Enhanced geothermal systems (EGS) are moving from engineering experiments to commercial development.
Data centers, advanced manufacturing, and electrification need reliable, around-the-clock power. For project developers, large power users, utilities, and regulators, the question is no longer whether EGS is viable. It is whether existing legal and regulatory frameworks can accommodate projects that share characteristics of both geothermal facilities and oil-and-gas operations.
An early commercial deployment is already operating. In Nevada, Google and Fervo Energy’s Project Red became operational in November 2023 and began delivering carbon-free electricity to the local grid serving Google’s Nevada data centers. The project is small — approximately 3.5 MW— and combines horizontal drilling, hydraulic stimulation, and real-time subsurface monitoring in a commercial power project.
Larger projects are now following. Fervo’s Cape Station project in Utah is on track to begin delivering power in late 2026, reach approximately 100 MW by early 2027, and expand toward 500 MW at full buildout. Fervo also announced $421 million in non-recourse financing for Phase I.
Accelerating Commercial Deployment
While the subsurface approach differs from traditional geothermal development, the legal issues are familiar: site control, resource ownership, water rights, drilling approvals, interconnection, offtake, tax-credit qualification, construction risk, and long-term reservoir performance.
Traditional geothermal has long been constrained by geography, working best where heat, fluid, and permeability naturally co-occur. EGS is designed to remove location as a limiting factor.
The subsurface generally gets hotter with depth, and EGS projects often target rock temperatures ranging from 150°C to 200°C or higher.
EGS uses oil-and-gas technologies — including directional drilling, horizontal drilling, hydraulic stimulation, and downhole monitoring — to create or enhance permeability in deep, hot rock. Water is circulated through the engineered reservoir, heated underground, and returned to the surface to generate electricity. EGS is intended to provide dispatchable, carbon-free power available in more locations than traditional geothermal facilities. (See Figure 1.)
Figure 1. Generalized schematic of EGS process.
Engineering, however, is only the beginning. Commercial EGS projects must fit within legal frameworks built for conventional geothermal, oil and gas, public lands, water rights, utilities, and environmental review — not for engineered underground heat-exchange systems.
Permitting, Ownership, and Regulatory Frameworks
Federal policymakers are beginning to respond. The bipartisan Harnessing Energy at Thermal Sources (HEATS) Act (H.R. 5587), which passed the House in April 2026 and was referred to the Senate, would amend the Geothermal Steam Act of 1970 to reduce duplicative federal permitting in certain mixed-ownership settings.
The bill would eliminate the federal drilling-permit requirement for qualifying geothermal exploration and production on non-federal lands where the United States owns less than 50 percent of the subsurface geothermal estate, provided the operator submits a state permit application.
The HEATS Act highlights a threshold question: who owns the geothermal resource? There is no single national answer. On federal lands, or where the United States has reserved geothermal interests, federal leasing rules may apply. On state or private lands, ownership and permitting may turn on state law. Thus, for EGS, the value lies not only in naturally occurring heat or fluids, but also in the right to drill, stimulate, circulate fluid through, monitor, and manage an engineered heat-exchange system underground.
States are also acting. Nevada, Utah, Colorado, Texas, and others are adapting oil-and-gas expertise and regulatory models to geothermal development while updating rules for leasing, permitting, subsurface resource management, utility procurement, and cost recovery.
Due diligence for commercial EGS projects may require analysis of geothermal ownership, pore-space rights, surface access, water rights, injection and production permits, interconnection, environmental review, induced seismicity, power purchase arrangements, utility tariffs, tax-credit monetization, and project finance.
Oil and gas statutes may offer useful analogues given EGS’s reliance on similar drilling techniques, but analogous legal frameworks may not fully address all EGS-related issues; EGS will raise new questions about subsurface property rights, long-term reservoir stewardship, and conflicts with existing oil and gas operations.
Project Economics and Tax Incentives
Economics also factor in. While EGS remains capital intensive, costs may decline as drilling performance, completions design, reservoir management, and project repetition improve. Federal clean-energy incentives will also be relevant.
Geothermal projects have historically been eligible for production or investment tax credits, and Treasury’s post-2024 technology-neutral guidance treats geothermal as a zero- or net-zero-emissions electricity technology under Sections 45Y and 48E. One legal question is how to define the credit-eligible “facility”: the surface plant, wells and gathering system, engineered reservoir, or some integrated combination.
EGS also raises a broader policy question regarding whether governments will continue to subsidize specific technologies, or increasingly reward attributes such as low carbon intensity, reliability, dispatchability, and firm capacity. For 24/7 clean-power buyers, tariff structures and procurement models may prove as important as tax credits.
Takeaway
Companies with large electricity needs, subsurface assets, utility relationships, or energy-development strategies should be watching geothermal permitting, utility procurement, transmission policy, land rights, tax credits, and project-finance structures. The legal rules are being written now.
These developments will not affect geothermal alone. They may also shape the next generation of advanced nuclear reactors, long-duration energy storage, clean hydrogen, carbon capture, and other technologies competing to supply reliable, low-carbon power.