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Vol. 26, No.16 Week of April 18, 2021
Providing coverage of Alaska and northern Canada's oil and gas industry

Governor’s bills would promote geothermal

Proposed modernization of statutes is aimed at encouraging the exploration and development of Alaska’s geothermal resources

Alan Bailey

for Petroleum News

The Alaska Legislature is considering bills introduced by Gov. Mike Dunleavy, Senate Bill 104 and House Bill 135, to encourage exploration and development of Alaska’s geothermal energy resources.

On April 9 officials from the Alaska Department of Natural Resources talked to the Senate Resources Committee about SB 104 and its objectives.

Reflecting on a recognition that Alaska’s geothermal resources have not been developed to the extent that the state would like, Steve Masterman, director of Alaska’s Division of Geological and Geophysical Surveys, told the Resources Committee that the idea was to modernize the geothermal statutes.

“So we are trying to revise the statutes to make exploration of our geothermal resources more attractive to industry and thereby promote their exploration and ultimate development, in order to promote clean energy industry jobs,” Masterman said.

Alignment with oil and gas statutes

Essentially the bill would align the statutes governing geothermal activities with the statutes for oil and gas exploration and development, increase the time available for a company to explore an area, and provide the means for a company to explore a larger area than is realistically possible under current statutes.

The bill would bring the statutes up to date, in part, by eliminating temperature limitations for resources which can be considered geothermal - modern technology allows the production of geothermal energy from lower temperature resources than had been possible in the past, Masterman explained.

Similar bills, SB 161 in the Senate, were introduced to the last Legislature but did not complete the legislative process by the end of last year’s legislative session.

Key features

Haley Paine, deputy director of Alaska’s Division of Oil and Gas, described to the committee some of the key features of the new bill. The proposed statutory changes would include a change in terminology, with prospecting permits being termed prospecting licenses - this would align the geothermal terminology with that for oil and gas exploration. To allow more time for geothermal exploration activities, a prospecting license could run for five years, rather than the two years of a geothermal prospecting permit.

To allow a licensee a greater land area for exploration, the maximum land area encompassed by a license would be 100,000 acres, rather than the current 51,200-acre maximum for a permit. And, as with oil and gas exploration licenses, there would be the potential to convert a prospecting license to a geothermal lease, based on completed work commitments and an acceptable exploration plan. These conditions for conversion to a lease allow flexibility in the arrangements, without having to try to define what is meant by a commercial geothermal discovery, Paine commented.

A current provision giving surface landowners preferential rights for geothermal exploration under their lands would be removed from the statutes. And, under the proposed statutes, a prospecting license would not be required for the exploration and development of geothermal resources for domestic, non-commercial or small-scale industrial use.

Existing statutes for geothermal land leasing would not be changed. As with oil and gas, the state can hold periodic lease sales, with lessees having geothermal prospecting and development rights on leased state land. Paine said that since 1983 the state has held four geothermal lease sales: three in the area of Mount Spurr and one on Augustine Island. Mount Spurr and Augustine are both active volcanoes on the west side of Cook Inlet. Only one of these lease sales, the 2008 Mount Spurr sale, resulted in competitive bidding and subsequent on-the-ground exploration activities. However, all Mount Spurr leases were subsequently relinquished, Paine said.

Mount Spurr

Masterman talked about the exploration that had resulted from the 2008 Mount Spurr lease sale, and about the geothermal potential at Pilgrim Hot Springs, near Nome on the southern Seward Peninsula. A geothermal power plant at Mount Spurr could potentially supply electricity to the Railbelt electric grid at Beluga on the Cook Inlet coast. Geothermal energy in the Pilgrim Hot Springs area could potentially support Nome and a proposed nearby graphite mine.

Both of these geothermal locations illustrate the value of being able to explore over a relatively wide area for a lengthy time period.

Hot springs at the surface a few miles to the south of Mount Spurr’s active crater point to the existence of a subsurface reservoir of hot geothermal water that would be the prime target for geothermal drilling. But where in the subsurface might that reservoir be? - it could lie several miles from the hot springs.

Masterman reviewed the complex geology of the area. In particular, a major fault, the Capps Glacier fault, runs east to west on the south side of Mount Spurr. Following surveying activities, Ormat Nevada, the company that acquired most of the tracts sold in the 2008 lease sale, opted to drill three wells into sedimentary strata below shallow volcanic rocks on the south side of the fault. However, the wells did not encounter any warm or hot rocks or water, Masterman said.

New explorers in the region, armed with that knowledge, would have to use geology and geophysics to search elsewhere for the elusive geothermal reservoir.

“So they have a difficult task in front of them,” Masterman said. “They have to try to trace the hot water back from the surface exposure to the reservoir, and drill into that reservoir.”

It would take several seasons of geologic mapping and geophysical surveys, to assess where to drill, he said.

Pilgrim Hot Springs

The area around Pilgrim Hot Springs is also marked by some significant faulting. In particular, the area to the north of the springs has dropped vertically to form a faulted block referred to as a graben, probably several thousand feet thick, Masterman explained.

Past drilling at the springs has identified water at a temperature of about 90 C at a depth of about 300 feet. But the subsurface temperatures are cooler below this depth, indicating that the hot water originates somewhere to the side of the springs, rather than underneath. But no one yet knows from where the water has flowed - perhaps it has migrated up one of the faults in the area.

Exploration to date has been carried out in a tiny area immediately around the springs. Locating the hot water source would require exploration over a much wider area over an extended time period - hence the value of some of the statutory changes in the new bill, Masterman commented.

And, while a geothermal power plant based on the known pool of hot water at the springs could supply some of the power than Nome uses, a plant based on the thus-far undiscovered hot water source may be able to generate much more power, potentially fully fueling Nome and the proposed graphite mine nearby, Masterman said.

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