US official: CUC to receive $10.4M for water, wastewater improvements in 2020

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BRADLEY R. O’Brien, senior attorney of the Environmental Enforcement Section of the U.S. Department of Justice, told the federal court that the Commonwealth Utilities Corp. is expected to receive $10.4 million in federal funds for water and wastewater improvements in the aftermath of Super Typhoon Yutu.

In Nov. 2008, after the U.S. Environmental Protection Agency cited CUC for violation of the Clean Water Act and the Safe Drinking Water Act, the District Court for the NMI issued Stipulated Orders 1 and 2.

SO1 focuses on drinking water issues while SO2 focuses on oil issues such as requiring CUC to repair and replace oil storage and operation infrastructure, manage tank and pipeline facilities, and require spill and emergency response equipment and protocols.

The stipulated orders also require the parties to provide the federal court with status reports on CUC projects.

In his latest status report, O’Brien noted that under the court’s guidance, “substantial SO1 progress has been made utilizing federal grant monies, especially relating to CUC providing drinking water on a 24-hour basis to all CNMI residents.”

He added that substantial SO2 progress has also been made under the court’s guidance to improve the infrastructure of the public utility. “Completed projects include construction of the CUC Pipeline and Tank 102; major repairs to Tank 103; and the repair and construction of secondary containment at the power plants to minimize the likelihood of future oil spills.”

O’Brien said much “of CUC’s progress is due to funding and technical support provided by the United States. Since the Orders were entered through January 2020, CUC will have been awarded approximately $80 million in EPA grant funding for CUC’s SO1 drinking water and wastewater systems. In addition, in 2020 CUC is expected to receive additional funds of approximately $10.4 million for water and wastewater improvements in the aftermath of Typhoon Yutu. Prior to the entry of the EEMC Order (Dkt. No. 151), the Department of the Interior…awarded approximately $10 million in grant funding for CUC’s SO2 projects.”

The CNMI, “pursuant to the EEMC Order and through $17.8 million in DOI grants earmarked to [the] CNMI and $5 million in a CNMI monetary payment, is contributing an additional $22.8 million…toward CUC’s SO2 projects. Since the entry of the Orders through January 2020, CUC will have received in excess of $112 million from these federal government agencies ($107 million) and [the] CNMI ($5 million) for SO1 and SO2 projects.”

According to O’Brien, “CUC historically sustains lengthy vacancies in management positions thereby impeding CUC’s operations and compliance with the Orders. On a positive note, since the August 2019 status conference, CUC has filled the positions of Chief Engineer, Drinking Water and Wastewater Division Manager, and the Technical Manager for Oil. The only remaining unfilled position is the Wastewater Treatment Plant Supervisor (previously occupied by Mr. Wasser, but has been vacant since February 3, 2019). It continues to be critical that CUC retain persons who meet the SO1 qualifications and fill any vacancies in a timely manner.”

Prior to SO1 entry, O’Brien said, “only 26 percent of the CNMI Saipan population experienced continuous 24-hour drinking water. Within five years of the entry of SO1 and with improvements funded substantially by EPA, the availability of 24-hour Saipan drinking water reached 94 percent in 2013 then fell to 73 percent in 2014 and 2015, increasing to 81 percent in 2016 through spring of 2018. CUC recently informed EPA that approximately 96 percent of Saipan currently benefits from 24-hour drinking water.”

As for water meter installation, reading, and billing program plan, “CUC reports that approximately 96 percent of customers are billed based on water meters. CUC has made progress with the installation of a meter test bench and continues to work towards accurately billing customers based upon consumption,” O’Brien said.

Regarding the repair of leaks in the drinking water system, “CUC continues to report that it is not billing customers adequately to cover the costs of service. CUC states that non-revenue water is approximately 63 percent, meaning only 37 percent of drinking water produced, pumped, and chlorinated by CUC is being billed to customers and generating revenue. CUC reported it is losing approximately 200 million gallons per month of produced water. The costs associated with the lost water is passed on to paying customers. The reasons for this loss include leaks, water theft, and failed water meters.”

O’Brien said “SO1 requires an EPA approved plan and schedule to perform detection and repair of leaks in the drinking water distribution system, and to identify and eliminate subsurface connections to old drinking water lines or pipes that may negatively impact the quality of water in the distribution system. In 2014, EPA disapproved CUC’s proposed Leak Detection and Repair program. CUC remains deficient in submitting items for EPA approval under SO1, including failure to submit a plan to repair leaks in the drinking water system as required by SO1 Paragraph 34; to provide an update for procurement procedures as required by SO1 Paragraph 20; to install a computer-based preventative maintenance management system as required by SO1 Paragraph 37; and to complete a water meter maintenance and testing program as required by SO1 Paragraph 33, Dkt. No. 14.”

On August 26, 2019, O’Brien said, EPA approved CUC’s wastewater collection system spill prevention and response plan pursuant to SO1 Paragraph 23.

He added that CUC’s Master Plan identifies CUC’s infrastructure needs over a 20-year period and was completed by CUC using over $2 million in EPA funding.

“Notwithstanding the effort and funding put toward this project, CUC will not commit to implement the Master Plan and maintains that Master Plan compliance is dependent upon federal government funding,” O’Brien said.

SO1 also “requires an Interim Financial Plan and a Final Financial Plan that will generate sufficient revenue to cover compliance activities, the Orders, and measures necessary to ensure compliance with the [Clean Water Act and the Safe Drinking Water Act.] CUC must develop financial reserves to timely fund and implement the Master Plan, including emergency operations, maintenance, and replacement reserves equal to three months of budgeted expenses. CUC must establish a rate structure to generate sufficient revenues”

In 2011, O’Brien said, “CUC submitted an unacceptable conditional Interim Financial Plan dependent upon the federal government funding CUC projects. Therefore and in conjunction with the Master Plan, EPA rejected CUC’s conditional Interim Financial Plan. In rejecting CUC’s submittal, EPA described that CUC is solely responsible for the operations; that CUC must generate sufficient revenues; and that CUC cannot continue to rely on the federal government to financially support CUC. CUC has not responded to EPA.”

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