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HomeMy WebLinkAboutMakushin Geothermal Project Description 1995os7 Ve iv ww 4000 KRUSE WAY PLACE ©BUILDING ONE,SUITE 255|>LAKE OSWEGO,OREGON '97035.'Fisath MAKUSHIN GEOTHERMAL PROJECT PROJECT DESCRIPTION PREPARED BY MAKUSHIN GEOTHERMAL COMPANY 4000 KRUSE WAY PLACE BUILDING ONE,SUITE 255 LAKE OSWEGO,OREGON 97035 APRIL 1995 Power Corporation al April 24,1995 =2) Mr.Dennis V.McCrohan Deputy Director -Energy- Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage,Alaska 99503 Subject._MAKUSHIN GEOTHERMAL PROJECT <- Dear Dennis: Enclosed please find copies of the information packages which OESI has prepared to send to third parties for the Makushin Geothermal Project. This will help to keep you informed about what information has gone out to industry,and should there be any questions,you would have the same information as everyone else. I'll definitely keep in touch with you as this process moves forward.Markley and LeResche will also be receiving copies of this package.- If you have any questions,please do not hesitate to call me. Very truly yours, hb |EGEIVEEiic'Patrick J.McAllister Ec v !c iVicePresidentAp?2B tees L MCALLIST\MAKU\AIDEA104.LTR Incl jEnclosureAlaskaIncustris|Coveloomer;and Exnor:Authority Building One,Suite 255 *4000 Kruse Way Place *Lake Oswego,OR 97035 *(503)636-9620 *FAX (503)697-0286 INDEX PAGE Background 1-2 Development of Well Field 3 Plant Facility 4 Road,Bridges,Pier,&Existing Airstrip 5 Electric Transmission System 6 Construction 6 Operations 7 Benefits 7 Project Status 8-11 APPENDIX Unalaska Map Tab 1 Makushin Geothermal Electric Generation Site Map Tab 1 Executive Summary of R.W.Beck's Final Report Tab 3 Letters of Support Tab 4 Permit Summary Tab 2 PROJECT DESCRIPTION MAKUSHIN GEOTHERMAL PROJECT PROJECT DESCRIPTION A.BACKGROUND The City of Unalaska is a fish processing and marine transportation center on Unalaska Island in the Aleutian archipelago (see map in Tab 1,attached).It is the largest fishing port in the United States and the fastest growing municipality in Alaska.Unalaska is central to the State's third largest industry -fishing and seafood processing -and has become a critical hub in the State's transportation infrastructure.Total energy and capacity requirements have grown at an average rate of over 50%per annum over the last decade.In fiscal year 1994,total energy consumption was estimated at 89.2 million kWh per year. The rapid and largely unplanned growth of industry and population at Unalaska over the past decade,and concurrent enactment of stringent Federal air quality regulations,has caused a crisis in energy systems in the municipality.The City is the largest municipality in the State (and probably in the country) without a centrally-dispatched electric grid. Large industrial loads meet most of their own demands through self generation.The City has reciprocating diesel fired generation capacity of 7.5 MW,and various industrial self-generation facilities have installed capacity of an additional 45 MW,all reciprocating diesel engine driven.In fiscal year 1994,the City provided an estimated 28 million kWh,about 30%of total kWh consumed. Installation of self-generation facilities by industries in the municipality have been without a central plan,and the resulting mix of uncoordinated generation has resulted in severe inefficiencies,both economic and environmental.The City is constrained from adding diesel capacity at its existing powerhouse due to air quality standards for NOx emissions. One of the major fish processors is currently exceeding the 250 tons/year emission requirements for NOx and is currently applying for a PSD permit.The City of Unalaska is likewise,applying for a PSD permit. Makushin volcano,located approximately 13.5 miles from Unalaska (see second map in Tab 1,attached),contains a geothermal resource calculated by MAKUSHIN GEOTHERMAL COMPANY Page 1 PROJECT DESCRIPTION MAKUSHIN GEOTHERMAL PROJECT the Alaska Power Authority in 1986 to be capable of supporting indefinitely a power generating plant of 12-20 MW capacity.The Alaska Industrial Development and Export Authority (AIDEA)is a state agency with the following mission statement:"To promote,develop and advance the general prosperity and economic welfare of the people of Alaska,to relieve problems of unemployment,and to create additional employment.”AIDEA in conjunction with the local government and the private sector is considering development of that resource to meet the long term energy requirements of the City of Unalaska and its industrial complex.Approximately $3 million in private sector funds and $6 million in state funds have already been invested in the project. Makushin Geothermal Company (MGC),a wholly owned subsidiary of OESI Power Corporation (OESI),continues to put resources to work in making the project a reality.Work on major environmental permits is well under way. Refer to the "Project Status"section for a more detailed discussion of the permit status. MGC has proposed an 18 MW nameplate geothermal power production facilitytobelocatedapproximately12mileswestandnorthwestofDutchHarboron the Island of Unalaska,at a remote site near the base of Makushin volcano called South Plateau,and associated infrastructure,including transmission, distribution and central dispatch facilities for the City of Unalaska.It is anticipated that financing for the entire project will be provided through a combination of AIDEA debt and third-party grants and equity.AIDEA will develop the Plan of Finance which will further identify the source of these funds.The "Project Status"section will cover the financing in more detail. This plant will replace significant amounts of the self-generated power.The self-generation facilities are facing fluctuating fuel oil prices and increasing pressures to reduce air emissions;both of which are incentives to switch to consistently priced,geothermal based power generation.This power will provide stable pricing to the City of Unalaska and its industrial consumers, while providing a reliable and more environmentally sound source of electricity necessary to allow future growth in the local community and economy. The City of Unalaska has executed a letter of intent to purchase its full energy requirements from the AIDEA geothermal generating facility at a formula price, and several large industrial consumers have executed similar letters of intent to purchase their full requirements from the City. The project components include utilization of existing roads for access to the maximum extent possible in the Makushin River drainage.Existing airstrip at MAKUSHIN GEOTHERMAL COMPANY Page 2 PROJECT DESCRIPTION MAKUSHIN GEOTHERMAL PROJECT Broad Bay will be upgraded and used for transport of personnel and light equipment and supplies.Barge landing at Broad Bay will be established for off- loading of large equipment and supplies.A permanent pier will be constructed at Nateekin Bay for marine vessel access.Ultimately,the electrical transmission line will be installed from the power plant at the South Plateau to tidewater (Broad Bay)where it will be buried under the subsea surface, emerging at the City of Unalaska. The South Plateau development contains those facilities necessary to drill the geothermal wells and produce electricity including five well locations with associated reserve pits,an emergency camp to be used during construction and a permanent control,maintenance and housing facility for the post- construction use.The power plant will mostly be built off-site,transported to the South Plateau and installed in place. The design for this plant is based on proven technology and existing operating plants owned and/or operated by OESI Power Corporation.OESI is an experienced independent power producer that has successfully developed, secured project financing for,constructed,owns,and operates seven geothermal power plants using proven technology similar to the Makushin Geothermal Project. No environmental impact is expected from the development of the Makushin Geothermal Project,rather,the project is expected to improve environmental quality in the service area by allowing compliance with air quality regulations due to reduced use or retirement of diesel generation. Since the City is currently without a centrally-dispatched electric grid,the only way to effectively distribute this power is by establishing a central dispatch and distribution grid system.This grid is an essential project component.The construction of the Makushin Geothermal Project will provide the basic power requirements of the City,all the major fish processors,and other industrial customers.It will displace an equivalent amount of electricity currently generated in Unalaska using diesel fired generating facilities. B.DEVELOPMENT OF WELL FIELD The Project will consist of three 4,000 foot deep production wells and two 4,000 foot deep injection wells located on the South Plateau.The production wells are anticipated to generate approximately 1,560,000 pounds per hour of MAKUSHIN GEOTHERMAL COMPANY Page 3 PROJECT DESCRIPTION MAKUSHIN GEOTHERMAL PROJECT wells are anticipated to generate approximately 1,560,000 pounds per hour of geothermal steam and brine at a temperature of 290°F at the surface.The first well will be located adjacent to the test well ST-1 drilled by the State of Alaska and the other two wells will be approximately 1000 linear feet from the test well.Some adjustment in the well location may be required depending on the testing results of the first wells drilled.These wells are artesian and the fluids will flash into steam and brine for utilization by the power generation facility described below.After passing through the generation facility,the geothermal fluid and condensed steam will be injected at approximately 180° F,allowing the geothermal fluids to be replenished. A pad 180 feet long by 250 feet wide will be prepared for each well using native material and will provide a level compacted area on which the drilling rig and equipment will be placed.A lined reserve pit approximately 60 feet by 60 feet by 10 feet deep will also be constructed at each location. Cc.PLANT FACILITY The power plant will be constructed on the South Plateau after the wells are completed.The plant will utilize approximately 1,560,000 pounds per hour of geothermalfluidinits four modular turbine generators,which employ a closed,binary,hydrocarbon 'electrical generation cycle.Plant cooling will be provided by four air condensing units located adjacent to each of the turbine modules. A plant substation located near the plant site will be installed to step up the power from 13.8 kilovolt to 34.5 kilovolt for transmission to the City.Fire protection equipment will include a 350,000 gallon fire water tank,fire pump and jockey pump.The plant will also include ancillary electrical equipment,an emergency diesel generator with a lined and bermed 15,000 gallon diesel storage tank,and a control and maintenance building complete with maintenance and hotel facilities for the crews (approximately 14 crew members).A conventional septic system will be constructed as a part of the permanent facility. The design of the geothermal plant would use air cooler condensers and all geothermal fluid from the production wells will be injected back into the ground,therefore eliminating nearly all discharge of pollutants into the atmosphere. Development of the Makushin project would allow for the expansion of the geothermal field and because of the modularized concept of the electrical MAKUSHIN GEOTHERMAL COMPANY Page 4 PROJECT DESCRIPTION MAKUSHIN GEOTHERMAL PROJECT generation units,additional generation can be added with low incremental costs. D.ROAD,BRIDGES,PIER,&EXISTING AIRSTRIP Initial construction access to the South Plateau will be from Broad Bay via what remains of an existing World War II (c.1944)road built by the Corps of Engineers on the Makushin Valley floor.The existing road will require major renovation and the addition of four to five new bridges.The road alignment will follow the existing road in the gravely area adjacent to the river, approximately eight additional miles to the base of the existing switchback road where the last three and one-half miles of road will require new construction of a rudimentary road for construction access.This road will cross to the south side of the valley and traverse high on the valley wall, before dropping into the Makushin Valley and finally up to the South Plateau. The South Plateau is approximately 1200 feet above sea level. Approved upland material sources will be utilized for road and plant pad construction.None of the approved material borrow sources located along the river bed will require blasting.Some blasting may be required at approved upland material sites and to bench-in the road in the upper Makushin Valley. Stream crossings will utilize bridges which will avoid an increase in stream velocity.Culverts will be designed appropriately for the size and velocity of the stream. Permanent access to the site will require a 1.5 mile road to be constructed from Nateekin Bay to the Makushin Valley,where it will intersect with the renovated road described above.A pier will be constructed in Nateekin Bay supported by steel piles.It will be approximately 16 feet wide and 320 feet long.A beach landing facility will also be required at this location for occasional heavy loads to be delivered by barge during operation.A small building (30 feet by 40 feet)will be located at Nateekin Bay for emergency supply storage and accommodations.It will be suitable for an emergency overnight stay during inclement weather when travel either to the plant or to the City of Unalaska is unsafe.No drinking water supply will be developed and only a pit privy will be provided. Broad Bay facilities include a temporary construction barge landing area,which will be removed when construction is complete,an equipment shelter housing MAKUSHIN GEOTHERMAL COMPANY Page 5 PROJECT DESCRIPTION MAKUSHIN GEOTHERMAL PROJECT the cable landing,a lined and bermed fuel storage area,as well as a staging area and construction camp facility. All drilling personnel and lighter supplies will be transported by small water craft or fixed wing aircraft from the City of Unalaska to Broad Bay where a useable airstrip exists. E.ELECTRIC TRANSMISSION SYSTEM A single,34.5 kilovolt,3-conductor,250 kcmil copper cable will be buried adjacent to the road between the South Plateau and Broad Bay for approximately ten miles.A submarine cable of similar construction will be placed across Unalaska Bay near the existing cable right-of-way to Amaknak Island.An above ground connection facility will be housed in a 20 foot by 15 foot building at Broad Bay for the purpose of protecting the connection between the buried and submarine portions of the cable.The transmission line will connect with the City of Unalaska's distribution system. F.CONSTRUCTION All materials for the drilling operation including the drilling rig,personnel camp, emergency personnel camp,heavy supplies and fuel will be mobilized to the South Plateau from Unalaska by barge and truck.Fuel will periodically be off- loaded from a barge and stockpiled in six 10,000 gallon temporary double- walled tanks located in Broad Bay.The tanks will be located in a lined,bermed site with 115%capacity and 12 inches of freeboard in order to enhance fuel containment in the case of tank failure. Approximately 6,000 gallons of water per day (6,000 gallons average--9,000 gallons maximum)will be required for the drilling operation.This water will be drawn from Fox Canyon Creek or from small streams near the drilling site.The drilling operation will span approximately nine months unless a winter layover is required. A 60 person camp used for the various phases of construction will be located at Broad Bay for the road and transmission line installation.Native materials and rock from the approved upland material borrow sources will be utilized to create a level firm pad for the personnel camp.These temporary camps will utilize approximately 4,800 gallons of water per day.The camps will each MAKUSHIN GEOTHERMAL COMPANY Page 6 PROJECT DESCRIPTION MAKUSHIN GEOTHERMAL PROJECT cover an area of approximately 125 feet by 150 feet.All sewage will be treated by an approved system to allow surface discharge of liquids and all burnable solids will be incinerated on-site.Combustible trash will be burned on site.Noncombustible trash and ash will be accumulated and stored in 55 gallon drums or other suitable containers before being back-hauled to the City landfill once or twice per month. All supplies,plant equipment and personnel for plant construction will be brought in by barge,landing craft,or fixed wing aircraft utilizing the existing (upgraded)airstrip in Broad Bay.A temporary barge beach landing area will be prepared on the beach of Broad Bay for off-loading plant and construction equipment.This landing area will be reclaimed once construction is complete. G.OPERATIONS During normal operations there will be little geothermal brine or steam present except within the plant cycle.For occasional maintenance and well warm up activities after the well has been inoperative for some period,geothermal brine will be discharged into the geothermal pit on the South Plateau.The fluid in the pit will be removed by pumping the liquid to the injection system,thus returning it to the subsurface formation.These warm up and maintenance procedures will occur approximately six to twelve times per year. The plant will be manned around the clock and will utilize a total crew of fourteen.Maintenance crews will normally work during the day time hours. H.BENEFITS The major benefits of this project: °The project will provide a primary,base loaded generation facility and integrated power system for the Unalaska/Dutch Harbor community, one of the largest load centers anywhere without centrally dispatched electric power. °The cost of electric power will not be dependent on future fuel oil prices,but will be based on an environmentally acceptable long-term renewable source of energy. MAKUSHIN GEOTHERMAL COMPANY Page 7 PROJECT DESCRIPTION MAKUSHIN GEOTHERMAL PROJECT °The generation plant will dramatically reduce current diesel emissions, which are limited under the Federal Clean Air Act and are restricting economic development at the nation's busiest fishing port. °The project will promote and enhance rural development in Alaska. °The project is consistent with federal and state government emphasis on renewable resource development for the production of electricity. °The project will foster the partnership of industry and the city,state, and federal governments. I.PROJECT STATUS 1.Logistics Significant effort has been expended over the life of the project to investigate and evaluate many of the project design and logistic details.This project has particularly challenging logistics because of its remoteness,unusual weather, and lack of access to the South Plateau and Broad Bay.MGC has studied such items as road routes,access by helicopter,barge support,fuel sources for construction,means for fuel delivery during construction,mancamp type and location,plant site location,operation and maintenance considerations, and transportation across Unalaska Bay.MGC's findings concerning these matters have been incorporated into the plan of construction and the cost estimates.Many of the potential subcontractors have also been identified. 2.Right-of-Way Discussions have begun on a preliminary basis with all property owners concerning right-of-way.The two native corporations are supportive of the project and will require contracts to obtain access and to utilize road building material from their property.The project will require access to two native allotments administered by the Bureau of Indian Affairs (BIA).Permission for use of the allotments must be granted by the BIA and by the native allottee of record.Although MGC has spoken with the native allottees,negotiations must be progressed and the BIA process must be initiated. MAKUSHIN GEOTHERMAL COMPANY Page 8 PROJECT DESCRIPTION MAKUSHIN GEOTHERMAL PROJECT 3.Permits Nearly all state permits are administered through a single state agency,the <DepartmentS\of Governmental Coordination (DGC).All applications for statepermitsrequiredbythestatereviewprocesshavebeencompletedandthe state review was initiated in late 1994.The thirty day public comment period was also started but suspended on the twenty-fifth day of the review period. This review was suspended to allow the applicant to respond to certain questions presented by various state agencies.Once responses to these questions are submitted and accepted the state review process will be re- started allowing the various state agencies to issue their respective permit. Applications for the Army Corps of Engineers (USCOE)permit and the U.S. Coast Guard have been completed and the review process is progressing.The USCOE review is nearly complete.The NEPA process has been triggered and the USCOE will complete an Environmental Assessment for the project. A public meeting in the local community has been suggested by some individuals and entities in Unalaska and MGC has offered to host such a meeting.This will allow MGC to more fully explain the project and allow the local community to ask questions.This will keep the applicant pro-active during the permitting and right-of-way acquisition period,as well. The primary permit activity remaining,in addition to the above,include filing for the City of Unalaska Tidelands Lease,U.S.Coast Guard Navigability Determination and Bridge Permit,plan reviews of the sewage treatment and injection plans (applications have already been submitted),EPA Spill Prevention Control and Countermeasure Plan (SPCC),Storm water Pollution Prevention Plan for construction and Spill Plan for operations,and normal building permits required for construction. Refer to the attached Permit Summary (Tab 2)for a more detailed listing of the permit status. Alaska Industrial Development &Export Authority (AIDEA) AIDEA is the state agencies that will own and manage this project.They contracted with R.W.Beck to perform an economic and technical comparison of various technologies to provide power to the Unalaska community (see Tab 3).The attached executive summary of this report provides support for the project and indicates the following: MAKUSHIN GEOTHERMAL COMPANY Page 9 PROJECT DESCRIPTION MAKUSHIN GEOTHERMAL PROJECT °The status quo alternative violates current air quality related generation limits,a situation which will be exacerbated by any future load growth. °Both the Integrated Diesel Alternative and Makushin Alternative would bring the Unalaska/Dutch Harbor area into environmental compliance and allow for future load growth. °Present environmental problems cannot be adequately addressed without island-wide interconnection and coordinated dispatch. °The Integrated Diesel Alternative is the lease-cost alternative under the following assumptions:(a)no load growth and loss of load,both with a base fuel price escalation. °The Makushin Alternative is the least cost alternative under the following assumptions:(a)3%load growth and loss of load with a high fuel price escalation. °The Integrated Diesel and Makushin Alternatives are approximately equal under the following assumptions:(a)no load growth with high fuel price escalation,and (b)3%load growth with a base fuel price escalation. The three largest processors have signed letters of intent to purchase their power requirements from the Makushin project as long as power is available. AIDEA will be assisting the City of Unalaska with negotiating requirements Power Sales Agreements with these processors.There will also be a need for supply contracts as the Makushin Project cannot supply all the power required during the peak period,necessitating the operation of the processors'diesels to provide peaking power. AIDEA,the City of Unalaska,and the native corporations are very supportive of the project and have been an integral part of the team.MGC has been coordinating with AIDEA to solicit project support from the Alaskan congressional delegation.A reception for the Makushin Project was held in Washington D.C.to seek additional support.This reception was most successful and subsequently resulted in several letters of support (see Tab 4). MAKUSHIN GEOTHERMAL COMPANY Page 10 PROJECT DESCRIPTION MAKUSHIN GEOTHERMAL PROJECT 5.Funding The Power Sales Agreements were not in place soon enough to allow the project to be submitted to the state legislature for approval in 1995.It will be requested that the state legislature provide authorization to AIDEA to issue state industrial revenue bonds backed by the state moral obligation.Once the Power Sales Agreements are in place a package must be prepared for the legislature for consideration during the 1996 legislature.Meanwhile,requests for federal and state grants to complete the funding must be prepared mid- 1995 for consideration in the 95/96 and 96/97 federal grant appropriations. These funds could be available by October of 1995 allowing the project to proceed.It is expected that the project can be fully funded through a combination of state industrial revenue bonds and state and federal grants. MAKUSHIN GEOTHERMAL COMPANY Page 11 \)>|a -_. PROPOSED'7 <aNORTHERN SEA ROUTE ALASKA *--G\\wetSyP4)oPSS THE GREAT CIRCLE ROUTE ».SEATTLE MAKUSHIN VOLCANO DUTCH HARBOR: | UNALASKA : UNALASKA,POSITIONED FOR FUTURE GROWTH MAKUSHIN GEOTHERMAL ELECTRIC GENERATION PROJECT ° i sR ENG :occa ;rts fed tapes :z TH,4 NLGy)\\ost 7 No 4% "o GrikZ ae PRN Wan "3 Condhe A Ge.Driftwood Bay SySertoSchZENSPA4\i\= isV N - |es "3 \,77le1Matusiin 1 $9057 5 |i I 12 : et,WIS ef -0 al A USGS 16 MINUTE TOPOGRAPHIC MAP UNALASKA (C-2)QUANDRANGLE 4 UNALASKA (C-3)QUANORANGLE os ays \OESI ALASKA CORPORATION __. APPROXIMATE SCALE IN MILES MAKUSHIN GEOTHERMAL ELECTRIC GENERATION PROJECT i Vat oo UETHE 3 COATDUR eITERVAL 100.EEF JOB NO,23431-003-020 |TT SUMMARY AND STATUS OF ENVIRONMENTAL PERMITS AND OTHER APPROVALS MAKUSHIN GEOTHERMAL PROJECT All State permits are filed as a package as part of the Consistency Determination. *Required for construction to commence. **To be filed by Contractor. R___Revised Application Packet 11/29/94 A.STATE PERMITS * 1.Office of the Governor,Div.of Governmental Coordination (DGC): Coastal Consistency Determination Packet filed 7/15/94R ON HOLD 2.Alaska Dept.of Fish and Game (DF&G): Fish Habitat Permit -Title 16 Application complete;fish inventory TAS/94R ON HOLD complete RETZLAFF\PERMIT.DOC\dlc 1 December 8,1994 A.STATE PERMITS *(Cont.) 3.Alaska Dept.of Environmental Conservation (ADEC): Permit to Operate (Air Quality) Solid Waste Disposal (Drill Waste) Waste Water Disposal (Injection & Domestic Mancamp) Section 401 -Water Quality Certification Agency preparing preliminary permit Submit on-site contract Done as part of COE Section 404 Permit 3/15/94 3/15/94 3/15/94 N/A 3/21/94 3/21/94 3/21/94 N/A ON HOLD ON HOLD ON HOLD RETZLAFF\PERMIT.DOC\dic December 8,1994 A.STATE PERMITS *(Cont.) SUBMITTAL DATE:©'APPROVAL DATE EXPECTED EXPECTED 4.Alaska Dept.of Natural Resources (DNR): a.Div.of Water Temp.Water Rights 3/15/94 3/21/94 &ON HOLD 7/15/94R Permanent Water Rights-So.Plateau 11/29/94 ON HOLD b.Div.of Oil &Gas Geothermal Production Well Permits 3/15/94 3/21/94 ON HOLD Geothermal Injection Well Permits 3/15/94 3/21/94 ON HOLD c.Div.of Lands Right-of-Way Cable placement in State Tidelands 7/15/94R ON HOLD Tidelands Lease For Dock and Beach Landing 7/15/94R 1/96 Land Use Temp barge landing 7/15/94R ON HOLD d.State Historic Preservation Office Will review project with DGC 7/15/94R ON HOLD packet RETZLAFF\PERMIT.DOC\dic 3 December 8,1994 B.FEDERAL PERMITS * SUBMITTAL DATE APPROVAL DATE -EXPECTED - |_-_-a a 1.US Army Corp of Engineers (COE) AGENCY PERMIT CURRENT STATUS EXPECTED | Section 404 Permit 7/7194 ON HOLD Approval date depends on whether EA or EIS required.Includes endangered species. Section 10 Permit Approval with 404 Permit (one WI7194 ON HOLD permit will be issued by COE).US Fish &Wildlife Services )Part of Nat'!Marine Fisheries )COE EPA 404 (b)(1)(Wetland))Submittal 2.US Coast Guard (USCG) Aid to Navigation For dock (to determine jurisdiction)|11/4/94 11/29/94 ON HOLD For crossing navigable waters (to Bridge Permit determine jurisdiction)11/4/94 11/29/94 ON HOLD RETZLAFF\PERMIT.DOC\dlc 4 December 8,1994 C.OTHER PERMITS AND APPROVALS THESE PERMITS DO NOT AFFECT THE TIMING OF MAJOR PERMITS 1.Alaska Department of Environmental Conservation (ADEC) Sewage Treatment System Plan Review (Leach Field) Injection System Plan Review Submit plans and specs.for package equipment with PE stamp Submit plan and specs.with PE stamp |SUBMITTAL DATE. 60 Days Prior 60 Days Prior ACTUAL APPROVAL DATE. 'EXPECTED |AC 2.Environmental Protection Agency (EPA) Spill Prevention Plan (SPCC)- Construction Spill Prevention Plan (SPCC)-Operations Underground Injection Control Inventory Storm Water Pollution Prevention Plan (SWPPP) For construction By 6 months after start-up To be submitted after completion of injection wells To comply with NPDES General Permit.File before construction On hold On hold Prior to injection File 5/95 File File File File RETZLAFF\PERMIT.DOC\dIc December 8,1994 C.OTHER PERMITS AND APPROVALS (Cont.) __SUBMITTAL DATE _EXPECTED -EXPECTED |.ACTUAL | Sources 3.City of Unalaska Tidelands Lease Waiting City implementation of procedures through OC -90 days Conditional Use Permit If required **Building Permits To be submitted throughout the By Contractor construction process **Occupancy Permit By Contractor At completion 4.State Fire Marshall Plan Review **Temp Camp By Contractor Permanent Facilities 96 5.Battle Mountain Gold Co.Battle Mountain Gold Co.&the Pipeline and Road System on Leases Aleut Corp.currently negotiating 6.Bureau of Indian Affairs and Native Allottees Road and Transmission Line through Began 4/1/94 4/5/94 Makushin Valley Letter to get info. 7.SARA 311 and 312 requirements to be 5/95 N/A submitted after construction begins 8.OSHA Safety material to be obtained prior |N/A N/A to construction 9.Ounalaska Corp.Land Use Discussions have begun ON HOLD 10.The Aleut Corp.Material Borrow Discussions have begun ON HOLD RETZLAFF\PERMIT.DOC\dic December 8,1994 Alaska Industrial Development February 28,1995 Analysis of the Makushin and Export Authori Comparative Power Cost Geothermal Project Final Report vm) tee FEAT Th BLESyin Ao tes hardest ekpadsako igh aad Se oR . Fe eek a Soe be &, " % ' ; es5 'Ties f 3 < - a _ Pac ee ae ee oe 9 ict - ' i 5 EXECUTIVE SUMMARY EXECUTIVE SUMMARY INTRODUCTION Over the past two decades,the economy of the Unalaska/Dutch Harbor area has grown considerably,primarily due to growth in the local seafood processing and shipping industry.In response to the need to locate processing facilities near the fishing grounds,several large international companies have established operations in the Unalaska/Dutch Harbor area.The resulting growth has created certain problems,including the logistical and air quality problems associated with providing electric power to area residents and businesses.Electric power is currently provided entirely from diesel generators located at the local load centers.As the economy has grown in recent years,so has the installed diesel capacity and the generation of electrical energy. In order to lessen the area's dependence on oil as the sole fuel source, alternative resources have been investigated for a number of years.These investigations have recently developed a new urgency as energy requirements have caused some existing generating sites on the island to approach or surpass currently permitted emissions limits.One of the potential generating options is a geothermal-fueled generator,which would take hot fluids from the Makushin Volcano area,use the fluid to produce electrical energy,re-inject the fluid into the ground,and transmit the electrical energy to the load centers in the Unalaska/Dutch Harbor area. PURPOSE The purpose of this report is to provide the Alaska Industrial Development & Export Authority ("AIDEA”)with projections of life-cycle costs of electricenergyovera30-year period,allowing AIDEA to evaluate the Makushin Geothermal Project ("Makushin"or the "Project")against other power generation options.This study includes a review of a diverse set of resource options,including combustion turbines,internal combustion diesels,coal, wind,and hydroelectric generation. fiewp2156.205 \rpt2.doc EXECUTIVE SUMMARY STUDY RESULTS After an environmental and economic screening of the available power supply options,two alternative power supply plans were developed to compare to the Status Quo Alternative (continuation of current operations).These were the Integrated Diesel Alternative,(addition of baseload diesel generation at a new site),and the Makushin Alternative for which it was to be assumed that some level of grant funds would be made available.Based upon a preliminary economic analysis,AIDEA directed that the grant amount be set at $45 million. The three alternatives were examined in a detailed production cost and financial analysis over a 30-year period.The total 30-year "life-cycle”costs of power were also aggregated to an equivalent cost in 1998 on a present value basis,for ease of comparison.The following table shows the results of the study of the three alternatives under several possible load growth and fuel price escalation scenarios. frlwp2156.2a5\rpt2.doc Page 1-2 EXECUTIVE SUMMARY Table ES-1 SUMMARY OF RESULTS 30 Year Life-Cycle Costs Base Fuel Price Escalation Status Quo Integrated Diesel Makushin Alternative”Alternative Alternative No Load Growth $182,400,000 $177,700,000 $192,800,000 Best Case 8%above Integrated Diesel 3%Load Growth $244,800,000 $234,500,000 $239,500,000 Best Case”)Best Case”) Loss of Load $185,700,000 $179,400,000 $186,700,000 Best Case 4%above Integrated Diesel High Fuel Price Escalation No Load Growth $197,800,000 $192,200,000 $194,300,000 Best Case”)Best Case”) 3%Load Growth $273,000,000 $261,200,000 $249,400,000 5%above Makushin Best Case Loss of Load $203,200,000 $195,700,000 $187,900,000 4%above Makushin Best Case (1)Violates current air quality related generation limits. (2)Assumes grants totaling $45 million. (3)Results are within 2%and judged to be equal for purposes of this study. fop21.56 eaS\ept2.doc Page 1-3 EXECUTIVE SUMMARY PRIMARY CONCLUSIONS The following primary conclusions were developed based on the assumptions and analyses presented in this study.Other general conclusions are included in Section 5 of this report. 1.The Status Quo Alternative violates current air quality related generation limits,a situation which will be exacerbated by any future load growth. Both the Integrated Diesel Alternative and Makushin Alternative would bring the Unalaska/Dutch Harbor area into environmental compliance and allow for future load growth. Present environmental problems cannot be adequately addressed without island-wide interconnection and coordinated dispatch. The Integrated Diesel Alternative is the least-cost alternative under the following assumptions: s No load growth/Base fuel price escalation »Loss of load/Base fuel price escalation The Makushin Alternative is the least-cost alternative under the following assumptions: e 3%load growth/High fuel price escalation «Loss of load/High fuel price escalation The Integrated Diesel and Makushin Alternatives are approximately equal under the following assumptions: «No load growth/High fuel price escalation e 3%load growth/Base fuel price escalation f\top2156.ee5\rpt2.doe Page 1-4 CONCLUSIONS GENERAL CONCLUSIONS 1.Power costs associated with the Makushin Alternative are somewhat higher than the Integrated Diesel Alternative during the initial years of the Project.These costs decrease thereafter,and decrease substantially (by 50%)in the 20th year of Project operations,after the debt is retired. A rate stabilization fund would be necessary to make the Makushin Alternative rates competitive with the Integrated Diesel Alternative in the initial years of Project operation. Federal Renewable Energy Production Incentive payments,which are potentially available for Makushin,would eliminate or reduce the need for a rate stabilization program. Due to the lower capital investment per kilowatt and the incremental addition of capacity over time,the Integrated Diesel Alternative shows the least sensitivity,and therefore the lowest risk,with respect to changes in load growth. The Makushin Alternative shows the least sensitivity,and therefore the lowest risk,with respect to future increases in fuel price. Due to the relatively small amount of capacity available from the addition of a hydroelectric generation resource at Pyramid or Icy Creek,such a resource would not by itself mitigate the environmental air quality problems on Unalaska over the long term.If Makushin is not selected,this option may warrant further review as it could potentially mitigate some environmental concerns in the short term at a reasonable cost. Due to the relatively small amount of capacity available from addition of wind power generation on Unalaska,such a resource would not by itself mitigate the current environmental air quality problems on Unalaska over the long term.If Makushin is not selected,this option may warrant further review as it could potentially mitigate some environmental concerns in the short term at a reasonable cost. Combustion turbines,coal-fired generation,and medium and high speed diesel generation are not economically viable alternatives for new generation. Used diesel generating equipment as a generation option has uncertaintiesassociatedwithenvironmentalpermittingandthuswasnotconsideredin the final resource plans. ff\wp2156.2a5\rpt2.doc . R.W.Beck 5-2 CONCLUSIONS 10.Development of the Makushin Alternative would minimize the potential for future air quality problems in Unalaska associated with diesel emissions and changing regulatory requirements. 11.As presently structured,the Makushin Project would be financed by AIDEA,with the State assuming most of the project risks.For the Integrated Diesel Alternative,however,the City would be responsible for the financing and the associated risks. flwp2156.aa5\rpt2.doe | R.W.Beck 5-3 adel ALASKA INDUSTRIAL DEVELOPMENT :AND EXPORT AUTHORITY <_* @ME-ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /561-8050 FAX 907 {561-8998 March 30,1995 The Honorable Senator Frank Murkowski United States Senate 706 Hart Building Washington,D.C.20510-0202 Subject:Makushin Geothermal Project,Unalaska Dear Senator Murkowski: Enclosed is a copy of the Comparative Power Cost Analysis of the Makushin Geothermal Project.Mr.Larry Markley asked that we send the report to you in response to discussions he has had with you and your staff.As you know,the State has been involved in consideration of this project for nearly a decade. The Comparative Power Cost Analysis of the Makushin Geothermal Project was prepared for Ormat Energy Systems (OESI),the City of Unalaska,and AIDEA by our consultants,R.W.Beck,a nationally recognized engineering firm based on the west coast.The objective of the report was to evaluate the life cycle generating costs of the Makushin geothermal project versus other power generating options for the City.As presently structured the Makushin project would be developed by OESI;financed and owned by AIDEA;the State would assume most of the project risks;and the energy would be sold to the City and the fish processors,the primary industrial users of power in Unalaska and Dutch Harbor. As you are aware,in recent years Unalaska has been ranked as the busiest fishing port in the nation and there has been substantial electrical energy growth in capacity which has enabled this expansion.While electrical energy remains a vital element of the fish processing industry,future energy growth is currently capped due to violations in air quality standards and is vulnerable to the vagaries in the price and supply of diesel oil. In the future,low cost energy will be essential to the fish processing industry,port development and other City expansion projects.The Makushin project has the potential to provide the City with a long term energy supply at prices equal to or less than oil;remove the sensitivity of the City's growth to oil price fluctuations and supply; eliminate local air pollution problems for the City and the processors;and underpin City development with reliable, low cost energy. As indicated by the attached Beck report,the project requires a grant of approximately $45 million from State and Federal sources.The study determined that grant money is necessary to eliminate any rate disparities for the consumers in the early years of the project,resulting from the high capital cost of the geothermal project compared to diesel generation.The higher initial capital cost of a geothermal project is due to the technological requirements of generation from a renewable resources;the infrastructure required at the remote Makushin site;and the risks involved in geothermal well development.However,the return to the City assured low cost,reliable,clean energy for the future is significant. AIDEA is currently working with OESI to determine the financing roles and development issues related to the project.Our short term development plan and schedule are as follows: The Honorable Senator Frank Murkowski March 30,1995 Page Two wd6. Obtain a power sales agreement with the City and the processors.(Spring 1995) Evaluate OESI's financial strength and qualifications,and ability to provide a turnkey construction contract and assure the geothermal lease. Obtain AIDEA Board and City approval for continuing with the project development.(Spring 1995) Examine the possibility of obtaining initial "seed”grant from Federal sources to fund particular preliminary activities such as a financial development plan,turnkey construction agreements,and completion of environmental permitting.(Summer 1995) Prepare draft State legislation to support the Makushin project with State grant funds conditional upon Federal funding.(Fall 1995) Obtain Federal and State funds for the balance of the required grant.(1996) We believe your support and involvement in the process will be critical and we will be seeking your assistance in obtaining the initial seed grant of $800,000 from DOE as soon as we have completed [tems 1,2,and 3 above.The Power Sales Agreement and approval by the City and the processors will provide assurance that the City and the processors are willing buyers of energy at a price consistent with our comparative analysis. Please do not hesitate to contact Mr.Larry Markley or me if you would like any additional information or if you have suggestions as we begin to explore possible funding sources of the geothermal project. Sincerely iam R.(Riley )Snell Executive Director WRS:bjf h:all\kohmer\maku2 APR =7 1995ALASKAINDUSTRIALDEVELOPMENT =AND EXPORT AUTHORITY x_- x ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /561-8050 FAX 907 /561-8998 April 3,1995 The Honorable Senator Ted Stevens United States Senate 522 Hart Building Washington,D.C.20510-0201 Subject:Makushin Geothermal Project,Unalaska Dear Senator Stevens: Enclosed is a copy of the Comparative Power Cost Analysis of the Makushin Geothermal Project.Mr.Larry Markley asked that we send the report to you in response to discussions he has had with you and your staff.As you know,the State has been involved in consideration of this project for nearly a decade. The Comparative Power Cost Analysis of the Makushin Geothermal Project was prepared for Ormat Energy Systems (OESI),the City of Unalaska,and AIDEA by our consultants,R.W.Beck,a nationally recognized engineering firm based on the west coast.The objective of the report was to evaluate the life cycle generating costs of the Makushin geothermal project versus other power generating options for the City.As presently structured the Makushin project would be developed by OESI;financed and owned by AIDEA;the State would assume most of the project risks;and the energy would be sold to the City and the fish processors,the primary industrial users of power in Unalaska and Dutch Harbor. As you are aware,in recent years Unalaska has been ranked as the busiest fishing port in the nation and there has been substantial electrical energy growth in capacity which has enabled this expansion.While electrical energy remains a vital element of the fish processing industry,future energy growth is currently capped due to violations in air quality standards and is vulnerable to the vagaries in the price and supply of diesel oil. In the future,low cost energy will be essential to the fish processing industry,port development and other City expansion projects.The Makushin project has the potential to provide the City with a long term energy supply at prices equal to or less than oil;remove the sensitivity of the City's growth to oil price fluctuations and supply; eliminate local air pollution problems for the City and the processors;and underpin City development with reliable, low cost energy. As indicated by the attached Beck report,the project requires a grant of approximately $45 million from State and Federal sources.The study determined that grant money is necessary to eliminate any rate disparities for the consumers in the early years of the project,resulting from the high capital cost of the geothermal project compared to diesel generation.The higher initial capital cost of a geothermal project is due to the technological requirements of generation from a renewable resources;the infrastructure required at the remote Makushin site;and the risks involved in geothermal well development.While we understand such a grant is quite large and in some ways inconsistent with budget reduction efforts the return to the City assured low cost,reliable,clean energy for the future is significant. The Honorable Senator Ted Stevens April 3,1995 Page 2 AIDEA is currently working with OESI to determine the financing roles and development issues related to the project.Our short term development plan and schedule are as follows: I. 2. 6. Obtain a power sales agreement with the City and the processors.(Spring 1995) Evaluate OESI's financial strength and qualifications,and ability to provide a turnkey construction contract and assure the geothermal lease. Obtain AIDEA Board and City approval for continuing with the project development.(Spring 1995) Examine the possibility of obtaining initial "seed”grant from Federai sources to fund particular preliminary activities such as a financial development plan,tumkey construction agreements,and completion of environmental permitting.(Summer 1995) Prepare draft State legislation to support the Makushin project with State grant funds conditional upon Federal funding.(Fall 1995) Obtain Federal and State funds for the balance of the required grant.(1996) We have asked Senator Murkowski for this leadership in obtaining the grant.We also believe your support and involvement in the process will be critical and we will be seeking your assistance in obtaining the initial seed grant of $800,000 from DOE as soon as we have completed Items 1,2,and 3 above.The Power Sales Agreement and approval by the City and the processors will provide assurance that the City and the processors are willing buyers of energy at a price consistent with our comparative analysis. Please do not hesitate to contact Mr.Larry Markiey or me if you would like any additional information or if you have suggestions as we begin to explore possible funding sources of the geothermal project. SincerelyMiey ic Executive Director WRS:bif h:all\bjf\makuskin The Deputy Secretary of Energy Washington,DC 20585 February 24,1995 Mr.Patrick J.McAllister Vice President OESI Operating Services Corporation Building One,Suite 255 4000 Kruse Way Place Lake Oswego,OR 97035 Dear Mr.McAllister: Thank you for your letter of January 20,1994.Geothermal energy has an exemplary record as a clean,reliable,and economic source of electric power, and we are proud of our parmership with industry in developing the technology that has made this record possible.The planned Makushin facility would utilize many of these technological advances and will enable Unalaska to meet strict air quality requirements by displacing diesel-fueled generators.This project also will reduce the quantity of carbon dioxide and other greenhouse gases released to the atmosphere. The Secretary and I have directed the geothermal staff to provide the Makushin Project with technical assistance from existing program resources.A Department representative will visit Unalaska in the near future to initiate coordination of this assistance. We share your enthusiasm for geothermal energy and welcome the Unalaska forward-looking plan.We look forward to working with you and other Makushin Project proponents to achieve it. Sincerely, Bill White January 11,1995 Tho Honorable Frank H.Murkowski United States Senate 706 Hart Building Washington,D.C,20510-0202 Dear Senator Murkowski: I understand that the Alaska Delegation has met with Mr.Wood of Geolectric Power Company and his clients from OBSI Power Corporation regarding the development of a geothermal plant at Makushin Bay.I regret that I was unable to attend the meeting due to other commitments, The Aleut Corporation has always supported the development of alternate energy for our region,especially,the proposed Makushin Geothermal Project.We have supported this project in the past and will continue to support Mr.Wood's efforts to develop a plant in the future. The Aleut Corporation appreciates the time you have givon in the efforts to seriously develop the geothermal project. Thank you. Sincerely, THE ALBUT CORPORATION PohpagAlicoPetrivelli Chief Executive Officer /kge Refs \\KOD\LETTERS\9995-0006 A 4000 Od Bewerd Hwy,Sulie 300 Anchorage,Alasia 99503 (907)881-4300 FAX (907)563-4228 Wnited Stats Senace . WASHINGTON,OC 20510 Srevoty ¢UGS The Honorable Hazel R.O'LearySecretaryofEnergy U.S.Department of Energy1000IndependenceAve,.,S.W. Washington,D.C.20888 Dear Secretary O'Leary: We are writing to express cur strong interest in the proposedMakushinGeothermalElectricGenerationFroject,and to urge the Department to lend its support. Located on the Aleutian.Island of Unalaska,this eleven megawatt gecthermal powerplant will serva the growing electricdemandsofUnalaska/Dutch Harbor,the largest fishing port in the United States and one df Alaska's fastest growing communities. The State of Alaska will own the Makushin facility,and the electricity will be sold to the City of Unalaska to meet thecommunity's rapidly increasing power needs.This project isparticularlymeriteriousbecauseitwillmateriallybenefittheenvironmentbydisplacingofl-fired electric generation and theassociatedairemissions. We hope that appropriate resources can be found in theDepartment's FY 95 geothermal budget for this beneficial project,or can be directed to it as they become available.We also lookforwardtoDOE's FY 96 budget for additional support. We look forward to working with you to bring this much-neededpowerplantintebeing. rr Sincerely, :/)f L-oNUhwee,PanDonYoungTedStevensMurkowski Member of Congress U.S.Senator US.Senator CITY OF LINAI.ASKAP.O.BOX a8VAALABIUL,ALABIVA 88588 a(G07)Get.1381 .MAX GOT)081-1417 %oh January 17,1996 The Honorable Frank H.Murkowski 706 Hart Building Washington,0.C.20610-0201 Deer Senator Murkowaki: |would like to take this opportunity to express my sincere appreciation to you for taking the time from your busy schedule to meet with Roe Sturgulewsk!and me regarding the Makushin geothermal project in Unalasks.As you are aware,theproposed18-megawatt electrical generation facility will serve the long-term energyneedsofthefastestgrowingcommunityInthestateandthenation's leading fishing port.Federal environmental constraints have capped the City's diesel generation capacity,forcing future large electric utillty customers to install and operate individual electrical generation facilities and placing severe constraints on further economic development within our community.Federal support for this clean,renewableelectricalgenerationfacilityisessential.it ls expected that this project will benefit thecommunity,state and nation by facilitating additions!growth through the creation of jobs end economic opportunitiss in the fish processing and International transportation 'Industries. Agsin,thenk you for taking the time to meet with us regarding this Important project.{would also like to thank Howard Useem,Professional Steff Member to the Senate Committes on Energy and Natural Resources,and Jos Kooley, of your steff,for their participstion in our mecting with the Department of Energy. Very truly yours, "ibe Eu City Maneger Bnited States Senate WASHINGTON,OC 20510 January 17,1995 The Honorable Hawel RX.O'LearySecretaryofEnergyU.S.Department of Energy1000IndependanceAve.,S.W.Washington,D.C.20885 Daar Secretary O'Leary: <wanted to write a more pergonal letter in addition to theoneCongressmanYoung,Senator stevens,and I wrote to youregardingtheMakushinGeothermalElectricGenerationProjact. Representatives of the State of Alaska,the City cf Unslasxa,Alaska Industrial Development xxport Authority,and the OZSI PowerCorp.met with DOE staff,and they were very pleased with theinterestshownintheirprojeot.In addition to thanking you andDeputySecretaryWhite,I would particularly like to commend andthankMarshallRaed,Allan Jelacic,Dave Lombard,Rodney Adelman,Melanie Kenderdineli,and Jim Thralkeld. With the Department's help I think thia meritorious projectwillbebuilt,and that would be good for the Unalaska/Dutch Harborcommunityandtheenvironmest. I look forward te working with you on this matter,and onotherissuesinthefutuse. Since aittee on Energy and atural Resources ALASKA INDUSTRIAL DEVELOPMENT=fh AND EXPORT AUTHORITY x<_a=ENERGY AUTHORITYee- 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /361-8050 FAK 907 (861-8998 January 23,1995 The Honorable Frank H.Murkowski United States Senate 706 Hart Building Washington,D.C..20510-0201 Subject:Makushin Geothermal Project City of Unalaska Dear Senator Murkowski: Thank you for taking the time to meet with David Eberle,Project Manager for the Alaska Industrial Development and Export Authority (AIDEA),and representatives from the City of Unalaska and OESI Power Corporation recently.We appreciated the opportunity to brief you and your staff on the status of the proposed Makushin Geothermal Project.1 also would like to express my sincere thanks to you for hosting the reception for the group while they were in Washington.It was helpful to have a more personal introduction to members and staff of the Senate Energy Committee and to meet key staff of the U.S. Department of Energy. As discussed,the project will play an important role in helping the city overcome air quality problems associated with current emissions and allow for continued growth of the region's fishing industry.In addition,the project wil provide an alternative energy supply to the City of Unalaska,reducing its dependence on fossil fuels which fluctuate in price. We appreciate your interest and support for the project,as well as your suggestions towards securing financial assistance.We will keep you informed as significant milestones are met regarding project development. Sincerely, Executive Director ce:-_Jim Ayers,Chief of Staff John Katz,Special Counsel