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PROPOSAL FOR

TECHNICAL ADVISORY SERVICES

RELATING TO GEOTHERMAL

RESOURCE ASSESSMENT

FOR THE

DEPARTMENT OF BUSINESS,ECONOMIC DEVELOPMENT AND TOURISM

ENERGY DIVISION

R. A. PATTERSON & ASSOCIATES

w. L. D'Olier

K. P. Goyal

APRIL 1991

H. P. Ross

R. A. Patterson

3. Mr. D'Olier and Mr.Patterson have detailed knowledge of thespecifics and progress of the geothermal/cable project; eachparticipated as consultants to parties active in the HawaiianEl ectric Company-state RFP and Proposal process that developedduring the period May 1989 - January 1990.

Mr. D'Olier was a consultant to stone & Webster EngineeringCo. (SWEC), which in turn was the prime technical advisor toHawaiian Electric Co.(RECO).

Mr. Patterson consul ted for Mission Power Engineering Co.,materially assisting in the management and wri ting of theproposal which was chosen by HECO as the most responsive totheir requirements.

II. SUMMARY - STATE AND DBED OBJECTIVES

R. A. Patterson & Associates will work with an accurate andthorough understanding of the objectives of DBEP energy division andthe state administration. These objectives are succinctly presented inthe RFP. Our understanding of the purpose and direction of theconsulting work is presented below.

STATE AND DBED OBJECTIVES

1. Determine the extent and magni tude of the geothermal resourceswi thin the State . Active deep dri 11 ing , well tes ting andcommercial production later this year should allow a regionaldetermination to be made first in the KERZ.

2. Identify the characteristics of the geothermal resource.

3. Determine the potential of the resource for commercialexploitation, and long term conservation and management.

4. Optimize DBED's management and supervision of thegeothermal resource assessment program and geothermal/cableproject master planning with the assistance of a qualifiedgeothermal industry consul ting group, sel ected by acompeti ti ve bidding pro,cess. -, '-,

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5. Improve the resolution of geothermal development issues andproblems between agencies, and between agencies and thecommercial developers, using the consulting team. Keyagencies. DBED, Department of Land and Natural Resources(DLNR), Department of Health (DOH), Hawaii County, theTechnical Advisory Committee (TAC), University of Hawaii (UH),and the us Geological Survey (USGS) will be key agencies inthis process. The contractor will participate as DBED'sadvisor in key meetings, by making analyses andrecommendations, and by the submission of written reports.

6. Publish two comprehensivegeothermal energy resource.

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status reportsThe Contractor

(SR) on thewi 11 prepare a

draft of the first status report by December 1991 forpresentation to the 1992 state legislature. The draft of asecond report will be due in May 1992 for presentation as anannual report to the state administration and the public.

A wide array of current activities and past achievements in theKERZ support the objectives stated above.

The HGP-A generating facility completed nearly 8 years of highcapacity electrical generation (March 1982-December 1989). The singlegeothermal well - HGP-A, which supplied the 2.4 MW plant, is capable ofcontinued production of 350· F fluids.

One private industrial group, the Puna Geothermal Venture, iscompleting a well field to commence electric generation later in 1991from a new 25 MW plant. This power, to be sold und~r contract to HawaiiElectric Light Company (HELCO), will serve the Big Island grid. PGV hasplans for a second 30 MW plant, to be built somewhere in the KERZ area.A second private group, True/Mid-Pacific Geothermal Venture, has by deepdrilling demonstrated electric grade resource potential at a locale 7.5miles uprift from the HGP-A well. This exploration activity iscontinuing, and True/Mid-Pacific has signed an "as available" contractwith HELCO for 25 MW of power for the Big Island.

Italian (ENEL) and New Zealand (R. James) geothermal expertsexamined the KERZ in 1990. ENEL allowed that "deep drilling hasconfirmed the presence of an industrially exploitable system." RussellJames estimated the KERZ power potential in the range of 500 to 700 MWe,based on the work done to date, and the limited information thusobtained.

studies by the UH and others, have evaluated the geothermalpotential for other parts of the Big Island and other islands in theHawaiian chain.

Unfortunately, the KERZ achievements are not all positive. Seriousimplications about well field productivity and costs are being raisedby the drilling to date.

• Of 9 deep geothermal wells, three (True 1, Ashida 1 andLanipuna 1) found favorable high temperatures but little orno fluids. This 30+% incidence of fai I ure points to thecritical problem of finding the fracture permeability foradequate fluid production.

• steam flow rates in five productive wells (HGP-A, KapohoState-1 and -la, -2 and -3) are very modest in range andvolumes; 72,000 to 33,000 pounds per hour. This low yieldper well could place severe economic constraints ondevelopment.

• steam finding costs per well are high; Kapoho State-1 and 3,with respective 72,000 and 70,0000 lbs/hr flow rates and $2.5and $3 million completed well costs show funding costs of $33and $43 per pound-hour of steam. Although the comparison isnot wholly appropriate, equivalent costs in the Geysers were$7-$15 per pound-hour of stearn in the mid 1980s.

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All of these findings reveal the pressing challenges in the KERZ;locate the permeable reservoir and improve well productivity. The DEEDand state objectives are well founded and timely. We believe thatdetermination of the extent and magnitude of the geothermal resource isthe paramount challenge. Deep drilling, flow test, and production data,extended by competent reservoir engineering, geologic and geophysicalsurveys, analyses and interpretation, will be the basis of thisdetermination. All other sectors of interest will be impacted by thesefindings.

The core team assembled by R.A. Patterson & Associates has uniquecredentials in KERZ drilling, flow testing, and geotechnical operations,and in evaluation and surveys for this challenge in geothermal resourceassessment in Hawaii.

III. CONTRACT SCOPE OF WORK

The Contract Scope of Work as written in the RFP, is incorporatedin this Proposal for clarity and comment. The work elements have beenenumerated as Tasks 1 through 7 to better identify these separatesectors of the total work under the proposed Contract. In addition, suchidentification will serve to facilitate work progress reports, and tocategorize professional fees and other charges on monthly invoices.

Each Task will be accomplished jointly and personally by severalor all members of the team of four professionals cited in Sections Iand V of this Proposal. Work on all Tasks will commence immediately,assuming the final execution of the Contract Agreement with DEED, on orabout 1 July 1991. Anticipated work efforts and products, discussed insection IV, support the seven Tasks which constitute the Contract Scopeof Work.

The tasks are here reproduced from the RFP, along with comments onour anticipated approaches to the work specified. Team assignments willbe made to adequately cover the work required as each item is begun,after direction from the DBED staff.

TASK 1

• RPA, as Contractor, will assist DBED and DLNR in establishingpriorities among available resource assessment methods, including(as exampl es) : exploratory dri 11 ing; core-sampl ing and well­testing; surface and aerial surveys; and regional mapping.Guidance in this regard must be sensitive to budget constraints.

This task will receive integrated technical attention fromD'Olier, Goyal and Ross. Patterson will identify all budgetconsiderations to assist priority determinations and identifyalternate responses to unexpected events or issues.

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TASK 2

• RPA, as Contractor, will assist DBED and DLNR in planning thedirection of and managing the SOH program and in eval uatingavailable exploratory drilling methods, with cost effectivenessbeing a major criterion.

The entire RPA team brings special qualifications to Task 2,having recently completed the SOH Program Review, and othertechnical and management evaluations, under contract to DBEDEnergy Division. Our record of responsiveness andaccomplishment points to our abilities to work as a productiveteam in this area. Patterson and Goyal will devote specialefforts to permitting and flow testing in the second round ofSOH operations. D'Olier will lead team considerations of SOHcost effectiveness.

TASK 3

• Contractor will assist DBED and DLNR in designing and planningappropriate well tests, surface and aerial surveys, and/or samplingprojects. Provide advice on appropriate instrumentation andequipment, methods and procedures, personnel, and budgets.

Task 3 will require detailed and coordinated analysis byD'Olier, Goyal and Ross. Two related action paths will beused;

1) cooperative testing with full-sized geothermal wellsand SOH's to better identify productive geothermalreservoir; and2) carefully selected geophysical procedures and surveysto predict reservoir extensions from the well data base.

TASK 4

• Contractor wi 11 assist DBED and DLNR by providing technicalguidance relative to the geothermal/cable project master plan andEIS being prepared by the consulting firm, ERCE.

Mr . Patterson, residing in Honol ul u, wi 11 di rect Task 4considerations for the geothermal/cable master plan and EIS.He has ready access to the ERCE staff, and a previous smallconsulting assignment with the ERCE office in Honolulu.

TASK 5• Contractor will assist DBED and DLNR by providing technicalguidance relative to planning and design of the geothermal/cableproject by the consortium and HECO.

RPA offers particular qualifications to accomplish Task 5.D'Olier, working jointly with Stone & Webster EngineeringCorporation for HECO, helped to write the May 1989 RFP forthe geothermal/cable project and completed the technicalevaluations of all five Proposals submitted (Nov. 89-Jan. 90).

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Patterson, whileCompany, directedselected by HECO.

TASK 6

consul ting for Mission Power Engineeringthe preparation of the winning proposal

• Contractor will assist DBED and DLNR to make reasonablejudgements and to reach objective scientifically supported,concl usions about the extent and characteristics of geothermalresources, recognizing that such judgments and concl usions mayserve as the basis for public policy and/or investment decisions.

Task 6 is an exceptional scientific and technical challenge;it is taken as full notice that DBED and DLNR want a crediblenew evaluation of the geothermal resource. We believe thatRPA's new team of geologist, reservoir engineer andgeophysicist bring the quintessential discipl ines to thiscritical Task.

TASK 7

• Contractor will advise DBED and DLNR on well-field design andmanagement in order to assist them in adopting appropriatepolicies, standards, and design criteria to avoid over-productionand premature depletion of geothermal resources.

Goyal and D'Olier will lead the considerations in Task 7. Wellfields designed for production, injection and monitoringfunctions must respect land use status, seismic, and volcanicrisks in moving geothermal energy from reservoir to generatingplant. Reservoir and resource management will be critical inHawaii geothermal utilization; prudence in development and akeen percepti on of reservoi r and resource vulnerabi 1i ti es wi 11be essential to effective long-term conservation andmanagement of a critical energy resource for the entire State.We expect that the newly-organized Technical AdvisoryCommittee will playa pivotal role in this work, and we areplanning a close association with this group.

IV. DELIVERABLES AND LEVEL OF EFFORT

Anticipated Work Efforts and Products - The team is fully prepared toprovide the following deliverable reports, memos, and other inputs tothe overall efforts detailed above.

* attendance upon request at key meetings of State interagencytechnical and policy committees involving DBED, DLNR, other Stateagency officials, and, on appropriate occasions, representativesof involved institutions such as the University of Hawaii and USGS.

* preparation, as needed of written reports addressing specificaspects of or probl ems concerning resource assessment work inprogress and making specific recommendations.

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* submission, on or before December I, 1991 (approximatel y onemonth prior to the start of the 1992 legislative session), of aninterim draft written reports on geothermal resource assessment,consisting of the following information: (1) a status report onthe state's geothermal resource assessment program; (2) adescription and brief analysis of available data and informationfrom all public and accessible private sources; and (3) a summaryof reasonable judgments and objective conclusions which theconsultant is able to make from the available data and informationabout the extent and nature of geothermal resources.

* submission, at least 45 days prior to the end of the one yearcontract term, of a draft annual report on geothermal resourceassessment including the following kinds of information: (1) astatus report on the state's geothermal resource assessmentprogram; (2) a comprehensive analysis of available data andinformation from all public and accessible private sources; and(3) a sununary of reasonabl e judgments and objective concl usionswhich the consultant is able to make from the available data andinformation abut the extent and nature of geothermal resources;(4) a discussion of the accompl ishments of the consul tant inassisting the program during the contract term; and (5)recommendations with regard to future needs, priorities, andplants. DBED will work cooperatively with the consultant duringthe early part of the contract term to develop an outline for thisreport in order to make it as meaningful as possible. The reportshould address each of the elements covered by the foregoing scopeof work.

* submission, at least 5 days prior to the end of the one-yearcontract term, of a final resource assessment report, incorporatingany changes suggested or required by DBED.

V. RELEVANT WORK EXPERIENCE

A. TEAM EXPERIENCE

The core team of professional s assembl ed to perform the work,identified in the RFP and this Proposal, contains the most essentialdiscipl ines for the primary task of geothermal resource assessment.D'Olier, Goyal and Ross have long, creditable records in the resourcesector of the geothermal industry. Patterson has detailed experiencein administering and managing geothermal enterprise and operations inHawaii, and in general management of highly complex, technicallyoriented organizations.

Expertise and/or specific skills not available in the proposer'steam described can be obtained, if necessary, through other consultantsin the geothermal and alternate energy industries in Hawaii and in thewestern United states. If this is required, we are prepared to makerecommendations for additional team members to DBED, based on ourknowledge and respect for the qualifications of these new members.

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Detailed statements of Experience and Qualifications for these fourteam members are presented together in Appendix A. The followingsummary remarks describe specific work experience for each member,relevant to the Scope of Work herein.

William L. D'Olier. Mr. D'Olier is a Registered Geologist, state ofCalifornia; he is an independent consultant, working exclusively in thegeothermal industry since a January 1988 retirement from Thermal PowerCompany. D'Olier managed for Thermal the drilling and evaluation of 3KERZ geothermal wells Kapoho State I, 2 and I-A, each of whichpenetrated the geothermal reservoir and measured steam production duringflow tests. In 1983, he directed Thermal staff and Consultant HowardP. Ross in the prosecution and interpretation of an aeromagnetic surveyin the lower KERZ. In 1987, with Goyal and Iovenitti, he presented thefindings and concl usions of deep dri 11 ing and testing in the PunaReservoir Report which established the basis for the 25 MW geothermalpower system now under construction by the Puna Geothermal Venture(PGV) .

Mr. D'Olier associated with stone & Webster Engineering Corporation(SWEC) in the December 1988-January 1990 interval to prepare the RFP forthe HECOjState Geothermal Interisland Transmission Project (500 MW andcable) He wrote Appendix A of the RFP, entitled "Geothermal Resourcesof the Kilauea East Rift Zone" and participated in the technicalevaluation of all five proposals received. In recent association withRPA, D'Olier was a key contributor to the SOH Program Review which wascompleted in January 1991 as technical advisory service to DBED EnergyDivision. As to regionally oriented geothermal resource assessment,D' 01 ier has personal 1y accompl ished reconnaissance or fiel d and prospectsummaries for the following productive or prospective regions:

Geysers-Clear Lake KGRA, CABasin & Range, CAl NV, VTCascades CAl OR, WA

Island of Java, IndonesiaLuzon and Leyte, The PhilippinesAndes Mountains, Chile

Keshav P. Goyal. Dr. Goyal is geothermal reservoir engineeringconsultant, with over 16 years experience in the geothermal industryand research. He is a Professional Engineer, registered in the state ofCa Ii forni a (Mechani cal Engineer speci al i zed in thermal fluid phenomena) .He conducted reservoir engineering research at Lawrence BerkeleyLaboratory, and has diverse geothermal industry experience. Dr. Goyalwas Thermal Power's reservoi r and well testing engineer during theKapoho-state exploration drilling. He designed the equipment and allprocedures for KS-IA well flow testing, including well preparation andopening, measurements at mul tipl e rate flows, safety, and abatementprocedures. This 1985 acti vi ty was a major advance in testing KERZgeothermal wells safely and in obtaining quality data. Dr. Goyal wrotea detailed KS-IA flow test report which contains substantial reservoirinformation and analysis. He also wrote the Puna Reservoir Report withD'Olier and Iovenitti which is basis for the PGV plans for a 25 MW (net)electric power facility.

Dr. Goyal, in recent association with RPA, made importantcontributions, particularly in flow testing concepts, to the SOH ProgramReview. His regional geothermal reservoir assessments have focused onthe Basin & Range Province and the Imperial Valley in California andMexico.

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Ralph A. Patterson. - Mr. Patterson was the Hawaii Project Manager forThermal Power Company for four and one-half years, ending in late 1988when the Puna Geothermal Venture interests were sold by Thermal PowerCompany. Mr. Patterson's management responsibilities with Thermal Powerincluded operations, drilling, legal, financial, public and governmentalrelations, environmental studies and presentations, permi tting, andmarketing. Mr. Patterson is currently a new business developmentconsultant based in Hawaii.

Howard P. Ross. - Dr. Ross is a Senior Geophysicist and the Section Headfor Applied Geophysics with the Earth Science Laboratory Division of theUniversity of Utah Research Institute (UURI). He received his B. A. inGeology from the University of New Hampshire and M. S. and Ph. D.degrees from the Pennsylvania State University. He was a seniorgeophysicist with Kennecott Exploration Inc. from 1967-1977, where heconducted research in the magnetic and electrical methods, and completedinduced polarization/electrical resistivity, aeromagnetic, and gravitysurveys for porphyry copper and massive sulfide deposits.

Since joining UURI in 1977, Dr. Ross has served as the ProjectManager for the Department of Energy (DOE) Geothermal Division-IndustryCoupled Program and for numerous geophysical studies for the mining andgeothermal industries and for government agencies. He has been ProjectManager for the DOE Geothermal Division-State Cooperative Reservoi rAnalysis Program since 1985. Dr. Ross has completed geophysicalinterpretations for numerous geothermal areas in the western Uni tedStates, and for geothermal resources on Ascension Island (South AtlanticOcean), Hawaii, st. Lucia, Mexico (Los Azufres), Guatemala (Zunil),Kenya, and Ethiopia. Dr. Ross has been active as a Peer Reviewer forthe DOE Nuclear Waste Isolation Program, and as a consultant to U. S.mining and geothermal companies. He is the author of more than 20journal publications and numerous reports in the fields of geothermalenergy, geophysics, remote sensing, and environmental studies.

As a consultant to Thermal Power Company and the Puna GeothermalVenture, Dr. Ross completed a review and interpretation of availablegeophysical data relating to the Kilauea East Rift Zone (KERZ) in 1983.He subsequently designed, reviewed and interpreted several proprietarydetai I ed geophysical surveys which were compl eted as part of othergeothermal expl orati on programs, hel ping to pI an, execute and makecomplete interpretation of Thermal Power Company's KERZ aeromagneticmap in 1985.

B. CONFLICTS/POTENTIAL CONFLICTS

Since all of the team members have been associated with variousentities interested in the geothermal developments in Hawaii at sometime or other, the following requested statements on conflicts orpotential conflicts are included in our proposal. It is our consideredopinion that none of these associations will cause any conflicts withthe work on resource assessment described by DBED in their RFP. In fact,we believe the close associations that the team has developed with abroad spectrum of the geothermal community in Hawaii will serve to beone of the strongest assets available to DBED.

Disclosure-D'Olier

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Mr. D'Olier has no association or affiliation of any kind withfirms or parties involved in geothermal exploration or development inHawaii, with the single exception of an active consulting service toHECO concerning the overall results and implications of the ongoing SOHProgram. His former consulting association with SWEC for HECO is nolonger active.

Disclosure-GoyalDr. Goyal has no current affiliation with any firms involved in

geothermal enterprise or study in Hawaii. He is employed as a seniorReservoir Engineer by Calpine Corporation, and has permission to consultin areas not in conflict with his employer's activity.

Disclosure-PattersonMr. Patterson was the Hawaii Project Manager for Thermal Power

Company for four and one-half years, ending in late 1988 .. He providedmanagement consulting services to Mission Power Engineering Company,providing general consulting and lobbying services in support of MissionPower's interest in the HECO RFP for geothermal/cable development. Hedirected the preparation of the winning proposal selected by HECO duringthis consulting assignment, which ended in mid-1990.

Discussions have been held for several months with Mission EnergyCompany, successor to Mission Power Engineering Company in the KilaueaEnergy Partnership, for a new consulting arrangement to continueservices similar to those provided for Mission Power Engineering. Sucha new assignment (if enacted) would not appear to cause a conflict withthe more technical I y oriented services to be provided under thisproposal. Mr. Patterson has represented Mission Energy as an observer,on a paid dai 1y basis, at two recent meetings regarding geothermaldevelopment in Hawaii. There is, however, no contract for furtherservices in place at this time.

Disclosure-RossDr. Ross provided geophysical services as an independent consultant

to Thermal Power Company from 1982 to 1983, and to Diamond ShamrockCorporation in 1985, in connection with the Puna Geothermal Venture.Since this work was terminated in 1985, and since the ownership of thePuna Geothermal Venture has changed, no conflict of interest isidentified as a result of this work.

Since 1986, Dr. Ross has served as the Technical Project Managerfor the DOE-Geothermal Division's State Cooperative Reservoir AnalysisProgram, while employed at UURI. In this position, Dr. Ross serves asa technical contract monitor, and provides ongoing administrative andcontract assistance to the DOE and to 12 state geothermal teams. He alsocoordinates geophysical, geochemical,geologic and age-dating technicalassistance for these state teams. One of these grants is with the Stateof Hawaii DBED. The technical work for a project "Silica Control andRecovery in Geothermal Fluids" is being conducted at the University ofHawaii at Manoa under the direction of Dr. Donald Thomas. The grant isscheduled for completion on June 20, 1991.

Dr. Phillip M. Wright, Technical Vice President at UURI, and Dr.Marshall Reed, DOE/GD, have Dr. Ross's request to provide consultingservices on this project and have indicated that no conflict of interestis present.

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VI. ACCESSIBILITY AND RESPONSIVENESSThe proposal team presented here has a number of specific

advantages to DBED. Based in Honolulu, the team will be immediatelyresponsive to the needs of the Energy Division through Mr. Patterson;consultation and involvement in specific problems or discussions willbe facilitated by regular telephone, facsimile and writtencorrespondence. Because of its track record in the supplying of similarservices to DBED over the past eight months, RPA can be counted upon toeffectively concentrate on the core of problems and issues related togeothermal assessment. Direct access by DBED to all team members willbe made possible; where needed, coordination of work and deliverablesthrough Mr. Patterson has proven to be successful, and will be continuedunder the proposed contract.

Team members residing on the Mainland are never far away by rapidcommunications. In addition, with a minimum of planning and coordinationthrough Mr. Patterson, attendance by other team members at specificmeetings, wi th minimum fuss, is possibl e. Since travel costs are notdirectly productive to the work at hand, minimizing such costs shouldbe a prime goal of contractor selection and contract administration. Therecord of RPA, under its previous DBED contracts, in managing suchnecessary travel to Hawaii at the least cost, and indeed in meeting withDBED staff during seminars on the Mainland, is an illustration of thecost consciousness that RPA brings to the work presented.

VII. CONTRACT COSTS

Hourly rates for each of the team members are proposed at $80. Anoverhead fee of 20% of the hourly rate will be added to all professionalhours to cover regular communications, secretarial services andadministrative costs.

Major costs, such as for publications, maps and complex graphics,etc, plus travel expenses will be billed at cost. Hawaii GET will beadded to billings as appropriate.

Invoicing wi 11 be on a monthl y basis in accordance wi th DB EDrequirements.

SOH3PROP.DOC!rap

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TECHNICAL ADVISORY SERVICESPROPOSAL

APPENDIX A

RESUMES

R. A. PATTERSON & ASSOCIATESAPRIL 1991