VEAZIE — One of the largest business deals the region has seen in 30 years began over lunch at Bangor’s Olive Garden Restaurant in July 1997.
On one side of the table sat Veazie town officials, still reeling from the deregulation of Bangor Hydro-Electric Co. and the resulting loss of $20 million in taxable property.
On the other side were partners from the Brunswick-based Casco Bay Energy Co., who promised economic salvation in the form of a new power plant in Veazie.
“We were kind of down in the dumps,” recalled Rod Hathaway, chairman of the Town Council. “Then, out of the blue, comes this project with numbers like $220 million. I said, `Can this be real?”‘
Town Manager Bill Reed, who has seen many a pie-in-the-sky deal come and go, was skeptical. “When dreams are laid out on the table, more often than not, they don’t come to fruition,” he said in a recent interview.
But this one came true.
Today, on the land of Bangor Hydro’s old Graham Station, groundbreaking officially begins on the $221 million Maine Independence Station, which will produce electricity fired by natural gas.
Getting there required a remarkable degree of savvy for this town of 1,200. For Casco Bay and its parent company, North Carolina-based Duke Energy Power Services, it was a project laced with considerable risk.
The idea for the plant, first proposed in January 1996, came at the nexus of two great initiatives in the state’s power industry: the proposed deregulation of its electrical utilities and the promise of cheap, clean-burning natural gas via the Maritimes & Northeast pipeline.
Competition among electrical utilities had not been attempted in Maine, and the 200-mile line from Baileyville to Westbrook was far from a done deal.
“We could go and permit this plant, but if there’s no gas, we’re out of luck,” said Chris Herter, one-time president of Casco Bay, now a consultant to the project, which was bought out by Duke this summer.
Though state and federal agencies have yet to sign off on all of the permits for the pipeline, plant officials are confident they will be approved. The station is scheduled to be on line in early 2000, soon after the opening of the pipeline in late 1999.
There are currently more than 50 proposals for natural-gas-fired power plants in New England, including at least 13 in Maine.
Advocates of natural gas say it will hold down the cost of electricity and make Maine industries and businesses more competitive. The likely winners are paper companies, who many believe have been kept at a competitve disadvantage due to the state’s reliance on oil.
Smaller gas-fired plants are in the works in mill towns like Rumford and Bucksport. Casco Bay originally planned to follow suit with a plant on land owned by Bowater’s Great Northern Paper Co. in Millinocket.
The power station would have been a considerable boon to the town’s depressed economy, but negotiations there ultimately stalled. Casco Bay negotiated with GNP President Don McNeil for nine months before discussions reached an impasse, according to Herter.
“We were way down the line with Millinocket, but they said we’d have to wait six months for a study from Bowater,” he said. “I think Don McNeil wanted to do it. It got caught up in corporate [bureaucracy].”
McNeil, currently on leave while attempting to put together a group of investors to buy the Millinocket mill, declined comment.
GNP spokesman Gordon Manuel downplayed the discussions, but acknowledged that Bowater studied the cost-effectiveness of a transfer to natural gas. The company recently concluded that a pipeline hookup was not in its best interest.
`The cost of getting a lateral to Millinocket was just too expensive,” Manuel said.
With Millinocket out of the picture, Veazie, always on the company’s radar screen, became the front-runner. The town held the appealing prospect of a much larger plant — 520 megawatts compared with 250 in Millinocket.
Next to the Penobscot River and eight miles from the proposed pipeline route in Orrington, the site off Shore Road was an ideal place for a power plant.
Veazie has historical roots in power generation. At 107 years old, the Veazie Dam is the oldest active power generator in New England. From a dollars-and-cents perspective, Bangor Hydro’s existing transmission lines meant that Casco Bay did not have to start from scratch.
Fortunately for both sides, the town had recently finished cordial abatement proceedings with Bangor Hydro regarding the value of its holdings in Veazie. Though the town lost close to $20 million in taxable property — roughly one-fourth its value — the two sides were able to avoid the courtroom with a joint appraisal costing roughly $85,000. By contrast, Central Maine Power Co. abatement battle with Yarmouth cost over $1 million in litigation.
Some town officials have wondered if the town’s agreeable settlement played a role in Casco Bay’s move to Veazie.
“Deep in my heart, I want to say it was a factor,” said Hathaway, the council chairman. “If we had been totally embroiled in protracted, high profile, in-the-news litigation with Bangor Hydro, it would have affected whether Chris Herter would have approached us.”
In one quick stroke, the Maine Independence Station will more than double the value of Veazie. The facility will occupy close to 30 acres on the site of the former Graham Station, and will employ 25 to 30 people. The impact of the project should be felt throughout the region in the form of product sales and construction work.
“It’s very significant for this part of Maine,” said Caroll Lee, senior vice president at Bangor Hydro. “I don’t remember a project of this magnitude coming into this part of the state during the last 20 to 30 years.”
Unlike some communities, which might view such a project as a giant cash cow, Veazie has charted a conservative course regarding its future economic growth.
With the Maine Independence Station, Veazie could cut its mill rate in half, from $19.60 per $1,000 in property valuation to roughly $10 per $1,000. Instead, the town hopes to keep the rate steady at 14 or 15 mills.
The town plans to keep the surplus — an average of $700,000 a year — in reserve accounts to plan for maintenance and unforeseen emergencies. The policy keeps the town from having its economic destiny too closely tied with one business.
Town officials said they wanted to avoid painful tax hikes such as Wiscasset suffered after the close of the Maine Yankee nuclear power plant, as well as their own roller-coaster ride of valuation in the wake of the deregulation of Bangor Hydro.
Another measure of stability stems from the project’s use of tax increment financing, which will provide the town with predetermined tax payments of between $1.2 million and $1.6 million a year.
A side benefit to the TIF is the agreement that Casco Bay and Duke will build an access road connecting the power plant off Shore Road with a planned business park off School Street.
The business park had been on the back burner since 1979. Town officials had never been able to sell the town on appropriating half a million dollars with the promise of “If you build it, they will come.” The road, in essence, allows the business park to exist.
“Now, almost 20 years later, we’re talking about actually doing this,” Hathaway said. “I honestly don’t think we could have done it without the power plant.”