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2 Geothermal Resources Council Transactions, Vol. 26, September 22-25, 2002 Desert Peak East, Nevada: A StepToward EGS Commercialization in the Basin and Range Daniel Schochet, Ann Robertson-Tait* and Alexander Schriener, Jr.3 ORMAT Nevada, Inc., Reno, Nevada *GeothermEx, Inc., Richmond, California 3Earthrock Consulting, Ridgecrest, California Keywords Enhanced Geothermal Systems, EGS, HDR, Desert Peak, Basin and Range ABSTRACT A project to assess the technical and economic feasibility of developing an EGS project at the Desert Peak East geothermal resource area is planned within the boundaries of the approximately 9,000-acre Desert Peak leasehold. The presence of a potential EGS resource is confirmed by deep drilling and existing geological and geophysical data. This prototype Basin and Range EGS project seeks to enhance or create permeability in a subsurface environment that is common throughout the province. In the State of Nevada alone, there are numerous similar systems with low environmental sensitivity, good infrastructure and accessible terrain that could be developed for EGS power. Elements of the first phase of the program include a conceptual hydrogeologic model of the EGS reservoir, well designs and drilling plans, fracturing programs, resource testing programs, forecasts of heat extraction rates, power plant design scenarios, economic analyses, environmental, regulatory and mitigation plans, and a project implementation plan. The objectives of subsequent phases of this project will be the drilling, logging, hydraulic fracturing and testing of the reservoir, followed by the construction and operation of a facility employing EGS technology for commercial power generation. The project seeks to demonstrate that: 1) hydraulic fracturing technology can be applied commercially to geothermal systems; 2) adequate analytical techniques (such as subsurface stress analysis, fracture system definition through seismic monitoring, numerical simulation of fluid flow and heat transfer in fractured media, etc.) required for an EGS project are already available; 3) neither water loss nor cooling of the produced fluid is a prohibitive barrier to a well-designed EGS project; and 4) commercial power can be generated reliably from an EGS project. Introduction The greatest potential for generating electricity from geothermal energy lies in harvesting the heat from geological formations that have high temperatures but lack natural permeability. The technology to realize this potential exists, and but has not been extensively field-tested and refined for EGS application. The objectives of this project are to develop an EGS system that will provide geothermal fluid to sustain the operation of a power plant, delivering commercial electricity to a utility or other power consumer. In the course of this work, we will: 1) define the appropriate technical tools for the geological evaluation of an EGS prospect in the Basin and Range province; 2) define and implement a drilling and fracturing program to bring EGS energy to the surface; 3) prove the viability of this mode of heat harvesting by sustainable operation of the EGS energy source; and 4) define the real economics of EGS power by converting the EGS energy to electricity in a geothermal power plant, with the commercial sale of this power to a utility or energy consumer. This project will make use of a geothermal field that is well defined by a significant body of data. The EGS power plant will be relatively modest in size (up to 10 MW net), but will benefit economically from the existing infrastructure and staff of several nearby operating geothermal facilities. This proximity will significantly reduce the costs associated with demonstrating the commercial feasibility of a pilot EGS-technology geothermal plant project, by allowing for the cost-effective use of field personnel, transmission capacity and other required operational functions, and by providing a reliable source of production make-up water. The area to be investigated lies within the boundaries of the approximately 9,000-acre Desert Peak leasehold held by ORMAT in Churchill County, Nevada (Figure 1). The presence of a potential EGS resource is confirmed by deep drilling and existing geological and geophysical data. The Desert Peak East EGS Project is set in a typical Basin and Range geothermal environment, and if successful, it will present a blueprint for similar developments at many areas within the Basin and Range province. 251

3 ~ Fault. Schochet, et. a/. Productive Wlla Other Wls Participating area 0 Active producer o Damaged (originally f Injector p t ~ EGS area capable O( production produ*e) [.-:] Known hydrothermal -:- Plugged and abandoned dashed area o Nommmerclal where uncertain A Strat test I gradient hole Figure 1. Well and fault location map, Desert Peak, Nevada. Why Desert Peak East? The project will utilize an identified EGS site that: is located in an area of known thermal potential, but has not produced economic geothermal energy; has much higher than average measured heat flow, but limited permeability and fluid content; is not part of the commercial reservoir area and has never been capable of producing commercial quantities of geothermal fluid; is hydrologically and geologically separate from the productive field; contains a deep (9,641 feet / 3,013 m) and mechanically sound well that cannot sustain production capable of generating 1 MW of electricity, but is within a geologic formation that is a good candidate for proving EGS technology; is located in a relatively flat area, fully accessible by existing roads; is in close proximity to an existing transmission line, and benefits from the infrastructure and staff at the nearby Brady and Desert Peak geothermal power plants, both of which are owned and operated by ORMAT affiliated companies. This unique combination of features sets the stage for a pilot EGS project that has a high probability of technical and commercial success. -- a.1 Addressing the Barriers to EGS Development There are several technical barriers to the implementation of commercial, EGS-derived power from hot but low-permeability areas. These include: 1) identifying and evaluating target EGS sites; 2) creating and defining a fracture system; 3) controlling water loss; and 4) the high cost of drilling and completing successful deep wells. The site has been identified by previous drilling and requires no additional identification work. However, the site has not been evaluated previously in terms of its EGS potential. The Phase One work (see below) will provide the geothermal industry with a real-world case study of practical techniques that enable a typical Basin and Range candidate site to be qualitatively and quantitatively evaluated for its EGS potential. The second and third barriers stated above are related to the creation and definition of a fracture system that is sufficiently large and or complex to avoid problems of short-circuiting and unacceptably high cooling rates. This remains the least understood aspect of EGS development. The project will help overcome these barriers through information gained empirically in the Phase "bo hydraulic stimulation and testing program. The precise targets for hydraulic stimulation to be determined upon completion of Phase One will likely include selected facies in the pre-tertiary section, which includes rock types that are common in many areas of the Basin and Range province. After the fracturing is undertaken in Phase "bo, we will produce information on the design, execution, monitoring, mapping and testing of the engineered fracture system, including the types and densities of frac fluids, the injection rates and volumes pumped, the type of proppants used and the timing of their injection, the seismic data collected to map the fracture system, and the pre- and post-frac testing of the wells. Through dissemination to the geothermal industry, this body of knowledge will help define the more practical goal of developing a commercial EGS reservoir and producing electric power from it. The ability to minimize water losses though the created fracture system, and even in the natural fracture system that may also be present, will be an important practical issue in the Desert Peak East EGS area. Although hydrogeologically isolated from the Desert Peak hydrothermal system and having limited natural permeability, the area is crossed by major faults. Given that there is a finite quantity of water available on site (the separated brine from the Desert Peak geothermal plant), water loss will need to be minimized as much as possible by optimizing the placement of production and injection wells. The high cost of drilling and completing deep wells is indeed a significant barrier to EGS commercialization. However, the Desert Peak East project provides a significant advantage in this 252

4 Schochet, et. a/. regard: as demonstrated by wells DP23-1 (which is available for use in this project) and 35-13TCH, high temperatures can be found in the EGS area at relatively shallow depths. There are numerous areas in the Basin and Range province known or very likely to have similar conditions, particularly in areas near hydrothermal systems. Therefore, we will overcome this barrier by demonstrating that one does not necessarily need to drill excessively deep and expensive wells to successfully produce EGS power. The primary institutional/financial barrier that must be tackled before EGS can provide a significant portion of the nation s energy needs is the perception that EGS power cannot be developed commercially, even in the absence of any technological barriers. Fortunately, the positive institutional and financial aspects of the Desert Peak East EGS project make it more likely to break through this barrier than would have been the case without the existing infrastructure. The project seeks to demonstrate that, in a favorable geologic environment with some existing infrastructure, EGS can indeed be a near-term commercial source of energy. Phase I Program Phase One work will focus on conceptual and numerical modeling of the Desert Peak Eaqt EGS reservoir and studies conducted in support of future hydraulic fracturing work, to determine the optimum conceptual EGS design and to demonstrate EGS feasibility. The development and use of conceptual models to target EGS development and numerical models for detailed reservoir assessment will enable the same level of confidence to be obtained in the project, and indeed in any other EGS project, as is currently enjoyed for hydrothermal reservoirs. The conceptual modeling process will be very similar to that followed for conventional hydrothermal projects, in that it will incorporate a wide variety of existing geological, geochemical, geophysical, drilling, well testing and production data. Using the conceptual model as a guide, specialized analyses will be performed to identify target zones for hydraulic fracturing. Once these zones have been identified, a numerical model will be developed that will include realistic projections of permeability enhancements to be realized by hydraulic fracturing. Thus, at a quite modest incremental cost, the EGS concept for a Basin and Range-type geologic environment can be cost-effectively evaluated. The conceptual model, which will guide all development work at the site, will utilize the existing Desert Peak database to determine the natural state of the resource. These data include all drilling results, downhole logs (temperature, pressure, spinner, geophysical), well test results, geochemical data from both regional exploration and routine power plant operation, geologic mapping and geophysical survey data (gravity, magnetics, MT, etc.). The conceptual model will include the distributions of temperature, pressure and chemical species, and will use geologic and geophysical data to make inferences about the horizontal and vertical dimensions of the system and the hydrogeologic controls on fluid flow in the hydrothermal system and heat flow in the EGS zone. The next work to be completed will be aimed at identifying target formations for hydraulic fracturing. First, the feasibility of running new logs in well DP23-1 will be assessed. If it is possible to log this well to a useful depth without a workover, then a truck-mounted unit will be mobilized to run a fracture-imaging log (Schlumberger FMS or similar), a sonic log and a gamma ray log in the open-hole section of the well. The fracture imaging log will be analyzed for borehole breakouts, drilling-induced tensile fractures and natural fractures to determine the orientation of the stress field with depth. The sonic log will be used in the acoustic characterization of the subsurface, and the gamma ray log for correlation with other wells. PTS logs will also be run to identlfy permeable fractures. In addition, we will conduct petrological, mineralogical (XRD) and mechanical analyses of existing cuttings and cores from wells DP23-1 and 35-13TCH. These analyses will be used to determine rock properties and identify intervals that have the proper mechanical and mineralogical integrity for stimulation work to be carried out in Phase II. Furthermore, the analyses will be useful in determining which, if any, proppants and chemical treatments will be useful in maintaining and/or enhancing the fracture system. Using reasonably conservative estimates of the permeability enhancements resulting from hydraulic fracturing and appropriate locations for the four wells that will comprise the two EGS couplets, we will use numerical simulation to evaluate the rate of heat extraction that can be sustained from the Desert Peak East EGS area. The fracture system that can be expected after hydraulic stimulation may be one of two types: 1) a finite set of long, discrete, sub-parallel fractures; or 2) a fracture network that breaks up the reservoir into numerous matrix blocks separated by fractures. Three-dimensional numerical reservoir simulation models will be constructed, consisting of two production-injection couplets for both of the above type of fracture systems, using the subsurface temperatures and hydraulic properties derived from the conceptual model. The numerical model will be used to study the sensitivity of temperature decline trend (the most critical parameter in EGS development) to fracture characteristics and well spacings. Various orientations and well combinations will be investigated. For discrete fractures, the main characteristics to be considered will be aperture, dimensions, fracture orientation and fracture spacing. For the fracture network, we will consider fracture density, corresponding matrix block size, and the storage and flow capacities of the matrix and fractures as the critical variables. We will also model any possible effects of changes in water geochemistry on the overall EGS system, to evaluate if scale inhibition will be required for either production or injection wells. The results of the numerical simulation will indicate what range of well spacing and fracture characteristics will lead to an acceptable long-term cooling rate. If the well spacing required for a specific case is too large to be practical in terms of land use, then that case will be discarded as implausible. Likewise, the required fracture and matrix characteristics must be realistic for the case to be meaningful in the commercial sense. Through an iterative process, we will arrive at reasonable well spacings for the two couplets, and will be able to forecast their long-term performance. From a forecast of the temperature and flow rate trends at the production wells, we will forecast power generation capacity. 253

5 Schochet, et. a/. Subsequent Phases Phase Two activities will likely begin with drilling a core hole to 5,000 to 6,000 feet (1,563 to 1,875 m) at a distance no more than 1,500 feet (500 m) from well DP23-1. This core hole will be eventually used as a seismic monitoring well during fracturing work, and as a pressure monitoring well during subsequent flow testing. First, however, core and log data will be use to further characterize the fracture distribution in the vicinity of the first EGS couplet. In addition, laboratory tests will be undertaken to evaluate the rock mechanics and fracture characteristics of various pre-tertiary units. It is likely that one or more mini-fracs (small-volume hydraulic stimulations, with down-hole pressure monitoring) will be performed to determine the magnitude of the minimum and maximum horizontal principal stresses. With new data in hand, well DP23-1 will be hydraulically fractured, with appropriate seismic and downhole pressure monitoring in the new core hole and in other available Desert Peak wells. Subsequently, a second large-diameter well will be drilled to complete the first EGS couplet. The location of this well will be based on the seismic monitoring data collected during the hydraulic fracturing of DP23-1 and the results of the new core hole. This second well will be fractured and the couplet will be tested over a period of several months to confirm the viability of the system. Upon successful completion of the first couplet, a second couplet may be drilled to obtain the production rate required for the power plant. A program of seismic monitoring and testing will be followed as for the first couplet, and tracer tests will be run to estimate reservoir volume and flow-through times. Phases Three and Four would proceed after the successful completion of the required wells. An important consideration at this point will be the market for the EGS power. The project has a distinct advantage in this regard, in that the nearby Brady/ Desert Peak complex has a built-in market for the EGS power, in the form of existing and proposed power sales contracts as well as the need for internal plant power usage ( house power ). Thus the risk of failure in finding a power market is minimal. Phase Three involves the construction of the EGS power plant and associated infrastructure for power generation, and Phase Four will be the commercial operation of the EGS power facility, selling the power either to a utility or to the local power consumer described above. Discussion and Conclusions The Desert Peak East project will be implemented in the Basin and Range province of the western United States, where a large number of comparable EGS candidate sites exist, and will use existing technology to define the actual economics of producing sustainable EGS-supported electrical power. Since conventional, commercial-quality hydrothermal resources are limited, it is highly likely that sustainable EGS power will be tapped in the future. This project will help define important technical and economic parameters crucial to cost-effective EGS development, thus improving the prospects for providing renewable EGS power at numerous locations in the western US. The Desert Peak East EGS Project has been designed to represent a template for development of a large number of similar geologic targets throughout the western United States and elsewhere. Although the ultimate costs of the project may exceed those feasible in today s energy market, there exists a ready consumer for the power: the Bradys-Desert Peak geothermal complex. The existence of this captive market will provide a real advantage to this pilot project, as previously discussed. If significant flow rates and/or temperatures can be obtained from the EGS wells, this project will demonstrate that EGS technology can provide cost-effective, commercial electricity production from many areas under current or near-future market conditions. However, at current energy prices, the increased risks and costs of drilling and fracturing EGS wells remain major barriers. The project aims to break down these barriers by developing a small-scale pilot EGS project in as favorable an environment as possible, allowing EGS technology to advance with minimal risk. The recent spike in natural gas prices is only one indicator that energy prices will not remain stable; as energy prices increase, EGS will become more attractive. Federal energy legislation for a Renewable Portfolio Standard and the geothermal production tax credit, which are being implemented in response to the growing awareness that geothermal energy can stabilize a utility resource portfolio, will also make EGS more economical. Geothermal industry stakeholders, and particularly drilling services suppliers, will help to drive the technology forward. With the discovery and development of more ubiquitous commercial EGS resources, through the EGS-specific application of existing technology, a greater number of EGS developers will be attracted to the field. The project relies upon proven technology for reservoir characterization and routine wellfield power plant operation, and the application of existing fracturing technology to EGS. What remains to be demonstrated is the feasibility of creating a large and complex enough fracture network to support a modest initial power plant. Until attempts are made to create such fracture networks, EGS energy will remain a concept rather than a reality. 254