Basics of Geothermal Development Introduction to Geothermal Leasing, Operating Regulations, and Envi

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Basics of Geothermal Development
Introduction to Geothermal Leasing, Operating
Regulations, and Environmental MonitoringReno,
NevadaOctober 3, 2008

• Sean Hagerty
• California State Office - Geothermal Program Lead
• Bureau of Land Management

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General Role and Responsibilities of Federal
Agencies Associated with Geothermal Leasing US
Forest Service National Forest Lands Bureau
of Land Management Public Lands
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Geothermal Regulation TeamWashington, D.C.

• Joel Yudson, Solicitor
• Barbara Fugate, Solicitor
• Wyndy Rausenberger, Solicitor
• Kermit Witherbee, BLM-WO-Program Lead
• Ian Senio, BLM-WO-Fluid Minerals
• Frank Bruno, BLM-WO- Legs Regs
• Rich Hoops, BLM-Nevada SO
• Sean Hagerty, BLM-CA SO
• Rich Estabrook, BLM-CA-SO
• Cheryl Seath, BLM-Bishop Field Office
• Bob Henricks, BLM-Utah SO
• Al McKee, BLM-Utah SO
• Bob Fujimoto, USFS-Region 6-Portland, OR
• Herb Black, MMS-Denver
• Sara Inderbitzen, Solicitor (MMS)

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Geothermal Leasing Permitting
Energy Policy Act of 2005 Revised 43 Code
of Federal Regulations
Part 3200 Final Rule Published in Federal
Register on May 2, 2007 Regulations became
effective on June 1, 2007
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Geothermal Leasing

• Competitive Leasing
• (43 CFR 3203)
• Direct Use
• (43 CFR 3205)
• Lease Duration and Work Commitment
  Requirements
• (43 CFR 3207)

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Geothermal Leasing

• Competitive Leasing (43 CFR 3203)
• Lands are nominated
• Available lands offered at sale
• Lease awarded to highest qualified bidder
• Noncompetitive Leasing (43 CFR 3204)
• Lands not receiving a bid
• Available for 2 years after sale
• Mining Claims with approved POO
• Pending Lease Applications (43 CFR 3200.7
  3200.8)
• Leases issued prior to 08/08/2005 (43 CFR
  3200.7)
• Leases issued between 08/08/05 and 05/31/07
• Leases issued on or after 06/01/07
• Lease Conversions (43 CFR 3212)
• Leases issued prior to Act, Option of having
  lease fall under benefits of the Act deadline of
  12/01/2008

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Direct Use (43 CFR 3205)

• Lands Available
• Secretary of Interior may identify lands
  exclusively for direct use
• Lands may be leased noncompetitively
• Lease size not more than is reasonably necessary
  for proposed use
• Determine competitive interest
• 90 day public notice of lands to be leased
• If no competitive interest issue lease
• Competitive interest offered next lease sale
• Direct Use Fees
• Companion Mineral Management Service regulations
  (30 CFR 206)
• State, Tribal or Local Governments
• Uses without sale and for public purposes other
  then commercial generation of electricity
  nominal fee for use

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Section 225. BLM/USFS MOU

• MOU signed by the BLM Director and the US Forest
  Service, Chief of the Forest Service, on
  4/14/2006
• Administrative procedures for processing lease
  applications
• 5-year leasing program within USFS lands and
  updating every 5 years
• Program to reduce backlog of lease applications
  pending on 8/8/2005 by 90 within same time
  period

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Lease Duration and Work Commitment Requirements
(43 CFR 3207)

• Primary Term 10 yrs
• Initial Extension up to 5 yrs
• Additional extension up to 5 yrs
• Production extension up to 35 yrs
• Lessee must satisfy minimum work requirements
  (each yr after the 10th year)
• Establish a geothermal potential and if
  established confirm existence of producible
  geothermal resource.
• Secretary may establish payments in lieu of
  minimum work requirements
• Well capable of producing in commercial
  quantities or in actual production
• Geothermal Lease Overlying a Mining Claim
• Exempt from annual work requirements if a plan of
  operations has been approved

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Annual Lease Rental (43 CFR 3211.11)

• Noncompetitive Lease
• Years 1 10 1.00/Acre
• Year 10 5.00/Acre
• Competitive Lease
• Year 1 2.00/Acre
• Years 2 10 3.00/Acre
• Year 10 5.00/Acre

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Annual Lease Rental (43 CFR 3211)

• You must always pay rental
  (43 CFR 3211.14)
• You may credit rent towards royalty
  (43 CFR 3211.15)
• You may not credit rent towards direct use fees
  (43 CFR 3211.16)

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Royalties (43 CFR 3211.17)
First 10 years of Production - 1.75 royalty
rate After 10 years of Production - 3.5
royalty rate Royalty rates are applied to the
gross proceeds derived from the sale of
electricity
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Lease Acreage Limitations (43 CFR 3206)
Maximum Lease Size 5,120 Acres Acreage
Limitations 51,200 Acres/State Lands subject to
an approved unit agreement, drilling contract,
or development contract are exempt (cooperative
agreements)
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Additional Amendments

• 25 share of federal revenues to counties
• USGS assessment of geothermal resources
• 25 Federal revenues to be returned to DOI for 5
  years to use in program FY 2006-2010

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Permitting Drilling Utilization
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Geothermal Use Authorizations

• Exploration Permits Off Lease
• (43 CFR 3250)
• Notice of Intent (NOI) Temp Gradient Hole
• Exploration Permits On Lease
• (43 CFR 3260)
• Geothermal Sundry Notices (GSN)
• Geothermal Drilling Permits (GDP)
• Development/Utilization Permits
• (43 CFR 3270)
• Facility Construction Permits (FCP), Commercial
  Use Permits (CUP), and Site Licenses

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Schematic of a Typical Temperature Gradient Hole
Well Pad Layout (75 x 100)
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Schematic for a Typical Deep Test Well Pad (300
x 360)
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Typical Production Well Pad Layout
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An Example of an Industry Standard Rotary Rig
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An Example of an Industry Standard Rotary Rig
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Geothermal Deep Drilling vs. Temperature
Gradient Well Drilling
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Geothermal Drilling at Capitol Building, Boise,
Idaho
The first geothermal district heating system in
the U.S. was built in Boise, Idaho. Today Boise's
capitol and other municipal buildings are all
heated with a geothermal district heating system.
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Downhole Drilling Bits Tools
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Example of a Deep Exploration Well
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Example of a Deep Exploration Well and Well Pad
CalEnergys Directionally Drilled Production
Wells near Salton Sea, CA
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A Typical Pumped Production Well at Ormats East
Mesa Operations, Imperial Valley, CA
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Typical Geothermal Well
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Typical ProductionWell Completion
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Example of Blow Out Prevention Equipment Used
While Drilling
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Exploration Permits
Off Lease Notice of Intent to Conduct
Geothermal Exploration (NOI) Form 3200-9 (43 CFR
3250) On Lease NOI or Sundry Notice Form
3260-3 Geothermal Drilling Permit (GDP) Form
3260-2 (43 CFR 3260)

• Describes lands to explore, exploration plan
  procedures, approximate start end dates
• Temperature gradient wells describe drilling
  plan, surface use plan, evidence of bond coverage
  (5K/operation, 25 K statewide bond, or 50K
  nationwide), reclamation plan for each well
• GDP on-lease includes drilling plan, surface use
  plan and evidence of bond coverage (10K/lease,
  50K/State, or 150K/Nationwide)
• NEPA EA or EIS may be required

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Geothermal Drilling Permits 43 CFR 3260

• Completed and signed Geothermal Drilling Permit
  (GDP) (form 3260-2)
• Complete operations plan, may include Geothermal
  Sundry Notice (GSN) for well pad
• Complete drilling program (casing, depth, )
• An acceptable bond (10k/Lease, 50K/State,
  150K/Nationwide)
• NEPA EA or EIS may be required
• Approval of GDP prior to commencing drilling
  operations

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Utilization of Geothermal Resources 43 CFR 3270
Electrical Generation Facilities Facility
Construction Permit (FCP) Commercial Use Permit
(CUP) Site License Direct Use Facilities FCP,
CUP, Site License
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Utilization Operations Permitting
Site License and Facility Construction Permit
Plain English according to Al Gore.Pre 2007
Regs Submit plan that shows what you want to do
and a proposed site license agreement BLM will
review and decide whether or not to issue a
permit and license to proceed. Until and unless
we do, dont even think about it (43 CFR 3271.10)
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Unitization of Geothermal Resources 43 CFR 3280

• Unitized leases join together (federal, state,
  and private)
• Unit Operator represents all committed
  leases/lessees
• Unit Agreement Document approved by BLM and
  Unit Operator Plan of Development
• Costs/Revenues shared
• Drilling targets based upon geology, not lease
  boundaries
• Minimize surface impacts
• Drilling on one lease same as drilling on all
  leases committed
• Statewide lease acre limits do not apply (51,200
  acres)

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Environmental Lease Monitoring
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• COMPLIANCE REQUIREMENTS
• The Code of Federal Regulations
• Geothermal Resource Operational Orders
• Notice to Lessees
• Lease Terms and Stipulations
• Approved Plans and Permits
• Conditions of Approval
• Verbal Orders from BLM
• Other Instructions from BLM
• Any Other Applicable Laws and Regulations

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Lease Inspections

• Lease Surface Inspections
• Wellfield (wells, pad, pipelines)
• Electrical Generation Facilities
• Drilling Inspections (Blow out prevention,
  cementing)
• Well Abandonment Inspections
• Production Verification Inspections
• Flow Electrical Meter Calibrations
• Continuous Monitoring

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Utilization Operations Reclamation
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Additional Information

• Forms
• https//www.blm.gov/FormsCentral/search-form.do
• Map Coverage/GIS/Leases
• http//www.geocommunicator.gov/GeoComm/index.shtm
• Regulations
• http//www.blm.gov/nhp/300/wo310/
• http//www.blm.gov/style/medialib/blm/wo/Communica
  tions_Directorate/regulations.Par.94775.File.dat/E
  7-7991.pdf

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