Colorado has adopted significant and comprehensive policies to address carbon emissions in the state and has set goals to greatly reduce carbon emissions in the near future. To reach these goals, the state will need to rapidly develop renewable energy projects. However, land use and development regulations often pose challenges for private developers seeking to build these types of projects.

Last year, the Governor signed Senate Bill 24-212, the Renewable Energy Projects Act, which recognized that there may be opportunities to streamline and expedite permitting of renewable energy projects. The main purpose of the law is to provide local governments with technical assistance in crafting regulations governing the siting of commercially viable renewable energy projects and commercial energy transmission facilities. Although the law emphasizes wind and solar power in its legislative purpose, local governments in the State should also take advantage of the technical assistance to craft regulations that streamline commercial geothermal energy projects. This is especially pertinent because the Colorado Energy Office recently approved $7.7 million in grant awards to encourage exploration and development of geothermal energy in the state.

Meanwhile, state law governing geothermal energy and water use has recently changed. For decades the Colorado Geothermal Resources Act included a declaration that the doctrine of prior appropriations should be modified to permit the full economic development of geothermal resources. This provision was repealed in 2023 when the state passed SB 23-285, Energy and Carbon Management Regulation in Colorado, a bill that, among other things, bifurcated the authority to regulate geothermal operations between the state engineer and the Energy and Carbon Management Commission (formerly known as the Oil and Gas Conservation Commission). This affects the future of geothermal development across the state, particularly as it relates to water rights.

Colorado has high potential for geothermal energy generation, but this potential was difficult to tap into in the old regulatory framework for several reasons. First, geothermal energy facilities typically use underground water as a medium for heat exchange, meaning the wells needed to produce geothermal energy are subject to doctrine of prior appropriation. Second, the regulation of underground water rights for geothermal wells was the exclusive authority of the state engineer, and a permit was required for any type of geothermal well. Lastly, even though the state engineer could waive permit requirements for nonsconsumptive uses of water, it was unclear if the waiver applied to binary geothermal power systems that reinject appropriated groundwater.

SB 23-285 sought to address this confusion and further streamline geothermal energy production by changing the regulatory framework. In the new regulatory framework, deep geothermal operations, like those that can provide reliable commercial energy, are under the exclusive regulatory authority of the Commission while shallow geothermal operations, like those used for a residential heating system, remain under the authority of the state engineer. The state engineer is also bound to issue a permit so long as the appropriation does not injure another’s vested water rights, and the water used by the geothermal facility has been determined to be nontributary groundwater. The Commission’s first set of regulations for deep geothermal operations were released in August of 2024, and they are similar to those that govern oil and gas development, allowing the Commission to approve or deny permits to protect health and safety while allowing local governments to implement stricter standards.

It remains to be seen how much these recent changes in law and grants of money will affect future geothermal development and exploration in the state. Meanwhile, taking a regulatory approach too similar to that which governed extractive oil and gas industries may raise some eyebrows among some in environmental groups. On the other hand, the Renewable Energy Projects Act also requires the Colorado Energy Office to report on how renewable energy projects, including geothermal energy projects, impact wildlife resources, as well as conduct public hearings on these matters. Given that there are currently no commercially operating geothermal electricity generation facilities in the state, Colorado is still in the early stages of any such development and rules will continue to evolve.

SOURCES

• S.B. 23-016 (signed 11 May 2023), https://leg.colorado.gov/sites/default/files/2023a_016_signed.pdf.
• S.B. 24-212 (signed 21 May 2024), https://leg.colorado.gov/sites/default/files/2024a_212_signed.pdf.
• Colo. Rev. Stat. § 29-20-401 et seq.
• Colorado Energy Office, Polis Administration Announces $7.7 million in Awards for Geothermal Energy Projects, https://energyoffice.colorado.gov/press-releases/polis-administration-announces-77-million-in-awards-for-geothermal-energy-projects (24 May 2024).
• C.R.S. § 37–90.5–102(1)(c) (repealed by Laws 2023, Ch. 235 (S.B. 23-285), § 5, eff. July 1, 2023).
• S.B. 23-285 (signed 22 May 2023), https://leg.colorado.gov/sites/default/files/2023a_285_signed.pdf.
• Bureau of Land Management Press Release, Colorado collaborate to advance efficient geothermal development (29 Mar. 2011), https://www.blm.gov/press-release/bureau-land-management-colorado-collaborate-advance-efficient-geothermal-development.
• C.R.S. § 37-90-137(2)(b).
• C.R.S. § 37-90.5-106 (1)(a)(I).
• C.R.S. § 37-90.5-107(1).
• Colo. Code Regs. 402-10, 6.1.2.
• Justin Plaskov, Geothermal’s Prior Appropriation Problem, 83 Univ. Colo. L. Rev., 257, 281-82 (Winter 2011)
• Colo. Code Regs. 402-10, 14.1.
• C.R.S. § 37-90.5-106(1).
• C.R.S. § 37-90.5-107(1)(b).
• Energy and Carbon Management Commission Rules, 1300 Series – Deep Geothermal Operations, https://ecmc.state.co.us/documents/reg/Rules/LATEST/1300%20Series%20-%20Deep%20Geothermal%20Operations.pdf; Draft Regulations (available at https://drive.google.com/file/d/1MM18-MlIdg2ZeidIMdFgyFhLkR67Agma/view).
• Chase Woodruff, Colorado oil and gas regulators adopt ‘deep geothermal’ drilling rules, Colorado Newsline, https://coloradonewsline.com/2024/08/13/colorado-oil-gas-deep-geothermal-rules/ (13 Aug. 2024, 2:43 PM).