AEDC signs 10-year, $35 million natural gas contract with Elk River Public Utility District

  • Published
  • By Patrick Ary
  • AEDC/PA
ARNOLD AIR FORCE BASE, Tenn. --  AEDC has decided to expand its current natural gas supplier's role and responsibility for the safe and reliable delivery of natural gas.

On July 1 the Elk River Public Utility District (ERPUD) signed a new 10-year, $35 million contract with the government for natural gas, operations and maintenance of pipelines to AEDC and now an expanded operation supplying gas through an ERPUD-replaced distribution system. The government previously owned those lines and ATA, the operating contractor at AEDC, previously operated and maintained them.

The new piping replaced aged piping that needed upgrades. All valves, equipment, meters and connections were upgraded. AEDC points of delivery were reduced and connections to abandoned sites were terminated. All this work ensures AEDC and ERPUD that natural gas supply and service for the next 10 years will be performed with the least amount of operational risk.

In 1997, the Secretary of Defense directed Department of Defense installations to study privatization of their utilities, citing the need to recapitalize or upgrade utility systems that had not competed well for funding. The Secretary of Defense also noted that utility operation and maintenance was not a core function of the DOD and would likely be performed more efficiently and effectively by industry or local utility suppliers.

AEDC began working with ERPUD in 2009 to privatize the AEDC natural gas system, after a competitive utilities privatization contract option was completed without an award.

AEDC went to the Air Force Civil Engineering Support Agency, which agreed to provide $1 million in funding for the pipe replacement. ERPUD started replacing the pipes in June 2010. In September 2011, ERPUD took custody of the last segment of AEDC's natural gas lines, meaning the utility is now the owner of and responsible for operation and maintenance of the lines that distribute natural gas on the complex's property.

ERPUD took ownership of the system section by section as it was replaced. Corey Rice, a project manager in AEDC's Civil Engineering Branch, said ERPUD's control of the line will alleviate concerns on behalf of the complex if a problem ever did occur. Elk River performs gas line maintenance and repair every day; according to Rice, ERPUD has much more experience when it comes to maintenance of a natural gas system. Moving out of the gas line business means the complex can focus more on the mission.

In addition to handing over the roughly 10,000 feet of line inside the fence, on July 1 AEDC signed a 10-year, $35 million supply contract with ERPUD for natural gas.

"Moving to a 10-year contract is a good thing," Rice said. "A lot of people and time are involved in renewing a contract on an annual basis, both at AEDC and ERPUD; starting in 2013, AEDC will perform an annual review of the contract. This will take much less time and only involve one or two people. We will not need to renegotiate the contract with ERPUD until 2022. We now have a long-term contract. This is good for ERPUD and AEDC."

ERPUD has provided natural gas to AEDC for decades, but the contracts were much shorter and ERPUD only controlled the lines up to the fenced-in portion of the complex. ERPUD general manager Mike Gundersen said he is happy to have a long-term contract with the utility's largest customer.

"This gives us some stability and helps us with some strategic and long-term planning," Gundersen said. "It's very helpful to know you have that commitment for an extended period of time."

AEDC uses natural gas for a wide variety of operations. It's piped into steam plants on base for heating and freeze protection. It also fuels dryers that provide dry air for testing at the Engine Test Facility and Propulsion Wind Tunnel Facility.

Bob Walker, technical director of AEDC's Civil Engineering Branch, said he is happy with the service ERPUD has provided.

"We've not had any major curtailments or incidents regarding their service to us," Walker said. "They have provided reliable and sustainable natural gas. We are also very happy to have successfully completed this part of our utilities privatization effort."