The Jamestown Board of Public Utilities will be paying two months advance rent for the natural gas pipeline they would like to purchase.

On Monday, the board approved the advance rental payments because of the delay by the state Public Service Commission to approve the sale of the pipeline has caused cash flow problems for EmKey Gathering, owner of the pipeline, and its parent company.

The BPU pays $56,508 a month to rent the pipeline, so the advance payment will total 113,016. David Leathers, BPU general manager, said the board has approved the advanced rental payments twice before.

In September 2017, the PSC ruled against the sale of the gas pipeline. Last year, Leathers said BPU staff will work on recommendations on what to do next following the denial by the PSC. He said BPU officials have time to create a new proposal because their current lease with EmKey to use the gas pipeline doesn’t expire until 2020.

According to a news release from the BPU in October 2017, the PSC’s decision is based upon a determination that the purchase price of $5.4 million to be paid by the BPU is not in the best interest of ratepayers because the amount exceeds the net book value of these assets based on information provided to the PSC as part of the petition.

According to the PSC ruling last year, which can be found on the New York State Department of Public Service website, current circumstances differ significantly from those facing the BPU in 1999, when they reached a 20-year lease agreement with EmKey Transportation predecessor Nornew Energy Supply.

In 1999, the BPU engaged in a competitive process to solicit options for transportation service. Nornew Energy Supply in interest built and/or upgraded the facilities as a result of submitting a winning bid to the BPU for providing transportation service for a 20-year period.

That process was manifestly competitive. At the time, no facilities existed to transport gas to the BPU’s generating station.

Now, as the initial 20-year transportation service agreement nears expiration, the BPU again needs to consider options for transportation service, the PSC ruling stated. Unlike the circumstances present in 1999, however, a single pipeline now exists that can provide the transportation service that the BPU requires. The only alternative to continuing use of the facilities would be to construct a second pipeline.

The PSC ruling states, however, assessing recent pipeline construction costs corroborates the BPU’s estimate that a new pipeline would cost more than the sales price negotiated for the facilities and it is questionable whether a second pipeline would provide benefits to New York state. The BPU explained that it agreed to the proposed transfer terms because EmKey Transportation stated that the annual cost of transportation service under a newly-negotiated agreement between it and the BPU would increase substantially, and to a level that exceeds the annualized costs of the proposed transfer.

Under these circumstances, the BPU and, by extension its ratepayers, have no realistic alternative than to continue relying on the gas pipeline, the PSC ruling states. Furthermore, unlike its initial bid to construct the facilities and provide transportation service, EmKey Transportation now has sufficient leverage to compel the BPU to pay an amount for the facilities that exceeds their net book value, but is less than the approximate cost of the least-cost alternative, i.e., constructing a new pipeline.

EmKey Transportation is an affiliate of Emkey Energy, an Erie, Pa.,-based company that owns and operates EmKey Gathering. The pipeline and equipment BPU officials would like to purchase was previously owned by Nornew Energy Supply. The pipeline has been in use since 2001 when the BPU began to operate gas-fired equipment like the LM6000 gas turbine generator.

In other business, the BPU approved hiring Tremco Roofing to apply acrylic elastomeric coating to 86 Steele St. for $325,000. According to the BPU resolution, the work will be done by Jamestown Roofing through Tremco Roofing. The coating has a 20-year warranty.

The BPU also approved for Lakeshore Paving to remove and install new asphalt at their wastewater treatment plant for $169,690. BPU officials only received the one bid for the job.