Legislature would remove a 10-year expiration clause on geothermal leases to allow companies more time to develop projects, as well as remove restrictions on geothermal lease sizes and reduce royalty fees for power producers that have scared other developers away from the state.

The legislative package, written and sponsored by the Idaho Department of Lands with the support of Gov. C.L. "Butch" Otter (R) and other top-ranking lawmakers, comes as the Gem State tries to stake its claim in the renewable energy boom that is sweeping across the Interior West.

"In order to get a company to come in, it's just nearly impossible the way our law is now," Rep. Bert Stevenson (R) told members of the House Resources and Conservation Committee last week, according to the Times-News in Twin Falls. "We've got to make these changes to encourage that geothermal development."

The changes would apply only to Idaho's 2 million acres of state endowment lands -- parcels given to the state by the federal government when Idaho joined the Union in 1890. Those tracts are intended to produce revenue to support public schools and several public university and charity funds.

Eric Wilson, minerals program manager for the Department of Lands, said much of the state endowment lands are in the southeast part of the state, which is believed to have tremendous geothermal energy potential.

The Bureau of Land Management -- which handles federal leasing on the 12.7 million acres it manages in Idaho, as well as 17 million acres of U.S. Forest Service land in the state -- has estimated that by 2025 geothermal plants in the state could be producing as much as 1,670 megawatts -- enough to power more than 650,000 homes.

Those estimates place Idaho behind only California and Nevada in total geothermal power producing potential, according to BLM.

But Idaho currently has only one operating geothermal power plant, U.S. Geothermal's 13-megawatt capacity Raft River 1 project about 200 miles southeast of Boise in the Raft River Valley. By comparison, BLM's Nevada state office lists 12 active geothermal operations on federal land that produce about 350 megawatts of electricity, according to federal statistics.

And BLM last week issued draft approval for up to five new geothermal power plants in western Nevada that could power nearly 50,000 homes (Greenwire, Jan. 31).

"There's a lot of potential in Idaho. It's just that when you look at projects that have already gone through [exploratory] drilling and are under construction, Nevada, California, Utah and Oregon are leading the pack," said Karl Gawell, executive director of the Geothermal Energy Association, an industry trade group. "But of all those states, Idaho has potentially the largest untapped capacity."

1 percent, but growing

The slow pace of geothermal development in Idaho in some ways mirrors the technology's development nationwide.

Currently, geothermal, which relies on heat and steam from the earth's core to drive electric power generators, accounts for less than 1 percent of total domestic energy production.

The Interior Department has estimated that by 2025 geothermal plants on federal land could produce enough electricity to power more than 10 million homes, placing it on par with wind and solar.

And geothermal, unlike wind and solar, can provide baseload power, moving electricity to the grid 24 hours a day regardless of whether the sun is shining or the wind is blowing.

Idaho's decades-old state statutes, however, were written "before anyone was sure what geothermal energy was and how it could be used," Wilson said.

Among the current law's shortcomings is a cap limiting geothermal leases on state land to 640 acres. While the footprint of a geothermal plant is relatively small, wells are typically spread across 1,000 or more acres, requiring developers on state endowment lands to purchase multiple leases.

Another pitfall for developers is the state's 10-year retirement clause for geothermal leases on state endowment lands. That's probably too short a time for a company to determine whether the resource is sufficient to invest millions of dollars in a new plant, said Steve Lubinski, a BLM geologist in Burley, Idaho.

"In an oil and gas field, you can drill a well and know in a matter of days if it's going to be profitable," Lubinski said. "With geothermal, it can be a decade or more. It's a much more drawn out process."

In addition, Idaho collects a 10 percent royalty rate from geothermal producers operating on state lands, nearly three times what BLM collects from geothermal operators on federal lands. The high royalty rate has made it uneconomical for most companies seeking to do business in Idaho.

"The developers can't make a project pencil out at 10 percent. They can't make it work," Wilson said. "So we realize our rates are too high. If we can get it down to 3.5 percent, we'll be bringing in good steady income. Right now we've got a 10 percent rate but no production, and 10 percent of nothing is still nothing."

Federal leasing activity

While the state proceeds with its lease and royalty reforms, geothermal development is not standing still in Idaho, where federal leases are moving forward at a healthy pace.

A prime example is a proposal to develop geothermal resources on 640 acres of BLM land in the Raft River Valley. The area was proposed for lease two years ago, but the nominating company's name is to be withheld until a formal bid is entered for the lease this summer. The lease proposal is open for public comment through Feb. 25.

Geothermal development on federal land requires a multistep process that begins with the purchase of leasing rights at a competitive auction. After that, further analysis and permits are required to drill wells, build power generators, and site roads and other infrastructure needed to produce electricity, Lubinski said.

The nominated parcel in the Raft River Valley is in an area with high geothermal potential, according to BLM and the Forest Service, which issued a programmatic environmental impact statement (PEIS) in 2008 identifying the best sites for geothermal development across the West.

BLM is currently reviewing nine other agency-managed parcels for possible lease in Idaho, as well as three others nominated on Forest Service land, Lubinski said. "One of our state director's priorities is doing a better job of processing these," he said.

Since June 2007, BLM has held three geothermal lease sales, resulting in leases on 18 parcels covering 28,168 acres, according to federal records.

The BLM parcel proposed for lease this summer sits near U.S. Geothermal's Raft River project, which occupies 8.2 square miles of private land. That plant, which first began producing electricity in late 2007, has five deep wells producing about 11 megawatts of electricity a day, enough to power about 4,000 homes.

Daniel Kunz, U.S. Geothermal's president and CEO, said the company plans to start construction on a second production unit at the site this year that would have the capacity to produce 26 megawatts, or enough to power about 10,000 additional homes.

Kunz praised state lawmakers' latest effort to promote geothermal energy development on state endowment lands.

"They're trying," Kunz said. "The government needs to provide incentives so that people can lease or develop or seek to develop this resource."

Streater writes from Colorado Springs, Colo.

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