The Impact of Geothermal Development on Stockraising Homestead Landowners

A controversy exists at the Geysers Known Geothermal Resource Area in California, and possibly elsewhere, over compensation for geothermal development activities on lands acquired by private individuals but where the mineral interests are owned by the Federal Government. Thirty million acres of such land, thought to have limited use otherwise, have been conveyed to individuals for stockraising purposes. The Federal courts have held that geothermal resources were mineral resources and thus were subject to leasing on stockraising lands. Such leasing has begun and, as a result, some surface estate landowners lost rents and royalties anticipated for resources they thought were theirs, or otherwise felt threatened by development taking place around them.

The Federal Government does not have the responsibility to negotiate what, if any, compensation is appropriate for owners of stockraising lands because geothermal development takes place on their lands. Whether or not Federal leasing takes place on their lands, owners of stockraising lands could be adversely affected by geothermal development activity taking place on the surrounding private, State, and Federal lands. The impacts could be greater if their land is leased. Most individual ownership parcels are considered recreational in nature. Yet even these uses may be eliminated, reduced, or impaired by geothermal activity, with a resulting loss in land value. While protection bonds have been obtained, compensation agreements have been worked out between surface owners and lessees for only five of the nine leases issued so far. GAO believes that being able to begin lease operations by merely filing a protection bond is a disincentive for the lessee to negotiate such an agreement. The landowners are concerned that their interests are adequately protected, and even profitable, as a result of geothermal development on and around their lands. It is doubtful that they will be satisfied with compensation that is less than the annual rentals and royalties they were to receive before the decision. The rents and royalties now go to the Federal Government. The landowners, under existing legislation, are entitled to compensation only for damages to their crops and tangible improvements.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: John W. Sprague Team: General Accounting Office: Energy and Minerals Division Phone: (202) 512-7783