Vt. Gas says cash offer to Cornwall does not set a precedent

ADDISON COUNTY — Vermont Gas Systems’ recent offer of $1.5 million in cash and other incentives to Cornwall if the town dropped its opposition to Phase II of the Addison Rutland Natural Gas Project signaled a change in tactics for the company as it tries to complete the three-phase pipeline project.
The South Burlington company’s new top executive said the move was part of an effort to foster good relationships with towns and citizens, which Vermont Gas has struggled to do since announcing the project in 2012.
“This is a Vermont Gas effort to reset the framework of how we’re going to deal with communities in the future,” incoming Vermont Gas CEO Don Rendall told the Independent.
But Rendall cautioned that the Cornwall proposal — which differs significantly from agreements the company made with towns along Phase I of the project — should not be seen as a boilerplate agreement that Vermont Gas will use in the future.
“I wouldn’t think of it in the context of precedent,” Rendall said, adding that the company plans to approach each town on a “case-by-case, unique basis.”
Under the proposed Cornwall agreement, Vermont Gas would, among other incentives, pay $1.5 million to the town over 10 years, pay $125,000 for educational activities, spend up to $2 million to connect homes to the pipeline and pay full property taxes on the land used for the pipeline, estimated to be about $60,000 annually. On Dec. 16, more than two dozen people asked the Cornwall selectboard to move slowly in approving the proposed deal.
The cost of the incentives, Rendall said, would be included in the total project cost, which the company presently estimates at $75 million. More than 90 percent of the project will be paid by principal customer International Paper, which operates a mill at the pipeline’s terminus in Ticonderoga, N.Y.
Rendall, who joined Vermont Gas in November and officially gets the top job in January, said International Paper did not have any influence on Vermont Gas’ offer to Cornwall. Phase II of the pipeline has not yet been approved, and is currently being reviewed by the Public Service Board.
Rendall said he does not feel pressure to be more generous to towns along Phase II of the pipeline, which primarily serves an out-of-state company rather than the Vermont homes and businesses the Phase I line will serve. But he did acknowledge that the phases differed significantly, and thus necessitated different approaches with towns.
“The approach with Cornwall was quite straightforward and a departure from the company’s approach in the past,” Rendall said, adding that the company aims to “develop a strong collaborative relationship with the town’s leadership, the selectboard.”
Rendall told the Independent last week that the company will likely offer Shoreham, another town along the Phase II route, a deal similar to the one they offered Cornwall.
In eight memorandums of understanding the company signed for the Phase I portion of the project — a 41-mile pipeline from Colchester to Middlebury and Vergennes — Vermont Gas did not negotiate payments to any of the eight Chittenden County and Addison County towns along the pipeline route. The Public Service Board approved Phase I in December 2013, and Vermont Gas broke ground on the project this past June.
Vermont Gas and Monkton, through which the Phase I pipeline will cross, signed a memorandum of understanding in June 2013. It includes protections for landowners, requires the company to build distribution lines to about 20 percent of town structures and pay about $78,000 in annual property taxes, but does not include any outright payments.
Monkton selectboard Chair Stephen Pilcher, who helped negotiate that deal, said he believed the Vermont Gas proposal to Cornwall was built on a foundation that Monkton created. He noted that Vermont Gas did not originally plan to build distribution lines in town until the Monkton selectboard pressed for it.
While Vermont Gas did not offer $1.5 million in payments to Monkton, he believed Monkton negotiated the best deal possible at the time.
“Personally, I’m proud of the MOU that Monkton negotiated given the time and circumstances under which it was negotiated,” Pilcher said last week.
He praised Vermont Gas’ effort to improve relations with landowners and towns.
“That some towns and individuals are now getting some of the things that we originally asked for, such as payment of legal fees, is a good thing,” Pilcher said. “I would wish that Vermont Gas understood earlier that being a partner rather than an adversary was always going to be a better strategy.”
With its proposal to Cornwall, Vermont Gas hopes to end 2014 on a positive note after a tumultuous year in public relations for the South Burlington company.
In February, the company sent letters to nine Monkton residents along the pipeline route in which it threatened to take their land via eminent domain. The landowners, some of whom were actively negotiating with the company, said they felt bullied into signing easements.
In April, the company asked the Public Service Board to approve a protective order that would exempt from public review many documents related to the Phase II project, drawing criticism from open government advocates and the Vermont Press Association. The board in May approved a watered-down version of the agreement.
In June, Monkton residents told legislators and state regulators that, despite a pledge by the company to “reset” talks, negotiations had not improved.
In July, Vermont Gas announced a 40 percent/$35 million cost hike for Phase I, blaming unanticipated increases in construction costs and increased oversight of the project. The Department of Public Service fined the company $35,000 for not giving regulators an updated budget for more than a year preceding the announcement, and mandated quarterly budget estimates.
That same month, the company told the Independent it would not adjust its cost estimate for Phase II, but did just that 11 days later.
In August, Gov. Peter Shumlin said he was “extremely disappointed” with the Phase I cost overruns and concerned that the negotiations between the company and landowners were not being conducted fairly.
The company took a number of actions throughout the year it said were aimed at improving relations with landowners, including: firing the third-party firm that had been conducting talks, offering to pay for independent mediators, and temporarily holding off on eminent domain proceedings. In November, the company said CEO Don Gilbert would be retiring at the end of the year and Rendall would lead the company.
Already Rendall’s tenure is marked with controversy. At the company’s South Burlington headquarters on Dec. 19, he announced another price hike for Phase I, this time to the tune of $33 million.
Now, the project is estimated to cost 78 percent more than the figure the Public Service Board approved just a year ago.
In the same announcement, Rendall also said Vermont Gas has asked the board to postpone review of Phase II, so the company can review the cost of that project.
Rendall said he is still confident Phase II will be approved, but wants to be transparent by providing regulators with the most accurate figures.
On the uncertain future of the entire project, Rendall said he is committed to finding common ground between the needs of landowners, towns, the state and the company, and summed up his goal with a simple question.
“How can we make this work for the community we’re serving?” he said.

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