MADISON — Residents were split Thursday night, speaking both for and against a $72 million proposal to build a natural gas pipeline through central Maine.
About 50 people gathered in the auditorium of Madison Area Junior High School to learn and express opinions about the town’s proposal to build the pipeline through 12 communities.
The town is competing with a private company, Portland-based Kennebec Valley Gas Co., to construct and operate the line from Richmond to Madison.
Whether the town-owned project happens will depend on whether Madison voters approve a $72 million bond request on election day, Tuesday, Nov. 8.
Thursday night, Kenneth Billings, of Madison, wanted to know why a town should build the pipeline.
“Why do you feel that the taxpayer ought to get involved in private business?” he asked.
“We have proof in the pudding from Madison Electric Works that we can keep rates cheaper,” said Joy Hikel, Madison’s economic development director.
“In a way, Madison has landed on the utility spot on the Monopoly board game,” she said. Town officials said there is a great need for a cheaper source of heating fuel for major mills, small businesses, schools and residences in the region.
“It’s clean. It’s abundant. It’s domestic, and it will create jobs and increase the economic conditions here in central Maine,” Town Manager Dana Berry said.
Still, Madison resident Richard Greenstreet questioned the environmental impact of extracting the oil from shale.
“I have no interest in going into $72 million in debt,” Paul Fortin, of Madison, added. He said he has “no interest in putting the people in Madison at that risk when there is an alternative (Kennebec Valley Gas).”
Madison resident Marc Leslie wanted to know details about possibly adding a compressor station farther up the pipe. Jon Edgerton, of Wright-Pierce engineering, said it will depend on demands at each user location, the diameter of the pipe and its pressure.
“It sounds very enticing,” Leslie said, “But the cost is going to be something.”
Officials said the project would not increase Madison residents’ tax bills, as the bond would be paid entirely with money generated by the pipeline. If anything, taxes likely would decrease, Berry said.
“The revenues will be used to subsidize municipal taxes,” he said. The total debt service of undertaking the pipeline project would be $102 million. That includes $72 million in principal and $30 million in interest.
If a major commercial or industrial user moves after the pipeline is constructed, Berry said contracts would keep the entity paying.
“If you do not live up to that obligation you still continue to pay,” he said.
Officials also said the pipeline would ultimately fuel a gas-fired electricity generator at Madison Electric Works, allowing the utility to generate its own electricity and reduce those customers’ rates.
The competing entity, Kennebec Valley Gas, has already completed its feasibility study, mapped routes for the approximately 80 miles of feeder lines and the main line and received preliminary approval from the Maine Public Utilities Commission.
The company has not yet secured all its needed funding, however. Financing will depend on whether major users, such as Sappi Fine Paper in Skowhegan and Madison Paper Industries, agree to hook up to the line. The company also needs to negotiate tax breaks with each of the 12 towns.
The tax increment financing districts would require municipalities to give back a percentage of local property taxes to the developer to help finance the pipeline. TIF districts also act as a tax shelter for towns, so increased property values in the designated areas don’t result in increased tax commitments.
Unlike Kennebec Valley Gas Co.’s project, Madison would not ask each town along the pipeline for tax breaks. The communities are Richmond, Gardiner, Farmingdale, Hallowell, Augusta, Sidney, Waterville, Oakland, Fairfield, Norridgewock and Skowhegan. Representatives of Kennebec Valley Gas attended Thursday’s meeting.
Though they didn’t speak to the crowd, they provided paperwork to residents. It stated: “The Nov. 8 Madison vote is not a choice between ‘gas’ or ‘no gas’ for Madison. KVGC will build the pipeline, and Madison will have gas.”
“It is definitely in our plans to come to Madison. Madison Paper is one of our anchor tenants that we want, and we’re eager to get them, and they’re eager to have gas,” said Tony Buxton, an attorney with Preti Flaherty and an investor in Kennebec Valley Gas.
Russ Drechsel, president and chief executive officer of Madison Paper Industries, said the paper mill is converting its boilers to natural gas.
“We have to watch our energy costs and watch them very closely. So we’ve made some capital investments already,” he said.
Edgerton, with the engineering company, spoke about the specifics of building a natural gas pipeline, which would potentially join with the Maritimes & Northeast compressor station in Richmond. The layout of the pipeline would take advantage of public rights of way between Richmond and Madison, he said. It’s likely there would be a smaller spur out to Sappi Fine Paper in Skowhegan.
Construction could conceivably start in February 2013 and be completed by July 2014, Edgerton said. Once constructed, an emergency response team would be on hand 24 hours a day.
Richard Ranaghan, senior vice president of public finance at Gorham Savings Bank, spoke about the low interest rates available. Madison is estimating a 4 percent interest rate on the bond.
Hikel said the town has to prove to several entities it can successfully build, operate and finance the project before it is granted a loan.
“If you think getting a mortgage these days is tough, try being scrutinized by a bond,” she said. “It’s protection for us.”
According to the U.S. Energy Information Administration, households heating with natural gas this winter will spend an average of $19, or 3 percent, more than last winter. Natural gas is the primary heating fuel for about half of U.S. homes.
In comparison, the administration expects households using heating oil to spend an average of about $193, or 8 percent, more this winter. About 6 percent of U.S. homes depend on heating oil, but 80 percent of those homes are in the Northeast.
The next public hearing on the proposed pipeline will be at 6:30 p.m., Thursday, Oct. 27, at the junior high school.
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