|
Alaska utility asks legislators for help Operating out of bankruptcy, Naknek Electric Association says $3.2M needed to confirm geothermal potential of problematic well Wesley Loy For Petroleum News
A struggling electric power cooperative is looking to the Alaska Legislature for funding to continue its geothermal exploration program.
Officers of Naknek Electric Association on Jan. 27 testified before the House Resources Committee in Juneau, saying $3.2 million is needed right away to complete a troublesome geothermal well.
Specifically, the money would be used to sidetrack the well, which has experienced technical problems preventing a full and accurate test of its geothermal potential, the co-op representatives said.
A sidetrack is a hole drilled off an existing wellbore, often as a way to bypass downhole problems.
“We’re on a very tight timeframe,” Nanci Morris Lyon, a Naknek Electric board member, told the committee. “Our project is truly ready to roll, other than the $3.2 million.”
Clogged well Naknek Electric serves villages at Bristol Bay, in remote Southwest Alaska. The bay is famed for its enormous summer runs of sockeye salmon, and local canneries are major users of co-op power.
Looking to escape rising prices for diesel to run its generators, the small utility embarked on an exploratory campaign to find a geothermal energy source capable of making electricity. It saw good potential for geothermal, as the volcanic Katmai National Park and Preserve is nearby.
As part of the effort, the co-op bought a National 1320 drilling rig in 2009, and subsequently used it to drill its first, and so far only, exploratory geothermal well outside the village of King Salmon.
But the drilling proved very difficult. Co-op representatives say barite-based drilling mud clogged the well, known as G-1, and expensive measures to try to unstop the hole and allow it to flow properly have failed.
In September 2010, Naknek Electric was forced to file for Chapter 11 bankruptcy protection from creditors due to high costs and other issues associated with the geothermal program.
Some skepticism An Anchorage bankruptcy judge has given the co-op until March 16 to file a bankruptcy reorganization plan.
Naknek Electric officials suggested to legislators the geothermal effort could hinge on legislative help to reassure the bankruptcy court, which otherwise “could effectively halt the project.”
After consultation with experts, the best path forward appears to be drilling a sidetrack off the clogged geothermal well, the officials said. The alternative for the co-op, they said, is ending the geothermal exploration effort, selling off the drilling equipment and continuing to generate power with diesel costing upwards of $6 million annually.
The diesel expense is an enormous burden for the co-op and the region’s small population, the Naknek Electric witnesses said.
Rep. Eric Feige of Chickaloon, co-chair of the House Resources Committee, noted drillers had already tried to sidetrack the well twice before and encountered problems.
“What leads you to believe that you’re going to have success with a third sidetrack?” Feige asked the witnesses.
“Well, we will be utilizing a different engineer on it,” said Donna Vukich, the co-op’s general manager. She added that drillers would have a better understanding of downhole conditions, and a technical team from the U.S. Department of Energy would be on-site.
Some legislators suggested it might be tough to help the co-op, as the session runs to April 15, well after the court deadline for filing the bankruptcy reorganization plan.
‘Critical juncture’ Vukich told legislators the co-op had explored other funding options, but the problem is the bankruptcy court won’t allow the utility to take on more loans.
Co-op officials submitted documents to the committee detailing the utility’s debt and its spending thus far on the geothermal effort.
Naknek Electric’s current debt load totals $44.5 million, including $23.5 million for the G-1 well; $8.5 million for purchase of the rig; $3 million for rig upgrades; and $9.5 million in fuel and other loans.
The documents say the $80 million geothermal project is “now at a critical juncture — the immediate need for $3.2 million to leverage approximately $17 million in previously obligated federal grants as well as a federal loan guarantee.”
The majority of Naknek Electric consumers, as well as regional organizations such as the Bristol Bay Borough and the Bristol Bay Native Association, support the geothermal project, the documents say.
Geothermal experts the co-op engaged at the request of federal and state agencies “are in agreement that the initial well and the overall site hold high potential for Alaska’s first utility-grade geothermal power production facility,” says a project update given to the committee.
In recent years, Alaska legislators have plowed many millions of dollars into alternative energy projects around the state.
| 