Huntingburg Council votes to abandon gas storage field

The Huntingburg Common Council voted unanimously to abandon the gas storage field the city has operated for around 20 years at Thursday’s council meeting.

The decision was pushed to the forefront due to a recent change in the classification of a 4-inch distribution line that runs approximately 9-miles from the gas storage field to Stendal. The line runs along Old Highway 64 until it turns onto County Road 500 and ends at the gas storage field located on 500.

City Utilities Superintendent Tony Traylor informed the council the distribution line would be reclassified by the Indiana Regulatory Commission as a transmission main.  The new classification of the line would require the city to complete around $190,000 in upgrades if they continued to operate the field.

City Attorny Phil Schneider gave the council and the public a brief history of the decision to create the gas storage field in the early 90’s. The city gas was supplied by Texas Eastern under a set limit per day. When residents exceeded the daily amount the price of the gas skyrocketed to ten times the market rate and during the peak months of usage the city exceeded the limit daily. The city leased the storage field and built the line from Stendal to supply the residents during these peak times and reduce the costs.

Currently gas prices are stabilized due to the increase in natural gas reservoirs throughout the United States. This has also brought gas prices to a historic low and the prices are forecast to remain stable and low for many years. Additionaly, a recent large gas pocket discovery near Stendal that could potentially supply the city. A 2700 foot section of 4-inch line from this new field could receive a waiver and still be considered a distribution line due to the c0uncil’s decision. Traylor told the council the state inspector informed him they would not allow a waiver if the city had to reclassify the 9-mile line as a transmission line.

Traylor provided a report to the council outlining the costs to operate the gas field since 2001. According to his report the field has cost the city $292,000 since 2001. In 2012, due to the lower demand and the lower cost of gas, the income from the gas field was down about 35 percent over 2011. Traylor stated in his report this would eventually force the city to raise gas rates if they did not decide to abandon the field.

The storage field was also due to have approximately $75,000  in repairs and maintenance completed if it were to remain in operation.

With the decision the city will begin the abandonment process immediately although the process could take up to two years to complete. The field is possibly holding 198,532 million cubic feet that the city will attempt to withdraw over that period of time. The value of the gas is estimated at $1,020,891.09 and will be sold to the city’s customers. The amount of gas in the field is inaccurate due to inaccurate records kept on how much was lost during water removal processes in the 90’s. Traylor reported the amount is what he shows on paper records and the city won’t know how much is in the field until they pull it all out.

There are 13 lease holders the city makes annual payments to for the lease of the ground under the property. Those lease holders have the right to keep the wells open on their properties, however once the city abandons the field it will no longer have any responsibility with the sites. According to the lease the city also gives seven of the lease holders free gas and since 2001, the city has given away $54,825.17 of gas; this will also stop once the field is abandoned.

The city’s initial lease payment was $995,400 when it first leased the storage field and the gas was injected into the field at at cost of $493,252.88.  The city will not recoup any of these costs.

The council agreed the decision was the most fiscally responsible course the city could take with the current information.