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Naknek Electric Utility Heats Up Geothermal Plans

Naknek Electric Association (NEA), banking on a decade of geothermal research and planning, is preparing to drill an exploration well near King Salmon, in a multi-million dollar project with potential to provide power to 28 villages in Southwest Alaska.

"We are very excited about the potential geothermal resource and the enormous benefit to our region," said Donna Vukich, general manager of NEA, which plans to begin drilling this summer, or early fall.

The project would be the first utility-grade geothermal development in Alaska. The initial cost estimate for the generation plant and 450 miles of transmission line interconnecting regional villages is $200 million, NEA officials said.

With residents of Naknek and King Salmon currently paying US $0.43 a kilowatt-hour, the introduction of less expensive energy sources can't come a moment too soon. Estimates are that use of geothermal power could cut the cost of power production by 70 percent.

Other benefits would be a cleaner environment, with elimination of 3.5 million gallons of diesel fuel now used to generate electricity, plus an energy base for long-term economic development, to sustain local communities.

The initial load would be 18 megawatts, with full potential to use 25 megawatts within two years.

NEA has made a considerable investment over the past decade on research, and geological and geophysical work in preparation for the exploratory well, to be drilled to 9,000 to 12,000 feet.

Geothermal is power extracted from heat stored in the earth. Geothermal energy originates from radioactive decay of minerals, and from solar energy absorbed at the surface. Steam and hot water produced inside the earth have been used for space heating and bathing since ancient times, although geothermal power is now best known for producing electricity.

It is a non-polluting, renewable energy source, with no carbon emissions, and the water is replenished by rainfall and heat is continuously produced inside the earth.

The site, which the utility purchased a year ago, has no known surface anomalies and would be considered a hidden system, Vukich said.

In December 2008, NEA formed a partnership with Alaska Earth Sciences, an Anchorage-based geologic consulting firm specializing in mineral and energy exploration and resource evaluation, to accelerate progress on this project.

AES is providing permitting, project management, geological and geophysical services, and assistance with funding efforts.

NEA also has signed a contract with California-based GeothermEx, a geothermal consulting firm, to develop drilling specifications and well design documents, assist in the selection of a driller, provide technical assistance during drilling and coordinate testing and evaluation of the well.

AES project manager Gary Friedmann said the firm has already done geophysical surveys and the next step will be organizing and executing the drilling program.

Other players include Castle Mountain Group, for permitting, and Bristol Bay Native Corp., the Alaska Native regional firm.

Meanwhile, NEA is in negotiation with drilling firms for their services and the possible outright purchase of drilling rigs, which would be a cost savings over leasing. Leasing a drill rig could run $35,000 to $50,000 a day, while a relatively new drill rig, in good condition, could cost in excess of $20 million, Friedmann said.

There are a number of such rigs currently in Alaska, and a lot of them are idle, although not that many are for sale, because many folks are optimistic that the price of oil will turn around, Friedmann said.

Friedman said his firm would like to begin the drilling phase this summer, because it will probably take at least three months, maybe four, to complete the well.

Typically, after determining the nature of the geothermal resource, a second well would be drilled to inject water in the reservoir, he said. The first well will be an exploratory production well.

"We are designing it with the idea that it would carry hot water to the surface to be run through a generation plant," he said.

The second well would be an injection well, sited away from the first well, from several hundred feet to 2,000 feet away. That well would be used to inject water back into the reservoir to find its way back to the injection well to be pumped to the surface.

"We want the water flowing at a speed it could carry the maximum amount of heat from the hot rock to the surface," Friedmann said. "We are hoping the water is about 350 degrees."

There would be an electrical production facility on site, with most of the energy turned into electricity. Friedman estimated it would take one to two years to get into production of the electrical generating plant, which would be built by NEA.

High energy costs, one of the driving forces in pushing people out of rural communities, is a vicious cycle, because even when some residents leave, the cost of running local facilities and businesses remains the same, Friedmann said.

"The board of Naknek Electric believes if they can find a stable, reliable relatively inexpensive source of electricity, that will not only help lower bills, but it will be an economic development incentive," he said.

It is unusual for a utility to undertake a project of this size, Friedmann said. But the utility hopes the state will eventually become a partner in the venture.

"Right now there is some support from the Department of Energy, but most of the funds for the project itself have come from the utility," he said. "It would be great if the state would work with the federal government to bring stimulus money to projects like these."

NEA has invested more than $2 million in research on the project, in addition to $325,000 from the Denali Commission to assist with seismic testing, Vukich said.

There was also nearly $2.9 million in energy and water legislation funds added to the federal Omnibus bill.

NEA is still waiting to hear whether it will get $5 million requested from the state, Vukich said.

Margaret Bauman is a staff writer for the Alaska Journal of Commerce.

This story was originally published in the Alaska Journal of Commerce and was reprinted with permission.

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