CUC directs Guam contractor to stop work on oil pipeline project

The Commonwealth Utilities Corp. has directed a Guam contractor for the oil pipeline project to immediately stop work at the site for allegedly not addressing concerns raised by CUC and the U.S. Environmental Protection Agency.

CUC counsel James S. Sirok disclosed that the utilities agency is in the process of notifying Smithbridge Guam Inc. of its default in the terms of its contract, and issuing a notice of termination of the company’s contract.

In CUC’s report filed in federal court on Friday, Sirok said that EPA transmitted a letter to CUC on Aug. 1, 2014, outlining several concerns it had with Smithbridge personnel and management of the CUC pipeline project.

Because of these concerns, and in an attempt to mitigate the potential of personnel and management problems arising as the project moves forward, Sirok said that EPA gave CUC 10 days to replace inadequate and ineffective personnel on the project with competent, qualified, and experienced pipeline supervision, construction and welding personnel.

The lawyer said that CUC told Smithbridge on Aug. 4, 2014, to replace three supervisors within 10 days.

He said the company was also directed to provide with the names of their newly nominated personnel and their respective qualifications for review and approval by both CUC and EPA within 10 days.

Sirok said their written notice further outlined various CUC concerns with the project’s management and execution of planned construction work.

Sirok said they informed Smithbridge that its failure to address these concerns with corrective action would place the company in jeopardy of being declared in default.

By Aug. 14, 2014, the directives and concerns of both CUC and EPA had yet to be addressed, he said.

The lawyer said that during CUC’s discussion with Graeme Ridley of Smithbridge last Aug. 15, it became clear that the company was not prepared to address the directives and concerns.

The oil pipeline is an eight-inch aboveground receiving pipeline that delivers diesel fuel from the Mobil oil facility to CUC Power Plants 1 and 2 in Lower Base. EPA had stated that until the pipeline is properly repaired or replaced, it poses a threat to the adjacent ocean.

The pipeline project was initiated in 2010 at a cost of $1.8 million. Due to numerous problems that contributed to the project’s delay, the cost ballooned to $6 million this year.

U.S. District Court for the NMI designated judge David O. Carter will fly next month from Santa Ana, California, to Saipan to conduct another on-site inspection of the pipeline project and other CUC projects and facilities that have concerns or disputes.

Carter recently expressed “deep concerns” over the delay in the construction of the oil pipeline. He pointed out that the pipeline construction has only, at most, preliminarily started.

The federal court signed stipulated orders for CUC in 2009, setting the requirements and deadlines for the utilities agency to meet. The orders represent an agreement between the CNMI and the EPA on how CUC will come into compliance with the requirements of the Clean Air Act and the Safe Drinking Water Act.