H.R. 5638: Geothermal Royalty Reform Act

This bill, known as the Geothermal Royalty Reform Act, aims to amend existing regulations regarding geothermal resources in the United States. Specifically, it seeks to change how royalties are calculated for geothermal energy production from leased lands.

Key Changes Proposed

• The bill modifies the Geothermal Steam Act of 1970, which governs geothermal energy extraction.
• Royalties, which are payments made to the government for the extraction of geothermal resources, will now be based on the output from each individual electric generating facility that uses these resources.
• Previously, royalty calculations were more generalized and did not differentiate between different facilities producing electricity from geothermal resources.

Specific Amendments

The bill includes the following amendments to the existing language of the Geothermal Steam Act:

• In one section, it specifies that royalties will be assessed "with respect to each electric generating facility producing electricity from such resources" rather than on a blanket basis.
• The adjustments ensure that the amount paid in royalties is directly linked to the specific output of each facility, allowing for a more precise calculation.

Purpose of Amendments

The intent behind these changes is to create a more equitable framework for assessing royalties based on actual production levels. This could allow for better revenue collection by the government while providing a clearer financial structure for companies involved in geothermal energy production.

Considerations

By tying royalty payments to the production output of individual facilities, the bill may encourage greater efficiency and productivity within the geothermal sector. Companies could be incentivized to maximize output at each facility to reduce their effective royalty rates.

Relevant Companies

• ORG - Ormat Technologies, Inc.: As a leader in geothermal energy development, Ormat may experience direct impacts from changes in royalty calculations, potentially affecting their operational costs and profitability.
• FCEL - FuelCell Energy, Inc.: Although primarily focused on fuel cell technology, their investments in geothermal energy may respond to modifications in royalty obligations under the proposed bill.