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Council wants more answers

By Staff | Aug 13, 2010

Rugby city officials continue to support talk of bringing commercial natural gas service to the city, but there are simply too many questions left to answer before the council is prepared to okay an exclusive franchise agreement with Knife River Gas Company.

That is the message city officials conveyed to Bob Valeu and David Blair, of Kadrmas, Lee and Jackson, an engineering firm working with Major Pipeline, Inc., on proposed gas service to Rugby.

Earlier this month, Major Pipeline, which is a partner in the newly-formed Knife River company, requested a 30-year franchise agreement with an option to continue for an additional 10 years with the city. Now that request has decreased to a 20-year contract with the option to go another 10 years.

However, in the days following that request, city officials had questions, specifically should Rugby lock into a long range contract knowing little about this company and what role the N.D. Public Service Commission (PSC) will play in this process, and whether Knife River is going to be able to purchase gas to sell.

Those issues were addressed at the council’s meeting on Aug. 12.

Valeu said the PSC must grant a certificate of necessity in order for Knife River to proceed, regardless of the company’s securing a franchise agreement with the city.

Then Dave Cichos, Rugby mayor, asked why doesn’t Knife River/Major go through the process of getting a certificate of necessity first before coming to the city seeking a franchise agreement?

While Valeu said it’s not imperative for the company to get a franchise agreement first, given the costs and time involved in working with the PSC, Knife River doesn’t want to make that investment, if there are doubts the community is on board.

Gerry Jacobson, ward two councilman, like many others on the council are supportive of bringing natural gas to town, but signing a long-range agreement with uncertainties of whether the company will be able to follow through with such a complex and multi-million dollar endeavor concerns him. Would such an exclusive agreement preclude the city from pursuing other natural gas possibilities in the future?

Jacobson said he is interested in including language in an agreement where the company has so much time to achieve its intent of providing gas. If it can’t meet those reasonable deadlines, than the city can get out of the agreement.

Valeu understands the council’s concerns and agreed provisions can be made to clarify that issue in an agreement.

Another question raised was whether Knife River even has permission to buy gas off one of two pipelines – Alliance Pipeline and WBI – it has identified as a possible gas source. Blair said the company has been in preliminary discussions, but ultimately that won’t become settled until it receives a certificate of necessity with the PSC and a franchise agreement.

Cichos said Major Pipeline’s specialty is in the transmission phase of natural gas service and wondered how they can provide the internal distribution system to customers? Valeu said the company fully understands this undertaking and would not be willing to put up this investment and complete this project if it did not possess that expertise.

Knife River is also presently working with the communities of Beulah and Hazen on providing commercial gas, and many of the same issues are being talked about, Valeu said.

The council moved to table the franchise request, so the city officials can work with Knife River and KLJ representatives in working out new provisions in a possible agreement as well as receive a timetable on what the PSC would need to approve. Arland Geiszler, ward four councilman, said it would be good for a committee to be formed along with the city attorney to discuss questions or concerns which can be forwarded to project officials.

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