Delays in CUC priority projects

Top officials of the Commonwealth Utilities Corp. disclosed that two priority projects required under a federal court mandate continue to face challenges that may further delay their completion due to the increasing costs and some technical problems.

These two projects—replacing a rusting 8-inch aboveground pipeline and a dilapidated diesel fuel oil tank—are both required by Stipulated Order No. 2 and are under a court order to be completed within a set timeline.

The diesel pipeline is in dilapidated condition and is not cost-effective to repair and has to be replaced with a new one. The Tank 102 project involves a 500,000 gallon diesel fuel oil tank. This will replace Tank 010 which has been found to be a source of pollution and is non-repairable.

CUC executive director Alan Fletcher and legal counsel James Sirok disclosed that since the oil pipeline project was initiated in 2010, the cost has ballooned from just $1.8 million then to $6 million this year. The significant jump in cost was attributed to numerous problems that contributed to its delay. As a result, they explained, CUC continues to be assessed penalties by the U.S. Environmental Protection Agency.

Fletcher said the design build contract for the pipeline was awarded to Smithbridge in 2010 but the project was held up due to financing. A year later, EPA approved the pipeline design and a notice to proceed was issued. Due, however, to some deficiencies that were later uncovered, EPA withdrew its approval.

In 2012, the court ordered a redesign of the pipeline to reroute around contaminated soil and the contract was awarded to Vanderpoll Pipeline Engineers. Last year, both EPA and U.S. Department of Transportation approved the final design, which included several add-ons.

Plans are in place to complete the project in 2014. It was revealed that a final construction execution plan is due to EPA on May 17 and construction is expected to begin on June 14.

CUC expects to complete construction by Oct. 17 and full project completion is expected on Dec. 14 plus a 30-day buffer.

According to Sirok, CUC’s biggest challenge at present is compliance with 49 CFR 195, which is a federal certification involving transportation of hazardous materials by pipeline. It was revealed that this specification is the first to be mandated in a pipeline project in the Pacific.

“The cost has ballooned over the years and it’s at $6 million today,” said Sirok, referring to the many changes that delayed the project for so long.

Funding for the oil pipeline is sourced both from federal monies and CUC revenue. Sirok admitted that because of CUC’s funding constraint, implementation of the project and necessary changes affected the capability of CUC.

Sirok said CUC is “under the microscope of the judge and EPA” and is in a serious situation with the project. He disclosed that CUC will have to fly to California for the next hearing on the stipulated orders.

In considering the plight of the agency, the CUC board approved to seek relief from the EPA, to ask for its consideration and a waiver on the penalties and fees assessed on the project.

Tank 102 project

According to Fletcher, the Tank 102 project is also facing further delays, primarily due to technical and contract issues.

It was in 2011 when the RFP for a tank fabricator was released and the contract was awarded a year later. However, when EPA uncovered deficiencies in the geothermal review, a change order for additional foundation work was made.

It was in 2013 when the notice to proceed and construction began. However, the contractor—due to poor performance—was issued a default notice, resulting in a further delay.

At present, CUC is in sole source discussions on the project, but this only yielded one alternative company who is interested in the job.

Fletcher revealed that other related contracts for the project remains on standby until construction resumes due to the difficulties and anticipated costs for re-procurement.

“This position is frequently reviewed as the project continues to be delayed,” he said.

According to Sirok, both EPA and the federal judge are concerned about the status of the tank replacement project and bared the threat of receivership for CUC.

“EPA indicated that they’re discussing [this issue] with their superior, whether or not to consider receivership on this situation,” said Sirok.