Test drilling is to take place at the site of a former Weardale cement works in a bid to find natural hot water.
The cement works closed in 2002
The Blue Circle cement works at Eastgate, near Stanhope, closed in 2002 with the loss of 147 jobs.
A task force was set up to look at how the site could be redeveloped, with one option being the creation of a hot spa attraction.
Now it has been confirmed that drilling is to begin on 2 September. Work is due to last up to eight weeks.
The hot water is produced thousands of feet beneath the surface of the area.
The Upper Weardale Task Force, which included Wear Valley District Council and regeneration agency One NorthEast, suggested creating a new village as a permanent feature.
A spokeswoman for Wear Valley District Council, said: "This is a major milestone in the redevelopment of the Eastgate site and is intended to confirm the presence of geothermal hot water.
"The drilling is expected to take six to eight weeks, and if successful will supply geothermal energy for the renewable energy model village to be developed on the site.
If successful it will make this a unique site within the UK."
The new village would contain a variety of other uses, including housing, some of it to be used as permanent homes, others as short term holiday lets as well as accommodating small businesses keen to be associated with the 'green' credentials of the site.
A hotel and craft shops are also planned alongside the River Wear.