Pagosa Springs geothermal project: Concerns over legality of funds transfer to public-private partnership

September 14, 2014
Pagosa Hot Springs

Pagosa Hot Springs

From the Pagosa Springs Sun (Ed Fincher):

According to 18th century Scots poet Robert Burns, “The best laid plans of mice and men often go awry.”

Pagosa Verde owner Jerry Smith must have this line of poetry running through his mind all the time when dealing with the federal, state and local government, and Monday night’s meeting of the Pagosa Area Geothermal Water and Power Authority was probably no exception.

The authority, which consists of three town councilors (David Schanzenbaker, John Egan and Mayor Don Volger), the three county commissioners (Michael Whiting, Steve Wadley and chairman Clifford Lucero) and one at-large seat held by Mike Alley, just barely had enough members show up at Town Hall to achieve a quorum for the meeting.

Town Manager Greg Schulte, along with County Administrator Bentley Henderson and County Attorney Todd Starr, acts as staff for the authority, began by giving some background information for the people in the audience who may not have attended the authority’s previous meetings.

The original intent of the authority, as spelled out in the agreement between the town and the county, was to enter into an agreement with Pagosa Verde to form a separate entity — Pagosa Waters LLC — as a public/private partnership.

Pagosa Waters would then consist of three people: one appointed by the authority, one appointed by Pagosa Verde and one at-large member. The point being, this arrangement would ensure joint ownership of the project between the two local governments and Pagosa Verde, while at the same time allowing the project to be managed by a full-time, working board instead of part-time government volunteers.

According to Schulte, a wrinkle in the plan occurred because of a recently awarded grant from the Colorado Department of Local Affairs worth nearly $2 million. Archuleta County was the official applicant for the grant because DOLA only deals with local government bodies, not private companies.

The $2 million grant from DOLA counts as matching funds for a $4 million grant from the U.S. Department of Energy, which was awarded earlier this year to Pagosa Verde. However, since Pagosa Verde is a privately owned, for-profit company and Pagosa Waters LLC would be a public/private partnership, DOLA had concerns about the legality of Archuleta County funneling its funds into the project.

Schulte then alluded to a meeting held last week involving himself, town attorney Bob Cole, Starr and another attorney, Russ Dykstra, who has some experience with similar situations.

Starr then took over the briefing, explaining, “He has been involved in some very large public/private partnerships … and his suggestion was that, from everybody’s stand-point, an LLC is probably not the form we want to take. Some sort of concession agreement is the best way to do it because we can take care of all of Jerry’s requirements and all of our requirements.”

More Pagosa Springs coverage here.


9News series about #COwater and the #COWaterPlan — Mary Rodriguez

September 10, 2014


9News.com reporter Mary Rodriguez has embarked on a series about the Colorado Water Plan and water issues in Colorado. The first installment deals with Cheesman Dam and Reservoir. Here’s an excerpt:

It is something most of us take for granted: running water. Colorado is now beginning to grapple with how to keep the tap flowing, both now and in the future. As the state develops a water plan, set to be released in December, we are beginning a series of stories revolving around that precious resource…

Cheesman Reservoir and Dam

Nearly 7,000 feet above sea level, it’s a place of stillness and a quiet refuge. Yet, it’s also a place capable of wielding immense power.

Cheesman Reservoir is a major source of water for communities up and down the Front Range. It holds 25 billion gallons of water. That’s enough water to cover Sports Authority Field with a foot of water more than 79,000 times. All of it is held in place by the Cheesman Dam, which was built nearly 110 years ago.

“It was tremendous foresight that this reservoir has been pretty much unchanged in all that time,” documentary filmmaker Jim Havey of Havey Productions said.

The reservoir is just one of the places Havey is beginning to capture as part of an upcoming documentary called “The Great Divide.” The subject? Water.

“We looked at water, initially, as a great way to tell the story of Colorado,” he said.

Colorado’s water system is a complex combination of reservoirs, rivers and dams. As the state’s population has grown, though, there has been a greater need to come up with a water plan that can evolve with time.

“Really, it is all connected,” said Travis Thompson, spokesperson for Denver Water, which bought the Cheesman Reservoir nearly 100 years ago.

Denver Water– along with water municipalities and agencies across Colorado– is now working on a long-term plan for Colorado’s water. It includes, among other things, figuring out the best way to manage the state’s water as it flows between different river basins and whether or not to create more reservoirs.

“We’re not planning just for today, we’re planning for tomorrow– 25 years, 50 years down the road,” Thompson said. “And we have many challenges that we’re looking into, just like our forefathers had.”

Those challenges include how to provide enough water for people and industries in Colorado, as well as people in 18 other states– and even two states in Mexico– which also get their water from rivers that begin in Colorado.

“What the water plan is going to mean, I don’t think anybody knows yet,” Havey said.

Yet, it’s a plan that has a lot riding on it below the surface. The first draft of the state’s water plan is due in December and is expected to be presented to the state legislature next year. For more information about the water documentary, “The Great Divide,” go to http://bit.ly/1qDftUO.

More Denver Water coverage here. More South Platte River Basin coverage here. More Colorado Water Plan coverage here.


Cortez Sanitation District gives some businesses a break on rates

August 26, 2014
Cortez early 1900s via Crow Canyon Archaeological Center

Cortez early 1900s via Crow Canyon Archaeological Center

From the Cortez Journal (Tobie Baker):

The Cortez Sanitation District will provide temporary relief to dozens of local businesses that saw sewer rates spike 100 percent or more this year…

The CSD resolution states it is “fair, equitable and in the public interest to limit any rate increase to 100 percent in any one calendar year.” Teresa Wlodyka, owner of the Tomahawk Lodge on South Broadway, is among 54 customers to be impacted by the resolution. Rate changes should be reflected in September bills…

CSD manager Tim Krebs said the adjusted rates could remain in effect for 12 months.

“The board can adjust rates at any time,” said Krebs. “We just wanted to give some relief to those who were affected above 100 percent.”

The resolution also states “rates being adjusted down are subject to up to another 100 percent per calendar year until their rates meet the current SFE schedule.” Krebs said that if a customer’s previous bill, for example, was $100 per month, the stipulation allows the board to increase the bill to $200 per month next year and even up to $400 per month the following year.

“The rates need to eventually meet the same rate schedule everyone else is being billed from,” said Krebs.

Approved by a 3-1 margin, the resolution is forecast to cost the district $68,589, but save business owners $56,628 and public entities $11,961. Board member John Stramel voted against the measure. Board member John Candelaria was absent from the public hearing.

More infrastructure coverage here.


Still no action on the Hermosa Creek Watershed Protection Act

August 25, 2014
Hermosa Park

Hermosa Park

From The Denver Post (Scott Willoughby):

Coloradans, perhaps better than anyone, understand and appreciate just how special the wilderness can be. And as connoisseurs of the outdoors, they recognize there are not only wild places, but there are best wild places.

These are the places that inspire — some acknowledged and held sacred, others that have managed to remain under the radar. Others still find themselves perched in a sort of purgatory somewhere in between.

Hermosa Creek, in the San Juan National forest just north of Durango, might qualify among those in-betweeners. To Durango locals, the drainage that translates to “beautiful” creek epitomizes the Colorado outdoor experience, and they’d like to see it remain that way. But those who don’t frequent the Four Corners region may not be aware of all that this hidden gem has to offer.

Count the majority of U.S. Congress among that latter group. For more than a year now, a bipartisan bill known as the Hermosa Creek Watershed Protection Act has languished in the legislative branch of our federal government as a consensus of local stakeholders await acknowledgment of efforts to preserve the attributes that make the place so special.

“The primary thing the bill does is it takes the basin and protects it exactly as it is today,” said Ty Churchwell, backcountry coordinator for Trout Unlimited’s Sportsmen’s Conservation Project. “This bill is completely supported by consensus from all stakeholders — everyone from county commissioners and town boards to sportsmen, miners, mountain bikers and motorized users. There’s nothing for them to do in D.C. but vote it forward.”

Beyond its lush landscape and idyllic scenery, the beauty of Hermosa lies in its everyman outdoors appeal. The upper creek is a focal point of Colorado Parks and Wildlife’s Colorado River cutthroat reintroduction program, and the state’s largest unprotected roadless area remains a hunter’s paradise where trophy elk still die of old age. The 20-mile main trail along the creek corridor is a mountain biker’s mecca. The same trail is shared by a reasonable number of motorized users. Backpackers and horseback riders might cross the creek and make their way into a proposed 38,000-acre wilderness area a quarter mile away.

Overall, the bill would protect 108,000 acres through a series of special management areas, allowing for a variety of historic uses. It’s a one-of-a-kind proposal aimed at protecting an entire watershed as an intact, whole unit, rather than parts and pieces of it.

“When we started talking about protecting Hermosa as a river, the work group decided to look at this river basin as a whole ecological unit instead of just a river corridor,” Churchwell said. “That means that the boundaries for this protection are the ridge lines. Everything that flows out of this basin is included in the protection — the whole watershed. It’s the first time that we are aware of that there has ever been a protection bill that encompasses an entire watershed.”

As a result, a coalition of sportsmen’s conservation groups, guides and outfitters, fly shops and retailers, have united with local government entities in support of protecting this public land deemed vital to America’s hunting and fishing traditions and values.

“Hermosa Creek and the backcountry lands that flank its banks are among the special places that hunters and anglers in Colorado and across the region see as crucial to protect for the good of sportsmen, the environment and the sustainability of area businesses,” said John Gale, the Colorado-based manager of the National Wildlife Federation’s sportsmen’s outreach.

Should a portion of the drainage receive federal Wilderness designation this year, it will mark the 50th anniversary of the Wilderness Act of 1964 as only the second wilderness area recognized by Congress since 2009.

More Hermosa Creek watershed coverage here and here.


The EPA has finished mercury-decontamination efforts at the Red Arrow Gold Corp. mill site on Grand Ave. in Mancos

August 14, 2014

Western watershed priority: Manage wildfire risk and impacts

August 11, 2014


From the Albuquerque Journal (John Fleck):

Krista Bonfantine can look up into the mountains behind her Sandia Park home and understand, better than most, the connection between the forested watersheds that provide most of New Mexico’s water and the stuff coming out of her tap.

As she opened the lid on the concrete box that surrounds Cienega Spring, which supplies her neighborhood’s water, she pondered what might happen if a fire burned through the overgrown woods above – the risk of floods tearing down the picturesque canyon, ash and debris wiping out the water supply intake.

Fire and the resulting damage to watersheds have been an increasing concern in recent years, and Bonfantine is part of an ambitious effort to tackle the cause – overgrown forests in New Mexico’s mountains.

While the risk to Bonfantine’s neighborhood is nearby, and therefore immediately apparent, the widespread risk of fire in the watersheds that provide much of New Mexico’s water supplies is harder to see.

The problem is not just the forests themselves, explained Beverlee McClure, president of the Association of Commerce and Industry, a business group. The threat of upland fires threatens the reliability of the water supplies on which we all depend, she said…

McClure’s organization is part of The Rio Grande Water Fund, a broad-based coalition that is working to scale up patchwork efforts underway in the mountains of northern and central New Mexico to restore forests in order to protect the watersheds and water systems on which they depend.

As McClure spoke, a crew from a Corona-based company called Restoration Solutions was at work up the road with chain saws, felling trees in an overgrown patch of woods at a place called Horse Camp on the edge of the Cibola National Forest.

The overgrown woods in the mountains of New Mexico are the result of a century of firefighting that prevented natural, low-intensity fires that used to clear out undergrowth. The result is forests that are so thick in places that they are hard to walk through…

Trees being cut last week on Forest Service land near the Sandia Crest Road can be used as firewood, but there is not enough money to be made from cutting the small timber clogging the unhealthy forests to make such work self-supporting, Racher said. “There’s not enough value in that wood to pay for what needs to be done,” Racher said.

That is at the heart of the Forest Trust, which is attempting to raise $15 million per year in government money and private contributions to pay to expand the work, said Laura McCarthy, director of New Mexico conservation programs for the Nature Conservancy, an environmental group…

“This is a big problem that the federal government is not going to be able to solve for us,” McCarthy said.

More restoration/reclamation coverage here.


Geothermal in Pagosa Springs — The Mountain Town News

August 8, 2014


From The Mountain Town News (Allen Best):

Nobody doubts that the Colorado town of Pagosa Springs has hot water. It bubbles to the surface at around 140 degrees and in quantities sufficient to sustain a large commercial spa and several more public pools along the San Juan River.

As well, the hot water heats 13 businesses and 5 homes in downtown Pagosa Springs plus the Archuleta County courthouse, delivering this energy at a cost roughly 20 to 25 percent below the going rate for natural gas and 30 percent less than electricity.

But is there sufficient hot water available to produce electricity, warm 10 acres of greenhouses, and deliver heat to 600 homes?

Geologic modeling suggests there is, but until additional wells are drilled, as is expected later this summer, there’s no way of knowing for sure. If those exploratory wells confirm large volumes of hot water, then two large-bore wells will be required to extract the hot water and, after the heat is transferred from the water, return it underground.

Federal and state grants this year have given the project traction. The U.S. Department of Energy delivered $3.9 million, followed by $1.9 million from state sources. The town and county governments created a consortium called the Pagosa Area Geothermal Water and Power Authority to provide 30 percent in local funds, or $520,000, as required by the federal grant.

A private company, Pagosa Verde, which is pushing the project, came up with an equal amount in in-kind services. It owns 20 percent of the project and has the backing of a South Carolina-based investment firm called Natural Energy LLC.

Another milestone occurred in late May, when Colorado Gov. John Hickenlooper stopped in Pagosa to sign H.B. 14-1222 into law. The law, co-sponsored by Sen. Ellen Roberts, a Republican from Durango, and Sen. Gail Schwartz, a Democrat from Snowmass Village, lengthens the repayment period and otherwise provides great flexibility for private-activity bonds issued with the backing of the state government for geothermal and other renewable energy projects.

Michael McReynolds, policy advisor at the Colorado Energy Office, says the new law recognizes the large costs of proving the geothermal resource exists before development can occur.

However, other areas of the state are interested in replicating the business model of diverse revenue streams being assembled at Pagosa Springs. “It really depends upon the specific communities and what they want to pursue,” he said when asked if the new law will be used to finance other community renewable energy projects.

Jerry Smith, the chief executive at Pagosa Verde, says the new law was “huge” in allowing the project in Pagosa Springs to go forward.

In providing access up to $16.7 million available for as little as 2 percent interest, Smith’s project can now proceed. He estimates the need to spend $26 million before revenue can be gained.

“It’s a community-scale project, replicable throughout the Rocky Mountain states. I wanted town and county citizens to own it,” says Smith. “They only way they could participate was by forming an authority, similar to a housing authority. It’s a quasi-governmental authority.”

The public-private partnership is called Pagosa Waters LLC.

Because of the lower-cost money produced by the state and federal grants plus the clear bonding authority enabled by the new state law, he sees a financial path opening up.

Bonds will be just 2 percent. “That’s essentially free money,” he says. “We can borrow as much as we need to secure revenue for the project, “and it’s a way we go.”

Cheap borrowed money also relieves the onus of finding extremely hot water and arranging for sale of electricity, says Smith. If tests reveal merely hot water, such as bubbles up in the local springs, then that’s still hot enough for greenhouses and living rooms.

From the Romans forward

Hot water originating underground has long been put to practical uses. Romans at Pompei used hot water to heat buildings.

The Idaho Capitol Building has been heated with water drawn from 3,000 feet below ground, but 86 buildings with more than 5.5 million square feet of space are also heated by a separate geothermal heating district, according to Jon Gunnerson, geothermal coordinator for the City of Boise Public Works. It is the largest geothermal heating system in the United States, he says.

Commercial electrical production from geothermal sources began in 1911 in Larderello, Italy. The first commercial electrical production in the United States began in 1960 at The Geysers in California.

In 2013, according to the Geothermal Energy Association, the United States had 3,386 megawatts of installed geothermal capacity, or about three times as much as the trio of giant coal-fired power plants found in the Comanche complex near Pueblo, Colo.

Less prominent than photovoltaic panels, geothermal was nonetheless responsible for 0.41 percent of all electrical generation last year, ahead of solar at 0.23 percent. Biomass, wind, and hydro all produced more than geothermal.

California far and away has the most geothermal installed capacity, followed by Nevada, then trailed more distantly by Hawaii, Utah, and Idaho.

In Colorado, geothermal resources have been used to heat small greenhouses associated with the Mt. Princeton Hot Springs, near Buena Vista, as well as commercial springs. But no electrical production has been achieved because of concerns that new uses will rob existing users of their heat.

“Until very recently, Colorado’s geothermal potential for generating electricity has been assigned little promise,” notes the Colorado School of Mines at its geothermal website. “This appears to be based more on a lack of study, rather than on sound science.”

The website article goes on to note that a 2008 report from the Massachusetts Institute of Technology found that Colorado is the top state in the nation for potential commercial development of its heat, mostly if deep wells are drilled near Rico, Trinidad and other hot spots in a process called enhanced geothermal recovery.

Potential in Pagosa

Just how much electricity the Pagosa project could produce depends upon the heat of water. Colorado School of Mines studies concluded a strong likelihood of substantial hot water 2,000 to 5,000 feet under the land leased by Smith’s company about two miles south of downtown Pagosa Springs. Hot water for the downtown heating district is drawn from a depth of 300 feet.

Smith says it’s a cinch that the water found 2,000 to 5,000 deep will be at least 140 degrees Fahrenheit, the temperature of the water found closer to the surface. If so, it should be enough to produce four megawatts of round-the-clock electricity, what is called base-load generation.

If the water is 250 degrees, as the geological modeling suggests, it could generate 12 megawatts—and still have residual heat for the greenhouses and the homes.

Archuleta County altogether has baseload demand for 20 megawatts of generation. Another renewable source, a proposed biomass plant that would burn forest products to generate electricity, would generate 5 megawatts. Both biomass and geothermal generators probably need to get paid more for their electricity by the local electrical cooperative, La Plata Electric, than what the cooperative currently pays.

Biomass plant proponent J.R. Ford last winter said he needed 15 to 20 percent more than what the La Plata and other electrical cooperatives pay wholesale provider Tri-State Generation and Transmission. Tri-State’s power comes primarily from coal, natural gas, and hydroelectric.

Distributed generation

Both the geothermal and biomass projects in Archuleta County are representative of small sources of electricity called distributed generation. In a famous 1976 essay published in Foreign Affairs, Aspen-area resident Amory Lovins advocated more localized generation as necessary to shift power production from giant but often distant coal-fired power plants. In that same essay, Lovins also stressed that more local sources of electricity would reduce the vulnerability of the grid to terrorism.

“Distributed energy is what the world needs to get to,” says Smith, who cites Lovins as one of his heroes.

Smith moved to Archuleta County in 1989 after a career in the entertainment industry in California. He describes himself as a “liberal arts guy who values things that most people find technical and dry.”

Pagosa Skyrocket via Native Ecosystems

Pagosa Skyrocket via Native Ecosystems

Geothermal is wet, of course, but whether it moves forward in Pagosa Springs depends upon the outcome of a review by the U.S. Fish and Wildlife Service. The 600 acres of land leased for the drilling between the San Juan River and Highway 84 has a plant species, the Pagosa skyrocket (Ipomopsis polyantha), which has been listed as endangered under the Endangered Species Act.

The plant grows one or two feet tall, often in the understory of Ponderosa pine, and has been found in only three places, all near Pagosa Springs.

The federal grant money triggered the need for a biological assessment, which will be the basis for a biological opinion. If adverse effects can be avoided, such as by using care in the placement of wells, the Fish and Wildlife Service can approve the drilling this summer.

Existing wells reach a maximum 1,200 feet, but Smith expects to need wells 2,500 to 5,000 feet deep. The working hypothesis is that the underground rocks at the site are fractured than those that provide the water for the commercial hot springs and downtown heating district.

How will anybody know if the new wells are tapping a new source of heat instead of robbing the existing geothermal resource? Smith says his company will inject heat and pressure gauges on all local hot-water wells, “so they know immediately whether we are tapping the resource.” Colorado law and new regulations in Archuleta County protect existing geothermal users in case of damage to their resource.

Chris Gallegos, who administers the town’s geothermal heating district, says it’s “an unknown” whether Smith’s project would impair the existing users. “Through the test wells we should be able to determine whether the extraction of that heat would affect us or not,” he says.

Additional resources:

http://coloradogeologicalsurvey.org/energy-resources/renewables/geothermal/uses/electrical-generation/

http://www.eesi.org/files/geothermal_030206_gawell.pdf


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