WELL DRILLING PLAN

204 South Court Street, Room 100 Alturas, CA 96101

(530) 233-7660

California Energy Commission Grant Number GEO-16-005

Prepared for Modoc County by: Warner Mountain Energy Corporation

May 2018

TABLE OF CONTENTS

1 INTRODUCTION ............................................................................................................................. 1

2 EXPLORATION ACTIVITIES UNDER GEO-14-003 ............................................................ 1

3 LOCATION ........................................................................................................................................ 1

4 EXPLORATORY WELL DRILLING ............................................................................................ 2

4.1 GOALS AND OBJECTIVES .................................................................................................. 2

4.2 DRILLING SITE SELECTION CRITERIA ........................................................................ 3

4.3 REGULATORY REQUIREMENTS ..................................................................................... 4

4.3.1 Drilling Permits ................................................................................................................ 4

4.3.2 California Environmental Quality Act (CEQA) Compliance ............................ 4

5 DRILLING OPERATIONS AND PROCEDURES ..................................................................... 5

5.1 Site Preparation .................................................................................................................... 5

5.2 Drilling Procedure ............................................................................................................... 5

5.3 Drilling Hole Sizes, Casings and Wellhead Equipment .......................................... 8

5.4 Drilling Fluids Program ..................................................................................................... 9

5.5 Cementing Program ......................................................................................................... 10

5.5.1 Conductor Job ................................................................................................................ 10

5.5.2 Surface Job (recommended 50% excess on open hole volume) ................ 11

5.5.3 Intermediate job (recommended 100% excess on open hole volume) .. 11

5.6 Directional Program ........................................................................................................ 11

5.7 BOP Requirements ........................................................................................................... 12

6 DRILLING OPERATIONS REQUIREMENTS ....................................................................... 17

6.1 Site and Operational Requirements........................................................................... 17

6.2 General Requirements .................................................................................................... 18

6.3 Site Housekeeping ............................................................................................................ 18

6.4 Drilling Equipment ........................................................................................................... 19

6.5 Safety ..................................................................................................................................... 19

7 POTENTIAL DRILLING PROBLEMS ..................................................................................... 20

7.1 Lost Circulation.................................................................................................................. 20

7.2 Stuck Pipe............................................................................................................................. 20

7.3 Wellbore Instability ......................................................................................................... 21

7.4 Well Control ........................................................................................................................ 21

7.5 Equipment Breakdown ................................................................................................... 21

8 LOGGING PROGRAM .................................................................................................................. 21

8.1.1 Mud Logging ................................................................................................................... 22

8.1.2 Temperature Gradient Logging .............................................................................. 22

8.1.3 Data Analysis ................................................................................................................. 23

9 SUPERVISION OF DRILLING ACTIVITIES AND NOTIFICATION OF OPERATIONS 23

9.1 Procedures for Change Orders .................................................................................... 23

9.2 Drilling Operations Flexibilities Needed .................................................................. 24

9.2.1 Examples of Immediate Decision-Making Situations ..................................... 24

10 DELIVERABLES AND PERFORMANCE .......................................................................... 24

11 SITE RESTORATION ............................................................................................................. 25

12 WELL COMPLETION ............................................................................................................. 25

FIGURES

Figure 1. Approximate location of exploratory well. ............................................................... 2

Figure 2. Drill pad layout ..................................................................................................................... 5

ACRONYMS

2D Two-dimensional

ANSI American Natural Standards Institute

API American Petroleum Institute

BBLS Barrels

BGS Below Ground Surface

BOPE Blow-Out Prevention Equipment

BUTT Buttress Thread Connection

CEC California Energy Commission

CEQA California Environmental Quality Act

DC Drill Collar

DOGGR California Division of Oil, Gas and Geothermal Resources

DP Drill Pipe

DSA Double Studded Adaptor

FIT Formation Integrity Test

FOSV Full Opening Safety Valve

GPM Gallons per Minute

GROO Geothermal Operational Orders

H2S Hydrogen Sulfide

IADC International Association of Drilling Contractors

ID Inside Diameter

LCM Lost Circulation Material

LPD Low Probability of Detection or Loss Per Day

LSND Low Solids Non Dispersed

MD Measured Depth

MSDS Material Safety Data Sheets

MT Magnetotelluric

OSHA Occupational Safety and Health Administration

PAC Poly Anionic Cellulose

POH Pull out of Hole

PPG Pounds per Gallon

RIH Run In Hole

ROP Rate of Penetration

SIDPP Shut In Dull Pipe Pressure

SOW Slip on Weld

ST+C Short Thread and Coupled

TD Total Depth

TVD True Vertical Depth

WME Warner Mountain Energy

WOB Weight on Bit

WOC Wait on Cement

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WELL DRILLING PLAN

1 INTRODUCTION The purpose of this drilling program is to evaluate geothermal resource development potential in the eastern Surprise Valley region of Modoc County by drilling an exploratory well in the project area. Drilling services will be performed by Welsco Drilling, a California-licensed drilling company, based in Fallon, Nevada. Services performed during drilling shall be conducted in accordance with State of California and/or Modoc County regulations applicable to the area and to drilling operations. It is anticipated that the geothermal exploratory well will be drilled to a depth of up to 4500 ft below the ground surface.

2 EXPLORATION ACTIVITIES UNDER GEO-14-003

Prior to this drilling phase of exploration, geological studies within the project area included surface observations, two-meter soil temperature probe surveys, soil gas survey, shallow temperature gradient augering, rock sampling, seismic surveys, and magnetotelluric (MT) surveys and drilling of three temperature gradient holes as part of the Energy Commission GEO-14-003 project. Results and conclusions of these methods are documented in the Energy Commission Final Project Report completed in March 2018. Data obtained from the drilling of these holes are intended to provide the basis for planning exploratory drilling activities. The WME-TG2, WME-TG3 and WME-TG4 holes were drilled to depths of 929 ft, 750 ft, and 1,410 ft below ground surface, respectively.

3 LOCATION A drilling location (Figure 1) for exploratory drilling has been selected based primarily on the results of MT surveys along with the three temperature gradient holes drilled in the study area. The area selected is approximately the same location of temperature gradient hole WME-TG2. The legal description of the area in which drilling will occur is Modoc County, California, Mt. Diablo Meridian Township 42 North, Range 17 East, SE ¼ of the SW ¼, Section 6.

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Figure 1. Approximate location of exploratory well.

4 EXPLORATORY WELL DRILLING

4.1 GOALS AND OBJECTIVES

The goal of this exploratory drilling project is to generate compelling well and reservoir data that will be utilized to attract a geothermal developer to the project. Advancing the project to the stage of exploratory drilling reduces risk for geothermal development investors by adding value to the project. Ancillary goals include adding value to other potential geothermal development projects in Modoc County by proving the capabilities and extent of the resource; positioning Modoc County as a meaningful contributor to California’s Renewables Portfolio Standard requirements and to the clean energy arena; filling in scientific data gaps existing on the east side of Surprise Valley; and creating economic growth opportunities for Modoc County. Objectives of this project include deep drilling to an approximate depth of up to 4,500 feet bgs; obtaining a geophysical borehole log to identify physical and chemical characteristics of the formation such as flow zones, fractures, resistivity, and permeability; performing mud logging of the well cuttings which helps to identify zones and extent of mineral alteration which is indicative of geothermal activity; and temperature gradient logging in the well. Reservoir modeling of the testing and drilling data will provide information for forecasting reservoir characteristics and performance. Development of a comprehensive technical report is an advanced level of feasibility that will be utilized to attract investors to the project.

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4.2 DRILLING SITE SELECTION CRITERIA

Based on the integration of data collected during the geologic and geophysical studies associated with GEO-14-003 project, three temperature gradient hole sites were selected and were successfully drilled in October 2016: WME-TG2 was drilled to a depth of 929 feet below ground surface with a maximum temperature at bottom hole of 215°F; WME-TG3 was drilled to a depth of 750 feet below ground surface with a maximum temperature at bottom hole of 183°F; and WME-TG4 was drilled to a depth of 1,416 feet below ground surface with a maximum temperature at bottom hole of 223°F. Results of gradient drilling show increasing gradient with depth with no temperature reversals in the three holes. The locations of hot springs and thermal wells in the study area appear to be associated with the low surface resistivity values seen in the MT profiles. These lower resistivity values may represent a highly fractured basalt dike, dipping eastward, that allows thermal waters to escape from under the lake sediments and issue as hot springs. Higher temperature alteration minerals (chlorite and epidote) correlate with basalt and other volcanic rocks in all of the gradient holes. A clay cap of varying thickness overlies basalt and volcanic rocks in all three holes. The basalt observed on MT profiles may be a controlling structure for upwelling of geothermal fluids. In comparing WME-TG2, WME-TG 3, and WME-TG 4 at a depth of 700 feet, it is observed that WME-TG3 is 20°F cooler than WME-TG2 and WME-TG4. WME-TG2 is the most favored target location for additional drilling because of the lost circulation zone, alteration mineralogy and favorable temperature gradient profile. Geothermometer calculations estimate the resource to be at a temperature of 285°F. Assuming a linear extrapolation of gradient of 7.48°F /100 feet observed in the 616-919 feet interval in WME-TG2, a depth of about 2600 feet would be required to reach a temperature of 285°F. However, this depth is predicted as a result of calculated geothermometer temperatures from geochemical data and shallow temperature gradient well data. Conditions such as the uncertainty of geochemical data from potential mixing of non-thermal waters, changing deeper subsurface geologic conditions and unknown zones of faulting/fracturing can modify the gradient data and result in a risk in depth projections for a geothermal reservoir. Geophysical data in the area of WME-TG2 indicate a deeper geothermal reservoir potential below the clay cap encountered in the WME-TG2. Given the data available from geophysical studies, geochemical studies, estimated thickness of overlying clay sediments from other studies, well logs, and thermal

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gradient measurements, it is recommended that resource confirmation drilling be performed at the location of WME-TG2 to a depth of approximately 4,000 – 4,500 feet bgs.

4.3 REGULATORY REQUIREMENTS

4.3.1 Drilling Permits

Permission to drill requires two forms from the State of California Division of Oil, Gas and Geothermal Resources (DOGGR): Oil and Gas Designation of Agent (Form OG-134) and Notice of Intent to Drill (Form OG-105). An Agent is designated for the purpose of establishing a contact for all orders, notices, and processes. Warner Mountain Energy (WME) shall be the Designated Agent for the drilling project and will process the request. WME will also process the Notice of Intent to drill. The drilling permits will be issued to the Operator, Welsco Drilling. Prior to mobilizing equipment, Modoc County will ensure that a drilling permit has been obtained. WME and Welsco Drilling will be responsible for ensuring compliance with DOGGR guidelines. WME and Welsco Drilling will coordinate drilling activities with Mr. Jack Truschel, Geothermal District Engineer, DOGGR.

4.3.2 California Environmental Quality Act (CEQA) Compliance

As part of the process for receiving Energy Commission funding under GEO-14-003, the California Environmental Quality Act (CEQA) process was invoked. The Initial Study Mitigated Negative Declaration relative to GEO-14-003 required a biological survey to evaluate the area for avian species and rare-plant species to be conducted prior to drilling. A biological survey, initiated by WME, was conducted on April 19, 2106 by Todd Sloat Biological Consulting. The outcome of the CEQA process for GEO-14-003 also required avoidance of cultural resources sites. An archaeological pedestrian survey, initiated by WME, was completed in September 2014 by the Genesis Society. Sensitive areas were identified and drilling was planned such that it does not interfere with sensitive areas. If cultural resources are encountered during drilling, the drilling Supervisor will notify WME and WME shall contact the Genesis Society. It is anticipated that there will be no additional biological or cultural surveys will be required for exploratory drilling given that the same geographical location is being utilized for exploratory drilling as for temperature gradient drilling.

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5 DRILLING OPERATIONS AND PROCEDURES The following sections describe well drill operations. Please refer to the Acronym table for definitions associated with the drilling terminology. Acronyms are not defined within the text of this section.

5.1 Site Preparation

➢ If needed, drilling site will be leveled to accommodate drilling equipment. This

work will be coordinated by WME. It is not anticipated that significant site preparation work will be needed as the selected is easily accessible on flat ground on a gravel pad that has already been developed.

➢ If needed, WME will place gravel on portions of drilling pad; however, it is not anticipated that this will need will occur.

➢ Mud pits will be excavated for the drilling location. The size of the mud pit will be approximately 4 feet deep by 10 feet wide by 40 feet long.

Figure 2. Drill pad layout

5.2 Drilling Procedure

• Install cellar • Build location • Move in and rig up Rig. • Inspect rig for safety • Hold an in house pre-spud operations and safety meeting with all Parties

involved. • Mix spud mud

Fuel Tank 8’ X 20’ Gen Set 4’ X 8’

Mud Pump 8’ X 30’

Schramm 130 8’ X 35’ Pipe Trailer 8’ X 40’

Suction Tank 8’ X 30’ Shaker Tank 8’ X 30’

Mud Pit 4’ Deep X 10’ Wide X 40’ Long

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• Set 14” conductor pipe utilizing the rig at 80 feet and cement using ready mix • Spud in surface with 12.25”bit • Run the following BHA for mud rotary:

12.25” bit 1-8” drill collar 12.25” Stab 3-6” drill collars

• Drill with 65RPM • RUN 15-20,000 lbs WOB • Run both pumps 60SPM • Drill to 600 feet • Run deviation survey every 300’ • If losses are encountered, it may be necessary to utilize LCM • Once casing point has been reached and company mad determines we are in

competent formation circulation with mud must be regained fully before attempting to run casing. (only if air drilling has been utilized)

• Circulate hole for casing • POH and lay down drilling assembly • Run 600’ of 9&5/8” K-55, 36#/ft. BUTT casing with Davis Lynch float collar,

40’ shoe joint & float shoe • Install centralizers on 1st,3rd,5th,7th, 9th,11th,13th joints • Weld shoe and float collars. Tack weld 4 ea 3” welds on top and bottom of

first 4 joints of casing. • Fill casing every 4 joints while running in hole • Once on bottom install cement head and circulate casing • Cement as per cementing program • WOC 12 hours • If cement does not reach surface or falls back any at all do a Top Job and

bring full cement to surface. • Cut off 14 , then 9&5/8”and weld on 9&5/8” SOW X 11” 3M wellhead with

2ea. 2” LPO’s below flange • Test between welds to 50% of casing collapse pressure • Install 11” 3000# Annular BOP • Install rotating head or inverted rotating head rubber • Install kill line with 2” check valve and full opening valve to kill side of

wellhead • Install 2 ea 2” full opening valves on wellhead on choke side and hook to

choke manifold • Test BOP witnessed by Regulatory Authorities (notify parties 24 hours in

advance) • Drill out with:

• 8.5” Bit w/3 ea 18 nozzles • Bit sub w/ float and totco ring • 1-8.25” stab.

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• 1-6” DC • 1-8.25” stab. • 3-6” DC • DP

• Drill with 100RPM • RUN 15-20,000 lbs WOB • Run both pumps 60SPM • Drill to 3400 feet • Survey every 500’ • Once Geologist have determined we are drilling in competent rock for a

casing shoe circulate for casing • POH for casing keeping hole full at all times. • Run 3400’ of 7” K-55 23#/ft. ST&C casing with Davis Lynch float collar, 40’

shoe joint & float shoe • Install centralizers on 1st, 3rd, 5th, 10th & last 4 joints • Weld shoe and float collars. Tack weld 4 ea 3” welds on top and bottom of

first 4 joints of casing. • Fill casing every 4 joints while running in hole • Once on bottom install circulating swedge and circulate casing to ensure full

circulation. • Remove circulating swedge and install cementing head • Cement as per cementing program. • WOC 12 hours • If cement does not reach surface or falls back any at all do a Top Job and

bring full cement to surface. • Pick up 11” BOP Stack • Cut and dress off 7” • Install 7” SOW X 8” 600 ANSI wellhead with 2ea 2” LPO’s • Install 8” 600 ANSI Master Valve • Install 8” 600 ANSI X 7&1/16” 3M crossover spool or DSA • Install 7&1/16” Annular BOP • Install rotating head or inverted rotating head rubber • After BOP test is approved RIH with 6.25” drilling assembly as follows:

• 6.25” bit • 4.75” motor • 1-4.75” drill collar • String Stabilizer • 1-4.75” drill collar • String Stabilizer • 4-4.75” drill collars

• Drill float, cement and shoe with mud • Drill 10’ of new hole • Preform FIT • Commence to drill w/ 65 RPM

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• Run 15K WOB • Run 1 pump 60SPM • Survey every 500’ • Drill to 4500’ • POH • Rig up and run 5” perforated liner and hang at 3200’ to 4500’ • Change over to water • RIH with drill pipe or tubing at 3 different depths and perform airlift

operation (800’, 1000’ & 1200’) • Record all parameters during air lift operations • Pull pipe from hole • Fill hole and preform injection test at 3 different rates • Record all parameters during injection test

5.3 Drilling Hole Sizes, Casings and Wellhead Equipment

Hole sizes to be drilled • 17.5” to 80’ • 12.25” to 600’ • 8.5” to 3,400’ • 6.25” to 4500’

Casing Requirements • 80’ of 14” conductor casing (AB53) • 600’ of 9&5/8” 36#/ft, K-55, BUTT Casing (Collapse Resistance 2020 psi,

internal yield pressure 3520 psi, Body yield strength 564,000#) • 3,400’ of 7” 23#/ft, K-55, ST&C Casing (Collapse Resistance 3270 psi, Internal

Yield Pressure 4360 psi, Body Yield Strength 366,000#) • 300’ of 5” flush joint, 11.50#, k-55, Valley flush joint blank casing (Collapse

Resistance 3060 psi, Internal Yield Pressure 4240 psi, Body Yield Strength) • 1,000’ of 5” flush joint, 11.50#, K-55, Valley flush joint perforated casing Casing Accessories • 1 ea. Davis Lynch or equivalent 9&5/8” BUTT Fig 303 Sure Seal Float Shoe • 5 ea. Centralizers 9&5/8” X 12.25” • 1 ea. 9&5/8” Top Plug • 1 ea. Davis Lynch or equivalent 7” ST&C Float Collar • 1 ea. Davis Lynch or equivalent 7” ST&C Float Shoe • 10 ea. Centralizers 7” X 8.5” • 1 ea. 7” Top Plug • 1 ea. 5” X 7” Liner Hanger / Get off Tool • 1 ea. 5” guide shoe

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Wellhead Equipment • 1 ea. Casing Head 9&5/8” SOW X 11” 3M w/ 2ea 2” LPO’s • 3 ea. 2” 3M threaded side valves • 1 ea. 2” 3M check valve • 1 ea. Casing Head 7” SOW X 8” 600 ANSI w/ 2ea 2” LPO’s • 1 ea. Master Valve, 8” 600 ANSI • 1 ea. Double studded adaptor 8” 600 ANSI X 7&1/16” 3M

5.4 Drilling Fluids Program

➢ Hole size: 12¼” Depth Weight Viscosity Filtrate (Feet) (PPG) (Sec) (ML) 80’ – 600’ 8.4-8.8 45-50 <10 Spud mud. Recirculation reserve pit. Utilize fresh API gel and to raise viscosity. Treat clays as necessary. At the top of the Productive Formation build LSND mud. Utilize PAC type product as needed for fluid loss control. Thin clays, if found, with chemicals and water as needed. Use appropriate LCM for lost circulation. Maintain flow rate at 200 to 250 gpm for hole cleaning in the 12 ¼” hole. Losses will occur sometimes total and with approval of geologist, drill with acceptable or no returns. ➢ Hole size: 8.5” Depth Weight Viscosity Filtrate (Feet) (PPG) (Sec) (ML) 600’ -3400’ 8.4-8.8 45-50 <10 Spud mud. Recirculation reserve pit. Utilize fresh API gel and to raise viscosity. Treat clays as necessary. At the top of the Productive Formation build LSND mud. Utilize PAC type product as needed for fluid loss control. Thin clays if found with chemicals and water as needed. Use appropriate LCM for lost circulation. Maintain flow rate at 180 to 200 gpm for hole cleaning in the 8.5” hole. Losses will occur sometimes total and with approval of geologist, drill with acceptable or no returns. ➢ Hole size: 6.25” Depth Weight Viscosity Filtrate (Feet) (PPG) (Sec) (ML)

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3400’- 4500’ 8.6-9.4 36-45 < 10 cc At the top of the Productive Formation, minimize/discontinue the use of Gel and conventional LCM additives. Reduce filtrate and enhance well bore stability and rheology with polymer additions if necessary, and sweep the hole as needed with high-viscosity Xanthan Gum Polymer pills. If needed to control whole mud losses, use only non-damaging and/or acid-soluble LCM additives (Calcium Carbonate, Magma Fiber). This will reduce the possibility of promoting formation damage. Utilize TORKease to reduce torque and drag. Soda Ash may be required to treat out hardness. Adjust mud properties and flow rates to promote good hole cleaning and stability. Remarks: • Monitor all drilling parameters on a continual basis to determine effective mud

weights, implement an effective solids removal program using linear shakers, centrifuge, and mud cleaner.

• Recycle sump pit water into the active mud system at the shaker box to reduce

waste volumes. • Wiper trips to be determined by ROP, drag, and torque. • H2S is not expected however, monitoring continuously for early detection of any

gas influx, will be rigorously maintained.

5.5 Cementing Program

5.5.1 Conductor Job

Depth 80’ Inside Diameter 14” Job Excess Fill to Surface Conductor Casing 0’-80’ Outer Diameter 14” Inner Diameter 13.5” Casing Weight ¼” wall Casing Grade A53B Procedure: Dig 17.5” hole with rig. Lower conductor in hole and stabilize in center of hole. Run 2” pipe to 80’ and pump cement from Surface with ready mix slowly so it does not bridge off. Pull 2” while cementing. Hold conductor centered in hole until cement sets up.

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5.5.2 Surface Job (recommended 50% excess on open hole volume)

Depth (TVD) 600 ft. Depth (MD) 600 ft. Hole Size 12.25 in. Outer Casing ID 13.5 in. Inner Casing Size/Weight 9&5/8 in. 36 lbs/ft. Inner Casing ID 8.921 Class G Cement 171 sacks Density 14.2ppg Yield 1.68cf/sack Displacement 43.3 bbls Volume Calculations 80 ft X 0.4888 cf/ft with 0% excess 39.104 cu. ft. 560 ft X 0.3132 cf/ft with 50% excess 263.088 cu. ft. 80 ft X 0.4341 cf/ft with 0% excess 34.73cu. ft. (inside casing) Total Slurry Volume 336.992 cu. ft. (60 bbls)

5.5.3 Intermediate job (recommended 100% excess on open hole volume)

Depth (TVD 3400 ft. Depth (MD) 3400 ft. Hole Size 8.5 in. Outer Casing ID 8.921 in, Casing Size/Weight 7 in. 23 lbs/ft. Casing ID 6.366 in. Class G Cement 277 sacks Density 14.2ppg Yield 1.68cf/sack Displacement 136.2 bbls Volume Calculations 600 ft X 0.167 cf/ft with 0% excess 100.2 cu. ft. 2800 ft X 0.1268 cf/ft with 100% excess 355.04 cu. ft. 40 ft X 0.2210 cf/ft with 0% excess 8.84 cu. ft. (inside casing) Total Slurry Volume 464.08 cu. ft. (82.66bbls)

5.6 Directional Program

All bottom hole assemblies are to be locked straight hole assemblies. See procedure.

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Surveys will be run every 300’ on surface then 500’. No specific bottom target is required. However, the deviation will be closely monitored to eliminate the risk of hole drag, over pull, and/or torque. This is very important for insurance to reach the desired target depth. Interval Max. Dogleg Severity Max. Vertical Dev. Survey Interval 80’ - 600’ 1dg/150’ 0.5dg 300’ 600’ - 2500’ 1dg/150’ 1.5dg 500’ 2500’- 3500’ 1dg/150’ 3.0dg 500’

5.7 BOP Requirements

➢ 600 feet to 3400 feet, 9&5/8” surface casing w/ 11” 3M stack Equipment: • An Annular BOP. • An Inverted rotating rubber or rotating head. • An Accumulator System which shall provide sufficient capacity to supply 1.5

times the volume of fluid necessary to close and hold closed all BOP equipment units with a min left over pressure of 200 psi above the precharge pressure (electric pump).

• A back up to the primary charging system which shall be automatic and supplied

by a separate power source than the primary and capable of the same function(air pump).

• In addition an emergency backup system for the actuating system must be

installed at the source of energy to the primary Accumulator that is completely independent and possess sufficient capability to close all BOP units and hold them closed (Nitrogen system).

• This unit shall be at least 50 feet from the well head. • One operable remote BOP control stations. • A Wellhead with side outlets to provide separate choke and kill lines. • The kill line side shall have one full opening valve. • There shall be a check valve in the kill line between the mud pumps and the kill

line control valve. • The choke line shall have two full opening valves.

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• There shall be a fill up line installed from the trip tank to the area above the

annular. • The rig shall be equipped with standpipe valve and standpipe pressure gauge for

reading pump pressure and (SIDPP) shut in drill pipe pressure. • The rig shall be equipped with an Upper Kelly Cock and readily accessible handle

to operate it. • The rig shall be equipped with lower Kelly cock and wrench to operate it. • The rig shall be equipped with a FOSV (full opening safety valve) for the drill

pipe and readily accessible handle to operate it. When drilling, an H2S monitoring system, shall be installed

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Blowout Prevention Design 9&5/8”

➢ 3400 feet to TD, 7&1/16”” intermediate w/ 7&1/16” 3M • An Annular BOP. • An Inverted rotating rubber or a rotating head. • An 8” Master Valve. • An Accumulator System which shall provide sufficient capacity to supply 1.5

times the volume of fluid necessary to close and hold closed all BOP equipment

Rotating head or inverted rubber

11” 3M Annular BOP

9&5/8” SOW X 11” 3M Wellhead

2 ea. 2” LPO for 11” casing with a 2” check and full opening valve on the kill side and 2ea 2” full opening valves going to the manifold on the chock side

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units with a min left over pressure of 200 psi above the precharge pressure.(electric pump).

• A back up to the primary charging system which shall be automatic and supplied

by a separate power source than the primary and capable of the same function (air pump).

• In addition, an emergency back-up system for the actuating system must be

installed at the source of energy to the primary Accumulator that is completely independent and possess sufficient capability to close all BOP units and hold them closed (Nitrogen system).

• This unit shall be at least 50 feet from the well head. • One operable remote BOP control stations. • A Wellhead with side outlets to provide separate choke and kill lines. • The kill line side shall have one full opening valve. • There shall be a check valve in the kill line between the mud pumps and the kill

line control valve. • The choke line shall have two full opening valves.

• There shall be a fill up line installed from the trip tank to the area above the

annular. • The rig shall be equipped with standpipe valve and standpipe pressure gauge for

reading pump pressure and shut in drill pipe pressure (SIDPP). • The rig shall be equipped with an Upper Kelly Cock and readily accessible handle

to operate it. • The rig shall be equipped with lower Kelly cock and wrench to operate it. • The rig shall be equipped with a full operating safety valve (FOSV) for the drill

pipe and readily accessible handle to operate it. When drilling the following shall be installed: H2S monitoring system

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ATTACHMENT “G”

Inverted rotating rubber or rotating head

7&1/16” 3M Annular BOP

7&1/16” 3M X 8”600 ANSI Crossover or DSA

8”600 ANSI Master Valve

7” SOW X 8"600 ANSI Wellhead with 2ea 2” LPO’s

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6 DRILLING OPERATIONS REQUIREMENTS

6.1 Site and Operational Requirements

• The drilling contractor will follow the federal Geothermal Operational Orders

(GROOs), and Occupational Health and Safety Administration (OSHA) Petroleum Safety Orders - Drilling and Production and all stipulations and special conditions of the Surprise Valley drilling permits.

• The drilling program will be carried out in coordination with WME representatives. The driller and drill foreman will be expected to maintain close communication with WME personnel. Notice and consultation, to include making recommendations and detailing options, is required for any changes in drilling that may be necessary to include control of lost circulation, major changes in mud program, and bit changes.

• The following will be monitored and recorded during operations: a. Changes in mud return temperatures. Changes in mud return

temperatures are indicators of whether geothermal fluids are present. b. Changes in return flow rates. c. Condition of the drilling fluids. d. Hydrogen sulfide and methane gas.

• Drilling may cease and the hole will be carefully monitored if any of the problems listed below occur during drilling:

a. Any sudden increase in return temperature b. Any sudden increase in the volume of drill cutting returns c. Lost circulation

• The drilling contractor will be required to keep reports on the following: a. Bit log (with footages, type bit, and serial numbers) b. Daily drilling report (with times, tasks, footages, site activities, and

number of joints of drill pipe on location) c. Drilling fluids log (with footages, quantities) d. Daily cost log (for materials, footage and time charges).

• A pipe tally book will be kept up to date at all times by the driller and complete records will be kept on the International Association of Drilling Contractors (IADC) Daily Drilling Report Form. Both the tally book and the IADC Daily Drilling Report Form will be kept on the drill site and available for inspection by WME representative.

• Approved standard equipment to measure drilling mud properties must be provided by the drilling contractor or his mud supplier. At a minimum, a Marsh Funnel and Mud Balance will be on site at all times. Mud properties will be measured periodically or at the request of the WME representative. Measurements will be recorded.

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6.2 General Requirements

▪ The drilling contractor shall provide all equipment, labor, material, and

supplies to drill, complete, and test a geothermal exploration well to a depth of approximately 4,000-4,500 feet bgs.

▪ The drilling contractor will be required to provide proof of Workman’s Compensation compliance.

▪ The drilling contractor is responsible for water haulage and storage. The water collection point is within 1/2 mile of all drilling sites.

▪ Fuel delivery and storage is the drilling contractor's responsibility. ▪ If a crane, fork lift, or front-end loader is required, the drilling contractor

shall have the responsibility for obtaining the equipment or services. ▪ The drilling contractor is responsible for providing portable toilets. ▪ The drilling contractor will provide a trailer or equivalent facility on site for

the drilling crew. ▪ The drilling contractor must be licensed with the State of California. ▪ The drilling contractor is responsible for approved and environmentally

acceptable disposal of mud or other drilling products. ▪ The drilling contractor will provide the generators for electricity to run rig

lights and other required equipment.

6.3 Site Housekeeping

• Portable tanks may be used at the drill site for drilling fluids, water, and cementing operations. A mud pit may be used for storage of drilling fluids and cuttings.

• The drilling contractor shall provide minimum storage for about 500 bbl’s of water on the drill site during drilling.

• Damage to natural vegetation and other features will be kept to a minimum. • The drilling contractor will diligently perform "good housekeeping" practices at

all times. Trash shall be contained. Environmentally sensitive material and wastes shall be placed in approved containers and be properly labeled.

• The drilling contractor shall make every reasonable effort to prevent, control, or suppress any fires and to report, as soon as possible, the location and size of fires and to provide assistance as needed to suppress the fires.

• All necessary preventive measures shall be implemented to avoid any contamination of soils due to spills or leaks of all hazardous materials and liquids. Any spills or leaks shall be immediately cleaned and properly disposed. A suitable container will be placed under all known leaks. The drilling contractor will be responsible for the clean up and cost of any spills or leaks of hazardous materials and liquids.

• The drilling contractor shall have a working cellular phone on the drill site at all times.

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6.4 Drilling Equipment

The drilling equipment shall be capable of drilling a hole to 4,000 feet depth. The drill rig will be equipped with the following working accessory equipment. a. Weight indicator b. Mud pressure gage (direct inline) c. Drilling rate recorder d. Wireline with depth counter

• Blow-out prevention equipment (BOPE) will be installed and pressure tested as WME representative requires.

• Pumps must be capable of providing proper circulation for all planned drilling fluids and cement operations.

• The drilling contractor will receive no compensation for rig time if drilling is stopped for major repairs to drilling rig and support equipment components. On the other hand, lubrication, changing filters, changing pump valves and seats are considered normal maintenance and are not repairs.

• The drilling contractor shall have sufficient spare parts on the drill site for maintenance, nominal replacement and repairs of the drill string, mud pumps, and drilling rig components.

6.5 Safety

• All vehicles shall be operated at posted and reasonable and safe speeds. • All accidents or incidents, resulting in personal injuries or damage to property,

will be immediately reported to the WME representative. Copies of all accident reports will be provided to WME and Modoc County.

• The contractor shall inform all of its employees and sub-contractors that the possession, use, or sale of non-prescription drugs or narcotics considered dangerous or illegal by the U.S. Department of Justice and the possession, consumption, or use of intoxicants, such as alcoholic beverages, or being under the influence of dangerous drugs, narcotics, or intoxicants, is strictly prohibited on the drill site.

• Drilling personnel will operate all equipment in a safe manner and they will be attired in proper safety equipment. Drilling operations shall cease at any time that the WME representative, the drilling contractor, or the contractor's driller determine that it is unsafe to drill further.

• The drilling contractor will be responsible for keeping a fully stocked first aid kit on-site during all operations. The contractor will also be responsible for providing all personal protective equipment for the contractor’s personnel.

• The drilling contractor will have a minimum of two, fully-charged, 20 pound fire extinguishers on site during all phases of the project.

• If return temperatures rise rapidly to 180 degrees Fahrenheit, all drilling will cease immediately; and the hole will be circulated until the temperatures are determined to be stabilized.

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• The drilling rig shall be equipped with adequate lighting for safe night operations. Also, the rig mast shall be equipped with a rotating red aviation warning light.

• Material Safety Data Sheets (MSDS) for drilling fluids, lubricants, and additives will also be provided to WME and copies will be kept on the drilling site for reference as needed. Drilling fluids and additives will be biodegradable, environmentally acceptable and contain no hazardous substances.

• Smoking will not be allowed within 100 feet of the drilling rig or fuel supply areas.

• Telephone numbers of emergency services will be posted at all times on drill rig or dog house and in the drilling foreman or tool pusher trailer.

7 POTENTIAL DRILLING PROBLEMS

7.1 Lost Circulation

The most expensive problem routinely encountered in geothermal drilling is lost circulation, which is the loss of drilling fluid to pores or fractures in the rock formations being drilled. Combating lost circulation can be approached in different ways - drill ahead with lost circulation; drill with a lightweight drilling fluid that will have a static head less than the pore pressure in the formation; mix the drilling fluid with fibrous material or particles that will plug the loss apertures in the formation; or pause in the drilling and try to seal the loss zones with some material that can be drilled out as the hole advances.

7.2 Stuck Pipe

In addition to the “mechanical” sticking caused by chips and cuttings collecting on top of the drilling assembly (described above), the pipe can also be held against the wellbore wall by differential between the drilling fluid pressure and the pore pressure. Many intervals encountered in geothermal drilling are under-pressured. This means that the pore pressure is less than that of a column of cooler water at the same depth, which provides a pressure drop that tends to hold the pipe against the wellbore wall. Differentially stuck pipe will not rotate nor can pulling move it, but the well can still be circulated. Differentially stuck pipe is usually combated with a lubricant that reduces the fluid loss and helps equalize the pressure around the drill pipe. The other “last resort” method is to lighten the mud column to eliminate the differential pressure. However, if the diagnosis of differential sticking is wrong and the stuck pipe is actually a result of wellbore instability, lightening the mud column will increase the problem.

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7.3 Wellbore Instability

Wellbore instability has a number of effects, which can cause widely varying kinds of problems. The wellbore may be mechanically unstable because the rock is fractured or it can occur due to degradation of the wall from the invasion of liquid from the drilling fluids. The wellbore wall, especially in formations with significant clay content, may become weakened by adsorption of water into the clay of the wellbore rock. Sloughing or unconsolidated formations can aggravate hole-cleaning problems, can fall in around the drill pipe to stick it, and can wash out to a very large diameter. Large washouts not only complicate cementing, but lower fluid velocity in the larger diameter reduces cuttings-carrying capacity. Swelling or squeezing clays may reduce hole diameter to a point that will either stick the pipe or prevent running casing. Differential stresses may cause the well to become unstable. This is a particular problem as holes are deviated away from vertical. The problem can be mitigated by understanding the stress regime and managing the well deviation and direction relative to the regional stresses.

7.4 Well Control

Well control, in general, has to do with preventing the flow of formation fluids into the wellbore and safely removing them if they get into the wellbore. If the hole advances into a fractured or permeable stratum where the pore pressure is higher than the static head of the drilling fluid, the formation fluid will flow into the wellbore—this is called a “kick”—and that flow must be controlled. If control of that flow is lost, then the resulting disaster is a “blowout”. Blowout prevention equipment (BOPE) controls a kick and potential outflow at the wellhead. The BOPE stack is comprised of five types of devices to shut off the wellbore and prevent fluid flow out of it: Rotating heads, annular preventers, pipe rams, blind rams, and shear rams. The basic function of each is to shut off the wellbore, but they operate in slightly different ways.

7.5 Equipment Breakdown

The potential always exists for equipment failure associated with the drilling rig mechanical components, pumps, motors, generators, and hydraulics.

8 LOGGING PROGRAM The drill helper will obtain samples from the well in a consistent and systematic manner at the direction of WME and the site geologist. Sampling activities will be

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coordinated with the site geologist. During drilling, mud logging will take place. After about 30 days of drilling, the well will be logged for temperature.

8.1.1 Mud Logging

Mud logging creates a detailed record by examining the cuttings of rock brought to the surface by the circulating drilling medium commonly called “mud”. This mud medium can range from water to highly engineered drilling fluid to foam or even compressed air. It circulates cuttings, fluids, and gases from the drill bit to the surface. These features are sampled and analyzed.

Mud loggers connect various sensors to the drilling apparatus and install specialized equipment to monitor drilling parameters. Much of the equipment requires precise calibration or alignment by the mud logger to provide accurate readings. We observe, record, and interpret the indicators in the mud returns during the drilling process, and combine these properties with drilling parameters such as drilling rate, weight on the bit, rotary torque, pump pressure, pump rate, mud density, flowline temperature, and other data. Another important task of the mud logger is to monitor gas levels (and types) and notify other personnel on the rig when gas levels may be reaching dangerous levels, so appropriate steps can be taken to avoid any dangerous condition.

Horizon Well Logging uses a mobile laboratory to facilitate operations. The lab contains computers, data acquisition hardware and software, gas analysis instrumentation, instruments for temperature and other parameters, and a large variety of support tools. A microscope and related tools and chemicals are used for lithology (rock type) and mineralogy analysis. A logging lab usually contains hundreds or even thousands of inventory items.

Data gathering, synthesis, presentation, and distribution are fully computerized. The logs take several forms and scales can be both depth-based and time-based. They display data curves, interpretive graphic lithology, and descriptions and annotations. In addition, various written and graphic reports are produced. Information is typically uploaded by satellite or other means to a website where real-time and archival data is available to authorized users.

8.1.2 Temperature Gradient Logging

Temperature gradient logging shall occur after approximately 30 days of hole completion. This time period allows for stabilization of the water temperature. A stainless steel data logger will be lowered into the steel tubing using a wireline on a reel. The reel has a line counter installed which keeps track of the feet of line reeled out. The data logger will be programmed to log at one-second intervals. However, every ten feet, the logger will be allowed to rest for three minutes to ensure that the temperature has stabilized. Time will be kept in a log book with respect to time of logger deployment and time logger is stopped at the 10-foot intervals. At bottom depth, the logger will be allowed to rest for 15 minutes. The

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same process will be repeated upon raising the logger back to the surface. Data are then downloaded into the software program supplied by the equipment manufacturer. A graph will be produced and WME geologists will compare the output to the recorded depth and time intervals to determine temperature at a given depth. This process will be completed for each temperature gradient hole.

8.1.3 Data Analysis

During mud logging, geologists will be actively inspecting logging results to check for presence of alteration minerals, fault structures along with temperature differential in mud in and mud out fluids, clay layers and clay type, well circulation, gas, and general lithologic characteristics and changes. The target drilling depth is 4000-4500 feet, however, certain conditions such as loss of circulation can be a deciding factor on well depth.

9 SUPERVISION OF DRILLING ACTIVITIES AND NOTIFICATION OF OPERATIONS

Supervision of drilling activities will be the responsibility of WME geologists. WME geologists will be responsible for supervision of directing drilling depths, logging well cuttings, monitoring inflow and outflow mud temperatures in a written log, and addressing drilling problems should they arise. Decisions on drilling depths are typically based on a combination of criteria to include but not limited to: Mud return temperatures, rate of drilling, lost circulation or other drilling problems, cost overruns, and safety concerns.

9.1 Procedures for Change Orders

Change Orders to Drilling Program: If a major change to the drilling program needs to occur, WME geologists (Lisa Kuscu, Roy Mink, Ismail Kuscu) will discuss the situation with the driller and then notify County of Modoc by telephone or email immediately. County of Modoc may need to discuss the change with the Modoc County Board of Supervisors and with the CEC. Any major change orders will be done via a written request to be signed by WME supervising geologist, Welsco Drilling, and County of Modoc. WME and Welsco Drilling will await written approval for recommended or necessary changes prior to initiating the change. Minor changes to the drilling program are anticipated to be approved by WME geologists. Major changes will be handled as described above with the assurance that everyone understands time is of the essence when drilling.

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Change Orders to the Budget: Any change order affecting contract budget and/or maximum costs to the County pursuant to contracts between County of Modoc and its contractors will be done via a written request to be signed by the WME supervising geologist, contractor(s), and County of Modoc

9.2 Drilling Operations Flexibilities Needed

Exploration drilling for deep geothermal resources in the Eastern part of Surprise Valley, California has not been done before. In preparation for drilling there, the subsurface geology has been interpreted from surface geology and geophysical data but still there are significant unknowns with respect to what is actually at depth beneath the earth surface. As a result, any explorative drilling program needs the flexibility to make decisions in the field. This ability helps to reduce both risk and added cost when unknown factors occur during drilling. The decision process should be streamlined to focus on the drilling engineer and site geologist with immediate real time approval from the project manager and notification to the project sponsor.

9.2.1 Examples of Immediate Decision-Making Situations

The decisions related to casing points and well depth need to be flexible. Even with the best of geotechnical data, actual location of casing points or potential production zones are dependent on the subsurface geologic conditions and are only verifiable during the drilling. These zones can vary by tens or even hundreds of feet and require flexibility for the on-site well geologist and/or drilling engineer to call these points. The plan is based on the best estimate of conditions in the subsurface but is only an estimate. This includes insuring enough material are on hand to allow for unsuspected events to occur. This means extra materials shall be on site to avoid project shutdown costs due to lead time required for ordering and shipping of additional materials, such as pipe. Drilling depths need to be flexible based on conditions encountered. Conditions can include, but not be limited to, lost circulation, production zones, and wellbore stability. While permit requirements will be adhered to, drilling depths need flexibility which could stray from the budget line items or drilling plan. While the project will stay within budget, flexibility on drilling depths and casing intervals need to be exercised.

10 DELIVERABLES AND PERFORMANCE • The drilling contractor will provide WME with the IADC Daily Drilling Report

Form and a Daily Cost Report Summary. These reports will detail times, tasks,

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footage's, site activities, materials, cement, and mud that were used. Billing will be based on these reports. In addition, the drilling contractor will keep a bit log that will detail footages, type bit, and bit serial numbers. Copies of mud reports that detail mud properties, footages and amount of drilling fluids used will also be provided to WME.

• If drilling tools or equipment are lost in the hole due to the driller's negligence or

faulty drilling equipment, Modoc County will not be charged for equipment or time required for recovery.

11 SITE RESTORATION The drilling contractor shall remove all equipment, trash, and spilled mud and cements. The drilling contractor will also be responsible for the clean up and disposal of all hazardous materials and spills. All mud pits and sumps will be back-filled by WME. All disturbed ground around the site shall be restored to acceptable levels by WME. Drill cuttings will be leveled after 30 or more days which allows time to for the cuttings to dry out. Leveling of drill cuttings will be done by WME.

12 WELL COMPLETION The exploratory well will be kept open for an indefinite period of time and is not required to be abandoned. WME will adhere to California code on any reporting or fees required for the exploratory well once drilling is completed. WME shall adhere to rules outlined in California Statutes, Public Resources Code, Ch. 4, Geothermal Resources.