The city of Klamath Falls Geothermal District Heating System started to provide heat to 10 government buildings on March 20, 1984. This startup was two and one-half years after construction of the system was completed and the operation is scheduled for only a four-month test period. The delay was the result of citizens objecting to pumping and injecting geothermal fluids in the reservoir and was legally enforced by means of a city ordinance passed by the voters. This Initiative Ordinance essentially regulates the resource by requiring any additional water pumped from a geothermal well be returned to that same well. The state of Oregon filed a lawsuit against the city, claiming that state regulation preempted city action. The issue currently is in the Court of Appeals, after Klamath County Circuit Court ruled that the state was not preempted and the ordinance was valid and enforceable. Historical description of development that led up to these institutional and legal problems are discussed. Citizens objections and third party mitigation measures by means of reservoir engineering studies and public meetings are described. Lessons learned from the Klamath Falls experience are pointed out so future developments in other communities may benefit.