Illinois Valley News

The building housing the co-generation plant at Rough & Ready Lumber Co. (IVN file photo)

A civil trial between Illinois Valley-based Rough & Ready Lumber Co. and PacifiCorp began at the Josephine County Family Court building in Grants Pass last week.

The case stems from a lawsuit filed by Rough & Ready against the utility firm, and was the result of cost overruns and associated delays in the construction and connection of a co-generation power plant at the timber-processing operation to Pacific“s grid system.

On the afternoon of Tuesday, July 6, Rough & Ready President Link Phillippi took to the witness stand to testify. Circuit Court Judge Pat Wolke presided.

Portland-based attorney Melinda Davidson represented the lumber firm, and Allison Kruger provided counsel for the defense. The two attorneys spent much time arguing about the admissibility of various documents outlining problems with the plant project and its timelines and costs.

At one point, Kruger asked Phillippi if he is an expert on good utility practices. Phillippi responded that as a small business owner, he is familiar with the importance of project costs and schedules.

Kruger argued that Phillippi is not qualified to testify about the matters, but Wolke overruled her and said that he would allow the testimony to remain on the record.

Phillippi testified that notification of a $96,000 increase in the project“s costs was provided to him via a December 2007 e-mail.

“It caught me unaware,“ he recalled.

During cross-examination, Kruger asked Phillippi about the project“s total cost, which was $6 million. In testimony, it was stated that connecting the power plant to Pacific“s system cost Rough & Ready around $545,000. Kruger said that figure represented close to 9 percent of the project“s overall price tag.

Kruger also questioned Phillippi about the $2.5 million Business Energy Tax Credit (BETC) that his firm received from the state to help offset the project costs. Phillippi verified that Rough & Ready received $1.67 million in cash from the state through the BETC program, plus a couple of federal grants.

Those grants included $500,000 from a U.S. Dept. of Agriculture Rural Development Program, and a $243,000 woody biomass grant from the U.S. Forest Service, Kruger said. Phillippi confirmed those numbers in his testimony.

Kruger wrote the figures on a dry erase board, and added a $1.6 million grant from the Energy Trust of Oregon that also was received by Rough & Ready for the plant project. Phillippi pointed out that the energy trust money is scheduled for disbursement throughout a four-year period, not all at once. He added that those funds are released on a quarterly basis and depend on the level of electricity generated by the plant.

Phillippi verified that the BETC funds and federal grant dollars were received in 2007, prior to project completion.

Kruger maintained that the various grants and tax credits reduced the project“s cost to $2.5 million. She said that the lumber firm receives an estimated $40,000 per month, and that the plant is expected to generate power for 20 years.

Using those figures, Kruger said that the plant should bring about $480,000 in yearly revenue to Rough & Ready, and that the total project costs should be paid off within five years.

Phillippi said that the “economics are different“ and that costs can change throughout time.

On the morning of Thursday, July 8, the dry erase board with Kruger“s figures stood alongside a board containing the definition of the term, “good utility practice.“ Attorneys and witnesses for both sides of the case stood in the hallway and entered the courtroom as the 9:30 start time drew near.

Davison called John Martin to the witness stand. Martin is the principal of the Portland-based firm Pacific Energy System, which specializes in engineering and project management.

In his testimony, Martin stated that he has analyzed different utility projects of a similar size to that of the Rough & Ready co-generation plant. That includes a Salt Lake Valley landfill project, he said, which was two times the capacity of the Rough & Ready project, and was much more expensive and involved three generators.

Martin testified that he analyzed e-mails from PacifiCorp personnel regarding the project, and said that their expertise on the subject was questionable. Davison moved to admit one of those e-mails into evidence. Wolke allowed it, despite Kruger“s objection on the grounds that it lacked relevance.

PacifiCorp did not use contract crews efficiently, Martin said, and did not properly communicate additional costs for items such as a mobile power substation.

“I never saw anything where they were concerned about the budget,“ Martin said. “It was a prescription for cost overruns.“

Under good utility practice, Martin said, cost scheduling is the project manager“s duty. There is a natural progression for these kinds of projects, he added, and engineering typically is done towards the beginning of them.

Martin said that the worst action a company can take in such a situation is to change project managers multiple times in one year, which PacifiCorp allegedly did. He said that interconnections always are an issue on such projects, and that special attention must be paid to them as a result.

This particular project, Martin said, is “one of the worst things I“ve ever seen,“ in terms of how it was managed. Martin testified that PacifiCorp“s staff “didn“t really have a budget“ because Rough & Ready was shouldering the costs.

Although the end result of the project was good, Martin said, it “took way too long.“

“It was just too expensive,“ he said.

Martin said that a lot of time was lost at the beginning of the project, which ultimately caused the cost overruns and delays.

During her cross-examination of Martin, Kruger contended that Phillippi contributed to the delays by taking 34 days to return a facilities studies report.

A verdict for the trial likely will not be reached until later this summer. Wolke was scheduled to preside over mental health court on the afternoon of Friday, July 9, had regular court duties on Monday, July 12 and had a vacation set to start the following day.

We want to hear from you!
Add your thoughts with the link below.

Comments returning soon!

Back to top of story