The Energy Bill:

Geothermal Interests

July 30, 2002

Bob Lawrence and Associates, Inc

Alexandria, VA

Analysis of Key Provisions in the House and Senate Energy Bills

So far the results of the energy bill from the House and Senate fail to reduce the country’s dependency on foreign oil, increase our energy security, benefit consumers, or help our environment.

Ref: PIRG

Renewable Resource Assessment

• DOE will assess all available resources within on year.

• DOE will assess all available resources within one year.

Senate BillHouse Bill

Geothermal Renewable Energy and Research and Development

“The program should focus on advanced concepts for the long term. The first priority should be high-grade enhanced geothermal systems; the second priority should be lower grade, hot dry rock, and geopressured systems; and the third priority support of field demonstrations of enhanced geothermal systems technology, including sites on lower grade areas to demonstrate the benefits of reservoir concepts to different conditions.”

“To develop, in partnership with industry, technologies, and processes based on advanced hydrothermal systems and advanced heat and power systems, including geothermal heat pump technology.

• Improve exploration and technology to increase successful drilling of wells from 20 percent to 40 percent by 2006.

• Reduce cost of drilling by 2008 to $150 per foot.

• Enhance systems to double useable geothermal resource base.”

House Bill Senate Bill

Review of Regulations to Eliminate Barriers to Emerging Energy

Technology

• Federal agencies must review standards and regulations identifying those which act as a barrier to market-entry for energy efficient technologies.

• No provisions

House Bill Senate Bill

Insular Area Renewable Energy and Energy Efficiency Plans

• Secretary of Interior will work with Secretary of Energy and insular chief executive officers to recreate plans for energy security in insular areas focusing on indigenous and new renewable sources of energy .

• To “reassess the state of energy production, consumption, efficiency, infrastructure, reliance on imported energy, and potential of the indigenous renewable energy resources and energy efficiency in regard to the insular areas and to create long term plans to reduce dependence on energy imports in insular areas.”

House Bill Senate Bill

Existing Right-of-Way on Federal Lands

• Each federal agency will review lands used for energy transmission and transportation to determine if rights-of-way can handle any additional capacity, and what modifications could facilitate additional

capacity on federal lands.

• “The issuance of rights-of-way shall be limited to areas-of high energy potential for wind or solar development, that are not located within roadless areas; where operation of wind or solar facilities would be compatible with the scenic, recreational, environmental, cultural, or historic values of the Federal land, and would not require the construction of new roads for the siting of lines or other transmission facilities.”

House Bill Senate Bill

Inventory of Energy Production Potential on Federal Lands

• Inventory of wind, solar, coal, and geothermal energy production potential on federal lands, excluding national parks and wilderness areas. Includes an update of the 1978 Assessment of Geothermal Resources by the United States Geological Survey.

• A five-year plan from the Secretary of the Interior and the Secretary of Agriculture outlining the development of wind and solar power on federal land in an environmentally sound manner.

House Bill Senate Bill

Opening of Public Lands under Military Jurisdiction

• Makes military lands subject to geothermal leasing.

• No Provisions

House Bill Senate Bill

Leasing on Forest Service Lands

• Clarifies forest service authority.

• Clarifies when right-of -way exists for federal lands, including forest service areas.

House Bill Senate Bill

Renewable Energy on Indian Lands

• Buy Indian Act amended to include energy and energy byproducts as preferential goods.

• “A report on energy consumption and renewable energy development potential on Indian land. The report shall identify barriers to the development of renewable energy by Indian tribes, including Federal policies and regulations, and make recommendations regarding the removal of such barriers.”

House Bill Senate Bill

Royalty Exemption for Direct-Use Facilities

• Creates exemptions for direct use and low-heat facilities.

• No provisions

House Bill Senate Bill

Royalty Relief for New Facilities

• Reduces royalties for existing facilities and provides exemptions to new or expanding facilities.

• No Provisions

House Bill Senate Bill

Renewable Energy Production Incentive

• Provides reimbursement for analyses required by the National Environmental Policy Act.

• Provides reimbursement for analyses required by the National Environmental Policy Act and provides provisions for hydropower.

House Bill Senate Bill

Federal Purchase Requirement

• Government promotion of production and marketing of energy efficient products, reduce government energy consumption by 45% by 2020 through the use of energy efficient products, unconventional, and renewable energy.

• Government must buy 7.5% of its energy from renewables by 2010.

House Bill Senate Bill

Production Tax Credit

• Includes $2.4 billion in tax incentives for renewables, extending the Production Tax Credit for wind facilities, closed-loop biomass facilities, and poultry waste facilities through January 2007. Also extends tax credit to open-loop biomass and landfill gas.

• Included $3.3 billion in tax incentives for renewables, extending the Production Tax Credit for wind facilities, closed-loop biomass facilities, and poultry waste facilities through January 2007. Also extends tax credit to solar, open-loop biomass, swine and bovine waste, and geothermal energy.

House Bill Senate Bill

Tradable Tax Credits

• No Provisions • Provides that public utilities, electric cooperatives, and Indian tribes may sell, trade, or assign sec. 45 tax credits to any taxpayer one time only. No subsequent sales or trades would be permitted.

House Bill Senate Bill

Allow Business Energy Credits against the AMT

• Makes the Alternative Minimum Tax inapplicable to business energy credits created by the bill. Effective for taxable years beginning after 12/31/2001.

• No Provisions

House Bill Senate Bill

Election to Expense Geological and Geophysical Expenditures

• Allows G&G costs to be expensed. Effective for G&G costs paid or incurred in taxable years beginning after 12/31/2001.

• Allows G&G expenses to be amortized and recovered over 2 years. Applies to payments paid or incurred in tax years beginning after 12/31/02.

House Bill Senate Bill

Renewable Portfolio Standard

•The House Energy Bill does not contain a renewable portfolio standard.

•Contains a very modest renewable portfolio standard that could result in ten percent of our electricity being generated for new renewable sources by 2020.

•Two renewable energy credits will be issued for facilities on Indian lands.

•Credits may be issued to existing facilities to count towards requirements.

Senate BillHouse Bill

86.0

26.5

35.5

6.5

87.6

44.0

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

Biomass/biofuelsenergy systems

Geothermal technologydevelopment

Hydrogen research Hydropower Solar energy Wind energy systems

Renewable Technologies

FY 03 Appropriations : House

Milli

ons

100.0

37.0

45.0

7.5

95.0

50.0

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

Biomass/biofuelsenergy systems

Geothermal technologydevelopment

Hydrogen research Hydropower Solar energy Wind energy systems

Renewable Technologies

FY03 Appropriations: Senate

Milli

ons

We would like to send a special thanks

to

Karl Gawell and Denise Schroeder

of the

Geothermal Energy Association

for their assistance with this presentation