|
Geothermal project meets more adversity Alaska electric co-op, already in bankruptcy over troubled drilling program, says equipment bought to test well needed costly fixes Wesley Loy For Petroleum News
Trouble continues to dog Naknek Electric Association’s geothermal drilling project.
The small electric cooperative in Southwest Alaska has been trying to complete an exploratory geothermal well in an effort to find an alternative to burning expensive diesel to generate power.
Cost overruns on the geothermal project forced NEA into a Chapter 11 bankruptcy filing on Sept. 29, 2010.
Since then, the co-op has worked to secure additional funding and test its Naknek G-1 well, located about seven miles northeast of the village of King Salmon.
But on April 16, the co-op’s bankruptcy attorney filed court papers indicating that an air compression system purchased in Texas to work on the well had failed, requiring costly repairs.
Equipment problems An Anchorage bankruptcy judge in December cleared NEA to take out a $1.5 million loan to continue work on its well.
The work included lifting drilling mud and cuttings, and testing well flow and temperature to determine the hole’s strength as a geothermal source.
NEA used part of the loan to buy an air compression system needed for the job. The co-op acquired the system from Advantage Equipment Inc. in Midland, Texas, court papers say.
But the equipment soon exhibited problems on the well site, the co-op contends.
Donna Vukich, NEA general manager, sent a Feb. 12 letter to Advantage outlining the problems.
“I am writing to seek a fair and reasonable settlement for unacceptable mechanical problems with the air compression system, and particularly the booster, that you sold to Naknek Electric Association in December,” the letter began. “I will lay out the facts as we see them, and suggest how we might resolve the situation.”
Upon arrival in Alaska, the equipment needed servicing — an oil change, oil filters and fuel filters — and then proved difficult to start, requiring new batteries, an alternator and alternator belts, the letter said.
Once put to work, the system wouldn’t build the expected pressure, and the booster engine began stalling, Vukich said.
After no more than 60 hours running under a load, the booster on Jan. 22 “made a loud banging sound,” forcing a shutdown, she wrote.
Her letter said NEA tried to remedy the problems with Advantage, but ultimately the co-op contracted with a Wyoming compressor company to repair the damaged equipment at a cost of $112,756 plus $36,500 shipping.
Co-op seeks reimbursement Vukich requested that Advantage reimburse NEA a total of $121,256.
The co-op enlisted a Midland attorney, Alan H. Meyers, to help with its claim against the equipment vendor.
NEA has said in court filings that if the well proves viable, the co-op aims to line up millions more in financing for further geothermal drilling.
Already, the Alaska Oil and Gas Conservation Commission, which regulates drilling, has approved a permit for a second exploratory geothermal well, the Naknek G-2 well.
The co-op, in an April 19 court filing, indicated it will report on “the present status of the geothermal well” by May 2.
NEA serves the villages of King Salmon, Naknek and South Naknek, all located along the Naknek River in the Bristol Bay region of Southwest Alaska. The co-op has just over 600 residential and business members, and serves major salmon canneries during the bay’s summer commercial fishing season.
Like many of the state’s rural electric utilities, NEA depends on expensive, barged-in diesel to run its generators.
NEA has asked the bankruptcy court for permission to borrow up to $6 million to purchase 1.5 million gallons of fuel needed to continue operations past mid-June.
The co-op began looking at geothermal energy several years ago, as the boundary of the volcanic Katmai National Park and Preserve is just a few miles from NEA’s power lines.
| 