S. 363, Geothermal Production Expansion Act of 2013

Cost Estimate
June 27, 2013

As ordered reported by the Senate Committee on Energy and Natural Resources on May 16, 2013

S. 363 would authorize the Bureau of Land Management (BLM) to award leases for certain federal lands on a noncompetitive basis for the development of geothermal resources. Based on information provided by BLM, the Department of Energy (DOE), and individuals working in the geothermal industry, CBO estimates that implementing the legislation would have no significant impact on the federal budget over the 2014-2023 period. Enacting S. 363 could affect direct spending; therefore, pay-as-you-go procedures apply. However, CBO estimates that the net effect on direct spending would not be significant in any year. Enacting the legislation would not affect revenues.

S. 363 would authorize BLM to offer noncompetitive leases of up to 640 acres for lands adjacent to known geothermal discoveries. Under the bill, a company that identified a geothermal resource that extended onto federal land adjacent to company-controlled lands could acquire the lease for a specified amount (bonus bid) determined by BLM to be equivalent to the fair market value rather than an amount determined through a competitive auction. In addition to paying fair market value for the parcel, the bill would require any company awarded such a noncompetitive lease to make annual rental payments equal to those required for lands that are leased competitively. Finally, a company could receive only one noncompetitive lease for each known geothermal discovery.

Under current law, 75 percent of all receipts from bonus bids, rents, and royalties related to the development of geothermal resources on federal lands is paid to the states and counties in which those lands are located. The remaining 25 percent is deposited in the U.S. Treasury. CBO estimates that awarding noncompetitive leases for lands adjacent to known geothermal discoveries could reduce bonus bids on those parcels. However, because the legislation would require the companies that are awarded those leases to pay fair market value for them, we estimate that implementing the bill would not reduce the amount of receipts deposited in the U.S. Treasury by more than $500,000 in any year.

In addition, based on information provided by DOE and individuals working in the geothermal industry, CBO expects that implementing S. 363 could increase receipts from royalties paid on geothermal energy production by reducing the amount of time it takes to develop a known geothermal resource and by reducing the likelihood that lands containing geothermal resources would be acquired for speculative purposes. CBO estimates that any increase in the amount of royalty receipts that would be deposited in the U.S. Treasury would not exceed $500,000 in any year. Those amounts would offset any reduction in receipts from issuing noncompetitive leases under the bill. Thus, CBO estimates that implementing S. 363 would have no significant net impact on direct spending through fiscal year 2022.

The bill contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would impose no costs on state, local, or tribal governments.