The Commonwealth Utilities Corp. needs an additional $2.8 million to meet the federal court’s orders for the construction of a new oil pipeline and oil storage tank, according to CUC executive director Alan Fletcher yesterday.
If measures to raise the needed funds fail, Fletcher said that CUC will have to file a petition for emergency rate relief with the Commonwealth Public Utility Commission in the next few weeks.
Fletcher said that $866,000 of the amount needed is a court-ordered contingency fund, which is to be established and monies accumulated no later than April 30, 2014.
Fletcher said that CUC has $1 million in reserve, which leaves a total of $1.8 million needed in a very short period of time.
Options for obtaining the needed funds include government funding, grant money, and loans.
“Unfortunately, loans are problematic at this time since CUC’s assets are tied up by the SDLLC power plant contract, which is still in litigation,” he said.
U.S. District Court for the NMI designated judge David O. Carter ordered CUC last week to create an $866,000 contingency fund for the pipeline project.
Carter said that if the amount is raised through increased rates, then any balance remaining after project completion shall be rebated back to consumers.
The CUC pipeline is an eight-inch aboveground receiving pipeline in Lower Base that delivers fuel from the Mobil Oil facility to CUC power plants 1 and 2 in Lower Base.
Until the pipeline is repaired or replaced, the U.S. Environmental Protection Agency says it poses a threat to surrounding waters.
Carter also ordered CUC to move forward with the completion of the oil storage Tank 102 Project at CUC’s Power Plant 1 in Lower Base.
These court orders are related to two stipulated orders the federal court issued in 2009 regarding, among other things, the integrity of CUC’s oil storage tanks, including Tank 102.
In a statement yesterday, Fletcher said the oil pipeline project, which has been ongoing since 2010, continues to grow in scope, complexity, and cost due to EPA’s added requirements.
“While CUC has protested many of these requirements, the finality of judge’s order is clear and CUC must move forward,” he said.
CUC, Fletcher said, has been ordered to begin construction using specific court-approved contractors at their proposed pricing.
“While there are grant funds available for most work, there is a deficit and currently no contingency funds for project and price changes that we know will occur,” he said.
The Interior Department has already given CUC $2 million-plus for the pipeline project.
As for the Tank 102 project, Fletcher said the contractor defaulted on its obligations during the tank’s construction, resulting in CUC terminating the contract.
He said CUC is currently working with the underwriter of the performance bond to correct the defective work and complete the project.
“However, any resolution regarding the scope of work needed to complete the project, and the performance bond reimbursement for the work, is speculative and potentially litigious,” he added.
Carter has ordered CUC to move forward with construction prior to resolution of the performance bond issues.
“This means CUC will need to fund the correction of defects and completion of the tank construction project itself,” Fletcher pointed out.