Project overruns force Southwest Gas to delay pipeline completion: Remaining construction postponed till ’98
The promise of natural gas has blown up in the faces of Donner Lake residents, and remaining pipeline installations probably won’t begin until 1998 because Southwest Gas has spent more than its entire budget on a half-completed project.
With only about half of the Truckee project complete, the company is already over its $29 million budget by $5 million. To finish the job, not including Donner Lake, it will cost $11 to $25 million more, said Jim Kane, vice president of operation for Southwest Gas.
Company representatives told a room full of frustrated locals at the sanitary district board room last week that the company should have never promised to serve Donner Lake in the first place because trenching the rocky terrain would cost about $13,000 per lot, or $14 million total. The average cost for Truckee service is $3,000 per lot.
But Donner Lake residents and contractors said those were absurd figures and that the company should make good on its original promise, or Donner Lake property value would drop while propane prices soar.
“As a town we should stand together,” said one person at the meeting. “Donner Lake is getting treated like second-class citizens. Our property values are going to decline because we have propane tanks, and propane prices are going to skyrocket. You made a commitment to the Town of Truckee.”
Mayor Bob Drake added that residents who don’t have natural gas service are “being held for ransom” by propane price increases, but Southwest Gas said propane prices have gone up across the country.
About two weeks ago, the company speculated it wouldn’t be able to service the Prosser area because Caltrans won’t allow construction along Highway 89. But the company may install pipelines along Prosser Dam Road and Forest Service roads instead.
Piping downtown Truckee is still being studied. The company is reluctant to trench the area because of the likelihood of contamination, which would make Southwest Gas legally responsible for clean up. Instead it might run gas mains along the backs of downtown buildings, said Kane.
The company hopes to begin work in the southern half of Tahoe Donner this summer, but the California Public Utilities Commission must first approve Southwest Gas’ request to spend an additional money, a process expected to take two to three months. Following that is the town’s encroachment permit process, which will take another month. By then, the construction season will be nearing its end.
“It appears to me that we’ll be out of the construction window this season,” said Town Manager Steve Wright. “I don’t want the company leading people astray that half of Tahoe Donner can be done this summer.”
Southwest Gas is finishing last summer’s project this year with the installation of 800 more gas meters.
He said the company’s shareholders will eat most losses from the Truckee project, and the company will only recoup the principal. Southwest Gas is asking Truckee for its support in extending a 12-cent surcharge, originally planned to last eight to 10 years, another estimated 10 years.
Town officials are perplexed, if not irate, about Southwest Gas’ problems in Truckee, primarily because the company partly blamed the town for overspending.
“The town adopted new trenching and construction standards for repair of the streets since it incorporated,” said Kane. “They were changes in the way we were requested to perform work that increased costs. I’m not criticizing anybody, but the changes do reflect higher costs.”
Kane said there were unanticipated requirements in compaction testing, repaving and trenching standards, hiring of flaggers and construction clean up. The company had to haul off “spoils,” dirt dug from the trenches, at the end of each day and bring it back each morning to keep streets clear at a cost of $1.6 million, according to Kane.
But this baffles town officials, especially since Truckee’s position on dirt removal didn’t change from Nevada County’s after incorporation.
“We had meetings with Southwest Gas throughout the year, and my question was always ‘Why are you hauling off the dirt?” said Public Works Director Tom Covey in a follow-up interview. “It’s not in our standards. They said the fill didn’t meet their standards because the rocks were too large. We said leave the spoils there and we’ll use it.”
Covey said that he’s worked regularly with Southwest Gas for the last 20 years, and that they’ve always been a good company.
“I don’t know what happened when they came to Truckee,” he said.
Southwest Gas is using the town as a scapegoat for bad management, said an unnamed source who works for the town. The town authorized flaggers to work overtime and on weekends, but did not require it, the source said. Southwest Gas participated in decisions to adopt new trenching standards, and the town even dropped some standards at the company’s request. The source also said that $2.3 million in unexpected asphalt repair should have been figured into the original estimate, unless the company intended to leave its trenches open.
New state and federal requirements also increased costs, according to Southwest Gas. The Army Corps of Engineers required a cultural study in Martis Valley for $160,000. Caltrans refused to close a freeway off ramp at Donner Pass Road to facilitate pipeline construction, which cost Southwest Gas another $30,000. A week later, Kane said, Caltrans closed the ramp for a parade.
But town officials said poor management is mostly to blame for the $15 million of overspending.
“There was a lot of bad management and they fired the people that did it,” the mayor said. “If these issues [of town requirements] would have risen to the light of day, I think we would have responded.”
One official claims he saw welders, who were getting paid $100 an hour, making barbecues out of old pipes during the work day.
It’s possible that the Truckee-Donner Public Utility District could take over the remainder of the project, said PUD board member Jim Maass at the meeting.
“The town would share the costs and the profits,” said Maass. “There are no stockholders in the PUD except for its customers. I thought about this every time I shoveled out my propane tank this winter.”
The PUD has scheduled a public workshop on the issue at its next board meeting Wednesday, May 7, at 7 p.m. in the PUD building board room.
Southwest Gas and town officials asked Truckee residents to write the PUC either supporting or opposing the PUC’s approval for continued work by Southwest Gas in Truckee. Letters can be mailed to the town council, which will then forward letters to the PUC, and should be addressed to Town of Truckee, 11570 Donner Pass Road, Truckee, CA 96161, Attention: Steve Wright.
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