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At Tuesday night’s town council meeting, after presenting the preliminary budget for 2014 — which was based on Pagosa Springs’ share of projected sales tax revenues totaling $3,259,012 and included all of the items on which the town plans to expend money next year — town manager David Mitchem asked that any further discussion of the budget be postponed until a series of work session with the department heads could be scheduled for that purpose.
In the meantime, he proceeded to introduce another possible project in which the town could invest.
Kirsten Skeehan and Jerry Smith from Pagosa Verde, along with Ed Morlan from the Region 9 Economic Development District of Southwest Colorado, were on hand to explain their plans for creating a new utility company that would use geothermal energy to produce electricity locally.
After a brief explanation of the economic and environmental benefits of locally produced energy, Mitchem clarified the only thing town council was being asked to do now was approve a public meeting, tentatively scheduled for 6 p.m. on Monday, Oct. 14, at the CSU Extension Building at the fairgrounds.
The purpose of the meeting will be to present the idea to the public, answer any questions or concerns, and then return to town council with the results. At that point town council, as well as the Archuleta County Board of County Commissioners, will most likely be asked to contribute $65,000 each to the project.
While Mitchem made every effort to clarify this investment would be what he defined as “risk capital,” he did explain how the risk had been reduced so far, providing the results of several scientific studies. He also explained the potential benefits of getting in on the project at this point, thereby becoming part owner of a potentially very profitable business.
Town council was presented with a letter from Greg Munro, the CEO of La Plata Electric Association, which promised, “La Plata Electric Association, Inc. and Tri-State Generation and Transmission Association, our power supplier, do have an interest in the Pagosa Verde Geothermal Generation Project. If the project is successful and it does produce electrical energy, we have an interest in purchasing that energy.”
The risk, as Mitchem and Skeehan explained in even more detail during an exclusive interview with SUN staff earlier that day, is if the $200,000 combined investment — the town, the BoCC and Pagosa Verde would each contribute a third — is used to drill a series of test wells, only to prove conclusively that there is no geothermal aquifer where they thought it was, or the water from said aquifer is present, but not hot enough to be useful for anything.
This financial risk has been mitigated to quite an extent by the work of the Colorado School of Mines. For the last two years, Dr. Mike Batzle has lead summer field camps for a team of students and professors from CSM and the Imperial College of London. The results of their studies have pointed to a number of previously unknown faults, as well as several new aquifers in the region.
The belief is that a large underground reservoir of hot water exists on the Levine property south of Reservoir Hill, near where Mill Creek passes under US 84.
The next step in the process is to drill a series of relatively shallow (500-1,500 feet), narrow-bore test wells to determine how hot the water is (it needs to be at least 160 degrees to generate electricity), how well it flows (the hope is for an artesian well so no pumping will be required), and to pinpoint the optimal spot for the next test well.
Skeehan explained the geological science of “mud logging.” Core samples of the material extracted during the drilling process are analyzed by an expert to determine the composition of subterranean features with an eye towards determining the best placement for an even deeper (3,000 to 4,000 feet) well into the actual source of the water we see bubbling up at the surface.
At the same time, a portion of the money invested by the town (as well as the county and Pagosa Verde) will be used to research alternative uses for the heat.
If the water is not hot enough to spin a turbine and generate electricity, what other uses could it be put to? How hot does the water need to be to run a greenhouse during the winter or to raise fish in an aquaculture operation?
Ed Morlan suggested there are companies out there interested in using greenhouses supplemented by geothermal energy to produce crops all year long, even during the winter. He pointed towards pharmaceutical companies that grow herbs and medicines, but was then quick to point out he was not suggesting a marijuana operation.
Mitchem referred to a graph that illustrated the “bankability” of a project. As time goes by and progress is made — as more research is conducted, findings are published, and more research is conducted based on those findings — the risk associated with the project grows less and less. However, at the same time, as the risk shrinks the cost of investment increases.
As the buy-in cost rises and the inherent risk falls, Mitchem explained that the optimal time to invest in a project is where those two line on the graph cross. The Pagosa Verde Project is now at that point.
Financial risk is only one part of the equation — what if the town invests $65,000 for exploration only to find out there isn’t enough hot water to use? The other risk is environmental. What if Pagosa Verde starts drilling all of these holes south of town only to find that it has adversely affected the flow of water in the existing downtown wells or spring?
Council member Kathie Lattin was the only person to raise this concern during Tuesday night’s meeting, complaining that the town has paid for flow rate studies on all of the downtown wells, but she has never been presented with any conclusive findings from those studies. Councilor David Schanzenbaker agreed.
While Skeehan admitted those results are no longer on the town’s website, where they have been published for the last year, Smith offered to take Lattin and Schanzenbaker to his office in the Heritage Building, but getting information from him is like trying to get a drink from a fire hose, he joked, because he has the results of every scientific study that has ever been done concerning Pagosa Springs.
SUN staff had mentioned a similar concern during the earlier interview. Mitchem and Skeehan took turns explaining the results of the CSM study. A chemical analysis of the water from the Levine site seemed to indicate the existence of two separate aquifers; the types and concentrations of minerals in the water from the town wells is not the same as the water found on the Levine property.