June 18, 2012

Big expansion planned for pipeline proposal

By Michael Shepherd mshepherd@centralmaine.com
Staff Writer

AUGUSTA -- The prospective buyer of a company planning to build a natural gas pipeline through the Kennebec Valley region plans to spend $150 million on a massively expanded project.

Deadlines

Petitions to intervene in the Summit proceedings must be filed with the Maine Public Utilities Commission by June 26. A case conference has been scheduled at the PUC’s Hallowell office on Thursday, June 28, at 2:30 to rule on petitions and discuss the time frame of the proceedings.

Summit Natural Gas of Maine's spending estimate is about $70 million more than what than the project's original owner, Kennebec Valley Gas Co., had planned.

The price tag's near-doubling isn't the only shocker revealed in documents filed recently with the state. The pipe network is expected to deviate drastically from the Kennebec Valley Gas plan by starting in Windsor, not Richmond, and consisting of two high-pressure pipelines instead of just one.

"As the economic development guys like to say, this is a game-changer," said Michael Starn, Hallowell's city manager.

The proposal was filed with the Maine Public Utilities Commission on June 1. The commission has set a June 26 deadline for petitions from members of the public who want to wiegh in upon Summit's plans.

The PUC must also approve the purchase and sale agreement between Kennebec Valley Gas and Summit.

Of the total estimated project spending, the documents say Summit plans to invest $80 million in steel and large diameter pipe while $70 million is slated for a network of distribution lines. That's greatly expanded from the original plan, which called for a 56-mile line from Richmond to Madison with less capacity for residential distribution.

In sharp contrast to original plans, there's now a substantial focus on residential customers. Multiple area municipal officials, who have been briefed on plans by company officials, say Summit aims to serve 25,000 customers in its first five years after targeting an estimated 35,000 possible customers in the pipeline's planned area. The proposal filed with the state hedges that number, estimating about 15,000 will be served after three years of operation.

Summit's chief operating officer, Eric Earnest, says his parent company, which also operates subsidiaries in Colorado and Missouri and is fully owned by a JP Morgan investment fund, is looking to double its nearly 35,000-person customer base with two projects in Maine alone. The proposal says the JP Morgan fund now has more than $3 billion of equity investments in it.

The other project, Earnest said, is a proposed natural pipeline from Old Town to Millinocket that Summit hopes to build, own and operate. While the company has contract engineering firms working in Millinocket on that project, Summit's main focus is on central Maine, he said.

Gov. Paul LePage's office has been advocating for a natural gas pipeline in that area to be built from there with private capital to fuel paper mills in the Millinocket area. In January, the owner of a shuttered Millinocket mill told MaineBiz that "we absolutely have to have a natural gas line" to get the mill started.

Adrienne Bennett, LePage's spokeswoman, declined to comment on Summit's involvement, referring questions to Kenneth Fletcher, state director of energy independence, who couldn't be reached for comment.

"It's really just about the size of the opportunity up there," Earnest said of the company's interest in Maine. "Fortunately we have a strong equity partner and debt partners who are just as excited as we are."

Kennebec Valley Gas was interested in anchoring the project here by serving large consumers, like paper mills in Skowhegan and Madison and the under-construction MaineGeneral Medical Center and The Marketplace in north Augusta.

Summit does too. The proposal says Sappi Fine Paper's mill in Skowhegan, Huhtamaki's mill in Waterville and Madison Paper Industries in Madison are all planned customers.

Ken Young, director of the Kennebec Valley Council of Governments, which has been a go-between for towns and pipeline developers, summed up the difference between the old and new plans this way: "KVGas's proposal (was) to get to the paper companies. Summit's proposal is get to the paper companies in a way that increases opportunity to get to the residential market."

(Continued on page 2)

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