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Mount Spurr Geothermal Project – Final Report for Year End 2011
Prepared by:
ORNI 46, LLC 6225 Neil Road, Reno, Nevada, 89511
For the Alaska Energy Authority Pursuant to Grant Agreement Number 7030018 February 6, 2012
Statements in this report may contain “forward-looking statements.” Whenever you read statement that is not
simply a statement of historical fact (such as when we describe what we “believe”, “expect” or “anticipate” will
occur, and other similar statements), you must remember that our expectations may not be correct, even though
we believe they are reasonable. You should read these statements completely and with the understanding that
actual future results or actions may be materially different from what we expect, as a result of certain risks and
uncertainties. For a complete discussion of the risks and uncertainties relating to any forward-looking statements
in this report, please see “Risk Factors” as described in our Annual Report on Form 10-K report filed with the
Securities and Exchange Commission on 28 February 2011.
We will not update these forward-looking statements, even though our situation will change in the future. Please
note that these forward-looking statements are made only as of the date hereof, and Ormat Technologies
undertakes no obligation to update or revise the forward-looking statements, whether as a result of new
information, future events or otherwise.
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Table of Contents
Executive Summary .......................................................................................................... 3
Basic Project Information ................................................................................................ 5
Section 1: Land Use ........................................................................................................ 10
Section 2: Permitting and Environmental Analysis .................................................. 13
Section 3: Cost of Energy and Market Analysis ........................................................ 23
Section 4: Simple Economic Analysis ........................................................................ 26
Section 5: Summary and Recommendations ............................................................. 27
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Executive Summary
ORNI-46 LLC, a fully owned affiliate of Ormat Nevada Inc, (jointly referred to in this document
as “Ormat”) was granted a Round III Renewable Energy Fund grant to perform a staged
reconnaissance and assessment of the geothermal resources on Mt. Spurr, located in the west
Cook Inlet, some 80 miles west of Anchorage.
The exploration program under the grant was a two-year plan covering continued resource
studies, assessment surveys and core drilling.
During the summer of 2010, Ormat completed extensive exploration work, built on field
reconnaissance work done in 2009 and desktop and other studies done beforehand. Work
performed in 2010 included geologic mapping; rock/soil sampling; geochemical sampling; a
ground-based gravity survey; a ground based Magneto-Telluric (MT) survey; an airborne
magnetic survey; airborne LiDAR and satellite-based digital imaging. Analysis and synthesis of
the data collected, along with previous geologic information and models, resulted in the
generation of seven core-hole targets, two of which were later on drilled.
Core-drilling of well 62-2 (a.k.a Lower Chaka – R) was completed to a depth of 822 feet in
September 2010.Core-drilling of well 67-34 (a.k.a Upper Chaka – R) was completed to a depth
of 1000 feet, also in September 2010. For a detailed description of the work done in 2010
please refer to the 2010 Final Report.
Work in 2011 centered on drilling Well 26-11 to a total depth of 3,988 ft. and did not encounter a
significant temperature gradient as we hoped. In addition, data collected during the 2011 drilling
season significantly contributed to understanding the potential for a geothermal resource at Mt.
Spurr. This well successfully intercepted the several target fault zones and encountered
extensive fracture-hosted hydrothermal alterations that suggest a geothermal system may be
present at depth beneath Mt. Spurr. However, the maximum temperature encountered was a
disappointing 140°F and the temperature gradient obtained at was 2°F/100 feet, considered a
low temperature gradient. This may be due to the low thermal conductivity of the conglomerate
unit encountered or lack of modern hydrothermal system in this location. The West Foreland
conglomerate, which is a sedimentary aggregate of lithified pebbles and cobbles, is not a good
conductor of heat and is not a high quality geothermal reservoir rock.
Shallower, more economically viable geothermal resources are more likely to be located farther
west, closer to the active volcanic vent of Crater Peak. The potential geologic hazards in this
area are higher than the eastern region, but this area also contains the most concentrated
hydrothermal activity at the volcano. Ormat had planned to drill an exploratory well here in
2010; however the drilling season was truncated due to challenging weather conditions.
Exploration in this area is likely to yield vital information about the large-scale geothermal
system at Mt. Spurr.
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Ormat is compiling a team of geologists and engineers to quantify the hazard risk and possible
engineering solutions for locating a power plant closer to Crater Creek. If engineering solutions
allow a low risk power plant in this area, Ormat will recommend continuing with exploratory
drilling in the Crater Creek area in the summer of 2013.
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Basic Project Information
Project Location
The Mount Spurr geothermal project is located on geothermal lease tracts acquired from the
State of Alaska in the Mt. Spurr Geothermal Lease Sale No. 3 on June 16, 2008. The leases
are located approximately 80 miles west of Anchorage on approximately 35,806 acres along the
southeastern flank of the active volcano Mt. Spurr (see Figure 1 and Figure 2). There are three
main areas of exploration interest at the project, termed the Western, Central, and Eastern
regions. All three regions were surveyed for geologic, geophysical, and geochemical properties.
Two shallow wells (~1,000 ft.) were later on drilled in Tracts 1 and 2 in 2010, and a deeper well
(~4,000 ft.) was drilled in Tract number 7 in 2011, all in the eastern region.
Site Access
The Mt. Spurr lease area is ~35 miles northwest of the nearest infrastructure at the village of
Tyonek, and ~40 miles northwest of the natural gas-fired power plant at Beluga. The area
surrounding Mt. Spurr is roadless, necessitating that exploration at Mt. Spurr be helicopter
supported. Field activities in 2010 and 2011 were based at a remote camp within the eastern
portion of the lease area, with the nearby villages of Tyonek and Beluga serving as resupply
stations.
Tract Number Section Township Range Meridian
001 35 and 36 14N 16W Seward
1 and 2 13N 16W Seward
002 33 and 34 14N 16W Seward
3 and 4 13N 16W Seward
003 31 and 32 14N 16W Seward
5 and 6 13N 16W Seward
004 35 and 36 14N 17W Seward
1 and 2 13N 17W Seward
005 33 and 34 14N 17W Seward
3 and 4 13N 17W Seward
006 31 and 32 14N 17W Seward
5 and 6 13N 17W Seward
007 11, 12, 13, and
14 13N 16W Seward
008 9, 10, 15, and
16 13N 16W Seward
009 7, 8, 16, and 17 13N 16W Seward
010 11, 12, 13, and
14 13N 17W Seward
011 9, 10, 15, and
16 13N 17W Seward
012 7, 8, 17, and 18 13N 17W Seward
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013 21 and 22
(partial) 13N 16W Seward
014 19 and 20
(partial) 13N 16W Seward
23 and 24 13N 17W Seward
015 19, 20, 21, and
22 13N 17W Seward
Table 1: Ormat’s geothermal leases - legal description
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Figure 1: Regional area map
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Figure 2: Project location map
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.
Figure 3: Geological Structures and Well Locations
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Section 1: Land Use
The ultimate goal of geothermal exploration at Mt. Spurr is to construct a geothermal well-field
and utility-scale power plant that would supply Alaska’s Railbelt with clean, renewable power for
decades to come. The relative proximity of transmission lines at the Beluga natural gas-fired
power plant, about 40 miles to the southeast, makes the Mt. Spurr Geothermal prospect one of
Alaska’s most promising renewable energy options. The remote nature of the Mt. Spurr area
and heightened geologic hazard risk create challenges for exploration and development, but
these may be overcome by careful planning combined with engineering solutions.
2010 Exploration Summary
During the summer of 2010, Ormat completed extensive exploration work, built on field
reconnaissance work done in 2009 and desktop and other studies done beforehand. Work
performed in 2010 included geologic mapping; rock/soil sampling; geochemical sampling; a
ground-based gravity survey; a ground based Magneto-Telluric (MT) survey; an airborne
magnetic survey; airborne LiDAR and satellite-based digital imaging. Analysis and synthesis of
the data collected, along with previous geologic information and models, resulted in the
generation of seven core-hole targets, two of which were subsequently drilled.
The eastern region was then selected as the region of main focus, due to its being outside the
area of known volcanic hazard and the fault structures that were identified, potentially indicating
the existence of a geothermal resource at commercial depth of 3,000~4,000 ft. (see details
below). Core-drilling of well 62-2 (a.k.a Lower Chaka – R) was completed to a depth of 822 feet
in September 2010.Core-drilling of well 67-34 (a.k.a Upper Chaka – R) was completed to a
depth of 1000 feet, also in September 2010. For a detailed description of the work done in 2010
please refer to Ormat’s 2010 Final Report.
2011 Exploration Summary
Ormat sited two deep temperature gradient core holes for the 2011 drilling season. Mobilization
for the first hole, Well 26-11 (Spurr West), occurred between May 30 and June 2. Temperature
gradient hole 26-11 was spudded on June 3, 2011. Geophysical surveys results suggested that
high temperature fluids might be encountered at depths between 3,000 and 4,000 feet. The drill
rig used was capable of drilling to at least 6,000 feet deep.
Challenging Alaskan weather conditions slowed drilling progress throughout the season, with
persistent fog and periodic high winds grounding the helicopter and hampering work at the rig
site. Also, due to the hydrothermally altered nature of the rock and the numerous fault zones
encountered, drilling conditions proved to be challenging, especially as drilling depth increased.
At a depth of 3,988 feet on August 11, the drill pipe broke off (“twisted-off”) deep within the well,
halting the drilling at Well 26-11 for the season. At this late date, there was not sufficient time to
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mobilize for the drilling of an additional well. In addition, lower than anticipated bottom hole
temperatures and poor reservoir rock encouraged a reevaluation of planned field activities.
In drilling Well 26-11 Ormat was expecting to intersect multiple fault zones and was preparing to
encounter and flow test high temperature fluids. And while unfortunately this did not occur, the
well did contribute significantly in determining the local lithology (rock type) through core
analysis, identifying the overall geologic structure of an area (faults in the rock), and obtaining a
temperature gradient (the pattern of temperature increase with depth).
When Ormat’s exploration at Mt. Spurr began, the area was still in the process of being mapped
by the State. Gaining an understanding of the local lithology has therefore been an important
goal of exploratory drilling in 2010 and 2011. The cores collected from the three wells provided
a wealth of information on the local geology. See the 2010 Final Report for complete
information on the lithologies encountered in the first two shallow core holes, which included
lavas and other volcanic deposits. 2011 drilling at Well 26-11 intersected two main lithologies:
(1) 587.5 feet of what was likely an ancient volcanic debris flow, and (2) 3,330.5 feet of
sedimentary pebble/cobble conglomerate, likely representing an ancient riverbed. The volcanic
unit is composed of angular to sub-rounded clasts of andesite lavas, granite, and fine-grained
sedimentary rocks in a clay-rich matrix. Ubiquitous pyrite throughout the deposit suggests that
this may have been the hydrothermally altered flank of Mt. Spurr that is believed to have
collapsed several thousand years ago. The conglomerate unit is believed to be the West
Foreland conglomerate, a well-known formation to Alaskan oil and gas geologists. This unit has
been extensively mapped throughout many locales in the Cook Inlet basin. The discovery of
these two rock units in the 2011 core is useful in understanding the geology of Mt. Spurr, and is
also extremely valuable information for other Alaskan geologists working in the region.
Locating regional faults is a vital part of geothermal exploration, as hydrothermal fluids
preferentially flow along these great cracks in the earth. Faults can be thought of as “conduits”
for the migration of hydrothermal fluids at depth, and they are an important part of the plumbing
of a geothermal system. These faults are also necessary for enhanced formation permeability,
increasing fluid flow rates in production wells.
Alteration of rocks and minerals is another key indicator of a geothermal system at depth. As
hot water flows through rock, it dissolves some minerals and deposits others. This alteration of
the rock is a sign that hot water has flowed through an area. Because hot water preferentially
flows along faults, hydrothermal alteration tends to be concentrated in fault zones.
Exploratory well sites at Mt. Spurr were chosen to target modeled, hydrothermally altered fault
zones. Wells drilled in both 2010 and 2011 successfully intersected these large-scale
structures. Well 26-11 intersected four separate fault zones along the large-scale “Kid Fault”,
each fault zone showing extensive hydrothermal alteration. This discovery shows that hot water
has flowed through the area, and allows for the potential of a geothermal system at great depth.
Throughout the rock core recovered from Well 26-11 there was significant hydrothermal
alteration of the rock that increased with depth.
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The maximum temperature recorded in Well 26-11 was 140°F. Though we had hoped for
higher temperatures, the temperature gradient, or change in temperature with depth is also very
important. The rate of increase of temperature with depth is one of the best indicators of the
quality of a potential geothermal resource. The temperature gradient obtained at Well 26-11
was 2°F/100 feet, which is considered a low temperature gradient. This may be due to the low
thermal conductivity of the conglomerate unit or lack of modern hydrothermal system in this
location. The West Foreland conglomerate, which is a sedimentary aggregate of lithified
pebbles and cobbles, is not a good conductor of heat and is not a high quality geothermal
reservoir rock.
Based on all previous geologic data from the region around Mt. Spurr, it was anticipated that
drilling in this area would intersect granitic bedrock at a relatively shallow depth. It was
surprising to Ormat as well as to several Alaskan geologists that we encountered over 3,000
feet of the West Foreland conglomerate and that we were not able to reach the underlying
granitic rocks. Hard, coherent basement rocks such as the granitic rocks are considered
optimal geothermal reservoir rocks because they hold preexisting fractures open rather than
collapsing, better transmitting hydrothermal fluids. Temperature gradients collected within
granitic rocks might also be slightly higher due to higher thermal conductivities.
Another factor that may suppress observed temperatures is the phenomenon of the “rain
curtain.” Large ice-clad volcanoes such as Mt. Spurr release large volumes of seasonal
snowmelt and glacial runoff. This ice-cold water infiltrates the ground, diluting potential high
temperatures of hydrothermal systems. The “rain curtain” effect has been observed at various
glacially covered volcanoes, such as in Cascadia. The hydrothermal systems beneath these
volcanoes are believed to be suppressed by the influx of the abundant cold water, and it may be
necessary to drill deeper beneath them to reach high temperature geothermal fluids. Though
this makes deep hydrothermal systems more difficult to access in some locations, the high
amount of precipitation and/or glacial/snow melt also provides a constant source of meteoric
water necessary to sustain a geothermal system.
Based on the low temperatures and poor reservoir rock encountered, Ormat concludes that the
likelihood of encountering commercial temperatures (>~350°F) at commercial depth (<~7,000
ft.) is low and is therefore that exploration focus should shift to the central part of the lease area.
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Section 2: Permitting and Environmental Analysis
Permitting
2011 core drilling at Mt. Spurr was referred to for permitting purposes as “Phase 2b” and its exploration activities were conducted in accordance with the following authorizations and permits: ADNR Division of Oil and Gas - Lease Plan of Operations Update Phase 2 • Approval No. LOCI 10-005 Amendment 1 (Update) issued on May 26, 2011
ADNR Division of Mining, Land, and Water - Temporary Water Use Permit (TWUP) • Permit No. TWUP A2010-98 Amendment 2 issued on May 27, 2011
ADEC Division of Environmental Health - Drilling Waste Storage and Disposal • Waiver under 18 AAC 60.900(a)(1) approved on May 16, 2011 ADEC Division of Environmental Health – Temporary Camp Practices Permit • Permit No. 777770097 for Camp 1 location issued on June 6, 2011 ADF&G Division of Habitat - Fish Habitat Permit • Permit FH 10-II-0206 Amendment 2 issued on June 16, 2011 AOGCC - Permit to Drill • Permit No. 211-069 for Spurr West 26-11 issued on June 2, 2011
Environmental Analysis, including Hazard Assessment
Exploration crews working on Mt. Spurr made every effort to maintain the pristine nature of the
fieldwork areas. All personnel were made familiar with the Mitigation Measures and Lessee
Advisories outlined in the Mount Spurr Geothermal Lease Sale No. 3 Final Finding of the
Director released by the Alaska Department of Natural Resources, Division of Oil and Gas on
June 16, 2008. Multiple camp meetings and periodic inspections by the on-site operations
manager ensured compliance with these measures.
Little to no vegetation was cleared to install the base camp and the 2010 drill sites. The 2011
sites were cleared of dominantly resilient alders, which has cleared opening for future re-growth
of willow, improving migratory bird habitat.
Personnel and equipment were transported ~35 miles by helicopter from the village of Tyonek
to the base camp and drill sites on Mt. Spurr. The helicopter for the 2011 season was a small,
fuel efficient Robinson 44 capable of transporting 3 passengers. The helicopter pilot gave full
safety briefings on all flight operations to any new arrivals on site, and provided frequent safety
reminders at camp safety meetings, and throughout day to day operations. A small fuel cache
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was established at base camp to provide fuel for helicopter operations. The cache was
designed with secondary containment in accordance with ADEC regulations. Fuel or hazardous
substance containers with an aggregate storage capacity greater than 55 gallons were placed at
a minimum of several hundred feet away from any water bodies and drinking water sources.
The project site was protected from leaking or dripping fuel and hazardous substances during
equipment storage and maintenance by the placement of drip pans and other surface liners
designed to catch and hold fluids under the equipment, and by creating an area for storage or
maintenance using an impermeable liner. During fuel or hazardous substance transfer,
secondary containment or a surface liner was placed under all container or helicopter fuel tank
inlet and outlet points, hose connections, and hose ends. Spill kits sufficient to respond to spills
of up to five gallons were on hand during any transfer or handling of fuel or hazardous
substances. Trained personnel attended transfer operations at all times. Helicopter refueling
did not occur within the annual floodplain. All independent fuel and hazardous substance
containers were marked with the contents and Ormat or a contractor’s name using a permanent
label.
Wildlife habitat
Ormat prepared a Bear / Wildlife Interaction Plan as part of its Lease Plan of Operations for its
Mt. Spurr Geothermal Exploration Project. The objective of this Plan was to ensure that the
effects of the project on wildlife and wildlife habitats within the project area would be minimized.
Practices and procedures aimed at preventing, minimizing or mitigating potential adverse effects
of the project on wildlife and wildlife habitats are outlined below. This plan focused on species
of interest that were identified during the environmental assessment process.
Species of interest for which specific mitigation measures have been developed include
migratory birds, golden and bald eagles, and grizzly bears. Other species such as moose,
wolverine, black bears, ground squirrels, red fox, mountain goats, resident birds, and Dall sheep
are considered using generalized mitigation measures.
The following regulations apply to the wildlife and wildlife habitats within the project area:
Migratory Birds
Under the Migratory Bird Treaty Act (MBTA) (16 U.S.C. 703), it is illegal for anyone to “take”
migratory birds, their eggs, feathers or nests. “Take” includes by any means or in any manner,
any attempt at hunting, pursuing, wounding, killing, possessing or transporting any migratory
bird, nest, egg, or part thereof. In Alaska, all native birds except grouse and ptarmigan
(protected by the State of Alaska) are protected under the MBTA. The destruction of active bird
nests, eggs, or nestlings can result from mechanized land clearing, grubbing, and other site
preparation and construction activities and would violate the MBTA.
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Eagles
Bald and golden eagles are protected under the Bald and Golden Eagle Protection Act (BGEPA:
16 U.S.C. 668-668c). All parties working in the vicinity of eagles are responsible for avoiding
the taking, “at any time in any manner (of) any bald eagle...or any golden eagle... or any part,
nest or egg thereof” (16 U.S.C. 688a). “Taking” is defined as to, "pursue, shoot, shoot at,
poison, wound, kill, capture, trap, collect, molest or disturb" (16 U.S.C. 688a). During the
nesting period (March 1 through August 31), eagles may be sensitive to noise and obtrusive
human activity in the vicinity of nest sites. Eagle nests occurring in the vicinity of any project
component, including borrow sources, roads, staging areas, etc. must be identified.
Bears
Under Alaska State Regulations, “you may kill game animals in defense of your life or property if
you did not provoke an attack or cause a problem by negligently leaving human food, animal
food or garbage in a manner that attracts wildlife and if you have done everything else you can
to protect your life and property.” In addition, baiting and feeding bears and other wild game by
photographers, tourists, hunters or others is prohibited by regulation (5 AAC 92.230) except for
trapping furbearers or hunting black bears consistent with regulations on black bear baiting [5
AAC 92.085(4)].
General Wildlife Mitigation
A number of general mitigation measures have been proposed to limit the effects of the project
on wildlife. These policies and practices were applied throughout Phase I and 2 activities of the
Mt. Spurr Geothermal Project and are aimed at minimizing or preventing wildlife problems
through the training of employees, management of food and garbage, treatment of problem
animals, and establishment of procedures and policies on wildlife management.
These general mitigation measures included the following:
• All company and contractor personnel were made aware of all permit compliance
requirements.
• All company and contractor personnel were required to complete awareness training.
The training was designed to inform each person working on the project of
environmental, cultural, and social concerns and to ensure that personnel understand
and use techniques necessary to preserve geological, archaeological, and biological
resources. In addition, training sought to help personnel increase their sensitivity and
understanding of the community values, customs, and lifestyles in the project area.
• Additional specialized training in firearms, bear safety, and first aid was provided to
employees as needed.
• No activities, including camp set-up, occurred within 500 feet of any fish bearing
waterbody.
• Project personnel were instructed not to feed wildlife of any type or in any other way
attempt to attract or harass animals or birds.
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• Food was kept inside wildlife proof containers that minimize odors. Any grease, oils,
fuels, or antifreeze stored on-site were stored in bear-proof areas or containers.
• Waste was reduced, reused, or recycled to the maximum extent practicable. Garbage
and domestic combustibles were incinerated or hauled away daily whenever possible to
an approved site in accordance with 18 AAC 60.
• Dogs were not allowed on site.
• Personnel avoided all interactions with wildlife.
• Bear deterrents (yelling, air horns, and rubber bullets) were used in a few instances
when bears were too close to camp or the drill site. Bears departed the area when
deterrents were used.
• Firearms were available for use on site by authorized personnel only. Personal firearms
were not permitted on-site.
• No hunting or fishing by project personnel was permitted. Personal fishing gear was not
permitted on-site.
• Birds, nests, and eggs were left intact. One active nest was found near one of the
proposed drill sites, so the drill site was moved to provide a wide buffer around the nest.
Drill site was not used in 2011, however. (Full details below under Migratory Birds.)
• Surface entry was avoided within one-quarter mile of trumpeter swan nesting sites
between April 1 and August 31.
Observations
Migratory Birds:
Personnel were informed that all birds (except grouse and ptarmigan) are protected under the
Migratory Bird Treaty Act (MBTA), and that grouse and ptarmigan are protected by the state.
Personnel were informed that they cannot touch or bother any birds, nests, eggs, etc.
As is recommended by USFWS, and as stated in our Wildlife Interaction Plan, we worked to
avoid land clearing, etc. during the bird nesting period between May 1 and July 15. In mid-May
of 2011, however, our work sites were still covered in snow, and no birds had begun nesting.
Thus USFWS provided verbal approval to Ormat to move ahead with site clearing. We were
able to clear our western work site (Spurr West, 26-11) promptly, however, after rapid snow melt
in late May, we had not yet completed the clearing of our eastern drill site (Spurr East, 84-11).
USFWS then granted us verbal approval to conduct a bird nest survey prior to any land clearing,
to avoid disturbing potential nests.
On June 3, HDR staff ecologist Chris Wrobel and Ormat Alaska representative Allison Payne
conducted a bird nest survey at drill site Spurr East 84-11. The nest survey covered an area of
approximately 200 x 300 feet, more than twice the area required for the drill site, plus an extra
approximately 100 x 100 feet around the landing zone. Within this area, one active bird nest
was found: a fox sparrow nest, containing 5 eggs. The nest was found approximately 50 feet to
the east of our proposed drill site. Chris Wrobel recommended a buffer zone approximately 75
feet in diameter. Therefore we moved our proposed drill site approximately 100 feet to the west.
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We flagged off a buffer zone 100 feet to the west of the nest, and proceeded clearing land to the
west of the buffer the next day. Clearing was completed within a few days. As it turned out, site
84-11 was never drilled in the 2011 season.
Eagles
Personnel were informed to look for eagle nests when beginning work in a new area. No eagle
nests were seen during 2010 or 2011 operations. There were a small number of eagle sitings in
the camp/drill rig area in the 2011 season, when the birds were observed flying over the area,
but the birds were generally not seen at close enough range to determine exact species.
The USFWS had previously conducted aerial surveys in the Mt. Spurr area (September, 2010)
to document the presence/absence of eagles in potential nesting habitat. No bald or golden
eagle nests were observed during the survey. One unidentified eagle (an immature) was
observed flying in a gorge about 1.5 miles NE of current drilling operations. USFWS did not
recommend a second survey for spring of 2011 since the project appears to have minimal
potential for disturbance to nesting eagles due to: 1) disturbance associated with the type of
work is minimal, and 2) lack of nesting eagles in the area.
Cultural and Historical Sites
No cultural or historic sites were encountered during the 2010 or 2011 operations.
Hazard Assessment
INHERENT MT. SPURR HAZARDS Mt. Spurr is an active stratovolcano in Alaska’s Aleutian Volcanic Arc, it’s most recent eruptive
activity occurring in 1992. As an active volcano, Mt. Spurr possesses numerous sources of
geologic hazards. See Figure 4 below for a summary hazard map from the USGS/AVO
‘Preliminary Volcano-Hazard Assessment for Mt. Spurr Volcano, Alaska’ [Open-File Report 01-
482]. The red oval shows the location of our 2010/2011 base camp.
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Figure 4: Volcano Hazard Assessment for Mt Spurr (Waythomas & Nye)
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Volcanic hazards that could affect Ormat’s operations include:
VOLCANIC ASH AND BOMBS – Hazard from ash clouds include not only the fine particles
lofted into the atmospheric column, but the threat of large fall-out volumes onto the flanks.
Some of this fall-out may also be larger diameter (~8cm-2m) volcanic bombs more proximal
(within several kilometers) to the vent.
LAHARS AND FLOODING – Lahars are fluidized rock and soil from the flanks of the volcano
that are mobilized during eruptions due to interaction of flank snow and ice with hot erupted
material. These types of debris flows generally run down previous drainages, but can also lead
to damming and thus eventual flooding. Lahar deposition at Mt. Spurr could potentially reach
20-40 km east of the edifice.
DEBRIS AVALANCHES – Debris avalanches are rock and soil mobilized downslope due to
flank collapse, slope failure, intense seismic activity or other catastrophic events. These
avalanches generally occur during eruptive phases however collapse can occur during
quiescence due to slope instability from weakened flank rocks (due to long term hydrothermal
alteration of the edifice). Debris avalanches may reach between 15 and 30 km east or west of
the edifice.
PYROCLASTIC FLOWS – Pyroclastic flows are mixtures of very hot (several hundred degrees
Celsius) volcanic gases, ash, and debris that travel down-slope from the vent; higher gas
volumes leads to great velocities. Pyroclastic flows at Mt. Spurr could reach upwards of 20-
25km distant from the edifice and would be lethal to anything in their paths.
D IRECTED BLASTS – These blasts are a direct result of total flank failure (that uncaps the
internal vent system) in a particular direction, similar to the well-known Mt. St. Helens directed
blast of 1980. While rare in the life of a volcano, one such blast has been documented for
ancestral Mt. Spurr and thus is possible for the future of this edifice. A large directed blast could
affect a radius of between 25 and 30 km from the edifice.
LAVA FLOWS – Lava flows tend to erupt from the vent after the initial explosive activity has
paused or ceased. Lava flows at Mt. Spurr tend to be very viscous (thick) and slow moving, as
opposed to the “river of lava” type of flow observed, for instance, at Hawaiian volcanoes. Mt.
Spurr-type lava movement would generally be measured at meters per day, rather than
kilometers per hour, and would tend to follow predictable drainage patterns.
EARTHQUAKES – Mt. Spurr’s location within the active tectonic regime of the Upper Cook Inlet
makes it susceptible to both volcanic and tectonic-induced earthquakes. While major events
(greater than 6.0) are not known to occur regularly, events greater than 3.0 (that which can be
reliably felt by humans) are common – especially during periods of unrest, pre-eruption and of
course syn-eruption.
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Another source of geologic hazard unrelated to volcanism is simple SNOW AVALANCHES . The
large volume of ice and snow on Mt. Spurr renders significant potential avalanche hazards to
winter and spring-time operations downslope from the steep southern faces of the Mt. Spurr
edifice.
Mt. Spurr’s Recent Eruptive History
Mt. Spurr is an active stratovolcano, its most recent eruptions occurring in 1953 and 1992. The
high cone summit of Mt. Spurr is an ancient vent that has not been active for several thousand
years. The currently active vent is Crater Peak, to the south of the summit along the northern
boundary of Ormat’s geothermal leases (Figure 2). The 1992 eruption of Crater Peak sent
plumes of volcanic ash thousands of feet into the atmosphere, depositing enough ash in
Anchorage, 80 miles to the east, to shut down the airport. At times during this explosive phase
of the eruption, ash was measured to an altitude of 14 km (46,000 ft.), and ash was blown as far
away as Manley Hot Springs, 264 mi (425 km) north of the volcano.
As the eruption progressed, avalanches of hot debris cascading down the south flank of Crater
Peak mixed with snow to form lahars that reached the Chakachatna River. Successive
pyroclastic flows formed overlapping tongues of coarse debris that coursed down the slopes of
Crater Peak and funneled into preexisting drainages. The farthest-traveled pyroclastic flows
moved about 1.8 mi (3 km) from the crater rim, descending more than 3280 ft. (1000 m) in
elevation. This eruption also blasted large blocks up to 3.3 feet (1 m) across in a concentrated
zone of fallout up to 1.9 miles (3 km) southeast of Crater Peak, and blocks and bombs up to 6
miles (10 km) from the Crater Peak vent.
This recent eruption from Crater Peak deposited pyroclastic material and debris flows/lahars in
the area immediately surrounding the vent. Much of these deposits are located within Ormat’s
lease area. If a geothermal power plant is built on Mt. Spurr, every effort would be made to
locate the plant as far as possible from the active vent of Crater Peak, outside of the zone of
highest volcanic hazards. However, any power plant built at Mt. Spurr would necessarily be
subject to possible hazards.
ORMAT EXPERIENCE AND MITIGATION There are many geothermal power facilities worldwide located around or near active volcanoes,
and exploration has been performed in many of these settings by the geothermal industry.
Ormat currently operates a 30 MW geothermal facility, operating since 1993, in a volcanically
active area on the Big Island of Hawaii as well as plants near volcanoes at Momotombo,
Nicaragua, and Zunil and Amatitlan in Guatemala. We maintain contact with monitoring
agencies in each of these locations (the Hawaiian Volcano Observatory [HVO] at our Puna plant
in Hawaii and the in-country volcanological institutes in both Nicaragua [INETER] and
Guatamala [INSIVUMEH]).
Exploration drilling on Mt. Spurr has thus far been focused within the eastern portion of the
leases, farthest from the active Crater Peak. The topography and potential road access in the
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eastern portion is also a more favorable location for engineering a power plant. This would be a
preferable location for power plant construction, but resource availability and risk mitigation
dictate final location. During exploration it is beneficial to drill wells in a more widespread region
around the flanks of Mt. Spurr, including closer to Crater Peak, in order to understand the entire
hydrothermal system at Mt. Spurr.
Fortunately Mt. Spurr is one of the best monitored volcanoes in the world. The Alaska Volcano
Observatory (AVO) maintains a total of 17 volcano monitoring stations on and around Mt. Spurr.
As magma rises beneath a volcanic edifice prior to eruption, the pressurized magma and gases
cause rocks to break at depth, creating small earthquakes. The movement of the magma and
associated hot fluids and gases can also create seismic signals. This seismicity is one of the
best early indicators of volcanic activity. AVO maintains 17 extremely sensitive seismometers
which can detect even the most subtle seismicity beneath the volcano. The seismic network
displays the data in real-time at AVO headquarters in Anchorage.
In addition to the seismic stations, there are several other monitoring methods in use by AVO.
Geodetic monitoring stations measure inflation of the edifice in the event of an accumulation of
magma at depth. Remote cameras directed at Mt. Spurr allow AVO personnel to observe any
possible variation in normal background activity at the volcano, such as landslides or increased
steaming. Satellite imagery analysis is also carried out by AVO staff twice daily to look for the
presence of ash or increased thermal flux at the volcano.
A well-monitored volcano like Mt. Spurr will generally provide weeks to months of early warning
prior to an eruption, allowing ample time for project personnel to depart the area. Nevertheless,
Ormat has taken extra precautions to protect the health and safety of crews working on this
active volcano. During field operations at Mt. Spurr, emergency contact information was
exchanged between Ormat crews and AVO personnel, each side able to share any pertinent
observations relating to possible volcanic unrest. On-site Ormat personnel reviewed Mt. Spurr
seismicity data every day while crews were in the field. Project personnel were briefed on
potential volcanic hazards, and an escape route was established. In addition, a project
helicopter was on site at all times in the event of emergencies.
Non-Volcanic Hazards
With regards to avalanche hazard and other extreme weather, exploration work at Mt. Spurr
was conducted primarily during months when the weather was more temperate. This is
generally between late May and September. The base camp was established far enough away
from the mountain to enable crews to ride out weather events at the exploration site, if and
when they may occur. This includes potential avalanche episodes in the early spring. Though
our leases rise to elevations of greater than 7,000 ft., much of our land to the south is at less
than 1,500 ft. allowing for easier occupation of the site in all weather.
Unexploded Ordinance
As detailed in the 2010 Multi-Agency Completion Report, Mt. Spurr was used as a firing range
from the 1940’s through the 1950’s. The US military came through and cleared the area, but
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there are some possible unexploded ordinances (UXOs) that remain on the mountain. Visual
inspection and metal detectors have been used in the process of clearing camp and drill sites to
detect possible UXOs. Mt. Spurr crews discussed the UXO issue during camp safety meetings,
and all personnel were informed of how to identify, avoid contact with, and report on the
discovery of any UXOs. During the 2011 season, several suspected UXOs were discovered
around the upper flanks of the mountain, mostly by helicopter, and their locations were recorded
and reported to the DNR.
Health and Safety
Personnel with EMT and /or Wilderness First Aid and CPR training were on site at all times
during the 2010/2011 season. In terms of health and safety, there were no reportable spills
during the project and there were no injuries or accidents.
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Section 3: Cost of Energy and Market Analysis
The Mount Spurr geothermal power plant, if developed, would serve customers in the Railbelt.
The Railbelt is unique among regions in the United States in that its cost curve for electricity and
heat is highly dependent on one source of fuel, namely natural gas produced in the Cook Inlet.
Thus, any easing to future supply disruptions in this source can potentially result in significant
benefits that would not necessarily be experienced if such a project was located in the mainland
U.S.
Communities served by the Railbelt utilities are heavily reliant on natural gas resources
produced in-state. On page 35 of the Mount Spurr Geothermal Lease Sale No. 3; Final Finding
of the Director. Alaska Department of Natural Resources Division of Oil and Gas: June 16,
2008, the Alaska Department of Natural Resources concluded that “Although current electrical
demand is largely met by natural gas, gas reserves are finite and eventually Southcentral
Alaska will have to find another energy source. Geothermal development resulting from this
lease sale could contribute to the area’s future energy supplies. Additionally, introduction of a
competing energy source in Southcentral Alaska may result in downward natural gas price
pressure on local utilities.”
Figure 5: Cook Inter Natural Gas Production
Figure 5 above demonstrates the forecast for supply shortages in Cook Inlet natural gas in the near future. The source is the Alaska Energy Authority - Alaska Fuel Price Projections 2011-2030. January 25, 2011:
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http://www.iser.uaa.alaska.edu/Publications/Fuel_price_projection_2011-2030_final_01252011.pdf
Natural gas production in the Cook Inlet is depleting rapidly, generating concerns over future
supplies for both electricity and heating. By the time Mount Spurr will be available, natural gas
supply may be in critical shortage. Thus, a 50-100 MW average, net to the grid, renewable
base-load energy project will help bridge the gap and help stabilize energy prices by offsetting
the need to use these natural gas supplies for electricity production and will free considerable
amounts of natural gas for heating.
Figure 6: Projected fuel for Southcentral Alaska 2011-2030
In the final Alaska Railbelt Regional Integrated Resource Plan (RIRP) Study released in February 2010, Mount Spurr was the only geothermal resource considered as available to the Railbelt region.
The report noted how the Railbelt in Alaska is unique in that it is removed from major domestic
sources of natural gas, including the North Slope of Alaska, and mainland markets. Thus,
options are limited for baseload power to Liquefied Natural Gas (LNG), hydro-electric, coal,
municipal solid waste, nuclear power, or geothermal power. Intermittent sources such as wind
and tidal are prospective, but require baseload generation to back them up. There is particular
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concern for how to accommodate significant amounts of wind into the grid, given that the
Railbelt remains a relatively small market overall.
Biomass is limited by biomass fuel stocks, which may not be available at economies of scale,
and as a result, aren’t analyzed in the report.
LNG and nuclear power require significant cost, infrastructure, and time constraints. Hydro-
electric remains site dependent and requires significant time constraints and initial capital costs
towards development. The major hydro-electric project option, the Susitna Dam has its own
environmental challenges, according to the report, and would cost between $4.1 billion and $10
billion and would take over a decade to complete. Coal-fired power plants remain an attractive
option based on price, but environmental issues and the potential for environmental opposition
and carbon pricing are a limiting factor.
In the study, the estimated cost of wholesale power for any option will be $164.10/MWh to
$206.80/MWh by 2025.
That being said, at present the cost of electric power in the Railbelt is significantly lower than in
rural Alaska, at well below $100/MWh, although this price is expected to go up as natural gas
supply declines. With these kinds of estimates, Mount Spurr is in an advantageous position to
provide baseload electric generation at the lowest end of the price scale, should a commercially
viable resource be identified.
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Section 4: Simple Economic Analysis
Our preliminary cost estimates for a geothermal power plant indicate:
• Size: 50 -100 MW net, on a yearly average basis
• CAPEX: $5,000-$6,000 / kW
• All inclusive O&M costs (incl. royalties, property taxes, etc): $35-$55/MWh
• Target placement in service date: 2017-18
• Required power sales price: $120-$130/MWh with a 1.5% yearly escalator
Additional benefits to the Railbelt should this power plant be constructed:
• Price is guaranteed, regardless of commodity prices (e.g. natural gas) for the lifetime of
the power purchase agreement, expected at 25 years
• This will we be a base-load plant that will help relieve the demand for depleting natural
gas. The project will displace some $3,000,000 MMBtu of natural gas each year
• Energy produced will be clean with near zero emissions, minimal surface and visual
impact and will not consume water. The geothermal fluids will be 100% re-injected into
the reservoir to ensure its sustainability
• The stated power price includes the value of renewable energy credits and other green
attributes
• The plant will create over 100 jobs during construction and will create dozens of high
quality permanent jobs in this rural part of Alaska
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Section 5: Summary and Recommendations
After our first two years of exploration, Ormat recommends more closely evaluating the potential
for geothermal development in the Crater Creek area in the central portion of our leases. To
date, Ormat’s exploration drilling has focused on the eastern portion of the leases, where
volcanic hazard and infrastructure costs are considered lower. Drilling results in the eastern
area are encouraging from an alteration and structural standpoint but disappointing in terms of
temperature and reservoir quality. Temperatures were lower than anticipated, and we
intersected 3,400 feet of conglomerate, which is expected to provide poor reservoir
rock. However, geologic investigations and all geophysical surveys cover the entire lease
area. From these studies, the Crater Creek area is considered to have the highest probability to
provide an economically viable resource.
Exploration in the Crater Creek Area
Shallower geothermal resources are more likely to be located closer to the active volcanic vent
of Crater Peak in the central portion of the leases. The areas along the drainages beneath
Crater Peak show the most potential for active hydrothermal systems at depth. Numerous high
temperature surface expressions of a deeper geothermal system are present in the Crater
Creek area, including 60-80°F rivers, hot springs up to 104°F, abundant warm seeps, and
anomalously warm glacial runoff. Alteration of the rocks in the area, geochemistry, and active
faulting also suggest that this area could reveal an economically viable geothermal resource.
There is much to be learned about Mt. Spurr’s geothermal potential by drilling in the Crater
Creek area. The chances of drilling into the hydrothermal system are significantly greater here,
and to intersect the system at depth could (1) prove the existence of a geothermal resource at
Mt. Spurr; (2) help us to understand the geochemistry of the Mt. Spurr hydrothermal system; (3)
greatly improve and constrain the model for the plumbing (faults/structure) of the hypothesized
geothermal system; and (4) more precisely be able to determine potential reservoir
temperatures.
Ormat had plans to drill this area in the 2010 season, but the plans were cut short when the
onset of winter weather ended the drilling season. One potential drill site in the area was
already cleared of vegetation in 2010, and plans for the drill pad layout were made. Access to
this area would be similar to other drill sites, and wells at Crater Creek could be drilled with the
fly-in rigs. Foggy conditions in the Chakachamna River valley may pose less of a logistical
challenge in this area than in the lower elevation drill site of 2011.
Ormat has not concentrated efforts in this central portion of the lease area earlier on, however,
because this area is at a higher risk for geologic hazards. Potential volcanic hazards in the area
around Crater Creek include ash fall, pyroclastic flows, lahars, rock falls, and more.
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Ormat wishes to consider options for exploration and possible development in the Crater Creek
area. Ormat plans to enlist a team of geologists, including Alaskan volcanologists and
engineers to evaluate potential power plant locations and field design in this central lease area.
If it is deemed possible to engineer a low-risk power plant there, Ormat will recommend moving
forward to further exploratory drilling near Crater Creek, probably in 2013.
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Appendix A: Selected Photographs from 2011 Exploration Activities
Hard hats at the ready to receive sling
load during mobilization of Well 26-11.
Mt. Spurr 2011 basecamp in light fog.
Rare sunny day at Well 26-11.
Geochemist Laura Garchar sampling
spring water on the flanks of Mt. Spurr.
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“Warm seeps” along the walls of Crater Canyon are host to thermophilic algae.
Close-up of core section, West Foreland
conglomerate.
Thermophilic monkey flowers thrive along 70°F streams in Crater Canyon.
One of many loads of core ready for
slinging.