To establish a resource valuation method to calculate royalty for geothermal mining lease R-2 to Puna Geothermal Venture (PGV) (resubmittal)

Abstract

The Board of Land and Natural Resources approved Geothermal Mining Lease R-2 on February 20, 1981 to Kapoho Land Partnership. Subsequently, the Board approved the transfer to Puna Geothermal Venture at its August 27, 1982 meeting. The terms of the Geothermal Mining Lease R-2 and Regulation 8, Administrative Rules which was then in effect, requires the Board to "In the event that geothermal resources hereunder is not sold to a third party but is used or furnished to a plant owned or controlled by the lessee, the gross proceeds of such production for the purposes of computing royalties hereunder shall be that which is reasonably equal to the gross proceeds being paid to other geothermal producers for geothermal resources of like quality under similar conditions without deducting any treating, processing and transportation costs incurred, notwithstanding Rule 3.136b. of Regulation 8." This condition of the lease is consistent with Section 182-18, Hawaii Revised Statutes and Section 182-31, Hawaii Administrative Rules. Royalties received by the Board will be shared. 50% of the funds will go to the State of Hawaii; 30% of the funds will go to the County of Hawaii; 20% of the funds will go to Office of Hawaiian Affairs. Staff has briefed the County of Hawaii (Mayor and County Council), and Office of Hawaiian Affairs (Chairman and Trustees). Briefings have also been provided to Hawaii Geothermal Alliance. Staff has also met with Puna Geothermal Venture and True/Mid-Pacific Geothermal Venture. Subsequent to these meetings, the Office of Hawaiian Affairs Committee on Planning, Economic Development, and Housing voted on September 8, 1993 in favor of the staff netback method to calculate geothermal royalties, and the full Board of Trustees voted on September 10, 1993 in support of the staff netback method for geothermal resource valuation in their effort to carry out their fiduciary responsibilities. Copies of OHA's actions are attached.