Alaska adds geothermal option to upcoming oil, gas lease sales

ANCHORAGE, Alaska Mon Feb 4, 2013 7:41pm EST

ANCHORAGE, Alaska Feb 4 (Reuters) - Alaska will offer potential developers the chance to explore geothermal resources at an active volcano in Cook Inlet, the state's oldest producing oil and gas basin, state officials said on Monday.

The geothermal lease sale on May 8 will coincide with oil and gas lease sales, the state Department of Natural Resources said. The state will offer oil and gas exploration rights around Cook Inlet and the Alaska Peninsula, an area of southwestern Alaska that has had only limited petroleum exploration.

The geothermal piece is 66,000 acres at Mount Augustine, a 4,134-foot island volcano 180 miles southwest of Anchorage and 60 miles southwest of the Kenai Peninsula town of Homer.

The volcano's most recent explosive eruptions were in 2006, sending ash clouds that disrupted air traffic in Anchorage. Other recent eruptions were in 1986, 1976, 1971 and 1963-64, according to the federal-state Alaska Volcano Observatory.

The volcano poses risks to explorers including earthquakes, landslides and mudflows, volcanic gas and ash releases, explosions and lava flows, the department's presale report said.

But its location, near the state's most populated region, offers potential advantages, since geothermal energy could "help satisfy the increasing demand for electricity and energy sources" in south-central Alaska, the report said.

Geothermal plants capture power created by steam from liquid boiled deep underground, and a push for cleaner energy sources has led to a partial revival in the U.S. West.

Alaska's last geothermal lease sale was in 2008. Nevada-based Ormat Technologies spent $3.3 million for leases at 11,070-foot Mount Spurr, a volcano 80 miles west of Anchorage.

Since then, Ormat has been conducting exploration drilling and other work, with support of the Alaska Energy Authority. So far, drilling results have been disappointing, but additional drilling in a separate area of the volcano is planned for this summer, Ormat said in a 2012 report to state officials.

The Cook Inlet oil and gas lease sale will offer 815 tracts sprawling over 4 million acres. Production from the area, south of Anchorage, has been declining since the 1970s, though there has been a flurry of new exploration led by smaller companies.

"Cook Inlet still holds significant resources and we are hoping for a continued trend of successful lease sales and increased drilling activity," Bill Barron, director of the department's Division of Oil and Gas, said in a statement.

The Alaska Peninsula oil and gas lease sale will offer 1,047 tracts covering 5.8 million acres.

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