A utility proposal to bring natural gas service for the first time to a number of heating oil-dominated central Maine communities is turning into a bit of a football as a state legislative proposal bids to help facilitate financing for gas supply projects. Supporters contend that it will help boost the state’s economy and critics are leery of the state picking favorites among energy sources.

Maine regulators in August conditionally approved plans to build an 80-mile pipeline that would bring natural gas service to a swath of the state for the first time. The eight-inch diameter transmission pipeline would run through more than dozen towns from Richmond to Madison in the Kennebec Valley region.

Project sponsor Kennebec Valley Gas Co. (KV Gas) said at the time that it would eventually have to return to the Maine Public Utilities Commission (PUC) for a final approval of its financing and engineering plans for the $70 million project. With the pipeline, KV Gas bids to become a fully operational natural gas local distribution company (see Daily GPI, Aug. 19).

State Sen. Roger Katz, from Augusta is sponsoring a bill with the KV Gas pipeline directly in mind, calling the project “the most important economic development project in the last 20 years in this area.” Katz argued that high energy costs have made it difficult for that area of the state to attract and retain good businesses.

The Katz bill (LR 2589) would increase the state finance unit, the Finance Authority of Maine’s (FAME) cap on insuring loans, which now sits at $7 million. Katz is leaving it to the state legislature’s energy and utilities committee to establish the amount of the new cap.

Heating oil interests in the state as represented by the Maine Energy Marketers Association have immediately attempted to counter Katz’s proposal as singling out gas for special treatment. The marketers group argues that if the gas pipeline project is economically viable, it should not need state help through loan guarantees and tax breaks.

A KV Gas official, Richard Silkman, told local news media that state loan guarantees from FAME would help his utility’s project or any other natural gas pipeline project.

Backers of the gas pipeline that is slated to start commercial operations in 2013 emphasize that Maine has the highest per-capita use of heating oil in the nation and twice that of other New England states. KV Gas pipeline advocates predict that adding natural gas supplies in central Maine would lower fuel costs for all customer segments: residential, commercial and industrial.

©Copyright 2011Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.