FRANKFORT — A powerful lawmaker is seeking a change in state law that would boost an “unprecedented” natural gas pipeline project in his home county.
House budget committee chair Jason Petrie, a Republican from the Todd County seat of Elkton, is backing an exemption from state regulation for the project which is aimed at spurring industrial development. Whether the project must receive approval from the Public Service Commission is under dispute in Franklin Circuit Court. Petrie’s legislation would end that dispute in the pipeline’s favor.
Petrie four years ago secured $30 million in state funding for the Pennyrile Regional Energy Agency (PREA) — created by the Todd County cities of Guthrie and Trenton, which have a combined population of fewer than 2,000. PREA is trying to build something the PSC considers unprecedented for a city: a 53-mile natural gas pipeline stretching across Todd, Christian, Trigg, Caldwell and Lyon counties.
PREA has argued the pipeline is an economic development boon, expanding gas supply to “large gas users” including a Novelis aluminum recycling plant in Guthrie along with “unserved and underserved areas” in the region, according to a court filing. The agency says Guthrie’s gas supply from a small supply line from Clarksville, Tennessee, has been exhausted.
County fiscal courts in the region have passed resolutions in support of the proposed pipeline, and PREA announced last year it had finalized a contract to supply the Fort Campbell military installation with natural gas. PREA received a $30 million appropriation from the state budget in 2022, which Democratic Gov. Andy Beshear credited Petrie for helping secure. WPKY reported last year the estimated cost of the project is $120 to 150 million, and the Kentucky New Era reported last year the pipeline would draw its supply from the ANR pipeline that runs through Western Kentucky.
“You’re talking about a major artery for economic development,” Petrie told the Lantern last week in Frankfort. “There are several businesses that can benefit from it. You’ve got a commerce park over in Christian County that could benefit from it.”
But the PSC, along with other interested parties, are raising questions over who would be the regulatory backstop for the pipeline’s ratepayers — if not the PSC — if problems arise during construction or from utility service.
John Park, a PSC attorney, told Franklin Circuit Judge Thomas Wingate on Monday that regulation by the commission would ensure customers living outside Guthrie and Trenton have recourse if problems with the pipeline arise, along with preventing “wasteful duplication of pipeline facilities.”
Park noted that natural gas distribution company Atmos Energy also services the Western Kentucky region.
“Without those protections, PREA could do pretty much whatever it wanted to do,” Park said.
It’s also a pipeline that hasn’t materialized yet. PREA cited “unforeseen delays” in a lawsuit complaint last year and stated it had planned to have the pipeline in service by early 2026. PREA is also suing some landowners along the planned pipeline route, citing eminent domain law, seeking easements for the pipeline.
Wingate said on Monday he likely would rule in favor of PREA because the agency was “correct in its analysis” of the issue, echoing an argument by PREA that the PSC was stalling economic development.
Who will regulate the pipeline?
The sticking point between PREA and the state’s utility regulator involves PSC jurisdiction.
State law makes the commission responsible for overseeing most Kentucky utilities. But municipal utilities — those owned and operated by local governments — are not subject to PSC regulation, the rationale being that local officials and voters will hold the utilities accountable.
The PSC does regulate service, rates and proposals by more than 1,000 electric, water and gas utilities, ranging from small water districts providing drinking water to rural communities to massive investor-owned electric utilities such as Louisville Gas and Electric and Kentucky Utilities.
Kent Chandler, the former chair of the PSC and a resident senior fellow of energy and environmental policy at the think tank R Street Institute, told the Lantern that competition between utilities can create “wasteful duplication” of service — such as having multiple wires or pipes running to the same house. To avoid that, utilities are essentially given monopolies over service areas, and in exchange those utilities are regulated by the PSC.
Chandler said if customers of a municipal utility are unhappy with bad service or high rates for water or electricity, they can voice concerns at the ballot box.
But if a city wants to extend utility service beyond its borders — as is the case with the cities that formed PREA — customers who don’t live in the city would not have a clear way to express concerns.
“I think there are outstanding questions of absent PSC jurisdiction: what is the governance and what is the protection of prospective customers look like?” Chandler said. “It is not crazy to think that local governments would want to provide gas service for economic development purposes where it doesn’t currently exist. There is, however, embedded in the PSC statutes, the legislature’s expectation that folks will not run service into areas that already have service.”
In the court case between PREA and the PSC, the pipeline agency claims it is defined as a “city” under state law and not subject to PSC regulation because it is an entity created by two cities. The PSC argues that PREA does not qualify as a city and that the scope of the project goes far beyond what cities are exempted from.
The PSC had previously directed PREA not to begin construction on the pipeline or begin utility service from it until receiving permission from the regulator. That’s the directive that PREA is challenging in court and that would become moot under Petrie’s legislation. He amended Senate Bill 8, which increases PSC membership from three to five, to exempt PREA exemption from PSC regulation. The bill is awaiting a vote in the House.
Chandler said Petrie trying to change state law is a “legitimate action” to provide the PSC direction.
But Audrey Ernstberger, a lobbyist with the environmental legal group Kentucky Resources Council, has expressed concerns to Petrie and other lawmakers that Petrie’s effort appeared designed to “circumvent” a pending court decision while allowing PREA to “serve industrial and commercial customers outside traditional regulatory structures.”
“Those customers, like all utility customers, deserve oversight to ensure rates are fair, just, and reasonable and that basic consumer protections are maintained,” Ernstberger said.
Petrie changed the language he added into SB 8 to clarify that the pipeline is serving commercial and industrial customers, not residential customers.
“I think there’s going to be sufficient oversight in the way it’s put in the ground,” Petrie told the Lantern, mentioning the federal government also provides oversight of gas pipelines. “I think the ratepayer protection is a valid concern if you’re dealing with residential. That’s just never what this has been designed for.”
Courtroom scrutiny
Meanwhile, PREA is suing some landowners in Western Kentucky for access to land to build the pipeline, and attorneys representing those landowners are raising questions about the pipeline’s status, its financial viability and whether PREA has eminent domain power.
Eston Glover, the chair of PREA’s board and the former CEO of the Pennyrile Rural Electric Cooperative, in a February deposition for a Christian Circuit Court case said the $30 million received from the state was the only funding PREA had so far, but the agency was in communication with banks and supporting Fort Campbell in applying for a loan to help build the pipeline. He said PREA has spent $7-8 million of the $30 million in state funding.
PREA’s contract with Fort Campbell stipulates gas has to be delivered to the military installation by April, according to the deposition. Glover said “another entity” that he refused to name would be supplying the gas. When asked by an attorney in a condemnation case what accounting or reporting requirements are in place for the $30 million state appropriation, Glover also said: “We don’t send anything to the government. We keep both sides updated on what we’re doing.”
When asked who he updates, he said he provides updates “orally, personally” to Petrie and the governor.
Petrie, when asked about Glover’s deposition, said he’s talked with Glover “less than a handful of times” about the progress of the pipeline.
A Beshear spokesperson did not provide a response to Lantern questions about the accounting requirements for P
