Raft River Resurgence

A landmark achievement sparked to life in the high sagebrush desert of southeastern Idaho in 2008, when U.S. Geothermal Inc. generated the first commercial geothermal power in the state. Principal project partners acquired the property from Vulcan Power Co. in 2002, with a vision of renewable energy production in a region rich with geothermal resources.

U.S. Geothermal’s successful start-up of a new 13 MW net geothermal power plant at Raft River wasn’t the first time the Earth’s heat produced electricity at this remote site, 200 miles southeast of Boise. The U.S. Department of Energy (DOE) drilled the geothermal wells there in the 1970s to test binary cycle power technology and experiment with direct uses of geothermal fluid for agriculture and aquaculture.

“We proved the reservoir and successfully operated a 5 MW power plant for several months in 1980-82, but scrapped it when project funding ended,” said Idaho National Laboratory Renewable Power Engineer Greg Mines.

Since then, binary geothermal power plants flowered across the American West and around the world, with increasingly efficient technologies and equipment from ORMAT International Inc. leading the way. Indeed, binary cycle equipment is often the technology of choice for producing electrical power from moderate-temperature geothermal resources.

A 1985 Bonneville Power Administration geothermal study (“Final High-Temperature Ranking: Pacific Northwest”) put Raft River in first place among sites across the region. A review of DOE data on Raft River resources by independent consulting firm GeothermEx Inc. estimated that the geothermal reservoir has a power production potential of 110 MW (50 percent probability of 15.6 MW per square mile).

The study confirmed U.S. Geothermal’s enthusiasm for building a commercial power generation facility at Raft River. With backing by Canadian investors and a cost-sharing agreement with DOE for Lang Drilling/Boart Longyear to reopen, clean and flow test geothermal wells at the site, the company set out to make that dream a reality. Initial public offerings on the TSX Venture Exchange in 2003 provided U.S. Geothermal with the capital it needed to begin developing Raft River and other geothermal projects.

In January 2005, U.S. Geothermal signed a 20-year, 10 MW power purchase agreement with Idaho Power Co. for output from the company’s planned $39 million Phase One, Unit One development. The following May, U.S. Geothermal signed two additional 10 MW PPAs for its planned $70 million Phase Two development at the site, for a total proposed output of 30 MW.

With PPAs in hand, U.S. Geothermal’s wholly owned subsidiary, Raft River Energy I LLC, signed a fixed price, $20.3 million engineering, procurement and construction (EPC) contract with ORMAT Nevada Inc. ORMAT set out to develop site plans and draft initial design for the Unit One, 13 MW (net) binary cycle power plant.

Project Financing

Dundee Securities helped U.S. Geothermal complete a private placement (PP) of 25 million shares of common stock at C$1.00 per share in April 2006. All stock equity was raised at the parent company level and was not particular to an exchange, said U.S. Geothermal COO Doug Glaspey. Indeed, most of this PP went to U.S. investors. In August 2006, the company announced a $34 million project finance agreement with Goldman Sachs, which formed Raft River Holdings LLC to partner with RRE to own, build and operate the Raft River project.

U.S. Geothermal contributed $5 million in cash and transferred ownership of the seven existing production and injection wells to RRE, plus geothermal rights and leases covering 1,800 acres out of the 5,200 acres controlled by the company. Through Raft River Holdings LLC, Goldman Sachs contributed $34 million to the project. The deal included $1.7 million annually (for 10 years) in Federal Renewable Electricity Production Tax Credits, which were signed over to Raft River Holdings.

Additional common stock offerings since 2006 have raised C$30 million for general working capital, completion of acquisitions, exploration activities and ongoing development both at Raft River and at U.S. Geothermal’s Neal Hot Springs project in Oregon. In October 2007, the company moved to the Toronto Stock Exchange where it trades under the symbol GTH. In April 2008, the company’s common shares were listed on the American Stock Exchange under the symbol HTM.

Resources and Drilling

According to Glaspey, data collected from the Raft River geothermal field confirmed a large, moderate temperature geothermal resource, with temperatures from 275 F to 300 F at depths between 4,500 to 6,000 feet. Fluids in the wells were found to be clean and with low-salinity, with total dissolved solids between 1,200 and 6,800 parts per million. Non-condensable gas content was low.

Union Drilling started an improvement program in August 2006 at four of the old DOE Raft River geothermal wells. Drillers deepened two existing injection wells, drilled a new injection well and bored additional legs in two existing production wells. The work enhanced fluid production and reduced the number of wells needed to feed the Unit One power plant.

Initial drilling work validated a reservoir model showing an extensive geothermal resource at Raft River. Bottom hole temperatures of up to 300 F were confirmed during well improvement drilling operations, with fluid flows of 1,000-plus gallons per minute. The drilling program proved the Raft River geothermal reservoir extended to planned injection well sites. Union Drilling moved its rig to the project’s Phase Two area to bore the first new production well at Raft River in more than 25 years.

Land and Water

To ensure no adverse effects on Phase Two development or financing, U.S. Geothermal strengthened its geothermal energy lease and property rights in 2006. The company bought two new land parcels totaling 1,083 acres with groundwater rights (1,904 acre-feet) for cooling water at its Phase One and Phase Two power plants and to improve pipeline and facility access. A separate water rights purchase ensured an additional 544 acre-feet of cooling water.

In March 2006, Raft River Rural Electric Cooperative agreed to offer interconnection and wheeling services on a power transmission line to the project. Shortly afterwards, U.S. Geothermal issued Ormat a notice to proceed. Ormat designed Raft River Unit One with binary cycle technology, including a cooling tower for more efficient condensation of the system’s isopentane working fluid. The contract specified first power production in September 2007 and commercial operations in October 2007. (For caption and credit information, click on this image in the gallery below.)

U.S. Geothermal managed the remainder of project development, including applications and filing for all necessary permits from the Idaho Department of Environmental Quality. The company contracted Industrial Builders to install the project’s $2.6 million geothermal pipeline gathering and distribution system. Ormat later contracted the same company to handle the power plant mechanical installation.

By October 2006, Ormat had started manufacturing power plant components at its factory in Israel, begun fieldwork on structural foundations and ordered major project pumps and electrical components. U.S. Geothermal also signed contracts to reconstruct an existing 3.4-mile-long, 34.5 kV power line to the project from a Bonneville Power Administration substation and to install electrical distribution lines to wellheads in the geothermal field.

U.S. Geothermal’s power sales plans changed in March 2007, when the company was selected by Idaho Power for further negotiations to provide 45.5 MW of renewable electricity. Under the new agreement, the utility would accept full output of 13 MW from Raft River Unit One; an annual six-month portion (June through November) of power from a planned Unit Three project; and full output of 26 MW from a planned geothermal development at Neal Hot Springs in southeast Oregon.

Contrary to the company’s original agreements with Idaho Power–which limited power plant sales output to 10 MW–a new PPA would allow Raft River Unit One and Unit Three to operate at full power, Glaspey said. “For U.S. Geothermal, that meant a 30 percent increase in generation with reduced operating costs and no additional capital investment.”

In April 2007, U.S. Geothermal awarded a $1.3 million contract to ITT/Goulds to provide line-shaft 900- and 1,000-horsepower geothermal production pumps. Ormat power plant construction proceeded on schedule and budget, with the cooling tower under construction, concrete foundations in place and major power components (condensers, compressors, pentane storage tanks, heat exchangers, turbines, generator and transformer) either in place, delivered or in transit to the site.

Further ensuring adequate access and future resources, U.S. Geothermal won a competitive U.S. Bureau of Land Management geothermal energy lease auction in June 2007. The 1,685 acres under lease adjoin the Raft River project and increased the company’s holdings by 32 percent to nearly 7,000 acres.

By August, Industrial Builders had set all of Ormat’s major power plant equipment on its foundations and piping installation and electrical connections were proceeding. The power plant control room and motor control center buildings were finished and switchgear installed. The cooling tower was nearing completion and injection pumps and motors were in place. Hot geothermal fluid from production wells began to flow through the new geothermal pipelines to the power plant by the middle of the month.

Technical issues delayed project completion during the fall of 2007, pushing the planned start-up from October to the end of the year. U.S. Geothermal staged a 108-hour power production test during which it produced 1,022 MWh of electricity. The facility also operated continuously for 24 hours, producing a peak of 13.2 MW (gross). With four production wells and three injection wells in service, maximum and minimum outputs were 14.4 (9.4 MW net) and 9.5 MW (7.1 MW net).

The power plant was then shut down for evaluation and to address mechanical problems. Notable was Goulds/ITT reconfiguration of injection pump impellers to drive shafts and ORMAT repairs after an inlet screen was swept into a turbine. The power plant restarted on November 22, 2007 and has operated continuously since then.

Start-up operations allowed for operator training, equipment tests, performance testing and other completion tasks. Under contract terms, Idaho Power purchased electricity generated during start-up. ORMAT completed its work on Raft River Unit One on December 28, 2007, with commercial power generation achieved January 3, 2008.

PPAs Approved

In January 2008, the Idaho Public Utilities Commission approved the new full-output PPA for Raft River Unit One power delivery, nullifying U.S. Geothermal’s original 2005 PPA with Idaho Power. The company’s two additional 10 MW PPAs for Raft River Unit Two output had not been submitted for regulatory approval and were mutually cancelled by U.S. Geothermal and Idaho Power.

The Eugene Water and Electric Board signed a 25-year PPA in March 2008 for variable electrical output up to 16 MW from U.S. Geothermal’s planned Raft River Phase Two, Unit Two power plant. “We are still negotiating PPAs with Idaho Power for full output, June through November, from our planned Unit Three power plant, and with another utility in the region for full output, December through May,” said Glaspey.

The company is also seeking a PPA with Idaho Power for 26 MW from its proposed Neal Hot Springs project in Oregon. All agreements for future power deliveries are subject to successful drilling and availability of sufficient geothermal resources.

In June 2008, Raft River Unit One net power output was 10.5 to 11.5 MW. With four production and four injection wells in operation, maximum net electrical output achieved by the plant during March, April and May was 11.2, 12.0 and 11.7 MW, respectively. The power plant operated at 99 percent availability during the period, including scheduled maintenance.

The company said project operating costs were higher than budgeted because of winter startup issues, chemical treatment of cooling water and environmental monitoring and compliance. To avert damage to power plant condensing units, U.S. Geothermal installed a reverse osmosis filtering unit to reduce dissolved chloride from cooling tower feed water.

In August 2008, U.S. Geothermal announced Raft River Unit One was “performing up to expectations” during hot summer conditions, generating 9.5 to 10.5 MW (net). The water-cooled facility operates more efficiently than an air-cooled binary cycle power plant during the summer months. The power plant operated at 99.9 percent availability during the last six months of 2008, with cooler fall and winter temperatures boosting production between 11.0 and 11.5 MW (net).

Future Prospects

Using data from injection and production well tests, Geothermal Science Inc. is developing a computer model of the Raft River reservoir to help plan strategies for future drilling operations. U.S. Geothermal’s goal is to increase Unit One power plant output to its full potential of 13 MW and provide enough geothermal fluid to power the company’s planned 26 MW, Phase Two development. Options include additional legs to existing production wells, new production wells and new injection wells to support increased production.

A recent study involved injecting geothermal fluid into a production well. The experiment increased pressure stability within other nearby production wells, while improving power plant performance. These and other tests to improve efficiency of operations are ongoing. The company said drilling to enhance power production would likely be part of their exploration efforts this year.

To better utilize the Raft River energy resource, U.S. Geothermal project managers are also engaged in discussions with several parties to study the viability of “cascaded use” of hot geothermal fluid after it leaves the power plant, but before injection back to the deep reservoir. Such uses might include year-round, direct heating of greenhouse or aquaculture operations.

In October 2008, DOE chose Raft River to demonstrate Enhanced Geothermal Systems. DOE will fund up to $6 million of the $9 million project, with U.S. Geothermal providing “in-kind contributions” of technical data, a spare injection well and several monitoring wells. The company will partner with the University of Utah, APEX Petroleum Engineering and HiPoint Reservoir Imaging LLC. The research team will measure enhanced permeability gained through thermal fracturing with cold-water injection. DOE and U.S. Geothermal hope the work will reduce the need for new production and injection wells at the Raft River Phase One and Two power projects.

Ted J. Clutter is a former Executive Director of the Geothermal Resources Council. He can be reached at tclutter@cableone.net.

Sidebar: Other Pojects Under Development by U.S. Geothermal Inc.

San Emidio – Nevada: Purchased by U.S. Geothermal in April 2008 from Empire Geothermal LLC and Mike Stewart for $16.8 million, San Emidio is 100 miles north of Reno. The San Emidio property includes 22,944 acres of private and U.S. Bureau of Land Management leases, with a proven geothermal reservoir. Based on independent estimates, reservoir power production potential may be up to 44 MW (90 percent availability). The project has a 1986 vintage operating binary power plant with 3.6 MW (net) capacity that is currently producing 2.5 to 3 MW with 4,000 gallons-per-minute (gpm) of geothermal fluids. NV Energy buys electricity from the facility under a PPA that continues to 2017. The power plant is connected to the transmission grid via a 60 kV intertie. U.S. Geothermal plans to expand the resource with a $75 to $85 million plan to increase geothermal production with new production and injection wells and efficiently expand power production to 26 MW.

Neal Hot Springs – Oregon: Acquired in September 2006, U.S. Geothermal’s Neal Hot Springs project consists of geothermal and surface leases covering 9.6 square miles in eastern Oregon, 90 miles northwest of Boise, ID. Chevron Minerals drilled the site in the late-1970s, discovering a commercial-grade geothermal resource. High-voltage transmission lines run within 11 miles of the resource. In March 2007, U.S. Geothermal started negotiations with Idaho Power Co. for a Power Purchase Agreement that would include its proposed 26 MW Neal Hot Springs project. In July 2008, the company completed well NHS-1, which penetrated the Neal Hot Springs geothermal reservoir at 2,287 feet. A discharge test resulted in artesian flow at a peak rate of 2,055 gpm at a temperature of 286.5 F. Independent estimates pegged potential power production of the well at up to 6 MW. U.S. Geothermal is awaiting permits to drill three additional wells, which will demonstrate the reservoir’s potential size and production capability. Power transmission studies are complete and preliminary power plant engineering is underway.

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