Geothermal leases draw big crowd, big dollars

Uncertain where to start the bidding on the first parcel to be leased last week by the Bureau of Land Management for geothermal exploration, auctioneer Lynn Engdahl asked if anyone just might be willing to pay $2 an acre.

In less than five minutes, the geothermal industry executives crowded into a conference room bid the lease up to $14,000 an acre the highest price ever paid for a geothermal lease on federal land.

It's a sign, officials said, that the geothermal industry in the region is poised to boom.

While the recording-setting lease from last week's auction is on property in northern California, geothermal leases in Nevada generated some $11.7 million in bids from companies eager to tie up landholdings in the belief that geothermal development is about to boom.

The highest-priced bid to lease a Nevada property came from Reno-based Ormat Nevada, which will pay a bonus bid of $2.6 million to lease 5,120 acres of federal land in Lander County.

In all, Ormat placed winning bids on seven tracts totaling 68,900 acres. The company will pay $8.2 million in bonus bids for the property.

(Under the federal leasing process, companies pay a first-year rent of $2 an acre along with the amount of the bonus payment that they bid. Geothermal operators also pay royalties on the electricity they produce from federally owned geothermal resources.)

Bids for some of the other 42 Nevada parcels offered for lease by the BLM ranged as high as $300 an acre. All of the parcels that were offered for lease drew bids, and none were put back on the shelf.

Throughout the 90-minute auction, aides furiously punched numbers into calculators as their bosses made split-second decisions about how much they should be willing to pay to play in the geothermal business.

Thirty companies registered to bid on geo-thermal leases, and 11 of them made successful offers. Seven companies made winning bids on the 43 Nevada properties that were leased, while the half dozen northern California properties were leased to four companies.

Raser Technologies Inc. of Provo, Utah, won leases on four parcels totaling about 15,000 acres. It will pay a total of $620,000 in bonus bids.

Most other bidders, however, kept a low profile.

More than 80 geothermal executives and federal employees took nearly every chair and leaned against the walls of a conference room in the BLM office while leases were auctioned. Few left early.

Last week's sale, the first in more than three years, provided a strong indicator of the rising interest in the geothermal industry, said Henri Bisson, deputy director of the BLM.

He noted, too, that most of the nation's geo-thermal resources are found on public lands.

A study by the Western Governors Association last year estimated Nevada could economically add 1,488 megawatts of geothermal power by 2015 and 2,895 megawatts by 2025 from known sources of geothermal heat. Even the lower figure would be enough power to serve nearly 1.5 million electric customers.

State and local governments will see even faster benefits from last week's lease auction.

Fifty percent of the money from the leases is distributed to the state government, and

25 percent is sent to the county in which the lease is located. BLM keeps the remaining

25 percent.

For winning companies, however, there's no assurance that their investment in leases will turn into profits, Ormat executives noted.

Long months of exploration and analysis lie ahead to determine if the properties contain commercial levels of geothermal resources, and the building of power plants and transmission lines takes more time and capital.