Rights to former Searsport-to-Limestone jet fuel pipeline go on auction block

Posted May 03, 2012, at 6:49 p.m.

LIMESTONE, Maine — Control of the 200-mile-long pipeline that once linked jet fuel tanks in Searsport with the former Loring Air Force Base will be auctioned off next month.

The company that had been leasing the right of way, pipeline and associated equipment, Loring BioEnergy, has defaulted on its lease payments, a lawyer for the mortgage holder said.

The pipeline was built by the Department of Defense in the early 1950s at the height of the Cold War to supply jet aircraft with fuel. The jet fuel was taken by ship to the port facility at Mack Point in Searsport, then pumped through the 6-inch diameter pipe north to the base.

Loring BioEnergy, through a complex set of leases and fee interest arrangements, had control of the pipeline, said Jacob Manheimer, an attorney with Pierce Atwood in Portland, representing the current mortgage holder, United States Power Fund LP. The nonprofit Loring Development Authority owns the corridor real estate.

Loring BioEnergy wants to build a co-generation power facility, producing electricity and steam or heat that could be used by a food or wood processor. The company planned to have its power plant, to be located at the former base, supplied by natural gas pumped through the pipeline.

Since more electricity would be produced than can be used in Aroostook County, the business plan also called for sending electricity on lines south to connect to the New England power grid. Aroostook County is not directly linked by electric lines to the central and southern parts of Maine but is connected through New Brunswick.

The New England power pool group declined to build an electric line at ratepayer expense linking The County with the rest of the region. As a fallback, Loring BioEnergy is considering constructing its own, smaller electric line to be buried along the 200-mile pipeline corridor and then underwater to Boston, according to Hayes Gahagan, company vice president.

With the ratepayer electric line failing to gain approval, Gahagan said Loring BioEnergy’s proposal has stalled and it has fallen behind in lease payments on the pipeline.

The 90-plus-year lease for the pipeline, Gahagan said Wednesday, was collateral for a loan from United States Power Fund. Neither Manheimer nor Gahagan would say what the value of the lease was or how much was owed.

United States Power Fund is holding the June 4 auction at the Robert A. Frost Memorial Library in Limestone. The auction requires bidders to deposit $450,000 to participate. The actual value of the combined assets — access to the corridor and the pipe, pumps and valves — is believed to be more than $5 million, according to Manheimer.

A successful bidder, Manheimer said, would own “all of the rights of Loring BioEnergy to develop and operate the pipeline,” including the rights of way over the 50-foot-wide corridor that extends from Searsport to Limestone. A new owner would be able to use the pipeline, but not do much more, he suggested.

The pipeline was decommissioned in 1994 and filled with nitrogen to inhibit corrosion.

Established corridors such as this one are considered valuable because the cost of developing new ones is so prohibitive. Whether for a road or a power line, securing rights of way over private property would have to come through negotiations with countless owners or through eminent domain seizures that could be challenged, dragging out the process.

Corridors such as the one that holds the Searsport to Limestone pipeline could be used for electric transmission lines, natural gas pipes, data lines or even a railroad.

Gahagan downplayed the meaning of the foreclosure and said it is not a death knell for his company’s proposed energy project. He believes his company could reach a deal with whatever business entity ends up owning the rights to the pipeline and corridor and lease it for natural gas transmission.

After the Maine Power Connection proposal was shot down by ISO New England, the regional electric grid, Gahagan said Loring BioEnergy reconfigured its plans. The company is going through a reorganization, he said Wednesday.

By state law, the foreclosure proceeding requires a public auction. United States Power Fund could itself be a bidder at the auction, Manheimer said.

SEE COMMENTS →

ADVERTISEMENT | Grow your business
ADVERTISEMENT | Grow your business

Similar Articles

More in Aroostook