What is it? A Geothermal resource is a geothermal reservoir that is located close
to the surface. It is created when the geology of the area has high temperature
gradients, where there are deep subterranean faults and cracks that allow rainwater
and snowmelt to seep underground sometimes for miles. There the water is heated by
hot rocks and circulates back up to the surface to appear as hot springs, mud pots,
geysers or fumaroles. If the ascending hot water meets an impermeable rock layer,
the water is trapped underground where it fills the pores and cracks comprising 2
to 5% of the volume of the surrounding rock, forming a geothermal reservoir. Much
hotter that surface hot springs, geothermal reservoirs can reach temperatures of
more than 700 degrees and are a powerful source of energy.
To access the geothermal energy, wells are drilled into the reservoir.
The hot water and steam shoot up the well naturally (or are pumped up) at
temperatures between 250 and 700 degrees. This hot water and steam then turn
turbine generators to produce the power. The cooled water is then ejected back
down a return well to start the cycle again. Unlike fossil fuel plants, no fuel
is burned and only water vapor is created.
Pilgrim Hot Springs is a classic example of a geothermal resource that has the
potential to create a power source for the Nome area. During the 1920's and up
to WW II, the Catholic Church heated their buildings using thermal energy and wind
energy to pump the hot water out of the reservoir and to the buildings. During the
"Geothermal Energy Use at Rural Alaska Sites" public workshop held last month at
the Aurora Inn, the geothermal potential of Pilgrin;l Hot Springs was one of the
major resources covered. A consultant estimated it would cost around $40 million
for a 20 MW binary plant (NJUS capacity with the new plant will be around 15.8 MW).
These estimates were based on what he called the "Alaska Cost Factor" where he
doubled the actual cost estimate of $20mm. The binary plant would then create power
at between 4.5 to 7.5 cents per kilowatt hour with a thirty year plant life.
Alaska Energy Authority then estimated it would cost an additional $100,000 per
mile to build a transmission line to the Nome grid. Much more geological research
would need to be conducted before any economic final economic analysis could be
concluded.
A number of months ago we were given a number of technical papers on the potential
natural gas resources in the Norton Basin that were completed in the 1970's. These
papers noted the occurrence of gas seeps in Norton Sound and the possibility of
having commercial quantities of natural gas. In one such paper "Geologic Settings
and Source Depth of the. Norton Basin Gas Seep" noted "unsubstantiated reports
indicating the existence of natural hydrocarbon seeps near the mouth of the
Inglutalik in the northeastern part of Norton Bay and in the Sinuk River valley
about 35 km northwest of Nome. " Limited prospecting for oil was also conducted
near Hasting Creek in 1906 and again in 1918. Two holes were drilled in 1906,
one showing a trace of oil and the other encountered flammable gas at a sufficient
pressure to blow the 1,210 pound drill stem 69 feet up the hole. No records indicate
any further exploration in 1906. Two holes were drilled in the same area in 1918 and
one additional in 1919, only to show negative results.
The Norton Basin did not receive any further exploration until the early 80's when
both ARCO Alaska and Exxon Corporation drill exploratory wells looking for commercial
quantities of oil. They did not look at the gas potential as they assumed commercial
gas development would require a large scale LNG (Liquid Natural Gas) project that was
not economically feasible. They found no oil, so the wells were capped and the Norton
Sound gas again became an afterthought until just recently.
In January of 2005, the U.S. Department of the Interior completed a paper called
the "Engineering and Economic Analysis of Natural Gas Production in the Norton Basin".
Hereafter referred to as "The Study". The Executive Summary noted "According to the
estimates in the Undiscovered Oil and Gas Resources, Alaska Offshore 1995 Assessment,
the Norton Basin contains 2,707.80 BCF (billion cubic feet) of potential undiscovered
natural gas. Of this amount, at least 18.20 BCF is producible over 30 years and is
located within 30 miles of Nome." However, this potential natural 2as resource has
not been exolored vet so exact quantities cannot be accurately predicted. The paper
focused on natural gas production for electrical generation, but not the potential
for gas distribution for both residential and commercial heating. . The study is
quite technical and my layman's knowledge of petroleum engineering limits me to
try and touch on the main elements and assumptions. I recommend you read this study
which can be accessed at:
http://www.mms.gov/alaskalrelNatural_gasNorton.pdf
The Study summarized the potential of developing natural gas from the Norton Basin
at a local level on an engineering, geological and economic basis to answer the
question "if there is gas, can it produce and can it be economic?" The breakeven
price was based on the 2004 price of energy/fuel in Norton Sound region. At the time,
average fuel costs were at $1.07 /gallon of No. 2 diesel. Each fuel was converted to
BTU/gallon and BTU/dollar for comparison purposes. A number of spreadsheet models
were created to analyze numerous aspects of production from Norton Sound beginning
with the physical parameters of the gas resource inside the formation to the
utilization of gas at the distribution center. A thirty year well life was used
although they estimated the gas resource to last much longer.
The Study made use of the well & mud logs produced by Arco Alaska and Exxon to base
their feasibility study on. The gas prospect is located 30-40 miles directly south
of Nome in the Mid-Tertiary West Sub-basin Fill play that covers 12,400 acres.
Water depth is around 50'. A minimum of two productions wells were used from one
formation with a third well to inject the drill waste and CO2. Two wells allow for
continuous production if one well shuts down for maintenance or well damage. Wells
were required to be drilled to the depth of 3,000' to meet the ideal production
pressures. Jack up drill rigs would be used to for both the exploration and production
wells. Subsea production units would be use to bring produced gas to shore as opposed
to a large offshore platform. (Shell Oil uses a subsea production system in the Gulf
of Mexico at a depth of 5,300 feet). The product would be transferred via a underwater
30-40 mile pipeline to terminal facility in Nome. Total infrastructure and production
costs were estimated at around $97 million.
The Study's Conclusion noted "In summary, the Engineering and Economic Analysis
of Natural Gas Production in the Norton Basin study portrays a grim view of natural
gas production in the Norton Basin, but only under current conditions". The amount
of risk involved in the project would possibly require State of Alaska and Federal
Government assistance that could lead to lower financing costs. The Mineral Management
Service has provided incentives for high cost/high risk exploration for natural gas
in the Gulf of Mexico under the Deepwater Royalty Relief Act of 1995. The Department
of Interior has in the past incurred most of the exploration costs in selected
government-funded exploration energy costs.
Since this study was written, the price of fuel to NmS has risen from $1.20 to $2.03
per gallon which is nearly double from what The Study's break even price was based on.
It also did not look at the potential market for home & commercial heating fuel which
would further increase the projects revenues and reduce the risk. Now seems to be the
time to begin looking to the future and begin exploring these two options in more
detail. This is no different than Cominco/Red Dog searching for shallow gas
(coal bed methane) to lower their energy costs. So what is our next step? Since
this is a regional problem, I believe the timing is right to involve the City of
Nome, Alaska Energy Authority, AVEC and our state and federal congressional
delegations to begin taking a serious look at what options we can take for the future.
Mayor Michels noted "the City of Nome has made it a priority to deal with rural
energy issues locally and hopefully regionally. In our legislative packet we
delivered to the Alaska Legislature and our Congressional Representatives,
we have requested assistance for:
- Further exploration of the oil and gas seepage that has been reported thought the
century. One outcome of this is that the MMS has published a report about the wells
that were drilled 30 miles south in the ocean. We need to know what the next step is
for continued exploration.
- The State of Alaska's Energy Authority to continue working with NmS to identify
alternate energy resources and assist in procuring additional state and federal funds
to study and develop alternate energy sources for electrical generation.
- We will continue to support the Governor's commitment to rural Alaska by including
full funding for PCE in his budget submitted to the legislature. Nome will continue
to urge the Legislature to fully fund the PCE program for the new fiscal year and
continued full funding in seceding years."
This is a long-term problem that will require a long term solution. The Chamber is
looking to take the lead on this and has asked Cameron Reitmeier, author of the MMS
study to come to Nome and address the Chamber as well as the City Council. We are
currently working on the timing of this visit which will probably take place after
the Rural Energy Summit that will be held in Valdez on September 20-22nd.
MITCH ERICKSON