Hi Randy,
I didn't go with a Geothermal in the end due to the extremely high start up cost of doing it correctly but I did a lot of research and I'm currently set up in a way that will make for a simple transformation down the road, should I get the extra budget to do it.
Of course, I can't tell if this applies to your neighbor, but here is what I can tell you.
Briefly, there are two types of geothermal systems. A closed system (which I would have chosen) and a two-well system. In a closed system, a long single pipe is snaked through the ground horizontally, just deep enough to gather the heat. Once it's filled, the water constantly flows through then returns to the house. It keeps re-circulating the same water so there is no strain on your well and no dumping back into the soil. This, to me, is the 'proper' way to do it.
The other method is a two well system. Water is pumped up from one well, goes through the condenser, then is dumped out via a second well. Contractors who prefer this system will try to tell you that this is fine because the water remains clean and is placed back into the ground so there is no water loss. (Note, a lot of geothermal contractors around here just happen to have well digging as their, primary business.)
The problem with this system is that underground water tables are very complex. The wells have to be so far apart, but even when you go as close as they will allow, it is more likely than not that you are pulling water from one water system and dumping it back into a completely different water system.
These systems use an incredible amount of water and it is very possible to disrupt the natural flow of the underground water tables. Normally, you think about sucking a system dry and although that is not very common, saturating the other water system with the runoff is a common way to cause problems.
Some municipalities have put restrictions on these two well systems because two many houses in a small area can really cause issues. Either sucking a shared water table dry or super saturating another so badly that you get surface water problems, or even huge sinkholes developing.
I don't have the links handy but if you Google geothermal and throw in some European keywords, countries like Norway and others are much more developed in this technology than we are and you will find lots of advice, regulations, and examples.
Again, I have no idea that this is causing your problems but thought I would share what's possible.
