Surf's up for GeoAlaska
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Part 1: Craig gets Northwest Mount Spurr geothermal exploration license
Kay Cashman Petroleum News
The potential for new zero carbon geothermal energy development in Alaska has surfaced again, this time with a long-time oil and gas investor/entrepreneur, Anchorage-based Dr. Paul Craig.
On May 24 the Alaska Department of Natural Resources' Division of Oil and Gas issued the Northwest Mount Spurr two-year geothermal prospecting permit to GeoAlaska LLC, 100% owned by Craig. His permit, or license, covers three state tracts on 6,376 acres northwest of Trading Bay and approximately 40 miles west of Tyonek on the southern flank of Mount Spurr, an active volcano to the west of upper Cook Inlet, about 80 miles west of Anchorage.
The two-year permit can be extended for a third year if GeoAlaska has been unable to discover a viable geothermal resource despite reasonable diligence in conducting exploration activities. And then it can be rolled into a state geothermal lease, which is like an oil and gas lease in that it can be extended if the acreage is in production.
“I haven't switched industries. For 28 years I have been in the energy industry,” Craig told Petroleum News in a May 26 interview.
“The scientific data regarding the atmospheric impact of Alaska's oil industry is hands down more environmentally friendly when compared with other oil fields elsewhere in the world,” he said. “GeoAlaska is trying to move Alaska's energy industry one step forward into the future by creating a source of green electrical energy that has a zero-carbon footprint on the environment. We are not anti-oil. We are not anti-natural gas. We are pro-business and pro-energy, but we want to do it in a way that creates a sustainable future for our children and our grandchildren; for generations to come.”
Craig said “GeoAlaska perceives Mount Spurr as the most propitious location at which to develop an Alaskan-owned and operated geothermal energy company.”
The “we” in many of Craig's statements is inclusive of Erik Anderson, a consultant and innovator, who first brought Mount Spurr to his attention.
Anderson has an option to buy a minority interest in GeoAlaska in the future, having earned that option through “sweat equity,” Craig said.
Enter Erik Anderson
Anderson approached Craig about two years ago. He had been working with Raser Power Systems, an Alaska limited liability corporation that was owned by Salt Lake City-based Cryq Energy, which was recently acquired by a subsidiary of geothermal energy giant Macquarie Infrastructure of Australia.
“Raser applied for a Mount Spurr exploration permit with the division, and was granted it about two months ago, but they didn't apply for the location that Erik thought was most promising. Instead, Raser applied for the surface expression geothermal hot springs at the base of Mount Spurr. Erik was encouraging Raser to think more about where the reservoir would be that was the source for those springs,” Craig said.
“Erik had heard about my oil patch entrepreneurship and decided to approach me. He explained that there were some very attractive geothermal properties that were not applied for. As he educated me, the more I learned, the more I thought he had a good idea. And so, through GeoAlaska LLC we applied for 10 square miles north and west of Raser’s selected acreage.”
GeoAlaska’s acreage “linearly follows the Capps Glacier fault and the North Bench fault,” Craig said.
“North Bench fault is sufficiently close to the Crater Peak magma conduit, that a well at sufficient depth could encounter thermally charged water. The BTUs of geothermal energy that may be discovered could be substantial,” he said.
Anderson, Craig said, describes himself as an earth scientist.
“Erik is brilliant mathematically and geologically. He is … highly educated, knowledgeable and is experienced in geothermal. He's well-connected with geothermal experts worldwide. He's the one, for example, who brought GeothermEX, a Schlumberger company, to my attention,” he said.
“Erik has a background in hydrology. He has worked on various geothermal projects. … For example, he has had experience working on a very successful geothermal exploration program at Nevis in the Caribbean. And he worked on the geothermal program at DNR a few years ago and is now working as an independent consultant.”
There are several other notable consultants that Anderson has brought to GeoAlaska: “Those consultants have been very helpful in terms of analyzing data and planning for exploration, financing, etc.,” Craig said.
Quantitative Frontier LLC is a consulting firm owned by Anderson. On Jan. 30, 2020, when it appeared no 3D seismic was going to be acquired before the first ANWR 1004 area lease sale, Quantitative released a report titled Land Valuation by Simulated Exploration of a Probabilistic Model of the Undiscovered Oil Accumulations in the ANWR 1002 Area.
“As I said, Erik is brilliant,” Craig said, who himself holds a PhD in neuropsychology.
Financing first One of the first things on Craig's agenda now that he has the exploration license is to find financing for the project. He has been running the operation out of his “back pocket, so to speak.”
“We have multiple interested parties. We're just trying to figure out which path or paths to pursue that is in the best interest of all concerned,” Craig said.
Although he didn't go into detail about what those options are, the obvious possibilities are entering into a drill-to-earn agreement, partnering with a company that has the capacity to raise the financing, and/or accessing federal programs that may help with financing or green-energy tax incentive programs that might help make the project more economically attractive to financiers.
“I like a surfing metaphor that describes our perfect timing for getting into geothermal,” he said. “We started almost two years ago. It feels analogous to deciding to go surfing and heading out before sunrise while the water was still calm, and then waiting for dawn when the waves will arrive.”
“Well … Surf's up! We could not have known the things that would happen in last two years. The Clean Energy Act of 2020 was two or more years in the making. Trump signed it in December 2020 when it was integrated in the Cares Act. Thirty pages of that bill was dedicated to geothermal. Then chair of the Senate Energy Committee, Lisa Murkowski, was pushing it - she and her staff, helped write those 30 pages,” Craig said.
Putting it into the grid “We will be working to tie the electricity we hope to produce into the Railbelt electrical grid,” he said.
GeoAlaska already has a letter of intent with a potential and “very credible” power purchaser.
“We have a letter of understanding with a potential consumer of significant quantities of electricity. They would like their efforts to be as green as GeoAlaska wants those efforts to be. Zero carbon footprint,” Craig said, noting the power purchaser is a public company with a strong balance sheet.
“They would be delighted to purchase our electricity if it can be reasonably priced,” Craig said.
It is too early in the game to release the name of the potential buyer, he said.
Brand new drill rig GeoAlaska already has identified a drilling rig - brand new and built in Alaska.
“It's a newly constructed rig. It has been designed consistent with AOGCC's requirements for drilling rigs. And the beauty of it is that it's state of the art and it's heli-portable. No component weighs more than 4,000 pounds. And it fits together like a big Lego set. It's elegant and beautiful,” Craig said, noting the rig is “a remarkably well-designed piece of equipment.”
The designer and builder is Anchorage-based Alaska Drilling & Completions LLC. Tim Flynn is the company's chief operating officer.
A member spotlight published by The Alliance in July 2019 said the drilling company was formed in November 2015 with the intent of providing the best-in-class drilling and completion engineering and project support services required for Alaska oil and gas exploration, appraisal and/or development campaigns.
“The company has been founded on the premise that diligent pre-planning along with sound engineering design are the keys to executing a successful project that is on schedule and on budget. The two founders of the company; Tim Flynn and David Ross, are both degreed petroleum engineers with a combined total of 60 years working in both the service and operator sectors of the oil and gas industry.”
Their experience includes 38 years supporting development projects and remote exploration campaigns in the Cook Inlet and on the North Slope.
Drilling to 3,000 feet Like the rig, the drilling program GeoAlaska is designing, Craig said, will meet Alaska Oil and Gas Conservation Commission standards as well as all other regulatory requirements.
“Our exploration plan at this time is to drill to about 3,000 feet. We should hit water well before that depth. Contrary to oil and gas exploration, we're targeting fractured rock that is usually found along fault lines,” he said.
Alaska Drilling & Completions “is well aware there is a risk of loss of mud when drilling into fractured rock, so we may be doing continuous coring. …. We’ll certainly be selecting a drilling program that meets all of AOGCC's requirements, including using a blowout preventer that is temperature-rated for the geothermal targets we'll be drilling.”
Craig quipped, “This is the first time in my life that I started a business with the hope of getting into hot water!”
More on the drilling program in the second part of this story - and more on the tremendous amount of science collected by Craig and Anderson for the project.
“We're not going into this blind,” Craig said.
See Part 2 in the June 6 edition of Petroleum News, which will be available online late in the day Thursday, June 3.
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