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HomeMy WebLinkAboutPilgrim Hot Springs Geothermal App November 5, 2009 Alaska Energy Authority 813 West Northern Lights Blvd. Anchorage, AK 99503 Re: Proposal to AEA Renewable Energy Fund, Round 3: “Pilgrim Hotsprings Geothermal Assessment and Confirmation” Dear Sir or Madam: The University of Alaska Fairbanks is pleased to submit the attached proposal, “Pilgrim Hotsprings Geothermal Assessment and Confirmation.” The Principal Investigator from UAF is Dr. Gwen Holdmann, Director for the Alaska Center for Energy and Power, INE. As ARO for the UAF Office of Sponsored Programs, I affirm that UAF, as a division of the Alaska State government, is eligible to apply for this funding. UAF is committed to supporting this project as outlined in the statement of work and budget, and that UAF has the necessary infrastructure to manage and support this project. This proposal formally commits $407,667 in matching funds, a portion of the funding included in a pending research award from the US Department of Energy (Tasks 1 and 2, “Topic Area 1: Validation of Innovative Exploration Techniques: Pilgrim Hot Springs Alaska”). UAF is in compliance with applicable federal, state, and local laws, including existing federal credit and federal tax obligations. If you need additional information, please feel free to call my office at (907) 474-1851. Sincerely, Andrew Parkerson-Gray, Director Office of Sponsored Programs University of Alaska Fairbanks Renewable Energy Fund Round 3 Grant Application AEA 10-015 Application Page 1 of 23 10/7/2009 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-III.html Grant Application Form GrantApp3.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 Costworksheet3 .doc Summary of Cost information that should be addressed by applicants in preparing their application. Grant Budget Form GrantBudget3.d oc 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 GrantBudgetInst ructions3.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 3 AEA10-015 Grant Application Page 2 of 23 10/7/2009 SECTION 1 – APPLICANT INFORMATION Name (Name of utility, IPP, or government entity submitting proposal) University of Alaska Fairbanks, Institute of Northern Engineering, Alaska Center for Energy and Power Type of Entity: Government Entity (University Research Center) Mailing Address P.O. Box 755910, Fairbanks, AK 99775-5910 Physical Address 525 Duckering Building, 309 Tanana Loop Telephone 907-474-5402 Fax 907-474-6686 Email gwen.holdmann@alaska.edu 1.1 APPLICANT POINT OF CONTACT Name Maggie Griscavage Title Director, UAF Office of Contract & Grant Administration Mailing Address University of Alaska Fairbanks PO Box 757880 109 Administrative Services Center Fairbanks AK 99775-7880 Telephone 907-474-7301 Fax 907-474-5506 Email fygrcon@uaf.edu 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) 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 X 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. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 3 of 23 10/7/2009 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) Pilgrim Hot Springs Geothermal Resource Assessment 2.2 Project Location – Include the physical location of your project and name(s) of the community or communities that will benefit from your project. Pilgrim Hot Springs, Alaska. Could impact Nome, Teller, Brevig Mission, and Kotzebue. 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 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) X Reconnaissance Design and Permitting X Feasibility Construction and Commissioning Conceptual Design 2.4 PROJECT DESCRIPTION The Pilgrim Hot Springs geothermal system was extensively studied in the late 1970s and early 1980s with a variety of geological, geochemical, and geophysical studies. Unfortunately the execution of these surveys and interpretation of the data from these earlier studies did not result in a thorough understanding of the area, and the most important conclusions for potential future development – such as locating the upflow zone of the geothermal fluid – were not conclusively determined. This proposal will fund a ground-based survey to complement a Department of Energy award under DE-FOA-0000109 in the amount of $4,616,879. A similar submission was recommended for funding under Round II, but fell below the cutoff for the $25 million in projects that was ultimately funded. The goal of the larger project (combining DOE and State funding) will be to pinpoint the upflow zone using advanced geophysical survey techniques, and to verify the location, depth to the resource, and temperature through a new drilling program. Both the existing wells and the new hole will be flow tested to obtain water samples for chemical analysis, and to conduct pressure interference surveys between the wells. These data, combined with an airborne thermal imaging survey to determine total heat flow to the surface should be adequate to determine total potential output of the system for sustainable long term Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 4 of 23 10/7/2009 development. The proposed project is a joint effort between the Alaska Center for Energy and Power (ACEP) and the Catholic Bishop of Northern Alaska, (owner of Pilgrim Hot Springs). The project will be led by ACEP. In addition to the project partners, letters of support have been provided by Mary’s Igloo Native Council (owners of property adjacent to Pilgrim) and Nome Joint Utilities, both of whom would be impacted in their organizations’ long-term decision making by conclusions reached through this study. Letters of support from both of these organizations is included as attachments. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 5 of 23 10/7/2009 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, etc.)  In 2007, the Alaska Energy Authority funded a preliminary feasibility analysis of Pilgrim Hot Springs as a potential energy option for Nome. The study was completed by Hattenburg Dilley & Linnell, LLC, a consulting firm specializing in civil, geotechnical, and transportation engineering and the report concluded geothermal power produced at Pilgrim Hot Springs could potentially be an economically viable alternative energy resource for the city. Currently, Nome requires 12 MW of power, which includes 7 MW for the Rock Creek Gold Mine (not currently in operation). While there are indications that the Pilgrim geothermal resource could supply 5 MW or more to Nome and the region (Teller, Brevig Mission, and even Kotzebue could potentially benefit from development of the Pilgrim Hot Springs site), the actual source of geothermal fluids was never identified in previous resource assessments. The proposed program laid out in this proposal is designed to better characterize the resource to encourage private development of the site. The owners of the Pilgrim resource plan to develop a RFP to develop the site if results from this program are encouraging. In addition, the Mary’s Igloo Native Corporation (MINC), a federally recognized Alaska Native Corporation, may be interested in relocating their community to their traditional land adjacent to the Pilgrim site if the resource is developed. The potential benefit/cost ratio of this project is very high despite the cost. This project will build on several prior assessments of the site, and if a significant resource is indentified the possible benefits to the entire region are substantial. In 2007, Nome Joint Utilities alone spent $2,566,000 in fuel. This number could double as the Rock Creek Gold Mine ramps up production. In addition, Teller and Brevig Mission spent $121,000 in fuel combined, and Kotzebue $2,000,000. If some or all of this fuel can be offset through the development of a geothermal power plant at Pilgrim, the benefits may warrant construction of the facility despite transmission distances. This project represents the first step toward this goal by quantifying how much potential energy is available for sustainable development at the site. In addition, funding for this project will permit the University of Alaska to accept the DOE funding for the project ‘Validation of Innovative Exploration Techniques at Pilgrim Hot Springs, Alaska’. A request for waiver of the cost share requirement for that award was denied, and at this point the funding is pending identification of match funds totaling approximately $1,650,000. The technique proposed in both this proposal and the DOE project - to use airborne and satellite based infrared surveys to delineate and quantify the geothermal resource - would be applicable as an inexpensive exploration technique for a number of other low and moderate temperature geothermal resources throughout Alaska. The ground surveys outlined in this proposal will help to verify this technique, and could save millions of dollars in future geothermal exploration efforts around the state. 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. The project budget will support 20% of the costs for Phase I of this project, including geophysical assessment of the site. Specific surveys to be funded include aerial infrared imaging, resistivity surveys, a soil CO2 survey, water chemistry analysis, well logging and flow tests of existing wells at Pilgrim. Additionally, a detailed economic feasibility assessment of various scenarios for developing the resource will be completed, including power generation for Nome and the region, as well as direct use applications such as a commercial greenhouse operation. The budget also supports 50% of Phase II gradient and confirmation drilling of the Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 6 of 23 10/7/2009 resource to confirm the model developed in Phase I. The remaining funds will be available from the DOE award to ACEP through a separate award. 2.7 COST AND BENEFIT SUMARY Include a summary of grant request and your project’s total costs and benefits below. Grant Costs (Summary of funds requested) 2.7.1 Grant Funds Requested in this application. $ 1,748,343 2.7.2 Other Funds to be provided (Project match) $ 407,667 pending 2.7.3 Total Grant Costs (sum of 2.7.1 and 2.7.2) $ 2,156,010 Project Costs & Benefits (Summary of total project costs including work to date and future cost estimates to get to a fully operational project) 2.7.4 Total Project Cost (Summary from Cost Worksheet including estimates through construction) $ 6,365,222 2.7.5 Estimated Direct Financial Benefit (Savings) $ 0 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.) $ 2,687,000 potential annual fuel savings in Teller, Brevig, and Nome Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 7 of 23 10/7/2009 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 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. The PI for this program will be ACEP Director Gwen Holdmann. Ms. Holdmann previously served as PI for the geothermal exploration and development project at Chena Hot Springs Resort, and is also the PI of the pending DOE funding to complement this project. The Chena and Pilgrim geothermal resources are both considered to be part of the Central Alaska Hot Springs Belt and are expected to contain similar hydrothermal systems. Additional project co-Is include Dr. Anupma Prakash, and Dr. Jo Mongrain. Dr. Prakash is a Professor at the Geophysical Institute, University of Alaska Fairbanks. Her research expertise is in using remote sensing and geographic information systems techniques for characterizing land surface composition and change in high latitude regions, and she has worked extensively with thermal infrared data (including on the Chena Hot Springs project). Dr. Mongrain is an Associate Professor in the Petroleum Engineering Department at UAF. Dr. Mongrain has a strong background in petroleum reservoir engineering, specializing in the development of numerical models and will assist with modeling the geothermal system. Resumes for Ms. Holdmann, Dr. Prakash, and Dr. Mongrain are included as attachments. 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.) Past exploration conducted in the late 1970’s and early 1980’s at the site resulted in the drilling of 6 very closely spaced holes ranging from depths of 150 ft to 1001ft, passing through a very shallow plume of thermal water that may be flowing in a southerly direction. The project laid out in this proposal will build on the existing work to determine the extent of the system, total heat flow to the surface, depth to the resource, and temperature at depth. These values are needed to make economic and technical assessments for potential development of the site. The project is expected to take 2 years to complete and will include three Phases and multiple sub-tasks as outlined below: Task 1 – Thermal Infrared Mapping and Analysis around Pilgrim Hot Springs (Completed in November, 2010) For any geothermal development in this area, a systematic survey and analysis on the extent, nature, magnitude of the thermal anomaly, and a quantitative estimate of the heat flux beyond the natural radiative heat of the Earth and Sun is required and is particularly useful in determining the extent to which the resource can be exploited for sustainable power generation or direct use. To achieve this goal, specific objectives and subtasks are listed below. Only partial funding for this task is requested as it is also funded under the pending DOE scope. 1. Use available thermal infrared images from moderate resolution Earth Observing Satellites, such as Landsat and ASTER to generate a land surface temperature and emissivity map of the study area at a regional 1:50,000 scale. (Note: Archived Landsat data are available at no cost from US Geological Survey. Dr. Prakash is an approved NASA science data user and will receive archived and potentially new ASTER data over the study area at no Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 8 of 23 10/7/2009 additional cost to the project). 2. Use available optical data from archived Landsat images, potentially new ASTER and ALOS images, and available archived CIR air photos to create a landcover classification map at a regional 1:50,000 scale and in parts at 1:10,000 scale. This landcover map will serve as the base map to understand the landuse practice in the study area. ALOS is a Japanese satellite and data from this mission are acquired and distributed by the Alaska Satellite Facility at UAF. The investigators are approved ALOS data users and may be able to acquire new ALOS imagery over the study area at no additional cost to the project. The investigators will also use old U2 color infrared airborne images from the late 70s over the study area (Figure 1) to characterize the landscape at a better spatial scale. Figure 4. Color Infrared (CIR) image from late 70s showing part of the proposed study area. Pilgrim thermal springs are in the center, and an old air strip is in the lower part of the figure. Various tones of red are indicative of different vegetation types that show a pattern reflective of underlying geology. 3. Acquire airborne thermal infrared images in springtime and in late summer/early fall at local reconnaissance and detail survey scale. The local reconnaissance scale survey will be carried out to provide thermal infrared images at approximately 4m spatial resolution and will cover an area of about 3km*5km centered around the hot spring. The detail survey will be carried out by flying a lower height of about 750m to provide thermal infrared images at approximately 1m spatial resolution. Acquiring the data at two different times will help to reduce uncertainties in analysis introduced due to seasonal effects. The thermal infrared data will be acquired using a FLIR® Systems Automation Series ThermaCam A320 mounted on a Cesna Skywagon 185, flown by Tom George of Terra Terpret, Inc. Along with the thermal images, a near infrared camera will be mounted on the plane to acquire concurrent multispectral images that will help to further characterize the terrain and the vegetation cover and help with thermal image interpretation. A similar setup used in for a thermal survey over Chena Hot Springs, Alaska in 2004-2005 gave excellent results (see Figure 5 below). The near infrared camera has been budgeted in this proposal though expenses for the FLIR overflight will be covered by the DoE proposal. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 9 of 23 10/7/2009 Figure 5. Left: Airphoto mosaic of the Chena Hotsprings area. The pools are in the foreground, and are centered on where the greatest surface expression of heat is visible in the thermal infrared images. Right: Thermal infrared image of approximately corresponding area. The roofs of buildings and snowfall reflect sunlight in the 15-20C range. Differing vegetation shows different temperatures due to the difference in emissivity of various plants and the bare ground. 4. Process airborne thermal infrared images. The airborne campaign will result in acquisition of hundreds of thermal infrared images, with each image frame containing 320 x 240 pixels. The individual image frames will be georectified and mosaiced to create a near seamless thermal mosaic of the study area. Again, the mosaic will be created for both the local reconnaissance scale and the detail survey scale images. Pixel integrated temperatures over a broad 7.5-13 m range (spectral range of the thermal instrument) will be calculated for each image pixel, after correcting for atmospheric conditions (humidity and temperature) and range (distance to the target). A similar mosaic will be created for the airborne optical images to facilitate direct comparison of thermal data with the optical data. The image mosaics from spring will be compared with image mosaics from late summer/early Fall to account for seasonal affects in the data. Thermally anomalous pixels will be identified using statistical analysis and thresholding to separate anomalous pixels from the background pixels. For each thermally anomalous pixel the relative heat loss in watts will be calculated after correcting for the background temperature, measuring only flux beyond the natural radiative heat of the Earth and Sun. An error analysis will be carried out to account for errors introduced by the instrument, atmosphere, aircraft orientation, and the general terrain. 5. Field data will be collected concurrent to the airborne data acquisition. Field data collection will involve (a) taking differential GPS measurements of specific targets to serve as ground control points for georectifying airborne data (b) laying out new calibrated ground control points, such as mounted space blankets (already available to the investigators, and have been tested to give excellent results in studies) if sufficient identifiable natural targets are not available in the field (c) field mapping of typical landcover classes to assist in creating a training set for carrying out landcover classification of airborne and satellite borne optical data (d) field based temperature and humidity measurements at selected locations and times (e) field based thermal imagery collection using a FLIR® Systems ThermaCam S40 (also available with the investigators). Field data will also help in error analysis and validation of results. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 10 of 23 10/7/2009 Task 2.1 – Repair wellheads and collect new static and flowing temperature logs on the existing wells (completed in July, 2010) The existing wells are in exceeding poor condition as no maintenance has been performed on them since the prior drilling program took place. Nonetheless, the existing wells are obvious sources of new data to help better pinpoint the upflow zone, particularly through the use of modern modeling techniques. Before any logs can be run, basic repair work must be completed to the wellheads, and even then it is likely that several are not salvageable and should be plugged and abandoned. All of the wellheads will need to be pulled, and some replaced. At a minimum, valve gates and stems need to be greased and repacked and general maintenance performed. This may not require any welding, as all wellheads are currently flanged and bolted. If it is determined some of the wellheads need to be replaced, new wellheads will be assembled ahead of time, including a gate valve and a removable stand pipe for instrumentation, considering the artesian environment. Extension casing may be required for the wells which are sinking into the ground. According to the original reports, none of the wells flow at greater than 100gpm artesian, so it is possible the wells may not even need to be pumped down to rework the wellheads. However, a portable gas pump has been included in the budget for this task. Only partial funding for this task is requested as it is also funded under the pending DOE scope. Figure 1. Well PS-1 at Pilgrim Hot Springs Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 11 of 23 10/7/2009 Figure 2. Well PS-3 at Pilgrim Hot Springs After the wellheads are repaired, temperature logs will be completed on the wells. K10 Kuster high resolution pressure and temperature memory tools will be used if the wellheads can be opened; alternatively, preliminary surveys can be made with a small 8in long 1/2in diameter RTD temperature measuring device. It would also be desirable to run pressure surveys (such as a pressure transient and flow test) on the wells using the Kuster gauges, once the wellheads are reworked for safe and easy access. PS-1, PS-2, and PS-3 are of particular interest as they are the hottest wells based on the original reports. Task 2.2 – Conduct a shallow temperature probe survey (Completed in September, 2010) A shallow temperature probe survey will be conducted to complement other ground-based survey techniques, and a shallow temperature map of the area completed. This will be combined with the ground truthing planned for Task 5. We will assemble materials and tools needed for the temperature survey based on a design from the University of Nevada. These include 2.2 meter long sections (approximately 7 foot) of ¼” steel pipe for probes and RTD (Resistance Temperature Detector) temperature measuring devices. The probes will be installed 1 to 2 meters into the ground and temperature recorded after time is allowed for equilibration. Only partial funding for this task is requested as it is also funded under the pending DOE scope. Task 2.3 – Conduct a CSAMT survey (completed in September, 2010) A ground-based Controlled Source Audio Frequency Magnetotelluric (CSAMT) survey will be conducted for the purpose of imaging the subsurface in the Pilgrim area to identify permeable features below the valley fill in the proximity of the hot springs. These data will be interpreted using 2- and 3-dimensional inversion algorithms to image the subsurface and will be used to identify potential drilling targets. A geothermal reservoir typically has a high level of porosity and permeability and exhibits relatively high internal temperatures. These properties lower the electrical resistivity of the reservoir, which is therefore detectable using electromagnetic geophysics methods. The primary purpose of the CSAMT survey will be to pinpoint the upflow zone of the thermal fluids in conjunction with the other survey techniques included as part of this Phase. This will be accomplished using a V8 Wireless Data Acquisition System SSEM from Phoenix Geophysics. The survey will require 3 individuals and 2 weeks field time at the site, plus data processing. An example of a planar image from a CS and NSAMT survey conducted during the geothermal reconnaissance program at Chena Hot Springs is included below. Only Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 12 of 23 10/7/2009 partial funding for this task is requested as it is also funded under the pending DOE scope. Figure 3. Planar AMT image of Chena Hot Springs Resort Task 2.4 – Synthesis of new and old datasets and development of a conceptual model of the geothermal system based on Tasks 1-4 in order to site gradient and confirmation holes in Phase 2 (Completed in December, 2010) As part of this task, we will try to resurrect old archived data from this study, both published and unpublished, and apply this information to new geologic, geochemical, and geophysical interpretation techniques. Where possible, our team will compare the new findings to the earlier findings. This task has the potential to show if the thermal system has been active or not and if there are radical changes of significance. All data will ultimately be used to develop a conceptual model for the site in order to site the gradient and confirmation holes planned for Phase 2. Only partial funding for this task is requested as it is also funded under the pending DOE scope. Task 2.5 – Comprehensive economic analysis for options to develop the Pilgrim Hot Springs Resource (Completed in February, 2011) The long-term goal of this project is to spur private sector development of the resource to benefit the region and its residents. One outcome of this project will be to develop a comprehensive economic and financial analysis of a variety of potential project configurations, given the preliminary outcome from the previous tasks. This will include a variety of options given the expected maximum developable potential of the resource, including – at opposite ends of the spectrum – a large scale power generation project to support the region, or a direct use local project, such as a greenhouse to supply fresh produce to the region. This task will build and expand upon the work already completed by HDR. Phase 2: Conduct gradient and confirmation hole drilling program (completed in November, 2011) Ultimately, in order to determine total energy (for heat and power generation) which can be sustainably extracted from the reservoir and create an optimal plan for long-term development of the resource, the upflow zone will need to be definitively identified and flow tests conducted. This can only be accomplished through a new drilling program, however we believe the chances Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 13 of 23 10/7/2009 of success are very high. A portion of the drilling program will be covered through the DOE funding, therefore funding requested for Phase II is only to supply match for the pending federal award. From 2 to 6 TG holes up to 500 feet deep will be permitted and drilled to test the conceptual model and further refine the location for the two deeper confirmation holes. The locations of these holes will be determined from the then existing data and any need to obtain temperatures in a specific spot to develop the most complete conceptual model. These TG holes can be drilled with either a core or rotary rig and either during the spring or summer months depending upon the site location and local equipment availability. Once these 500 foot holes confirm the optimal locations for the two confirmation holes, they will be drilled either with a core rig or a combination of rotary at shallow depths and core below 200 or 300 feet. A rig capable of drilling NQ core to at least 2000 feet and perhaps being helicopter transportable is needed. Considerable flexibility in the drilling plan is necessary until specific sites are chosen and access issues are defined. Ideally such a hole would be rotary drilled adjacent to a road but given the shortage of existing roads in the area and the marshy nature of much of the land at Pilgrim we need to be prepared to helicopter a rig into place at one or more of the sites. This raises issues such as proper sizing of the largest load with helicopter capabilities and availability. It is unknown what equipment will be locally available in the area two years from now. Our project team is aware of these challenges and is prepared to address them, should this project be funded. To develop a budget and plan for the drilling portion of this project, some worst case assumptions have been made, such as a complete drilling rig and supplies will need to be transported to Nome from somewhere else specifically for this work. A budget totaling $2,304,779 was developed for the DOE submission. Another worst case assumption is that a helicopter will have to move the rig onto every location, with perhaps 5 moves. If it turns out that it is possible to use a local drilling rig for some or all of the drilling and that some sites can be accessed overland, then there is the potential for a large cost saving or reduction in the budget. This will not be known until late in 2010 or early in 2011. As current example of costs project one of our project participants worked on a helicopter supported geothermal exploration core hole in southern Chile in early 2009 where a single 1070 m core hole capable of being flow tested and related supporting costs totaled $1.4 to $ 1.5 million. Preliminary quotes for one core hole at Pilgrim have been received from two drilling contractors and indicate a similar magnitude of cost. The first is through the United States Department of the Interior (DOI) through their Alaska Rural Energy Project (AREP). AREP is a collaborative effort between the Bureau of Land Management (BLM) and the United States Geological Survey (USGS) that provides the scientific and technical expertise required to identify and assess shallow subsurface resources, such as coalbed methane and geothermal, with the potential to serve as sources of alternative energy for rural communities in Alaska. The project, by design, partners with other federal, state, local, and private agencies to optimize the available resources required to efficiently and effectively conduct Alaska rural energy investigations. In 2004, the AREP purchased a portable Christensen CS-1000 drilling and coring rig to conduct shallow (<2500 ft) exploratory drilling operations in remote locations. The rig was used to conduct coalbed methane (CBM) drilling and testing procedures in Fort Yukon (2004), Franklin Bluffs (2005) and Wainwright, Alaska (2007). In 2008, the project transported a larger truck- mounted drilling rig to Wainwright to conduct CBM reservoir characterization and production testing. This allowed the Christensen rig and associated equipment to be transported to Anchorage where it is currently stored at the BLM Campbell Tract ware yard. The rig is therefore available for other rural energy project use starting in 2009. The second quote is from a drilling team including Schlumberger (experts in exploratory core Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 14 of 23 10/7/2009 holes) and Arctic Drilling (the only driller based in Alaska with significant geothermal experience). This quote is also for a helicopter mounted core rig and costs are similar to the AREP proposal. Phase 3: Development of a numerical reservoir model of the geothermal system for potential power production (completed in August, 2012) A numerical reservoir model of the Pilgrim geothermal system will be created. This model is required to truly understand the reservoir dynamics and adopt an appropriate long-term production scenario. Data from all prior drilling programs and testing will be needed to characterize this model to effectively predict future performance, temperature, pressure and flow data relating to the deeper system. This phase will be led by Dr. Jo Mongrain, a professor in the Petroleum Engineering Department at the University of Alaska Fairbanks. Dr. Mongrain has a strong background in petroleum reservoir engineering, specializing in the development of numerical models and has worked frequently within multi-disciplinary geoscience teams. This Phase is primarily funded through the pending DOE grant. 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.) Project milestones follow the Phases and sub-tasks as outlined in Section 3.2. Milestones are shown on the project timetable below as blue diamonds. A report with preliminary findings on the Pilgrim site will be released at the end of September 2011, and the final project report will be completed in August, 2012. A separate paper analyzing economic feasibility including options for direct use at the site will be completed in February, 2012. Figure 4. Timeline Showing Milestones In addition to the milestones outlined above, there are several go/no-go decision points at key points during the project. These are shown in the chart below: Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 15 of 23 10/7/2009 Figure 5. Go/no-go Decision Chart 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. Project personnel – In addition to the project managers listed in section 3.1, the program will retain the services of contractor Dick Benoit of Sustainable Solutions as drilling program manager, and also contract with an independent drilling supervisor. Two graduate students are included in the budget – one to participate in the geophysical studies (through the Geophysical Institute), and one who will work with ACEP on the economic feasibility assessment. In addition, funding for 2 undergraduate students to assist with the ground based surveys is included. An engineering technician will lead the CSAMT, and an engineer from Phoenix Geophysics will also be employed for a period of 1 week to set up equipment. Local hire will be used for both the CSAMT survey and the drilling program. Project equipment – The project will use core drill rig, such as the CS1000 P6 core rig jointly owned by USGS and BLM. An information sheet on the rig is attached. The rig is trailer mounted and can be flown into Nome via a commercial flight and trucked to Pilgrim. CSAMT equipment will be purchased for this project, as it will be used at other resource assessment Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 16 of 23 10/7/2009 sites around the state. Specifically, 2 broadband MT instruments capable of making shallow measurements to depths of 0-20 km such as the Phoenix V5-2000 system will be used. The thermal infrared data will be acquired using a FLIR® Systems Automation Series ThermaCam A320 mounted on a Cesna Skywagon 185, flown by Tom George of Terra Terpret, Inc. An Infrared gas analyzer (IGRA) will be required for the soil geochemical surveys, and shallow temperature probes will be built as part of Phase 1. Finally, three Kuster K-10 gauges will be used for acquiring temperature and pressure measurements from the existing and planned wells. 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. Quarterly reports will be prepared and submitted to the Alaska Energy Authority. An interim report will be completed in October, 2010, and a final report will be completed in March, 2012. 3.6 Project Risk Discuss potential problems and how you would address them. The project involves standard assessment and exploration techniques minimizing any perceived risk. Project delays may occur related to weather conditions during field activities including the aerial infrared and CSAMT geophysical surveys, and the drilling program. Scheduling field activities during the summer months will mitigate most expected problems related to field work. The precise cost for drilling operations is also unknown; however it will not exceed the budget proposed here. If cost overruns occur, the total footage may be reduced. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 17 of 23 10/7/2009 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. As a resource assessment, the objective of this project is to determine the potential extent and amount of the energy resource that is available. Specifically, the Pilgrim project is designed to provide information on the documented geothermal resource for potential future development of the resource for power generation and/or local food production. Geothermal resource development has been demonstrated at other sites in Alaska (Chena Hot Springs), and new technology has resulted in power production from lower temperature resources such as expected to exist at Pilgrim Hot Springs. Unlike most renewable energy systems, geothermal energy can supply baseload power and therefore is available 24 hours a day and 365 days a year. In addition to power generation, it is also a viable resource to replace conventional fossil fuel for space heating. 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. There is no existing energy system at Pilgrim Hot Springs. All communities on the Seward Peninsula use diesel gen-sets for primary power generation and fuel oil for heating. 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. The existing energy resource is geothermal produced from a moderate temperature geothermal reservoir. This project will not have any direct impact on the existing energy infrastructure, beyond reducing diesel generation base load should a project be developed. 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 18 of 23 10/7/2009 If developed, the existing energy market for the geothermal power plant would be the community of Nome, and possibly other communities on the Seward Peninsula. In 2007, the Nome Joint Utilities alone spent $2,566,000 in fuel. This number could double as the Rock Creek gold mine ramps up production. In addition, Teller and Brevig Mission spent $121,000 in fuel combined, and Kotzebue $2,000,000. In order to supply power to Nome, 37 miles of power lines would be required along the existing road system. Two alternate routes through Grand Central and Mosquito Pass would reduce the distance by approximately 10 miles, but the route is not road accessible. 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 system:  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 The Pilgrim geothermal system is classified as a moderate temperature resource, with maximum temperatures from geothermometers estimated at ~150 °C. Steam is not expected to be produced in the system, and as such a binary power plant such as the one installed at Chena Hot Springs will be required. The plant at Chena operates off 74 °C fluid and generates ~400 kW of electric power. 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. The Pilgrim Hot Springs site is patented ground with both the surface and subsurface owned by the Catholic Bishop of Northern Alaska. The property is a 320 acre in holding surrounded by property owned by the Mary’s Igloo Native Corporation. Both owners own both the surface and subsurface resources. 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 The following permit requirements may apply to the drilling portion of this project. $10,000 is included in the project budget for costs associated with permitting. The Alaskan Guidelines for Exploratory Operations is found in Article 3, Chapter 11 AAC 87.010 to AAC 87.290. This section outlines guidelines for the exploration of geothermal systems and the drilling of all Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 19 of 23 10/7/2009 geothermal wells in the state. It is important to note that resources with a temperature of less than 120 °C (such as what is expected at Pilgrim) are not defined as geothermal but rather permitted as a water resource under Alaska state statutes.  Application for geothermal exploration drilling. As per Alaska Statutes Sec. 41.06.050, ‘an operator shall file an application with the commissioner for permission to drill the well’.  Drilling Permit. As per Article 3, Chapter 11 AAC 87.070 ‘a drilling permit is required before the drilling, redrilling, or deepening of any well and before the reentry of an abandoned well’. This permit must include plans for well identification, casing, cementing, and blowout prevention.  Drilling Bond. As per Article 3, Chapter 11 AAC 87.080 ‘an applicant for a drilling permit shall file an indemnity bond for each well drilled, redrilled, or deepened, or a statewide bond for the drilling, redrilling, or deepening of one or more wells on the same lease or unit area. The bond must be in the amount the commissioner determines necessary to ensure compliance with applicable provisions of this chapter’.  Plan for abandonment of geothermal exploration well. As per Article 3, Chapter 11 AAC 87.030, the applicant must provide the state with a plan for exploration well abandonment done in ‘such a manner that will protect freshwater aquifers and prevent subsurface interzonal migration of fluids and surface leakage’.  Survey Monument Requirement. As per Article 3, Chapter 11 AAC 82.640, ‘a survey or monumentation of lease boundaries may be required by the commissioner to determine compliance with lease or to determine the extent of possible damage to adjacent properties from lease operations’.  Environmental Impact Assessment. It is not anticipated that this project would have significant environmental impact, however an Environmental Assessment for the drilling phase of this operation will be required (water discharge, total project footprint). The State of Alaska Environmental Statute pertaining to exploration is AS 46.15.010. Assessment must be approved by the Department of Environmental Conservation Permitting Office and/or the Commissioner’s Office. 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 It is not anticipated that this project would have significant environmental impact. 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 Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 20 of 23 10/7/2009 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 capital cost of proposed renewable energy system  Projected development cost of proposed renewable energy system As part of the 2007 Pilgrim Preliminary Resource Report, Hattenburg, Dilley & Linnell, LLC estimated 5 MW at Pilgrim could be developed for $29-51 million. This included $3.2-7 million for an exploration program, which is covered under the proposed work plan for this project. 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.) N/A 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 At this time, there are no power purchase agreements in place for this project. A letter from Nome Joint Utilities is included in the attachments. 4.4.4 Project Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. Download the form, complete it, and submit it as an attachment. Document any conditions or sources your numbers are based on here. Please see attached worksheet. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 21 of 23 10/7/2009 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 The potential benefit/cost ratio of this project is very high despite the cost. This project will build on several prior assessments of the site, and if a significant resource is indentified the possible benefits to the entire region are substantial. In 2007, the Nome Joint Utilities alone spent $2,566,000 in fuel. This number could double as the Rock Creek Gold Mine ramps up production. In addition, Teller and Brevig Mission spent $121,000 in fuel combined, and Kotzebue $2,000,000. If some or all of this fuel can be offset through the development of a geothermal power plant at Pilgrim, the benefits may warrant construction of the facility despite transmission distances. This project represents the first step toward this goal by quantifying how much potential energy is available for sustainable development at the site. 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 that 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 N/A 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. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 22 of 23 10/7/2009 Organizational work on this project has been ongoing for nearly 2 years. In addition, numerous site visits have been made to collect current data to use for this proposal and others. A similar proposal was submitted under Round II of the Renewable Energy Grant Fund, but was not awarded due to limited available funding. Had the DOE funding been available for cost share at that time, the project would have scored high enough that it would have been funded despite the reduced program funds available. A Department of Energy grant was recently awarded that overlaps this proposal with concurrent Phases and tasks. The DOE grant will require up to $1.7 M in cost share, because a request for waived cost share was rejected. This cost share has not yet been identified, but if this project is awarded for the requested budget, it would count as cost share. 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. There is significant local support for this project. The two most critical local entities, Mary’s Igloo Native Council and Nome Joint Utilities, have both written strong letters of support for this project and are included with this proposal. We have also included funding for local hire of personnel and equipment for the field and drilling portions of this project. 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 Provide a narrative summary regarding funding sources and your financial commitment to the project. Funding for this project in the amount of $4,686,479 is pending through the Department of Energy, depending on the ability of our project team to procure state or private match in the amount of $1,717,305. This proposal was originally developed after our Round II proposal was recommended for funding. Unfortunately, that project was not funded when available program funding was cut to $25M for Round II. We have been able to significantly reduce our budget request for this Round III proposal due to the pending federal funds. This project has been in development for 2 years, and the program has been well thought out over that time. The total budget for this project is $2,156,010. For a discussion of budget categories, see attached budget narrative below. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 24 of 24 10/7/2009 SECTION 9 – ADDITIONAL DOCUMENTATION AND CERTIFICATION SUBMIT THE FOLLOWING DOCUMENTS WITH YOUR APPLICATION: A. 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 Section 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. Governing 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. F. 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 Andrew Parkerson-Gray Signature Title Director, UAF Office of Sponsored Programs Date 11/10/09   Renewable Energy Fund Round 3 Project Cost/Benefit Worksheet   RFA AEA10-015 Application Cost Worksheet Page 1 10-7-09 Please note that some fields might not be applicable for all technologies or all project phases. The level of information detail varies according to phase requirements. 1. Renewable Energy Source The Applicant should demonstrate that the renewable energy resource is available on a sustainable basis. Annual average resource availability. Unknown, this project is intended to determine this value. Unit depends on project type (e.g. windspeed, hydropower output, biomasss fuel) 2. Existing Energy Generation and Usage a) Basic configuration (if system is part of the Railbelt1 grid, leave this section blank) i. Number of generators/boilers/other N/A ii. Rated capacity of generators/boilers/other iii. Generator/boilers/other type iv. Age of generators/boilers/other v. Efficiency of generators/boilers/other b) Annual O&M cost (if system is part of the Railbelt grid, leave this section blank) i. Annual O&M cost for labor N/A ii. Annual O&M cost for non-labor c) Annual electricity production and fuel usage (fill in as applicable) (if system is part of the Railbelt grid, leave this section blank) i. Electricity [kWh] N/A ii. Fuel usage Diesel [gal] Other iii. Peak Load iv. Average Load v. Minimum Load vi. Efficiency vii. Future trends d) Annual heating fuel usage (fill in as applicable) i. Diesel [gal or MMBtu] N/A ii. Electricity [kWh] iii. Propane [gal or MMBtu] iv. Coal [tons or MMBtu] v. Wood [cords, green tons, dry tons] vi. Other                                                              1 The Railbelt grid connects all customers of Chugach Electric Association, Homer Electric Association, Golden Valley Electric  Association, the City of Seward Electric Department, Matanuska Electric Association and Anchorage Municipal Light and Power.      Renewable Energy Fund Round 3 Project Cost/Benefit Worksheet   RFA AEA10-015 Application Cost Worksheet Page 2 10-7-09 3. Proposed System Design Capacity and Fuel Usage (Include any projections for continued use of non-renewable fuels) a) Proposed renewable capacity (Wind, Hydro, Biomass, other) [kWh or MMBtu/hr] This project is intended to determine the potential developable size of a geothermal project at the site. Preliminary estimates are about 5 MW b) Proposed Annual electricity or heat production (fill in as applicable) i. Electricity [kWh] unknown ii. Heat [MMBtu] unknown c) Proposed Annual fuel Usage (fill in as applicable) i. Propane [gal or MMBtu] none ii. Coal [tons or MMBtu] iii. Wood [cords, green tons, dry tons] iv. Other 4. Project Cost a) Total capital cost of new system This project is intended to determine potential project cost based on resource data and optimal configuration. Approximately $5-$10,0000 per kW b) Development cost Included in above c) Annual O&M cost of new system 2-3¢ per kW-hr is typical for a binary power plant d) Annual fuel cost None, possible lease cost for site development 5. Project Benefits a) Amount of fuel displaced for i. Electricity Approximately 1,200,000 gallons per year for Nome ii. Heat iii. Transportation b) Price of displaced fuel Potentially $2,566,000 in diesel fuel for NJUS annually (over $51M for 20 year project life assuming constant diesel fuel cost) c) Other economic benefits Potential for local food production d) Amount of Alaska public benefits Additional benefit of developing inexpensive exploration technique applicable to many other sites. 6. Power Purchase/Sales Price a) Price for power purchase/sale N/A 7. Project Analysis a) Basic Economic Analysis   Renewable Energy Fund Round 3 Project Cost/Benefit Worksheet   RFA AEA10-015 Application Cost Worksheet Page 3 10-7-09 Project benefit/cost ratio This project will determine this value based on the available resource. Payback This project will determine this value based on the available resource. Renewable Energy Fund Grant Round III Grant Budget Form 10-7-09 Milestone or Task Anticipated Completion Date RE- Fund Grant Funds Grantee MatchingFunds Source of Matching Funds: TOTALS 1) Task 1 – Thermal Infrared Mapping and Analysis around Pilgrim Hot Springs November, 2010 $ 60,000 $ 43,452 Pending U.S. DOE Grant$ 103,4522) Task 2.1 – Repair wellheads and collect new static and flowing temperature logs on the existing wells July, 2010 $ 185,108 $ 109,123 Pending U.S. DOE Grant $ 294,2313) Task 2.3 – Conduct a CSAMT survey September, 2010 $ 173,345 $ 120,720 Pending U.S. DOE Grant$ 78,6634) Task 2.2 – Conduct a shallow temperature probe survey September, 2010 $ 22,000 $ 55,707 Pending U.S. DOE Grant$ 77,7075) Task 2.4 – Synthesis of new and old datasets and development of a conceptual model of the geothermal system December, 2010 $ 10,000 $ 78,663 Pending U.S. DOE Grant $ 88,663 6) Task 2.5 – Comprehensive economic analysis for options to develop the Pilgrim Hot Springs Resource February, 2011 $ 26,000 $ 0  $ 26,000 7) Phase I Final Report March, 2011 $ 40,000 $ 0  $ 40,000 8) Permitting for Phase II March, 2011 $ 14,500 $ 0  $ 14,500 9) Phase II Confirmation Drilling Program November, 2011 $ 1,177,390 $ 0  $ 1,177,390 10) Phase III Completion of numerical model of system to make decisions about future development August 2012 $ 10,000 $ 0  $ 10,000 11) Final Report December, 2012 $ 30,000 $ 0  $ 30,000 TOTALS $ 1,748,343 $ 407,667 $2,156,010 Budget Categories: Direct Labor & Benefits  $ 148,115 $ 202,541 Pending U.S. DOE Grant$350,656 Travel & Per Diem  $ 43,592 $ 15,720 Pending U.S. DOE Grant$59,312 Equipment  $ 144,705 $ 145,126 Pending U.S. DOE Grant$289,831 Materials & Supplies  $ 52,503 $ 60,000 Pending U.S. DOE Grant$112,503 Contractual Services  $ 1,359,428 $ 0  $1,359,428 Construction Services  $ 0 $ 0  $0 Other  $ 0 $ 0  $0 TOTALS $1,748,343 $ 407,667 $2,156,010 Applications should include a separate worksheet for each project phase (Reconnaissance, Feasibility, Design and Permitting, and Construction)-Add additional pages as needed UAF Budget Narrative Pilgrim Hot Springs Geothermal Assessment and Confirmation Project Senior Personnel. Funding to support 200 hours for Holdmann, the technical lead and PI for UAF, is requested. Funding is requested to support co-Is Jo Mongrain and Anupma Prakash. Per UAF policy, senior personnel receive leave benefits at a rate of 18.7% (Holdmann) and1.7% (Mongrain & Prakash), calculated on salary. Other Personnel. Funding to support a total of 695 hours is requested for both Jack Schmid and Markus Mager, UAF research staff, for technical assistance and data interpretation on the project. Per UAF policy, staff receive leave benefits at a rate of 20.2%, calculated on salary. Funding to support two Graduate Student research assistants. Students work 20 hours per week during the academic year (560) and 40 hours per week during the summer (760). Fringe Benefits. Staff benefits for UAF are negotiated annually with the Office of Naval Research. Rates are 28.2% for executive salaries, 31.9% for faculty, 44.1% for staff, and 8.0% for graduate students in summer only. UAF requires that graduate students receive health insurance for the duration of the project. Student Services. UAF requires that graduate students receive tuition support and other costs for the duration of the project. Travel. (Domestic) Funding is requested to support travel for: fieldwork, planning meetings and a professional conference. Travel. (Foreign) Funding is requested to support travel to: Ontario, Canada. Contractual Services. Funding is requested to support outreach and report costs, lab analysis, drilling consultant, drilling contractual services, training, licenses, computer services, and image flyover, and project communication and documentation. Subaward costs. Funds are requested to support a subaward to USDOI for drilling services. Permanent Equipment. For this project includes: Kuster gauges and purchase and installation of the Phoenix v5-2000. Materials and Supplies. Funds are requested for field supplies, computer supplies, sampling supplies, a generator, etc. Matching Funds. Matching funds of $407,667, a portion of funding included in a pending research award from the US Department of Energy (Tasks 1 and 2, “Topic Area 1: Validation of Innovative Exploration Techniques: Pilgrim Hot Springs Alaska”). Please see the attached Intent to Award Letter from DOE below. NOME JOINT UTILITY SYSTEM a component unit of P.O.Box 70 •Name,Alaska 99762 •(907)443-NJUS •Fax (907)443-6336 November 9,2009 Mr.Steve Haagenson Alaska Energy Authority 813 W Northern Lights Blvd Anchorage,AK 99503 RE:Pilgrim Hot Springs Geothermal Dear Mr.Haagenson: The City of Nome/Nome Joint Utility System is most interested in alternatives to reduce our reliance on high cost diesel fuel for power generation.DOE/NETL funded a Nome Region Energy Assessment that included participation and input from numerous parties,including AEA and the City/NJUS.The final report dated March 2008 assessed technologies available to Name for electric power generation including,coal,wind,geothermal and natural gas. One of the Assessment’s conclusions was a significant portion of Nome’s power demands could potentially be met,and electricity costs significantly reduced,if the geothermal resource at Pilgrim Hot Springs could be utilized,but to determine viability would require further analysis to fully prove the capacity. The Alaska Center for Energy and Power,University of Alaska,has been successful in obtaining federal funding to further investigate the Pilgrim resource using some innovative techniques in a couple of core holes on the property.Over the course of two summers,ACEP will validate testing technique,which when proved reliable,can be of great benefit in identifying additional potential geothermal sources in the state.We are thrilled ACEP has chosen the Pilgrim location as the initial location for their exploration.With additional information gleaned,the resource can be further delineated and valuable requisite information will be available to allow an economic feasibility assessment to be conducted to determine if a power generation project for Nome based on the Pilgrim resource is viable.Anecdotally,based on some limited information available from drilling 30 years ago,the community does perceive the Hot Springs as a possible energy source and this Project would determine definitively if the resource is large enough and has the potential to provide us much needed relief from our extremely high energy costs. There are substantial potential benefits if this project can move forward.We urge your favorable consideration of ACEP’s application for state funding to leverage federal dollars already committed,and which will allow this project to go forward in summer 2010.Thank you for your consideration. K.Hanq(elahd \?neral Manager/Chief Operating Officer JOINT UTILITY SYSTEM Providing reliable utility services to system rate payers efficiently and economically by prudently operating and maintaining system assets in a fiscally responsible manner CATHOLIC BISHOP OF NORTHERN ALASKA DIOCESE OF FAIRBANKS 1316 Peger Road Fairbanks, AK 99709 (907) 374-9500 Fax: (907) 374-9580 bishop@cbna.org November 5, 2009 Ms. Gwen Holdmann Director Alaska Center for Energy and Power University of Alaska Fairbanks Dear Ms. Holdmann, Congratulations on your recent USDOE grant award for the Pilgrim Hot Springs geothermal resource assessment. We look forward to working with your team on that project, with the goal of determining whether there is adequate hot water to benefit the greater region with a renewable energy project and help reduce the high cost of energy for residents. They certainly need a break from the high prices they have paid for energy over the past many years. I understand that there is the potential for another grant due on November 10, 2009 from the Alaska Renewable Energy Fund Round III, and that you have recently discussed the details with Tom Buzek from my office. As the land owner, including both the surface and subsurface, the Catholic Bishop of Northern Alaska, legal title for the Diocese of Fairbanks, hereby grants access to the property for your researchers to conduct this project as presented. If the property is sold or leased prior to the start of your proposed geothermal project on this property, I will highly recommend your efforts to develop the geothermal resource and fully cooperate with any of the granting agencies involved with your project. I am in full support of the geothermal development that may be beneficial to any of the Seward Peninsula communities and residents. If you have any questions, please continue to work with Tom Buzek in my office. I appreciate your efforts to keep these geothermal projects moving for the Pilgrim property. Sincerely yours, Most Rev. Donald Kettler Bishop – Diocese of Fairbanks cc: George Bowder Tom Buzek .