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Home My WebLink AboutMankushin Geothermal Conference 1993DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT COMMISSIONER'S CONFERENCE ROOM JUNEAU Makushin Geothermal Electrical Generation 9:00 a.m.-4:00 p.m. June 24,1993 9:00 a.m.Welcome and Opening Remarks Commissioner Paul Fuhs 9:10 a.m.History and Development of Geothermal Resources Commissioner Paul Fuhs in Unalaska (to include an overview of the political,social and environmental issues -also touch on possible national interest issues) 9:45 a.m.*Project Presentation (to include current project Mr.Dan Schochet,President, concept,project viability,financing scenarios,and Mr.Jack Wood,Chairman, technical issues of the project)Geoelectric Power Company ¢Project Benefits 10:30 am.Break 10:45 am.Presentation of the Role of AIDEA/AEA Potential Financing Participation in Applicable Scenarios - Define Need for Power Sales Agreements ttrel11:30 am.Governor Walter J.Hickel A>vaC9tA01molJ.itd11:45 am.Lunch Break ' sf $ 1:30 p.m.Remarks and Questions from Invitees Regarding NNtheProject Ail(3:30 p.m.-_Discuss Next Steps Following the Meeting Geothermal Meeting (revised 6/23/93) The Honorable Walter J.Hickel Governor, State of Alaska Paul Fuhs Commissioner, Department of Commerce and Economic Development Glenn Reed Assistant Commissioner, Department of Commerce and Economic Development Jack S.Wood,Jr. Chairman, Geolectric Power Company Dan Schochet President, Geolectric Power Company James Porter Chief Executive Officer Geolectric Power Company Mr.Joseph B.Fahrendorf Chief Operations Officer OESI Riley Snell Executive Director, AIDEA John Olsen Operations Engineer, AIDEA Corinne Rogers Director of Marketing, Republic Financial Corporation Frank Kelty Mayor, Unalaska/Dutch Harbor Mark Earnest City Manager, Unalaska/Dutch Harbor Roe Sturgulewski Public Works Director, Unalaska/Dutch Harbor Daniel R.Rosetta President, OSI Glenn A.Olds Commissioner, Department of Natural Resources Raga Elim Special Assistant to the Commissioner, Department Of Natural Resources Dick Pace President, UNISEA,Inc. Sandra Mollar Engineer, Ounalaska Corporation Winn Brindle General Manager, Alyeska Seafoods,Inc Morio Higashigawa Vice President, Aleyeska Seafoods,Inc. Greg Baker President, Westward Seafoods Alice Petrivelli President/CEO Aleut Corporation Ron Lee Vice President,Finance Aleut Corporation State of AlaskaDSWalterJBickel,Governor Alaska Energy Authority .A Public Corporation June 18,1993 : The Honorable Paul Fuhs Commissioner Alaska Department of Commerce &Economic DevelopmentP.O.Box 110800 Juneau,Alaska 99811-0800 Subject:Makushin Geothermal Project Dear Commissioner Fuhs: The Alaska Energy Authority wishes to support your effort to encourage communication between potential providers and users of the Makushin GeothermalResourcesnearUnalaska.We are quite familiar with the resource and its potential since the Energy Authority,including some of its present staff,managed the exploration effort in the early 1980's that discovered the commercial grade geothermal resource on Mt.Makushin.In the mid-1980's we prepared technical and economic feasibility studies on the use of hot fluids from Makushin for electric power generation and more recently we have monitored and encouraged the efforts of private developers to obtain financing and necessary contractual arrangements for the project. Our consultants technical review indicates a project of at least 12 MW should be sustainable based on known reservoir characteristics and actual drilling experience on the mountain.Eventual development of the project will require agreements between those using electrical power from the project and project owners and operators. We believe now is a good time for serious negotiations on the project because: 1.National and state agencies are proceeding with the implementation of recent laws that govern exhaust emissions from diesel power plants.In some cases additional clean up of exhaust gases may be necessary to meet local standards. Additional investment in clean up equipment might be avoided if electric power needs came from a "cleaner"resource that did not require such regulation. 2.Federal tax policy and the National Energy Act of 1992 provides some favorable benefits for private financing of geothermal projects. PO.Box 190869 704 East Tudor Road Anchorage,Alaska 99519-0869 (907)561-7877 Fax:(907)561-8584 93Q2\VJA5005(1) Letter to:The Honorable Paul Fuhs _Subject:.Makushin Geothermal ProjectJune18,1993 3.A geothermal 'based electric power supply would be sheltered from suddenchangesinfueloilpricesthatcouldaffectelectricpowercostsforutilitiesand fish processing plants. 4.The staffs of the Energy Authority and Alaska Industrial Development and Export Authority are familiar with the project and could assist in accessing capital markets if required. It is clear that the major electric power users in Unalaska would need to be participantsinsuchaprojecteitherthroughpowerpurchaseagreementsthatsecurefinancingorperhapsasequityinvestorsthemselves.We will be happy to be of assistance to you and others if requested.I wish you,industry representatives,and city officials every success in your meeting on June 24,1993. Sincerely, Ronald A.Garzini Executive Director BNP:RAG:ja cc:Riley Snell,Alaska Industrial Development and Export Authority John Olson,Alaska Industrial Development and Export Authority Mark Earnest,City of Unalaska Roe Sturgelewski,City of Unalaska 93Q2\JA5005(2) PRESENTATION ON THE VIABILITY OF THE MAKUSHIN GEOTHERMAL ELECTRICAL GENERATION PROJECT Prepared For: The State of Alaska Department of Commerce and Economic Development Juneau,Alaska 99811 Juneau,Alaska June 24,1993 Prepared By: GEOlectric Power Company 1575 Delucchi Lane Suite 115 Reno,NV 89502 OESI Power Corporation 4000 Kruse Way Place Suite 255 . Lake Oswego,OR 97035 SUMMARY OF PROJECT VIABILITY CONSIDERATIONS TECHNICAL:- POWER MARKET: PROJECT STRUCTURE: RISK ANALYSIS ECONOMIC: ¢GEOTHERMAL RESOURCE ¢POWER PLANT TECHNOLOGY ¢CONSTRUCTION ISSUES ¢POWER REQUIREMENTS ¢RATE STRUCTURE ¢POWER PURCHASE AGREEMENTS *PROJECT SPONSORS *PROJECT DEVELOPER ¢PROJECT OWNERS/OPERATORS ¢RESOURCE OWNER *POWER PURCHASERS ¢CONSTRUCTION RISKS ¢OPERATING RISKS _«FINANCEABILITY «SOURCES OF FINANCING TECHNICAL VIABILITY GEOTHERMAL RESOURCE GEOTHERMAL ENERGY IS THERMAL ENERGY DERIVED FROM THE HEAT OF THE MAGMA AT THE CENTER OF THE EARTH. ABUNDANT IN MOST OF WESTERN UNITED STATES -ESPECIALLY IN ALASKA WHICH MAY HAVE AS YET UNEXPLORED GEOTHERMAL RESOURCES CONTAINING HEAT ENERGY GREATER THAN ALL OF LOWER 48 STATES COMBINED. FROM 1982 TO 1987 THE STATE OF ALASKA CONDUCTED AN EXPLORATION AND FEASIBILITY PROGRAM AT MAKUSHIN ON UNALASKA ISLAND AT A COST OFAPPROXIMATELY$6,000,000.Do EXPLORATORY WELLS PROVED THE EXISTENCE OF A HIGHLY PRODUCTIVE 380°F LIQUID DOMINATED -HYDROTHERMAL -RESOURCE AT LESS THAN 2000 FOOT DEPTHS IN THE UPPER MAKUSHIN VALLEY 12.5 MILES FROM THE CITY OF UNALASKA. LEADING GEOTHERMAL CONSULTANTS CONCLUSION: "...GEOTHERMAL PROJECT CAN BE SUPPORTED BY THIS RESOURCE" ED'ON SOUND FUNDA'*ameateleTECHNOLOsteeee!nee.ig .wee Pine |CEOTHERMAL id PRODUCTION WELL . COLD WATER WELL =Fem PRODUCTION yenencedTRANSMISSION:eetinesce ns LAS roe LINES rig CENERATING [A "4 .:PLANT Van |TO WATER ¢ i!)4rhabt ites,INJECTION WELLme:aN [proneDISTRICTSYSTEM=P au nied ve.rt ti GEOTHERMAL < _-hel fees rrooucronwuss beg adie G ati gUeeBsperp>tywe SCALE &@D }Temperature below 90°C (194°F)e C)-Geopressured Resources Area Suitable for Geothermal Heat Pumps (Entire U.S.) TECHNICAL VIABILITY POWER PLANT TECHNOLOGY 'RESOURCE TEMPERATURE 380°F CAN USE FLASH TECHNOLOGY,BINARY TECHNOLOGY OR COMBINATION. IN U.S.A.THERE ARE 41 OPERATING HYDROTHERMAL PROJECTS GENERATING 930 MW -REPRESENTING A TOTAL CAPITAL INVESTMENT OF $2.3 BILLION. SUMMARY .Project Type Binary Flash Combined No.of Projects:19 21 1 Note (1) MW Capacity:172MW 733 MW 25MW Note (2) CONCLUSION:EXISTING POWER PLANT TECHNOLOGY IS MATURE AND PROVEN. MAKUSHIN PROJECT WILL USE COMBINED FLASH -BINARY WITH 3 OR 4 FACTORY PACKAGED MODULES FOR TOTAL OF 14 TO 15 MW GROSS CAPACITY. PLANT MAY BE EXPANDED BY ADDING ONE OR MORE ADDITIONAL MODULES. Note (1):OESI has developed 12 of 19 operating Binary projects and single Combined project. Note (2):OESI has developed 126 of 930 MW of operating project capacity. be &.paeoPREHEATER/EVAPORATOR nN A .GEOTHERMAL HOT WATER TO INJECTION ----wd--]--/Sy,Loge |___-- wag---OR STEAM (FROM PRODUCTIONWELLSv' FEED PUMP oI Oo WELLS) --- TURBINE vA / GENERATOR EVAPORATIVE CONDENSER SIMPLIFIED GEOTHERMAL BINARY PROCESS DIAGRAM GEOTHERMAL STEAM AND BRINE FROM CASONATEDWELLSSe-]SEPARATOR STEAM WATER -ooc>+ BRINE TO INJECTION WELL COOLING a TOWERELECTRICITY4H[steam --i | y TURBINE WATER BASIN GENERATOR | ---- CIRCULATING WATER PUMP ! CONDENSER i ae ™ CONDENSATECAALAW CONDENSATE YCONDENSATEPUMPSEXCESSCONDENSATE TO INJECTION WELLS SIMPLIFIED GEOTHERMAL FLASH PROCESS DIAGRAM -og TECHNICAL VIABILITY CONSTRUCTION ISSUES ¢PROJECT REQUIRES: 12.5 MILE ROAD TO SOUTH CANYON PLATEAU IN UPPER MAKUSHIN VALLEY TRANSMISSION LINE TO CITY OF UNALASKA SUBSTATION,INCLUDING 3.5 MILE CROSSING OF UNALASKA BAY | 'DOCK FOR THE CONSTRUCTION MOBILIZATION AND PLANT ACCESS TWO OR THREE PRODUCTION WELLS PRODUCING UP TO 1,200,000 LBS.PER HOUR OF GEOTHERMAL FLUID AT 380°F ONE OR TWO INJECTION WELLS TO PROVIDE FOR 100%REINJECTION BUILDING AND AUXILIARY SYSTEMS FOR MANNED OPERATION AND MAINTENANCE °INFRASTRUCTURE: CITY TO EXPAND 34.5 KV GRID TO INCLUDE ALL INDUSTRIAL POWER USERS. otf i] i LPS ' ) | ! eT SN On N--Toy fa .wesr |S7eTty,nN "tp \.Ww ¥(TR ee 5 gy)Lag' nfUS Sties A\ ages'Cade (Ss hy LQ22\NS aoeebe5:SEASp\fen .NY CFgfire fa ah 1) ¥.at > ¢.y )T Greg ae 0i{/ oy '' 4 ' va lies TECHNICAL VIABILITY PROJECT DEVELOPMENT COSTS ESTIMATES BASED ON OESI POWER CORPORATION AND ALASKA ENERGY AUTHORITY BUDGETS BUDGET SUMMARY ASSUMES 1995 PROJECT COMPLETION CONSTRUCTION/WELL DRILLING BUDGETS,INCLUDING CITY OF UNALASKA'S DISTRIBUTION SYSTEM: Range ($000)Low High 1.Plant -oe Direct Plus Escalation $51,940 $67,710 2.Geothermal Field Direct Plus Escalation 12,526 13,512 3.Contingencies +Project Reserves (See Note)10,370 13,725 Grand Total $74,836 $94,947 Note:Contingencies +Project Reserves are as established by A.E.A. POWER MARKET VIABILITY POWER REQUIREMENTS LOADS AND RESOURCES FOR UNALASKA MODELED IN 1991 BY R.W.BECK USING HOURLY DISPATCH MODEL PROPOSED 14 MW PROJECT PRODUCES 10,400 KW AVERAGE ANNUAL CAPACITY. ECONOMIC MODELS ARE VIABLE AT CONSERVATIVE 82%CAPACITY FACTOR Capacity Factor %__(See Note) 82%_i$_87%-_92%_ Annual Production in kwhrs 75,000,000 79,000,000 84,000,000 ENERGY LOAD/RESOURCE FORECAST FOR 1994/1995 FOR UNALASKA MUNICIPAL UTILITY Energy (kwhrs) Loads City of Unalaska 23,550,000 Contract Customers 62,050,000 Total 85,600,000 kwhrs Resources Geothermal Project 78,300,000 City's Diesels 7,300,000 Total 85,600,000 kwhrs Note:Geothermal Power Plant Availability is Typically Better than 98%. ENERGY | 6,000, 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 AN FEB MAR A 1994/1995 ANNUAL ENERGY PROFILE POWER MARKET VIABILITY RATE STRUCTURE PAYMENTS MAY BE BASED ON CAPACITY PAYMENT -FIXED MONTHLY/ANNUAL CHARGE PLUS ENERGY PAYMENT AS A VARIABLE CHARGE FOR KWHRS USED ECONOMIC MODEL ASSUMES DELIVERED COST OF POWER TO USERS TO BE 12¢/KWHR -TOTAL,INCLUDING CAPACITY AND ENERGY -IN 1992 DOLLARS - LEVELIZED WITH ESCALATION ACCORDING TO INFLATION ONLY ELECTRIC POWER AT 12¢/KWHR INCLUDES: POWER GENERATION COSTS 10.5¢/KWHR CITY OF UNALASKA UTILITY ADMIN.COSTS _1,5¢/KWHRTOTALss:42.06 /KWHR AT 10.5¢/KWHR GEOTHERMAL POWER GENERATION IS CURRENTLY COMPETITIVE WITH DIESEL POWER . POWER MARKET VIABILITY POWER PURCHASE AGREEMENTS POWER SALES /PURCHASE AGREEMENTSAREESSENTIAL FOR PROJECT FINANCING. KEY ELEMENTS IN SUCH AGREEMENTS ARE -LEVEL OF COMMITMENT BY PURCHASERS -FINANCIAL CONDITION OF PURCHASERS -POSSIBLE OWNERSHIP INTERESTS IN PROJECT BY PURCHASERS -POSSIBLE PREPAYMENT OF ELECTRICITY -TERM OF FIRM PURCHASE COMMITMENT PROJECT STRUCTURE PROJECT SPONSORS STATE OF ALASKA: AIDEA WITH OTHERS -WILL PROVIDE BOND FINANCING AND STATE OF ALASKA SUPPORT CITY OF UNALASKA;: MUNICIPAL UTILITY WILL DISTRIBUTE POWER POSSIBLE PRIVATE SECTOR POTENTIAL SPONSORS UNALASKA/DUTCH HARBOR INDUSTRY GEOLECTRIC POWER COMPANY NATIVE CORPORATIONS -TAC,OC OTHERS INCLUDING DRILLERS AND CONSTRUCTOR TURNKEY DEVELOPER AND RESOURCE OWNER OESI POWER CORPORATION DEVELOPS -CONSTRUCTS PROJECT PROVIDES OPERATIONS AND MAINTENANCE SERVICES UNDER CONTRACT SELLS GEOTHERMAL FLUID TO PLANT OWNER (tb PROJECT STRUCTURE -CONSTRUCTION OESVGEOlectric Contracting Function Electrical Engineering OESV/GEOlectric Contracting Function Civil Engineer Project Development And Management Team Mechancial Engineer "Power Plant Contractox Process Engineer OESV/GEOlectric Contracting Function Drilling & Related h TestingaeEvaluation |Denotes:Contractual Relationship ?--Denotes:Management/Technical Oversight&Supervision Relationship PROJECT STRUCTURE PROJECT OWNERS/OPERATORS AIDEA OR AIDEA/PRIVATE SECTOR TO BE OWNERS DURING BOND REPAYMENTPERIOD PRIVATE SECTOR GROUP MAY OWN PROJECT IF NO BONDING REQUIRED CITY OF UNALASKA TO STEP INTO AIDEA'S POSITION AFTER BOND DEBT REPAID OPERATION BY CONTRACT WITH PRIVATE SECTOR GROUP (OESI) POWER PURCHASERS UNALASKA/DUTCH HARBOR CURRENT INDUSTRY -ALL TO PARTICIPATE FUTURE INDUSTRY -PARTICIPATE WITH A PREMIUM PAYMENT PROJECT STRUCTURE -OPERATIONS Electricity Payments Electricity City of Unalaska Supply&Distzibution Power Plant Power Plant Fuel Fee Operations &MaintenanceOuner Geothermal Fluid Fuel Supply O.&M. Contractor Payments Geothermal Field Operations &MaintenanceFieldOwner Yquauheyasuadny-}>VY VIABILITY RISK ANALYSIS CONSTRUCTION RISKS CAN SUFFICIENT PRODUCTION WELLS BE DRILLED WITHIN THE ALLOCATEDBUDGET CAN THE PROJECT BE CONSTRUCTED ON TIME AND WITHIN BUDGET ARE ALL CASUALTY RISKS INSURABLE CAN THE PROJECT BE IMPACTED BY ADVERSE REGULATORY OR PERMIT DECISIONS OPERATIONAL RISKS WILL THE RESOURCE SUPPORT THE PROJECT FOR THE FULL POWER SALES PERIOD WILL THE POWER PLANT OPERATE FOR THE FULL POWER SALES PERIOD WILL THE BUDGETED OPERATIONS AND MAINTENANCE COSTS BE SUFFICIENT FORLONGTERMOPERATION WHAT IS THE RISK THAT THE LOADS WILL BE REDUCED DUE TO LONG TERM ECONOMIC FACTORS ECONOMIC VIABILITY PROJECT FINANCEABILITY PROJECT FINANCING MUST BE OBTAINED FOR 3 DISTINCT PERIODS -PRE-DEVELOPMENT FINANCING,PRIOR TO CLOSING OF FINANCING FORCONSTRUCTION -CONSTRUCTION PERIOD FINANCING,PRIOR TO INITIATION OF COMMERCIAL OPERATION -LONG TERM FINANCING,AFTER INITIATION OF COMMERCIAL OPERATION FOR LIFE OF| PROJECT ECONOMIC VIABILITY PRE-DEVELOPMENT FINANCING THIS IS FOR PROJECT EXPENSES TO ADVANCE DEVELOPMENT THROUGH CLOSING OF CONSTRUCTION FINANCING. AT-RISK FUNDING OF OVER $2,000,000 TO BE PROVIDED BY OESI/GEOLECTRIC AS DEVELOPER-RESOURCE OWNER . OESI/GEOLECTRIC AS DEVELOPER-RESOURCE OWNER RECEIVES BENEFITS FOR RISK BY: -REIMBURSEMENT OF COSTS AT CONSTRUCTION CLOSING -DEVELOPMENT FEES DURING CONSTRUCTION BASED ON PROJECT CONSTRUCTIONFORCOSTPLUSFIXEDFEE -PAYMENT OF FLUID FEE,ON ¢/KWHR OF ACTUAL PRODUCTION -FEES FOR OPERATION AND MAINTENANCE SERVICES ECONOMIC VIABILITY CONSTRUCTION FINANCING ECONOMIC MODELS ASSUME ACCEPTANCE OF FEASIBILITY BY LENDER.CONSTRUCTION PERIOD FINANCING BECOMES LONG TERM FINANCING UP INITIATION OF COMMERCIAL OPERATION.POSSIBLE FINANCING SCENARIOS ARE: -100%BOND FINANCING.PRICE OF POWER IS 12¢/KWHR,LEVELIZED IN 1992 DOLLARS.TOTAL COST OF PROJECT,INCLUDING FINANCING CHARGES MAY BEBETWEEN$84,000,000 (low estimate without use of Contingencies or Reserves)AND$119,700,000 (high estimate with use of all Contingencies and Reserves). -ALL PRIVATE SECTOR EQUITY FINANCING.PRICE OF POWER IS ALSO 12¢/KWHR IN 1992 DOLLARS.TOTAL COST OF PROJECT,FOR CONSTRUCTION ONLY WITH NO FINANCING CHARGES REQUIRED,RANGE BETWEEN $64,500,000 (low estimate without use of Contingencies or Reserves)AND $95,000,000 (high estimate with use of all Contingencies and Reserves). -PRE-TAX RETURN ON INVESTMENT IS BETWEEN 10%AND 15%. 23 ECONOMIC VIABILITY SOURCES OF FINANCING STATE OF ALASKATAXEXEMPTBONDS,WITH CREDIT SUPPORT ANDMORAL OBLIGATION OF STATE)ELIGIBLE FOR 1.5¢/KWHR INFLATION LINKED INCENTIVE PAYMENT FOR 10 YEARSFROMD.O.E. PRIVATE EQUITY SOURCES ELIGIBLE FOR 10%GEOTHERMAL INVESTMENT TAX CREDIT,MODIFIED ACCELERATED DEPRECIATION AND GEOTHERMAL FIELD DEPLETION ALLOWANCES. 14 Unalaska-Dutch Harbor °|14 MW Geothermal Electrical Generation Power Plant ¢Power Plant Fuel Provided From The Heat of The Earth e The 'Fuel'Is 380+°f.Liquid Geothermal Fluids ¢Future 'Fuel'Costs Are Provided For In Project Construction Costs e Geothermal Power Plant Can Be Expanded to 15 Mw &20 Mw Unalaska/Dutch Harbor , #1 e Current Diesel Generation Fuel Only Cost =8.12¢/kwh ¢Geothermal Project Will Sell Power @ 10.5¢/kwh to City System e 9,0¢/kwh Could Be Available To City With 1.5¢/kwh From NEPA-92 e Scheduled Price @ 12¢/kwh Includes 1.5¢/kwh To City (Without NEPA-92) ¢Geothermal Electrical Price Remains Level Over 20+Years (1993 US$) Unalaska/Dutch Harbor #2 ¢All Diesel Generation Exceed Current Emissions Standards .Geothermal Project Will Allow A 'Bubble'To Be Place Over City ¢«No Additional Capital Needed To Meet Diesel Air Quality Standards ¢«Each Self-Generator Can Then Exceed Emissions Standards ¢Unalaska-Dutch Harbor 'Grid System'Would Comply Collectively ¢ 'Gird System'-By Its Design -Will Supply Backup 'Safety Energy' Inter-connected 'Grid System'Allows Sale of Surplus Generation Unalaska/Dutch Harbor #3 ¢The Geothermal Project Will Provide Readily Available --Stable Priced --Cost Effective and Reliable Electrical Energy,Without The Need Of Any Additional Self-Generation,For: New Support Business New Service Providers New Cold Storage New Additional Housing New Industry To Unalaska Expansion of Existing Facilities And Services Reduced Dependency On Island Imported Fuels ¢The Unalaska/Dutch Harbor Geothermal Electrical Project Will Provide What Every City In The Industrialized World Provides --A Modern,Interconnected Electrical Supply System --With Available, Reliable Electricity Sold At Reasonable And Stable Prices. Unalaska/Dutch Harbor #4 GEOTHERMAL POWER FOR UNALASKA AND DUTCH HARBOR: AIR QUALITY EMISSIONS AND PERMITTING ISSUES PREFACE This report was prepared by the Pollution Prevention Office as part of an issue summary for use by the Air Quality Management Section and Commissioner's Office.As requested by the Department of Commerce and Economic Development,the department will prepare a letter addressing the Makushin geothermal power project.The information in this report was compiled between December 16,1992 and February 1,1993.Additional background material is available upon request.As a separate summary,the Air Quality staff have estimates of the projected permit fees for existing power plants in the Unalaska and Dutch Harbor area. SUMMARY A proposed gecthermal power plant for the Unalaska-Dutch Harbor area could supply enough energy to substantially reduce the reliance upon existing diesel-fueled power plants.This in turn could:a)reduce future costs of environmental permits and | compliance monitoring for current power plants;b)reduce air pollutant emissions overall; and c)reduce costs of relying upon non-renewable diesel fuel for power generation. The State of Alaska supports the use of renewable resources for electrical power generation.Geothermal power plants,when properly designed and operated to minimize poliutants,can present a long term and environmentally acceptable solution for supplying baseload power.Correspondingly,the need for power from diesel fueled plants can be reduced to supply the peak energy loads needed for seasonal activities such as seafood processing plants. A successful geothermal power project minimizes emissions of air and water pollutants. Several chemical constituents of geothermal stearn can be managed to prevent additional costs of pollutant management,environmental permitting,and potential safety issues. Existing geothermal power piants in California and elsewhere in the world successfully demonstrate a wide variety of technological solutions that address design considerations unique to this type of energy.Those plants that operate with the greatest cost: effectiveness have environmental controls that were engineered and built into the project from the start, As the cost of environmental permitting and compliance monitoring in Alaska begins to rise with the adoption of user fees,it will become increasingly attractive to invest in renewable resource technology for generating power,while correspondingly minimizing financial commitments to non-renewable fuels.In addition,this shift could significantly reduce air pollutants produced in the Unalaska and Dutch Harbor area and thereby benefit public health for all area residents.; BACKGROUND The Makushin Volcano,located west of the communities of Unalaska and Dutch Harbor, is capable of producing long-term geothermal power.The total projected capacity of the proposed plant is 14 million kilowatt hours.Based on current data for power usage bythecityandseafoodprocessingplants,geothermal power could provide the baseload power needed for the community and local industry. At present the City of Unalaska and three seafood processors each have diesel-fueled power plants with enough generation capacity that they require air quality permits reviewed under the Prevention of Significant Deterioration (PSD)provisions of Alaskan and federal law.New user fees for permitting functions are required under the Clean Air Act amendments,and are being proposed this legislative session.The fees are structured in two tiers,including direct hourly costs incurred for time spent to issue or work on a specific permit.Costs of inspections and compliance monitoring would also be recovered directly in fees.The second tier encompasses indirect fees for program support functions,assessed as an additional cost per ton of estimated air pollutant. Costs associated with issuing a new PSD permit (approximately 310 hours or more),if calculated at $65 per hour,could exceed $20,000.Required inspections and routine compliance monitoring activity could cost another several thousand dollars per year, added to annual emissions fees that could start at $6 per ton per contaminant. The actual design of the Makushin geothermal plant will determine the volume of environmental emissions or wastes produced during plant operation.Thorough evaluation of the Makushin geochemistry and the corresponding engineering options will be well worth the investment of time and expert talent needed for this phase of the project.The chemistry of Makushin's steam and waters is well documented,and is characterized by relatively low levels of several chemicals typically associated with voicanic fluids.tn fact,the geologists who drilled and sampled the Makushin geothermal field noted that the nearby hot springs did not have the typical chemical odors of springs associated with other geothermal areas. The variety of conditions at geothermal power plants around the world has generated many solutions to manage and control these naturally occurring chemicals to minimize air and water emissions,and to limit corrosion from constituents such as hydrogen sulfide.The design of the plant can also minimize potential wastes to substantially reduce operational costs of waste handling and disposal.Some plants minimize air and wateremissionsbymaintainingchemicalconstituentsinliquidphase,and reinjecting the fluid into the geothermal field.To control chemical reactions such as corrosivity or bacterial activity,chemicals may be added and the resulting solid,liquid or vapor must then be managed to minimize emissions or waste.Inese issues Can be identined In tne cesign phase,and solutions engineered to effectively manage them. POLICY CONSIDERATIONS tt may be worthwhile to develop a position for the Department of EnvironmentalConservationthatsupportstheuseofrenewableresourcesforpowergeneration.The State of California,which has several geothermal power plants,has a commitment "topromoteeconomicallyfeasibleandenvironmentallyacceptablepowerplants.."(Public Resources Code,Article 4,Section 1800).This includes other resources such as photovoltaic,solar,wind,and tidal power generation. Additional environmental gains might also be made with a coordinated energy production strategy.!n particular,establishing a "grid"system for electrical distribution which links the on-shore seafood processor electrical generating capacity with other utility ownedgeneratingequipmentmightresultintheformationofoneormoreelectricco-operatives. Additional tax credits may also be available for such cooperatives.The advantages of centralized versus distributed power production could then be integrated with long-term capacity growth.Centralized production facilities would take advantage of economies of scale,and would allow enhanced air pollution control at minimum cost. PERMITTING CONSIDERATIONS The design of a proposed geothermal plant will determine the specific environmental permits that will be needed.The Makushin geothermal steam contains total gas concentrations that are relatively low (less than 0.02 percent).Included are hydrogen sulfide,methane and chlorine.All constituents of the geothermal steam or fluid will need to be managed to limit emissions or accumulation as solid waste,as well as minimizing corrosive and erosive environments in the plant. lf adequately designed,a geothermal power plant at Makushin will not need an air quality permit requiring PSD review.This design parameter should be incorporated into the early phases of the overall project development.Some geothermal plants outside Alaska have required PSD air permit conditions due to a high volume of air pollutant emissions. With a Makushin geothermal power plant completed and providing the baseload power, then the existing power plants could be modified.The goal would be to reduce each plant's capacity below the threshold that mandates an air quality permit review for Prevention of Significant Deterioration.Either physical or operational modifications may accomplish this reduction.Then,the costs of the existing plant permits would decrease since the emissions are reduced,and compliance monitoring would become less record intensive.In addition,new power plants in the area could be sized smaller because they could utilize the baseload supplied by geothermal power production.Thus,the capacity of new plants could also be less than the threshold that mandates PSD permit provisions and corresponding fees. Although insufficient technical information was available from the proposal reviewed bythePPandAQMstafftoaccuratelydeterminetheemissionsfromthisproposed geothermal facility,a nominal 14 MW electric generating facility consisting of traditional gas turbines or diesel electric generators would have the following potential emissions (in tons per year):- NO,CO SO,PM _VOC Total tons per year2-7 MW turbines natural gas fred 336 112 18 2 2 470 diesel fuel fired 414 118 84 2 2 620 3-5MWdiesels 2030 527 230 68 54 2909 As noted above,expected potential emissions from the geothermal facility could not be accurately determined from the technical information presented.In addition to out- gassing emissions from the geothermal fiuid,emissions can be expected from venting or cooling the binary fluid.Since the binary fluid is proprietary in nature,no assessment can be made of toxicology of these emissions. Air permitting and compliance monitoring costs for a new facility consisting of the either turbines or diesel electric generators can also be directly compared to the proposed project.The cost of permitting for a facility consisting of diesel fired turbines or diesel electric generators is approximately $22,300 for PSD review (a one time charge),$2,500 for permit review and renewal (recurring every 5 years),$2,750 in annual emissionchargesforthecaseofaturbinefacility($9,400 for a diesel facility)and about $6,500 inannualcostsforinspectionsandcompliancemonitoring.Outside the air program,otherrequirementssuchasfuelspillpreventionandcontainmentwouldaddtotheannualcosts of these facilities.By comparison,a geothermal facility permitting costs would be $1,100 for permit review (a one time charge),$900 for permit review and renewal (recurring every 5 years),$660 in annual emission charges,and $1,800 in annual costs for inspections and compliance monitoring.Additional costs which may be required for the geothermal facility include water treatment operational costs,wastewater discharge permitting costs,and perhaps solid waste disposal costs. There are several options for plant design that will need to be carefully evaluated.If the chemical constituents are concentrated into liquid and then discharged,there may be a requirement for an industrial wastewater permit.if a liquid is reinjected,there may not actually be a discharged "waste".It would be important to avoid concentrating and discharging pollutants as air emissions,so that the facility would not require an air permit with PSD provisions.The project developers should be strongly encouraged to meet with Departmental staff early in the planning stages,to ensure that environmental regulatory issues are fully discussed and analyzed.: REFERENCES Motyka,R.J.,LD.Queen,C.J.Janik,D.S.Sheppard,R.J.Poreda,and S.A.Liss.1988. Fluid Geochemistry and Fluid-Mineral Equilibria in Test Wells and Thermal Gradient Holes at the Makushin Geothermal Area,Unalaska Island,Alaska.Report of Investigations 88-14.State of Alaska,Dept.of Natural Resources.Fairbanks,Alaska.90 p. R.W.Beck and Assoc.1992.Draft Report on the Unalaska Geothermal Project. Prepared Oct.21,1992 for the Alaska Energy Authority.Anchorage,Alaska. Unpublished. Personal Communications: Chris Nye,Alaska Volcano Observatory,Fairbanks,Alaska. Shirley Liss,Dept.of Natural Resources (DGGS),Fairbanks,Alaska. John Olson,AIDEA,Anchorage,Alaska Mark Sims,EPA (Air Quality),Sacramento,California Bob Reynolds,Lake County Air Quality Management District,California John Thompson,Lake County Air Quality Management District,California Jeff Anderson,ADEC,(Air Quality),Juneau,Alaska (formerly issued geothermal power plant permits in California) Alfred Bohn,ADEC (Air Quality),Juneau,Alaska Glenn Reed,ADCED (Commissioner's Office),Juneau,Alaska