Maine State Representative and driller/owner Chad Grignon is looking out for his fellow contractors.
By Mike Price
Every time Chad Grignon’s company went to purchase a new drilling rig, his mind quickly began calculating the number of wells needing to be drilled to register the machine in his home state of Maine.
It quickly became a sore point in his eyes.
Depending on the town and its mill rate (tax rate), the motor vehicle excise tax of a new drilling rig in Maine could reach as high as $85,000, according to Grignon. That amount is a combination of Maine’s 5.5% sales tax on the new rig, plus the first year .024 × manufacturer suggested retail price, plus the state registration fee based on weight. The following years don’t include sales tax.
The 47-year-old driller/owner of Pine State Drilling Inc. in Athens, Maine, has purchased five new rigs (four in Maine, one in Ohio) over the last 20 years. However, in Maine alone, Grignon says there have been only three new rigs purchased over the past 15 years.
“We’re not the only ones,” Grignon says. “Cranes—they’re multimillion-dollar pieces of equipment—they’re running into the same problem. We had a 70-ton crane work out of our shop and the company left it registered in New York because it just couldn’t register it here in Maine.”
Grignon, who has worked in the water well industry for more than 30 years, saw the high cost of a state excise tax on a newly purchased rig as a deterrent for his fellow Maine contractors. To the south in neighboring New Hampshire, for example, Grignon says the state doesn’t have an excise tax, nor a sales tax. It costs a flat rate of less than $1500 to register a rig in New Hampshire.
“So that just puts us way off the scale because this incurred debt would come on to us every year because state/local excise taxes are collected by the town to help pay for local roads, or whatever the town puts the taxes collected into its general fund to pay for,” he says. “As much as we want to finance our towns, we just can’t afford it as a small business.
“You have guys here (in Maine) drilling at prices that they drill in New Hampshire and you just can’t do that because of the costs that we incur in taxes up here.”
Up for a Challenge
Grignon went to listen to policy speeches from legislators he knows in February 2016. He expressed his frustration about policy decisions being made in Maine and was put on the spot to run for office.
“And when I’m challenged, I’m more than happy to accept a challenge. And yeah, I got myself into it,” Grignon says with a laugh.
Grignon, who had no prior experience before running for office in 2016, won the Maine House District 118 race by more than 950 votes. His slow winter months of recuperating from the eight busy months of drilling have now been replaced with his duties in the legislature while still running a business. “It’s a balance,” he admits.
Now a two-term representative, Grignon introduced a bill in February 2019 to encourage the purchase of new or used rigs in Maine’s water well industry. The Maine bill, An Act to Clarify the Application of the Motor Vehicle Excise Tax to Water Well Drilling Equipment, caps the full allowable excise tax on any rig to $2500 beginning in 2020. The truck is still excised at the current allowable state/local amount.
The bill was presented to the Taxation Committee by Grignon and by his long-time friend and fellow contractor, Ted Rolfe of Kennebec Well Drilling in Farmingdale, Maine.
In providing information about how equipment is taxed in neighboring New Hampshire, the chairman of the committee didn’t believe Rolfe when he stated contractors there only pay a tax on their truck, not their rig.
Therefore, during the committee hearing, Rolfe called his friend in New Hampshire who recently bought a new rig in 2018 and asked him to send a photo of its registration. Rolfe texted the photo to the chairman.
“It was kind of comical,” Rolfe says of the exchange. “The chairman said, ‘I don’t believe they would give up that tax in the state of New Hampshire that doesn’t have a sales tax.’ I said they do . . . It was surprising that the taxation committee passed it unanimously.”
With unanimous votes in both the Taxation Committee and House, the bill passed on June 4, 2019, and was signed into law on June 19, 2019.
“The cap price, and this is a process, has gone from $85,000 to register a new drill rig to $5000 to $7000 (rig and truck combined),” Grignon says.
“We’re not there where I’d like to be yet, but it’s a huge, huge improvement. It’s actually allowing these guys to see the light at the end of the tunnel, with this being a possibility of upgrading their equipment, which is desperately needed.
“You’re only talking a little over 100 companies in Maine that register drill rigs, and to me, there wasn’t enough value in the town or state fighting us to leave it the way it was. And they saw when I explained the competitiveness problem that it made sense to lower this cost to us.”
Scott Hodgdon, president of the Maine Ground Water Association Board of Directors and vice president of Hodgdon Well Drilling Inc. in Poland, Maine, says “the MGWA was receptive for Chad’s work on his bill he got passed. Anyone involved in the well drilling trades in Maine can benefit from it. The logging industry benefits from multiple laws that no other industry can. We’re happy to have a person who has a common-sense voice with trade experience to help Maine be more business friendly.”
Grignon says: “I was just ecstatically relieved. I was like, you know you really can get things done if you use logic and simple terms to explain your position that makes sense to everyone.”
‘I’d Like to See It Go Further’
As Grignon settled in as a legislator, he quickly learned the challenge in getting everything desired into one bill. That’s why he’s looking to expand the bill to set a cap on the full allowable excise tax to all related water well drilling equipment such as the truck to $2500, like how it now is on the rig.
In addition, Rolfe spoke with Grignon after the committee hearing about the idea of a future bill that would exempt the 5.5% sales tax on the rig. “I think the (tax) committee would consider that,” Rolfe says. “A rig costs enough as it is without adding all the taxes on top of it.”
Meanwhile, Grignon clearly sees this bill as a steppingstone for future legislation.
“I’d like to see it go further,” he says. “I’d like to see a flat rate registration fee on any drill rig is what my ultimate goal would be. We don’t put enough miles on this machinery, and I think we fall in the same place as farmers. Farmers provide food, milk; we provide water.
“To me, I think we’re part of an agricultural argument and that’s where I’d like to direct a policy of drilling businesses into that arena.”
In his research, Grignon looked to states like before-mentioned New Hampshire and Oklahoma that have a flat rate registration fee on rigs.
“I’d like to see everything within that entity of a drilling business under one umbrella for registration and the way the whole business is treated in the eyes of government and local town. That’d be my goal. I’d like to set that as a precedent.
“I think it would make these small family businesses stronger and more resilient and make it a longer-lasting industry that will survive into the future.”
Grignon, who currently operates one rig, a 2007 VersaDrill V2000, but is considering purchasing a new one (either another V2000 or the Atlas Copco Diamondback) this year, shares this advice to those in the industry wanting to see change on how their equipment is taxed in their respective states:
“They should invite their senator and state representative to their state water well association and explain to them how these trucks are not in the same use class as regular registered commercial vehicles,” he says.
“Find the fair cost to register and prepare a bill and be ready to answer tough questions at the committee hearing. These elected officials have no idea how our industry works. I’d use the idea if they want safe modern equipment to install drinking water, we need to make it affordable to own in your state.”
A Bill to Promote Geothermal
Grignon is working on a geothermal bill to present in January 2021 that raises awareness of the technology, increases the capped amount for projects, and makes it easier to receive a loan for geothermal installations. The multi-faceted bill also requires Maine to consider geothermal as a No. 1 option on school, municipal, and state projects.
“Maine really needs geothermal,” says Grignon who has installed more than 300 residential geothermal systems along with numerous commercial and school systems over the past 17 years. “We’re very reliant on oil up here, and geothermal works incredibly well.”
Approximately one-third of Grignon’s business is geothermal, and he’s hoping reliability issues that have cropped up with the equipment over the years have been resolved. Looking to Maine’s northern neighbor, Grignon has been following contractors in Québec, Canada, who have a long history of installing the systems.
“I figured Québec is the best way to model our systems here in Maine,” Grignon says, “so I’ve kind of adopted a lot of their policies and way of installing them and we’ve been very successful with our systems.
“I’m looking at what they’re using, footage per ton; what they’re using for grouting; what they’re using for pipe sizing; and their equipment.”
Grignon is a proponent of installing only closed-loop systems due to open-loop systems increasing arsenic levels in Maine’s groundwater. He also has learned that there are better materials other than pump grouts that are more conductive and safer for groundwater.
“We’ve been experimenting with other grout solutions that seem to be promising for the future,” he says. “We don’t have problems with holes collapsing and conductivity is through the roof, so we can actually shorten our holes, be more competitive, and we’re giving a better job.”
To sell geothermal to customers, Grignon used to take time explaining the system with customers and even went to home shows, but those days are long gone.
“Now we just get calls all the time,” he says. “I do a basic explanation over the phone and the easiest way to sell it to them is: I give them some customer names that we’ve done work for, and I’ll give you the unbiased opinion of how these systems work. ‘Call this gentleman and call this lady.’
“And they call them, and they call me back up and go, ‘When can you give me a price?’ So, I let the system sell themselves. It works really good.”
Grignon is running unopposed for a third term this November. Described by Rolfe as a go-getter who admires how he’s handling being both a legislator and running a business, Grignon looks forward to the challenges that lie ahead. It’s Grignon’s nature.
“I look at the service that the groundwater industry does for the state of Maine as vitally important,” he says, “and feel I’m probably one of the experts out of the whole legislature on groundwater. I feel I have a place there and a voice for everyone who is in this industry.”
Mike Price is the senior editor of Water Well Journal. In addition to his WWJ responsibilities, Price contributes to the Association’s scientific publications. He can be reached at firstname.lastname@example.org, or at (800) 551-7379, ext. 1541.