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Unalaska Trip Report 7-1986
Renn Atm...« "MEMORAD )UM FROM: stat of Alaske Don Shira,Director DATE:July 30,1986 Program Development FILE NO.: Brent Petrie,Director TELEPHONE NO.:: Rural Technical Support SUBJECT:Unalaska Geothermal Project Proposals vid Denig-Chakroff ject Manager Thirteen proposals have been received by the Power Authority in response to the Request for Proposals for the Unalaska GeothermalFeasibilityStudy(RFP No.APA-86-R-015).Five proposals have been received for the Unalaska/Dutch Harbor Load Forecast and Power Market Analysis (RFP No.APA-87-R-001).I propose that each proposal be evaluated on the basis of the criteria in the RFP, rather than following a "short list"procedure.The proposals are listed below in alphabetical order according to the prime contractor followed by proposed subcontractors. Unalaska Geothermal Feasibility Study Bechtel North American Corporation,Norwalk,California Peratrovich,Nottingham,and Drage,Inc. Mesquite Group,Inc. Brown &Root Development,Inc.,San Ramon,California Harding Lawson Associates CH2M Hill,Anchorage,Alaska Geothermex,Inc. Douglas Energy Co. Dames &Moore,Anchorage,Alaska SAI Engineers Mesquite Group,Inc. EBASCO Services,Inc,Bellevue,Washington The Ben Holt Company Frank Moolin &Associates Mesquite Group,Inc. Fluor Alaska,Inc.,Anchorage,Alaska Northern Technical Services,Inc. Forsgren-Perkins Engineering,Salt Lake City,Utah Morrison-Knudsen Engineering Higginson and Barnett,Inc. Geotherma-Arctic Slope Consulting Engineers (JV),Anchorage,Alaska . Teshmont Consultants,Inc. 5355/622 Memo to Don S....4 July 30,1986 Page 2 Wayne Hanson Associates Coopers &Lybrand Aleut Unalaska Development Corp. Gibbs &Hill,Inc.,San Jose,California Woodward-Clyde Consultants L.E.Breeding Professional Engineer,Anchorage,Alaska Polarconsult Alaska,Inc.,Anchorage,Alaska Barber-Nichols Engineering Co. Woodward-Clyde Consultants Power Engineers,Inc.,Hailey,Idaho Hart Crowser,Inc. URS Engineers Stone &Webster Engineering Corporation,Denver,Colorado Dryden &LaRue Engineefs,Inc. Argetsinger &Kulawik,Inc. Unalaska/Dutch Harbor Load Forecast and Power Market Analysis Arthur Young &Company,Anchorage,Alaska Jannette Professional Services Calista Professional Services,Inc.Anchorage,Alaska Howard Needles Tammen &Bergendoff Harza Engineering Company,Anchorage,Alaska Kinetic Energy Systems,Inc,Anchorage,Alaska The Institute of Social and Economic Research James K.Landman,P.E. R.W.Beck and Associates,Seattle,Washington 5355/622 ADANA Af Qa... MEMORA DUM TO: THRU: amoaar ota :of Alaska File DATE:July 23,1986 FILE NO.: TELEPHONE NO.: sUuBJECT:Trip Report Unataska-Akutan avid Denig-Chakroff 7/13/86 -7/19/86 Project Manager Purpose of Trip The purposes of this trip were (1)to conduct field investigations with the state geological survey for its engineering geologic feasibility study including geologic,geophysical,hydrologic,and archaeologic studies;and (2)to visit Akutan to obtain information about the city and Trident Seafood power systems and to investigate three potential hydropower sites. Sunday,July 13,1986 I departed from Anchorage on Markair at 10:30 a.m.along with 12 members of the geological survey team that would be conducting investigations in the geothermal project area.Members of the team included: Randy Updike Team Leader and Aggregate Materials Rod Combellick Wellsite Geotechnical Analysis Bill Long Glacial Constraints Gail March Avalanche Constraints &Computer Modeling Doug Jones Coastal Engineering John Reeder Slope Stability &Low-Enthalpy Studies Stan Carrick Surface Hydrology Mary Mower Water Chemistry Chris Nye Volcanic Constraints Chuck Holmes Archaeology Kerwin Krause Corridor Geotechnical Analysis Roger Allely Wellsite Survey &Site Seismicity Jim Beget Volcanic Constraints We were met at the Dutch Harbor/Unalaska Airport by John Reeder and our pilot,Ken Brown of Soloy Helicopters,Inc.Ken had already picked up our rental]truck,and two loads of gear and people were transported from the airport to the Unisea Inn,our base of operations.Ken,Kerwin,and I returned to the airport where Ken looked into fuel availability and Kerwin and I picked up a truck load of equipment that had been sent by air freight.We delivered some of this equipment to the helicopter,a Hughes 500C,and the rest to the Unisea.At 3:30 p.m.Kerwin and I drove to Victory Services to pick up the explosives for the seismic analysis.We delivered the 5276/624(1) File July 23,1986 Page 2 explosives and more equipment to the helicopter and Ken flew two loads of gear to an equipment cache at the head of Makushin Valley. After dinner at the Unisea,Stan instructed me in conducting a data dump of stream gauge equipment in anticipation of my trip to Akutan the following day. Monday,duly 14,1986 At 7:00 a.m.the team met over breakfast for the first of our daily morning work sessions lead by Randy to discuss work assignments and the helicopter schedule.After the work session,I obtained chains and locks for the Akutan stream gauges from Stan,then drove with Kerwin to get gas for the auger and to drop off my baggage with Aleutian Air.I took the helicopter to the wellsite with an intermediate stop at the equipment cache.I inspected the wellsite with John,Rod,Roger,Gail,and Randy and answered their questions about the project. At noon,I flew to the airport after dropping John and Roger at the equipment cache.I met Roy Taylor and Afzal Kahn arriving on Markair,and we flew to Akutan on the Goose.Dimitri,the VPSO,and Frank Anderson,the powerplant operator,were at the float plane port when we arrived.Frank took Afzal to the city powerplant while Dimitri took Roy and me in the city skiff to Loud Creek on the south side of Akutan Bay.Dimitri returned to town to take Afzal to Trident Seafoods while Roy and I worked at Loud Creek.I conducted a data dump and recorded stream stage (data attached)and installed chain locks on the datapod equipment.Roy and I hiked upstream and investigated potential weir sites on two branches of the creek. At 5:00 p.m.,Dimitri returned with the skiff and took us to Falls Creek on the south side of the Bay west of Loud Creek.I performed a data dump and stage reading while Roy hiked upstream to investigate potential weir sites.Dimitri then took us to North Site Creek where I found the equipment not working properly and could not conduct a data dump. We returned to Akutan in the skiff and found that Afzal had obtained all the information he needed from the city powerplant and Trident. We decided that Afzal and I should return to Unalaska in the morning so Afzal would get an opportunity to see the wellsite and fly the transmission line route of the geothermal project.Roy offered to remain and assist Stan if he arrived in Akutan on the morning flight to take a cross section of the three sites and check the equipment at North Site Creek. Tuesday,July 15,1986 Roy and I walked to the stream east of the village which is the source of the town's water supply and the site of a 15 kw hydroelectric system which has been out of operation for four years. 5276/624(2) File July 23,1986 Page 3 We met with Frank and Tom who gave us a tour of the water supply system and answered questions about the old hydropower system.The system has 800 feet of head and operated seasonally as there was not enough flow to produce power during winter months. At 10:30 a.m.,Stan arrived on Aleutian Air.Roy stayed to assist Stan while Afzal and I returned to Unalaska.After waiting some time for the helicopter to pick us up,we drove to the staging area of a BLM surveying project to see if their helicopter pilot could radio Ken.They said Ken apparently was not monitoring their frequency,but offered to fly us to the wellsite since they were headed across the Bay anyway. Afzal and I inspected the wellsite and discussed the project with team members at the site.Ken arrived and flew us to Kerwin and Randy.Kerwin,Afzal and I flew to Driftwood Bay and then down the potential transmission route in Makushin Valley,and Afzal answered many questions Kerwin asked about transmission line construction.We dropped Afzal at the airport where we met Roy and Stan returning from Akutan.Roy and Afzal were able to catch the Reeve flight to Anchorage,and Kerwin,Stan,'and I returned to the wellsite. During the afternoon,Randy,Kerwin and I inspected a lahar deposit at the mouth of Makushin Canyon,then Kerwin and I conducted a reconnaissance survey of potential transmission pole sites and road corridors along the south side of Makushin Valley.We returned to Unalaska at about 6:30 p.m.and discussed the days accomplishments with the entire team over dinner. Wednesday,July 16,1986 After the morning work session and breakfast,I was dropped off with Randy and Kerwin in the lower Makushin Valley where we drilled a 21 foot hole and hand augered to 25 feet.Soft,wet muds were encountered to 25 feet where we hit the top of an ash layer.No gravels were encountered. At 1:00 p.m.I was dropped off at the confluence of the Makushin River tributaries just below the wellsite plateau,where Stan and Bill had just finished installing two stream gauges.I noted what appeared to be a 100-year flood plain just below the plateau and between the two tributaries,which could be a potential site for aquaculture facilities.Bill,Stan,and I also discussed the need and possibility of installing wind and precipitation gauges at the wellsite and along the potential transmission route. At 2:00 p.m.,I was dropped off at the wellsite and,for the rest of the afternoon,I assisted Rod and Doug in augering holes on the plateau while Roger and Bill conducted surveys for the detailed contour map of the plateau. 5276/624(3) File July 23,1986 Page 4 Thursday,July 17,1986 I worked all day with Rod,Doug and Roger at the wellsite augering and taking soil samples,surveying for the site contour map,and assisting in the seismic survey.Bill assisted at the wellsite in the morning and was replaced by Stan in the afternoon when Bill and John went to the glacier and the summit.Two seismic lines were successfully shot on the plateau.At about 11:30 a.m.,we received a radio transmission from Randy who was stuck in a cloud bank on Sugarloaf Cone.He could not see 50 feet in any direction and had completely lost his bearings.We could see the cloud bank from the plateau and informed him that it was not very thick and would probably pass shortly.We notified Ken who landed as close to Sugarloaf as he could.Randy was able to follow the sound of the rotors and walk out of the cloud bank. At 7:00 p.m.,I attended a public meeting with 11 of the team members to discuss the project and engineering geologic survey with townspeople.However,only six townspeople showed up,though the meeting was well advertised.City Manager Nancy Gross,Electric Utility Supervisor Bob Burton,and Ounalashka Corporation President Kathy Grimnes were present along with three other members of the public.Notably absent were the Mayor or any representatives of the City Council.I gave an overview of the geothermal project,and each member of the team discussed his or her responsibilities and preliminary findings. Friday,July 18,1986 Chuck and I operated the auger all day;in the morning,with Rod at the wellsite and,in the afternoon,with Kerwin in Makushin Valley. We found no area of the valley with less than 20 feet of muck. Seismic lines were shot in the valley by Roger and John.Late in the afternoon,Kerwin and I were dropped off on a spur low on the south side of Makushin Valley to investigate the area for a potential road route.We hand augered several holes and found gravelly till at 3 feet.We speculated that bedrock would be encountered at no more than 6 feet.The foundation in the area appeared good for road construction,however,there is avalanche danger all along the south side of Makushin Valley. Saturday,July 19,1986 After breakfast,the team packed gear and equipment and transported same to air freight services and the airport.John and I drove to Summer Bay so he could show me the location of the hydrothermal well that was drilled there in 1980.We departed Unalaska on Markair at 12:30 p.m.and arrived in Anchorage about 2:30 p.m. 5276/624(4) File July 23,1986 Page 5 General Observations The field investigation for the geothermal project was an unqualified success.The weather was incredible;we had only one morning of rain,and most of the week it was clear and sunny.The helicopter service was excellent.Although the 500C was marginal in size for the number of people we had to transport,the pilot was superb and effectively managed his air time to accomplished the needs of the group.He was always flexible,cooperative,and down-right pleasant, even when he was obviously under a great deal of pressure. The investigating team was the most highly motivated,well qualified, professional group of scientists I have ever had the pleasure to work with.Each member was well versed in his or her area of expertise and responsibility and proceeded to conduct his or her assignment in a professional,expedient manner.Members of the team were able to perform a variety of tasks outside their area of project responsibility and were willing and eager to do so whenever they were needed and their schedule permitted. Randy Updike managed the project and the team skillfully and proficiently.He obviously respected and was well respected by each member of the team.His organization and scheduling of the project and his selection of the team reflected and accomplished his goal to provide,within a tight timeframe,recognized technical experts with significant Alaskan experience to conduct a comprehensive program on an economical budget. The "team approach"was emphasized and effectively carried out. Randy solicited opinions from individual team members and gave them serious consideration when decisions were made.He organized the team into subgroups with group leaders to accomplish individual tasks.Consequently,a team member may,as a designated group leader,direct a colleague on one day and,as an assistant,answer to the same colleague on the following day.To the credit of both Randy and the team members,this structure was extremely effective and the project was a great success. DC:kyf KCC.Don Saree - 5276/624(5) Bill Sheffield,Governor N Alaska Power Authority State of Alaska FOR IMMEDIATE RELEASE: JULY 18,1986 CONTACT:M.ISAACS 561-7877 JOHN CARPENTER Aleut Corporation 561-4300 GEOTHERMAL POWER STUDY UNDERWAY An economic assessment of one of Alaska's major geothermal fields has been given the go ahead as the result of successful negotiations between the Alaska Power Authority and two Native corporations. Agreements signed recently with the Aleut Corporation and Ounalashka Corporation define access and royalties associated with development of the Unalaska geothermal reservoir.According to APA Executive Director Bob Heath,these are the first agreements of their kind in Alaska. "This is the first time the value of a geothermal resource has been quantified for development,"Heath said."An additional hurdle was faced because this is considered a mineral resource--it belongs to the regional Native corporation which is a private entity.Most other geothermal sites in Alaska are publicly owned and have seen little interest in development so there was little guidance in drafting these agreements." Agafon Krukoff,president of the Aleut Corporation,praised the cooperation between the state and Natives saying "the corporation is very anxious to see this resource developed in the near future.These agreements are the basis of a good business relationship with the state, and the community has an opportunity to benefit from a locally available resource," With the agreements in hand,the Power Authority is proceeding with a feasibility study to determine the economic and financial implications of developing the field to provide electricity for Unalaska/Dutch Harbor,a community of 2,000 located on Unalaska Island in the Aleutian Chain.A request for proposals for the study has drawn the attention of over 130 firms,some as far away as New Zealand and France.Among the items to be studied are: e Type of equipment required to convert the wet steam resource to electricity; 5144/618/1 -MORE - PO.Box 190869 704 East Tudor Road Ancherage,Alaska 99519-0869 (907)561-7877 NEWS RELEASE 222222 Methods of developing the system in increments to allow capacity as needed; Environmental questions,including disposal of the condensed steam; Potential!for use of geothermal fluids for future agriculture and aquaculture facilities; e Analysis of transmission line requirements and support facilities. In addition to the feasibility study this summer,the Alaska Department of Natural Resources will conduct geologic,hydrologic and archaeologic investigations at the site and an independent market and load analysis will be completed.A determination on the feasibility of geothermal power development at Unalaska is anticipated by March 1987. The Power Authority's exploratory drilling program,completed in 1984, and analyzed during 1985,confirmed that the reservoir is capable of meeting the power demand of the island for hundreds of years.A preliminary economic analysis,completed in 1985,showed that geothermal power development appeared to be competitive with other alternatives such as diesel generators,wind and hydropower. RREKRKEKEKEKEEKEKRKEEEKEEREKEEKEKKRKRKEKKK 5144/618/2 -MORE - $s vo HEATH:- NUNN: LOUNSBURY: COMMISSIONER KNAPP:YES COMMISSIONER LOUNSBURY:YES MR.ARNOLD:YES MR.HARRISON:YES 00.0 0 cee ee vein MR.ALLISON:YES CHAIRMAN NUNN:YES This .......I would commend MR.ALLISON for remarks to _the staff,there are unique features there that would be helpful in some of the other deliberations.They should be incorporated and considered.The second item of new business is the Unalaska Reconnaissance Findings and Recommendations ...COMMISSIONER LOUNSBURY. Yes,MR.CHAIRMAN,this is an action item for approval of the draft Unalaska Reconnaissance Finding and Recommend- ations,including $640,000 feasibility study request.The Planning Conmittee recommended approval by the full Board based on the Unalaska Reconnaissance Findings and Recommen- dations pointing out the complexity in developing the power system for the city of Unalaska.This is a system using a geothermal source on Mechushin(?)Geothermal Resource on Unalaska Island.The Committee found that the staff had adequately evaluated the alternatives for electrification plan for the Unalaska-Dutch Harbor area,and we recommend that the Draft Reconnaissance Finding and Recommendations ALLISON(?): NUNN: ALLISON: 9329/381 be approved by the full Board and that $640,000 be reserved in the rural feasibility account for an Unalaska feasibil- ity study.However,the discussion was made primarily directed,by MR.HARRISON,that the staff be directed to be judicious in the use of these funds and that one method might be performing some of the economic analysis in-house or as much in-house as possible.Because Unalaska is one of the named communities in SLA 82,Chapter 90,funding for the Unalaska-Geothermal Project Study would be taken from internal account 490,and no additional request would be made for feasibility funding.I would so move MR. CHAIRMAN. Seconded. Moved and seconded,any further discussion with respect to the Unalaska Project?MR.ALLISON. Because of the location of this project,I would request the Board instruct staff to obtain a signed agreement for access into and use of the lands upon which the well(s)is to be set and the plant is to be set and the road is to go across,prior to the expenditure of any funds in the project.The basis for that is to avoid a situation that we have found ourselves in with at least one other trans- mission facility,where we have proceeded to construction Page 47 HARRISON: LOUNSBURY: ALLISON: LOUNSBURY: 9329/381 without having a firm contract and agreement on access, road and facilities construction.It would not necessarily have to be an advance of the expenditure of any money ...I don't want to make the staff nervous but,at least before _.. there was any conceiveable(?)commitment to proceed,I think that we should get that done because I have an apprehension that the cost could substantially escalate if we don't have that done. MR.CHAIRMAN....I think that is a very good idea and suggestion that we do get some final right-of-way agree- ments before we start spending our money. MR.CHAIRMAN,excuse me ...I misunderstood.Is that prior to any construction of the project or during the ...this initial feasibility study? Well,if we have to cut a road to do the feasibility study, then I would like to have the contract for the use of that property to cut the road before we cut the road,so that we are not negotiating a of what we have already committed.So,to the extent that it is necessary to conduct the feasibility analysis,then I think we should have it before that. + I would include that in that motion MR.CHAIRMAN. Page 48 NUNN: HARRISON: LOUNSBURY: NUNN: ED MORRIS:. 9329/381 The motion has been amended to be contingent on satisfac- tory rights-of-way being obtained prior to commitment of the Power Authority funds,so recommended. MR.CHAIRMAN,I think there is still a-little ambiguity in this.We are talking about not only a right-of-way I guess,but also a long-term lease or whatever reason for the Power Plant itself,which may not be on public land is that right?So,certainly ...I guess my thought was that before we commence the half a million dollar ..whatever it is,feasibility study,that these agreements would be worked out rather than just prior to construction. Would we amend that to say that any lands required for the project ..or the feasibility study. Okay,understand that the motion is now amended. MR.CHAIRMAN,may I ask one clarifying question on that. On the transmission line routing which obviously will require either required lands fee or easements for them, and that will then require some transmission line design considerations in order to be able to require the corridor, so in the proceeding with the project,you would have to do some'routing and line design for the transmission corridor in order to negotiate to obtain those necessary easements. Page 49 %NUNN: MORRIS: 9329/381 MR.MORRIS,I think the sense of the motion is that the recommendation on the first option is approved,but it is amended that rights-of-way to conduct such work even as you are describing,and access to the land,is firmly in hand before the full amount of this feasibility study is com- mitted and if that provides difficulty in the sense that it was going to be all as a part of one commitment,then I think you need to let us know before we finally vote on this. No,I just want to get their clarification.I think we should be able to proceed with that portion of the project to outline the necessary right-of-way requirements. Looking at the breakdown that is in the packet,the road and transmission route conceptual design analysis and process was $150,000 as the estimated amount;that a portion of that would go hand-in-hand with identifying those necessary rights away and some basic design work would have to be looked at in order to accomplish that. So,there would be a contract involved on that portion that would have to go forward.As to the other items ... certainly in terms of the geothermal assessments,the technology assessments of the equipment,the environmental aspect studies then would be deferred until we have met the amendment as proposed by the Board. Page 50 NUNN: HEATH:- NUNN: HEATH: NUNN: KNAPP: 9329/381 Does any member of the Board have any difficulty with that characterization?Further discussion?MR.HEATH. COMMISSIONER KNAPP:YES a Coursoe TE COMMISSIONER LOUNSBURY:YES MR.ARNOLD:YES MR.HARRISON:YES MR.ALLISON:YES CHAIRMAN NUNN:YES Next item under New Business is Waste Heat Findings and Recommendations and Approval of the FY86 Program. MR.HEATH. Go on MR.CHAIRMAN. COMMISSIONER KNAPP. The section MR.CHAIRMAN that this issue reflects on the revised program,when the original $5 million dollars was submitted,which was subsequently reduced to $2 million dollars,the staff went back to the drawing board and revised the program that will simplify the highest priority projects.The list of what was intended in the original $5 million dollar program;it comes up basically as a $2.4 million dollars .....other $400,000 in funds and will Page 51 COMMISSIONER LOUNSBURY reported that staff has drafted a preliminary Scope of Work and contracted consultants with expertise in one or more areas covered in the Scope of Work requirements.The Scope of Work information can be used as a basis for a formal Request for Proposal if required. There have been three responses to date and more are expected by May 15,1985.Staff has been instructed to continue to receive the consultants estimates up through May 15,and report on information received at the next Board meeting. FY86 LEGISLATIVE UPDATE MR.HEATH reported on the status of Power Authority legis- lation and answered questions of the Board pertaining to its status. II.NEW BUSINESS 9739/402 Action Items 1.RECOMMENDATIONS FOR JUNEAU 20-YEAR POWER SUPPLY PLAN COMMISSIONER LOUNSBURY stated the Planning Committee met and considered staff's request for endorsement of the Findings and Recommendations for the Juneau 20-Year Power Plan.The Committee recommends deletion of paragraph 2,Item 3 under costs,and that the Findings and Recommendations then be endorsed by the Board.Furthermore,The Committee supports staff's recommendation for further action to follow'the Reconnaissance Study.COMMISSIONER LOUNSBURY moved that the recommendations of the Planning Committee be adopted by the full Board.MR.ALLISON seconded the motion.The motion passed 6-0,with KNAPP,LOUNSBURY, ARNOLD,HARRISON,ALLISON and NUNN voting yes. 2.|UNALASKA RECONNAISSANCE:FINDINGS AND RECOMMENDATIONS COMMISSIONER LOUNSBURY stated that the Planning Committee,after determining that staff had adequately evaluated the alternatives for an electrification plan for the Unalaska-Dutch Harbor area,recommends approval of the Draft Reconnaissance Findings and Recommenda- tions by the full Board and that $640,000 be reserved in the Rural Feasibility account for an Unalaska feasibility study.Staff was directed to perform as much of the economic analysis in-house as possible. COMMISSIONER LOUNSBURY moved that the Board adopt the Planning Committee's recommendation.MR.ALLISON seconded the motion.MR.ALLISON requested that the Page 5 AAAN FANN Board instruct staff to obtain a signed agreement for access into and use of the lands upon which the well(s)and plant are to be set prior to the expendi- ture of any funds in the project.MR.HARRISON agreed with MR.ALLISON.COMMISSIONER LOUNSBURY amended his motion to be contingent on the obtaining of satisfac- tory right-of-ways on any lands required for thefeasibilitystudyandprojectpriortocommitmentofAlaskaPowerAuthorityfunds. The motion passed 6-0,with KNAPP,LOUNSBURY,ARNOLD, HARRISON,ALLISON and NUNN voting yes. WASTE HEAT:FINDINGS,RECOMMENDATIONS AND APPROVAL OF FY86 PROGRAM The $5,000,000 requested by the Power Authority in the FY86 budget for design and construction of projects invariousvillageswasreducedto$2,000,000 in the Governor's request.With this reduced funding,the proposed scope of the waste heat program was reducedproportionately.A revised priority list of projectswasprovidedintheBoardpacketswhichtotalled$2.4 million.COMMISSIONER KNAPP,Chairman of the Project Management Committee,recommended that staff go aheadwiththerevisedprogramof$2.4 million with a further direction to re-program for future years at approximately a $5 million dollar level.MR.ALLISON moved that the recommendation of the Project Manage-ment Committee be adopted.with the further provisothatstaffseekalternativesourcestofundwasteheat: projects outside the State appropriation process. MR.HARRISON seconded the motion.The motion passed 6-0,with KNAPP,LOUNSBURY,ARNOLD,HARRISON,ALLISON and NUNN voting yes. GALENA WASTE HEAT PROPOSAL A revised statement of the Galena Waste Heat project was furnished to the Board.MR.ED MORRIS,Associate Executive Director of Planning,reviewed the proposal for the Board.The City of Galena and Galena School District proposes to transfer funds to the PowerAuthoritytocompleteaWasteHeatRecoveryexpansion project.Approximately $300,000 would be transferred. Power Authority staff requests permission to enter into an agreement to accept such funds when formallyofferedandtoallocateupto$20,000 internally from general waste heat appropriations for re-design and project management.MR.ARNOLD moved that staff's recommendation be adopted based upon the findings Page 6 CuiWiWwuwWd _MEMORAR )UM Stat of Alaska * Ans Ate. TO: THRU: FROM: FILE DATEMay 6,1986 FILE NO.: TELEPHONE NO.: SUBJECT:Trip Report Unalaska/Dutch Harbor David Denig-Chakrof 4/29/86 -4/30/86 Project Manager Purpose of Trip - The purposes of this trip were (1)to meet with Village Corporation stafftodiscussthelatestdraftright-of-way agreement and (2)to meet with the Unalaska City Council and staff to update them on the progress of negotiations and to discuss provisions of the latest draft resource agreement that would affect power sales negotiations. Tuesday,April 29,1986 I departed Anchorage on MarkAir at 10:15 a.m.and arrived in Dutch Harbor at 12:15 p.m.The AirPac flight for which I had reservations was can- celled purportedly due to maintenance,but when I reached Dutch Harbor,I learned that AirPac had not flown in for several days,and rumors were that it may be going out of business.The MarkAir 737 flight and service were very good with the noted exception of an extremely hard landing at Dutch Harbor.That,apparently,is common;I was happy they hit the runway. I was met at the airport by City Manager Nancy Gross who dropped me at Cari's Motel.Carl's location is very convenient for business on the Unalaska side of the island.The room was clean and the price slightlycheaper($55.00 single occupancy)than the Unisea Inn.However,the rooms are tacky and worn and management is obviously more interested in operat- ing the store than the motel.I had to wait 20 minutes to register because the manager was busy selling pistols,and I couldn't raise the desk operator at 7:30 a.m.to place a long distance call for me.Also, there is no restaurant on the Unalaska side that serves breakfast. I met with Kathy Grimes,President of the Village Corporation,from 2:30 to about 4:30.We discussed in detail the current draft of the right-of-way agreement,which the Corporation's attorney had reviewed. Kathy requested clarification with respect to easement rights to specify that the width at transmission angle points,terminals,and other facil- ities would not exceed:100 feet.We-discussed and agreed that-the "Con-- sideration"provision should allow for a negotiated settlement before necessitating involvement of appraisers.Kathy indicated that threeadditionalsections(32,33,and 34)in Township 72 South,Range 118 West were IC'd to the Corporation but not listed in the project area.We discussed at some length the possibility of using waste heat from the geothermal plant or finding a hydrothermal resource in Makushin Valley foragricultureoraquacultureoperations.We called John Reeder who indicat- ed that there is a possibility of hydrothermal resources in Makushin Valley.I informed Kathy we would consider including this as part of the 4190/217(1) FILE May 6,1986 > Page 2 feasibility study as well as drilling wells in Makushin Valley or at Summer Bay in lieu of paying market value for the easements and rights-of-way granted. At 7:00 p.m.I attended the City Council meeting and gave a presentation on the status of negotiations and a review of the provisions affecting the City's cost of power.I explained changes made from the previous draft to address concerns expressed by City staff and the City's attorney.The council was very receptive,appeared to concur with the changes,and seemed anxious to proceed with the feasibility study.However,the City had asked R.W.Beck to review the agreement and wanted to await final approval until those comments have been received.The City Council is willing to hold a special meeting to approve the agreement if necessary. I discussed briefly with the Mayor,Paul Fuhs,a proposal to use fluids from the exploration well for an aquaculture demonstration project. Wednesday,April 30,1986 On Wednesday morning,I met with Jeff Currier,Director of Public Works, to go over the new draft agreement in detail.He liked the changes that had been made from the previous draft,but was still concerned about the Busbar cost calculation.He tried to call R.W.Beck to check on the status of their review but was unable to reach his contact person.Jeff said he would call later and ask R.W.Beck to send a copy of the comments directly to the Power Authority. Jeff dropped me off at the airport after our meeting,and I departed from Dutch Harbor at 1:00 p.m.on MarkAir. DDC:it cc:Don Shira,Alaska Power Authority Brent Petrie,Alaska Power Authority 4190/217(2) MEMORANLVUM Statc of Alaska TO: THRU: FR Mike Hubbard DATE:May 16,1986 Financial Analyst FILE NO.: TELEPHONE NO.: suByect:Unalaska Geothermal Project Dave Denig-Chakroff roject Manager This memo requests your review of the latest draft land and resource agreement for the Unalaska Geothermal Project with respect to comments on the agreement prepared by R.W.Beck for the City of Unalaska (documents attached).The City has asked us to work directly with Kurt Winterfeld of R.W.Beck to resolve his concerns. In particular,I would appreciate any assistance you can provide in helping me interpret the alternate royalty formula presented by Beck and the factors presented in Table A.I would also appreciate your thoughts on whether any of the concerns expressed by Beck are ones that could jeopardize our acquisition of financing for the project. I would like to schedule a meeting early next week between you,Brent Petrie,Don Shira,and me to discuss the Beck comments and then to make a conference call to Kurt Winterfeld to further discuss the matter with him. DC:kyf LOcc:Don Shira Brent Petrie Attachments as stated. 4371/597 IVICIVIUAMAD /UIVI Olat™OTF AlaSKa $ THRU: FR 2-001 A (Rev 10-84) 'FILE DATE:May 16,1986 FILE NO.: TELEPHONE NO:: SUBJECT:Trip Report Unalaska/Dutch Harbor ve Denig-Chakroff May 14,1986 -May 15,1986 Project Manager Purpose of Trip The purposes of this trip were (1)to meet with the Ounalashka Corpo-ration president and Board of Directors to discuss the final right-of-way agreement and seek approval of that agreement,and (2)to meet with the City's Public Works Director to discuss R.W.Beck's review for the City of the Power Authority-Aleut agreement. Wednesday,May 14,1986 I departed Anchorage on MarkAir at 10:15 a.m.and arrived in Dutch Harbor at 12:10 p.m.I took a taxi to the Unisea Inn and called Kathy Grimnes,President of the Village Corporation. I took a taxi to Unalaska and met with Kathy from about 1:00 to 3:00. We discussed the final draft of the right-of-way agreement,specifically reviewing the additions she had requested from the previous draft.She appeared content with the changes.We reviewed maps marked with the project area,and I gave Kathy copies of a summary report and three papers on the geothermal exploration program.I returned to the hotel to prepare for the Board presentation. At 7:30 p.m.,I attended the Village Corporation Board meeting.Boardmembershadreviewedthepreviousdraft.I pointed out the two ad-ditions to the final draft:(1)the phrase "to the maximum extent consistent with its own concerns"added to section 4,and (2)section 6 addressing taxes.I answered questions of the Board and reviewed the project area map.Board members seemed fairly well satisfied with the agreement.Kathy indicated that their attorney had not yet seen the tax section,and she felt he should review it before they make a final decision on the agreement.The Chairwoman of the Board indicated that it would require a resolution of the Board giving Kathy authority to sign the agreement pending approval by the attorney on the tax section and directed that such a resolution be prepared during the break.I left the meeting prior to the break. Thursday,May 15,1986 On Thursday morning,I met with Jeff Currier,Director of Public Works, to discuss R.W.Beck's review of the APA-Aleut Agreement.I read thereviewandwediscussedtherecommendationsindetail.Jeff was con- cerned about the time-frame involved in making additional changes to theagreementandsuggestedthatsomecompromisewasinorder.He suggested4370/422/1 - Trip Report May 16,1986 Page 2 that we review the document and work directly with Kurt Winterfeld of R.W.Beck to resolve his concerns.He called Kurt and asked him to work directly with us after we had a chance to review the comments in more detail. Jeff has hired an electric utility manager who will be on staff on May 27.He has had over 20 years experience in the utility business, and Jeff expects he will have a great deal to offer the project.Jeff indicated he still plans to leave Unalaska as soon as he can sell his home. I called Kathy before leaving for the airport,and she said she had not yet gotten in touch with their attorney.If she receives his approval, she will sign the original document and speedpack it to us.Jeff dropped me off at the airport after our meeting,and I departed from Dutch Harbor at 1:00 p.m.on MarkAir. DDC/tg 4370/422/2 ' FRM RW BECK SEATTLE R.W.Beck AND ASSOCIATES,INC ENGINEERS AND CONSULTANTS 0.BOX 6A18>BOR 2400 FOURTH &BLANCHARD BUILOING ° TRA,ALASKA KETCHIKAN,ALASKA*2121 FOURTH AVENUEmos 99901SEATTLE,WASHINGTON patat 206-441-7900 LENO.$S--1987-ER1-BX May 23,1986 Mr.David Denig-Chakroff£ Alaska Power Authority Post Office Box 190869 Anchorage,Alaska 99519-0869 Dear David: My suggestions for revising certain of the language for the Aleut APA contract are enclosed.The two areas in which revisions are suggested are (i)the definition of the City's Busbar costa and (ii)the Minimum Royalty. For the Minimum Royalty I have provided Options A and B.Option A simply calls for an annual "truing-up"whereby the Power Authority would bill Aleue for any overpayment of Royalty.This overpayment is defined as the amount by which the payments required by the current language exceed the greater of $100,000 or the Royalty as determined by formula in Section 2. Option B puts the Minimum Royalty as it really should be;a guaran- tee of minimum Royalty payments and not a method of advancing funds to Aleut.(Advance payments are more appropriate aa part of a security arrangement.) The main distinction with Option B is preventing overpayments from occurring during the year,so the City doesn't wait until after the end of the year for restoration of the overpayment.Rather than advancing money to Aleut,Option B assures that at the end of each quarter,Aleut will have collected at least $25,000,$50,000,$75,000,etc.This option would also benefit the City by smoothing cash flow.To compare Option B with the current draft's language,a table is attached which illustrates the two methods with some hypothetical figures, After further consideration,I still feel the concept of basing the City's Busbar cost on a hypothetical set of figures for investment and ex- peases which would otherwise have been incurred by the City will create more problems than it might solve.My suggestions on defining this concept in the contract are for the sake of clarity and should not be construed as an en- dorsement. 'C2 FROM RU BECK SEATTLE w5/23/86 16:03 P.3 Mr.David Denig Chakroff -2-May 23,1986 I£you have any questions or comments on the suggested Language, please let me know. Very truly yours, R.W.BECK AND ASSOCIATES,INC. Curtis K.Winterfeld Executive Engineer CKWicjt enclosures ec:Jeff Currier David Helsby 9 FROM RU BECK SEATTLE ve/EB/BE 14:45 P.fy't6BUSBARCOSTSDEFINEDASCITY'S HYPOTHETICAL COSTS 2.Royalties.(a)The Powar Authority ###. (b>)For Energy Resources #w #,The Power Share shail be the product of the total kilowatt-hours (kWh)produced and sold during the calendar quarter,muttiptied by the appropriate Royalty Rate as set forth in (id?below,further multiplied by the City's estimated Busbar cost.Whenever used herein,***. (i)The appropriate Royalty Rate ##&, (ii)The City's estimated Busbar cost for any give quarter "ay e shall be the quotient of (1)the sum of all costs directly attributable to generating electric power that would have been REETA8Ae2oeSedeafcsRAni)elieincurred by the City in producing or purchasing its total AEyg.ulekWh requirements at the Busbar absent purchases from the aPearhtt=oseProject divided by (2)its total kWh requirements at the Busber. Costs attributable to electric power generation for the purposes of this calculation shall include all relevant costs under axpense categories as set forth In Exhibit C Cattached hereto and made a part hereof by reference),Tha Power Authority and the City shall establish in consultation with Aleut the methodology by whioh the City's estimated Busbear coats will be detarmined. roo FREM RL BECK SEATTLE ar23/S6 143460 P 3 The agreed upon mathodology shall include all necessary procedures and reasonable accounting controls and shall be required of the City as a convenant and condition of any power sales agreement. FROM RW BECK SEATTLE _-/23/8B 14:46 P.4 on pe ANNUAL DETERMINATION OF MINIMUM ROYALTY OPTION A 3.Payment of Royalty.(a)Upon ##*,Following recovery of any advance Minimum Royalty the Power Authority shall pay Aleut,on or before January 15,April 15,July 15,and October 15,the Royalty accured and payable for the preceding calendar quarter.On or before January 25 of each year,the Power Authority shall computa any overpayment of Royalty made to Aleut for the preceding calendar year and shall bil!s Aleut for said overpayment of Royalty,If any.The bill rendered by the Power Authority for such overpayment shall be due and payable upon receipt by Aleut.The amount of the overpayment,if any, shall be determined as the positive difference of, (i)the sum of all Royalty payments,including Minimum Royalty payments,paid by the Power Authority for operation in the preceding calendar year,less the greater of either, Ci1)the sum of all Minimum Royalty payments paid by the Power Authority for operation in the preceding calender year,or unFROM Rll BECK SEATTLE u '2GL86 14:4?PY, (iii)?the eum of the total Royalty to Aleut as determinad in Section 2.above for operation in the preceding calendar year without consideration of any Minimum Royalty paid by the Power Authority. FROM RW BECK SEATTLE 1423/86 14:46 P.6 ANNUAL DETERMINATION OF MINIMUM ROYALTY OPTION B 2.Royalties.(a)The Power Authority ###,The Royalty paid to Aleut shall be determinad as provided herein and shall be applicable to the maximum output of the Initital production well or the equivalent output thereof:however,the Royalty paid to Aleut in any calendar year after commercial operation during the Primary Term and any extension term of the Lease shalf not be less than at the rate of One Hundred Ten Thousand Dollars ($110,000.00)per twelve (12)months.Royalty on Energy Resources ***, 3.Payment of Royalty.(a)Upon beginning commercial production and therafter during the Primary Term or any extension term of the Lease,the Power Authority shall pay quarterly Royalty which is the greater of, qi)the Mintmum Royalty multiplied by the fraction calculated as ($!)the total days in the calendar year ° FROM RW BECK SEATTLE w/ES/BE 14:48 P.7? through the end of the current quarter divided by (2) three hundred sixty-five (365)days,less the total Royalty paid for the current calendar year through the end of the preceding quarter,or (iid the Royalty as determinad by Section 2.for the current calendar year through the end of the current quarter less the total Royalty paid for the current calendar year through the end of the preceding quarter, (b)All payments of Royalty by the Power Authority to Aleut shall be due on January 15,April 15,July 15,and October 1S of each year. €c)Concurrently with making each ##w , (Cd)After the end of the Primary Term and each ten (10) years thereafter,the Minimum Royalty of $110,000.00 thereafter payable,as provided herein,shall be adjusted in the following manner.The adjusted Minimum Royalty to be paid after the Primary Term,and each ten (10)year term thereafter,shal!be the product of multiplying $110,000 by a fraction,the numerator of which ###, COMPARISON OF METHOOS FOR CALCULATING ALEUT ROYALTY PAYMENTS Royalty Calculated Per Section 2. OPTLON 8 Quarterly Energy Per Section 3.Royalty Beginaing End of Produced Busbar Royalty Payment Cunu lative of Payment Payment Payment and Solid Royalty Cost for Para.Para.(Max of (i)Royalty Period Period Due Oate €kMth 3 Rate (per kHH)Quarter cid Gi and (519)Payment YEAR 1:Ol-jJan-90 31-1ar-90 #200 #*$0 $0 9 Ol-Apr-90 9 -30-Jun-90 31-Sep-S 0.200 0 0 6 tu Cl-Jul-90 30-Sep-90 15-Gc t-90 1,538,500 0.032 0.200 $10,000 13,699 10,000 13,683 13,689 Ol-Dct-90 9 31-Dec-90 35-Jan-91 7,058,800 0.0425 0.200 6,000 25,205 56,301 3,1 70,000 YER 2:15-Jan-31 Ol-Jan-91 9 31-Mar-91 {S-Apr-931 3,075,900 0.0325 6.200 $20,000 $24,658 $20,000 $24,658 $24,698 Ol-Aer-90 KH e391 15-Jul-91 5,714,300 0.0350 0.200 40,000 24,952 B,HK2 3,342 00 O-fuI-90-H-Sep-91 15-Oct-33 1,538,500 0.0825 0.200 10,000 14,76 10,000 14,735 74,73 01-Oct-90 31-Dec SI 13-Jan-S2 7,058,800 0.0425 0.200 60,000 3,205 3,206 35,205 130,000 ASSUMPTIONS 3 Minimum Royalty (Section 2.(2?)equal$i00,000 .Coamerical operation begins August 12,1990. Royalty Nith Current Oraft Contract Quarterly Cumulative Royalty RoyaltyPaymentPayment 0 $0 13,587 13,587 3,0 38,5873,000 73,587 $25,000 $25,00025,00 30,00040,000 90,000 25,000 115,0003,00 150,000 .AWL03SADIGAMaWOMd-387csero*6rerl°d Bill Sheffield,Governor N Alaska Power Authority State of Alaska May 30,1986 Mr.Ted J.Bond,Petroleum Engineer Division of Oi]and Gas Alaska Department of Natural Resources 794 University Avenue Fairbanks,Alaska 99709 Dear Ted: In response to your letter of May 19,1986,this letter confirms the status of the Makushin ST-1 geothermal well and serves as application for continuing to maintain the well in suspended status.The current suspended wellhead configuration is illustrat- ed on the attached diagram.Pressure gauges are being checked every three months as weather and helicopter availability permit. The Power Authority maintains catastrophic well damage insurance with a $5 million liability and has set aside $200,000 for plugging and abandoning the well. The Alaska Power Authority is initiating a feasibility study for geothermal power development at the Makushin ST-1 wellsite.Conse- quently,we would like to maintain the well in suspended status for testing purposes until the feasibility study is complete and a decision is made as to the future of the proposed power project. We would like,therefore,to extend our suspension permit to September 30,1987.We propose to inspect the well biannually,as early as possible in the Spring and again in the late Fall before access to the site is restricted by snowfall.We feel this change in the inspection schedule is justified based on the past stability of the suspended well and as a matter of safety and practicality in reaching the wellsite during winter months. If you have any questions on this matter,please contact me or Brent Petrie at 561-7877. $i rely,L,.(yyDaviduutlelee? Project Manager Attachment as stated. DDC/cde acc:Don Shira Brent Petrie 45934 683869 =701 East Tudor Road =Anchorage.Alaska 99519-0869 (907)561-7877 oy od .we) MAKUSHIN ST-1 , -°WELLHEAD ORAWING FOR SUS?ENSION STATUS AS OF 8/16/85 -(NOT TO SCALE) 12"BALL VALVE I°XT"AGAPTER FLANGE PRESSURE CAUGE J”SAS Gate O°XD"AOAFTER FLANGE UZ"SALL VAGVE &FLCW LINE TMAQTTLUING valve erxerxa? 600 ATI - FLOW TEE 7X8"AGAPTER FUANCE CISCOMNECTEO FLOW LINE & TESTING EQUIPMENT 6°-450 ATI SARTON (ao LENGTH) MASTER VALVE 0724"ADAPTER FLANGE r EXPANSION s?oot P-$See Plan frend BELOW FoR DETAIL ye ANSI 300 RF ANSE 300 RF"iss "Ress Gara Vav&Gard VaeverhobiaSeas(New)(New) we -/70 fs"7*;y _Ex panution - YP uerore 5 oa {S200 wa O50 |.yaer TST Kaw .>: dine fuwcewnsoort(SY PranView +»#5GardVacs?. . ; we aa WING Varvle DETAIL.+'3 .ag pst Cree vaaves{4 TOS2"unesss ITNER MISE NOTED)f SCKVALEbyTath”asa ™2°PLUG 1 oe. MEMORATI )UM Stat of Alaska 'To:FILE DATE:April 14,1986 FILE NO.: THRU:TELEPHONE NO.:: SUBJECT:Trip ReportUnalaska/Dutch Harbor- FRO Dave Denig-Chakroff April 8,1986 to Project Manager April 10,1986 Purpose of Trip The purposes of this trip were (1)to meet with City of Unalaska offi- cials to review and discuss in detail the draft agreement between thePowerAuthorityandtheAleutCorporation,and (2)to meet with offi- _Cials and the Board of Directors and the Ounalashka Corporation to discuss the right-of-way agreement for the geothermal project. Tuesday,April 8,1986 I departed Anchorage on AirPac at 11:00 a.m.and arrived in Dutch Harbor at 1:00 p.m.I took a taxi to the Unisea Inn and called the City Manager,Nancy Gross,to tell her of my arrival.Nancy picked me up at the hotel and we went to City Hall where I met for approximately four hours with Nancy;Jeff Currier,Public Works Director;and John Florey, City Engineer.We held a conference call with Brent Petrie in which we discussed,generally,the provisions of the April 7 draft agreement and some of the history and thought that had gone into development of specific provisions.After the conference call,we went over the agreement page-by-page and discussed the details of the agreement.We also analyzed spreadsheets showing the royalty and rental payments that would result from the project under various scenarios and assumptions. Jeff indicated that the assumptions we used for the analysis werereasonable., Specific comments on the agreement were as follows: 1.The date of April 1,1986 in Article A,Section 4 (page 3)does not correlate with the date in Exhibit B.It should bechangedtoMay1,1987.o. 2.The definition of "Busbar"in Article C,Section 2(b)(page 9) is confusing because of its reference to power supplied by the City or by the Project.The Royalty calculation specifies that Busbar cost will be based on costs exclusive of the - Project;thus,there is an apparent conflict that should beclarified, 3.We discussed the somewhat nebulous wording describing calcu-lation of the Busbar cost.Jeff was unsure as to weather busbar costs based on the backup system or a theoretical oesystemdesignedtosupplyanequivalentamountofenergyastheprojectwouldbelower.He felt that R.W.Beck could : -supply this information,as well as guidelines on what general on Unalaska/Dutct rbor Trip Report April 14,1986 Page 2 and administrative costs should be considered "generating" costs. 4.The City intends to send the document for review by its attorney and by R.W.Beck.It will discuss the agreement with it's City Council at an April 22 work session to which the Power Authority is invited and urged to attend. We also discussed briefly the status of the right-of-way agreement and the possibility of the City negotiating with the Village Corporation for that agreement.Nancy indicated that the City would consider it,but that it does not have very good relations with the Corporation,and the Power Authority might be more successful negotiating on its own.She did indicate that the City now has extended its boundaries incorporating the Corporation lands needed for the project,and they would have condemnation powers over said lands.After the meeting,I had dinner with Nancy and John at Stormy's,a new Greek/Italian restaurant in Unalaska.Nancy drove me back to the hotel about 9:00 p.m. Wednesday,April 9,1986 I met with Kathy Grimnes,President of the Ounalashka Corporation,at 8:00 a.m.We discussed the right-of-way agreement in some detail,and I responded to the concerns which she had passed on from her Board.I offered photographs of power lines and terminal facilities which she had requested.She asked about the height of the power poles and whether or not the line would make any noise when in operation.Otherwise,Kathy had very little response except to indicate that all of the concerns had been addressed.We discussed my proposed presentation to the Board that evening,and she indicated that it should be kept as short as possible due to a lengthy agenda.We agreed that a slide presentation would take up too much time,but Kathy felt it would be a good idea to have a map of the area available for reference. After the meeting,I walked to Nicky's Place bookstore where I purchased one map and borrowed another for the Board presentation and had a lengthy conversation about the geothermal project with townsperson and store owner,Abi Dickson.Upon returning to the hotel,I called Afzal Khan to ask about the power pole heights and line noise.I also spoke briefly with Brent and briefed him on my meetings.I spent the afternoon preparing for the Board presentation. At 7:30 p.m.,I arrived at the Corporation's offices and met with the Board for 14 hours.In general,the Board was very receptive to mypresentationandmembersaskedthoughtfulandreasonedquestions.WhileIperceivedindicationsofsupportfortheagreementfromsomemembers,I perceived skepticism from others.The major concerns expressed included: 1.The appearance of the facility.2.A misconception that this was an "experimental"project. r 3846/582/2 Unalaska/Dutch =rbor Trip Report April 14,1986 Page 3 3.A desire to narrow the proposed location of the easements as much as possible. 4,The need to negotiate an agreement at all before the exact location of the easements were determined. 5.The time schedule for completing negotiations. I agreed to revise the document to address concerns discussed at the meeting and to forward the revised draft next week.One member also asked for a copy of the agreement between the Power Authority and the Aleut Corporation.I said I would ask the Aleut Corporation if they had any objection to this and to send a copy if they had none.I informed the Board that I would be in town for a City Council work session around April 22,and that I would be willing to discuss the agreement further at that time or at their next regulatory scheduled Board meeting on May 7. Thursday,April 10,1986 After checking out of the hotel,I returned the borrowed map to Abi Dickson and then met with Nancy Gross at the airport.We discussed the possibility of a joint meeting between the City Council and the Village Corporation Board.Nancy thought it was a good idea,suggesting April 21 as a possible date,and I said I would approach Kathy Grimnes with the idea. Erika Tritremmel,City Administrator for Akutan,was at the airport on her way back to Anchorage.I met with Erika about our proposed trip to Akutan.She will be on vacation until May 1,but said to contact the City office if we wanted to make the trip before her return. DDC/tg cc:Don Shira,Manager,Program Planning &Analysis Brent Petrie,Director,Systems Planning 3846/582/3 ALASKA POWER AUTHORITY DRAFT CONDITIONAL LAND AND RESOURCE AGREEMENT FOR THE UNALASKA CEQTHERMAL PROJECT April 7,1986 THIS AGREEMENT is made and entered into as of the day of >»1986,by and between THE ALEUT CORPORATION,an Alaska corpo- ration,hereinafter referred to as "AYeut,"and the ALASKA POWER AUTHORITY,a public corporation of the State of Alaska,hereinafter referred to as the "Power Authority." WHEREAS,the purpose of the Power Authority is to promote,develop,and advance the general prosperity and economic welfare of the people of AYaska by providing a means of con- structing,financing,and operating power projects;and WHEREAS,the Alaska Legislature finds that the establishment of said power projects is necessary to supply power at the lowest reasonable cost to the state's electric utilities,and thereby to the consumers of the state;and WHEREAS,it is the declared policy of the state,in the interests of promoting the general welfare of al]the people of the state,and public purposes,to reduce consumer power costs and otherwise to encourage the Jong-term economic growth of the state,including the development of its natural resources,through the establishment of power projects;and WHEREAS,the Power Authority,in cooperation with Aleut,has completed a four-year geothermal exploration and drilYing program near Mount Makushin on Unalaska Island,which re- sulted in the discovery of an extremely productive geothermal reservoir;and WHEREAS,the Power Authority has also completed a reconnaissance study of energy re- quirements and alternatives indicating that a geothermal power system is likely to be the most economic source of electric power for the community of Unalaska/Dutch Harbor;and 1594/572(1) + DRAFT Land and Resource Agreen Aprit 7,1986 Page 2 WHEREAS,the Power Authority Board of Directors has allocated funds to conduct a Fea- sibility Program for developing a geothermal power system on Unalaska Island,with the stipu- Yation that the Feasibility Program be initiated only after agreements have been negotiated with appropriate Tandowners for the use of lands and resources during the feasibility,design,con- struction,and operation phases;and WHEREAS,Aleut has received interim conveyance,under the Alaska Native Claims Settle- ment Act,to the surface and subsurface Yand estates on which the exploration and drilling took places; NOW,THEREFORE,witnesseth that: Article A.FEASIBILITY PROGRAM 1.Administration of Feasibility Program.The Power Authority shall,subject to appro- priation,fund and conduct a Feasibility Program fn accordance with Exhibits A and B,attached hereto and made a part hereof by reference,a feasibility analysis,hereinafter referred to as the "Feasibility Program,"for a geothermal power system to be Yocated on and over Aleut's Yand on Unalaska Island.The geothermal power system,hereinafter referred to as the "Project,"shall consist of geothermal wel!sites,wells,piping and power generation facilities and transmission , tines,roads and other appurtenances required to produce and transmit power to the City of Unalaska,hereinafter referred to as the "City,"distribution system.The Project,if developed by the Power Authority pursuant to the Feasibility Program,shall be Yocated within Township 72 South,Range 118 West,Sections 20,21,22,23,24,25,26,27,28,29,30,31,32,33,34,35, and 36;Township 72 South,Range 119 West,Sections 2,3,4,9,10,11,14,15,16,22,23,24, 25,26,27,33,34,35,and 36;and Township 73 South,Range 120 West,Sections 1,2,and 33 Seward Meridian,hereinafter referred to the "Project Area."The Power Authority shall designate a project manager whose primary responsibility is administration of the Feasibility Program. 2.Termination of Feasibility Program.The Power Authority Board of Directors,here- inafter referred to as the "Board,"may,at its option,and upon written notification to Aleut, terminate the Feasibility Program and this Agreement upon the completion of Phases (1)or (2), as set forth in Exhibit A,hereunder,or thereafter on the inability to acquire power sales agreements or financing for the Project after diligently pursuing acquisition of such agreements and financing. 1594/572(2) id DRAFT Land and Resource Agreen._.._ April 7,1986 Page 3 3.Participation by Aleut in the Feasibility Program.(a)The Power Authority shat! notify Aleut in advance of,and Aleut shall have the right to attend,at its expense,al?review Meetings between the Power Authority and its Feasibility Program contractors except meetings regarding bid documents or matters the Power Authority deems proprietary or to constitute a conflict of interest with respect to provisions hereof.UnYess both parties agree otherwise, the Power Authority and Aleut shal¥¥meet monthly during the Feasibility Program,at a time and place convenient to both parties,to review the Feasibility Program analyses.Aleut may make recommendations to the Power Authority with respect to continuation of the Feasibility Program; changes in the Feasibility Program,including scopes of work,schedules,and final report for- mat;and development or nondevelopment of the Project.The Power Authority shall give full consideration to recommendations of Aleut but such consideration shal!not restrict or diminish the Power Authority's responsibility to make final decisions on matters concerning the Feasi- bility Program and the Project. (b)The Power Authority shall,upon request,at no cost or at a cost not to exceed ten cents per page,provide Aleut with data and materials developed during the Feasibility Program except data and materials the Power Authority deems proprietary or to represent a conflict of interest with respect to provisions hereof.Throughout the Feasibility Program,the Power Authority shal?document to Aleut on a monthly basis the direct costs actually incurred in conducting the Feasibitity Program. (c)If requested by Aleut,the Power Authority shaY?provide to Aleut in writing a description of the nature of the meetings between the Power Authority and its Feasibility Program contractors to which Aleut is prevented from attending and an explanation of the reasons for preventing Alteut's attendance.Likewise,if requested by ATeut,the Power Authority shall provide to ATeut in writing a description of the nature of the information being withheld and an explanation of the reasons for withholding such information. 4.Commitment to the Project.Upon completion of Phases (1)and (2)of the Feasibility Program,as set forth in Exhibit A hereunder,the Board shal?commit to a course of action, within the timeframe set forth in Exhibit B hereunder,to develop the Project or to terminate this Agreement.The Power Authority shall notify Aleut in writing of the decision by the Board on or before April 1,1987,as referenced in Exhibit B hereof.In the event the Power Authority commits to a course of action to develop the Project,the Power Authority shall diligently proceed to complete its obligations as set forth in Exhibits A and B hereunder.In the event the Power Authority fails to commit to a course of action within the timeframe set forth in 1594/572(3) DRAFT Land and Resource Agreen April 7,1986 Page 4 Exhibit B hereunder,this Agreement shal)terminate,unless both parties agree in writing to continue the Agreement. 5.Access to Lands to Conduct Feasibility Program.AYeut shal¥allow access by the Power Authority,its empToyees,agents,representatives,and contractors to Yand Aleut owns on Unataska Island sufficient to conduct and complete the Feasibility Program as set forth in Exhibits A and B hereunder.Such access by the Power Authority shal?not prevent Aleut from alYowing access by others to Aleut Yand and resources on Unalaska Island;however,AYeut agrees that access by others,in the event of any access conflicts,shali be subordinate to the needs of the Power Authority to conduct and complete the Feasibility Program.Such access shal!be permitted during the Feasibility Program so Yong as the Power Authority performs its obligations set forth hereunder.If the Feasibility Program is terminated prior to acquisition of financing for the Project or if the Board decides not to develop the Project,Aleut agrees to allow access to Yands for plugging and abandonment of the Power Authority's existing exploration well,as an act of last resort in the event the Power Authority and Aleut cannot agree otherwise in writing to maintain the well. 6.Option for Project Development by Aleut.The parties hereto acknowledge that their consultations in av?phases of the project may be advantageous in providing to the City the most reasonable delivered cost of powers;therefore,the parties agree to consult with each other specifically during the financial feasibility analysis and power salYes negotiations phases of the Project,and the Power Authority sha¥1 consider AYeut's proposaYs to develop the project. Prior to or within sixty (60)days after completion by the Power Authority of Phase (4)of the Feasibility Program as set forth in Exhibit A hereunder,AYeut,in conjunction with reasonably qualified parties,may present proposals and agreements to provide for the funding,development and/or operation of the Project,any portion thereof,or a reasonably comparable project.In the event an Aleut proposal provides for the development of the Project at a delivered cost of power to the City that is equal to or Yess than that which the Power Authority can reasonably expect to deliver pursuant to.the completed feasibility analysts,as set forth in Exhibit A,or in the event the terms and conditions of a power sates agreement between Aleut and the City are preferred by the City,then AYeut's proposal for development of the Project shal¥1 be accepted. Upon acceptance of Aleut's proposal,the Power Authority shal?document to Aleut within thirty (30)days,the direct costs actually incurred on a monthly basis during the Feasibility Program set forth herein.Upon Aleut's reimbursement to the Power Authority for documented direct costs,this Agreement shall terminate. 1594/572(4) DRAFT Land and Resource Agreet._.._ April 7,1986 Page 5 Articte B.GRANT OF LEASE AND RICHTS FOR THE PROJECT 1.Lease and Production Rights.Upon the compYetion by the Power Authority of the Feasibility Program within the timeframe set forth in Exhibit B hereunder,prior to any drilling or construction and after a commitment by the Board to proceed with development of the Project, Aleut,for and in consideration of the royalties,rents,easement fees,and covenants herein provided,shall Tease exclusively unto the Power Authority surface Yands which are specifically identified in the Feasibility Program analysis as necessary to construct and operate the Project and shall grant separately to the Power Authority the non-exclusive right to drill for,produce, extract,take and remove from the subsurface estate of Aleut:(a)al¥products of geothermal processes,embracing indigenous steam,hot water and hot brines;(b)}steam and other gases,hot water and hot brines resulting from water,gas,or other fluids artificially introduced into subsurface formations;(c)heat or other associated energy found beneath the surface of the earths;(d)water from geopressured zones (the foregoing (a)through (d)are hereinafter referred to as "Energy Resources");and (e)any minerals (exclusive of of]or hydrocarbon gas that can be separately produced)which are found in solution or association with or derived from any of the foregoing (such minerals are hereinafter referred to as "Byproducts").In addition to the rights granted to the Power Authority above,AYeut shal?hereby grant to the Power Authority the right to explore the Leased Lands by geological,geophysical or other methods,whether now known or not,and,to the extent of Aleut's rights,to take water from said Leased Lands for operations hereunder.The surface Yands Yeased by Aleut to the Power Authority and the subsurface estate of Aleut in which the Power Authority has the non-exclusive right to conduct the foregoing activities are hereinafter collectively referred to as the "Leased Lands,"and the rights granted herein are hereinafter collectively referred to as the "Lease."Aleut agrees that the drilling for,production,extraction,taking and removal of Energy Resources and/or Byproducts from the subsurface estate of Aleut by a party other than the Power Authority shalt be subordinate to the needs and requirements of the Power Authority for so Yong as this Agreement is in effect. 2.Land,Resource Use,and Disposal Rights.For the same consideration,Aleut shall grant to the Power Authority the right to store,utilize,process,convert,and otherwise use such Energy Resources and Byproducts on or off the Leased Lands and to sel!the same or any part or derivative thereof on or off the Leased Lands during the term of the Lease,with the right of entry thereon at any times for said purposes,and to construct,use,maintain,erect,repair and replace thereon,and to remove therefrom al}roads,pipelines,ditches and Janes,telephone and telegraph lines,utility installations,power lines,poles,tanks,evaporation or settling basins,extraction or processing plants,machinery,equipment,buildings,electric power plants, 1594/572(5) DRAFT Land and Resource Agreen_.._ April 7,1986 Page 6 and equipment for generation and transmission of Energy Resources,Byproducts,and electric power,and for the handling,treatment or storage thereof,and ai)structures and facilities relating thereto,which the Power Authority may desire to erect,construct,or instal)in carrying on the Power Authority's business and operations on or from the Leased Lands;and the Power Authority shal)have the further right to erect,maintain,operate and remove a plant or plants,structures and facilities with all necessary appurtenances for the conversion of the Energy Resources into heat,power or another form of energy,and for the extraction of Byprod- ucts from steam,brine or water produced from the Leased Lands,including at)rights necessary or convenient thereto,together with rights-of-way for passage over,upon and across and ingress and egress to and from the Leased Lands for any or al}of the above mentioned purposes.The Power Authority shalt obtain any and al)permits,consents or licenses required by any public or private entity with authority to regulate the activities of the Power Authority conducted within the Project Area;Aleut makes no representations or warranties as to the requirements of any such permission,consent or license nor as to the availability of such.The Power Authority shall aso have the right,upon obtaining proper permit from appropriate agencies with authority to regulate such activities,to utilize or dispose of waste brine and other waste products from a well or wells on the Leased Lands into a wel)or wells drilied or converted for that purpose on the Leased Lands and the right to inject water,brine,steam,and gases from a well or wells on the Leased Lands for the purpose of maintaining or restoring pressure,increasing or maintaining production,or testing in the productive zones. 3.Right-of-Way Easement Rights.For the same consideration,Aleut shall grant the Power Authority rights-of-way and easements for a road,transmission line,dock,and associated Project facilities on and over Aleut''s surface and subsurface estates on Unalaska Istand.Said transmission line rights-of-way and easements shall commence at the power generation facilities and shall terminate at the point of intertie with the City distribution system.All easements shal}be one hundred (100)feet in width,except where a greater width is required to accommodate necessary Project facilities,and granted with the rights,privileges and authorities to:(a)construct,reconstruct,maintain,repair,operate,improve,and update upon or under lands within said easements an electric transmission line and road system including but not limited to poles,towers,conductor,guys,anchors,bridges,abutments,culverts,supporting apparatus,and such other structures as the Power Authority may now or shal}from time to time deem necessary;(b)provide ingress and egress to lands within said easements;(c)cut,trim, remove,and control the growth of,by machinery or otherwise,vegetation on or adjoining lands within said easements which in the judgement of the Power Authority,might interfere with, threaten,or endanger the operation and maintenance of said tine or systems (d)clear and keep lands within said easements free from fences,buildings,pavements,or other structures which in 1594/572(6) DRAFT Land and Resource Agreet Aprit 7,1986 Page 7 the judgement of the Power Authority,might interfere with,threaten,or endanger the operation and maintenance of said line or system or may increase the safety risks to Aleut or its property;and (e)license,permit or otherwise agree to the joint use or occupancy of said line or system by any other person,firm,or corporation for telephone,electrification,utility,or transportation purposes. Article C.TERMS AND CONDITIONS 1.Terms and Rentals.(a)This Agreement shail commence immediately and,unless terminated under any other provision hereof,this Agreement shall remain in force for so long as there exists an active Lease hereunder.The lease rights granted herein shall be effective immediately upon execution of this Agreement.The Primary Term of the Lease shall be for a period of thirty (30)years and shalt commence effective January 1 of the year in which commercial production first begins.The term shal)be extended automatically for a period of ten (10)years if any of the Energy Resources are being produced in commercial quantities from any of the Leased Lands at the end of the Primary Term,provided that the Power Authority is in compliance with alt the terms and conditions of this Agreement.Likewise,the term shall be extended automatically for a second period of ten (10)years if any of the Energy Resources are being produced in commercial quantities from any of the Leased Lands at the end of the initia} ten-year extension.{If at the end of the second ten-year extension,Energy Resources are being produced or utilized fin commercial quantities,and the Leased Lands are not needed for other purposes,the Power Authority shail have a preferential right to negotiate a renewal of the Lease for a further term in accordance with such terms and conditions to which Aleut and the Power Authority may at that time agree. (b)If at the expiration of the Primary Term or the expiration of the initial ten-year extension thereof,none of the Energy Resources is being produced,but on or before the date of expiration reworking operations or operations for the drilling of a well in search of any of the Energy Resources are commenced on said Leased Lands,the Lease wil)continue in force for an extension of twelve (12)months,provided that such operations of the Power Authority are continuously prosecuted and the Power Authority fulfills a1)other terms and conditions of this Agreement including the payment of the Minimum Royalty,Rental,and Easement Fee as defined herein.The operations of the Power Authority shall be considered to be continuously prosecuted if not more than nine (9)months shal)elapse between abandonment of a prior production well and beginning of operations for the drilling or reworking of a replacement well.If Energy Resources are not once again being produced continuously in commercial quantities within twelve (12). months from the date when commercial production first closed,the Lease may be terminated at the 1594/572(7) . DRAFT Land and Resource Agreen_ April 7,1986 Page 8 sole discretion of Aleut.If,as a result of such operations,any of the Energy Resources are being produced once again in commercial quantities,the Lease wilt remain in force for the extended term of ten (10)years,which extended term shat}have commenced on the date of expiration of the previous term period. (c)If Energy Resources are being produced in commercial quantities from the Leased Lands at the expiration of the Primary Term or the initial 10-year extension thereof,and (i) ait of such production shal)thereafter cease as a result of a deptetion of such Energy Resources from the Leased Lands or as a resuit of an Act of God or naturally occurring phenomenon,or (ii)a1)of such production shall thereafter be terminated due to wel)plugging, caving,or other well problems,the Power Authority may,within twelve (12)months from cessation of such production,resume drilling or reworking operations in an effort to obtain or restore production of any of the Energy Resources.If such event shall occur,the Lease shai} remain in force for the remainder of the term,inclusive of said twelve (12)months period, provided that (i)such operations of the Power Authority are continuously prosecuted,as defined above,and result in production in commercial quantities of any of the Energy Resources,and (ii)the Power Authority fulfills al}other terms and conditions of this Agreement including the payment of the Minimum Royalty,Rental,and Easement Fee as defined herein."Reworking,"as used herein,shal}include,among other things,cleaning,testing,repair,and replacement of wells and related facilities and equipment necessary to produce from such wells. (d)Subsequent to completion of the Project design and before commencement of construction,but in any case not later than July 1,1988,as referenced in Exhibit B hereof, and thereafter during the Primary Term or any extension term of the Lease,the Power Authority shall pay quarterly to Aleut in advance:(4)Rental,hereinafter referred to as "Rental,"in the sum of Twelve Hundred Fifty Dollars ($1,250.00)for up to ten contiguous acres of surface Leased Lands;and (ii)an easement payment,hereinafter referred to as "Easement Fee,"in the sum of Twelve Hundred Fifty Dollars ($1,250.00)for ai}easements and rights-of-way granted herein. The first payment of the Rental and Easement Fee shat?be due prior to commencement of construction,and the amounts of said Rental and Easement Fee shalt be prorated based on the days remaining in said quarter only.Ali other payments of Rental and Easement Fee shal)be due on January 15,Apri)15,July 15,and October 15 of each year. (e)After the end of the Primary Term and each ten (10)years thereafter,the quarterly Rental and Easement Fee payments of $1,250.00 each,thereafter payable as provided herein,shal}be adjusted in the following manner.The adjusted Rental and adjusted Easement Fee to be paid after the Primary Term,and each ten (10)year term thereafter,shall be the 1594/572(8) \ DRAFT Land and Resource Agreen..... April 7,1986 Page 9 product of multiplying $1,250.00 by a fraction,the numerator of which is the most recently published Consumer Price Index,ali items,a1)Urban Consumers (the "CPI-U")which is published by the U.S.Department of Labor,Bureau of Labor Statistics at the end of the Primary Term,or the end of each ten (10)year term thereafter,and the denominator of which is »the published CPI-U on the effective date of this Agreement.If publication of the CPI-U is discontinued,the parties hereto shat}thereafter accept comparable statistics on the cost of living for the United States as they shall be computed and published by an agency of the United States or,if such an index does not exist,by a responsible financial periodical or recognized authority then to be mutally selected by Aleut and the Power Authority. (f)Should production drilling operations not be commenced on said Leased Lands on or before July 1,1988,as referenced in Exhibit B hereof,this Agreement shal}terminate unless the Power Authority,on or before said date,shal)pay Five Thousand Dollars ($5,000.00)as annual Rental to the depository,as provided in Section 6 hereof,which payment shal)extend for twelve (12)months from said date,the time within which dritling operations may be commenced. 2.Royalties.(a)The Power Authority shall pay a Royalty to Aleut,as hereinafter described and referred to as "Royalty,"for any and ali Energy Resources and Byproducts produced and sold from a single wel),which shall be the Project's initially installed production wel)or the equivalent output thereof from a replacement wel}or backup well.The Royalty paid to Aleut shall be determined as provided herein and shat)be applicable to the maximum output of the initial production well}or the equivalent output thereof.Royalty on Energy Resources and Byproducts produced in excess of the maximum output of the initial wel),or equivalent output thereof,are not subject to this Section and shall be renegotiated prior to increasing such output capacity beyond the limitations set forth herein. (b)For Energy Resources that are converted to electric power before sale by the Power Authority,the Power Authority shalt pay Aleut quarterly,as Royalty,an amount (hereinafter referred to as the "Power Share")as determined below for the power produced and sold during the subject calendar quarter.The Power Share shal)be the product of the tota} kilowatt-hours (kWh)produced and sold during the calendar quarter,multiptied by the appropriate Royalty Rate as set forth below,further multiplied by the City's Busbar cost. Whenever used herein,the term "Busbar"shal)mean,for an purpose hereof,the point at which electric power is supplied to the City's electric distribution system,whether by the City or by the Project. 1594/572(9) i DRAFT Land and Resource Agreer April 7,1986 Page 10 (i)The appropriate Royalty Rate to be used in calculating the Power Share shall be determined as follows: Tota)kWh Produced and Sold During Quarter Royalty Rate Less than or equal to 5,000,000 0.0325 Greater than 5,000,000 and tess than or equal to 6,000,000 0.0350 Greater than 6,000,000 and tess than or equal to 7,000,000 0.0375 Greater than 7,000,000 and tess than or equal to 8,000,000 0.0425 Creater than 8,000,000 and Yess than or equal to 9,000,000 0.0475 Greater than 9,000,000 and tess than or equal to 10,000,000 0.0550 Greater than 10,000,000 and Yess than or equal to 11,000,000 0.0600 Greater than 11,000,000 0.0630 (ii)The City's Busbar cost for any given quarter shalt be the quotient of the sum of ail costs directly attributable to generating electric power exclusive of the Project and supplying said power to the Busbar divided by the total number of kilowatt-hours that are or would be produced exclusive of the Project and supplied to the Busbar.Costs attributable to electric power generation for the purposes of this calculation shal}include a)?relevant costs under expense categories as set forth in Exhibit C (attached hereto and made a part hereof by reference).The Power Authority and Aleut shall consult for the purpose of establishing procedures and accounting controls to appropriately determine the City's Busbar cost.Such agreed upon procedures and accounting controls shal}be required of the City as a covenant and condition of any power sates agreement. (i171)Calculation of the quarterly Power Share shal}be as follows: Power _Tota?kWh produced and Appropriate City Busbar Share sold during quarter Royaity Rate cost As an example:If 8,000,000 tota)kWh are produced in any calendar quarter,the appropriate Royalty Rate would be 0.0425.Assuming the City's Busbar cost is $0.20 per kWh,the Power Share due Aleut would be: Power Share =(8,000,000)x (0.0425)x ($0.20)=$68,000.00 (c)For Energy Resources that are not converted to electric power at any time by the Power Authority,the Power Authority shall pay to Aleut,as Royalty,an amount (hereinafter referred to as the "Energy Share")which shall be fifteen percent (15%)of the market value at the point of removal from the earth (hereinafter referred to as the "Welihead"),or at the point of removal of effluent from the geothermal power system,of said Energy Resources derived from tee * 1594/572(10) DRAFT Land and Resource Agreet April 7,1986 Page 11 the Leased Lands and extracted and saved and sold or used.The market value of such Energy Resources shall be negotiated and determined prior to delivery by the Power Authority to any third party. (d)For Byproducts,the Power Authority shall pay to Aleut,as Royalty,an amount (hereinafter referred to as the "Byproduct Share")which shal}be five percent (5%)of the market value at the Wellhead for al?Byproducts extracted from or allocated to the Leased Lands and saved and sold or used.The market value of such Byproducts shall be negotiated and determined prior to delivery by the Power Authority to any third party. 3.Payment of Royalty.(a)Upon beginning commercial production and thereafter during the Primary Term or any extension term of the Lease,the Power Authority shall pay quarterly to Aleut an advance Minimum Royalty (hereinafter referred to as "Minimum Royalty")in the sum of Twenty-Five Thousand Dollars ($25,000.00).The first payment of the Minimum Royalty shall be due within thirty (30)days after beginning commerctal production,and the amount of said Minimum Royalty shal}be prorated based on the days remaining in said quarter onty.A1} other payments of Minimum Royalty shall be due on January 15,Aprild 15,July 15,and October 15 of each year.Any advance Minimum Royalty so paid to Aleut shall be recoverable by the Power Authority only in the calendar quarter to which said payment applies and only out of said quarter's production of the Energy Resources or Byproducts,and the Power Authority is hereby authorized and directed to deduct the same from Royalty due and payable during said quarter only.Following recovery of any advance Minimum Royalty the Power Authority shall pay Aleut,on or before January 15,April 15,Juty 15,and October 15,the Royalty accrued and payabte for the preceding calendar quarter. (b)Concurrentty with making each Royalty payment,the Power Authority shall deliver to Aleut a detailed statement with substantiating documents setting forth the basis for the determination of the Royalty then paid by the Power Authority,including,but not limited to,an accounting for alt Energy Resources and Byproducts extracted,produced,consumed and/or soid from the Leased Lands.The Power Authority shat!instal}and maintain any and al?equipment necessary to accurately measure and quantify the Energy Resources and Byproducts extracted from the Leased Lands.Periodicatly,in accordance with industry practices and in no event tess frequent)y than yearly,the Power Authority shall cause an independent State or ©Federa} governmental certification of the accuracy of such measuring equipment.Aleut may,at its option and expense and at a time convenient to the Power Authority scheduled in advance,cause such measuring equipment to be inspected and tested for accuracy by independent inspection. 1594/572(11) DRAFT Land and Resource Agreem April7,1986 Page 12 (c)After the end of the Primary Term and each ten (10)years thereafter,the Minimum Royalty payments of $25,000 thereafter payabte,as provided herein,shall be adjusted in the following manner.The adjusted Minimum Royalty payments to be paid after the Primary Term,and each ten (10)year term thereafter,shal)be the product of multiplying $25,000 by a fraction, the numerator of which is the most recently published Consumer Price Index,al}items,a1¥Urban Consumers (the "CP!-U")which is published by the U.S.Department of Labor,Bureau of Labor Statistics at the end of the Primary Term,or the end of each ten (10)year term thereafter,and the denominator of which is >»the published CPi-U on the date of this Agreement.If publication of the CPI-U is discontinued,the parties hereto shall thereafter accept comparable statistics on the cost of living for the United States as they shall be computed and published by an agency of the United States or,if such an index does not exist,by a responsible financial periodical or recognized authority,then to be mutually selected by Aleut and the Power Authority 4,Purchase of Aggregate Materials.The Power Authority shal¥pay Aleut one dollar fifty cents ($1.50)per cubic yard for aggregate materials extracted from AYeut and,as measured emplaced in construction of the Project.Payment shal}be due and payable within thirty (30)days after the last day of the month in which said aggregate materials are actually extracted.The purchase price herein stated is effective only until commencement of operation of the Project. 5.Depository.Al payments required to be made by the Power Authority to Aleut hereunder shal)be paid to Aleut,herein calted depository.Aleut shal)have the right to designate,by written notice to the Power Authority,an alternate depository to which said payment shall be made.No change in the ownership of the Leased Lands or of any payments due Aleut hereunder shal}be binding on the Power Authority until?it shall have been furnished adequate written evidence thereof.In the event more than one person or entity sha)at any time be entitled to receive sums of.money payable hereunder to Aleut,al?such persons shal} have the right,jointly,to designate any other single 'depository to receive al¥payments hereunder on their joint and several behalf,and by jointly executed and acknowledged instrument so to advise the Power Authority,it being intended that the Power Authority shall never be required to make payment to more than one person or entity nor to draw more than one check for any separate payment becoming due hereunder.Until such notice shal]be furnished to the Power Authority,the Power Authority shal?continue to make al)payments to the depository last designated hereunder. 1594/572(12) DRAFT Land and Resource Agreen April 7,1986 Page 13 6.Lesser _or After-Acquired Interest.If it should hereafter appear that Aleut,at the commencement of Project development,owns a lesser interest in the Leased Lands than the fee simple estate therein and thereto,or less than the entire interest in the Energy Resources or Byproducts contained in and under the Leased Lands,then the Rental,Easement Fee,Minimum Royalty,and Royalty accruing to Aleut hereunder shal?be paid to Aleut in the proportion which Ateut's interest bears to the entire fee simple estate in the Leased Lands or to the entire interest in said Energy Resources or Byproducts.Notwithstanding the foregoing,should Aleut hereafter acquire any additional right,title or interest in or to the Leased Lands or said Energy Resources or Byproducts,then any increase in payments of money hereunder necessitated thereby shall commence with the payment next following receipt by the Power Authority of satisfactory evidence of Aleut's acquisition of such additional interest. 7.Taxes.(a)The Power Authority shall pay al)taxes levied and assessed against the Power Authority's Yeasehold interest in the Leased Lands.The Power Authority shal}pay at} taxes levied and assessed against al}structures,improvements and personal property placed upon the Leased Lands by the Power Authority.Aleut shal}pay al?taxes levied and assessed against the Leased Lands as if such Leased Lands were unimproved and shal)pay ai}taxes levied and assessed against al?structures and improvements placed on the Leased Lands by Aleut. (b)Aleut agrees to pay the Power Share,Energy Share,and Byproduct Share of any and ali taxes assessed upon any Royalty received by Aleut for Energy Resources and Byproducts from said Leased Lands. 8.Operations.(a)The Power Authority shal¥comply with al)Yaws and reguiations applicable to its operations hereunder as required by the laws of the State of Alaska and the Jaws of the United States. (b)The Power Authority,its agents,representatives,and contractors shal}ever indemnify,save harmless and defend Aleut from and against any and al)manner of claims,judg- Ments or suits whatsoever arising out of the Power Authority's activities or operations hereun- der other than those arising in whote or in part from Aleut's act or failure to act and this Section shal)survive termination of this Agreement, (c)Prior to exercising any access rights under this Agreement,the Power Authority, its agents,representatives and contractors sha})provide Aleut with certificates for genera} Viability and property damage insurances in reasonabYe amounts and form,and a Power Authority contractor shall name Aleut as an additional insured.All such insurance policies and 1594/572(13) DRAFT Land and Resource Agreem_.._ April 7,1986 Page 14 certificates shall inctude the following cancellation or change clause or a similar clause approved by Aleut:"This insurance will not be cancelled by this insurance company nor any changes made in the policy which wit!change the name of the insured,without first giving thirty (30)days notice in writing to The Aleut Corporation,One Aleut Plaza,Suite 300,4000 01d Seward Highway,Anchorage,Alaska 99503,as evidenced by return receipt of registered or certified mail."The insurance required under this paragraph shal)be maintained in full force and effect throughout the term of this Agreement and any extension hereof. (d)All of the labor to be performed and atl of the materials to be furnished in the Operations of the Power Authority hereunder shal}be at the Power Authority's sole cost and expense unless otherwise specified herein,and AYeut shal)not be chargeable with or liable for any part thereof.The Power Authority shal)protect Aleut and said Leased Lands against liens of every character arising from its operation thereon. (e)Whenever used herein,the expression "drilling operations"shalt mean,for al} purposes hereof,any work or actual operations undertaken or commenced for the purpose of dril}- ing of a well on or into said Leased Lands,including without limiting the generality hereof, the preparation of the ground therefor,the building of roads and other facilities therefor,the construction of a derrick and other necessary structures for the drilling of a well followed by the actual operation of drilling in the ground.Any such work or operations preliminary to the drilling in the ground may be undertaken in any order the Power Authority shall see fit.Al} such work and operations shal}be prosecuted with reasonable diligence after the Power Authority has obtained at permits,consents,and/or licenses which may be required. 9.Testing.The Power Authority shall be entitYed,without accounting to Aleut therefor in any manner,to flow and/or biow wells without restriction for testing purposes. 10.Uneconomic Operations.(a)Nothing herein contained shall require the Power Authority to produce,recover,save,and market any of the Eneray Resources or Byproducts con- tained in the produced brines or effluent from operations on the Leased Lands,which,in the Power Authority's judgment,is not economic to produce,recover,save,or market.The Power Authority shal?have the right to waste or dispose of any such uneconomic Energy Resources or Byproducts by such Yawful manner or means as the Power Authority shall deem appropriate in the circumstances.. (b)It fs recognized that the market demand for the Energy Resources or Byproducts may vary from time to time and during such periods as there is no market for any of the Energy 1594/572(14) DRAFT Land and Resource Agreenr.... April 7,1986 Page 15 Resources or Byproducts,the Power Authority's obligation to produce,process,and extract such Energy Resources or Byproducts shall be suspended.The Power Authority shall have no obligation to save or process Byproducts described in Section 1,item (e)of Article B above. (c)Subject to the foregoing and except as herein otherwise provided,the Power Au- thority agrees to drill wells and operate each completed wel}with reasonable diligence and in accordance with good operating practice and at}applicable laws so long as such wells shat} produce Energy Resources and/or Byproducts in commercial quantities while this Agreement is in force as to the portion of said Leased Lands on which such wel)or wells are situated. 11.Damages Resuiting From Operations.The Power Authority shall not be liable to Aleut for damages to any geothermal resources reservoir underlying said Leased Lands or for the loss of Energy Resources or Byproducts therein or therefrom or for any subsidence or surface damages resulting from its operations hereunder unless such damage or loss is caused by the Power Authority's gross negligence or wiliful misconduct. 12.Unitization.(a)The Power Authority shalt have the right,at its sole option, from time to time,either before or after production,to pool,unitize or combine all or any part of the Leased Lands with other land or lands or lease or leases (whether held by the Power Authority or others and whether or not the surface of such lands may be used for development or operating purposes)adjacent or adjoining the Leased Lands to comprise one or more operating or development units of not more than 1920 acres each,and drilling operations or production on any such unit shall constitute compliance herewith to the same extent as though such operations or production were on the Leased Lands.Aleut shat}participate fin the Minimum Royalty and Royalty from any such unit either in the proportion to which the number of acres owned by Aleut within the unit bears to the total number of acres in such unit or in the proportion to which the volume of Energy Resources that are produced on the Leased Lands owned by Aleut within such unit bears to the total volume of Energy Resources produced on such unit,whichever Aleut chooses. In any event,Aleut shall be entitied to receive,during the Primary Term or any extension term of the Lease,the Rental,Easement Fee,and Minimum Royalty as provided for in Sections 1(d)and 3 of this Article C..Such unit shal)become in existence upon the Power Authority's written notice to Aleut and execution in writing and recordation in the conveyance records of the District in which the Leased Lands are situated,of an instrument identifying and describing the pooled or communi tzied acreage.The Power Authority shay)at alt times keep Aleut informed of the lands embraced in any unit of which the Leased Lands form a part.Whenever used herein,the term "District™shat)mean,for al}purposes hereof,the State of Alaska Recording District. 1594/572(15) DRAFT Land and Resource Agreem April 7,1986 Page 16 (b)As to each and any such operating or development unfit,the Power Authority shat} have the right to commingle for the purpose of utilizing,selling or processing,or causing to be processed,the steam or steam power and/or extractable minerals produced from such operating or development unit with the steam or steam power and/or extractable minerals produced from other lands or units,so long as the production from the unit which includes at?or portions of the Leased Lands is measured,metered or gauged as to such unit production;unit production so measured,metered or gauged shalt then be allocated to the Leased Lands in accordance with the provisions of paragraph (a)above. (c)Allocation,as foresaid,shall cease upon any termination,either in whole or in part (by surrender,forfeiture or otherwise),of this or any other agreement covering lands in such operating or development unit as to the Yands covered by such terminated agreement or part thereof.In the event of the failure of Aleut's or any other owner's titie as to any portion of the land included in any such operating or development unit,such portion of such Yand shat} likewise be excluded in allocating production from such units provided,however,the Power Authority shall not be held to account for any production allocated to any lands to be excluded, as aforesaid,from such unit untess and until the Power Authority has actual knowledge of the aforesaid circumstances requiring such exclusion. (d)If any taxes of any kind are levied or assessed (other than taxes on the Leased Lands as such or any rights thereto not covered by this Agreement),any portion of which is chargeable to Ateut under Section 8 of this Article C,then the share of such taxes to be borne by Aleut as provided in this Agreement shat}be in proportion to the share of the Royalty from such unit allocated to the Leased Lands. (e)The Power Authority may,at its sole option,at any time when there fs no produc- tion in such unit of Energy Resources or Byproducts in quantities deemed commercial by the Power Authority,terminate such unit by a written declaration thereof,in the manner in which it was created. 13.Additfonal Operations.Aleut hereby grants to the Power Authority,its successors and assigns,sole and exclusive right to locate a well or wells on the surface of said Leased Lands and to stant drill said well or wells into,under,across and through said Leased Lands and into and under other,Aleut Lands together with the right to repair,redrill,deepen, maintain,inject in,rework and operate or abandon such well or wells for the production of Energy Resources or Byproducts together with the right to develop water from said Leased Lands for any of the Power Authority's operations pursuant to this Section and together with the right ca 1594/572(16) DRAFT Land and Resource Agreet....- April 7,1986 Page 17 to construct,erect,maintain,use,operate,replace,and remove al)pipelines,power lines, telephone lines,tanks,machinery,and other facilities,together with al)other rights necessary or convenient for the Power Authority's operations under this Section and together with the rights-of-way for passage over and upon and across and ingress and egress to and from said Leased Lands.Said rights may be exercised at any time or from time to time during the duration of this Agreement and as long thereafter as the Power Authority exercises any of the rights granted in this Section. 14.Aleut's Right to Bid.Aleut shall be notified as a potentia)bidder on any phases or tasks contemplated under this Agreement which the Power Authority or its agents or contractors may let for competitive bidding.Any bid that Aleut may submit,in conjunction with a reasonably qualified party or parties,for which the Power Authority determines there would be no conflict of interest in awarding the bid to Aleut,shal}receive equa)consideration to other bids submitted. 15.Titie Warranty.Aleut shal?grant and agrees to defend titte to the Leased Lands except for rights-of-way and easements of record,and further agrees that the Power Authority at its option may pay and discharge any delinquent taxes,mortgages,trust deeds or other de}inquent Yiens or encumbrances existing,levied or assessed on or against the said Leased Lands;and,in the event the Power Authority shall exercise such option,the Power Authority shall be subrogated to the rights of any holder or holders hereof and shal)have the right,in addition to other remedies provided by Yaw or equity,to reimburse itself by applying to the discharge of any such mortgage,tax,or other Vien or encumbrances any and al)payments accruing to Aleut hereunder. 16.Force Majeure.The Power Authority's obligations hereunder shal)be suspended, and the term of this Agreement,the schedule contained in Exhibit B hereunder,and the period for removal of the Power Authority's property in the event of termination shal?be extended white the Power Authority is prevented from complying therewith by strikes;lockouts;riots; action of the elements;delays in transportation;inability to secure labor or materials in the open markets laws,rules or regulations of any Federal,State,Municipa)or other governmenta) agency,authority or representative having jurisdiction;titigation or administrative proceedings affecting title to lands covered hereby or operations thereon;or by other matters or conditions beyond the reasonable control of the Power Authority,whether or not similar to the conditions or matters in this Section specifically enumerated. 1594/572(17) DRAFT Land and Resource Agreem.... April 7,1986 Page 18 17.Surrenders.The Power Authority may,at any time,surrender this Agreement to Aleut in its entirety or,from time to time,surrender only so much of the Leased Lands as the Power Authority may elect in the instrument of surrender.Such surrender shal}be accomplished by executing and delivering to Aleut or placing on record in the District in which the Leased Lands are located a quitclaim deed or deeds covering all or any part of the Leased Lands so selected by the Power Authority for surrender and the Power Authority shall thereby be relfeved of al)obligations as to the acreage so surrendered,except for obligations already accrued by the terms hereof or as provided by Section 20 hereof.Notwithstanding such surrender,the Power Authority shall nevertheless retain such rights-of-way,easements and privileges over,upon, through and across the lands so surrendered as shall be necessary or convenient for the Power Authority's operations on so much of the Leased Lands as shal)then be retained by the Power Authority under this Agreement and on the Power Authority's other lands in the vicinity.Prior to the execution of the power sales agreement with the City,the Power Authority may surrender this Agreement to Aleut upon thirty (30)days written notice.After execution of the power sales agreement,the Power Authority may surrender this Agreement only upon one hundred eighty (180)days written notice to Aleut. 18.Breach of Agreement.If the Power Authority has defaulted in any material re- spect in fts obligations hereunder,Aleut shat)so notify the Power Authority in writing,set- ting out in what respects Aleut deems the Power Authority to be in such default.If,within sixty (60)days after receipt of such notice,the Power Authority shal}commence to correct the default alleged by Aleut and continue the same with due diligence until the alleged default is corrected,the Power Authority shal)not be deemed in default hereunder.The service of said notice and the lapse of sixty (60)days without the Power Authority's commencing to correct the alleged default shall be a condition precedent to any action by Aleut for or on account of such default.Neither the service of said notice nor the doing of any acts by the Power Authority aimed to correct al)or any of the alleged defaults sha}!be deemed an admission or presumption that the Power Authority has failed fin any respect to perform it obligations hereunder. Termination or cancellation of this Agreement shall be the sole remedy of Aleut for failure of the Power Authority to drift!any well,make any payment,or perform any obligation set forth herein.The Power Authority shat)be obligated to and shall pay to Aleut ai?Royalty,Rental, and Easement Fee due up to the date of termination and surrender.tin the event of termination or surrender,the Power Authority shal}execute and deliver to Aleut a recordable instrument whereby the Power Authority relinquishes al}of its rights and interests in Aleut lands and this Agreement. 1594/572(18) DRAFT Land and Resource Agreen._.._ April 7,1986 Page 19 19.Removal of Property and Restoration.(a)The Power Authority may at any time during the term of this Agreement remove al)or any of the property and fixtures placed by it in or upon the Leased Lands,including the right to draw and remove a)?casing. (b)Following termination of this Agreement or any part thereof for any cause,and following abandonment of any wel}drilled pursuant to the provisions hereof,the Power Authority shall,within twelve (12)months thereafter or in accordance with a schedule agreed upon by both parties,remove al}personal property which the Power Authority shal}have brought upon the Jands affected by such termination or upon the drilisite of such abandoned welt;shal)fil)ai} sumps,remove all foundations and so nearly as practicable restore the areas affected by such termination or abandonment to the condition in which they were prior to the commencement of its operations hereunder;and,in the case of a partial surrender,shall deliver to Aleut a quitcltaim deed,in recordable form,surrendering to Aleut al)right,title and interest of the Power Authority in that part of the said Leased Lands as to which this Agreement shal)have been so surrendered,saving and excepting necessary easements and rights-of-way on the Leased Lands for the Power Authority's further operations on any part of the said Leased Lands as to which this Agreement shall not have been surrendered and on the Power Authority's other Yands in the vicinity.The ownership of any of the Power Authority's property not removed by it during the period herein provided shall,in the absence of force majeure as defined herein,be deemed abandoned by the Power Authority and shall pass to Aleut without further act of the parties or either of them effective upon expiration of such period. 20.Assignment.(a)The Power Authority shal)have the right to assign all or any part of its rights or interest in and to this Agreement,including but not limited to the Power Authority's right to occupy such portions of the surface of the Leased Lands as may be necessary for the construction of plants and other facilities,only to another state agency,department, office,authority,or representative having jurisdiction.No assignment by either party hereun- der shal)be effective for any purpose whatsoever until and unless a certified copy of the recorded instrument of assignment;or,if such assignment shall have been recorded only in short form,a true and complete copy of the instrument described in such short form under the true signatures of each of the parties thereto,together with a certified copy of such recorded short form,shall be given to the other party,in the same manner as is provided for a notice hereun- der. (b)In the event of assignment by the Power Authority of this Agreement as to a seg- regated portion of the Leased Lands,payments due Aleut hereunder shall be apportionable among the several leasehold owners according to the surface area of each of their respective 6 1594/572(19) DRAFT Land and Resource Agreen April 7,1986 Page 20 JYeaseholds;however,the Power Authority or its successor in interest shall remain responsible under the terms of this Agreement for performance by the assignee. 21,Native Practices.In selecting employees to carry out its obligations hereunder,the Power Authority shall give preference to Aleut shareholders and to other Alaska Natives,for all positions for which they are equally qualified and available.When reasonable and practical,the Power Authority shall provide training for such employees.The Power Authority shalt make good faith efforts to employ Aleut shareholders and other Natives in skilled,technical and administrative positions.The Power Authority shall,also,avoid substantial infringement upon the traditional practices,cultures and hunting and fishing places of Aleut shareholders,and Aleut shai)use its best efforts to keep the Power Authority informed of such hereditary practices,cultures and hunting and fishing places. 22.Survey of Leased Lands.The exact location of the Leased Lands and right-of-way easements within the Project Area,as described in Section 1 of Article A of this Agreement,as wel)as the location on said Leased Lands of the facilities and other improvements to be constructed as contemplated in the Project,shall be subject to approval by Aleut.Aleut shal} exercise its approval rights so as best to facilitate the purpose for which the Leased Lands are to be leased and in accordance with the determinations set forth in the Feasibility Program analysis.{t fs agreed by both parties to this Agreement that an as-built survey shall be conducted to establish by egal description the precise location of the Leased Lands and right-of-way easements and the costs of such survey shat}be borne by the Power Authority.The as-built survey shal}be completed within twelve (12)months after completion of construction, as referenced in Exhibit B hereof. 23.Memorandum of Agreement for Recording,Neither the Power Authority nor Aleut, nor the successors or assigns of either,respectively,shal}record this Agreement without the written consent of the other.However,the Power Authority or Aleut shall,at the request of either at any time during the term of this Agreement execute a memorandum or "short form"of this Agreement for purposes of,and in a form suitabite for being recorded.The memorandum or "short form"of this Agreement shat}describe the parties,set forth a precise description of the Leased Lands,specify the term of this Agreement and incorporate this Agreement by - reference. 24,Notices.Any notice or other communication hereunder from Aleut to the Power Authority shalt be given in writing by sending the same by prepaid registered or certified mai} with return receipt requested addressed to the Alaska Power Authority at P.0.Box 190869,701 * 1594/572(20) DRAFT Land and Resource Agreen April 7,1986 Page 21 East Tudor Road,Anchorage,Alaska 99519-0869,and any notice or other communication hereunder from the Power Authority to Aleut shal}be given in like manner to Aleut addressed to The Aleut Corporation,One Aleut Plaza,Suite 300,4000 01d Seward Highway,Anchorage,Alaska 99503.Any notice mailed as aforesaid shall!be deemed given and received within seventy-two (72)hours after the deposit thereof in the United States mail if mailed within the State of Alaska and if deposited in the United States mail outside of the State of Alaska,such notice shal)be deemed to have been given and received within one hundred twenty (120)hours after deposit in the United States mai).The parties may,by like notice at any time,and from time to time,change their respective addresses for the purposes hereof.Postmark dates on registry receipts for such notices shal}be conclusive as to the date of mafling. 25.Entirety Clause.If the Leased Lands shall hereafter be owned in severalty or in separate tracts,the Leased Lands nevertheless shall be developed and operated as one Lease,and ali Royaltfes accruing hereunder shal}be treated as an entirety,and shall be divided among and paid to such separate owners in the proportion that the acreage owned by each such separate owner bears to the entire leased acreage.Any payment required to be made by the Power Authori- ty pursuant to the foregoing shal)be paid in accordance with the provisfons in Section 6 hereof.There shall be no obligation on the part of the Power Authority to off-set wells on separate tracts unto which the Leased Lands may be hereafter divided by sale,devise, unitization,or otherwise,or to furnish separate measuring or receiving facilities. 26.Severability.If any part,portion or provision of this Agreement shall be found or declared nui},void,or unenforceable for any reason whatsoever by any court of competent jurisdiction or by any governmental agency having authority thereover,then only such part, portion,or provision shal}be affected thereby and the remainder of this instrument shal?con- tinue in full force and effect.The foregoing provisions of this paragraph shall be severable for the purposes of the provisions of this Section. 27,Binding Effect.This Agreement and all of the terms,covenants and conditions hereof shat)extend to and be binding upon the respective heirs,executors,administrators, grantees,successors and assigns of the parties hereto. 28,Definition.For purposes of this Agreement,"commercial production," "commercial operations,"or "commercial activities"shall mean the extraction of Energy Resources and/or Byproducts,and/or delivery of the products derived therefrom,for the benefit of the Power Authority and/or third party for purposes other than start-up or testing. 1594/572(21) DRAFT Land and Resource Agreen April 7,1986 Page 22 IN WITNESS WHEREOF,the parties hereto have executed this instrument as of the date hereinabove first written. The Aleut Corporation The Alaska Power Authority By By 1594/572(22) DRAFT Land and Resource Agreen April 7,1986 Page 23 1594/572(23) PHASE EXHIBIT A FEASIBILITY PROGRAM SCOPE OF WORK (1)TECHNICAL AND ECONOMIC FEASIBILITY ANALYSES, (2)PLAN OF FINANCE. (3)ACQUISITION OF POWER SALES AGREEMENTS. (4)FINANCIAL FEASIBILITY ANALYSIS, (5)ACQUISITION OF FINANCING FOR THE PROJECT. ON OR BEFORE February 1,1987 May 1,1987 December 1,1987 July 1,1988 Juty 1,1991 EXHIBIT 8B DEADLINES FOR FEASIBILITY PROGRAM AND DEVELOPMENT OF PROJECT Complete Technical and Economic Feasibility Analyses,accept final report. Complete Plan of Finance.Commit to course of of action for proceeding with the Project or terminating this agreement. Acquire power sales agreements,complete financial feasibility analysis. Complete project design,commence construction phase. Complete construction,commence operation. EXHIBIT C SCHESULE OF ELICICCE power COSTS UTINIG?nawla -caneificase 40.RePoating PEAiCO ACCSUNT is Bed Sh pe: REACo-ep (Isoreat2)FPC/FEncCLASSA/B oe (Test Year) é . . amExecs:se +wotes R ng AMatn:.4 1.POSER PRODUCTION EXPENSES A.STEAM POWER CENSRATION Operstion supervision &engineering Steam expenses Steam frem other sources Steam transferred -Credit Electric expenses Mise.steam power expenses Rents Maintenance supervision &engineering - Maintenance of structures Maintenanceof boiles plaatMaintenanceofelectricplant Maincanance of misc.steam plsat 'B.HYDRAULIC POWER CENERATION Operation supervision @ engineering Water for power Hydraulic expenses Electric éxpenses Mise.hydraulic power gen.expenses Rents Maintenance of supervision &engineering Maintenance of structures Maintenance of reservoirs,dams &waterways Maintenance of electric plant Maintenance of mise.hydraulic plant C.OTHER POWER CENERATION es Operation supervision &engineering Generation Expenses Mise.other power seaerction expensesRentsMaintenancesupervision&engineering .° Maintenance of structures Maintenance of generating &electric plant Maintenance of misc.other power generation plant D.OTMER POLER SUPPLY EXPENSES . System control and load dispatching Other expenses 2.TRANSMISSION EXPENSES Opcration supervision &enginceriag Load dispatching StL3Lion expenses Overhead line expenses Undersround line expenses Transmission of electricity by others ee. Misc.transmission expenses aiRentsGENERMaintenancesupervision&engineering 14-3"yintenance of structures fl". SCHESULE OF ELICISLE POwER COSTS =-----Uv eaTy AE ©COATIFiCATS 50. ACCENT NUMSES SEFERENCE EXPENSE CATICS2Y ©AMOUNTFec/Fiac Roa OFHERCLASSA/B Co-op (INDICATE)°. 2.TRASSHISSICON CASENSES CONT'D $70 $70 Maintenance of station equipment$71 $71 Maintensnce of overnead lines $72 $72 Maintesance of underground lines573$73 Maintenance of misc.transmission equipment 3.DISTRISUTION ZESENSES 550 $80 Operation suservisioa &engineering581$81 ,Load dispatching§82 §S82 Station expenses$83 $83 Overhead line expesses$84 :$84 Undergscund line exrenses585$585 Street lighting and signal systen expenses586$36 Meter expenses $87 $87 *Customer installation expenses ' 5&8 $88 Misc.distribution exsenses $89 $89 Rents $90 $90 Maintenance supervision &engineering $91 S591 Maintesance-of structures $92 532 'Maintenance of station equipment 593 . $93 Maintenzace of ovesnead lines «$94 $94 Maintenance of underground lines 395 595 Maintesance of line transformers§96 $96 ,Maintenance of street lighting and sign3l systea 597 $97 Maintenance of meters 598 598 _Maintenance of mise.distribution plant '&CUSTOMER ACCOUNTS EXPENSES 901 901 Supervision 902 902 Meter readiag expenses 903 $03 Customer records ard collection expenses 904 904 Unacollecsible accounts- 905 905 Mise.customer acesunts expenses §.CUSTCxE2 SERVICE & INFCSMATIONAL EXPENSES 907 907 Supervision 90S 908 *.Customer assistance expenses $03 905 Informational &instructional ° advertising expenses. 910 910 Mise.customer service & informsatioasl expenses ° 6.SALES EXPENSES 911 911 Supervision 912 912 Demonssesting &seliings expenses 913 913 Advertising expenses 916 916 Mise.sales expenses -CdSCIECULE OF ELISICLE PO*eR COSTS Ek URRY aUTincaaMAE©CERTFTCATS 0. ACCOINT NUMSER REFERENCESFrC/Fanc REA Oia CLASS A/8 9 Carep (INDICATE * 7.ACNINISTRATIVE &CENERALEXPENSES 920 920 Administrative &general salsries 921 922 OfSice supplies &expenses 922 922 Administrative expenses transferred -Cr. 923 923 Outside services employed 925 924 Property Insurance 925 928 Injuries &dazages 926 926 Employee pensions &benefits 927 927 Franchise requirezents 928 928 Regulatory commission expenses 929 923 Duplicate chasges -Cr. 930.1 930.1 General advercising expenses 930.2 930.2 Misc.general expenses 931 .=.931 Rents , 932°932 Maintenance of general plant EXPENSE CATCCORY AMOUNT 8.ALLOWABLE FIED COSTS (to the extent expensed) Depreciation Taxes Interest oa debt 2 Total Expenses,Excludisg Fuel Costs” NOTE:Am adjustseac for current fuel costs will be made by Commission Staff.The following inforsation is therefore required: '3.Reeulsced ucilieles with surcharees in effect 1.Current proce per gailon of fuel soown in most recest surcharge calculation approved by the Coczission. 2.Yearly gallons consumed and Xkd sales shown in most recent surcharge calculacion approved by the Commission. 2. ° a idb. Ueciliczes wieh neo surcharee ia effeee orcunreeulated l.Fuel storsge capacsty 2.Actual price per gallon of fuel on hand,assuming thaec latest purchases are sold last (i.e.FIFO) Atcach schedule showing components of totsl.Sch.Ref.3.Latest invoiced price of fucl per gallon Actscn copy of invoice.Sen.Ref. Vibe -lat a;Abea Ela,Maeeyapa a7 a