HomeMy WebLinkAboutSW Alaska Regional Geothermal GrantApplication4
Renewable Energy Fund Round IV
Grant Application
AEA 11-005 Application Page 1 of 21 7/21/2010
Application Forms and Instructions
The following forms and instructions are provided to assist you in preparing your application for
a Renewable Energy Fund Grant. An electronic version of the Request for Applications (RFA)
and the forms are available online at: http://www.akenergyauthority.org/RE_Fund-IV.html
Grant Application
Form
GrantApp4.doc Application form in MS Word that includes an outline
of information required to submit a complete
application. Applicants should use the form to assure
all information is provided and attach additional
information as required.
Application Cost
Worksheet
Costworksheet 4.doc Summary of Cost information that should be
addressed by applicants in preparing their application.
Grant Budget Form GrantBudget4.doc A detailed grant budget that includes a breakdown of
costs by milestone and a summary of funds available
and requested to complete the work for which funds
are being requested.
Grant Budget Form
Instructions
GrantBudgetInstructions 4.pdf Instructions for completing the above grant budget
form.
If you are applying for grants for more than one project, provide separate application
forms for each project.
Multiple phases for the same project may be submitted as one application.
If you are applying for grant funding for more than one phase of a project , provide
milestones and grant budget for completion of each phase.
If some work has already been completed on your project and you are requesting
funding for an advanced phase, submit information sufficient to demonstrate that the
preceding phases are satisfied and funding for an advanced phase is warranted .
If you have additional information or reports you would like the Authority to consider in
reviewing your application, either provide an electronic version of the document with
your submission or reference a web link where it can be downloaded or reviewed.
REMINDER:
Alaska Energy Authority is subject to the Public Records Act AS 40.25, and materials
submitted to the Authority may be subject to disclosure requirements under the act if no
statutory exemptions apply.
All applications received will be posted on the Authority web site after final
recommendations are made to the legislature.
In accordance with 3 AAC 107.630 (b) Applicants may request trade secrets or
proprietary company data be kept confidential subject to review and approval by the
Authority. If you want information is to be kept confidential the applicant must:
o Request the information be kept confidential.
o Clearly identify the information that is the trade secret or proprietary in their
application.
o Receive concurrence from the Authority that the information will be kept
confidential. If the Authority determines it is not confidential it will be treated as a
public record in accordance with AS 40.25 or returned to the applicant upon
request.
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 2 of 21 7/21/2010
SECTION 1 – APPLICANT INFORMATION
Name (Name of utility, IPP, or government entity submitting proposal)
Naknek Electric Association, Inc. (NEA)
Type of Entity:
501(c)(12) Not-For-Profit Electric Generation and Distribution Cooperative
Mailing Address
Naknek Electric Association, Inc.
PO Box 118
Naknek, Alaska 99633
Physical Address
#1 School Road
Naknek, Alaska 99633
Telephone
907 246 4261
Fax
907 246 261
Email
dvukich@nea.coop
1.1 APPLICANT POINT OF CONTACT / GRANTS MANAGER
Name
Donna Vukich
Title
General Manager
Mailing Address
Naknek Electric Association, Inc.
PO Box 118
Naknek, Alaska 99633
Telephone
907 246 4261
Fax
907 246 6242
Email
dvukich@nea.coop
1.2 APPLICANT MINIMUM REQUIREMENTS
Please check as appropriate. If you do not to meet the minimum applicant requirements, your
application will be rejected.
1.2.1 As an Applicant, we are: (put an X in the appropriate box)
X An electric utility holding a certificate of public convenience and necessity under AS
42.05, or
An independent power producer in accordance with 3 AAC 107.695 (a) (1), or
A local government, or
A governmental entity (which includes tribal councils and housing authorities);
Yes
1.2.2. Attached to this application is formal approval and endorsement for its project
by its board of directors, executive management, or other governing authority.
If the applicant is a collaborative grouping, a formal approval from each
participant’s governing authority is necessary. (Indicate Yes or No in the box )
Yes
1.2.3. As an applicant, we have administrative and financial management systems
and follow procurement standards that comply with the standards set forth in
the grant agreement.
Yes
1.2.4. If awarded the grant, we can comply with all terms and conditions of the
attached grant form. (Any exceptions should be clearly noted and submitted
with the application.)
Yes
1.2.5 We intend to own and operate any project that may be constructed with grant
funds for the benefit of the general public.
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Grant Application Round IV
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SECTION 2 – PROJECT SUMMARY
This is intended to be no more than a 1 -2 page overview of your project.
2.1 Project Title – (Provide a 4 to 5 word title for your project)
Southwest Alaska Regional Geothermal Energy Project
2.2 Project Location –
Include the physical location of your project and name(s) of the community or communities that will b enefit
from your project .
All geothermal exploration and development will take place on a parcel owned by Naknek Electric
Association, Inc. The allotment resides within the Bristol Bay Borough in T17S, R44W, Section
131/2SW1/4 and Section 23, NE1/4NW1/4S M. Project related administration, and billing and accounting
will be performed at NEA's headquarters building in Naknek, Alaska. (Figure 1)
When all phases of the project are complete a distribution intertie will link 25 + villages in the Bristol Bay
Region of Southwest Alaska to geothermal energy generation at Pike’s Ridge. (Figure 2)
Geothermal Project Location Map
Figure 1
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Grant Application Round IV
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Figure 1
2.3 PROJECT TYPE
Put X in boxes as appropriate
2.3.1 Renewable Resource Type
Wind Biomass or Biofuels
Hydro, including run of river x Transmission of Renewable Energy
X Geothermal, including Heat Pumps Small Natural Gas
Heat Recovery from existing sources Hydrokinetic
Solar Storage of Renewable
Other (Describe)
2.3.2 Proposed Grant Funded Phase(s) for this Request (Check all that apply)
Reconnaissance Design and Permitting
Feasibility X Construction and Commissioning
Conceptual Design
2.4 PROJECT DESCRIPTION
Provide a brief one paragraph description of your proposed project.
Phase IV: Construction, Testing, and Assessment – Naknek -G #3. The Southwest Alaska Regional
Geothermal Energy Project has drilled Naknek -G#1 to depth and is ready to begin assessing its
geothermal fluid production characteristics. Drilling Naknek -G #2 is scheduled to begin in October 2010
and completed before the end of the year. After Naknek -G #2 has been drilled and the capacity for
geothermal fluid production for electric and h eat energy generation is thoroughly understood NEA will
contract for design, permitting, and constructi on of a modular generation facility . In addition to traditional
Figure 2
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Grant Application Round IV
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geologic and geophysical logging in the Naknek wells includes a logical and well -considered set of
activities undertaken during and after drilling that will serve to characterize the reservoir and
communication between the first two wells in the production field. Naknek-G #3 drilling tasks are
scheduled to begin September 2011, and the costs of achieving its drilling (construction), testing and
evaluation objectives are the substance of NEA’s request for REFGP Round IV funding. Preliminary
results support temperatures and flow adequate for the production of electricity. Well field construct ion
including production and injection wells will continue until required MW capacity is met.
2.5 PROJECT BENEFIT
Briefly discuss the financial and public benefits that will result from this project, (such as reduced fuel
costs, lower energy costs, et c.)
Overall Project Benefit:
NEA is a member-owned cooperative that provides rate based electricity to the communities of the Bristol
Bay Borough, including Naknek, South Naknek, and King Salmon . These communities are a business
and industrial hub for A laska’s Bristol Bay region. This project will decrease and stabilize energy costs,
benefiting the public sector (e.g., schools, municipalities, and utilities) and the private sector (e.g., industry
and private energy users). By decreasing and stabilizing energy costs, the project would foster economic
development in the region, particularly in the main industries of fishing and resource extraction. Tourism
and service section employment opportunities will likely grow because the funds that currently are
dedicated to heat and electricity generation would be available for development of other projects.
The project will increase economies of scale and has the potential to replace not displace the use of No.1
and No.2 diesel fuel, approximately 5.5 million gallons current requirement of the ten target communities.
Phased energy infrastructure has the potential to save target communities $23.2 million annually and
dramatically reduce costly and potentially hazardous transportation of fossil fuels along habitat sensitive
waterways in Bristol Bay, home of the world’s largest wild salmon runs.
NEA is working with the Alaska Department of Labor and Workforce Development and Southwest Alaska
Vocational Education Center in King Salmon, Alaska to deliver proposed ri g technician apprenticeship
training. FY2010 and FY2011 training grant negotiations will provide approximately $250,000 for related
technical instruction and on-the-job workforce training with geothermal drilling emphasis that is portable to
the oil and gas industry.
The project is creating thirty five (35) locally-based, full-time jobs to drill, stimulate and prepare three
geothermal wells for production and another 40 temporary positions filled through subcontractors .
State and federal governments are looking forward to a changed economy based on the concept of “New
Energy”. American Recovery and Reinvestment funding is being flanked by additional public investment
in infrastructure upgrade and construction. Beyond the immediate benefits of lower a nd stably priced
geothermal energy development in the region t here will be sustained job creation and retention,
apprenticeship training opportunities, and career path awareness in the renewable energy sector.
Additional value lies in local project demons tration, technology transfer and applicability to other potential
geothermal sites in the region. NEA’s greenfield project envisions a long-term stable source of electricity
and is working with state and federal agencies to demonstrate geothermal technolo gies using indigenous
resources, natural and human, in a region poised for major resource development.
2.6 PROJECT BUDGET OVERVIEW
Briefly discuss the amount of funds needed, the anticipated sources of funds, and the nature and source
of other contributions to the project.
Approximately $10 million is required to drill the third geothermal well, Naknek -G #3. The US Department
of Energy, is contributing $5 million cost -share toward the drilling, testing, and assessment of Naknek -G
#3 through a competitive award for EGS demonstration. We are asking the state to help advance this
project with a $4 million match.
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Project Resources Cost-Share
US Department of Energy / NEA 5,624,000
Renewable Energy Fund Grant Program Funding Request 4,000,000
TOTAL 9,624,000
Project Costs Costs
Phase IV: Well Construction, Testing and Assessment of Naknek -G #3 9,624,000
TOTAL 9,624,000
Project Costs & Benefits
(Summary of total project costs including work to date and future cost estimate s to get to a fully
operational project)
2.7.4 Total Project Cost (Summary from Cost Worksheet
including estimates through construction)
$160,830,500
2.7.5 Estimated Direct Financial Benefit (Savings) $23,234,046 Annually
2.7.6 Other Public Benefit (If you can calculate the benefit in
terms of dollars please provide that number here and
explain how you calculated that number in your application
(Section 5.)
$
SECTION 3 – PROJECT MANAGEMENT PLAN
Describe who will be responsible for managing the project and provide a plan for successfully
completing the project within the scope, schedule and budget proposed in the application .
3.1 Project Manager
Tell us who will be managing the project for the Grantee and include contact information, a resume
and references for the manager(s). If the applicant does not have a project manager indicate how
you intend to solicit project management support. If the applicant expects project management
assistance from AEA or another government entity, state that in this section.
NEA’s team has experience in Alaska project management, permitting, geological exploration, and
geothermal development with significant EGS experience. Both the drilling program and the team
demonstrat e a clear understanding of the hurdles t o geothermal development and how to overcome them in
an expedient way.
Donna Vukich, General Manager of Naknek Electric Association, will manage this project with assistance
from geothermal project personnel of Alaska Earth Sciences in Anchorage , and a Company Man,
experienced in geothermal exploration, who will oversee drilling operations on site.
NEA’s General Manager Donna Vukich will also serve as the principal investigator. Ms. Vukich has twenty
(20) years of experience managing a small utility that each year experiences a highly variable load related to
Bristol Bay’s wild salmon industry . During the peak season the population and energy demand in the area
increases by a factor of 5.
Technical Partners
•Alaska Earth Sciences
•Baker Hughes
•Castle Mountain Group
•GeothermEx
Management recognizes the importance of competent project management and has worked with a team of
technical consultants to procure engineering, construction, and equipment services and contracts. They are
working with managem ent to insure that permitting and construction work meet regulatory requirements in
order to keep the project moving forward without costly delays.
Renewable Energy Fund
Grant Application Round IV
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3.2 Project Schedule
Include a schedule for the proposed work that will be funded by this grant. (You may include a
chart or table attachment with a summary of dates below.)
February 15 – March 31, 2011 - Design of well G-3. In accordance with the target selection and analyses
of data from G-1 and G-2, a well design will be prepared.
March 1 – April 30, 2011 - Permitting and procurement for well G -3. The drilling program and associated
documents will be submitted for permitting by AOGCC. The required services will be contracted, and all
needed equipment and supplies will be mobilized to the site.
May 1 – 31, 2011 - Prepare Drilling Pad for Drilling Well G -3. The existing well pad, measuring
approximately 300 ft x 300 ft will be extended and modified to accommodate the new well G -3, which will be
located at a distance of about 60 feet away from G -2. G-3 will be directionally drilled to the specified target.
Skid Drilling Equipment to Well G-3 Location. The drilling rig and supporting equipment will be moved to
the location of well G-3.
June 1 – September 15, 2011 - Drill Well G-3. This well is designed to reach drilling depths on the order of
8,000 – 14,000 ft, which will be conducted in several stages of different diameters so that the maximum
open-hole section will not exceed 5,000 feet at any given interval. This design will allow the well to be dril led
faster and safely in the presence of severe losses of circulation. The upper portion of the hole will be
completed with casing diameters that will minimize pressure losses due to friction during fluid production.
September 5 – 30, 2011 - Collect and Analyze G-3 Logging Data – Evaluate the suite of logs collected in
G-3 including petrologic/mineralogic analyses of cuttings in order to construct a velocity model, estimate
rock strength, and determine the magnitude of the vertical stress. If required, run additional geophysical logs
to determine fracture characterization, understand formation properties, and deduce the orientation of the
stress field.
September 15 – October 31, 2011 – Flow Testing and Evaluation of Well G-3. Once completed, well G-
3 will undergo a series of production tests, including temperature and pressure logs to evaluate its potential
for commercial production of geothermal fluids.
November 1 -- 10 - Install Permanent Wellhead Equipment on Well G -3. Permanent valve equipment
(Christmas tree) will be installed to properly and successfully complete G -3.
3.3 Project Milestones
Define key tasks and decision points in your project and a schedule for achieving them. The
Milestones must also be included on your budget worksheet to demonstrate how you propose to
manage the project cash flow . (See Section 2 of the RFA or the Budget Form.)
Well Design April 1, 2011
Permitting and Procurement May 1, 2011
Prepare Drill Pad and Move Rig to G-3 Location June 1, 2011
Drill Geothermal Well G-3 September 15, 2011
Collect & Analyze Logging Data October 1, 2011
Flow Testing and Evaluation of Well G -3 November 1, 2011
Install Permanent Wellhead Equipment November 15, 2011
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Grant Application Round IV
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3.4 Project Resources
Describe the personnel, contractors, equipment, and services you will use to accomplish the
project. Include any partnerships or commitments with other entities you have or anticipate will be
needed to complete your project. Describe any existing contracts and the selection process you
may use for major equipment purchases or contracts. Include brief resumes and references for
known, key personnel, contractors, and suppliers as an attachment to your application.
The well will be designed by Eduardo Granados of GeothermEx, a leading geothermal expl oration and
development firm based in Richmond, California. Mr. Granados has been involved in the development of
Naknek Wells G-1 and G-2.
Permitting will be handled by Castle Mountain Group, which has extensive experience in permitting drilling
operations in Alaska. Procurement will be accomplished by NEA Geothermal LLC personnel.
Preparation of the drill pad for G-3 and moving of the rig to the new location will be performed by NEA
Geothermal LLC in collaboration with Southwest Alaska Contractors, whi ch is based in Naknek, and Weaver
Brothers of Kenai.
The drilling of G-3 will be done by NEA Geothermal LLC with support from the following contractors who
have been selected by competitive bids for the drilling of G -1 and G-2, and who have proven to be reliable in
delivering quality and high-value services:
Alaska Earth Sciences - Geological Services
Baker Hughes/Inteq - Directional Drilling Services
Baker Hughes - Oilfield Tools for Fishing Services
Baker Atlas - Electronic Logging Services
Baker Hughes - Drilling Fluids
Baker Christensen - Drill Bits.
BJ Services - Cementing Services
Centrifuge Services - Solids Control
Chancellor Oil Tool - Liner Hanging and Cementing Assemblies.
DHI Services - Mud Logging.
NEA Geothermal LLC - Comprehensive Drilling Contracting Services.
Weatherford - Rental of Drilling Equipment and Blowout Prevention Equipment.
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3.6 Project Risk
Discuss potential problems and how you would address them.
Funding Support: Nationally, the negative spin on “Pork Barrel” funding may cripple successful investment
in many projects that are in the public’s best interest. Congressionally designated projects are sighted by
those against earmarking as a fraudulent use of federal funds. The Southwest Alaska Regional Geothermal
Energy Project is a congressionally designated proj ect slated to receive $3 million specifically for drilling a
deep confirmation well. Funding for the project may be at risk because of the popular attitude toward “pork”.
The upside, renewable energy projects have considerable public support and the mand ates for deep drilling
technology research and development are clearly evident in DOE funding.
Estimated Cost Overruns: Cost overruns are pandemic in grant funded projects. Project management
experience and commitment to cost control are evident in N EA’s ability to provide quality electric service at
the lowest price consistent with sound management. NEA’s financial management is note worthy in its
commitment to reduce spending and aggressively seek additional load which recently minimized the effect s
of a fisheries related economic downturn in the region. Project management has decades of experience
with RUS borrower compliance requirements , and government standard accounting and reporting practices
and consistently receives unqualified opinions from auditors. The use of standard accounting procedures
and record keeping and reporting, diligent project monitoring and informed decision making will help prevent
unnecessary cost overruns.
Permitting and Environmental Regulations: NEA has preliminary site control through ownership of the
project site and approved access easements. A deep drilling permit is being sought through the Department
of Natural Resources Oil and Gas Division. Management recognizes the importance of permitting and
regulatory c ompliance in keeping the project moving forward and mitigating any circumstances that result in
costly delays. Development of a road map and schedule for site development, well and generation facility
construction, and interconnection infrastructure environmental and ROW permitting, and all other regulatory
compliance requirements will be contractual and overseen by project management and corporate counsel.
Capital Equipment, Drilling Management and Material Acquisition: Drilling equipment availability , and
equipment leasing could pose significant risks due to increased demand on capital equipment , materials
(especially pipe), and labor because of oil, gas and geothermal exploration projects. Cooperative
agreements between the state and the oil and gas industry could significantly decrease the risk.
Project Delays in Material and Capital Equipment Delivery: Individuals and organization doing business in
remote Alaska anticipate delays due to weather and transportation. Project management has experi ence
and established working relationships with utility industry vendors, barge service operators and local
transportation companies, and is proactively seeking cost saving freight rates for equipment and materials.
Interconnection ROW Permitting and Construction: Unanticipated delays in project completion caused by
permitting and access could postpone the delivery of affordable energy and magnify the problem in the
region poses great risk. Hiring a consultant to handle permitting processes is worth th e investment.
Developing a road map, schedule and plan that maintains project momentum is essential. Cooperation and
open communication between local, state, federal, private and native land owners, permitting agencies and
project management regarding ROW’s and transmission corridors was established in Phase III and will
continue through all remaining phases of the project.
3.5 Project Communications
Discuss how you plan to monitor the project and keep the Authority informed of the status.
Ms. Vukich’s management experience at NEA, regional involvement and electric industry decision making at
state and federal levels is evidence of oversight and communication skills necessary to bring the project
online and within budget. Naknek Electric Association, Inc. and NEA Geotherm al LLC organizational charts
are included in Section 9.
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Reservoir Characteristics: Geothermal energy development through the resource confirmation phase is high
risk. Based on res ource characteristics generation design can mitigate some of the risks associated with
less than optimal resource temperatures, chemical composition, permeability and flow rates, but not all. The
development of new technology is in high gear to utilize th e natural heat of the earth in efficient and cost
effective ways. Enhanced geothermal system technology development is one example. The only way to
know the characteristics of the reservoir is to confirm and qualify the resource with a deep drill program that
applies appropriate engineering and technology for cost effective development.
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Grant Application Round IV
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SECTION 4 – PROJECT DESCRIPTION AND TASKS
Tell us what the project is and how you will meet the requirements outlined in Section 2 of
the RFA.
The level of information will vary according to phase(s) of the project you propose to
undertake with grant funds.
If you are applying for grant funding for more than one phase of a project provide a
plan and grant budget form for completion of each phase.
If some work has already been completed on your project and you are requesting funding for
an advanced phase, submit information sufficient to demonstrate that the preceding phases
are satisfied and funding for an advanced phase is warranted.
4.1 Proposed Energy Resource
Describe the potential extent/amount of the energy resource that is available.
Discuss the pros and cons of your proposed energy resource vs. other alternatives that may be
available for the market to be served by your project.
Over the past ten years NEA board and management has researched alternative energy sources with
potential for development in the region. Reliable and firm electric generation was the foremost criteria.
Wind energy was considered but preliminary studies determined that the greatest wi nd resource was
available during the winter months when demand was at its lowest. Wind energy is not firm and requires
100% back-up to meet load requirements. Processors would take on the risks of self generating if NEA
failed to provide reliable electric service during t he peak of the Bristol Bay wild salmon harvest when they
are going full speed and demand is high.
Currently, the extent of geothermal energy potential on Pike’s Ridge is not fully understood. Only after the
construction, testing and assessment of Naknek -G #2 and Naknek -G #3 will project management and
consultants have enough data to design a generation facility.
The region has various alternative energy options with some developers receiving public funding for
project s. Successful projects resulting in renewable energy generation will have the opti on of putting
excess generation on the distribution intertie system for utilization somewhere else along the intertie.
NEA’s proposed project, including the intertie is a win -win for renewable energy especially with federal
mandates for a renewable energy economy and infrastructure maintenance and construction, and a
budget to make a difference.
One of the most promising aspects of renewable energy development is DOE investment in geot hermal
technologies, especially EGS, where public funds are being expended to define and commercialize low
cost exploitation techniques and equipment that will enhance and expedite the utilization of hot rock
reservoirs for clean energy power generation that will help displace coal. NEA’s project has been awarded
a $12.3 million competitive award to implement an EGS demonstration project on Pike’s Ridge.
4.2 Existing Energy System
4.2.1 Basic configuration of Existing Energy System
Briefly discuss the basic configuration of the existing energy system. Include information about
the number, size, age, efficiency, and type of generation.
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Project management looked at the ten (10) communities that will be linked with first intertie build-out .
Thos e ten communities provide a snapshot of the region where greater than 95% of all electric generation
and home heating requirement s are met with diesel fuels . Diesel generators in the region range in age
from new to old. NEA’s White Superior engines are 3 4 years old and are among the oldest on-line.
Snapshot:
Electric Rates: .46/kWh - .89/kWh
Electric generation fuel costs: $3.61 - $5.09/gal
Home heating fuel costs: $4.61 - $6.09 /gal
Efficiency of diesel stand-alone generation ranges from 10.65 kWh/gal - 14.58 kWh/gal
Combined annual fuel purchases for electric generation: 3,109,401 gallons
Combined annual fuel purchases for home heating: 2,390,584 gallons
Total: 5,400,985 gallons fossil fuel delivered
Annual fuel c os ts for electric generation: $11,472,373
Annual fuel c ost for home heating : $11,761,673
4.2.2 Existing Energy Resources Used
Briefly discuss your understanding of the existing energy resources. Include a brief discussion of
any impact the project may have on existing energy infrastructure and resources.
Regional baseload electric generation, heating and transportation energy requirements are fueled with
diesel and gasoline. Grant assisted new energy infrastructure development will help make the near-term
transition to a renewable energy future possible. Yes, the region is highly invested in diesel generation ,
diesel fired home heating systems, and a petroleum fueled transportation system, but many small stand -
alone diesel generation facilities are unable to bear the costs of fuel and are perceived as a liability to the
state. Concerns in the region about energy costs, the environment , and the political attitude toward
climate change are making renewal energy development necessary and desirable. The region has wind,
tidal, hydro and geothermal energy potential that is virtually untapped because of intense upfront capital
costs . Financial assistance for more stand-alone energy infrastructure will not solve the problem .
NEA’s Southwest Alaska Regional Geothermal Energy Project will not only develop the geothermal
resource at Pike’s Ridge but will push forward a distribution intertie that will link the region’s renewable
energy projects and increase economy of scale that will ultimately reduce energy costs . The Renewable
Energy Grant Fund Program is a step in the right direction and must be followed by sustained commitment
to the idea of affordable, indigenous renewable energy for off-the-grid communities.
4.2.3 Existing Energy Market
Discus s existing energy use and its market. Discuss impacts your project may have on energy
customers.
Energy c osts in Southwest Alaska are high by any standard. Southwest Alaska communities are in
trouble. Volatile fossil fuel prices are destabilizing rura l populations and as a result, village life and culture
are in decline. Schools are closing, businesses are failing and residents are moving to larger hubs and
cities increasing demand on resources already struggling to keep up with population increases.
Lowering and stabilizing the cost of energy will radically improve local economies, enhance resource
development, expand employment opportunities and stem outmigration. Regionally, significant returns are
anticipated from quality enhancement and local va lue-added manufacturing in the seafood industry.
Project management knows the value of the watershed in Bristol Bay where record harvests and
increased ex -vessel prices in Bristol Bay’s sustainable wild salmon fishery have mitigated high energy
costs.
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4.3 Proposed System
Include information necessary to describe the system you are intending to develop and address
potential system design, land ownership, permits, and environmental issues.
4.3.1 System Design
Provide the following information for the proposed renewable energy syste m:
A description of renewable energy technology specific to project location
Optimum installed capacity
Anticipated capacity factor
Anticipated annual generation
Anticipated barriers
Basic integration concept
Delivery methods
Overall Proposed System: Overall, the Southwest Alaska Regional Geothermal Energy Project is a multi -
stage development project. Well construction, testing and assessment through Naknek -G #3 will move the
project into generation facility design and construction of an electric generation and direct use system.
The project will be the first utility -grade geothermal development in Alaska.
NEA owns the land, has documented access to the site and has full site control with exploration drilling
and site development permits , and an Environmental Assessment (EA ) which resulted in a Finding of No
Significant Impact. The surface acreage surrounding the NEA parcel is owned by Paug -Vik Inc., Ltd., a
village corporation with subsurface rights retained by Bristol Bay Native Corporation. NE A has a 100-ft
easement to access the site with a road and utility corridor. Bristol Bay Borough and the State of Alaska
have no jurisdiction over the land or the geothermal resource. Most of the land in the Bristol Bay Borough
is Native-owned.
Overall project design will include multiple stages of development corresponding to total geothermal
potential and the potential for expansion. The project, when all phases are complete will include the
following components:
Overall Project Components:
Geothermal brine production wells and gathering field and injection wells
25 MW binary generation facility scaling up to 50 MW capacity over time with growth
50,000,000 kWh generation annually with growth to 75,000,000 kWh in 2 years
Phased construction of 34.5 KV distribution intertie linking stand-alone G & D systems
Initial Load: 18 MW with full potential to use 25 MW within two years and 50 MW with growth
50% capacity factor with geothermal generation
100% capacity factor with hydrogen production
Hydrogen production and storage facility
Overall Project Benefits:
Dramatic drop in the cost of power production, estimated to decrease 70%
Cleaner energy with negligible emissions for reduced environmental liability and costs
E limination of 3.1 million gallons of diesel fuel for electric generation = $11,472,373
With cost -effective energy , on-shore processors have indicated that local secondary manufacturing
processes are feasible; growth in that direction is visible despite high energy costs. Stable and affordable
energy costs will allow affordable icing infrastructure and cold storage options for large and small seafood
processors for improved quality and price.
Although the project’s focus is to bring geothermal energy online in the region, natural resources, geology,
proximity to international shipping l anes and the region’s emerging role in the international rush for control
and exploitation of Arctic resources make Southwest Alaska an attractive region for geothermal
development and infrastructure funding and financing.
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 14 of 21 7/21/2010
Potential elimination of an additional 2.4 million gallons of diesel for home heating = $11,761,673
Long-term firm and reliable energy base for economic development for rural sustainability
Barriers:
High upfront costs and overall high costs of infrastructure development in remote area
Project financing
Acquisition of private, state and federal ROW for distribution intertie
Permitting and ROW access delays
The purpose of this proposal is to secure cost-share with REFGP funds to construct, test and
assess Naknek-G #3 for geothermal fluid production and electric and direct use capacity.
Phase IV: Construction, Testing and Assessment of N aknek -G #3
NEA plans to drill Naknek -G #3 NEA Rig 7. A pile driver will be used to install the 76-cm (30-inch)
conductor pipe to an approximate depth of 30.5 m (100 ft). Blow-out prevention equipment will be in use
on the well at all times, and all casing would be cemented back to the surface, isolating fresh -water
aquifers from contact with the activities and fluids in the wellbore.
Naknek -G #3 will be a deviated well reaching a maximum total vertical depth of approximately 3,658 m
(12,000 ft). The surface collar will be located approximately 18.3 m (60 ft) from both Naknek-G #1 and
Naknek -G #2 well collars and will deviate to an angle and depth determined by the results and analysis of
Naknek -G #2.
The well will be cased to a depth of 2,438 m (8,000 ft) and cemented to the surface. Hung casing strings
will be cemented throughout the liner lap. W ell design will completely isolate geothermal and drilling fluids
from contaminating fresh-water aquifers.
The well installation process will be guided by a steering system to drill the borehole within permitted
property boundaries. The well will be drilled to a depth sufficient to allow for evaluation of reservoir
conditions.
The present casing design calls for the well to be drilled in several stages of different diameters, so that
the open-hole interval will not ex ceed 1,500 m (5,000 ft) at any stage of drilling. This design will allow the
well to be drilled more quickly and more safely in the presence of any severe losses of circulation or
unstable formations; the upper portion of the hole will still be completed with a large enough casing
diameter to minimize pressure losses due to friction during production. The larger diameter completion in
the upper portion of the well will also allow a large, shaft -driven pump to be installed, in the event that it is
desirable to produce the well by pumping.
Naknek -G #3 - Well Completion
• The completed well will include installation of the following:
• 76-cm (30-inch) conductor pipe driven to 30 m (100 ft)
• 51-cm (20-inch) surface casing at 122–213 m (400–700 ft)
• 33.7-cm (13 3/8-inch) casing cemented to surface inside a 44.5-cm (17 ½-inch) hole at 900 m
(3,000 ft)
• 24.5-cm (9 5/8-inch) casing hung inside the 33.7-cm (13 3/8-inch) casing with a 900-m (300-ft)
liner tap and cemented inside a 31.1-cm (12 ¼-inch) hole from 800–2,400 m (2,700–8,000 ft)
• 19.5-cm (7 5/8-inch) combination of slotted and blank liner, hung inside the 24.5 -cm (9 5/8-inch)
• casing with a 30-m (100-ft) lap to total depth
• 21.6-cm (8 ½-inch) open hole drilled to 3,700 m (12,000 ft)
Naknek -G #3 - W ell Head Design
• 30.5-cm (12-inch) master valve
• 34.6-cm by 30.5-cm (13 5/8-inch by 12-inch) expansion spool
• 33.7-cm by 34.6-cm (13 3/8-inch by 13 5/8-inch) casing head
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 15 of 21 7/21/2010
Naknek -G #3 - Well Testing and Logging
After well completion, Naknek -G #3 will be tested to evaluate geothermal reservoir characteristics.
Typically, the geothermal fluids are pumped from the well through on -site test equipment, including
standard flow metering, recording, and sampling apparatus, to determine flow characteristics. The
pressure and temperat ure at various depths in the wellbore would also be analyzed to determine whether
the geothermal resource is sufficient for electricity generation. Additionally, core samples and wellbore
logs will be analyzed to characterize the reservoir by mapping open/flowing zones and measuring the
permeability within these zones.
4.3.2 Land Ownership
Identify potential land ownership issues, including whether site owners have agreed to the
project or how you intend to approach land ownership and access issues.
NEA owns the land on Pike’s Ridge and is granted access through ownership. A copy of the property
deed and is included in Section 9.
4.3.3 Permits
Provide the following information as it may relate to permitting and how you intend to address
outstanding permit issues.
List of applicable permits
Anticipated permitting timeline
Identify and discussion of potential barriers
Project Coastal Consistency Determination, Alaska Department of Natural Resources, Division of
Coastal and Ocean Management - Documents submitted to DCOM on 22 May 09, commencing
60 day review period clock
Permit to Drill a Geothermal Exploration Well, Alaska Department of Natural Resources
Inert Waste Monofill Permit, Alaska Department of Environmental Conservation
Temporary Water Use Permit, Alaska Department of Natural Resources, Division of Water
Resources
Temporary Storage Plan Approval, Alaska Department of Environmental Conservation
EPA Class I Non-Hazardous Industrial Disposal Well UIC Permit, EPA Region 10
Individual State Disposal Permit (concurrent with EPA Class I Permit), Alaska Department of
Environmental Conservation
Notice of Intent to Operate under Construction General Permit 2008, EPA Region 10
4.3.4 Environmental
Address whether the following environmental and land use issues apply, and if so how they will
be addressed:
Threatened or Endangered species
Habitat issues
Wetlands and other protected areas
Archaeological and historical resources
Land development constraints
Telecommunications interference
Aviation considerations
Visual, aesthetics impacts
Identify and discuss other potential barriers
Please refer to the copies of the Environment Assessment (EA) and Finding of No Significant Impact
(FONSI) in Section 9.
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 16 of 21 7/21/2010
4.4 Proposed New System Costs and Projected Revenues
(Total Estimated Costs and Projected Revenues)
The level of cost information provided will vary according to the phase of funding requested and
any previous work the applicant may have done on the project. Applicants must reference the
source of their cost data. For example: Applicants Records or Analysis, Industry Standards,
Consultant or Manufacturer’s estimates.
4.4.1 Project Development Cost
Provide detailed project cost information based on your current knowledge and understanding of
the project. Cost information should include the following:
Total anticipated project cost, and cost for this phase
Requested grant funding
Applicant matching funds – loans, capital contributions, in-kind
Identification of other funding sources
Projected c apital cost of proposed renewable energy system
Projected development cost of proposed renewable energy system
Southwest Alaska Regional Geothermal Energy Project – Phased Development
Project Resources Cost Share
Enhanced Geothermal Systems Demonstration
United States Department of Energy - Golden Field Office 12,376,568
Congressionally Directed Project - 2009 Water and Energy Bill
United States Department of Energy - Golden Field Office 2,854,500
Congressionally Directed Projec t - 2010 Water and Energy Bill
United States Department of Energy - Golden Field Office 2,500,000
Renewable Energy Fund Grant Program IV - Request 4,000,000
NEA Geothermal LLC – Rig #7 and Labor In-Kind 4,100,000
Naknek Electric Association, Inc. 15,000,000
TOTAL $40,831,068
Project Costs Costs
Phase III: Final Design and Permitting Construction
Resource Assessment - Permitting - EGS Testing
Phase IV: Construction, Commissioning, Operation, Reporting
40,831,068
Generation Facility - District Heating System 60,000,000
Phase V: Distribution Intertie - Phase I – 236 miles 60,000,000
TOTAL $160,830,500
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 17 of 21 7/21/2010
4.4.2 Project Operating and Maintenance Costs
Include anticipated O&M costs for new facilities constructed and how these would be funded by
the applicant.
(Note: Operational costs are not eligible for grant funds however grantees are required to meet
ongoing reporting requirements for the purpose of reporting impacts of projects on the
communities they serve.)
NEA is proposing REFGP project funding for Phase IV: Construction, Testing and Assessment of
Naknek-G #3, one of the planned objectives in constructing a multi -well production field and
gathering system for the Southwest Alaska Regional Geothermal Energy Project .
The viability of geothermal resources in the proposed project area will ultimately determine the project’s
operational plan; the results from drilling the first exploratory well, Naknek -G #1, will narrow the
engineering scope and may determine what type of geothermal system exists. It is not known whether a
conventional geothermal system exists or whether the geothermal resource requires enhancement to
develop a geothermal system or maximize resource potential. Naknek -G #1 testing results will indicate
t he reservoir type and provide initial hydrologic data. These test findings will assist in planning the
production and operational phase of this project . O & M costs are considered the same as for a diesel
system.
4.4.3 Power Purchase/Sale
The power purchase/sale information should include the following:
Identification of potential power buyer(s)/customer(s)
Potential power purchase/sales price - at a minimum indicate a price range
Proposed rate of return from grant-funded project
The project will s upply wholesale electricity for distribution on existing systems for the cost -of-power plus
the cost of distribution. All wholesale power sales agreements will follow this model. The goal is to lower
the cost of power to consumers, utilizing existing dis tribution systems owned by stand-alone cooperatives
in the region.
4.4.4 Project Cost Worksheet
Complete the cost worksheet form which provides summary information that will be considered
in evaluating the project.
Please refer to the Project Cos t/Benefit Worksheet included in Section 9.
SECTION 5– PROJECT BENEFIT
Explain the economic and public benefits of your project. Include direct cost savings,
and how the people of Alaska will benefit from the project.
The benefits information should include the following:
Potential annual fuel displacement (gal and $) over the lifetime of the evaluated
renewable energy project
Anticipated annual revenue (based on i.e. a Proposed Power Purchase Agreement price,
RCA tariff, or cost based rate)
Potential additional annual incentives (i.e. tax credits)
Potential additional annual revenue streams (i.e. green tag sales or other renewable
energy subsidies or programs that might be available)
Discuss the non-economic public benefits to Alaskans over the lifetime of the project
Should drilling of geothermal wells G2 and G3 result in successful energy prospects, the long -term
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 18 of 21 7/21/2010
socioeconomic effect would result in power delivery to Bristol Bay Borough communities at a greatly
reduced rate. The proposed project coul d result in a reduced cost for residential consumers of an
estimated $35.30 to $58.85 per month. Commercial, state, and federal consumers, as well as public
schools, can expect to see a reduction in monthly costs of between $111.40 and $137.90 per 500 k Wh
used.
Long-term effects are expected to be positive. The operation of the Southwest Alaska Regional
Geothermal Energy Project would result in the closure of the existing NEA diesel -fired generation facility
and reduction of 1.5 million gallons of diesel fuel currently used to generate power for the NEA service
area. This would result in the reduction of 33.3 million pounds of GHGs, primarily carbon dioxide, not
entering the atmosphere.
Local Bristol Bay Borough residents, of whom 18 are Native Alaskans , were employed during the peak
employment period in November 2009. Local vendors, including hotel, food service, and hardware
suppliers, have benefited from spending to support past and ongoing project activities. Construction
activities are likely to employ a significant number of local residents, including Native Alaskans. Upon
completion of the project, the availability of lower-cost electricity to the region will benefit residents by
increasing their disposable income, thereby improving their quality of life, and would benefit local
businesses by freeing up more capital.
SECTION 6– SUSTAINABILITY
Discuss your plan for operating the completed project so that it will be sustainable.
Include at a minimum:
Proposed business structure(s) and concepts t hat may be considered.
How you propose to finance the maintenance and operations for the life of the project
Identification of operational issues that could arise.
A description of operational costs including on-going support for any back-up or existing
systems that may be require to continue operation
Commitment to reporting the savings and benefits
The Southwest Alaska Regional Geothermal Project will be owned and operated by NEA. NEA is
incorporated as a not -for-profit 501 (C) (12) cooperative and employs the cooperative business model to
provide its members with reliable electric energy at the lowest possible cost consistent with sound business
practices. This business model returns excess margins to its members on a patronage bases. Net
margins above expenses belong to consumer members and may be allocated for distribution or retained as
working capital to expand, improve or maintain operations. Short -term gains are not the focus in a
cooperative business model but rather the creation of long -t erm value and sustainability for consumer
members. NEA is an efficiently run electric utility and has a proven record with RUS. In over 48 years of
operation debt service expenses have not posed difficulty. Since 1960 most capital improvements were
financed with member money. NEA will apply the cooperative business model and all audit, regulatory and
reporting for grants, financing and contractual agreements will be accomplished according to the
participating agency guidelines and NEA management standar ds. In the long-term, building locally
produced renewable energy electric generation and distribution infrastructure will bring security and
sustainability to the region. Energy Resource Economics is working with project management to develop a
business plan.
Southwest Alaska is poised both geographically and geologically for major economic productivity.
Transforming strategic natural resources like seafood, oil, gas and minerals, into globally viable market
commodities will provide economic benefit t o the region, state and the nation. Government renewable
energy systems investments supporting natural resource development is important for long -term rural
sustainability and independence. By whom and for whom these resources are developed is a question that
needs to be addressed by all participants. The development of low -cost renewable energy for seafood
processing and cold storage will bring sustainable economic benefits to the region. As a result of resource
availability, geography, potential strat egic oil, gas and mineral value-added manufacturing such as refining,
smelting, cold storage, and transportation and service sector growth local economies will stabilize and
diversify.
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 19 of 21 7/21/2010
SECTION 7 – READINESS & COMPLIANCE WITH OTHER GRANTS
Discuss what you have done to prepare for this award and how quickly you intend to proceed
with work once your grant is approved.
Tell us what you may have already accomplished on the project to date and identify other grants
that may have been previously awarded for this project and the degree you have been able to
meet the requirements of previous grants.
The NEA Southwest Alaska Regional Geothermal Energy Project is underway and is preparing to test and
assess Naknek -G #1 and installed the conductor for Naknek -G #2.
As part of this project, the following activities have been performed and infrastructure has been developed:
• NEPA requirements for an EA have been satisfied and a FONSI issued
• An EE for the proposed first buildout of the distribution intertie has been completed
• A 2.9-km (1.8-mi) long gravel road from Lake Camp Road to the project site has been constructed
• Two gravel pads, each approximately 91 m by 107 m (300 ft by 350 ft) have been constructed
• A laydown and storage area has been developed on the southern gravel pad
• Three containment areas for waste have been developed: an inert monofill, a drilling waste
monofill and a temporary waste storage area
• A small pond has been developed and permitted as a water source, with a permitted withdrawal
rate of up to 12 million gallons over a 2-year period
• A project office and work area supplied with electricity, heat, and other necessary facilities have
been established to support drilling efforts
SECTION 8– LOCAL SUPORT
Discuss what local support or possible opposition there may be regarding your project. Include
letters of support from the community that would benefit from this project .
Everyone in the region is affected by high cost energy; they are concerned about rural sustainability and
independence, and are searching for sustainable alternatives. They support their development but without
public fund support, they balk at the prospect of even higher energy costs to cover debt service . The
required high front end capital project costs are limiting renewable energy development. Long-term
financing and one-time grants for equipment purchases and construction projects is necessary.
Southwest Alaska Regional Geothermal Energy Project goals are supported by native organization
representing villages, and borough governing boards. Letters of Support are included in Section 9.
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 20 of 21 7/21/2010
SECTION 9 – GRANT BUDGET
Tell us how much you want in grant funds Include any investments to date and funding sources,
how much is being requested in grant funds, and additional investments you will make as an
applicant.
Include an estimate of budget costs by milestones using the form – GrantBudget3.doc
Phase IV: Construction, Testing, and Assessment – Naknek-G #3
Milestone or Task TOTALS
Well Design $24,000
Permitting and Procurement $50,000
Prepare Drill Pad and Move Rig to G -3 Location $250,000
Drill Geothermal Well G-3 $8,000,000
Collect & Analyze Logging Data $1,000,000
Flow Testing and Evaluation of Well G-3 $250,000
Install Permanent Wellhead Equipment $50,000
TOTAL $9,624,000
Renewable Energy Fund
Grant Application Round IV
AEA11-005 Grant Application Page 21 of 21 7/21/2010
SECTION 9 – ADDITIONAL DOCUMENTATION AND CERTIFICATION
SUBMIT THE FOLLOWING DOCUMENTS WITH YOUR APPLICATION:
A. Contact information, resumes of Applicant’s Project Manager, key staff, partners,
consultants, and suppliers per application form Section 3.1 and 3.4.
B. Cost Worksheet per application form Sectio n 4.4.4.
C. Grant Budget Form per application form Section 9.
D. Letters demonstrating local support per application form Section 8.
E. An electronic version of the entire application on CD per RFA Section 1.6 .
F. Authorized Signers Form.
G. Gove rning Body Resolution or other formal action taken by the applicant’s
governing body or management per RFA Section 1.4 that:
- Commits the organization to provide the matching resources for project at the
match amounts indicated in the application.
- Authorizes the individual who signs the application has the authority to
commit the organization to the obligations under the grant.
- Provides as point of contact to represent the applicant for purposes of this
application.
- Certifies the applicant is in compliance with applicable federal, state, and local,
laws including existing credit and federal tax obligations.
H. CERTIFICATION
The undersigned certifies that this application for a renewable energy grant is truthful
and correct, and that the applicant is in compliance with, and will continue to comply
with, all federal and state laws including existing credit and federal tax obligations.
Print Name Donna Vukich
Signature
Title NEA General Manager – Geothermal Project Manager
Date September 13, 2010