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

(Continued from page 4)

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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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"It's going to be very frustrating for the region to see declining (prices) in New York and New Jersey, and increases in New England," Levitan said.

HOMES VS. BUSINESSES

But again, the price difference between natural gas in New England and oil is expected to remain wide enough for years to come to encourage conversions, at least for businesses. Big users, such as paper mills and factories, will reap the quickest savings, and are more likely to have capital to invest.

That highlights another open question about Maine's rush to gas. How many of the seven in 10 Maine homeowners who now heat with oil will be able to take advantage of natural gas, and when?

Pipelines will never reach everywhere in rural Maine. And converting a typical central heating system from oil to gas can cost $6,000 or so. Proposals in the Legislature, and incentives offered by local gas utilities, will only pay for part of the total cost. And there's debate over how much government should subsidize the conversion, and where the money should come from.

The outcome of this debate is important to Summit Natural Gas, with its ambitious penetration plans to quickly reach thousands of homes and small businesses. The company's business model hinges on an energy fund managed by J.P. Morgan that has allowed Summit to raise $110 million for the first phase of construction. Connections to three paper mills will provide a shot of revenue for financing the project, which requires a 50-50 split of borrowing and equity.

Michael Minkos, Summit's president, said this formula is unusual in the industry, because it has a higher level of risk. But the price margin between natural gas and oil, and the ability of a homeowner to save $1,000 or more a year, is driving this business model. Five years from now, it will be clearer whether Mainers were willing and able to hook up to gas, as experts were predicting in 2013.

"The most difficult challenge for this area remains the investment required," Minkos said.

Tux Turkel can be contacted at 791-6462 or at:

tturkel@mainetoday.com

 

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