December 13, 2013






Baileyville CNG facility grows
by Edward French


     The market for natural gas is continuing to grow in Maine and the Maritimes, with paper mills, large businesses and homes in municipalities that are hooked into gas lines all among those who have converted from oil to gas. A number of those customers are now being served by Xpress Natural Gas (XNG) of Woburn, Mass., which redeveloped the former OSB mill in Baileyville into a high-capacity compressed natural gas (CNG) fueling complex last winter. The company has been adding more customers during the past year, including some in Canada, and expects to continue to increase the volume it ships out.
     About 25 to 30 trucks a day presently leave the Baileyville facility and have carried about 3 billion cubic feet of gas to customers this year. The facility can handle about 40 trucks a day. Each trailer that the trucks haul carries about a quarter of a million cubic feet of gas, so the facility is filling trailers with about five million cubic feet of gas a day, according to Michael Footer of Robbinston, the site supervisor. That daily amount would heat over 50 American homes for a year.
     Matt Smith, executive vice president for sales and marketing for Xpress Natural Gas, notes that Xpress is seeing the demand to justify expanding the volume that is handled. A potato starch processor in Prince Edward Island is among the new customers, and Smith notes that Xpress is finalizing agreements with other customers in the Maritimes. The Maritimes face an issue similar to the one in Maine, where the Maritimes and Northeast Pipeline does not reach a great many locations.
     In Maine, almost all of the pulp and paper mills not connected to a gas pipeline are customers, and the University of Maine at Machias will become a customer this summer. A Mars Hill potato processor and hospitals in Caribou and Presque Isle also are served through the Baileyville facility. Calais Regional Hospital (CRH) recently decided to switch from fuel oil to propane as a heating fuel and expects savings of 35%, according to DeeDee Travis, director of community relations at CRH. The conversion will be completed by the end of January. Although CRH has a three-year contract for propane, Travis says that the hospital will have the option in the future to switch to compressed natural gas.
     In 2011, Woodland Pulp constructed a gas pipeline to the mill from the Maritimes & Northeast Pipeline in Princeton. The mill's owners expected to recoup the $12 million cost for the 4.5-mile pipeline in one year, through avoided costs for oil. Most potential customers, though, are not able to fund their own pipeline and are looking to Xpress to provide the cheaper fuel source.
     Companies that supply the trucks to haul the XNG trailers include H.O. Bouchard of Hampden, Abnaki Trader of Sanford and Dead River Company of Bangor. In 2014, Xpress is planning to start a trial run at the Baileyville facility of fueling the trucks that haul the XNG trailers. "We can also use our trucked gas to set up truck fueling stations throughout Maine," Smith adds. He notes that CNG is about half the cost of diesel fuel. Although the cost for converting a truck to use CNG could be $30,000 to $40,000, Smith says that as CNG is more widely available customers "may decide to purchase their own" vehicle that can use CNG.

Serving municipalities

     Xpress also is working with municipalities in several states and a dozen communities in Maine on supplying CNG to them. Although no contracts have yet been signed, Smith says that "we expect to announce some in 2014." He notes that the city of Waterville has found that having compressed natural gas trucked in would be "significantly cheaper" for residential customers than having it delivered by a pipeline.
     Smith explains that providing gas to a municipality is a regulated service, with two basic approaches. Xpress can partner with a utility called a local distribution company, such as Bangor Gas Co., whereby they install the pipes and meters between customers and handle the billing and maintenance, and Xpress puts the gas into the pipe. Or Xpress can help a town that may already have a municipal utility like a water district, whereby the town uses its maintenance team and trucks to install its own pipe. "A municipal gas utility is common in many states outside of New England and is often the lowest cost way to provide the service -- and has the added benefit of being willing to add residents that are farther out from town that a traditional utility might find uneconomic to service," says Smith.
     "In both cases, we keep the cost of gas low because our trucks are a low‑cost 'virtual pipeline' that brings gas to the town rather than an expensive steel pipeline that must be run for many miles for relatively small population centers," he says. "Even when the distance is short, say 10 miles, the pipeline is typically not economic to run to small towns because the few number of customers bear too much of the shared cost burden on each individual homeowner." According to Smith, it can cost $1 million per mile in Maine to run steel pipe.
     Baileyville Town Manager Richard Bronson says town officials have not yet had any formal discussions with Xpress Natural Gas, although they would like to do so. While a municipality could set up a gas pipeline loop, Bronson notes that "the level of investment would disinterest us." Local distribution companies will install a pipeline, but they may require the municipality to pay a portion of the cost. So far no one has come forward as a local distribution company for Baileyville, since the utility would need the potential to hook up a certain density of customers.
     Still, Bronson says, "Baileyville is a possibility for natural gas," and he notes that the gas pipeline that serves the Woodland Pulp mill "is on Main St. now." To gain more customers, a pipeline would have to extend another seven miles to reach Calais, he points out.
     Baileyville wants to find partners for a municipal gas line, according to Smith, who adds, "Washington County stands to benefit from that approach."
     Although natural gas prices in Maine are more volatile during the winter because of gas pipeline restrictions into the Northeast, Smith anticipates that natural gas will continue to be "the lowest cost fuel" for years to come. He notes that commercial natural gas customers find heating costs are 30 to 40% less than if they were using heating oil, and he expects the value "would be the same for residential customers."
     Compressed natural gas is gas that is reduced in volume to allow for storage and transport. It is maintained at ambient temperature but high pressure. On arrival, the gas is released at normal pressure to the customer. In the U.S. the price of gas during the last couple of decades has been too expensive to encourage people to switch to using it, until recently. The average price for a unit of natural gas has dropped in the U.S. from $8 in 2008 to about $2.50 in 2012.

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