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Constraints on Geothermal Development: Tax and Beyond

John J. McNamara, Geothermal Resources Development (1977)

Development of the nation's vast geothermal resource base, now entering its third decade, has been painstakingly slow and arduous. Unfortunately, much of the delay has been man-made. Seemingly every point of contact between the legal system and geothermal resources — and there are many — has provided yet more roadblocks and frustration.

Access to the vast federal lands, believed to contain nearly 55% of the potential U.S. geothermal areas, languished in a legislative vacuum throughout the 60's. Mining,material and mineral leasing laws were all interpreted as inapplicable to geothermal resources. Even after the Geothermal Steam Act of 1970 ended that decade-old obstacle, preparation of leasing and operating regulations delayed the first competitive lease sale until January 1974, more than three years later. A flood of noncompetitive applications then confronted an understaffed Forest Service and BLM, and it was not until 1975 that the initial “noncomp” was granted.

Federal tax policy was similarly ignorant of geothermal's existence and congressional reaction has consistently been an unending chorus of “it's for the courts to decide”. In this crucial area, IRS has emerged as the policy maker, and their stance has, quite predictably, been a hostile one.

But while federal energy tax and mineral disposal policies failed to cover geothermal, many other area