Jan. 10 (Bloomberg) -- Tourist guide Patricia Salazar sees a marvel of nature when she looks at Chile's El Tatio geysers shooting plumes of heated white water vapor high into the air. Italy's Enel SA sees an untapped energy source.

Enel and Empresa Nacional del Petroleo, known as Enap, want to convert water heated by magma into electricity. Surrounding towns are lobbying the government to reject the proposal, saying it threatens their revenue from almost 100,000 tourists who visit the geysers annually.

``Chile is going through a period of energy scarcity, so they are considering every option,'' said Salazar, 41. ``But this is how people make their living.''

The conflict underscores Chile's desperation for energy, said Juan Lindau, a political scientist specializing in Latin America at Colorado College. Neighboring Argentina began slashing natural-gas supplies in 2004, driving up electricity costs 42 percent in the past year and dragging down Chile's economic growth.

The venture of Enel, Italy's largest utility, and Chile's state-run Enap is seeking approval for a $20 million project to drill test holes as deep as 2,500 meters (8,200 feet). If temperatures are high enough, they would drill more wells and use the steam to run electric generators, said Carlo Zorzoli, Enel's head of business development for Latin America.

Enel probably would sell carbon credits from the project to companies seeking to comply with requirements to reduce emissions of so-called greenhouse gases, said Brian Chase, an analyst at UBS Pactual in Santiago. It might sell them in Europe, where prices are higher than in the U.S., said Manlio Coviello, an analyst at the United Nations' Economic Commission for Latin America and the Caribbean.

Risk to Environment

The geyser field lies about 1,800 kilometers (1,100 miles) north of Santiago, in a desert region near Bolivia. Local residents say using the geothermally heated water to produce energy could hurt the environment as well as tourism.

Draining water from the desert might dry up or diminish the geysers, said Juan Sota, a councilman for the oasis town of San Pedro de Atacama. A road, 50-meter-high drilling towers and power lines would blemish the landscape, he said.

Calama, a city 130 kilometers west of El Tatio, is hiring an environmental consultant to assess potential damage and fight the plan, Mayor Arturo Molina said.

The power shortage is forcing Chile to choose ``energy over tourism or energy over the environment,'' Lindau said in a telephone interview from Colorado Springs, Colorado.

Geyser Show

Tourists from Europe, the U.S. and Latin America rise as early as 4 a.m. to drive the 97-kilometer, bumpy dirt road from San Pedro de Atacama to arrive at daybreak, when geysers that shoot water vapor as high as 8 meters are most active.

Visitors bundled in hats and sweaters wander a flat, muddy terrain more than 4,300 meters above sea level. The area is shrouded in white vapor and dotted with dozens of pools. Water heated underground pushes its way through, creating bubbles that burst into meter-high spouts.

``It's impressive,'' said Victor Silva, 23, who traveled from Spain to tour the geyser field, one of the largest in the world. ``This is why we came'' to Chile.

The Andes range, which runs the length of Chile, is dotted with hot springs and volcanoes, including the Llaima volcano in the south that erupted Jan. 1. Chile has 5 percent to 10 percent of the world's active volcanoes, said Jose Antonio Naranjo of the National Geology and Mining Service in Santiago.

President's Vow

Chile imports almost three-quarters of its energy. President Michelle Bachelet vowed to develop new power sources and boost alternative energy to 15 percent of new supplies after Argentina's cutbacks.

``You can't turn your back on the energy sources you have,'' said Jaime Orpis, a senator from northern Chile who is on the Senate's mining and energy committee.

The project could produce about 40 megawatts of power, said Jesus Figueroa, director of the Mining Ministry's geothermal unit. One megawatt is enough to supply about 1,000 U.S. homes.

The shortage increases costs for the energy-intensive mining industry, which consumes 30 percent of the country's power. More than a third of the world's mined copper comes from Chile.

``It's a problem of scarcity, prices, necessity and dependence,'' said Patricio Valdivieso, a political scientist at Pontific Catholic University of Chile in Santiago.

No `Fiasco'

Enel contends that the geysers won't be affected by drilling. The companies expect to find a heated underground reservoir, separate from the surface water feeding the geysers, Zorzoli said. The wells would be far enough away that tourists wouldn't see them, he said.

``We wouldn't put all this effort in if we were not truly convinced that we can develop a project compatible with the environment,'' Zorzoli said in a telephone interview from Rome. He said Enel won't risk an ``environmental fiasco.''

Enap spokeswoman Patricia Silva declined to comment.

San Pedro Mayor Sandra Berna said the desert town might be able to help ease the energy crisis by installing solar panels instead.

``I don't want to go down in history as the one who destroyed the geysers,'' she said. ``We can't pay that price. We can't hand over our tourist site.''

To contact the reporter on this story: Heather Walsh in Santiago at hlwalsh@bloomberg.net.

Last Updated: January 9, 2008 22:41 EST