City attorney flags legal risk as committee forwards storage agreement; mayor authorized to sign ahead of resolution vote

The Gallatin City Council Committee on March 25 forwarded resolution R2503-16 to the full council and authorized the mayor to sign a firm storage service agreement with Eagan Hub Storage before the resolution comes back for a final vote.

David Kellogg introduced the item, explaining that when the contract was reviewed by the city attorney it was returned because the contract's venue clause identified Texas instead of Tennessee; Eagan Hub said the storage terms are part of a tariff approved by the Federal Energy Regulatory Commission and declined to change that language.

City Attorney Susan spoke directly and said she was not comfortable with the contract language. "I'm not okay with it. It violates our policy and I need everyone to understand that, we will lose if we are to be in a lawsuit, we lose a lot of our defenses," she said, warning that choosing Texas as jurisdiction could mean the city would lose sovereign-immunity protections and related defenses. She said she had discussed the matter with Kellogg and considered the litigation risk low, but could not endorse the contract under current policy language.

Kellogg told the committee the city had searched for other storage options and that this provider was the most readily available and cost-effective option; he said losing access to the facility would leave the city with few alternatives.

The committee voted to forward the resolution to the full council. At the meeting the body also voted on a separate motion to allow the mayor to sign the contract the week of March 25 with an effective date in April to maintain alignment with the city's pipeline purchasing and storage schedule. That motion was made by Councilman Pan and seconded by Councilman Carter. During the vote at least one member signaled an abstention; the meeting record does not show a full roll-call tally for that authorization. The city attorney and staff said the contract has existed in various forms for about three decades and renews every 10 years.

Kellogg said the vendor has declined to change the jurisdiction language because the storage service is included in its FERC-approved tariff. Committee members expressed concern but acknowledged limited alternatives for storage capacity.

The committee forwarded resolution R2503-16 to council for final action and authorized the mayor to sign the contract ahead of that vote to avoid a break in storage services.