CUC accrues $45M in stipulated order penalties

From just $4 million in penalties three years ago, the Commonwealth Utilities Corp. has to date accrued $45 million in fines and penalties for failing to timely address the concerns raised by the federal government pursuant to stipulated orders related to water, wastewater and oil handling.

CUC chief financial officer Charles Warren told Saipan Tribune yesterday that the over $45 million represent penalties that have piled up since the stipulated orders were issued five years ago.

U.S. District Court for the NMI Chief Judge Alex R. Munson signed stipulated orders in March 2009, setting the requirements and deadlines for CUC to meet. The orders represent the agreement between the CNMI and U.S. Environmental Protection Agency on how CUC will come into compliance with the requirements of the Clean Air Act and the Safe Drinking Water Act.

Under Stipulated Order 1, the court requires CUC to create a new management and financial structure of all aspects of CUC’s operations. It is related to CUC’s inadequacy of providing potable drinking water and wastewater services. Stipulated Order 2 involves the lack of infrastructure for safe fuel storage, handling, and transfer facilities of the power generation facilities, and power distribution, including possible environmental site cleanup, among other requirements.

According to Warren, of the $45 million accrued penalties, CUC was only made to pay a minimal amount of about $169,000. This was paid in two separate occasions four years ago.

The first payment was made in January 2010, amounting to $29,000. A month later, in February of that same year, the corporation made another payment of $140,000.

Based on the provisions of both stipulated orders, CUC shall pay penalties for failure to meet any requirement in the SOs. Penalties imposed range from $250 per day per violation for specific deliverables up to maximum of $5,000 per day per violation.

For example, for specific deliverables under Stipulated Order 1, penalties imposed is $1,000 per day per violation for the first 30 days; then $2,000 per day per violation for the following 30 days; and $5,000 per day per violation for each day thereafter. The accrued penalties are inclusive of interest.

According to the order, any penalty accruing pursuant to SO shall be payable upon demand by the federal court. However, the U.S. may, in the exercise of its discretion, reduce or waive the penalties.

Warren disclosed yesterday that the requirements or deliverables for each stipulated order have different deadlines.

“While many of the stipulated order deliverables have set or easily determined due dates, many do not. Those with indefinite or difficult to determine dates include oil contamination remediation activities and completion of water/wastewater master plan projects. Dates can also change as the EPA reviews submissions and amends or otherwise changes project parameters,” he explained.

To address requirements of the stipulated orders, CUC has been exploring financial assistance from both local and federal sources.