News — 11 May 2012
By Jennifer Thurbide

District residents will be finding out this month if natural gas service will be coming to their doorsteps as Union Gas Limited has given project partners mere weeks to confirm funding on the more than $19 million expansion.

Communicating with Municipal officials last week the company noted that $2.7 million in federal funding has yet to be secured and a further $750,000 shortfall had been identified when all the funding was accounted for. Writing a letter, dated May 1st, to inform municipal officials on the status of the project General Manager for Infranchise Sales and Marketing David Simpson explained: “Union Gas, like the Municipality, would like to see these communities serviced with natural gas as originally planned; however, based on the funding sources currently identified for Phase II, a shortfall of $0.75 million still exists.” Giving the Municipality until May 3rd to decide, Simpson proposed that the Municipality commit to funding the shortfall and offered a four year payment schedule starting in 2013.

Calling an emergency council meeting on May 3rd to address the request, municipal staff recommended committing the funding, as without it, the project would either be cancelled or scaled back. Addressing those gathered Chief Executive Officer Brian Anderson explained that by approving the expenditure “Council would not have to sit down and point at a ratepayer and say you are not getting natural gas. If we don’t have the [money] the project will be dropped or downsized by $750,000 so there will be areas within the three townships that would not get gas.”

Anderson says the $187,000 a year required to pay back Union Gas for the shortfall would be obtained through the tax revenue gained by the Municipality from the utility along with the realized savings from converting applicable municipal buildings to the lower cost fuel option. “The Municipality pays approximately $160,000 per year in fuel oil costs. These costs will be reduced by 40 per cent once converted to natural gas for a savings of $64,000. The Municipality also pays approximately $24,000 per year for propane. These costs will be reduced by 50 per cent once converted to natural gas for a savings of $12,000,” he added.

Concerned about the commitment made to district residents in July 2010 when the Municipality promised it would not pass on the cost of the natural gas project to the ratepayers, Councillors questioned where funds for infrastructure upgrades would come from and what the impact on the project would be if federal funding was not secured. Anderson noted that municipal reserves could be tapped for the up to $20,000 needed to upgrade municipal heating and water systems and that without the federal funding the project is expected to be cancelled.

Weighing in on the discussion Mayor Phil Vinet advocated for the Municipality to support the gas line expansion into the community. “What it does is provides for $150,000 plus in tax revenue from here to eternity. That is where the money is,” explained the Mayor. “You are actually leaving a legacy of predictable revenue over 10, 20, 50 years. Ear Falls is a classic example, they put the line in [in the 60s] and they have been enjoying the tax benefits until this very minute and it is predictable revenue as it is based on your tax rates…with it going on commercial land it could generate significant dollars over the next 50 years.”

After 35 minutes of discussion Councillors voted unanimously to approve a Resolution supporting the expenditure. The municipal funding will join the provincial contribution announced last fall of $4.9 million, Goldcorp’s contribution of $2.15 million and Union Gas’ expenditure of $8.8 million. Although a figure related to the number of homes to be serviced was not available at press time from Union Gas, municipal officials confirmed many Red Lake, Balmertown, Cochenour and Chukuni Subdivision properties are scheduled to receive the service and properties in Madsen, Starratt Olsen, McMarmac and McKenzie Island are not.

Last Piece of the Puzzle

The federal government has been the last partner to come to the table to support the residential and commercial portion of the Red Lake Gas Pipeline Project having been asked to provide $2.7 million through regional development agency FedNor. When contacted last week, Parliamentary Secretary for the agency and Kenora MP Greg Rickford confirmed an application for the funding had been received and is currently being reviewed through the agency process. Unable to provide a timeline on when a decision will be made Rickford said there are economic benefits to a project of this magnitude. “I think [the project] represents an important alternative energy which will help sustain the community residentially and industrially. I think this whole process finds itself in a situation where major industries in Red Lake need the additional energy requirements so the benefits to residents I think comes along with that and to that end it is a more energy efficient and affordable form of energy so I think all around it is good for the community.”

Union Gas says as the construction season is underway and workers are returning to the area to complete the 43 kilometres of pipeline and supporting infrastructure that will connect Goldcorp Red Lake Gold Mines properties to a natural gas supply. The first phase of the pipeline project is expected to be completed and online by the fall.

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