SR's ThermaSource rides wave of steam

ThermaSource, a Santa Rosa geothermal company, is in the midst of major expansion as energy companies scramble to find steam for new power plants as oil and natural gas prices hover near record highs.

The company has raised $93 million over the past two years, including $41 million last month to purchase drilling rigs. It expects to double employment, from 200 currently to more than 420 by the end of the year, as it expands operations in California and Nevada, and moves into the Caribbean.

Forty trucks bearing sections of a new drilling rig will deliver the derrick this week to the Bottle Rock plant in Lake County, where ThermaSource is drilling steam wells.

While the geothermal industry is known for boom and bust cycles, energy industry veterans said the latest surge in activity appears to have staying power.

"My opinion is this will keep up. I just don't see any decline in energy prices," said Rich Estabrook, a geothermal expert for the federal Bureau of Land Management in Northern California. "Drilling rigs are in such demand it's almost impossible to get a drilling rig right now."

Only a handful of U.S. companies have the expertise to explore for seams of steam as deep as two miles underground, and ThermaSource is the only one specializing in the field. The other companies also are busy drilling for new sources of oil with crude prices near record highs.

"We're in a pretty good spot right now. We made the move when it was necessary and we're trying to keep the rigs busy," said Louis Capuano, ThermaSource's chief executive.

Capuano founded ThermaSource in 1980 after the petroleum engineer worked six years for several energy companies at The Geysers, the world's largest geothermal operation, straddling Sonoma and Lake counties.

Just two years ago, ThermaSource had four employees. But the company has seen demand for its services explode, driven by a series of market forces.

Steadily rising electricity prices combined with soaring oil and natural gas costs make geothermal power more profitable. Utilities in 25 states also are required to purchase more power from renewable sources.

Add to those factors the scarcity of drilling rigs to tap underground steam fields as energy companies seek out new sources of crude oil.

"We've certainly seen an uptick in activity. The real driving factor is electricity prices, and I don't see them ever going down significantly," Estabrook said.

With the growth in drilling contracts, ThermaSource sought financial backing and has been on a buying spree for drilling rigs over the past two years. The company previously relied on leased rigs.

Equity firms US Renewables Group and Riverstone Holdings provided an initial $22 million in 2006. ThermaSource has taken another $30 million on a credit line with Glitnir Bank, of Iceland, a major investor in geothermal projects. Recently, US Renewables and Riverstone put in another $41 million.

The steel drilling rigs -- costing $10 million to $12 million each -- tower 180 feet into the sky and drive drills deep into the earth.

A drill bit attached to a series of pipes chews through rock and dirt until it reaches a depth of 6,000 feet. Then, at a gradual angle, the rigs aim for steam reservoirs within fractures of the earth as deep as 20,000 feet underground.

ThermaSource owns four rigs. They are exploring for steam in California's Imperial Valley, near Winnemucca, Nev., and on the island of Nevis, in the Caribbean. Another one is developing wells in an existing Imperial Valley steam field.

An additional four rigs should be delivered to ThermaSource within the next month with a ninth due later this summer.

Those rigs likely will be deployed at The Geysers, in Nevada and Utah, and perhaps in the Caribbean and Central America.

"If we get the contracts, we will go after more rigs," Capuano said.

More crews are needed to run the rigs. ThermaSource is busy hiring rig hands, drilling engineers and supervisors, often tapping talent working in the oil fields of California and other Western states. The company also has added staff at its Santa Rosa offices.

Today, the company employs 200 and expects that number to swell to more than 420 by year's end.

"I thought we would be able to grow, I just didn't think it would grow that fast," Capuano said.

ThermaSource is benefiting from the greatest interest in developing the nation's geothermal energy resources in some two decades, federal officials said.

The BLM, for instance, last year awarded its first exploration leases on public lands in California in 13 years.

One of those leases was a 400-acre site at The Geysers to US Renewables and Riverstone to provide more steam to the Bottle Rock plant. The owners restarted Bottle Rock last June after 17 years in mothballs.

In a series of private lease agreements, Western GeoPower has pieced together about 1,000 acres at The Geysers for a new plant the Canadian company plans to startup by 2010. ThermaSource is developing the wells, using a leased rig.

There are 22 plants generating about 1,000 megawatts of electricity at The Geysers. At its peak two decades ago, 27 plants produced about 1,900 megawatts at The Geysers.

Production declined as steam pressure diminished, and some wells were poorly constructed and maintained.

To reduce the decline, the steam fields are being recharged with treated wastewater pumped from Santa Rosa and Lake County.

Power from geothermal plants is a small, though gradually growing share of electricity, generated primarily in California, Nevada and Utah.

About 4,000 megawatts of geothermal power is online in those states. That is enough power for three million homes.

You can reach Staff Writer Michael Coit at 521-5470 or mike.coit@pressdemocrat.com.

THERMASOURCE

Founded: 1980

Headquarters: Santa Rosa

CEO: Louis Capuano

Employees: 200 currently, expects to reach 420 by the end of the year

Funding: $93 million over the past two years from

US Renewables Group, Riverstone Holdings

and Glitnir Bank