A long-standing lawsuit involving the city of Somerset and a natural gas company has finally been put to rest, but not without controversy.
The Somerset City Council met Monday night and voted 6 to 2 in favor of approving the settlement between Continuum Energy, LLC, formerly called Seminole Energy Services, and the city. Four council members did not attend the meeting.
The city agreed to pay $75,000 to Continuum Energy, ending a suit that has been in court since 2009. The dispute was over the costs associated with the construction of the city's natural gas processing plant.
During the meeting, city attorney Carrie Wiese was asked by Mayor Eddie Girdler whether this was a good agreement for the city of Somerset.
“Absolutely, yes,” Wiese said. “I think we got well more than $75,000 out of the company, even with them pulling out and us having to build our own plant.”
However, Council Member Jim Mitchell disagreed.
“I thought it was wrong what they (Seminole Energy) were doing then,” he said. “I don't agree with giving them a dime myself.”
Mitchell and Councilor Linda Stringer cast dissenting votes.
Girdler explained that wrapping up a lawsuit that has been going for five years was a benefit to the city.
“It's a very complicated situation when you deal with oil, gas and mineral rights. It's a complicated mess in Kentucky. So, I think the $75,000 is going to save the taxpayers a lot of money.”
Girdler acknowledged that the settlement would not be a popular decision with some taxpayers and council members.
“These are complicated matters, and there's no good or bad ways of viewing these things. Sometimes you take the lesser of two evils,” he said.
The controversy stems from the city's transportation agreement in March 2009 with Seminole Energy that included services connected to a natural gas processing plant that the city was building near the Pulaski County and Laurel County line.
The city contends that Seminole “jumped the gun” without city approval and attempted to install a different processing process in the same area.
Seminole's process was unacceptable and not in the best interests of the city, Girdler said.
When the city built its processing plant and leased the plant to a different company, Seminole filed suit in Pulaski County Circuit Court stating that they had spent $750,000 on easements, specialized equipment it had manufactured in Texas and an electrical facility. Seminole claimed that Somerset owed them compensation for those costs.
Girdler said that the settlement, for the lesser amount of $75,000, was simply a way to end the dispute with the company, now known as Continuum Energy. This will allow both parties to move forward and continue to work together.
The city of Somerset denies any wrongdoings or that it is liable to the company for damages.
Girdler pointed out that the city earns around $500,000 yearly from its sales of natural gas, so the city is easily able to absorb the cost of the settlement. He also said that the city currently has a good working relationship with Continuum Energy and will continue to work with them in the future.
Continuum Energy does marketing for natural gas suppliers around the state. Continuum and similar companies are responsible for selling unused product to other companies, and Somerset requires this service from the company, Girdler said.
“Continuum Energy is essential for people putting the natural gas on our pipeline, which we get a transportation fee for,” Girdler said.
He also said that the city makes about $2 million on transportation fees.
Wiese said that the city's insurance company covered Somerset's legal fees for the lawsuit, but Continuum Energy paid its fees out of pocket. The city was essentially paying for the court costs of the energy company.
Girdler reiterated that ending the case now meant fewer costs for the city in the long run.
“Even if we win at the circuit court level, they (can) appeal it, and we would be spending hundreds of thousands of dollars in legal fees.”
Other items of business at Monday's meeting:
• Girdler updated the council on Senate Bill 130. He confirmed that two professional organizations, the Kentucky Association of Cities and the Kentucky Association of Counties, came out in opposition of the bill. Girdler said the bill would not only affect gasoline sales, but also parks, marinas and golf courses.
• Girdler said that gasoline costs rose recently, which meant the city's gas station had to raise prices. He added that sales had increased four times since other local stations increased their prices after the announcment of Senate Bill 130.
• The council approved a one-time utility adjustment for residential customers within the city of Somerset. This will be a $30 credit to offset the high cost of heating homes during the winter storm. The credit will be applied whether the residence was heated by natural gas or by electricity. It will be applied sometime after April 1.
• Garbage pickup should be resuming its normal schedule after being delayed last week due to the snow. All trash is being picked up unless a garbage bag is frozen directly to the ground, in which case the bag will be picked up after the ground has thawed to prevent ripping the bag. Pick-up for recycling has not resumed.