Maine’s largest brewery, the Shipyard Brewing Co., has been billed for only a fraction of its sewer usage since 1996, an apparent oversight that has cost the city of Portland hundreds of thousands of dollars a year in lost revenue.

The error was discovered a year ago, when city employees were working with Shipyard as part of an initiative to help city businesses reduce sewer usage.

Shipyard has been paying its full sewer bill since last March. The additional charges since then have ranged from $17,000 to $41,000 a month, according to Portland Water District records provided in response to a Freedom of Access request by The Portland Press Herald.

Shipyard bottles more than 3 million gallons of beer annually. Breweries typically discharge two to six gallons of water into the sewer system for every gallon of beer produced, according to Chris Swersey, manager of technical brewing projects for the Brewers Association, a national trade group.

Portland officials won’t say how much money the city has lost in all. The Portland Water District would not release Shipyard’s water usage data without the company’s approval because it is proprietary information, said Ron Miller, the district’s general manager. He said the brewery will decide whether to release the data by Monday, the deadline set by Maine law for responding to the newspaper’s request for information on the billing errors.

The city’s failure to collect a portion of Shipyard’s sewer payments means those costs have effectively been paid by other users, including businesses and homeowners. The unbilled sewer charges would amount to about $300,000 a year based on what the company paid in 2011, Miller said.

Shipyard President Fred Forsley confirmed that figure, but said the charges would have been less in previous years because the company produced significantly less beer. He said he did not know the total amount he should have been billed.

Without knowing how much water the brewery has used since 1996, when a second water line was installed, the Press Herald was unable to estimate what Shipyard’s sewer payments would have been since 1996.

Forsley said Shipyard has always paid its sewer bill and that he was never aware the bill covered only a portion of Shipyard’s usage. He contends the brewery is not responsible for making back payments for sewer service it was never billed for.

The payments would be so large that the brewery would go out of business, and with it would go the 75 jobs it provides, Forsley said.

City officials are trying to determine how the mistake occurred and are working with the Portland Water District to make sure all of the city’s sewer customers are being billed properly, city spokeswoman Nicole Clegg said. The city won’t decide whether it will seek back payments until the investigation is complete, she said.

“Right now we need to understand what happened and why,” she said.

The city is responsible for maintaining sewer lines. The water district is a quasi-municipal organization that provides water to customers in Portland and 10 other communities. It also provides waste treatment services to six municipalities, including Portland, and collects sewer fees for the city from businesses and homeowners.

Sewer bills are based on how much water a business or household uses, because water usage is usually an accurate indicator of how much wastewater a business or household produces.

The brewery operates in a building served by a metered, 4-inch water line that was installed in 1979. Shipyard has always paid the sewer bill on the account established for that line.

In 1996, at a time when Shipyard was the fastest-growing craft-beer producer in the country, the brewery added a new 6-inch water line.

A submeter was installed on that line to measure the additional volume of water coming in. The water district’s work order for the submeter, dated Sept. 3, 1996, specified that a sewer account would not be set up for the 6-inch line, according to district records.

At the time, a wastewater technician with the city named Dave Peterson told water district employee James Pandiscio, who has since retired, that the new water line required no sewer account because the service was for “brew water only,” according to a statement that Pandiscio gave to the water district on Jan. 20.

As a result, the brewery never paid a sewer fee for the millions of gallons of water that flowed through the 6-inch water line from June 1996 to March 2011.

Miller, from the water district, said the district made an inquiry to the city in 2004 — eight years after the new line was added — about the brewery’s sewer bill. He said new software for the district’s billing system “flagged’ the 6-inch line at Shipyard as a problem because the line had a submeter measuring water volume but no sewer account set up for it.

Miller said the district contacted Peterson on Oct. 7, 2004, and told him the city was losing a lot of revenue. Peterson replied that he understood. Miller said Peterson also told the water district to remove records of the submeter to eliminate the software flag while allowing the line to continue providing water without a sewer account.

It is unclear whether Peterson, the Public Services Department’s “outstanding employee of the month” for November 2006, was acting on his own initiative or following directions from someone with higher authority in City Hall. He died in 2007.

Other breweries in the city, such as the Allagash Brewing Co., determine a sewer fee by subtracting the volume of beer they produce from the total amount of water they use.

Forsley is now looking for the same kind of sewer credit for Shipyard, according to a Sept. 14 email to the water district from Portland Public Services Director Michael Bobinsky. Bobinsky said he is not offering the credit yet, but instead is billing Shipyard for the full sewer fee based on both water lines.

Officials from the city and the water district met Jan. 27 to discuss the issues. Miller said the city believes the water district is responsible for the mistake because it had never billed the brewery for sewer costs associated with the new water line. But Miller said the city is responsible because it never set up an account for the water line.

Forsley said Portland’s sewer fees are double what is charged to competing breweries in other cities. He said he will be focusing on wastewater reduction, with a goal of bottling one gallon of beer for every three gallons of wastewater the brewery produces. Forsley would not say what the brewery’s current beer-to-wastewater ratio is.

“In reality, we are putting a lot of water down the drain,’ he said. “My goal is to minimize that.”

Shipyard makes about 15 types of beer under the Shipyard brand, including seasonal best-sellers such as Summer Ale and Pumpkinhead Ale. It has acquired other brands, including Sea Dog Brewing Co. and Casco Bay Brewing Co., and makes non-alcoholic Capt’n Eli’s soda. Shipyard also brews beer for other companies, such as Peak Organic Brewing Co. and Gritty McDuff’s Brew Pub.

Company officials told The Portland Press Herald last year that Shipyard’s annual revenue was about $20 million. In 2000, its annual sales were $5 million, company officials said at the time.

Portland is home to five breweries. Dave Kleeban, one of the owners of Maine Beer Co., said it’s important that every business in the city pays its fair share.

“It shouldn’t matter who you are,” he said. “I can’t imagine that there should be a special deal in place for one business in the city and not all the other businesses.”

Richard Pfeffer, co-owner of Gritty McDuff’s Brewing Co., said the city shouldn’t make up for the mistake by forcing Shipyard to make back payments.

“It will be a real shame if the city tries to squeeze that much money out of a successful business,” he said. “That’s not going to benefit the city or the Maine brewery industry.” 

Staff Writer Tom Bell can be contacted at 791-6369 or at:

tbell@mainetoday.com

Twitter:TomBellPortland