(1) The use of water as a material medium is recognized as a beneficial use of such water. All applications to appropriate groundwater in order to utilize its geothermal energy shall be considered an application to appropriate geothermal fluid.

(2) (a) Prior to the production of geothermal fluid from a well, other than for flow-testing purposes, a permit to appropriate shall be obtained from the state engineer. This requirement shall not apply to nondiversionary utilization methods; however, such exemption shall not prevent the developer of a geothermal resource from establishing a property right based on his actual utilization.

(b) The permit to appropriate required by this subsection (2) may be waived by the state engineer for a diversionary utilization method which is nonconsumptive and which will not impair valid, prior water rights.

(c) The permit to appropriate required by this subsection (2) may allow for nonconsumptive secondary uses of geothermal fluid, including the recovery of geothermal by-products, and may allow for consumptive secondary uses of geothermal fluid, including sale, which will not impair valid, prior water rights.

(3) The state engineer shall grant a permit to appropriate geothermal fluids within one hundred eighty-two days after the filing of an application upon a finding that:

(a) The proposed appropriation will not materially injure a valid, prior water or geothermal right;

(b) The applicant has acquired or purchased an option to acquire adequate water rights to offset any material injury; or

(c) The applicant has obtained and offered to provide to any affected party an equivalent amount of replacement water of comparable quality.

(4) The appropriation of a geothermal fluid that is nontributary groundwater shall be in accordance with section 37-90-137 (4).

(5) The essence of the water right granted by a permit to appropriate geothermal fluid is the ability to extract geothermal energy from such fluid. The beneficial use of such energy is the basis, measure, and limit of the right and requires that efficient application methods be utilized.

(6) The provisions of articles 90 and 92 of this title relating to notice, hearings, appeals, and the administrationof water rights shall govern all matters arising under this section.

(7) Any application to appropriate a geothermal fluid pending on June 10, 1983, shall be processed and evaluated under existing law prior to June 10, 1983.

(8) For purposes of this section, "materially injure" and "material injury" include any diminution or alteration in the quantity, temperature, or quality of any valid, prior water or geothermal right; except that, with regard to a geothermal right, "materially injure" and "material injury" include a diminution or alteration in the temperature of water only if the diminution or alteration adversely affects the valid, prior geothermal right.