Geothermal Energy Needs Permitting Reform

At the very least, give geothermal energy the same exemptions that oil and gas receive
August 1st 2023


The promise of geothermal power is immense. Theoretically, the thermal energy accessible in the earth’s crust is larger than all the energy stored in fossil fuels and nuclear fuels combined. Furthermore, as a source of “baseload” energy (one that doesn’t fluctuate in supply at a given time), a mature geothermal industry could complement other clean but intermittent sources of energy like wind or solar. And geothermal uses far less land per amount of energy generated than either wind or solar. 

A recent breakthrough in enhanced geothermal systems (EGS) by a startup, partnering with the Department of Energy, has highlighted geothermal’s potential to combat climate change and produce zero-carbon electricity. Geothermal is a distinctly American opportunity: the geography of the American West is perfect for accessing hot rock near the surface. Moreover, much of the expertise of the oil and gas industry is immediately applicable to geothermal: techniques for drilling wells are largely similar. Fossil fuel equipment and workers could make an immediate impact in this clean energy industry. 

However, the current federal permitting process severely disadvantages geothermal energy relative to oil and gas. To secure leases and permits on federal lands, geothermal developers are forced to navigate a burdensome series of obstacles that the fossil fuel companies are exempt from. Streamlining the permitting process for geothermal could unlock a major source of abundant, clean, baseload energy. 

The promise of geothermal

Conventional geothermal systems function by pumping fluid through one or more injection wells. Heated by the thermal energy in earth’s crust, the fluid is then retrieved through a separate production well. However, conventional geothermal systems rely on highly specific conditions: heat resources close to the surface, and particular geological phenomena for the fluid to fissure. 

Next-generation geothermal systems attempt to make geothermal energy production viable in a wider range of conditions. A geothermal startup recently demonstrated a commercially viable enhanced geothermal system (EGS), applying engineering techniques from the natural gas industry to create a network of subsurface fractures that connect the injection well with the production well. The approach has significant advantages: by repurposing techniques like fracking from the mature industry of natural gas engineering, EGSs can tap into reserves of heat that couldn’t previously be cost-effectively accessed. The technology expands the number of potential locations for viable geothermal production. 

Permitting challenges

Despite the enormous potential of next-generation geothermal energy, the young industry is hampered by burdensome and lengthy permitting requirements. The oil and gas industry enjoys key regulatory exemptions that do not apply to geothermal, even though the processes are virtually the same. This asymmetry makes it much more difficult for geothermal to flourish.

The added environmental reviews make geothermal projects unnecessarily vulnerable to legal challenges from NIMBYs and environmental groups. Onerous permitting requirements and vulnerability to endless legal delays risk kneecapping the industry in its infancy. Without reasonable timelines for new projects, it’s impossible for learning to be shared across the industry, or for geothermal energy to become cost-competitive with other energy sources. 

Geothermal projects must undergo significantly more pre-approval review under the National Environmental Policy Act (NEPA). Under Section 390 of the Energy Policy Act of 2005, oil and gas receive categorical exclusions (CEs) for activities requiring fewer than 5 acres of surface disturbance, and for drilling on locations that received an approval under NEPA within the last 5 years. These exclusions allow oil and gas developers to receive streamlined approvals for exploration:

NEPA REVIEW.—Action by the Secretary of the Interior in managing the public lands, or the Secretary of Agriculture in managing National Forest System Lands, with respect to any of the activities described in subsection (b) shall be subject to a rebuttable presumption that the use of a categorical exclusion under the National Environmental Policy Act of 1969 (NEPA) would apply if the activity is conducted pursuant to the Mineral Leasing Act for the purpose of exploration or development of oil or gas.

ACTIVITIES DESCRIBED.—The activities referred to in subsection (a) are the following:

1. Individual surface disturbances of less than 5 acres so long as the total surface disturbance on the lease is not greater than 150 acres and site-specific analysis in a document prepared pursuant to NEPA has been previously completed.

2. Drilling an oil or gas well at a location or well pad site at which drilling has occurred previously within 5 years prior to the date of spudding the well.

3. Drilling an oil or gas well within a developed field for which an approved land use plan or any environmental document prepared pursuant to NEPA analyzed such drilling as a reasonably foreseeable activity, so long as such plan or document was approved within 5 years prior to the date of spudding the well.

Energy Policy Act of 2005, Section 390: NEPA Review 

Despite requiring the same stages of development and producing a cleaner product, geothermal projects receive no such exemptions, and are instead required to go through as many as six NEPA reviews. Any of these reviews can be sued by opponents of clean energy, NIMBYs, or misguided conservation groups

Moreover, the NEPA process creates multiple review stages, making it needlessly risky for developers to invest in geothermal energy and driving capital away from the industry. Because it’s hard to determine where underground heat is most accessible, geothermal sites require extensive testing before developers can confidently invest in production. Even after production wells have been drilled, developers must wait on a final NEPA review for the energy generation facilities to turn geothermal energy (steam) into electricity. Geothermal developers are forced to make capital-intensive investments without knowing the final permitting decision. 

It’s not just geothermal sites themselves that face more rigorous oversight. Pipelines, the vital infrastructure for moving natural gas to market, are sited by the Federal Energy Regulatory Commission (FERC). By contrast, transmission lines — which connect clean energy (like geothermal) to markets — require dozens of local and state approvals, a piecemeal process that takes 10-15 years on average to complete. Permitting disparities are compounded by the geological requirements for geothermal; while oil and gas can sometimes avoid federal land, the vast majority of accessible geothermal energy is on federal land in the Mountain West. As a result, geothermal projects often require NEPA reviews both for producing energy and for the final generation facilities, which must be near the drill site. 

The geothermal industry is a newcomer to a complex permitting process. Oil and gas is an established industry, with a mature lobby that has managed to secure carve-outs and exemptions throughout the permitting process. Government regulators have decades of practice working with oil and gas; regulators know how to approach reviews, and established production companies have practice jumping through regulatory hoops. By contrast, geothermal is often technologically novel for staff at government field offices. The staff at leasing and permitting offices often do not have the expertise to effectively evaluate proposals for geothermal plants. Completing the relevant permits can often take extra time while staff learn new evaluation procedures, or await internal guidance. 


The policy solutions for geothermal are relatively straightforward. As policymakers consider permitting reform, putting geothermal on an even footing with oil and gas should be an obvious component. Policymakers should: 

  • Extend the categorical exclusions that oil and gas receive to cover geothermal exploration drilling and certain types of wellfield development.
  • Expand agency capacity at relevant Bureau of Land Management (BLM) field offices. 
  • Reform the transmission siting and permitting process to expand opportunities for geothermal energy to connect to the grid. 
  • Comprehensively reform the NEPA process to reduce frivolous legal challenges and allow expedited agency review.

Under NEPA, categorical exclusions (CEs) offer the most streamlined process, allowing a standardized and rapid approval. Geothermal should have access to the same streamlined CEs that the oil and gas industry has for exploration drilling and well field development. Geothermal should receive a CE for stage four on the chart above, in addition to the existing CE for stage three. Expanding CEs for geothermal would not allow the industry to avoid environmental review or environmental standards. Exploration drilling and well field development are relatively small, and are not environmentally disruptive. These reforms would leave full environmental review requirements in place for more intrusive projects: the power plants that turn geothermal steam into electricity, and the transmission lines that carry that electricity to market. 

Congress should also direct BLM to prioritize developing staff capacity and coordination for geothermal leases and permits. Congress should pair this directive with funding for increased staffing, and should maintain pressure on BLM by requesting periodic progress reports. In the same way that government financing programs aim to help innovative clean energy companies cross the commercial “valley of death,” permitting agencies should proactively streamline their regulatory processes for emerging industries like geothermal. 

Congress could take up genuine reforms to the siting and permitting process for long-distance transmission lines. Transmission is vital in its own right to unlock clean energy production and modernize the grid. But it’s especially important for geothermal, as a higher-capacity transmission network would expand the opportunities for financially viable geothermal production while lowering production risk. Policymakers should consider taking up reforms in the Site Act, which proposes giving FERC authority to site large-scale transmission projects, or the Big Wires Act, which would require regions to maintain a minimum interregional transmission capacity. 

Finally, Congress should take up comprehensive reform to the NEPA process by restricting frivolous lawsuits and creating a limit on the amount of time courts can hold up construction. 

Geothermal energy presents an opportunity for American clean energy production that is almost too good to be true. In the American West, vast reserves of easily accessible underground heat sit under federal land. A tiny fraction of those reserves, tapped by existing technology, would provide baseload energy sufficient for the entire country. It would be a shame if regulations originally designed to protect the environment killed geothermal energy while shielding oil and gas.