Homer Alaska - News

Story last updated at 4:18 PM on Wednesday, June 6, 2012

Council tackles gas distribution

By McKibben Jackinsky
Staff Writer

With lots of questions to be answered, the Homer City Council held a work session on Monday to discuss the how-to's in delivering natural gas to Homer. With city residents, representatives of local businesses and city staff in the audience, the council sought the expertise of Kenai Peninsula Borough Mayor Mike Navarre; Soldotna Mayor Peter Micciche; Rep. Paul Seaton, R-Homer; Charlie Pierce and John Sims of Enstar Natural Gas Co.; Kachemak City Mayor Phil Morris; and Bill Smith, who represents the city of Homer on the Kenai Peninsula Borough Assembly.

The $8.15 million in the capital budget approved by the Legislature and Gov. Sean Parnell means natural gas can be brought from Anchor Point to Homer and Kachemak City.

"If the council agrees, first we'd like to ask Enstar about what their schedule would be for that," said City Manager Walt Wrede. "The state has agreed to try to get the grant to the city as quickly as it can after July 1, so we'll probably be asking council in an expeditious manner to accept and appropriate the money.

Then, between now and July we'll be working on a contract with Enstar that will need to be in place for them to do the trunk line. ... that will bring gas from Anchor Point to here. That's the first step. ... That's our most immediate concern."

Sims, Enstar's director of corporate communications, divided the project into three parts: installation of the trunk line; development of some type of assessment district to fund the distribution of natural gas within the city of Homer; and formation of another assessment district for distribution of natural gas within Kachemak City.

Enstar's part of the project begins with a permitting and right-of-way process.

"If everything falls into place, this is a project that will start in 2013. If we see some sort of snag with permitting or right-of-way, then it's a 2014 project," said Sims.

With the permitting process costing Enstar $545,000, the city council will have to accept the grant from the state and appropriate the funding to Enstar to begin the process, said Wrede.

Mayor James Hornaday listed three processes for funding the distribution of natural gas once it reaches Homer.

"As I understand it, the city can do it, Enstar can do it or the borough can do it," Hornaday said.

The city could take the lead by developing an HSAD, Homer Special Assessment District, a six-step process that can be initiated by the city council or property owners. Two different scenarios were presented, one with gas delivered to a core area of 2,100 lots for a total cost estimate of $6.1 million and a per-lot estimate of $2,909. The second scenario called for distribution to the entire city of 3,700 lots for a cost of $12.3 million and an estimated per-lot cost of $3,326. The estimates include installation of distribution lines to each lot. The city would pay upfront and users could pay assessments over a set number of years.

"There are still a number of variables," said Wrede. "One is whether or not we can include lots that front on the trunk line. At first we thought we couldn't, but there's a 50-50 chance that we can include those, so that'll bring down the cost a little bit."

Service lines connecting the main line to residences and businesses would be separate and paid directly to Enstar by property owners.

The borough could take the lead through development of a USAD, utility special assessment district. Similar to an HSAD, formation of a USAD was done by Anchor Point residents. If Enstar takes the lead, anyone wanting to connect to the gas line would deal directly with Enstar and would be required to pay the full amount upfront since Enstar offer financing.

Cost savings for 10 different structures sizes converting to natural gas were developed by Smith. On his chart, for example, a 2,266-square-foot, two-story house with an oil boiler and an annual cost for heat and water of $3,437 would have an annual cost for natural gas of $1,173. For that same building, Smith estimated the conversation to natural gas would cost $1,870 plus $1,050 for the service line and meter, for a total investment of $2,920 and a 100 percent return on investment in one year, four months.

Sims urged keeping in mind that service line and meter costs were specific to individuals and location.

"The question I always get is 'How much is this going to cost me' and we can't tell them," said Hornaday.

"You really can't," said Sims. "You can give a range, but it's very dependent on the individual."

In addition to a USAD, Navarre said the borough had explored different avenues for funding the project, such as a loan to the city.

Council member David Lewis asked if future shortages of natural gas were a concern. "The challenge has been more of deliverability than supply," said Sims. "Deliverability is something we will be facing in the future. We'll continue to work on those challenges. ... But as this point deliverability is something for all Cook Inlet residents to be concerned about. And we are working on that."

Disruption caused by installation of the gas line is another factor to be considered, said Wrede.

"If you try to do the entire town at once, you can imagine how that might go," he said.

Spreading it out over several years, however, could impact project costs.

"It's hard to project five years out," said Wrede. "

With approximately 35 miles of pipeline in the project, how long the project would take to complete would depend on several factors, including the city's timeline, weather and the use of more than one contractor.

"If we had an accelerated plan thrown in front of us, we'd look at it and get back with you on a reasonable time frame," said Pierce. "But I think there are resources within the state to do the work."

Seaton suggested viewing the work being done to distribute natural gas in Anchor Point.

"They have (7.5 miles) they're doing and they're thinking it's a 40-day project for them. If an additional USAD goes through, that's about a 6-mile job and they're thinking that's another 30-day extension," said Seaton. "I suggest you go talk to those contractors. There's a number that bid on it and there's a number of people that are going to be bidding on these jobs. ... Everybody should go out and look at Anchor Point so you can see exactly what it looks like."

The Homer City Council will hold a follow-up work session at 4 p.m. June 11. It will be followed by a Committee of the Whole meeting at 5 p.m. and the council's regular meeting at 6 p.m.

McKibben Jackinsky can be reached at mckibben.jackinsky@homernews.com.