Developers circling state plans to invest $75M in new natural gas pipeline

The State House in Augusta.
Troy R. Bennett | BDN
The State House in Augusta. Buy Photo
By Matthew Stone, BDN Staff
Posted June 01, 2013, at 6:17 a.m.

AUGUSTA, Maine — Lawmakers’ attempts to balance the two-year state budget that takes effect July 1 could be on a collision course with a comprehensive energy bill that has bipartisan support and has piqued the interest of pipeline developers.

Three budget amendments proposed Friday afternoon would funnel nearly $65 million into the budget over the next two years from three funding sources the energy bill relies on to pay for efficiency projects and electricity rate reductions.

The amendments, sponsored by Sen. Patrick Flood, R-Winthrop, come as lawmakers complete work on what they’re calling an omnibus energy bill that, in addition to boosting energy efficiency funding, aims to spur pipeline construction in New England by allowing the state to buy up to $75 million in new pipeline capacity.

As lawmakers complete the energy proposal, pipeline developers are interested. Gov. Paul LePage will meet Monday with Kinder Morgan, a major developer planning a pipeline expansion in northern Massachusetts, according to LePage’s energy director, Patrick Woodcock. And Thomas Welch, chairman of the Maine Public Utilities Commission, said he has also been discussing Maine’s energy proposal with pipeline developers.

“I’ve talked to a variety of pipeline people who have indicated that, certainly, what Maine is doing is very interesting to them,” Welch said Friday. “If this became law, I expect there would be much more focused discussions.”

The bill would allow Maine to buy pipeline capacity through an assessment on ratepayers with the hope that making the state a player in the pipe capacity market could spur new construction. If the state purchases capacity, it could then enter into energy cost-reduction contracts with natural gas generators by selling capacity in exchange for rates that reduce electricity costs.

The Maine Public Utilities Commission and ultimately the governor would be responsible for negotiating and signing off on such a contract under the bill.

By getting more gas into New England from emerging natural gas fields in New York and Pennsylvania, proponents said, Maine and New England may no longer be faced with the highest natural gas prices in the nation. Those high prices kick in mostly on high-demand days in the winter and summer months, and New England has been especially vulnerable because of limited pipeline infrastructure that has been slow to expand.

“It’s not a marketplace that welcomes new-entry competition, and that’s our problem,” said Tony Buxton, a lobbyist who represents the Industrial Energy Consumers Group and has been instrumental in crafting the energy proposal. The IECG represents many of the state’s paper mills, who are among Maine’s largest energy consumers. “We have a once-in-a-lifetime chance to be part of an energy revolution that benefits us. It’s a matter of getting at the gas.”

But whether the bill to allow that becomes law as it’s proposed depends on which revenue sources members of the Legislature’s Appropriations Committee draw on to balance the budget.

The amendments introduced Friday by Flood would claim half of three major energy-related revenue streams for the state’s general fund over the next two years. Those revenues would fund energy efficiency aspects of the energy bill that have appealed to Democrats who have been hesitant to embrace elements of the bill that address natural gas supplies.

The revenues include $11.25 million from carbon emission allowance auctions through the Regional Greenhouse Gas Initiative, or RGGI, and $30 million the federal government will pay Maine for failing to remove 550 metric tons of spent nuclear fuel from the defunct Maine Yankee nuclear plant in Wiscasset.

In addition, Flood’s proposal would claim $23.5 million from the systems benefit charge, which is tacked onto ratepayers’ electric bills to fund energy conservation programs run by the Efficiency Maine Trust.

The omnibus energy bill proposes to use RGGI revenues for direct electricity rate reductions, electricity efficiency projects at commercial and industrial facilities, and a home heating rebate program that would allow homeowners to abandon oil heat in favor of cheaper, more efficient heating systems.

The bill would use 55 percent of Maine Yankee funds for Efficiency Maine Trust programs and 45 percent for direct electricity rate reductions. Under the bill, the systems benefit charge would continue to fund conservation programs, though the Public Utilities Commission, rather than the Legislature, would set the charge, a provision that has raised concerns among some Republicans and LePage.

LePage is largely on board with the natural gas parts of the bill, Woodcock said, while he continues to want the bill to address wind energy by proposing stricter rules for wind developers and allowing large-scale hydropower to qualify as renewable energy.

“It’s just unfortunate that they’ve tried to do a comprehensive bill, yet all policies having to do with our wind energy act are not in the bill,” Woodcock said.

While he hasn’t committed his support, LePage will meet Monday with Kinder Morgan, owner of Tennessee Gas Pipeline, one of the major interstate pipelines that brings gas into New England from the Marcellus and Utica shales in Pennsylvania and New York. Kinder Morgan is proposing its Northeast Upgrade Project, which would add a pipeline stretching along Route 2 in Massachusetts.

Woodcock said LePage prefers a private solution for expanding New England’s pipeline infrastructure, but Maine’s participation in pipeline development could catalyze the market.

“It initiates a regional conversation about a regional problem,” he said.

“We’re at the table,” said Buxton, who has spoken with other interested pipeline developers and with officials in other New England states — which he declined to name — to see if they’re interested in making the same commitment as Maine to developing the region’s pipelines.

Maine, which would be limited to buying 200 million cubic feet per day of pipeline capacity under the energy bill, wouldn’t be able to fund a new pipeline on its own, said Welch.

“Two hundred million isn’t going to get you all the way there, but it might be enough to stimulate others who have interest,” Welch said. “There would have to be other public-private participation.”

http://bangordailynews.com/2013/06/01/politics/state-house/budget-efforts-compete-with-energy-bill-funding-as-lepage-prepares-to-meet-with-natural-gas-pipeline-developer/ printed on July 30, 2014