"Final Environmental Statement for the Geothermal Leasing Program," U.S. Department of the Interior. (Washington, D.C.; U.S. Government Printing Office, 1973). "Geothermal Energy: Resources, Production, Stimulation." Edited by Paul Kruger and Carel Otte, Stanford, Calif., (Stanford University Press, Stanford University, 1973). "Geothermal Resources Investigations, Imperial Valley, Calif.: Developmental Concepts," Bureau of Reclamation, January 1972. "Meeting California's Energy Requirements, 1975-2000," Stanford Research Institute, May 1973 (SRI project ECC-2355). "Preliminary Appraisal of Ground Water in Storage With Reference to Geothermal Resources in the Imperial Valley Area, California." Prepared in cooperation with the Bureau of Reclamation by USGS (Geological Survey circular 649). R. G. Bowen "Environmental Impact of Geothermal Development," Geothermal Energy Resources, Production, Stimulation, op. cit. James B. Koenig "Worldwide Status of Geothermal Resource Development," Geothermal Energy, Resources, Production, Stimulation, ed., Paul Kruger and Carel Otte, Stanford University Press, 1973. HENRY ESCHWEGE, APPENDIX IV U.S. DEPARTMENT OF THE INTERIOR, Director, Resources and Economic Development Division, General Accounting Office, Washngton, D.C. DEAR MR. ESCHWEGE: This responds to your request for comments on your proposed report to the Congress entitled "Problems Associated With Identification, Technological Development, and Use of Geothermal Resources." As the report notes, the Geothermal Energy Research, Development and Demonstration Act of 1974 (Public Law 93-410) established an organizational framework and broad guidelines for developing policy on geothermal energy. It is expected that the work of the mandated Geothermal Energy Coordination and Management Project (GECCMP) will consider and provide programmatic responses to the issues raised and the recommendations in the report covering such matters as leasing, R. & D. effort within the Department and others. Pending the results of the project efforts, it is appropriate at this time to provide a more general response to several of the issues raised in the report. Geothermal leasing program Designating known geothermal resource areas (KGRA).—The report states that the Secretary should, before designating a KGRA, require that sufficient subsurface data be obtained to better indicate whether or not there is a commercially exploitable geothermal reservoir. The basic point of the GAO is that industry is discouraged from entering competitive auctions for geothermal tracts because of in adequate data underpinning the KGRA designation. Competition could be focused on good prospects if more care was taken in making this designation. Currently, Geological Survey relies on surface geology and geophysical data. Stratigraphic drilling might provide important data in addition to that currently collected. Consideration will have to be given to whether or not the expected payoff is enough to justify the added costs or preparation for lease sales. Beyond these efforts, making substantial inroads into the disagreement among "geothermal experts" on the value of designated KGRA's would require drilling and completion of wells so that estimates of proven reserves could be made. Were Interior to limit competitive auctions to those tracts on which estimates have been made of proven reserves, we would be required to: Essentially eliminate the KGRA designation and rely completely on noncompetitive leasing, or Initiate an extensive exploratory drilling program, in effect taking over the exploration function from industry. The Department's current position is that geologic and geophysical data can provide sufficient grounds for designating KGRA's with the remaining uncertainty on resource characteristics inherent in developing subsurface resources appropriately dealt with by industry in the context of competitive auctions and subsequent development efforts. Moreover, exploratory and development drilling are felt to be an integral part of industry efforts and not an appropriate function for the Government. This view is apparently held by the Congress also as the conference report for the Geothermal Energy Research, Development, and Demonstration Act of 1974 specifically stated that drilling activities "should be to establish the extent and nature of geothermal resources, and should not involve any exploratory drilling, which is, and should remain the province of private industry." Finally, it should be noted that--especially in the cases of hot mineralized water and dry rocks-there is no standardized technology available for harnessing geothermal energy. For this reason, even a common understanding of the geothermal resource characteristics for a given tract leaves ample room for disagreement on its commercial value. Diligence requirements. The report recommends a strengthening of leasing regulations by including an option to require an increased level of expenditures by lessees during the 10-year primary lease term and by providing more specific requirements as to the minimum developmental actions required during the initial 5 years of a lease. The report does not note that the Interior Department took drilling costs into consideration at the time that provisions were placed in the regulations for increased rental fees and minimum expenditures in the second half of the 10-year primary lease term. There is disagreement now over the current cost of drilling an exploration well. Experience with existing leases can give us better information on that problem. Even if the report is correct in its assertion that the $166,400 in minimum expenditures and rental fees for an average geothermal tract does not cover the costs of an exploration well, current regulations provide incentives for diligent development. The lessee's basic options are: Put down the bonus money and $166,400 in minimum expenditures and rental fees to maintain rights to the lease. At the end of 10 years, no return will have been realized on the investment and exploratory drilling will still be required to determine whether or not the lease is worth developing. Put down the bonus money and spend $210,000 to $520,000 on an exploration well. The lessee can then decide to abandon the lease and take a tax writeoff on the acquisition and exploration costs or start production and begin to realize a return on his investment. Other recommendations.-The other recommendations in the report pertinent to special arrangements for leasing of land where ownership of geothermal resources is in dispute, and legislation to clarify the classification of geothermal resources as well as Interior's authority for offshore geothermal leasing will be considered in the implementation of the Geothermal Energy Research, Development, and Demonstration Act of 1974 (Public Law 93-410). Developing potable water from geothermal brines This Bureau of Reclamation program also will be addressed by the GECMP. Certain facts about the program and the report commentary require clarification. This program was the first Federal development-oriented program and, when one considers the limited resources devoted to it, has contributed significantly to advancing the state of the art in both desalting and power production as well as in environmental problems associated with geothermal resource utilization. We believe the report does not adequately credit the innovations of the Bureau in this evolving energy technology. The Bureau believes that its views on the two principal criticisms of its program should be presented in some detail. 1. The report repeatedly asserts that there may be less potential for water production from Imperial Valley than originally estimated, and implies that this is a serious shortcoming of the program. The Bureau states that it has never estimated the geothermal potential of Imperial Valley. Only a tiny fraction of the valley has been explored in adequate detail to hazard an estimate. The report credits the Developmental Concepts Report of 1972 which developed only estimated costs of fresh water if the resource should prove to be as large as 2,500,000 acre-feet per year. The report did not estimate that the resource was capable of that volume of production. Reclamation believes that the GAO report could be construed as meaning that proluction of 2,500,000 acre-feet per year was self-evident as being the Public Law 90-537 requirement for augmentation of the Colorado River. Actually, Public Law 90-537 requires that augmentation be done. y the most economical method. Barring environmental or legal restraints, at least 1,500,000 acre-feet per year probably can be provided at a nominal cost of only several dollars per acre-foot by Reclamaion's weather modification program. If this program is implemented, ess than 1 million acre-feet per year will be provided by desalting geothermal brines, should this source be the second most economical nethod of augmentation. The principal reason for placing a stage III concept of 2,500,000 cre-feet per year production of fresh water in the Developmental Concepts Report was to demonstrate a maximum cost of augmentation f all of the augmentation were from geothermal brines. Reclamation's ▪rogram is in no way deficient if less than 2,500,000 acre-feet per year are obtainable from desalting geothermal brines. Neither is there a need to give greater consideration to other alternatives as Reclamation has been diligently pursuing all alternatives within funding limitations and will continue to do so. As stated in the report, geothermal desalting technology developed in the Imperial Valley program could and is expected to be used in other arid areas in the Western United States and in other parts of the world to furnish needed fresh water supplies. Thus, the question of how large a resource is available in the Imperial Valley should not be deterrent on a program that is aimed at development of a new technology. 2. The report indicates that binary-cycle power development will probably preempt desalting of geothermal brines. This is not a valid assumption for several reasons. (a) Binary-cycle power development is still in the experimental stage and lacks proven technical and economic feasibility, as does desalting geothermal brine technology. Either, neither, or both may survive the research stage. (b) Even if the binary-cycle power system should prove to be feasible, the resource could well prove to be more valuable as a water source. Water at $100 per acre-foot equates to a cost of only about 5 cents per barrel of oil if the water is used for oil shale production. It is possible that water will prove to be a limiting factor in oil shale production, as almost the entire oil shale resources are located in the water-short Colorado River Basin. (c) The binary-cycle power system, if feasible, would probably be limited to the cooler-type geothermal anomally such as the Mesa Anomaly. On hotter types of anomalies, direct steam power production would probably be utilized and the hot brines would be available in a joint water/power system such as that presented in the Developmental Concepts Report. (d) Recent studies show that multipurpose water/power development is still possible and probably economical, using 400° F geothermal brines and a binary-cycle power system. In summary, since the Mesa Anomaly is the only anomaly that has been substantially explored on Federal lands in the Imperial Valley and as less than 10 percent of the Federal lands in the Imperial Valley have been explored even partially, there is a possibility that much hotter anomalies, such as that at Cierro Prieto, Mexico, in the southern part of the valley, remain to be discovered. Also there are many totally unexplored geothermal areas in the Colorado Basin outside of the Imperial Valley that would be available for development of water. Results from Reclamation's research program in the Mesa Anomaly, Imperial Valley, can be transported to any other anomaly in the United States or the rest of the world where a critical need for supplemental water exists. Because of the current state of the art in geothermal energy technology, there is no basis for considering Reclamation's program as deficient because of concurrent research in the binary-cycle type of geothermal powerplant. We appreciate the opportunity to review your draft report. Sincerely, ALLAN L. REYNOLDS, Director of Audit and Investigation. STATE POLICIES FOR GEOTHERMAL DEVELOPMENT* SUMMARY AND RECOMMENDATIONS THE VALUE OF GEOTHERMAL RESOURCES Every point of the globe rests on an ocean of molten rock at 1,000° C. Heat from this immense reservoir flows steadily to the Earth's surface, where it appears most dramatically as volcanoes, hot springs and geysers. But valuable geothermal resources are more widespread than these special displays. Broad geothermal belts encircle the entire planet-including all of the Western United States. In these areas, the Earth's heat is accessible and forms a valuable, multifaceted resource. (Fig. 1) Over the centuries numerous beneficial uses have been discovered for geothermal resources. Hot springs have traditionally been gathering places for recreation, and during the 13th century, the Larderello hot springs of Italy provided sulphur and other minerals for trade. Later, boric acid was commercially produced, and in 1904 electricity was first generated from the Earth's heat, again at Larderello.1 With improvements in exploration, well drilling and electric conversion technology, geothermal resources have become available during the past decades on a broad scale. The growing demand for secure. energy supplies has also made their development especially desirable. As a source of electricity, geothermal resources globally supply approximately 1,500 megawatts (MW) of power from over a dozen geothermal areas. The Geysers dry-steam field north of San Francisco (the only commercial power development in the U.S.) generates about 500 MW, which is adequate to supply a city of one-half million. Equally important globally are direct heat uses for geothermal resources in agriculture, industrial processing, and for heating and cooling of buildings. The Soviet Union, Hungary, Iceland, and New Zealand far exceed other countries in direct application of geothermal energy; their use totals almost 6,000 MW. In the United States, geothermal energy is used directly for heating at Klamath Falls, Oreg.; Boise, Idaho; and in other scattered locations. (Fig. 2) Present potential The energy potential of geothermal resources in the United States is hundreds of times greater than current use. Geothermal reserves in the Western States, assessed by the U.S. Geological Survey, are adequate to supply all new electric capacity in those States for the next two decades. This energy-over 100,000 MW can be generated from *National Conference of State Legislatures. "State Policies for Geothermal Development." Douglas M. Sacarto. 1 California Resources Agency, "Water and Power From Geothermal Resources." pp. 9-10. Total U.S. electric capacity from all sources is now approximately 500,000 MW. 93-800 O-77-8 |