SCR158.DOC

WHEREAS, section 182-18, Hawaii Revised Statutes, relating to geothermal royalties, requires the Board of Land and Natural Resources to fix the payment of royalties to the State for the utilization of geothermal resources at a rate that will encourage the initial and continued production of such resources; and

WHEREAS, in 2010, the Legislature passed Senate Concurrent Resolution No. 99, requesting the establishment of a geothermal working group to analyze the potential development of geothermal energy as the primary energy source to meet the base-load demand for electricity on the Big Island; and

WHEREAS, the members of this working group represented various sectors of the Big Island community, including agriculture, electric utility, union, business, the Office of Hawaiian Affairs, state government, environment, culture, and West Hawaii; and

WHEREAS, the working group submitted its final report to the Legislature in January 2012; its principal findings include the following:

(1) Geothermal is a renewable resource indigenous to the island of Hawaii that is dissociated from the price volatility of petroleum fuels;

(2) Geothermal can be a key component in a diversified energy portfolio for Hawaii County that would benefit the electrical grid and transportation;

(3) In Hawaii, geothermal is a firm energy resource at lower cost than fossil fuel;

(4) Developing multiple geothermal plants is the most prudent approach;

(5) Geothermal has the potential to supply base-load electricity with long-term reliability; however, the ability to supply grid management services currently supplied by conventional fossil fueled power plants must be demonstrated in order to consider geothermal as the primary energy resource for Hawaii County; and

(6) With geothermal power plants, agricultural fertilizers, hydrogen, oxygen, and business-enterprise power can be produced for off-peak rates during the hours of curtailed electrical demand; and

WHEREAS, the working group recommended actions by the Legislature, including the following:

(1) Make the allocation of geothermal royalties more transparent to show how benefits come back to the community and designate the records of allocations to be public domain;

(2) Establish a community advisory board to offer suggestions to the Department of Land and Natural Resources about how royalties generated by geothermal power plants are spent. The advisory board should include members of the communities that host or will host geothermal power plants and those who are most impacted by the development of geothermal energy;

(3) Encourage the Department of Land and Natural Resources to use geothermal royalties to identify promising geothermal sites and to further develop the resource;

(4) In light of the probability that oil will reach $200 per barrel, commission a study to show the economic impact of various prices of oil; and

(5) Facilitate development of geothermal by commissioning a critical review of the geothermal permitting process, regulatory capabilities, and possible investment incentives; and

WHEREAS, the Board of Land and Natural Resources has granted a public land lease to Puna Geothermal Venture to mine geothermal resources on the island of Hawaii, and allow Puna Geothermal Venture to sell the electricity it produces to Hawaii Electric Light Company, Inc.; and

WHEREAS, the Board of Land and Natural Resources reports that it received $642,599 in geothermal royalties from Puna Geothermal Venture in fiscal year 2009-10, of which thirty percent was distributed to the County of Hawaii and twenty percent was distributed to the Office of Hawaiian Affairs; and

WHEREAS, the Board of Land and Natural Resources is charged with various responsibilities with respect to geothermal mining leases, including the adoption of rules to establish or waive the royalty payments to the State; and

WHEREAS, Puna Geothermal Venture asserts that it could produce more renewable energy on a continuous basis, an assertion the Board of Land and Natural Resources would be expected to consider in any further evaluation of the royalty structure; and

WHEREAS, the performance of the Board of Land and Natural Resources with respect to its geothermal royalty responsibilities is subject to audit by the Auditor; and

WHEREAS, inasmuch as the State's responsibilities and interest in renewable energy are also the concern of the Department of Business, Economic Development, and Tourism even though the Department does not have regulatory authority over rate structures or land leases, the Department's performance may be integral to an audit regarding geothermal leasing and royalty payments and therefore should be subject to such an audit; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-sixth Legislature of the State of Hawaii, Regular Session of 2012, the House of Representatives concurring, that the Auditor is requested to conduct an audit of the State's program of geothermal leasing and royalty payments, including consideration of the role of the Board of Land and Natural Resources and the Department of Business, Economic Development, and Tourism, and any other matters the Auditor deems relevant to the audit to ensure that the development of geothermal resources continues in a fair, legal, and ethical manner; and

BE IT FURTHER RESOLVED that the affected departments and Puna Geothermal Venture are requested to cooperate in any way requested by the Auditor; and

BE IT FURTHER RESOLVED that the Auditor report findings and recommendations, including any recommendations for legislation, to the Legislature no later than twenty days prior to the convening of the Regular Session of 2013; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Attorney General; Director of Finance; Chairperson of the Board of Land and Natural Resources; Director of Business, Economic Development, and Tourism; Chairperson of the Board of Trustees of the Office of Hawaiian Affairs; Mayor of Hawaii County; Hawaii Electric Light Company, Inc.; and Puna Geothermal Venture.

	OFFERED BY:	_____________________________

Report Title:

Geothermal Royalties; DLNR; DBEDT

THE SENATE	S.C.R. NO.	158
TWENTY-SIXTH LEGISLATURE, 2012
STATE OF HAWAII