Businesses push using bonds to aid natural gas expansion; critics say Maine shouldn’t take risk

Posted April 12, 2013, at 11:39 a.m.

AUGUSTA, Maine — Businesses that are some of Maine’s largest energy consumers urged lawmakers Thursday to back two bills that would allow the state to issue bonds to finance a buildout of pipeline infrastructure in southern New England. The goal is to direct more natural gas to Maine and lower electricity costs.

Some of the state’s electrical and natural gas utilities and environmental advocates pushed back against the legislation during a six-hour hearing before the Legislature’s Energy and Utilities Committee. And committee members questioned whether it would be prudent for the state to assume the financial risk for expanding pipeline capacity where private businesses have found limited market potential.

“We need to gain more control over a market situation which is not working,” said Ken Fletcher, former director of Gov. Paul LePage’s energy office who was representing the Mid-Maine Chamber of Commerce. “If we do nothing, we can pretty much predict what the future’s going to be.”

The two bills are designed to allow Maine to better take advantage of emerging natural gas resources from the Marcellus Shale rock formation, which covers much of New York, Pennsylvania and West Virginia. While Maine’s in-state natural gas pipeline infrastructure is expanding, the interstate pipeline capacity is more limited, meaning it’s more expensive to transport the energy source to the Pine Tree State. Plus, businesses have largely resisted major expansions that could help direct more natural gas to Maine, due to its location and limited market size.

“There are times when, even on our conservative Republican principles, there are imperfect markets,” said House Republican Leader Ken Fredette of Newport, the primary sponsor of both bills. “There are times and places where government intervention is appropriate.”

One of the bills, LD 1187, would establish a three-member Maine Energy Cost Reduction Authority, which would be able to enter into energy cost-reduction contracts with natural gas generators by selling capacity in natural gas pipelines. The authority also would be able to designate corridors for pipeline construction and, if needed, use eminent domain to reserve a corridor for pipeline construction.

The other bill, LD 1262, would give the state authority to issue bonds — through the Finance Authority of Maine — to buy additional natural gas pipeline capacity and assist other states in pipeline projects that could benefit Maine.

Even an expansion of pipeline capacity into southern New England, Fredette said, could help lower Maine’s electricity costs because Maine belongs to a regional electric grid, ISO New England.

“It’s meant to put downward pressure on the cost, which is ultimately what we want to do in the marketplace,” he said. “Essentially, what we need to do is get more pipe laid from the Pennsylvania-New York area into southern New England, which is where the energy is produced.”

Rep. Larry Dunphy of Embden, the ranking Republican on the Energy Committee, noted that Maine is a net producer of electricity, meaning more electricity is produced in the state than consumed. The excess is sold back onto the New England grid.

“We’ve got all of these costs of infrastructure selling that power in the southern part of New England where they pay more for it,” Dunphy said. “If we decrease that market, how is that going to decrease electric costs in Maine?”

“We want to let the marketplace work better, and you do that by introducing competition,” Fredette responded.

About a third of Maine’s electricity today comes from natural gas, according to the U.S. Energy Information Administration, and Fredette said his bills could help lower both electricity and home heating costs. While Maine’s average retail price for electricity was lowest in New England in 2011, it was 27 percent higher than the national average.

As Maine’s in-state natural gas infrastructure expands, the state needs additional infrastructure to import the energy source, said Glenn Poole, energy director for Verso Paper Corp., which operates mills in Bucksport and Jay.

“Without expansion of natural gas into the New England region, all we are doing is adding more mouths to the same straw,” he said.

LePage has made reducing energy costs a cornerstone of his economic development agenda, and he is working on measures this legislative session to streamline the development of natural gas infrastructure and directly lower business electricity costs.

The governor’s energy director, Patrick Woodcock, didn’t take a position on Fredette’s bills Thursday, saying Maine needs to partner with other states in the region to expand natural gas pipeline capacity and warning lawmakers that the state likely wouldn’t realize a payoff for a few years. He added that the private market should take the lead on pipeline development.

Critics of the proposals questioned whether Maine would be betting its energy future on natural gas. While prices are low now, they could creep up as U.S. exports grow, said Jamie Py, president of the Maine Energy Marketers Association, whose members include heating oil dealers and gas station owners.

If the state is to assume the risk for funding energy infrastructure upgrades, Py said, the state should fund investments with proven returns.

“Conservation and efficiency upgrades yield the best return on investment,” he said.

Plus, a market is developing that makes it financially viable for businesses to pump natural gas to Maine through existing pipeline corridors, said Mark Lambert, government affairs director for Unitil, which supplies natural gas to 30,000 residential customers in the Portland and Lewiston-Auburn areas.

Natural gas resources could soon be developed in New Brunswick and sent to Maine through the existing Maritimes & Northeast Pipeline, Lambert said. And Richard Davies, Maine’s public advocate, noted the existing Portland Natural Gas Transmission System, which transports natural gas throughout New England, is seeking to grow the capacity of its pipeline.

The next step for Fredette’s bills is an Energy Committee work session, which hasn’t yet been scheduled.

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