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Providing coverage of Alaska and northern Canada's oil and gas industry
August 2018

Vol. 23, No.34 Week of August 26, 2018

AK geothermal: tantalizing possibilities

The state has many volcanoes, hot springs, but harnessing these remote features as viable energy sources has proven challenging

Alan Bailey

Petroleum News

The Alaska Department of Natural Resourcesí recent announcement that it is seeking nominations of land for geothermal use has again brought attention to what appears to be an underused state resource. With its myriad of volcanos and hot springs, why does the state not make much use of geothermal energy?

As amply demonstrated by Icelandís geothermal heating and power generation systems, natural heat can be an excellent energy source for human use. In the Alaska Interior, a geothermal energy system at Chena Hot Springs, used for greenhouse heating and electricity generation, has for a number of years demonstrated that a system of this type can operate effectively in the state. But hot springs in Alaska only appear at specific, isolated locations, not necessarily close to any habitation. And a crucial challenge in Alaska is finding a geothermal location where the nearby energy demand is sufficient to justify the significant up-front cost of geothermal development. As tends to be the case with most renewable energy sources, the cost of the energy consists mainly of the cost of amortizing the substantial system development cost over some extended period of time.

Unalaska and Akutan

For a number of years two remote communities in the Aleutians, Unalaska and Akutan, have been interested in harnessing power from nearby volcanos.

The city of Unalaska has wanted to develop known geothermal resources on the flanks or near the base of the Manushin Volcano, just 14 miles from town. Although Unalaska is a small, remote community, it is the site of a substantial fish processing plant, which, if it were to use the geothermal power, would improve the project economics. Geothermal energy would replace the use of diesel generators. However, to date the Unalaska project has not moved to a development stage.

Akutan also hosts a seafood production facility and is close to an active volcano. The city has drilled some test geothermal wells but has yet to establish a viable geothermal project.

2007 lease sale

The stateís invitation to nominate land obviously only applies to state land, and not to federal, Native or privately owned territory. Previously, in 2007, the DNR invited bids for geothermal leases adjacent to two active volcanoes on the west side of Cook Inlet: on the flanks of Mount Spurr, and on Augustine Island. In both cases the presence of active volcanoes would point to the presence of geothermal energy in the subsurface. But the viability of the geothermal resource for power generation or other uses depends on the precise nature of that resource, and on the viability of a development at a relatively remote location.

Mount Spurr

Of the two, Mount Spurr appears the more attractive proposition, given that the leasable land lies 80 miles west of the Municipality of Anchorage and just 40 miles from the closest point on the Railbelt electricity transmission grid. A geophysical survey conducted in the 1980s pointed to the possible existence of a layer of warm or hot brine 2,000 feet below a plateau at the entrance to the pass on the south flank of the mountain. There were also geochemical indications of geothermal water in the area.

In 2008 Ormat Technologies, a Lower 48 geothermal company, paid $3.5 million for 15 state leases on the flanks of Mount Spurr. In 2009 the company began an evaluation of its leases by conducting various forms of aerial survey, coupled with gravity and electromagnetic measurements. The company followed up in 2010 with the drilling of two core holes to depths of 1,000 feet. Then, in 2011, the company brought in a drilling rig to drill to a depth of 4,000 feet.

Disappointing results

Unfortunately, the deeper well proved disappointing, encountering no hot water and subsurface temperatures no higher than 140 degrees F. The Ormat project leader for the drilling effort later told the Alaska Senate Resources Committee that the well had unexpectedly encountered a type of rock called a conglomerate, a rock type that does not hold heat particularly effectively. There may also have been some mixing of warm geothermal fluid with cold glacial water from the surface, the project leader said.

Although Ormat formulated plans for further drilling and field work, perhaps drilling closer to the volcanoís crater, those activities never happened. In February 2015 the company announced that it was writing off the $7.3 million it had invested in its Mount Spurr venture.

The disappointing outcome of Ormatís efforts clearly illustrate the risks associated with geothermal exploration. However, there is obviously volcanic heat associated with Mount Spurr: It would appear premature to write off the mountainís potential as a source of usable energy, not too distant from a major population center and its associated electricity grid.

Augustine

Augustine, while obviously another potential source of volcanic heat, would be more challenging to develop, given its relatively remote location. The nearest power plants on the Railbelt grid are at Beluga 150 miles to the northwest and Nikiski 112 miles to the northeast. Having not received any bids, based on the 2007 lease sale, in 2013 the state offered 26 geothermal tracts in the Augustine area in conjunction with a Cook Inlet oil and gas lease sale. The state received a bid on one of the tracts but nothing resulted in the way of geothermal development.






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