Geothermal Royalty Reform Act

H.R. 5638 would modify how companies pay royalties on geothermal energy produced on federal lands. Currently, geothermal operators pay royalties based on the lease as a whole, meaning all power plants on the same lease must pay the same royalty rate once any facility reaches the 10-year production mark. This bill would change the calculation so that royalties are determined for each individual power plant separately, based on when that specific facility began producing electricity.

Under current law, geothermal operators pay between 1 and 2.5 percent of gross electricity proceeds during the first 10 years of production, then 2 to 5 percent thereafter. The bill would not change these royalty rates themselves, but rather how they are applied. By allowing each facility on a lease to maintain its own 10-year initial period for royalty purposes, the bill could encourage companies to develop multiple power plants on the same geothermal lease, as newer facilities would not immediately face higher royalty rates. The bill has passed committee review and is eligible for a floor vote.