The City Council of Webster City approved a new 25-year agreement with Black Hills Energy during its meeting Monday.

The new agreement passed the first reading, but ultimately a question on the November 5 ballot will ask voters whether Black Hills should continue as operator of the city’s natural gas system, or if it should be run by the city.

A May 31, 2024, letter to City Manager John Harrenstein from Black Hills Energy, opened negotiations between the city and Black Hills which continued throughout the summer.

The new agreement is a compromise; each party got something it wanted.

Without going into detail, Harrenstein said, “Earlier this year the city was faced with an insulting, unworkable offer from Black Hills.”

He’s likely referring to Black Hill’s contention the city would owe it $4 million should voters decide to return operation of the gas utility to the city. This is the amount Black Hills has invested in Webster City’s natural gas distribution system in the last 20 years.

Included in that sum is the cost of constructing 9.3 miles of natural gas pipeline, 1,346 service line replacements, and moving 128 gas meters.

Most of it, though — $3.3 million — was spent on a new office and warehouse at 225 Commerce Drive, Webster City.

The new facility is more than a one-to-one replacement for the building at 644 First Street which Black Hills rented for many years; it’s a regional service center, housing a staff of 18 people who provide gas service to 30 cities and towns in central Iowa.

Black Hills’ position isn’t a strong one. Both the previous agreement, which took effect in 2005, and the new agreement, which is set to take effect next year, specify: “Black Hills will, at its own expense, maintain the properties in good repair and operating condition during the term of the agreement, and, at the expiration or termination of this agreement, subject to the reimbursements noted below, it will surrender the properties to the city …”

In other words, Black Hill’s expenditures over the years were simply a cost of doing business.

The essence of the new agreement is that Black Hills would be granted a nonexclusive franchise to sell and distribute natural gas in Webster City for 25 years. Black Hills agrees to provide annual use data and full access to its records, receipts, and other documents pertaining to its Webster City natural gas operations to city staff as requested.

As of May 30, 2024, the natural gas distribution system served 3,600 residential and commercial customers in Webster City. Black Hills agrees to maintain the system “in good repair and operating condition for the term of the agreement.”

The company’s annual transportation fee, effectively its cost to use the natural gas distribution system in Webster City, will be set at $242,439.65 per year, beginning July 1, 2025, and increase 2.36% per year beginning July 1, 2026. This amount is payable to the city, and can be moved into the general fund at the City Council’s discretion.

Harrenstein said the transportation fee collected from Black Hills for 2024 is estimated to be $152,966.17.

The company also agrees to “maintain a facility within the city,” which, at the discretion of Black Hills, may be either a warehouse or office “at all times during the terms of the agreement.” It meets this criterion with the new facility on Commerce Drive, which opened March 15, 2021.

The agreement also requires Black Hills to “make a reasonable effort to place a drop box …” for customer payments “at a convenient location in the city, such as at a grocery store.”

This addresses the complaint the company effectively became inaccessible when it moved to its new office. A sign on the front door clearly states “this office is not open to the public. For customer service, visit blackhillsenergy.com or call 888.890.5554.” Customers were able to stop at a counter and pay gas bills at the previous, downtown location.

Importantly, where handling of a volatile, explosive substance such as natural gas is concerned, the agreement requires Black Hills to “provide emergency service, or contact information of Black Hills, which is intended to be available continuously.” Five of its Webster City staff reside here so presumably that translates to fast, local response in case of cut lines, leaks, accidents, etc., which has been available from the company in the past.

A broadly-worded requirement of Black Hills in the new agreement is that it “continue to make contributions for economic development, safety programs, community benefit in substantially similar amounts” as in the prior agreement.

By most measures, Black Hills has met this requirement in years past. Some recent examples include donations to: LIFT WC, the new mini pitch soccer field in East Twin Park, restoration of the fire-damaged Webster Theater, ACE Spanish/English language immersion program, Trees Forever, and the Webster City Area Chamber of Commerce.

The City Council approved the new agreement unanimously.

Mayor John Hawkins said, “We have an agreement with Black Hills which is beneficial for all. I look forward to another 25-year great partnership with them.”