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Waste Watch - Smyrna Natural Gas Issues

Updated: Tuesday, May 20 2014, 11:28 PM CDT
Waste Watch: Smyrna Natural Gas Issues

Stacy Case
  A Waste Watch investigation that involves one of our natural resources.
The town of Smyrna is overpaying, some say, for natural gas by about $4 million dollars.  Plus,  legal efforts to recoup that loss are doing a double whammy to your tax dollars.  

  The Town Of Smyrna is known for its family friendly atmosphere.
US News & World Report named it one of the best places to retire and it's also where the Nissan Leaf is made.

    But for a growing number of taxpayers, recent financial troubles are threatening all that's  'right'  here    Patrick Beauchene is a software account executive, who calls this absolute waste.

  Beauchene has become so passionate about his town's financial trouble, he started  the Facebook page Citizens for Smyrna.  He's deeply concerned his town is stuck in a deal with Municipal Gas Authority of Georgia overpaying 
for natural gas that's invisible to the naked eye, but is a very visible $4.2 Million deficit in the town's budget.  He says we just keep throwing money down the drain.

   Jeff Hollingshead is another concerned businessman who owns Smyrna Ready Mix who's running for Mayor because of what he calls fiscal irresponsibility.  He says, "If we're going to run Smyrna, we're going to have to run it like a business also where we're not tying our hands for extended periods of time and just signing documents that we do not understand."
    Years back, Smyrna elected option 2 in hedging documents  to start buying gas futures,  a practice known as hedging in what is historically a volatile market.

   Vanderbilt Finance Professor Jesse Blocher explains, "The way you typically hedge is by buying natural gas futures which is effectively buying in advance.  It's like prepaying for something. What you're trying to do is you're trying to smooth out some of the spikes both up and down."

   The legal language in option 2, which Smyrna leaders selected, reads:  "The customer .....  chooses to allow the Gas Authority to make all decisions as to how much to hedge, what type of instruments to use and when to execute trades on an ongoing basis." 
   Patrick Beauchene wonders if we should be playing a gambling game with something like this? 

   Smyrna had been selecting certain months to hedge and buy up gas futures to lock in a certain rate,  but argues the gas company hedged on their behalf for an extended period of time without their approval. So, when the price of natural gas fell drastically,  Smyrna was stuck paying the higher rate. 

   Though I asked Smyrna city leaders to explain the loss, they said they  couldn't comment on this pending lawsuit. Their attorney Jessalyn Zeigler released this statement in part saying: " The town's claims against MGAG (Municipal Gas Authority of Georgia) are that it has breached its contract with the town and engaged in deceptive trade practices that resulted in the imposition of several millions of dollars of unauthorized natural gas hedging charges upon the town..... "
   Beauchene reacts, "We continue to bleed cash on this thing both on the actual operation and on the legal fees side."

   Those attorneys fees already are at   more than a million and a half dollars.
Beauchene says that doesn't happen by accident and wonders if it did, does it really take this many years and this many legal fees to unravel something like that?

  Municipal Gas Authority of Georgia  in court papers claims  if Smyrna wanted to have more say so,  it should have selected Option 3 where it could make   its own decisions with respect to the type of instrument, timing of the hedge and volume."

   MGAG shared their side via Skype: I asked Arthur Corbin, "So out of all of the other member organizations.. 60 something.. have any of them sued you?
Arthur Corbin with  MGAG  responds, "No." 
Stacy: "So they must have had an understanding of what they were getting into?"
Arthur Corbin answers: "Yeah, we think they did and ultimately I think the town of Smyrna,  the folks,  I'm not sure the people there today,  but in the past those that got in the program we believe understood."

   Hollingshead sums it up this way," This was just poor planning and a risky investment.  We shouldn't be gambling with taxpayer money."

   As this works its way through the courts,  for now, Smyrna taxpayers are stuck holding the -very expensive- bag.

    If the town is successful in its deceptive trade practices claim, it could be awarded triple damages plus attorneys fees.
   A trial date is set for September 2015.
  Smyrna's efforts last year to pass a 50 percent tax hike was due in part to this natural gas issue.

Waste Watch - Smyrna Natural Gas Issues

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