Oil dealers accuse Legislature playing of favorites with plan to boost natural gas in Maine

Posted Dec. 21, 2011, at 3:18 p.m.
Last modified Dec. 22, 2011, at 5:42 a.m.

AUGUSTA, Maine — A legislative proposal that would aid plans to build an $85 million natural gas pipeline through central Maine could spur a broader debate about how Maine should diversify its energy portfolio to reduce costs.

Lowering energy costs is one of Gov. Paul LePage’s top priorities and he already has pledged to do his part to expand the availability of natural gas.

The linchpin of that expansion could be a proposed pipeline through Central Maine that would bring gas to an area of the state that doesn’t have it.

Sen. Roger Katz, R-Augusta, who lives in what would be the middle of the proposed pipeline, has introduced a bill for consideration next session that he said will help spur that expansion.

Katz’s bill, L.R. 2589, seeks to increase the insurance capacity of the Finance Authority of Maine. FAME provides a backup to businesses by guarantee to pay back 90 percent of a loan if the business cannot. The current cap is $7 million.

“We need to be looking at alternatives and solar and wind need to be part of that discussion, but those are more long-term,” Katz said. “Natural gas expansion is something we can do right now.”

Not everyone supports Katz’s legislation. The oil industry has opposed the bill because some claim it amounts to the state subsidizing one source of energy.

Jamie Py of the oil dealers lobbying group Maine Energy Marketers Association said government should not be endorsing specific energy projects at the expense of others.

“In general, tax incentives and subsidies that put an energy source at a competitive advantage is something we’re opposed to because it creates an unlevel playing field,” Py said.

Kennebec Valley Gas Co. wants to build a mainline from Richmond to Madison that would connect to the Maritimes & Northeast pipeline that transports gas from Nova Scotia to New England.

The firm already has begun reaching out to various communities to secure tax increment financing agreements. Under those TIF arrangements, a portion of property taxes paid by businesses along the proposed pipeline would help pay for its construction. In total, the utility company is seeking about $15 million in tax incentives from the various communities it plans to serve.

Between the TIFs and possible loan insurance from FAME, Py questioned the financial viability of Kennebec Valley Gas’ plan.

“I think that gets to the heart of the matter, which is: Could this [project] be viable on its own?” he said.

Bangor Gas, which serves the communities of greater Bangor, does not have a TIF. Similarly, Portland-based Unitil also has operated without the benefit of tax breaks.

Katz said he understands the concerns of oil dealers and he doesn’t blame them, but he also said there is nothing stopping oil dealers from applying to FAME for loan insurance.

“This bill doesn’t commit any public dollars,” the Augusta lawmaker said.

Py agreed that there are no direct state dollars, but if FAME insured a large loan for the project, it could limit FAME’s ability to back other projects.

Government subsidizing energy is not new, either at the state or federal level. Wind power has received subsidies and oil companies have gotten large tax breaks and incentives in the past.

Most communities have approved the gas company TIFs but residents of at least one — Farmingdale — have said no thanks. That tax rebate to the developers was about $735,000 over 15 years.

Shortly after the vote in Farmingdale, Kennebec County Gas officials said the pipeline would no longer involve Farmingdale. The mainline likely would still run through the town but there would be no spurs for businesses or homeowners to link to.

LePage has said that the state’s reliance on oil is not sustainable and he sees gas as a better option.

“In January, energy is going to be a big push,” LePage said in September. “I want to talk with the Legislature about natural gas infrastructure. We are gearing up now to talk with all of the natural gas companies, we want them to come in and talk to us about what we can do to get them to invest in the state of Maine.”

Py said he doesn’t mind that natural gas is gaining in popularity, but he said when it comes to taxpayers or ratepayers subsidizing energy infrastructure, it should be ratepayers.

“Natural gas is relatively inexpensive, but no one knows how long that is going to last,” Py added.

But gas is cheap, abundant and domestic for the moment, Katz countered. And the short-term savings could be huge. One of the biggest potential customers in Central Maine likely would be the state of Maine, including the State House and all agency buildings in Augusta.

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