Port Authority: What’s really going on

Mitchell County Supervisor Stan Walk and supervisors from Cerro Gordo, Worth and Winnebego counties formed the Port Authority in 2015. EJ photo/Travis Charlson.

Editors note: After looking through hundreds of pages of documents,  several public meetings and dozens of interviews, the EJ breaks down what’s going on behind the controversial Port Authority.

A potential project between Mitchell and Worth Counties looking to bring natural gas to the region has come under fire as of late, as county leaders fear that rising tensions and misinformation are giving people the wrong idea.

Mitchell County Supervisor Stan Walk, who has been involved with the “Port Authority” project since its inception in 2015, got into a lengthy disagreement about it on Facebook with former Iowa legislator and Osage Municipal Utilities General Manager Josh Byrnes.

The spat has continued to escalate, as recently Walk sent Byrnes an email saying he would “take the gloves off” if Byrnes continued to attempt to de-rail his projects. Walk later said he meant no physical harm, and said “I’m a 70-year-old-man. I’ve never [physically] fought someone in my life and I don’t intend to start now.”

Local news outlets that have picked up the story have mainly focused their coverage on the dispute between Byrnes and Walk, and have yet to take a deeper look into the Port Authority project in question.

Some concerned Mitchell County citizens want the County to pull out of the the deal, saying that they don’t feel there has been enough transparency with the project.

In this article, we attempt to look past the political disputes and lay out the facts of the project, why and how it was started, and the reasons why citizens are concerned.

The gas problem

Here’s one fact that neither side can deny: potential companies looking to build new facilities want access to natural gas. The problem? Mitchell County doesn’t have a whole lot of it outside of Osage and parts of St. Ansgar. And even in some of those areas, there isn’t much to spare.

“We’ve done a number of studies, we’ve had U.S. Energy go up and down our lines,” said Mitchell County Supervisor Joel Voaklander. “Natural gas has been a problem for this county.”

So why doesn’t a company bring more into Mitchell County?

It’s just like the ‘chicken vs. the egg’ conundrum –  companies won’t take the risk of building a facility and hoping a natural gas pipeline comes along someday. On the flip side, no one wants to build a pipeline and hope a facility will come along.

To make matters worse, federal law prohibits gas companies from prospecting over 10 percent of their capacity. That means they can’t install natural gas in an area without having an existing customer already there.

So which one comes first? The chicken, or the egg? The pipeline, or the company?

If they want to find ways to attract industry and growth to the region, local governments need to find away to address this problem.

The gas solution

In February and March of 2015, Cerro Gordo, Mitchell, Winnebago, and Worth Counties all entered into an agreement called a “Port Authority” in order to address the natural gas problem. Each county’s Board of Supervisors passed resolutions unanimously to enter into this agreement in January 2016.

Chapter 28J of the Iowa Code allows governmental bodies, such as city or county governments, to join together into these “Port Authority” agreements, through which the various parties involved can work together to solve problems and build utilities and infrastructure.

The “North Central Iowa Economic & Port Authority”, as it was named, consists of elected officials from each of the four counties. According to Iowa Code, they have the same legislative and executive rights, privileges, and powers that county and city governments have, excluding the ability to levy taxes.

The Port Authority’s meetings are open to the public and the minutes of those meetings are available upon request.

The newly formed Port Authority then started what’s being called the “Worth/Mitchell Pipeline Project,” which looks to potentially connect a natural gas pipeline between the two counties.

During an August 8, 2016 Port Authority meeting, a representative from Montana-Dakota Utilities, a natural resources company based in Bismarck, North Dakota, gave a presentation on a potential natural-gas pipeline from south of Joice to St. Ansgar, according to meeting minutes acquired by the EJ. The estimated cost for such a project was around $16 million.

Stan Walk then said at the meeting that Mitchell and Worth Counties needed to commission a study to come up with a design, have proper surveying and permitting done, and weigh environmental factors to determine if such a project was even do-able.

During a subsequent Port Authority meeting on January 10, 2018, Worth and Mitchell counties considered bids before approving an $800,000 contract with Montana-Dakota Utilities to perform such a study, with   both counties approving $400,000 of TIF funding for the cost of the contract.

According to the Port Authority, the completed study will include a “shovel ready” project plan, so that if the project doesn’t move forward right away, it can be picked up right where it was left off in the future.

Both county attorneys and a legal team from the Iowa Communities Assurance Pool found no issues with the contract, and it is expected to take up to 12 months to complete.

“This [didn’t] happen overnight,” said Joe Myhre of the North Iowa Area Council of Governments, who helped revise Mitchell County’s urban renewal plan. “We did public hearings in Worth County, we did public hearings in Mitchell County, we held consultation sessions with the school districts to inform them.”

Myhre said they also have resolutions of approval from the cities of Joice, Grafton, Kensett, Manly and St. Ansgar—cities that are within two miles of the proposed project.

“All have signed off on the gas pipeline in the urban renewal plan, “ Myhre said. “And again, there is nothing that says it’s going to be built today. They’re just doing the engineering analysis to see the feasibility of it, and where it moves forward.

“It passed all tests on the legal front.”

Why the public is concerned

So far, the only money the Port Authority has committed to the project was to commission this study to look into the feasibility of the project itself. Otherwise, The Port Authority has yet to take any action that would advance the pipeline project, according to Port Authority documents obtained by the EJ.

Durning Thursday’s meeting, the Port Authority board members made it clear that no aspect of the project has been initiated or funded, and those decisions won’t be discussed until the report comes back from Montana-Dakota.

Concerns about a possible conflict of interest or “shady land deals,” as some have called it, stem from a separate land agreement made between the Port Authority and Merlin Bartz, who is a Worth County Supervisor and is also a member of the Port Authority.

It should be noted that the piece of land in question does not sit on the projected pipeline.

Even so, Bartz does stand to gain from the deal, but the “deal” is actually an option on a deal, and one that very well may never happen.

“It’s a long shot,” Walk said.

Port Authority documents revealed that Bartz abstained from voting on any measures relating to the land option deal.

North Iowa Corridor Economic Development Corporation CEO Chad Schreck also said they were very cautious when making the deal, saying it was a “primary concern” that the Port Authority and Bartz didn’t break any conflict-of interest laws.

What is the ‘deal’?

According to the Port Authority board, a company called Midstream Methanol LLC had expressed interest in locating here in North Iowa, with the intent to build a large methanol gas plant.

Midstream Methanol said they would locate elsewhere if a deal couldn’t be reached in a timely manner.

“We had a short time to get a deal done, or [Midsream] was going to walk,” Bartz said.

Land had recently came onto the market adjacent to Manly Terminal, a storage and reload facility north of Manly with access to several class-1 railways.

Realtor Kevin Kolbet said that this land came onto the market because the previous owners wanted to swap it for land closer to their home farm.

In a phone interview, a relative said the previous owners were well aware of the potential that one day a commercial entity might want to develop there. However, the relative said the reason for wanting the swap was to settle a family dispute and the prospect of development on the land they were giving up was “pie in the sky,” and several years down the road at least.

The Port Authority then started asking around to see if someone would buy the land, and hold onto it with the prospect of selling it to Midstream, should a natural gas pipeline be built in the future.

“[The Port Authority] reached out all around the region [for someone] who would hold onto it until they could sell it for economic development,” Kolbet said.

However, no one agreed to purchase the land.

Walk and Bartz both said that some of the prospective buyers that were approached already do business with companies currently at the Manly Terminal, and since a new Midstream Methanol plant would compete with the Manly Terminal, they threatened potential buyers not to purchase the land next to their own.

“The buyers were bullied out,” Bartz said. “The economic development efforts of the county should not be bullied by someone who stifles competition.”

Since the Port Authority couldn’t find any buyers, they were left with few options.

“It was either going to be no land offer for Midstream, or Merlin stepping up to the plate,” Walk said. “And he took the risk and reluctantly stepped up to the plate.”

Bartz bought the 15-20 acre land for $11,000 per acre. The Port Authority entered into a land option agreement with Bartz, which says that if the Port Authority chooses, it can buy the land from Bartz in the future for $25,000 per acre. This option deal is conditional upon Midstream’s approval to enter into a land option as well.

In the option with Midstream Methanol,  the Port Authority would sell the land to them at $28,000 per acre, for $3,000 more per acre.

Land deals like this are fairly common, said Schreck, and it locks the parties into a price so that a competitor can’t swoop in with a better offer.

Members on the Port Authority board said Bartz took a big gamble for the sake of potentially helping North Iowa’s future economic development, as Midstream would be a premiere customer of the proposed natural gas pipeline and would bring upwards of 40 jobs to the area.

Bartz said that big energy companies don’t like the idea of local governments like the Port Authority putting in gas lines, and natural gas companies like Black Hills Energy have opposed such ideas because it competes with them.

  A bill introduced in the Iowa Senate in February 2012 gave county governments the ability to build, purchase and maintain natural gas pipelines as “public utilities”, just like waterworks, sewer systems, etc.

However, Black Hills Energy lobbied against it and the bill didn’t pass.

“Big natural gas is determining winners and losers,” Bartz said. “Where their pipelines go determines what communities live and die.”