September 13, 2012

Maine throws out its multi-million natural gas award

By Keith Edwards kedwards@centralmaine.com
Staff Writer

AUGUSTA — The state has thrown out its selection of a natural gas pipeline project for central Maine because its bid review process was found to be flawed, unfair and illegal.

click image to enlarge

GAS IMPASSE: A still image from a video posted Tuesday on the website of Summit Natural Gas shows work crews placing and welding a 6-inch high-pressure steel pipeline in Lake of the Ozarks region, Missouri, which will serve 10 towns and about 4,000 customers. An appeals panel has found the state erred when solicited bids for a natural gas pipeline project in central Maine, awarding the bid to Central Maine Power Co.-affiliated Maine Natural Gas over Summit Natural Gas.

Image courtesy of Summit Natural Gas

Competing natural gas plans

• Maine Natural Gas: $19.3 million investment, creating about 40 jobs, to develop the project over the next two years, first serving state property and users on both sides of the Kennebec River in Augusta. The project includes the potential to expand, as demand warrants.

• Summit Natural Gas of Maine: $150 million investment, creating about 435 jobs, to develop project intended to serve about 15,000 residential and industrial customers by its third year of operation. The project would start in the Augusta area and the pipeline would stretch north through Waterville and end in Madison.

Source: proposals filed with state

That decision by a state appeals panel to invalidate the award to Maine Natural Gas, announced Wednesday following a daylong hearing last month, halts any possibility that natural gas will come to the region soon and would appear to deepen an already contentious battle between two companies vying for the rights to build the pipeline.

Brunswick-based Maine Natural Gas, which is owned by Central Maine Power Co. parent company Iberdrola USA, has proposed a $19.3 million project that would employ about 46 people. It would serve state properties primarily in the Augusta area and would have been expanded if the company deemed it economically feasible.

Summit Natural Gas of Maine, a subsidiary of Summit Utilities Inc. of Littleton, Colo., had proposed a $150 million project it estimates would employ 435 people. Its much larger project called for a pipeline from Richmond to Madison, and the gas company already has lined up a number of tax breaks from affected communities to finance the project.

Summit appealed the Bureau of General Services' award to Maine Natural Gas, even as many regional leaders expressed concern that the smaller of the two proposals had won state approval and asked Gov. Paul LePage to intervene.

"Obviously we're pleased with the appeals panel's decision," said Tim Johnston, chief strategy officer and executive vice president of Summit Utilities. "We're proceeding with our engineering and due diligence and still working toward putting natural gas everywhere in the Kennebec Valley from Richmond on up to Madison."

H. Sawin Millett Jr., commissioner of the state Department of Administrative and Financial Services, announced the appeal panel's decision late Wednesday afternoon. The panel determined that the state process used to review bids was flawed in several ways and the award to Maine Natural Gas was "in violation of law, contained irregularities that created a fundamental unfairness, and was arbitrary or capricious," according to the appeals panel's written decision.

Millett said Wednesday that the Bureau of General Services "acknowledges that several flaws were identified by the appeal panel, in both the drafting and review process of this natural gas RFP."

As a result, the Department of Administrative and Financial Services "will be conducting a top to bottom review" of the bidding process, Millet said.

Ken Fletcher, director of the Governor's Energy Office, could not be reached for comment Wednesday.

Dan Hucko, spokesman for Maine Natural Gas, said Wednesday that Iberdrola USA and Maine Natural Gas "are disappointed with the appeal panel's decision to invalidate our contract award as low bidder" for the state's request for proposals.

"At this point, we will continue to evaluate all of our options and decide on a course of action in the near future," Hucko said.

A flawed process

Outside of a potential court challenge by Maine Natural Gas of the appeals panel decision, the project is expected to be put back out to bid by the state government. The panel decision does not give the project award to Summit; it simply invalidates the award to Maine Natural Gas, meaning the state would need to rebid the project from scratch.

(Continued on page 2)

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