- Associated Press - Wednesday, May 13, 2015

HERMISTON, Ore. (AP) - Hermiston is moving forward with forming its own natural gas utility after a victory in court.

The city council voted Monday for the city to hire an engineer and begin mapping out a strategy for creating the utility.

“We need to seek some expertise to help us come up with some better numbers,” city manager Byron Smith said.

The city formed the utility in name only on Aug. 25, 2014, but the move was immediately challenged in court by Cascade Natural Gas, the city’s current natural gas provider. In March the Umatilla Circuit Court upheld the city’s legal right to form the utility and on April 27 the deadline passed for Cascade Natural Gas to file an appeal.

The city’s current plan would be to limit the utility to serving the industrial land south of Hermiston, leaving Cascade Natural Gas to continue serving residents in town. Assistant city manager Mark Morgan said until a new gas pipeline gets built the Cook Industrial Site - the city’s prime industrial land - can’t accommodate any business that uses natural gas.

“Right now that southern industrial area is simply maxed out on gas,” he said.

Smith said the issue has already prevented a potential developer from bringing 250 jobs to the area because the natural gas it needed to heat its warehouse wasn’t available.

The natural gas problem also caused DuPont Pioneer to halt a planned multi-million-dollar expansion in Hermiston last year, which is what started the city on the path to getting into the natural gas business. Originally the company was told by Cascade Natural Gas that the infrastructure needed to serve the expansion would cost $450,000, causing the company to select Hermiston for its expansion, but later Cascade Natural Gas said there had been a mathematical error and the upgrade would actually cost $2.3 million.

If the city and developers had to bear the whole cost of the construction but Cascade Natural Gas would end up owning the infrastructure, the city reasoned, then why not create a municipal utility so the city would have ownership of the pipeline and could reap all of the profits from it?

Right now the city has a rough estimate of $3.2 million for construction of the transmission line, but hiring an engineer as approved by the city council Monday will allow the council to put together a better cost-benefit analysis for the creation of the utility.

Smith said city staff members have been looking into grants and other state funding options. When the city formed Hermiston Energy Services, its municipal electric utility, it paid for the initial formation with bonds that are being paid off using the revenue from customers’ electricity bills. He said something similar would likely take place with the natural gas utility.

Cascade Natural Gas spokesman Mark Hanson said the company did not file an appeal to the circuit court decision allowing Hermiston to proceed on the advice of its legal counsel, and moving forward it will “continue to focus on providing safe and reliable service to our natural gas customers in Hermiston.”

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Information from: East Oregonian, https://www.eastoregonian.info

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