RENO, Nev. (AP) - A Reno casino has hit the jackpot: An underground geothermal water source just north of one of its new 17-story hotel tower that will generate enough heat and hot water for all 2.1 million square feet of the resort's space.

The Peppermill Resort Spa casino recently gambled on an $8 million project to drill a deep hole on their property in search of the hot water, which hovers around 170 degrees.

"The Peppermill, they really did hit a nice temperature of water," said Lowell Price, oil, gas and geothermal manager for Nevada's Division of Minerals, which oversees the permitting process of geothermal wells on private property.

"It is really not hot enough for the big players ... for the generation of electricity, but what they are trying to do, they have a real nice find there, very nice," Price told the Reno Gazette-Journal.

The new green-energy system is schedule to go online in January. It will be used to heat all restaurants, casino floors, the expansive spa, plus every shower and sink in 1,600-plus hotel rooms year-round.

The move will save $1 million a year in energy costs, resort officials said, adding project expenses should be recovered through those savings in eight years.

"Through the course of the drilling, we were all concerned about if there was going to be enough water down there and if it was hot," said Alan Bailey, geologist and drilling engineer with Geothermal Resource Group, Inc. "Only in the final stages was it real clear that they had an excellent well here."

Peppermill executives are cheering now, but they were concerned during the drilling process. The drilling hit 4,421 feet before the aquifer was reached.

Peppermill officials were almost certain they'd hit water, since the property already has some smaller, albeit more tepid geothermal wells.

"If the water was not hot enough with the new well, that was the big risk in drilling," said Bill Hughes, the Peppermill's director of marketing.

The Peppermill's discovery comes at a time when the city of Reno and the state of Nevada are trying to raise awareness about the area's geothermal potential, as well as stepping up efforts to encourage geothermal companies to locate here.

"Last year, we had a banner year and we had 130 permits, which was the highest ever," Price said. "We are already up to 162 permits this year, so it is really taking off."

The majority of the permits are for wells that have water hot enough to use to generate electricity.

The Atlantis Casino Resort Spa, the Peppermill's rival in south Reno, is considering using the geothermal well under its property, CEO John Farahi said. The Atlantis has yet to apply for a permit for test drilling, Price said.

The Peppermill's system gives the resort an advantage over every other hotel property in the U.S., said Jim Combs of Geo Hills Associates LLC of Reno.

"The green energy heating addition to the HVAC (heating, ventilation and air conditioning) system at the Peppermill will now make it the only hotel in the United States whose heating source is totally provided from geothermal energy produced on their own immediate property," said Combs.

The Peppermill's geothermal endeavor will be showcased at the Geothermal Resources Council Annual Meeting and Geothermal Energy
Expo, to be held at the Peppermill Oct. 4-7. The convention is expected to attract about 2,000 participants.