"The director found and the commissioner concurred, that the potential benefits of Mount Spurr Geothermal Lease Sale No. 3, as conditioned, outweigh the possible adverse impacts, and that the sale will best serve the interests of the state of Alaska," the Division of Oil and Gas said in a statement.

Mount Spurr, located on the west side of Cook Inlet, erupted in 1992.

Petroleum News said geothermal development of the site would likely involve construction of a power transmission line from the power plant to Beluga, on the northwest side of Cook Inlet.