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State plans Mount Spurr lease sale Call for applications for geothermal exploration rights attracts enough interest for competitive lease sale, probably in January Alan Bailey Petroleum News
An escalating interest in renewable energy sources, driven no doubt by high oil prices and concerns about climate change, seems to have encouraged some significant interest in developing possible geothermal resources near Mount Spurr, on the northwest side of Alaska’s Cook Inlet, about 80 miles west of Anchorage. Mount Spurr is an active volcano that last erupted in 1992.
In April the Alaska Department of Natural Resources invited applications for geothermal prospecting permits or geothermal leases on 15 tracts of state-owned land totaling about 38,332 acres, northwest of Trading Bay along the southern flank of Mount Spurr. The area includes the east end of Chakachamna Lake and part of the Chakachatna River.
“We did receive two or more applications on almost all of the tracts,” Kathy Means from Alaska’s Division of Oil and Gas told the participants in the 2007 Mount Spurr Geothermal Workshop in Anchorage on Aug. 27.
But, under state statutes, the fact that several entities are interested in geothermal exploration means that the state must hold a competitive lease sale, Means said. The division proposes holding a lease sale, probably with sealed bids along similar lines to an oil and gas lease sale.
Best interest finding Also under state statutes, DNR must conduct a best interest finding to verify that the lease sale is in the state’s interest, from the perspectives of the environmental and social impacts of geothermal leasing. The best interest finding will also identify any necessary mitigation measures to prevent undesirable impacts from activities resulting from the leasing, Bruce Anders, the division’s head of leasing and permitting, told the workshop participants. The division will first prepare a preliminary best interest finding and request public comments on that.
“The administration felt that it was very important to include the public and receive comments,” Anders said. “… We’ll be issuing our PBIF very shortly.”
But to expedite the best interest finding process, DNR is reducing the public comment period following issue of the preliminary best interest finding from the customary 60 days to 30 days.
And by removing a narrow strip of land along the southeastern part of the leasable area from the sale, DNR is excluding tracts from the Alaska coastal zone. That will eliminate the need for a determination of consistency with the Alaska Coastal Management Plan prior to the lease sale, Anders said.
After completion of the best interest finding and a subsequent lease sale announcement, the division will likely allow 45 days between the sale announcement and the date of the sale.
Slotting all of this together should result in a sale announcement in December and a lease sale at some time in January, with leases awarded in February, Anders said.
Lease terms would include a primary term of 10 years, a rental of $3 per acre per year and a royalty of 10 to 15 percent of gross revenues, Means said. There will also be a bonding requirement to protect against surface damage. And there will be a requirement for reports, such as plans of exploration or development.
Is there a source? But what is the likelihood of finding a geothermal power source at Mount Spurr?
“There is a small zone of tepid hot springs that occurs on the south flank of Crater Peak. It’s not really a robust geothermal spring system,” Chris Nye, a geologist with the Alaska Division of Geological and Geophysical Surveys, told Petroleum News in May (Crater Peak is an active volcanic cone on the south flank of the mountain). Because the springs include water from snow melt or rain, the chemical content of the water does not help in determining the possible existence of a geothermal source at depth.
But a geophysical survey in the 1980s provided tantalizing indications of a possible layer of warm or hot brine 2,000 feet below the plateau at the entrance to the pass on the south side of the mountain. Some soil geochemistry anomalies also pointed to the existence of geothermal water in the area.
“What that (research) program did was identify various geophysical anomalies of which geothermal brine is a reasonable explanation,” Nye said. There are other possible explanations for the anomalies, he said.
If the anomaly does represent geothermal brine, the source of the fluid would be the logical target for an exploration program, either through further geophysical work or through drilling.
If water from the source was hot enough to boil, the resulting steam could drive a turbine-powered generator. But even water below the boiling point might provide a viable source of electricity: In a process known as an organic Rankine cycle the hot water can boil a secondary fluid, which in turn can drive a turbine. A power plant at Chena Hot Springs in the Alaska Interior, for example, has demonstrated successful electricity generation using water at just 165 degrees Fahrenheit.
And a power plant at Mount Spurr would enjoy the benefit of relative proximity to the Southcentral Alaska electricity grid.
Quite doable Although the construction of a power plant would entail some significant challenges relating to site access in the rugged terrain in the Mount Spurr area, a project to build a power plant does look technically feasible, were someone to find a suitable geothermal source, Lorie Dilley, an engineer with Hottenburg, Dilley and Linnell, told the workshop participants.
“I think it would be quite doable,” she said.
Dilley estimates that the total bill for the power-plant project, including the necessary transportation infrastructure and a transmission line to the Southcentral Alaska electricity grid, would come to something between $170 million and $368 million. Whether the project would be viable would depend in part on how much geothermal energy the power plant could utilize.
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