Yale had a population of 979 at the 2020 census, and according to Mayor Jason Brown, each of them, “every man, woman and child”, owes $1,500 to cover the bill from a former natural gas supplier who is suing the Yale Water and Sewer Authority. It’s $3,800 for anyone with a gas meter, he said.
On Friday, the Yale City Commission, acting in its capacity as trustees of the Water and Sewer Authority, voted to hire Oklahoma City law firm Elias, Books, Brown and Nelson to prepare for a bankruptcy filing under Chapter 7 for the trust.
Administrator Brian Porter, who abstained from voting due to his work in the financial sector, expressed his opposition, as did a number of residents present at the meeting. Administrator Paul Rosenquist was unable to attend.
The issue has been under discussion for nearly 18 months as Yale and a handful of other small towns in the same area – Hallett, Jennings, Oilton and Mannford – have grappled with how to handle their gas bills.
Oklahoma Municipal League executive director Mike Fina said he believes limited infrastructure and limited options for suppliers have contributed to the difficult situation for the entire group.
But Yale’s mayor noted that their balances were in the hundreds of thousands, while Yale’s bill was closer to $2 million.
BlueMark Energy LLC, asks the Tulsa County District Court to award more than $1.5 million, including interest and penalties for a balance it says Yale owes for natural gas delivered in February 2021 during winter storm Uri. Gas prices rose sharply during this period due to a sharp increase in demand and supply problems.
Yale officials, including City Manager Phillip Kelly, say the city’s actual usage during that time was measured and the city should have owed $211,000, which has already been paid.
They dispute the remaining charges and in September 2021 filed suit in Payne County District Court against Keystone Gas Corporation.
Keystone had a network of pipelines connected to the Yale Minor Pipeline that provided gas delivery from BlueMark Energy, a third-party supplier.
The city entered into a direct agreement with BlueMark in October 2021 after being informed that it would not have natural gas supply for its customers because Keystone was in arrears and would no longer be able to buy gas at BlueMark.
At the same time, it entered into a dedicated capacity lease agreement in which Yale agreed to pay Keystone $68,000 to transport the gas it had purchased directly from BlueMark.
According to the Trust’s filing with the Payne County District Court, Keystone agreed to reimburse Yale for all of its gas sold by Keystone to third parties or otherwise used by Keystone. It was to be paid at Yale’s expense, either through offsetting capacity payments or through direct payment.
Yale claims it was told Keystone would use the minimum amount needed to supply 26 residential customers, but city officials believe Keystone instead diverted “substantial portions” of Yale’s gas to supply customers like Cimarron Correctional Facility , a 277,640 square foot jail located near Cushing, and other customers who were not disclosed at the time of closing.
As a result, in its filing, Yale requested nearly $75,000 for the period October 2020 through June 2021, with the exception of February 2021, when historically high gas prices pushed the amount owed by Keystone to nearly of $1.2 million.
Attorney Wyatt D. Swinford, who is part of Yale’s legal team in the case, said there wasn’t much hope of collecting the money because Keystone was already in receivership.
The directors voted in July 2021 to give notice that they were terminating the contract with BlueMark Energy as a new pipeline was completed that would allow Yale to purchase Oklahoma Natural Gas on more favorable terms and with greater flexibility.
BlueMark filed a breach of contract lawsuit against Yale on June 28, 2021 and against Mannford on May 5, 2021, to collect outstanding balances.
The administrators all said they were concerned about the impact of the bankruptcy filing on the city’s ability to secure grants and obtain financing.
Trustee Larry Brown said he didn’t like the idea of bankruptcy, but also couldn’t bear the idea of paying something the city doesn’t owe.
“We were wronged,” he said. “It’s about the money, but it shouldn’t be. There is no gray area here. We have been wronged.
Oklahoma State has funded grants for Yale and other small towns that will be administered by the Oklahoma Department of Agriculture, but it takes time to develop a new state program.
It had been estimated that the apps would not be available until September. But in light of a potential bankruptcy action by Yale, state officials assured city leaders he could act more quickly.
Porter said Agriculture Secretary Blayne Arthur said they could be available as early as August.
He recommended suspending the bankruptcy to give the subsidy program time to get up and running.
But there are few guarantees, residents feared.
Administrator Larry Brown said Yale is not guaranteed to get all of the $1.4 million it still owes. Accrued interest will increase the balance, leaving the city potentially owing more than it can pay, even if it gets the full grant.
Administrators said they felt pressured and that BlueMark did not appear to be negotiating in good faith with them.
Administrator Richard Adsit said he felt BlueMark was trying to bully them into borrowing money to pay off the debt faster.
BlueMark charges 18% interest on Yale’s balance, or an additional $25,000 per month, driving up the final cost of settlement. The company’s most recent – and what was billed as the final pre-trial offer – lowered the interest rate to 12% and allowed Yale to pay the balance over 48 months, Swinford told administrators. .
But some residents also wondered if there was any guarantee that filing for bankruptcy would eliminate the debt. Resident Devin Greenfield acknowledged the difficult decision for administrators to make, but asked if action could be delayed for a few months.
Swinford said there are uncertainties, but the bankruptcy filing prevents BlueMark from receiving judgment.
Other options were presented at the special meeting. Josh Robinson, vice president of American Heritage Bank at Yale, said the bank was willing to work with the city to help the trust avoid bankruptcy.
Resident Stephen Bellew told trustees he works in finance and sees the impact bankruptcy can have. Bank financing would be more predictable.
“The unknown is much more risky,” Bellew said.
Bankruptcy will take time to prepare for, Swinford said. If the grants become available before the documents are filed, the trust could change its mind.
“Once it is filed, it is no longer your responsibility,” he warned.
Whatever Yale does, it has to be serious, Swinford said. He told administrators he would contact BlueMark one last time, but said the company had already rejected an offer from Yale to pay $1.4 million when state grants became available.
The trustees voted 3-0 to file for bankruptcy.
The Water and Sewer Trust Authority will be wound up, but it won’t impact operations because the city owns all the infrastructure and leases it to the trust, city attorney Roger McMillion said. The trust has equipment that will need to be sold, but that’s about it.
A new trust called the Yale Utilities Authority will be created to administer all of the city’s utilities.
“I think we’re done playing checkers,” Porter said.