Previous Story
EPA: ‘Pipeline leaks’; CUC: ‘No, it does not’
Original deadline to build pipeline was February 2011
The U.S. Environmental Protection Agency says the Commonwealth Utilities Corp.’s oil pipeline is degraded and experiences leaks. CUC denies it is leaking but suggests that it stop using the pipeline.
U.S. District Court for the NMI designated judge David O. Carter, from Santa Ana, California, is scheduled to inspect the pipeline and other CUC projects and facilities tomorrow, Saturday.
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 original deadline to build the new pipeline was in February 2011.
EPA, through the U.S. Department of Justice Environmental Enforcement Section senior attorney Bradley R. O’Brien, and CUC, through its counsel James S. Sirok, have filed in federal court a joint report on the progress of certain CUC projects. The CNMI government, through attorney general-nominee Gilbert J. Birnbrich, also signed the joint report.
On the pipeline project, EPA’s position is that the construction is stalled and that CUC is again failing to meet the federal court’s stipulated order No. 2 deadlines.
Stipulated order No. 2 focuses on oil issues such as repairing and replacing infrastructure, managing and replacing tanks and pipelines, and spill prevention and response.
O’Brien said the pipeline construction is critical as the old pipeline is poorly maintained and degraded, experiences leaks, and is no longer safe to operate at pressure.
O’Brien said that at the July hearing, CUC told the court and EPA that Smithbridge Guam Inc., (the now terminated construction contractor of the pipeline project) may not be capable of building the pipeline.
O’Brien said Vanderpool Pipeline Engineers Inc., the pipeline designer and third party construction manager, also explained to the court that Smithbridge should be replaced due to lack of competency and poor work quality.
On Aug. 1, 2014, EPA demanded that Smithbridge replace ineffective personnel with competent pipeline supervision, construction, and welding personnel.
On Aug. 29, 2014, CUC issued a notice of default and termination to Smithbridge. That same day, EPA received notice that CUC requested Vanderpool Pipeline Engineers to demobilize from Saipan.
This means that CUC must start over with a new hiring/procurement process with the length of that process unknown, and potential funding issues, O’Brien said.
The U.S., he added, is concerned about additional delays.
CUC’s position is that the pipeline is not leaking but, to prevent the possibility of it leaking, Sirok said the best option may be to stop using the pipeline and begin trucking fuel.
“This option has not been put into operation but is being seriously considered,” Sirok said.
He said Smithbridge has already been notified that its contract is terminated based on defaults in performance and its failure to comply with CUC and EPA directives to replace certain positions with qualified and competent personnel.
Sirok said CUC is in the process of demobilizing and securing the project site and of procuring a new contractor to complete the project.
“At this time there is no estimate on the time it will take to bring a new contractor to the pipeline project site and continue with the construction of the pipeline,” he said.
Sirok conceded that the project has experienced numerous delays in the past but he blamed the recent ones on the inability of Smithbridge to perform up to EPA’s and Vanderpool’s standards.
Smithbridge, through its counsel Mark B. Hanson, has filed a contract dispute with CUC over the contract’s termination, saying it is unwarranted and illegal.
Sirok said that by declaring the contractor to be in default and terminating the contract, CUC is proceeding in the appropriate manner needed to ensure that the pipeline is being built in accordance with the standards required under the project’s design and approved construction plans.
Sirok added that CUC is also proceeding in accordance with the concerns of EPA and Vanderpool.
The oil pipeline is an 8-inch aboveground receiving pipeline that delivers diesel fuel from the Mobil oil facility in Lower Base to CUC Power Plants 1 and 2.
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.
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.
