AUGUSTA — MaineGeneral Medical Center has agreed to buy 10 years’ worth of natural gas for its new regional hospital from one of two companies competing to build a pipeline in the region.
Maine Natural Gas officials said securing that commitment from such a major user has prompted them to move ahead with construction of a pipeline into Augusta — even without a commitment from the state government to buy gas the pipeline will bring.
“We’re coming to Augusta,” said Mark R. Beaudoin, director of quality and franchise development for Iberdrola USA, parent company of Maine Natural Gas and Central Maine Power. “We have a deal with one major customer and we’re negotiating with others. We’re going to serve our first customers in 2013.”
The agreement comes as Maine Natural Gas is moving quickly to build on momentum to build the pipeline over rival firm Summit Natural Gas of Maine.
Meanwhile, Maine Natural Gas officials sought to address concerns among some local business leaders that its pipeline plans weren’t as far-reaching and extensive as Summit’s plan.
“Beyond Augusta, we do have plans to serve up north, up into the Kennebec Valley,” Beaudoin said. “We’re seriously in negotiations with major anchor customers throughout the Kennebec Valley. The timeline to expand up north depends upon those negotiations with those major anchor customers.”
Darrel Quimby, vice president of Maine Natural Gas, recently told city councilors in Augusta that the firm will lay some sections of pipe over the next couple of weeks near the new hospital site in north Augusta, on Old Belgrade and Bog roads, off Route 27.
Chuck Hays, chief executive officer of MaineGeneral Medical Center, confirmed Monday the hospital and Maine Natural Gas had struck a deal so natural gas could be the hospital’s primary heating source.
“We went with Maine Natural Gas mainly because they can get us up and running by the time the new regional hospital opens up,” Hays said.
Dan Hucko, a spokesman for Iberdrola, said the agreement starts Nov. 1, 2013. MaineGeneral’s new regional hospital is expected to open about a month after that.
Counting on gas
Quimby said getting a gas line to the hospital will be Maine Natural Gas’s top priority, because the fuel is a necessity at the hospital.
The hospital committed to use at least 1 million decatherms to be provided by the pipeline Maine Natural Gas will build. One decatherm is the equivalent of 100,000 British thermal units, or Btu, and the equivalent of about 7 gallons of No. 2 heating oil, according to www.think-energy.net.
Hays said between the new hospital and the adjacent Harold Alfond Center for Cancer Care, MaineGeneral anticipates using about 100,000 decatherms a year. The distribution agreement with Maine Natural Gas should cover the hospital for about 10 years.
Hays said MaineGeneral designed the hospital to be heated by natural gas because using it will significantly decrease air emissions and the hospital’s carbon footprint and it costs less than fossil fuels.
He said using natural gas instead of heating oil could save the hospital about $600,000 a year.
Quimby said natural gas is currently about half the cost of oil. He said it would cost the average resident now heating with oil about $2,500 to convert to heat with natural gas.
Hays said the hospital had originally planned to use a liquefied natural gas system, but piped-in gas is estimated to save more than $250,000 in infrastructure costs.
He said he could not disclose the rate MaineGeneral secured with Maine Natural Gas. He noted the agreement with Maine Natural Gas is for distribution of the gas., and that the hospital will be able to buy gas from any firm connected to the pipeline.
Quimby said residential customers will also be able to tap into Maine Natural Gas’ pipeline system. He said residents of the Mayfair area of the city could start hooking up as soon as 2013, and “the hope is, in five years, to have the majority of the city piped.”
Plans move forward
Brunswick-based Maine Natural Gas already has state Public Utilities Commission approval to distribute gas anywhere in Maine where a gas pipeline does not already exist.
The deal to supply the new hospital with natural gas makes it the first to publicly announce a commitment from a major potential gas user in central Maine.
Summit Natural Gas of Maine, Maine Natural Gas’ competitor, recently received conditional approval from the PUC to distribute natural gas in Maine, and hopes to have unconditional approval by the end of the year. Unconditional approval from the PUC would allow Summit to also start construction on a pipeline, which officials have said they intend to do as soon as possible.
Tim Johnston, executive vice president of Colorado-based Summit Utilities, parent company of Summit Natural Gas of Maine, said Maine Natural Gas is still making its expansion beyond Augusta contingent on the financial viability of doing so, but has not said what it considers to be viable.
“Summit has no such contingency,” Johnston said. “Summit not only is finalizing build-out plans to serve over 15,000 businesses and residences in the first three years, (but) Summit’s model now suggests that Summit will serve many more customers than this.”
Johnston also said Maine Natural Gas has a history of slow expansion in the areas it currently serves, and its expansion beyond densely populated areas is likely to be limited.
Johnston said Summit has been in talks with potential customers throughout the Kennebec Valley, but declined to discuss details of the status of ongoing negotiations.
Both companies have said they will move forward with their pipeline plans even without a commitment from the state to use natural gas from either firm to heat state facilities in the Augusta area.
The state contract was bungled on the first try. State officials initially awarded the contract to Maine Natural Gas, but Summit appealed the decision and the state tossed out its own decision after a review panel found its selection process was flawed and unfair.
Maine Natural Gas has since filed a lawsuit asking the court to vacate the appeals panel decision and reinstate the state Bureau of General Services’ original decision to award the project to Maine Natural Gas.
Jennifer Smith, a spokeswoman for the state Department of Administrative and Financial Services, which oversees the Bureau of General Services, said Monday that the state has not yet issued a new request for proposals to bring a gas pipeline to serve state property in the Augusta area.
Beaudoin said Maine Natural Gas would invest about $150 million in the project if negotiations with potential major gas users to the north of Augusta are successful.
In its first proposal for the state contract, Maine Natural Gas had proposed a $19.3 million project that would have employed about 46 people. It would have served state property in the Augusta area, and company officials said it could have been expanded to serve businesses and residents elsewhere in the Kennebec Valley if doing so was economically feasible.
Summit Natural Gas proposed a $150 million project employing 435 people, reaching communities throughout the Kennebec Valley as far north as Madison.
Earlier this month, contractors for Maine Natural Gas installed 12-inch coated steel pipe under 11 culvert crossings on Route 17 between Windsor and Augusta. The state Department of Transportation was rebuilding the culverts as part of a paving project on Route 17, so Maine Natural Gas decided to install pipe under the culvert crossings before new pavement is put down.
Keith Edwards — 621-5647