$165 million project proposed at Geysers

Tapping steam 8,000 feet underground, a Canadian company has revived a long abandoned steam field and is attempting to build the first power plant at The Geysers in 21 years.

The $165 million project proposed in the mountains of northeast Sonoma County reflects resurgent activity at the world's largest geothermal field, part of the greatest exploration of the nation's geothermal resources in two decades.

Western GeoPower Corp. has discovered enough steam to convince lenders the project is viable for final funding, industry analysts predicted. The company also appears on track to gain Sonoma County approval as planners complete environmental reviews.

"We have a great degree of comfort now. It's less of a wild card. We've got the steam," said Ken MacLeod, Western GeoPower president and chief executive.

Construction is expected to start this spring on the new geothermal plant, which would put it on schedule to go online next year.

The 35-megawatt plant would rise where a PG&E unit ran for a decade before it was shuttered. While the new plant would generate about half the electricity of its predecessor, the unit would be more efficient and should operate 50 years or more.

Western GeoPower has contracted to sell the power -- enough for more than 26,000 homes -- to the Northern California Power Agency, which supplies electricity to 17 cities and districts including Ukiah and Healdsburg.

Western GeoPower is banking on the project's success to launch a search for more steam to supply a second plant planned on the 1,000-acre site at The Geysers. The company also is exploring geothermal projects in Southern California and British Columbia.

"Their Geysers project is a good one and will be a strong cash flow machine. Their strength is dependent on the project. Once online, the uncertainty will be gone and the stock will climb," said John McIlveen, an energy analyst for Jacob & Co. Securities, in Toronto.

Western Geothermal stock, which hit its 2008 peak in May at 45 cents a share, closed Monday at 16.5 cents a share on the TSX Venture Exchange, which is affiliated with the Toronto Stock Exchange.

The company has gone through almost $45 million funding raised from investors and will rely on loans for much of the remaining costs for the project, MacLeod said.

"Once we have the use permit, then the financing options open up tremendously for us," he said.

Last month, Western GeoPower completed four wells at The Geysers that exceeded expectations, finding 50 percent more steam than projected. While two wells remain to be drilled, the company is holding off until it gains county approval for the project and then obtains development loans.

The company is on its way to clearing the first hurdle, with county planners.

"It doesn't seem like there's too many issues related to the project," said Sigrid Swedenborg, Sonoma County's geothermal coordinator.

The plant is allowed under both county zoning and its general plan. Further, the project limits environmental impacts by using well pads and roads put in for the PG&E plant that once stood on the site, she said.

Less certain was a sufficient steam supply to power the plant.

PG&E closed its unit in 1989 after just 10 years in operation largely because the 62-megawatt plant was too large and over-mined the amount of steam available.

"This was always an area that was sort of a mystery as to whether or not you could find steam there again. And after all, it's not like you can pick up the lid and see what's inside," said Paula Blaydes, vice president of permitting for Western GeoPower.

Western GeoPower sized its plant based on estimates of the steam available, but the resource still needed to be found.

"The drilling program is where the biggest risk to these projects lurk," McIlveen said.

The wells drilled so far have tapped enough steam to supply about three-fourths of the fuel needed to power the plant. The amount is significant because lenders require greater certainty of a project's viability before making development loans, McIlveen said. Credit has tightened with the economy mired in a recession and the nation's financial system struggling.

"They do have numbers for the lender to look at and rely on. They should be ready for bank financing," he said.

The plant is on a fast track. The projected four-year turnaround, from leasing the site to completing the plant, tops the seven-year industry average, McIlveen said.

More plants could follow. Energy companies are mining new sources of steam at The Geysers and across the West as demand grows for geothermal power and other renewable energy supplies.

At The Geysers, the Bottle Rock power plant was restarted two years ago. The owners, US Renewables Group and Riverstone Holdings, have acquired more leases to provide more steam to the plant.

Calpine, the largest operator at The Geysers, is reworking existing wells and drilling new ones to increase production at its 17 plants. Calpine also could build new plants.

Currently there are 22 plants generating about 1,000 megawatts of electricity at The Geysers. At its peak two decades ago, 27 plants produced about 1,900 megawatts.

Production declined as steam pressure diminished. Plants often were oversized. Some wells were poorly constructed and maintained.

To reverse the decline, the steam fields are being recharged with treated wastewater pumped from Santa Rosa and Lake County.

Newer plants also are more efficient and typically smaller, helping improve management of steam fields.

"Hopefully if you manage the resource right it will be there forever," McIlveen said.

You can reach Staff Writer Michael Coit at 521-5470 or mike.coit@pressdemocrat.com.