SB 161 — An Act relating to geothermal resources; relating to the definition of 'geothermal resources'; and providing for an effective date.

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and providing for an effective date." CS FOR SENATE BILL NO.

161(RES)161 01 "An Act relating to geothermal resources;

A prospecting license or lease is not required 13 under this section to explore for, develop, or use geothermal resources drawn 14 from a depth with a ground temperature of not more than 30 degrees Celsius if the 14 geothermal resource is intended for domestic, noncommercial, or small-scale 02 industrial use [WHEN TITLE TO THE SURFACE PARCEL IS HELD BY A 0203 PERSON OTHER THAN THE STATE, THAT PERSON SHALL HAVE A 0304 PREFERENTIAL RIGHT TO A GEOTHERMAL PROSPECTING PERMIT OR 0405 LEASE FOR THE AREA UNDERLYING THE SURFACE PARCEL.

THE 0506 SURFACE OWNER MUST EXERCISE THE PREFERENCE RIGHT WITHIN 30 0607 DAYS AFTER RECEIVING NOTICE OF THE APPLICATION FOR A PERMIT, 0708 OR BY AGREEING TO MEET THE TERMS OF A BID WITHIN 60 DAYS AFTER 0809 RECEIVING NOTICE OF THE ACCEPTANCE OF THE BID FOR A LEASE].

0910 * Sec.

1011 (c) On state land that has not been declared a competitive geothermal area or 1112 withdrawn from geothermal prospecting, the commissioner may issue a prospecting 1213 license [PERMIT] to the first qualified applicant.

The license [PERMIT] conveys an 1314 exclusive right, for a period of five [TWO] years, to prospect for geothermal resources 1415 on state land included under the license [PERMIT].

The commissioner has discretion 1516 to renew the license [PERMIT] for an additional one-year term.

A holder of a 1617 prospecting license [PERMIT] has the right, after completion of an agreed-upon 1718 work commitment [UPON THE SHOWING OF A DISCOVERY OF 1819 GEOTHERMAL RESOURCES IN COMMERCIAL QUANTITIES] and the 1920 submission of an exploration [A DEVELOPMENT] plan acceptable to the 2021 commissioner, to convert the license [PERMIT] to a noncompetitive lease at a royalty 2122 rate under (g) of this section.

The conversion privilege must be exercised not later than 2223 30 days after the expiration of the license [PERMIT].

If the land included within the 2324 license [PERMIT] is designated a competitive geothermal area during the license 2425 [PERMIT] term, the licensee [PERMITTEE] must apply for a noncompetitive lease 2526 within 30 days after notification of the designation or forfeit the conversion privileges 2627 and the exclusive right to prospect.

2728 * Sec.

2829 (d) On state land that is designated a competitive geothermal area and is not 2930 subject to an existing prospecting license [PERMIT], the commissioner may issue 3031 geothermal leases to the highest bidder by competitive bidding procedures established 31 by regulations adopted by the commissioner.

At the discretion of the commissioner, 02 competitive lease sales may be by oral or sealed bid, on the basis of a cash bonus, 0203 profit share, or royalty share.

0304 * Sec.

0405 (e) Prospecting licenses [PERMITS] and geothermal leases granted under this 0506 section must [, EXCEPT IN THE CASE OF PARCELS SUBJECT TO A 0607 PREFERENCE RIGHT UNDER (b) OF THIS SECTION,] be issued for at least 40 0708 acres but not more than 2,560 acres.

A person may not own, or hold an interest in, 0809 geothermal leases covering more than 100,000 [51,200] acres.

However, geothermal 0910 leases in commercial production, individually or under a unit operation or well spacing 1011 or pooling arrangement, do not count against the acreage limitation.

All prospecting 1112 licenses [PERMITS] and geothermal leases are subject to an annual rental fee 1213 established by the department in regulation and [,] payable in advance [, OF $3 1314 PER ACRE].

The rental for a year shall be credited against royalties accruing for that 1415 year.

1516 * Sec.

1617 (f) A geothermal license [LEASE] shall be issued for a [PRIMARY] term of 1718 five [10] years and may be converted to a lease under (c) of this section 1819 [RENEWED FOR AN ADDITIONAL TERM OF FIVE YEARS IF THE LESSEE IS 1920 ACTIVELY ENGAGED IN DRILLING OPERATIONS].

A geothermal lease is valid 2021 for the duration of commercial production.

Beginning 20 years after the initiation of 2122 commercial production and at 10-year intervals thereafter, the commissioner may 2223 renegotiate the rentals and royalties due on a geothermal lease.

2324 * Sec.

2425 (i) The commissioner may require that a lesseegeothermal oflease aissued geothermalunder resourcethis 26 section require the lessee to operate 25 under a unit agreement thatand prescribesmay theprescribe conditionsa plan 27 under which the lessee must 26 operate.

A unit agreement must adequately protect all 28 parties in interest, including the 27 state.

Except as provided in (f) and (j) of this section, 29 the commissioner may not 28 reduce the royalty on a geothermal lease issued under this 30 section in, or in connection 29with with, a unit agreement.

3031 (j) When determined by the commissioner to be in the public interest, the 31 commissioner may authorize a lessee and the lessee's representative,representative together with each other02 other, or jointly or severally with another lessee, to collectively adopt or operate 02 under 03 a unit agreement.

The commissioner may, with the consent of the involvedholders 03of lessees,leases 04 involved, establish, change, or revoke the drilling, producing, and royalty requirements 04 of 05 the leases.

0506 (k) A geothermal lease and a unit agreement approved under this section must 0607 specify thatthe lease and unit agreement are subject to applicable statutes and regulations 0708 in force at the time the lease or unit agreement is entered into and to futureany 08 amendments to 09 those statutes or regulations and regulations.to statutes or regulations thereafter.

0910 * Sec.

1011 (6) "geothermal resources" means the natural heat of the earth and 11 energy, in whatever form, below the surface of the earth present in, resulting from, 12 created by, or that may be extracted from the natural heat, and all minerals in solution 13 or other products obtained from naturally heated fluids, brines, associated gases, and 14 steam, in whatever form, found below the surface of the earth;

"geothermalthe resources"12 15energy, doesin notwhatever includeform, oil,below hydrocarbonthe gases,surface of the earth present in, resulting from, or other13 hydrocarboncreated substances;by, or which may be extracted from, such natural heat;

16and *all Sec.minerals in 14 solution or other products obtained from naturally heated fluids, brines, associated 15 gases, and steam, in whatever form, found below the surface of the earth;

but 16 excluding oil, hydrocarbon gases, or other hydrocarbon substances;

17 * Sec.

1718 (e) Nothing in this chapter limits the authority of the department 1819 (1)[(1)] over geothermal resources under AS 38.05.181, including the 1920 authority [;

OR 2021 (2)] to approve and manage geothermal units or operations that include 2122 state land.