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Full steam ahead for natural gas project

Thursday, January 22, 2009

Local mayors and Sharp County Judge Larry Brown took questions from the audience after their meeting with Crist Engineering representatives Jan. 12. It was decided at the meeting that the natural gas project will proceed to the next stage. Photo/Amanda Powers
"Let's go ahead with it (the natural gas project)," Sharp County Judge Larry Brown said with excitement. This came after having several questions answered during the natural gas meeting Jan. 12

Crist Engineers Vice President Stewart Noland attended the meeting along with his colleagues who were there to help answer questions. Bob Wright of Crews and Associates was there to answer financial questions and Michael Moyers of Friday, Etheridge and Clark Associates, answered legal questions.

The mayors of Ash Flat, Hardy, Highland and Cherokee Village also attended along with several spectators. Sharp County Justices Darrel Kehrli and Ray Martin were among the crowd.

Feasibility study

Noland brought everyone up to speed, explaining what has been accomplished in the study and projection of the project. Cave City is the only area in Sharp County that is currently served by a local gas distribution system. The feasibility study to bring natural gas farther into the county was funded by the Delta Regional Authority.

The first thing the study entailed was a survey to assess how many Sharp County residents are interested in obtaining natural gas. The survey asked a few simple questions such as: on a scale of one to five, one being very likely and five being very unlikely, would you use competitively priced natural pipeline gas as a home heating source if available? What type of water source do you presently have? Why would you not use natural gas if it was available?

According to the study, more people returned the survey than normal. The geographic areas that were surveyed and replied were, customers with out-of-state addresses maintaining residences in Sharp County, Ash Flat, Evening Shade, Cherokee Village and Hardy water customers.

About 40 percent of the out-of-state property owners responded with 73.7 percent indicating they would use natural gas as a primary heating source if it were available. Evening Shade's response was 78.9 percent interested, Cherokee Village and Hardy (which were figured together) were for it with 50.8 percent interested and Ash Flat by 68 percent.

Based on 700 survey responses, citizens of Sharp County favor competitively priced natural gas. The overall percentage in favor or interested in the county was 70 percent.

After the surveys were received and the numbers calculated, the county chose to proceed with the study. The next step was to get each of the city municipalities on board.

A resolution of intent was drawn up for each city. The resolution was introduced during each of the city's council meetings and brought to a vote. The resolution was passed in all of the cities which, according to Noland, is where they were starting the meeting Jan. 12.

Financing options

If the project is approved through the next couple of steps it will then be time for the county to start considering financing options. The projected cost of the total project is $26,279,080. The annual debt service for the gas system is $1,371,768 while the annual debt service reserve is $137,177.

The goal would be to obtain a loan with a tax exempt status. Wright explained that one loan would need to be obtained as opposed to smaller loans as the project progressed. He explained this is much safer, especially with the economy the way it is right now. If obtained all at once, on a fixed interest rate, the money not being used can go into an interest bearing account and later be withdrawn as needed to proceed with the project.

There is also a possibility of some USDA funding available to use in conjunction with the loan. Wright said any funding available is fine as long as they are sure what they use won't affect their tax exempt status.

Consumer count

Judge Brown had presented several questions to Noland. He asked how many people will have to sign up to make this project feasible. "I don't know that today," Noland said. "The more people who sign up for the system, the less the cost will be."

Noland explained that the maintenance for the system is generally the same no matter how many customers there are. With this in mind, it comes down to division, the cost will become less when there are more customers. "But, if I had to guess, according to the surveys, which projected around 2,500 customers interested, I would say between 1,500 and 2,000," Noland said.

The projected price did not include any industry. Noland explained industry will also greatly reduce prices for consumers because they generally have much higher use.

According to his past experience with this type of project, Noland said not everyone will sign up in the beginning. Because of this it makes it difficult to guarantee cost.

"Some will not sign up until they see the trench in front of their house," he said. "Some are waiting for the results of this meeting and some will wait to see if there is funding." More accurate numbers will be available after the initial sign up period has begun. It is important that the citizens remember the more people who sign up the cheaper the cost he said.

The judge asked if it would be possible to include the chicken houses located outside of the Grange area. "If the demand is high enough we may be able to include them," Noland said. "This system will have the ability to expand, but that (the chicken houses) was not in the original feasibility study."

The other area that raised concern was the Fulton County areas of the cities. Noland said that he was not aware of the split in counties, he then stated this was more of a legal question.

According to Moyers, this is an issue that can be resolved. Hardy Mayor Nina Thornton said when they (Hardy) do anything it covers both counties but the laws are different for counties.

"Some bond issues state projects can be done within or near the county," Moyers said. "But, the bond being used for this does not say that, so we would have to go in and tweak some language which shouldn't be a very big legislative change."

He said he could contact the local representatives and get it to the legislature as soon as possible. The legislature started sessions the same day as the meeting.

Price comparison

Judge Brown asked Noland to explain the price comparison between natural gas and liquid petroleum. Noland handed out a booklet that shows the comparison. The booklet also compared natural gas with electric resources.

The comparison transfered each source of energy into a consistent basis. This basis is per MMBtu. MMBtu is a million btu, this is a common denominator for a thermal unit. It is the most efficient way to compare natural gas with other energies because they can all be broken down this way.

At the time of the this particular study, LP gas in Arkansas was at an average of $1.62 per gallon. The lowest priced fuel was natural gas at $13.44 per MMBtu. Propane was at $21.81 per MMBtu and electricity at $28.48 per MMBtu.

Although these prices fluctuate, and have since these numbers were obtained, the contrast in price stays fairly consistent. Natural gas, he explained, is also more efficient than electricity or propane.

With natural gas, the conversion takes place at the source, your stove for instance. When a gas stove is turned on the gas is there and that is all that is used. Electricity, which is converted at a plant, runs through a grid. If a town is located 20 miles from a power plant most would assume their power is coming from that plant but, this is not always the case. When electricity is generated it is sold and put on a grid to be purchased and resold. Noland said a power plant in Arizona could be providing power to several states.


SERT President Ruth Reynolds asked questions from an environmental standpoint. Reynolds questioned why Sharp County isn't looking into renewable energies instead of this pipeline. Judge Brown and Noland both told her that natural gas is among one of the cleanest sources of energy.

Noland explained to Reynolds that nuclear power plants and coal burning plants are far more harmful to the environment than natural gas. Natural gas is proven to be 50 percent more efficient and the efficiency, when used to power appliances, is what the appliance efficiency is rated.

Judge Brown told Reynolds that if Sharp County residents were to convert to natural gas it would actually help make Sharp County more environmentally friendly. The price will also help with economic issues. When propane prices are up it is difficult for some people to come up with the money to fill their tanks. With natural gas it is a monthly billing system which makes payment easier for some.

Reynolds pushed renewable energy and questioned why the county wasn't more interested in it. Reynolds gave examples of places using renewable energy and recited some recent studies that have been conducted. Noland told Reynolds that in the future the pipeline that would be installed for the project could be used to deliver bio-fuels and other sources of energy when studies and technologies progress. "No one knows what the future will bring," Noland said.


The final consensus of the mayors and the judge was to take the project into the next phase which will be getting residents signed up.

Residents will have a chance to sign up for service before the project begins. The contract will be binding as long as natural gas is brought to Sharp County but there may be an advantage to signing up early.

Those who sign up during the initial sign up period could have the hook-up and meter installation fees waived. This idea was brought up and tabled for later discussion.

As Noland explained, the more people who sign up the lower the cost will be. But the cost will also be low due to the fact that the gas in the pipe lines will be available to the county at wholesale prices.

This means several companies will be competing to sell the gas and the county will be able to obtain the lowest price and choose the company they purchase the gas from which will also help the cost. The county will not sell the gas for a profit, it will be sold to recover the cost.

The cities plan on holding several meetings to help answer questions citizens might have. Noland and his colleagues offered to attend the meetings to answer questions as well. The meetings are to be announced. The mayors discussed informing residents of the meetings by mail.

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I don't want to impede progress or poo-poo this concept, but given the fact that the Arkansas Earthquake Scientist just pointed out that there's a grave risk of another earthquake fault line 15 miles southeast of Marianna Arkansas where there is a natural gas pipeline, what about the fact that NE Arkansas and Sharp County sits close to the New Madrid Faultline, that there is already minor earthquake actitivy? Just as scientists predicted that the New Orleans levees would break in the event of a Category 5 hurricane, I think the New Madrid Faultline poses an impending risk and natural gas pipelines would serve to magnify the risks of natural disasters. I hate to pose these "what if" questions, like, "what if the sky were to fall", but these questions should be addressed in the feasibility study.....

-- Posted by conventional1 on Fri, Jan 23, 2009, at 7:55 PM

You bring up valid concerns, however the actual risks are minimal. You probably have more to worry about with the hazardous materials carried on our highways and rail lines, than with a natural gas pipeline.

There are pipelines crisscrossing this state (and just about every other state) already. Natural gas does not present any more of a hazard than other pipelines carrying hydrocarbons, and actually less than most of them.

After working in and retiring from the petrochemical field, as for safety is concerned, I'd rather have natural gas in my home than propane.

-- Posted by k0xxx on Mon, Jan 26, 2009, at 10:16 PM

well if there's 2000 customers and the cost of the project is twenty-six milion dollars,,,

that's thirteen thousand dollars per customer to pay for the project..

and annual debt service of $1,371,768 divided among two thousand customers is around $685 a year, or $57 a month, per customer.

I'd like to hear more about what this will really cost a homeowner.

I very much favor natural gas. It is clean and convenient,

and it's efficient too.

Electricity is produced mostly in steam power plants that are about 40% efficient.

That means for every kilowatt-hour (or BTU or MMBTU) that gets to your house,

one and a half more of them were thrown away at the power plant as wasted heat that went up the stack . Along with the carbon that was burned to produce them.

Natural gas heating should therefore actually reduce our collective residential carbon footprint.

not to mention gas is still there when ice takes down your local electric wires.

I'm retired on Social Security and cannot abide another hundred dollar utility bill. Ozark Acres water base charge has tripled in recent years, what'll this gas bill do if EPA gets their meddlesome hands into it??

I'd welcome natural gas if it's kept affordable. It really is the next step toward green-ness, but I fear it'll be pounced on by the carbon tax urchins and become just another government hand in my pocket.

-- Posted by oldjimh on Sat, Feb 7, 2009, at 9:46 PM

Existing propane customers also need to remember that switching to natural gas would require converting appliances to natural gas. Some appliances like cook stoves can be converted easily, but appliances like water heaters, gas logs, and wall heaters cannot be converted at all.

A customer could easily be looking at $1000 to replace 2 or 3 appliances.

-- Posted by wilk1 on Fri, Mar 6, 2009, at 12:52 PM

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