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Unalaska to pursue geothermal energy, leaving Chena Power out of the equation

The Makushin Geothermal Project began building a corridor to the site of the proposed power plant in 2021.
Courtesy of Ounalashka Corp./Chena Power LLC
The Makushin Geothermal Project began building an access corridor to the site of the proposed power plant in 2021.

Unalaska is still pursuing the Makushin Geothermal Project, even after a rocky four years to try to get the project off the ground. The latest hurdle requires that the city must break ties with the company previously hired to lead the project.

The City of Unalaska announced in a statement earlier this month they were pursuing a grant from the U.S. Environmental Protection Agency to fund the Makushin Geothermal Project, and that they would partner with the Qawalangin Tribe of Unalaska and Unalaska’s Native corporation, the Ounalashka Corp.

But the Ounalashka Corp. is tied to Fairbanks-based Chena Power. The two companies partnered in 2020, forming a joint venture known as OCCP, to pursue the project. That joint venture has a 50-year lease on the resource at Makushin. But slow progress due to OCCP’s failure to meet several funding deadlines led the city to choose not to renew its agreement with them.

This all means that for the city’s plan to work without Chena Power’s involvement, the Ounalashka Corp. would likely have to break ties with Chena.

Today, the Native corporation’s board of directors plans to meet to discuss ways to move forward, which could include dissolving its partnership with Chena Power, essentially buying them out.

Bernie Karl, the chief officer of Chena Power and president of OCCP, has been at the center of the project since its inception, when he brought the project back to life after it had simmered for years.

But OCCP does have a buy-sell agreement, meaning it is possible for the Ounalashka Corp. to buy Karl out of the partnership.

“They have the right to get rid of me,” Karl said in an interview Thursday. “It looks to me like they've moved ahead with the city and the tribe. They've already moved ahead, so it looks to me like they want to do this without OCCP.”

But Karl says the city has prevented the Unalaska City Council and Ounalashka Corp. shareholders from understanding the whole picture, namely by withholding the company’s monthly reports.

“If the city shared those reports with the council, they’d understand that we were right on track,” Karl said, and that they were on track to enter the next stage within a few months.

“We’re so close right now,” he said. “We've already bought the drill rig.”

But OCCP has already been granted three timeline extensions, pushing the proposed operation date back from 2024 to 2027. The pandemic and its fallout have led to numerous supply-chain issues, and the cost of borrowing has gone up drastically since the project began in 2020.

Ounalashka Corp. CEO Natalie Cale said in a statement that the company was “disappointed in the series of events that have unfolded” since the project’s inception, “the majority of which were out of OCCP’s control.”

“This has always been an expensive project. The fact that most of the costs are upfront, with the real savings and benefits (economical and environmental) in the long-term, seems lost on lenders,” she wrote.

City leaders say the city has urgent power needs that the geothermal project was supposed to address.

City Manager Bil Homka said the city has put other power projects on the back burner because the geothermal project was supposed to solve them. Now, Homka says, the city cannot afford to wait for geothermal to come online and has to move forward with alternative ways to solve the city’s urgent power needs.

The city filed its intent to apply for up to $500 million in federal grants for the Makushin Geothermal Project Feb. 1, nearly a month before the city council’s Feb. 27 meeting when they decided not to renew their agreement with the OCCP.

The deadline for the city to apply for the EPA grant is April 1.

Theo Greenly reports from the Aleutians as a Report for America corps member. He got his start in public radio at KCRW in Santa Monica, California, and has produced radio stories and podcasts for stations around the country.