West Wendover is poised to purchase the financially beleaguered and near bankrupt Wendover Gas company should the city council accept as expected a feasibility study in next Tuesday’s meeting.
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The study prepared by Bob Springmeyer of the Bonneville Research Institute apparently suggests 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.
While a copy of the study is not available to the public as of press time the following agenda items suggest that its approval is all but a done deal. That part of the agenda is reprinted below:
5. NEW BUSINESS
*a. Presentation of the Wendover Gas Project Phase 1 Feasibility Study and Discussion and
Decision to Approve and Accept Such Study and Other Matters Appropriately Related Thereto
Report: City Manager, Bob Springmeyer Bonneville Research
Review/Comment/Action: City Council
*b. Discussion and Decision to Approve the Interlocal Contract Between the City of West
Wendover, Nevada and the City of Wendover, Utah Regarding Gas Services and Other Matters
Appropriately Related Thereto
Report: City Manager, City Attorney
Review/Comment/Action: City Council
*c. Discussion and Decision to Authorize the City Manager to Proceed with Wendover Gas
Project Phase 1 Matters Including: 1) Proceed with the Related USDA-Rural Development
Financing; 2) Proceed with Related Negotiations Between the City of West Wendover and Mrs.
Nancy Green for the Acquisition of Wendover Gas Company and Propane of Wendover; 3)
Proceed with Related Authorizations from the Nevada Public Utilities Commission and the Utah
Public Service Commission in Regards to West Wendover Operating a Municipal Gas Utility;
and Other Matters Appropriately Related Thereto
Report: City Manager
Review/Comment/Action: City Council
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.
Presumably the feasibility study strongly suggests that getting the casinos back on to the system is vitally important to the success of the project.
In today’s political climate that should not be a problem. The purchase is strongly supported by Wendover’s largest gaming company, the Peppermill Corporation, which in the past Green cast as the chief ‘villain in her company’s demise.
“They just won’t do business with me,” Green tearfully told the council on more than one occasion.
The purchase of the gas company is also supported by Mayor Emily Carter and three out of five city Councilmen Johnny Gorum, Roy Briggs and Saul Andrade all of whom are also employees of the Peppermill Corporation.
The cost to buy the gas company is estimated to be $2.4 million.
The move is not however without opposition. The two non-Peppermill councilmen Izzy Gutierrez and Gerado Rodriguez have both expressed concerns not only about whether the city could take on the gas company but also whether the city should take on the gas company.
“I don’t think we should spend tax payers’ dollars to buy a failing business,” Gutierrez said in the past. “And I don’t think the city should take out a loan to buy a failing business either. This is really something for the private sector.”
However according to financial analyst Paul Kvam the gas system as is has no chance of turning a profit whether public or private or with the casino accounts or without them.
“As a financial analyst, I audited and worked on Wendover Gas before I retired from the PUC in June 2009. To this day, I do not know why Nancy Green built the system.” Kvam wrote last March. “It was doomed to failure from the beginning. Reading Staff’s original report and prefiled testimony on Green’s application for a license, I concluded it was full of hopeful assumptions as to system load (sales of propane) and unrealistic profit potential. I once asked Nancy during an audit why she built it in the first place and she said that another party had made preliminary plans to build it and she didn’t want this party to destroy her business. Well, she ended up building it, and destroying her business! I do believe that a system in Wendover could be successful. First, I would have to be connected to the Ruby pipeline in the north and sell natural gas. Second, everyone (West Wendover & Wendover, UT) would have to connect to it. Natural gas is real cheap these days and its savings, in compared to propane, would pay for the line. Natural gas would diversify the Wendover economy by bringing in new business and saving existing businesses big money in the long run. I’ve talked to Chris Melville about the need to get natural gas into Wendover and others, so I hope I made an impression. The disadvantage natural gas has in Wendover is that Wells Rural sells BPA power real cheap there. But, as sooner you folks go to natural gas, the faster the savings will occur and the better off the community of Wendover will be.”
The prospect of bringing natural gas to Wendover has also fired the imagination of Melville and the Peppermill majority on the city council and is given as the principal reason why the city should pursue the purchase of the gas company.
But that reasoning does not make sense to the man who is the biggest outside proponent of the pipeline.
“For the city to buy the gas company for $2 million is insane,” 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.”