Haw. Code R. § 13-183-31 - Royalties on geothermal production

(a) The rate of the royalty to be paid to the State for the production of geothermal resources shall be determined by the board prior to the bidding for or granting of a mining lease, but the rate shall not be less than ten percent nor more than twenty percent of the gross amount or value of the geothermal resources produced under the lease as measured at the wellhead and sold or utilized by the lessee. The board may readjust the rate of royalty of any geothermal mining lease at not less than fifteen-year intervals beginning thirty-five years after the effective date of the lease. In the event of any readjustment, the rate of royalty may not be increased by more than fifty percent over the royalty paid during the preceding period. The board shall give notice of any proposed readjustment of royalties and unless the lessee files with the board objection to the proposed royalties or surrendered the lease within thirty days after receipt of such notice, the lessee shall conclusively be deemed to have agreed with the terms and conditions. If the lessee files objections and no agreement can be reached between the board and the lessee within a period of not less than sixty days, the lease may be terminated by either party. In no event shall the rate of the royalty payable exceed twenty percent of the gross value. In addition to the above, the board may also impose a royalty based on a percentage of the net profit, cash bonus, or otherwise.

(b) For the purpose of computing royalties, the amount or value of geothermal resources produced shall be determined as the gross proceeds received by the mining lessee from the sale or use of geothermal resources produced from the leased land as measured at the wellhead. In the event that geothermal production hereunder is not sold to a third party but used or furnished to a plant owned or controlled by the lessee, the gross proceeds of the production for purposes of computing royalties shall be that which is reasonably equal to the gross proceeds being paid to other geothermal producers for geothermal resources of like quality and quantity under similar conditions after deducting any and all treating, processing, and transportation costs incurred. In the case of furnished geothermal resources, should the board believe that any stated charges imposed and deducted are excessive or that the stated sales price received by the lessee is unreasonable, the lessee shall, upon thirty days notice, provide the board with evidence that the charges or price or both comply with the above requirement of reasonably equal gross proceeds. Gross proceeds shall not be deemed to include excise, production, severance, or sales taxes or other taxes imposed on the lessees by reason of the production, severance, or sale of geothermal resources or geothermal by-products.

(c) The rate of royalty to be paid to the State for any geothermal by-product contained in and extracted from the effluence produced shall be not less than five percent nor more than ten percent of the gross proceeds received by the lessee from the sale of any by-product produced under the lease as measured at the wellhead and sold, exchanged, or otherwise disposed of by the lessee, including demineralized or desalted water, after deducting any treating, processing, and transportation costs incurred. No payment of a royalty shall be required on the water if it is used in plant operation for cooling or generation of electric energy or is reinjected into the sub-surface. No royalty shall be paid for geothermal byproducts used or consumed by lessee in the production operations. The board may readjust the rate of royalties for the production of geothermal by-products in the same manner and under the same terms prescribed in subsection (a) herein; provided that the rate of royalty for geothermal by-products payable shall not exceed ten percent of the gross proceeds. Gross proceeds shall not include the taxes described in subsection (b) herein.

(d) The lessee shall make payment of royalties to the board in Honolulu within thirty days after the end of each calendar month and accompany the payment with a certified true and correct written statement by the lessee, showing the amount of each geothermal resource produced, sold, used, and otherwise disposed of, and the basis for computation and determination of royalties. Lessee shall furnish other data as may be necessary to enable the board to audit and verify all royalties due and payable to the State.

(e) Metering equipment shall be maintained and operated by lessee in a manner that meets acceptable standards of accuracy consistent with geothermal industrial practices. Use of the equipment shall be discontinued at any time upon determination by the chairperson that the standards of accuracy or quality are not being maintained. If the equipment is found defective, the chairperson shall determine the quantity and quality of production.

(f) The lessee shall furnish the chairperson the results of periodic tests showing the content of by-products in the produced geothermal resources. Tests shall be taken as specified by the chairperson and by the method of testing approved by him; provided that tests not consistent with industrial practices shall be conducted at the expense of the State.

Notes

Haw. Code R. § 13-183-31

[Eff. JUN 22 1981] (Auth: HRS § 182-14) (Imp: HRS § 182-7)