Through Decree 1318 of 2022 (“Decree”) and Resolution 40302 of August 5th, 2022 (“Resolution”), the Ministry of Mines and Energy (“MME”), established the requirements for the granting of Exploration Permits and Exploitation of the Geothermal Resource and implemented the Geothermal Registry.
The Resolution develops the guidelines defined in the Decree regarding the generation of electrical energy. For this purpose, two essential stages are defined. The first-one, the Exploration stage and the second-one the Operation stage, both accompanied by the Technical-Financial Programs, documents that describe the activities to be carried out during the exploration or exploitation stage.
From the point of view of the generation of electrical energy, the Resolution indicates that the objective of the Exploration Permit and the Technical-Financial Program that goes along with it is to verify the existence of the geothermal deposit and to make a first energy estimate of the generation potential of electrical energy from it. After completing the Exploration stage, an Operation Request is submitted with, among others, the essential elements of the energy generation project, the definition of whether it is a cogeneration or self-generation project and the mechanisms of its connection with the National Interconnected System ("SIN" for its acronym in Spanish), if deemed necessary.
The MME will be in charge of verifying that those interested in the execution of the exploration or operation activities for the use of the geothermal resource for the purpose of generating electricity or Developers (“Developers”) have the legal and technical capacity to obtain an Exploration or Operation Permit for said activities. In turn, it will verify the delivery of the compliance guarantees, which will be the equivalent of two percentage points of the Financial Technical Program proposed in the Exploration or Operation Permit. Once the Exploration or Operation Permit is signed, the MME must register it in the Geothermal Registry.
The Exploration Permit is characterized by covering an area of 150 km and will be valid for 5 years from the date of registration in the Geothermal Registry and may be extended for another 3 years, if the obligations and regulations have been met applicable, in addition to the requirements established in article 14 of the Resolution and may be assigned in accordance with article 17 of the Resolution.
For its part, the Operation Permit will fall on the area requested by the Developer, duly approved and/or delimited by the MME and will be in force for 30 years from its registration and may be extended for a period of 30 years more; to make said request, it must demonstrate that the project is operational, unless, for reasons beyond its control, it has had delays in complying with its respective schedule, in addition to the requirements established in article 22 of the Resolution and may be assigned in accordance with article 25 of the Resolution.
Due to the fact that the regulatory objective of the Decree and the Resolution is to clarify the guidelines for the generation of electrical energy, a differentiated regulation is introduced for some uses also foreseen in the Decree: i) The Direct Uses of the Geothermal Resource, that is, the uses of heat from geothermal resources for non-electric uses, do not require additional permits; ii) Cascading Uses, that is, in cases where the remaining thermal energy from the electric power generation process is used, will not require registration or additional requirements to those provided for in the Operation Permit application; iii) In the event of intending to operate, as a secondary activity to the electricity generation, the minerals of the so-called Geothermal Brine (the water with salts, minerals and associated gases existing in the geothermal deposit) must comply with the regulations and permits that govern the matter.
Finally, it is noted that the Resolution provides other relevant elements such as: (i) guidelines for drilling, injection and well abandonment activities; (ii) reporting and surveillance obligations on the project developer; (iii) sanctions that may be imposed on developers, which range from a reprimand to the suspension or cancellation of the exploration or exploitation registry, depending on the conduct subject to the sanction; (iv) The differentiated Exploration and Operation Permits for the co-production activity, that is, the cases in which, derived from the hydrocarbon activity, secondary fluid products that are obtained by the owner of the hydrocarbon area are used for the generation of electricity, clarifying that the technical conditions of the wells to be used will continue to be governed by the provisions that regulate the activities of exploration and exploitation of hydrocarbons.