‘CUC fabricated EPA sanction’

The U.S. Environmental Protection Agency never issued an ultimatum to impose a daily penalty of $37,500 per violation if the Commonwealth Utilities Corp. fails to secure funding for the repair of the Agingan wastewater treatment facility by Feb. 28, the Attorney General’s Office said.

In a Feb. 9, 2005 memorandum to Gov. Juan N. Babauta, assistant attorney general Sean Lynch quoted EPA-Pacific Islands Office environmental engineer Michael Lee as saying that “U.S. EPA has not indicated one way or the other our intention should CUC fail to secure funding.”

“CUC fabricated the ‘news’ of a U.S. EPA ultimatum,” said Lynch.

A copy of Lynch’s letter was presented yesterday by Rep. Ramon Tebuteb, who voted “no” to the $3.3 million reprogramming for the Agingan outfall project. The bill, however, passed on a 13-3 vote during yesterday’s House session.

Lynch, in his letter, said that he contacted the EPA office to clarify the reported penalty.

He said that EPA, in its Sept. 2004 letter to CUC, had required CUC to notify it by Feb. 28 on the status of the utility firm’s loan application with U.S. Department of Agriculture-Rural Development.

“[Mr.] Lee informed me that U.S. EPA required CUC to provide notification by Feb. 28, 2005 regarding the status of CUC’s loan with USDA-RD…[Lee] confirmed that ‘U.S. EPA has not indicated one way or ‘the other our intention should CUC fail to secure funding’,” said Lynch.

In a letter dated Sept. 24, 2004 addressed to CUC executive director Lorraine A. Babauta, Lee said that since CUC was required by the USDA to submit audit reports for fiscal years 2002 and 2003 no later than Nov. 15, 2004, CUC should be able to update the EPA on the loan by Feb. 28, 2005.

“With an anticipated 45-50 days for USDA-RD review, therefore, by Feb. 28, 2005, CUC shall provide a written response to EPA regarding the status of the USDA-RD loan and a revised compliance schedule for construction of the Agingan STP ocean outfall,” said Lee.

After that, EPA will—“and if acceptable”—formally approve the revised compliance schedule and incorporate it into the 1999 administrative order.

The order spelled out the violations of CUC over the faulty Agingan facility and instructed the utility firm to immediately secure local funds for the project.

CUC said EPA has given a total of $2.1 million grant for the project.

Due to the apparent failure of USDA-RD loan, CUC aggressively lobbied the Legislature in January to provide it the needed funds, warning that if no funds are identified by Feb. 28, CUC would be slapped with a $37,500 penalty per violation.

In his 2004 letter, Lee conceded that failure in the loan application “would significantly delay construction of Agingan…”

“It has been five years since issuance of the AO and the construction of the outfall has still not been completed,” he said.

“CUC needs to take whatever steps are necessary to secure adequate funding for construction of the ocean outfall to ensure compliance as soon as possible. Failure to do so may result in EPA elevating this matter which could result in penalties of up to $32,500 per day per violation,” said Lee in Sept. 2004.

For his part, Tebuteb expressed disgust that CUC had not been straightforward on the Agingan issue.

“EPA never said CUC has to pay this amount after Feb. 28. CUC is not telling us the truth,” said Tebuteb.

When asked, acting CUC executive director Bernard Villagomez said he could not comment on the issue about the “fabricated news”, saying “the letter was not addressed to us.”

Villagomez attended yesterday’s House session on behalf of his superior, Lorraine Babauta, who is off-island.

For his part, CUC board chair Frank Guerrero, maintained that EPA “put the effective date of Feb. 28 deadline in the Sept. 2004 letter.”

He said he only managed “to secure a grace period” of 30 days when he talked to EPA this week.