May 26, 2013

Maine poised for historic transition to natural gas

Amid the state's rush to convert from oil to natural gas, however, it's possible that some issues important to Mainers are not being fully examined.

By Tux Turkel tturkel@pressherald.com
Staff Writer

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Bruce Madore, director of engineering and construction, looks over natural gas pipes Friday in the Summit Natural Gas of Maine yard in Augusta. Summit is poised to undertake major multimillion-dollar pipeline construction projects in both central and southern Maine.

Joe Phelan / Kennebec Journal

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This concept, now part of a bill that faces a pending vote in the Legislature, is being championed by Rep. Kenneth Fredette, House leader of the Republican Party. Republicans typically urge a free-market approach to energy policy. But Fredette has said that the cost of energy is such a burden on Maine, the state needs to take a more active role to encourage the switch to gas.

Yet in their desire to provide relief from high energy costs, some policymakers may not remember that natural gas prices reached record levels, briefly, in 2008. They may not be aware that the steep, downward trend in wholesale gas reversed direction this year, and prices are rising. That could leave Maine vulnerable to higher heating bills if gas prices spike again, for reasons we can't foresee now.

Natural gas now fuels more than half the electricity production in New England. The region got a taste of the consequences last winter, when a cold snap in January and a blizzard in February overwhelmed the gas supply, leading to shortages for power plants. That led to monthly, wholesale price peaks for gas, which carried over into electricity markets.

However, gas prices still are expected to stay low enough to maintain a long-term advantage over wind power, New England's leading form of new, renewable power. As is, wind can't compete with gas-fired electricity. No major projects would have been built without production subsidies and government policies that allow wind to be sold at above-market rates.

But when weighed against the impacts from Maine's heavy reliance on oil, policymakers have for 30 years felt the trade-off was worthwhile, and have sought to diversify energy sources, as a hedge. Politicians from both major parties have passed laws that promote homegrown, renewable power, in part for the local economic benefits it can provide in the form of jobs and investment.

Those policies now are under fire from Gov. Paul LePage. He wants to turn away from ambitious goals to grow wind power as an industry, set in motion during the administration of former Gov. John Baldacci. LePage wants to reverse that policy and, in his words, "fast-track gas."

'A WICKED PRICE TO PAY'

These competing approaches to Maine's energy future are rooted in two distinct points of view.

To Rich Silkman, the dominance of natural gas in Maine is inevitable and overdue. It's worthy of a similar level of government support that first brought electricity and telephone service to rural America in the early 20th century, he said.

"I've never understood the argument for diversity," said Silkman, a partner at Competitive Energy Services in Portland. "Over the past 30 years, diversity has made Maine's electric rates more expensive. When you look at diversity, you really have to ask what the cost is."

Silkman's company started the natural gas project in the Kennebec Valley that's now being sold to Summit. It also represents hundreds of businesses that want to convert to gas. Silkman rejects the argument that becoming dependent on natural gas puts Maine at risk for rising prices from unseen events. If and when gas costs rise to objectionable levels, Maine will shift to another fuel, just as it's doing now with oil. That's a better strategy than incurring above-average costs for decades, in anticipation of the worst case.

"It's a wicked price to pay for insurance," he said.

The shift to gas also threatens a local business sector that has seen its fortunes rise again with the price of oil -- wood heat. Maine's status as the country's most heavily forested state has helped support an expanding supply chain that includes loggers, pellet mills and sellers of wood stoves and boilers. A homegrown fuel that's cheaper than oil and carbon-neutral: It has added up to a compelling sales pitch that appeals to Maine's sense of independence.

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