Natural gas pipeline at standstill over contract dispute

By Matthew Stone, BDN Staff
Posted Aug. 15, 2012, at 6:27 p.m.

AUGUSTA, Maine — Two natural gas distributors are awaiting a decision from a state panel that will determine whether one of the companies gets the go-ahead to start construction on an Augusta-area natural gas pipeline or whether the entire process returns to square one.

Summit Natural Gas of Maine is appealing a June decision by the state’s Bureau of General Services to award rival Maine Natural Gas the rights to build a Windsor-to-Augusta pipeline that supplies natural gas to state offices on Augusta’s east and west sides. The two companies squared off in a hearing on Tuesday and are preparing to submit closing arguments by Aug. 24.

A special appeal committee will rule on the contract dispute after that.

The state in May put out a request for proposals to supply natural gas to state properties and other customers in the Augusta and Gardiner areas. The request also asked energy companies to show they could expand their pipeline projects to serve the rest of the Kennebec Valley.

Colorado-based Summit proposed a $150 million project for a pipeline serving state, business and residential properties in Augusta and Gardiner and throughout the Kennebec Valley.

Summit is in the process of purchasing Portland-based Kennebec Valley Gas, which had secured tax increment financing agreements from a number of towns along its proposed 80-mile pipeline route from Richmond to Madison.

Maine Natural Gas, based in Brunswick and owned by Spanish energy giant Iberdrola, proposed a $19.3 million project to build a natural gas pipeline serving Augusta. The company’s proposal didn’t include an extension to Gardiner or the rest of the Kennebec Valley, though the company says that expansion is part of its ultimate plan.

“We answered the [request for proposals] in the way that it was written,” said Dan Hucko, a Maine Natural Gas spokesman. “Summit chose to submit a proposal that was much more expansive than what the state had wanted or requested.”

The state wouldn’t pay for pipeline construction under either proposal, but would commit to being an anchor customer for the natural gas distributor.

At issue in the dispute over the contract award is what exactly the state’s request for proposals required and whether officials from the state’s Bureau of General Services properly scored the companies’ proposals.

“We built our project really to do what we thought the state wanted, which was to save as much money as possible,” said Tim Johnston, Summit’s executive vice president. “Since the state backfills the budget for schools and most of the municipalities, saving money for those folks saves money for the state.”

Summit also is asking questions about how state officials determined the amount the state would save from each natural gas proposal, and how many jobs each company would create during pipeline construction.

Johnston said Maine Natural Gas unfairly benefited from the way the state evaluated the savings from both proposals.

Summit also questioned why the state awarded Maine Natural Gas more points for job creation. Maine Natural Gas said its project would result in 46 direct jobs while Summit’s more extensive project would result in 435 jobs directly related to installing the pipeline.

The state’s Bureau of General Services didn’t comment on the bid award Wednesday, citing the unresolved contract dispute.

“Whatever the decision of the appeal panel, we’ll either move forward with the contract with Maine Natural Gas, or if the decision is to put out a new [request for proposals], we’ll put it out,” said Jennifer Smith, legislative and communications coordinator for the state Department of Administrative and Financial Affairs, which includes the Bureau of General Services. “We’re committed to bringing natural gas to the Augusta area and the state of Maine.”

Hucko said Maine Natural Gas is ready to start construction on the new pipeline and that the dispute over whether the contract was awarded properly is delaying work.

“Maine Natural Gas believes the process was handled correctly by the Bureau of General Services, that they did everything that was supposed to be done,” he said. “We would like to get this behind us so we can start our project.”

Hucko said Maine Natural Gas has started reaching out to potential customers beyond the Augusta area to prepare for an eventual Kennebec Valley expansion.

“The first step obviously would be to get it to Augusta,” he said. “Then, if it’s going to be big enough, then we would be ready to expand up the [Kennebec] Valley as long as it’s financially viable.”

Meanwhile, Johnston said Summit will have to re-evaluate its plans for a Kennebec Valley pipeline if the contract appeal panel doesn’t rule in its favor. An unfavorable ruling could potentially stop the project, he said.

“Without the load on the southern end, that northern project is much less doable,” he said. “You lose those economies of scale. It would be a major setback.”

http://bangordailynews.com/2012/08/15/news/state/natural-gas-pipelines-future-centers-on-resolving-contract-dispute/ printed on July 29, 2014