Background paper for workshop on geothermal energy

Contents: Introduction, Economic Incentives, Drilling Regulation, Land Use and Leasing, Relationship of Geothermal to Water Resources, and Ownership."In 1974, the Hawaii Legislature classified geothermal resources as minerals under Chapter 182 (Reservation and Disposition of Government Mineral Rights) of the Hawaii Revised Statutes. This chapter provides for the competitive leasing of state mineral rights, with requirements for bonds, certain lease stipulations and performance standards. Subsequently, the state Department of Land and Natural Resources promulgated regulations for leasing and drilling of geothermal resources (Regulation 8) under Chapter 182 and Chapters 177 (Ground-Water Use) and 178 (Wells, Generally). The legislature also has made substantial appropriations for geothermal R&D; authorized county governments to develop geothermal resources; set excise tax rate at 0.5% on gross proceeds from geothermal resources ; exempted building improvements for the use of geothermal resources from property tax; provided inducements for geothermal electric power development through certain utility regulations; and adopted federal tax benefits for geothermal development established by National Energy Act of 1978. When reviewing these existing policies for possible improvements, a distinction should be made between electricity production and direct heat applications. These two types of development typically differ on resource requirements, effects on the environment and surrounding communities, financial requirements and the kinds of investors and developers involved. Consequently, different economic incentives and regulatory policies for the two types of development frequently will be appropriate.