Louisiana Bill on Natural Gas Opt-Out Provision Dies in Committee

DALLAS — A bill that would have allowed members of the Louisiana Municipal Natural Gas Purchasing and Distribution Authority to withdraw from bond-financed natural gas purchase agreements with 90 days notice died Thursday in a Louisiana Senate committee.

Proponents of the measure agreed not to move forward after Morgan City offered to take the gas included in Westlake's 10-year natural gas contract through the authority. Westlake had sought the opt-out provision so it could purchase large volumes of natural gas on its own for resale to a nearby ConocoPhillips facility.

The authority sold $233.7 million of 10-year unrated revenue bonds in August 2006 to finance the purchase of a 10-year gas supply from JPMorgan Ventures Energy Corp. for its members 62 municipalities, including Westlake, and five parishes. The gas is resold to the participating members at a markup of approximately 10 cents per 1,000 cubic feet of gas.

The bill, HB 2212, was sponsored by Rep. Brett Geymann, R-Lake Charles. It passed the House last week on a 53-44 vote, the minimum number of "yes" votes necessary for passage, and sent to the Senate. An identical Senate measure, SB 767, was sponsored by Sen. Robert Marionneaux Jr., D-Livonia.

Both measures were assigned to the Senate committee on municipal affairs. Thursday was the final day the bill could be brought to the Senate floor for action.

"That bill is not going anywhere," said Don Nijoka, managing director of the Louisiana Municipal Gas Authority, which opposed the measure. "The bill was a real problem for us, and we were prepared to go to the Legislature [yesterday] to argue against it, but the situation has been settled."

The LMGA's board has approved the transfer of Westlake's gas purchase agreement to Morgan City, Nijoka said.

"All the issues have been resolved," he said. "We didn't want to hurt Westlake's opportunity to sell gas to the plant, but we still have a bond issue to pay for."

Nijoka said the opt-out bill could have made it more difficult for the authority to issue debt in the future.

"We're always looking at how people perceive us," he said. "If a member can get out with 90 days notice we can't buy gas for our members. The cost of gas will go up and residential utility bills will go up."

The original measure would have required the authority to determine how much it would cost a municipality to get out of a gas purchase contract within 30 days of receiving notice of the intention, but the House lengthened the time to 90 days after notification.

Rep. Geymann, who sponsored the House version, said the bill would have codified the authority's policies.

"We wanted to put language into the statute to give a timeline for when the authority would let folks out of 10-year gas deals," he said. "They had a policy to allow purchasers out of their contracts, but there was no procedure or process."

The proposal drew criticism from a number of groups, including the Louisiana chapter of AARP, which represents the interests of retirees.

Geymann said the opposition was misinformed.

"They said the bill would mean that residents of other towns would have to pick up the cost of higher gas rates if someone dropped out of the authority," he said. "That was never an issue.

"I was surprised that even came up," Geymann said. "The opponents didn't say anything in committee hearings or anywhere else until it came to the floor of the House."

Beth Bryant, media relations director for the AARP in Louisiana, said the situation highlights the need for a state consumer advocate to represent citizens in utility issues.

"This bill would have hurt lots of rural areas at the expense of one or two municipalities that wanted to buy and sell gas," she said. "If we had a consumer advocate in this state, the bill would never have gotten out of committee."

The LMGA was established by the Legislature in 1987. The Louisiana Municipal Association runs the authority under a management contract. LMGA's gas operations are operated by Pelican Gas Management, which is owned by state Sen. Robert Adley, R-Benton.

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