AUGUSTA — The company readying the Kennebec Valley’s massive natural gas pipeline says it has agreed to pay contractors tens of millions of dollars included in a lawsuit against the utility last month.
A top official at Summit Natural Gas of Maine, the company preparing to energize its network stretching from Richmond to Madison, said $38 million has been owed to between 10 and 20 contractors for months, and the company plans to pay money owed to those contractors for work done by Jan. 10.
The largest sum — about 75 percent of the money — is owed to K&K Excavation and the Turner company’s subcontractors, said Tim Johnston, executive vice president of Summit Utilities, the Colorado parent company of Maine’s Summit. Other local companies owed money include Gardiner-based Maine Drilling and Blasting and McGee Construction of West Gardiner, he said.
The large sum of money was jeopardized after Schmid Pipeline Construction Inc., a Wisconsin contractor hired last spring to manage construction of the pipeline’s steel backbone, walked off the job in November.
Schmid sued Summit for $72 million in damages in December, saying Summit breached its contract with the company and underestimated the scope of necessary work on the pipeline network. As a result, Schmid said it had to increase the number of workers and their working hours while providing more in materials and equipment without Summit increasing their payments.
Johnston said it was Schmid’s responsibility to use payments from Summit to manage work on the line, including hiring subcontractors. When Schmid walked off the job, the money went unpaid and almost all crews kept working, he said. However, Johnston declined comment when asked if Summit’s nonpayment affected Schmid’s nonpayment, as the lawsuit suggests.
Bill Purington, president and CEO of Maine Drilling and Blasting, said both Schmid and Summit contributed to communication voids with contractors. He declined to give the exact sum his firm is owed.
However, he said while the nonpayment didn’t cause long-term trouble for the company, it was concerning having a lot of money out on a big project, in this case, approximately 90 days.
“Any time you’ve got in excess of a million dollars out there, being a small, Maine contractor, it’s a significant amount of money,” he said.
The Portland-based attorney who filed Schmid’s lawsuit, John Hobson of the firm of Perkins Thompson, said subcontractor payments were included in the lawsuit, but he declined to be more specific last week.
Johnston said the money called for in the lawsuit does overlap and includes the money it plans to pay contractors, and everyone owed money was a subcontractor under Schmid.
“There just wasn’t any way we were going to wait for Maine contractors to get their money under the lawsuit,” he said. “That just wouldn’t be right.”
Summit hasn’t met previously stated timeframes for turning on its $350-million pipeline. In November, the company said the region-wide network would be turned on by mid-December. It hasn’t been.
But on Friday, Johnston said the company is close. It has introduced gas to the network on the east side of Augusta and should do the same on the west side and in Hallowell and Gardiner this week.
He said the payment issues only caused slight delays on the project, especially in Randolph, blaming Schmid for not hiring directional drilling companies early enough in the building process.
The payment delay sparked conversation in Maine’s construction industry surrounding Summit, owned by a private equity fund controlled by JP Morgan, a worldwide financial services heavyweight.
The industry’s two main advocacy groups, the Maine chapters of Associated Builders and Contractors and the Associated General Contractors of America, were both involved. Matthew Marks, AGC Maine’s executive director, said his group helped Summit identify members owed money.
Gov. Paul LePage’s office also fielded complaints from contractors owed money, according to Patrick Woodcock, director of the governor’s energy office.
For this story, Clay McLafferty, owner of K&K Excavation, didn’t return messages left at his office and on his home phone over several days. State records show he donated $1,000 to LePage’s 2014 re-election campaign in 2012. ABC’s political action committee kicked in $3,000 that year.
The governor has always been supportive of natural gas expansion and Summit’s project, yet his public statements have been at times both fawning and critical of the company’s work.
After a December celebratory event in Waterville that LePage attended, the company crafted a press release quoting the governor as saying Summit “has made extraordinary progress and will deliver on their promise and commitment to invest in infrastructure in the state.”
LePage’s tone was different in March, when he released a statement criticizing Summit for entering into a project labor agreement for pipeline work. Such agreements make contractors negotiate with one or more unions to establish work terms and conditions.
Woodcock said several contractors contacted his office about the payment delay, leading him to meet with Summit to pass along concerns. He said the scope of the project made delay in payment a unique situation for the state and region.
“It certainly has a broad effect on the economy, and we wanted to make sure all parties managed it accordingly,” Woodcock said.
Purington, the head of the Gardiner drilling company, lauded Summit for their eventual response to the payment issue, saying the companies will likely work together in the future.
But he warned of a large project’s ability to make or break many in the small state’s industry.
“When these larger companies come into the state, I think the state needs to be careful about how these relationships mainfest themselves,” he said. “If they weren’t able to piece this together in a timely manner, hundreds of Mainers could have been out of jobs.”