The recent coverage by the Bangor Daily News of issues affecting Maine’s energy future has encouraged me to comment on some of the options Maine should be pursuing, and warning about the cost impacts caused by the failure to develop and implement, a comprehensive long-term energy policy.
I am president of Maine’s Industrial Energy Consumers Group, a trade association of Maine employers, collectively providing more than 3,000 Maine jobs and whose existence depends on secure and reasonably priced sources of energy, especially electricity and natural gas. Many of our processes require large amounts of energy so we are deeply aware of the broad negative consequences of high energy prices. These high costs are driving unemployment and the loss of quality high-tech jobs. This, in turn, erodes Maine’s tax revenue base, resulting in increased taxes on those remaining while increasing dependence on state funded programs.
If you (or your employer) do not use natural gas, you may not think the price of natural gas is important to you. However, natural gas supplies about 40 percent of Maine’s electricity and sets the price of electricity more than 80 percent of the time. Natural gas prices are composed of two main components: 1) the gas itself which is priced relatively equally across the country, and 2) a locational price driven by supply and demand in a particular location. It is this second component of the cost, called the “basis differential,” that sets Maine apart from the rest of the United States. In some winter months, the basis differential can be more than half the cost of the gas price.
Maine normally has the highest basis differential in the U.S. and this contributes greatly to driving up the cost of electricity in Maine. Maine’s current basis differential costs Maine ratepayers over $100 million a year just in higher electricity costs. This cost increase affects you as a homeowner as well as those businesses that use natural gas.
The reason for this is that the push to clean up the environment by switching from coal and oil to natural gas (which has resulted in significant environmental benefits) has not been met with a commensurate buildup in gas supply. This situation is like requiring everyone to use state-of-the-art wood stoves and then outlawing woodlots.
There is a solution — the permitting and construction of one or more of the Maine liquefied natural gas projects proposed for Passamaquoddy Bay. When the LNG is vaporized and injected into the gas pipeline system, it represents an enormous increase in local natural gas supply and will put significant downward pressure on gas prices in Maine. It is like everyone having their own woodlot next to their house.
At a recent public meeting in Calais, there was tremendous local support for LNG, according to the BDN. Ironically, it is our Canadian neighbors to the north (the source of our current gas supply) who are opposing the Washington County projects and refusing passage of LNG ships through Canadian waters into Passamaquoddy Bay.
These are the same neighbors from New Brunswick and Nova Scotia who have asked Gov. John Baldacci and all of Maine to help them by allowing two massive energy corridors through Maine to Boston. These corridors are what they need to be successful in their ambitious economic development plan to build a $500 billion energy hub to serve southern New England.
We are in favor of helping our neighbors, but they need to be in favor of helping us. The commercial and provincial interests in Canada involved should immediately drop their opposition to the Passamaquoddy Bay projects; the fate of those projects will be decided by American, state and federal agencies after all necessary studies and reviews are completed. Maine elected officials need to send a clear signal to the Canadian opponents: Maine will not even consider assisting Maritime Canada and Irving Oil until they drop their opposition to attempts by Mainers to do the same kind of energy development that Irving and the provinces are also doing. That’s what real friends and neighbors do.
Glenn Poole works for Verso Paper and is the president of the Industrial Energy Consumers Group.