‘Natural’ savings

Published 9:31 am Wednesday, August 1, 2012

GATESVILLE – The Gates County School System is studying a plan that could produce thousands of dollars in savings.

At their recent meeting, the Gates County Board of Education listened to a proposal to switch at least two of their schools – the high school and middle school – from fuel oil to natural gas. Gates County Commissioner Johnny Hora pitched the plan to the school board.

Hora said he was following up on a plan discussed last year to make this conversion, one he said had the possibility of saving the school system 38 percent on what they are now currently spending on fuel oil.

“You can save tens of thousands of dollars per year by switching over to natural gas,” Hora said. “The problem lies with the natural gas supplier, investing nearly $240,000 and not having a lot of customers on their line. This is great for the county schools, but you’ve got to look at this from a business standpoint….natural gas firms and other types of businesses have to look out for their stockholders.”

Hora asked the school board if they would sacrifice some of their fuel cost savings to help pay for the natural gas infrastructure.

“If all these numbers are right, how much would you be willing to give up so that in the future you can save money,” Hora inquired.

Another piece of the puzzle, Hora said, is the price ratio differential between fuel oil and natural gas.

“Any contract that you would write would have to have to address the different ratios in price,” Hora suggested. “You want to maintain that pricing differential so that any commitment you make to the natural gas supplier that it fluctuates, giving them x amount of dollars for the capital (investment) based on the differential (in dollars) between the two products.”

Hora said economic forecasters are saying that natural gas prices in the United States are expected to remain stable based on the domestic supply of that fuel.

There is also a one-time, out-of-pocket expense for the local school system – $25,000 to convert a fuel oil boiler for operation with natural gas.

Hora said that he was looking at the possibility of other Gates County businesses converting to natural gas, thus making it a bit more enticing for a supplier to work out a deal. He stated that the local cotton gin is considering such a move, possibly saving them $35,000 to $40,000 annually on fuel costs.

“The natural gas company is not going to run a new line without an opportunity to make some money…that’s why they are in business, like anyone else, to make money,” Hora noted. “This is beneficial to our county if we want to see commerce grow and natural gas (availability) is extremely important to any manufacturing facility.”

Hora said the entire deal hinges on what the gas company will gain.

“If we’re going to get this deal done you have to have something to negotiate with to give the gas company the incentive to see that you are serious about this deal,” Hora said.

“Do you think they would be willing to negotiate a percentage of the savings rather than all of the savings we will gain from this,” asked school board member Dale Saunders Sr.

“Someone has to spend the $240,000 up front, but we know we can’t do that,” Hora replied. “Right now you’re spending a lot for fuel oil. You’re cutting that down by 38 percent (by switching to natural gas).

“It would seem to me that this deal needs more (natural gas) customers,” Saunders noted.

“Yes, big customers, and right now it looks like we only have the cotton gin,” said Hora. “It would be nice to have a big manufacturing company to come to Gates County. That would generate revenue for gas. If that happens down the road then that becomes a negotiating point for the schools.”

“I would want to know what they will offer before I throw my cards on the table,” stressed School Board Chairman Doug Lilley.

“That’s right, but you’ve got to have a game plan when you go in there to put your cards on the table,” Hora responded. “You need to know how far you’ll go, how much you are willing to give up, before you start negotiating. The gas company knows right from the start that they have to produce the revenue from sales to recapture the $240,000 in start-up costs.”

Hora suggested the school system talk with the owners of the cotton gin to see what they would be willing to sacrifice for negotiating purposes.

Board member Ray Felton, after recalling certain points of how natural gas companies invested in northeastern North Carolina decades ago, said he was of the opinion that this deal may be a big gamble to take.

“It’s almost like going to Las Vegas and spinning a roulette wheel hoping that this relationship with the gas company and their pricing remains as they are now,” Felton stressed. “We’re also spinning that roulette wheel if we think we’re going to get a payback if big industry comes here. The natural gas line here was put in 10 or 15 years ago. What are we doing different today than then to attract new industry to tap onto that line.”

Felton said what he thinks is preventing big industry from locating in Gates County is the lack of “a trained and willing work force.”

“Without population, you can’t have a trained and willing work force and you can’t have a population increase without jobs…they all go hand in hand,” Felton said.

“We only have about 35 residents per square mile in our county,” Hora observed. “When most any retail business looks at those numbers, it becomes very difficult for them to locate here without a bigger base of a revenue stream.”

“I agree that this can be viewed as a gamble, but that’s why you have to get the gas company to tie in to a stable rate,” Hora said. “They’re at just as much risk as you are. As it stands today it’s a good deal, but no one knows what the future holds.”

“It looks like we’re off to a good start with this discussion,” Lilley said. “We need to first put together a game plan and take it from there.”

About Cal Bryant

Cal Bryant, a 40-year veteran of the newspaper industry, serves as the Editor at Roanoke-Chowan Publications, publishers of the Roanoke-Chowan News-Herald, Gates County Index, and Front Porch Living magazine.

email author More by Cal