AltaRock Energy Stops Drilling for Now

AltaRock Energy, the geothermal startup backed by Google, Kleiner, Perkin, Caufield & Beyers and Khosla Ventures, has suspended drilling its first well for a demonstration project at a geothermal field in Northern California.

The company said it had "encountered a number of physical difficulties in the drilling of well E-7, the first well planned as part of its engineered geothermal systems (EGS) demonstration project in the Geysers, resulting from geologic anomalies particular to the formation underlying this well location."

Engineered geothermal systems involve drilling deep into the earth to fracture hot rocks and inject water into it to stimulate steam production. Another well would be drilled nearby to harvest the steam and hot water for running turbines to produce electricity.

EGS promises to create geothermal reservoirs in places without naturally occurring steam fields. Unlike a solar or wind farm, a geothermal power plant could produce electricity around the clock, making it an attractive alternative to fossil fuel-based power plants.

EGS advocates often cite a Massachusetts Institute of Technology report that touts the great potential of the technology to replace coal-fired power plants. Google cited that report when it announced a $6.25 million investment in the startup in August 2008.

But EGS is largely unproven as a commercially viable approach. Drilling each well costs a few million dollars alone, and building an underground reservoir presents serious technical challenges.

Then there are safety issues. A New York Times article in June this year questioned whether AltaRock's demonstration project at The Geysers would cause earthquakes and threaten the safety of residents nearby.

AltaRock posted a reply to the questions raised and explained the steps it would take to minimize problems. The safety issue, raised by residents interviewed by the Times, isn't new. They have contended for years that geothermal energy operations at the Geysers, which has been around for decades, have increased the number of earthquakes in the area.

Last month, the Times reported that AltaRock's project was falling behind schedule because its equipment had trouble penetrating rocks close to the surface. The federal Bureau of Land Management also has told the company that the federal agency plans to review safety issues before rock fracturing could begin.

In announcing its plan to suspend the drilling of its first well, AltaRock said it is looking at alternative locations either within The Geysers or elsewhere for its project.