Tuesday, November 18, 2003
Copyright © Las Vegas Review-Journal

Energy bill gives big boost to geothermal power

As congressional proposal stands, Nevada resource would get generous tax breaks

WASHINGTON -- Nevada's top renewable energy source, geothermal power, stands to get a big boost from legislation nearing completion this week in Congress.

A sweeping energy bill that runs more than 1,000 pages is generous to geothermal. It provides a new tax credit, reforms leasing requirements, alters royalty payments and directs the Interior Department to study how to maximize it on federal lands.

Geothermal would receive a new five-year production tax credit, an incentive industry backers hailed to encourage investment.

Unlike wind and solar power, which also receive tax credits, geothermal can be tapped 24 hours a day, its boosters say.

But harnessing the resource, which is derived from steam and hot water that runs under the Earth's surface, can be costly.

"It's critical to get these companies to invest the hundreds of millions it takes to put these facilities on line," said Rep. Jim Gibbons, R-Nev., who lobbied for the incentives.

The tax credit of 1.8 cents per kilowatt hour is designed to bring down the price of geothermal energy, making it more competitive with traditional electricity sources such as coal and natural gas.

"Geothermal is all across Nevada and could be used to energize businesses, apartment buildings and office complexes," said Sen. Harry Reid, D-Nev., who authored the provision.

The energy bill, which is expected to face final House and Senate votes before lawmakers adjourn, has other benefits related to geothermal.

For the first time, counties would receive 25 percent of the royalties generated by local geothermal exploration.

Under current law, the payment is divided between state and federal governments. The new formula would allocate 50 percent to the federal government and 25 percent to the state.

"That is enormously important for rural counties that have geothermal resources," said Gibbons, who proposed the idea. "It's going to be an additional source of revenue."

Some Democrats criticized other provisions, including one that would exempt companies opening new geothermal plants or expanding operations from paying royalties in the first four years.

Another section that drew criticism would exempt geothermal companies from paying royalties on precious metals found in wells on public lands.

Industry officials defended the breaks, pointing to studies that show geothermal companies rarely make enough money to pay royalties in those beginning years.

On minerals discovered in wells on public lands, Geothermal Energy Association executive director Karl Gawell said hard rock mining firms have the same benefit of not paying royalties.

Another part of the bill recalculates how companies would be charged production royalties. Instead of calculating the fees on the price of steam, the government would take a portion of a geothermal company's gross proceeds, according to the Geothermal Energy Association.

On another renewable energy matter, the bill does not require utilities to buy renewable power, an initiative already approved in Nevada and a dozen other states.

Even though the proposed 10 percent federal standard would have been less than Nevada's 15 percent threshold, environmental advocates said a new federal requirement could have boosted Nevada's power companies.

"Utilities in the state of Nevada generating more renewable energy than they could use could have been exporters," said Anna Aurilio, legislative director of U.S. PIRG, a Washington, D.C., environmental watchdog group.