Utah startup hits geothermal jackpot

Within six months of discovering a massive geothermal field, a small Utah company had erected and fired up a power plant - just one example of the speed with which companies are capitalizing on state mandates for alternative energy.

Anticipation of new energy policies has sparked a rush on land leases as companies like Raser Technologies Inc., based in Provo, lock up property that hold geothermal fields and potentially huge profits.

Raser's find, about 155 miles southwest of Provo, could eventually power 200,000 homes.

The company said it will begin routing electricity to Anaheim, Calif. within weeks.

Earlier this month, California adopted the nation's most sweeping plan to cut greenhouse gas emissions.

"We made a pleasant discovery, let's put it that way," said Brent M. Cook, the company's chief executive.

The number of government land leases and drilling permits have risen quickly, said Kermit Witherbee, who heads up the leasing program for the U.S. Bureau of Land Management, with more than two dozen companies now trying to make a score like Raser.

Two years ago, the U.S. Bureau of Land Management approved 18 geothermal drilling permits. That number more than doubled in 2007 and has nearly quadrupled this year.

The government leased a staggering 244,000 acres for geothermal development in the past 18 months. Another 146,339 acres went up for bid Friday in Utah, Oregon and Idaho.

All of it was claimed.

Raser's find "has the potential to become one of the more important geothermal energy developments of the last quarter century," said Greg Nash, a professor of geothermal exploration at the University of Utah.

The company quickly redrew its business plan, bumping up its planned development of 10 megawatts of power to 230 megawatts. That is in line with the field's power potential according to calculations by GeothermEX Inc., a consulting firm.

By comparison, the largest group of geothermal plants in the world are The Geysers, about 60 miles northeast of San Francisco. The Geysers geothermal basin produces about 900 megawatts of energy, enough to power the city, said Ann Robertson-Tait, a senior geologist and vice president of business development for GeothermEX.

Geothermal technology creates energy using heat that is stored in the earth. But geothermal still generates less than 1 percent of the world's energy, according to the Paris-based International Energy Agency.

"The outlook for geothermal is great," said Brian Yerger, an energy analyst for New York-based Jesup & Lamont.

Geothermal companies are relatively small players in the energy market and have had to scramble to lock up financing, particularly during a recession.

Merrill Lynch & Co. has pledged to fund Raser's first 100 megawatts of projects and says it is staying in the game.

"We've done a lot with Raser," said Merrill Lynch spokeswoman Danielle Robinson. "We're very committed to the company."

Cook said his company can raise additional money from joint ventures and stock sales. "This is where the money flows, to alternative energy projects that pencil out," he said. The company made its first major stock sale Nov. 14 to Fletcher Asset Management of New York.

"We are enthusiastic about our investment," said Kell Benson, Fletcher's vice chairman. The firm bought $10 million in stock at $5 a share, with an option to double the stake.

Raser and its supplier, UTC Power, plan to build another seven geothermal energy plants across the western United States by the end of 2009 and 10 plants a year for the next decade.

The push for geothermal power has been accelerated by state mandates like those in California, which this month said utilities must obtain a third of their electricity from renewable sources by 2020.

Raser, which specializes in low-boil geothermal sites, started buying leases five years ago on hundreds of thousands of acres that had been passed over because of their lower heat potential.

New technology, however, has made low-boil water useable for geothermal power. Raser buys 250-kilowatt power units from UTC Power, a subsidiary of United Technologies Corp.

Geothermal is also being used on a smaller scale.

"These things are slot machines. They make money," said Bernie Karl, owner of Chena Hot Springs Resort, off the grid 60 miles northeast of Fairbanks, Alaska. On geothermal energy from early UTC prototypes, Karl powers light bulbs, heats lodges and rooms for 210 guests, warms a greenhouse that grows food and spices, keeps an ice house frozen and makes hydrogen for resort vehicles.

Raser hit hot water at a few thousand feet below the surface circulating inside a zone of porous limestone a mile deep. The underground "lake" cycles hot water endlessly under the power of the Earth's internal heat like a steam engine, throwing up loops of hot water intersected by wells that return it to the system.

The company holds rights to 78 square miles of land in the area and believes it has barely tapped the full potential.