After executing at least his third flip flop in two weeks, West Wendover City councilman Roy Briggs came down against going forward with the purchase of the Wendover Gas Company, killing the project Tuesday.
Briggs once one of the buyouts biggest supporters Briggs once again provided the crucial third vote or rather non-vote that dashed the hopes of gas company owner Nancy Green to sell her near bankrupt company.
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Obviously talking about Briggs shortly after the vote two weeks ago, Carter indicated that Briggs was thinking about changing his vote and proceed with the buyout. Carter told the council and the audience that wavering councilman was a major reason for her veto.
City Council meeting below
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However when the item came up on the agenda Briggs said that the cost of the gas company and the construction of the proposed natural gas pipeline was simply too great for the city to contemplate especially with an uncertain economy. He would not be changing his vote and if Nancy green was searching for a buyer, she would have to look else where.
Briggs’ decision did not take her by surprise as early as the Monday before the meeting Green along with her attorney Jeff Crockett were informed that despite earlier signs that he would flip, briggs would not be changing his vote.
If Briggs reasons for not going forward on the purchase sounded familiar they were. Indeed they were some of the very reasons former West Wendover mayor donnie andersen gave when he vetoed the effort twice last summer and was twice over ridden with Briggs voting to over ride.
Even as late as last month, the purchase of the near bankrupt company seemed all but a done deal. Long a pet project of City Manager Chris Melville the idea was also supported by a solid three fifths majority of the city council, Briggs, Johnny Gorum and Saul Andrade and Mayor Emily Carter.
A $10,000 feasibility study prepared by Bob Springmeyer of Bonneville Research enthusiastically endorsed not only buying the beleaguered utility but also the natural gas pipeline in its synopsis. In total the city spent $24,000 in the process.
The feasibility study suggested that given the right conditions the city of West Wendover could purchase the gas company and operate it at either a profit or at least at the break even point.
That conclusion also gave the council political cover to support the project and to answer critics that the council had not done its due diligence in researching the project.
But in the two weeks between the release of the study and the council vote opposition to the purchase of the as company and the construction of the natural gas pipeline was growing most significantly from casino executives who reportedly not only read the report’s synopsis but also the numbers behind the conclusion.
Wendover Gas has been in severe economic straights for over a decade primarily according to owner Nancy Green because the major casinos in town opted out of receiving their propane supplied through her companies gas lines and instead went with Wendover Gas’ own wholesaler.
According to the feasibility study West Wendover could purchase the gas company for just under $2.5 million and even without the casinos coming back on the system, the city could operate it without losing money and without raising rates.
In Tuesday’s meeting Red Garter GM David Serafini touched on several discrepancies and suggested that the study was not only overly optimistic but completely ignored several major variables that could dramatically increase the costs of buying and maintaining the company.
The withdrawal of casino support may have been crucial to Briggs about face and Andrade failure to second Gorum’s motion. Both men along with Gorum and Mayor Carter are employees of the Peppermill Corporation and have been accused of in the past of tailoring their votes to their bosses demands.
While initially favorable to the idea when it was first proposed and until late last year several executives in the casino industry began to weigh the savings offered by natural gas to the cost of the pipeline and the debt burden it would place on the city and the cost that would have to be incurred to change over from propane to natural gas.
According to Peppermill President William Paganetti the panacea of natural gas came with a price tag too high for his company.
“The individuals making the proposal stated approximately $2 million would need to be invested to purchase a “gasification facility” in Wendover but it was unclear how that would be financed or who would own the facility.” He wrote in a letter last year. “The individuals making the proposal stated they had no experience running an LNG facility for a municipality and they could only give a few examples of similar systems in operation. In order to switch to LNG the Peppermill would have to incur an estimated $487,500 in conversion costs, including the replacement of two boilers that could not be converted without losing factory maintenance and warranties.
As the largest tax payers to West Wendover that indebtedness would have a direct impact on the industries already considerable property tax bill. And at least for the purchase of the gas company it is over $2 million that West Wendover need not have to borrow at all.
“For the city to buy the gas company for $2 million is insane,” former Nevada Public utilities financial analyst Paul Kvam said last November. “Anybody could pick up its assets for maybe $10,000 next year on the courthouse steps. Getting all the pipeline infrastructure for almost nothing would make the operations profitable. Then with those assets you could think about building the pipeline.”
The doubts whether the city could break even on the gas company was perhaps compounded with the question on the cost of the pipeline. While estimated in the feasibility report to cost just over $9 million Wendover has been burned before with overly optimistic projections.
To arrive at the estimate the study used a rule of thumb equation where the diameter of the pipe (4 inches) multiplied by the number of miles (62) multiplied by $40,000.
“It is a pretty basic formula,” said Wendover Gas trustee Steven Shute. “I have been involved in building pipelines for over 20 years and it is pretty accurate.”
But while the estimate is attractive it may not be accurate. First of all a four inch pipe may be enough to suit West Wendover current needs but much more, Kvam said.
“You have five casinos, the schools plus all the residential users,” he said. “That demand would take up a lot of the capacity of a four inch line especially if you include Wendover, Utah. Realistically to allow for the future growth and development natural gas is supposed to bring, the pipeline should be eight inches.”
The doubling of the diameter using Shute’s formula would bring the pipeline cost to about $20 million.
Bringing natural gas to Wendover is an old dream. 15 years ago then Mayor Walt Sanders and City Manager Keyth Durham initiated talks with the company planning to build what would become the Ruby Pipeline. Those talks however led nowhere. The pipeline was still in its planning stage and the cost also estimated to be over $20 million for a spur line to Wendover was considered to be too high.
While Briggs’ sudden reversal may have been personally embarrassing for the councilman and also perhaps to Mayor Carter it did save face for both Gorum and Andrade who did not have to change their vote.
That was not the case last year when the ‘Peppermill’ councilmen suddenly had a change of heart in their support of a new ordinance that would have required every alcohol server to under go a police back ground check.
After strongly supporting the new ordinance through its first reading the group flipped after reportedly being told the new ordinance would cost their employer tens of thousands of dollars every year.