Passing Gas: The Business of Keeping Watertown Warm

Fall is here. Furnaces across town have begun their daily work. We adjust a thermostat, hear a click, and expect warm air. What happens between that click and the gas well is considerably less simple.

Watertown Municipal Utilities is the name on most of our bills, but WMU is the last stop in a chain of companies stretching across North America. Some pull gas from the ground. Some prepare it for travel. Others sell it, finance it or operate the pipelines that carry it. Their decisions help determine what our heat costs.

Well, well, where does it come from?

Let’s start with the drilling companies. Tourmaline Oil and Canadian Natural Resources produce gas in western Canada. Chord Energy produces in the Williston Basin. These are examples of producers in regions connected to the pipeline network that can serve our part of the country.

Once gas is pulled out of the ground, it needs to be gathered and processed before it enters a major pipeline. Then someone has to buy it. Someone needs the right to move it. Pipeline operators have to deliver it to the right place, and WMU has to carry it the last mile.

That’s a remarkable amount of coordination behind a thermostat setting.

Publicly available WMU documents identify three gas sellers: BP Canada Energy Marketing, J. Aron and Sequent Energy. Northern Border, operated by TC Energy, is identified as Watertown’s primary incoming pipeline; Northern Natural Gas provides another connection. A seller is not necessarily a producer, and owning gas is not the same as having the pipe to deliver it.

That’s why “Where does our gas come from?” has more than one answer. Watertown’s heat belongs to a much larger economy. Local ownership of the pipes beneath our streets does not mean local control of every decision made before the gas reaches them.

Wall Street or Main Street?

One name in WMU’s supply records seems especially out of place beside a furnace: Goldman Sachs. They own J. Aron, a market maker and derivatives dealer, which transacts commodities like natural gas. 

Through the Central Plains Energy Project, Watertown participates in long-term gas arrangements involving J. Aron. Central Plains has used bond financing to pay in advance for gas supply, then sells portions of that supply to participating public utilities.

Read that sentence again. A Wall Street firm, a bond-financed gas deal and a municipal utility all meet at the same household heating bill.

It would be easy to sensationalize that. It would also be lazy. A complicated deal can be a smart way for a small utility to obtain favorable terms it could not secure alone. Complexity is not proof of a bad bargain. Nor is a promised discount proof of a good one.

The question we should ask is straightforward: What did the deal deliver?

How much of Watertown’s gas comes through it? What savings has WMU realized after project costs? What commitments did the city make in exchange? When market conditions change, which party carries the risk?

Those are not anti-business questions. They are the questions we would ask before signing a long-term deal for our own household. The dollar amounts are much larger, but the standard should be the same.

Who’s next in line?

The energy business is changing. Williams, which owns Sequent, is pursuing large data-center energy customers. TC Energy is investing in pipeline capacity. Producers can seek buyers in multiple markets.

That doesn’t mean a data center somewhere else has taken gas away from Watertown, or that our next bill will rise. It does mean WMU makes its purchasing decisions in a market where other customers are making their own plans.

A large buyer might want years of guaranteed supply. A producer could see a better opportunity elsewhere. A pipeline operator may build new capacity for customers willing to commit to it. None of those choices is made with Watertown alone in mind.

So what should our community do? Don't panic. But also don’t pretend we can become independent of the wider market. We do need to think ahead. What is secured, what remains flexible, and what is the effect if the price or availability of gas changes?

That planning has a cost. So does being caught without a plan. The people tasked with that planning? The members of WMU’s Utility Board. 

The Bottom Line

The next time my furnace starts, I probably won’t think about a gas well, a Goldman Sachs subsidiary or a pipeline reservation. I’ll be glad the house is warm. But now I know that the click of a thermostat is also the sound of dozens of decisions made beyond our walls.

The least we can do is understand the ones made on our behalf.

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