Natural gas a natural fit

By Joy Hikel, Special to the BDN
Posted May 11, 2012, at 1:52 p.m.

Heating with natural gas is a great alternative to using oil, and predictions show stable prices into 2030. The state should do more to encourage natural gas development.

The Maine Legislature is on its way to promoting natural gas lines and it needs to do more. This session it voted for, and Gov. Paul LePage signed, LD 1644, which will allow private companies to bond, through the quasi-state agency the Finance Authority of Maine, for private energy distribution facilities such as those for natural gas.

LePage has stated he believes natural gas pipeline development should remain in the private sector, which seems at odds with the willingness of the administration to provide low-interest public bonding opportunities for private investors. Natural gas development can be most profitably done with a true private-public partnership where both sides gain advantage from the arrangement.

Running the state “like a business” is a phrase used to justify cuts by the administration and Legislature during the state budget process. Revenues are not meeting expenditures.

The state is not achieving the basic business model for success. The state should look to increasing revenues in creative ways, and investing in natural gas will provide income as it does for the private sector.

The emergency status of LD 1644 demonstrates that the reduction of energy costs is a public necessity. Our water and sewer systems, deemed indispensable, warrant public involvement to guarantee the best service at the lowest price.

Should Maine participate in the financing and construction of natural gas distribution infrastructure because of the significant need for lower energy costs? A successful business looks for the greatest return. There is a huge potential return for the state to consider energy distribution for the public good.

Consider the advantages of public pipeline construction. A public entity benefits from a reduced cost of borrowing and is exempt from the sales tax on the purchase of materials. As natural gas pricing is based on several factors, including covering the cost of debt, consumers would benefit from the lower cost of public financing in the end result: gas rates.

Interest rates and terms are fixed for a longer time in public financing, also reducing the cost of gas to the ratepayers. Public involvement in the gas utility ensures the lowest price because it is controlled locally.

The Alaska Permanent Fund serves as an interesting example of public reward in private-public sector energy projects. Both partners realize profits.

The goal of the Alaska Permanent Fund is to provide a certain share of oil revenues to current and future generations of Alaskans. The fund was created by an amendment to the Alaska Constitution and allows each Alaskan to receive an annual check; the 2011 fund balance is approximately $38 billion.

The Legislature is authorized to spend fund income and each year the fund’s realized earnings are designated for inflation adjustments, operating expenses and the Permanent Fund dividend. Could Maine partner with private natural gas companies for a similar arrangement if state bonding is used? A successful business would certainly consider this option a win-win.

Lower rates, local control and revenue sharing make the case for Maine to take the risk to participate in the development of a natural gas distribution facility. A prosperity dividend for Mainers could possibly eliminate the need for welfare programs and property tax increases. Maine will certainly then be run like a business.

Joy Hikel is the former economic development director for the town of Madison. The views are her own and do not represent the town’s.

http://bangordailynews.com/2012/05/11/opinion/contributors/natural-gas-a-natural-fit/ printed on July 28, 2014