The City of Vader has decided to terminate a pilot program with Blue Array in light of the sewer company's inability to continue processing influent.
Though Blue Array had been testing their portable treatment system in Vader since the beginning of the year, power to their prototype was disconnected Dec. 1 after they failed to keep up with electric bills, leaving them unable to treat the sewage entering Vader's plant.
While this has not affected Vader's ability to continue providing sewer services (as the Department of Ecology had required Blue Array's system be redundant in case their experimental technology failed), it does provide grounds for Vader to terminate a memorandum of understanding (MOU) with Blue Array and the City Council voted Dec. 3 to give Blue Array 30 days notice to remove their facility.
Mayor Ken Smith said, up until the meeting, Vader had still intended to pursue a possible contract for services with Blue Array, but said a recent email from Blue Array CEO James Reilly changed the council's attitude.
In the email, sent Dec. 2, Reilly stated Blue Array's plant would be decommissioned on Dec. 16 if Vader did not honor an invoice asking for $72,131.72 in back payments and interest for services rendered since July. If the plant was decommissioned, Reilly continued, Vader would be required to pay a $250,000 restart fee to continue receiving Blue Array's services in addition to the outstanding charges, plus two months of advanced payments at $14,000 per month.
"It is not right that you keep receiving our service on one hand then balk at paying for it because of ‘no contract,’" read the email.
The demand for payment was called "funny" by Council Member Janet Charlton and "extortion" by Council Member Rodney Allison, and the overall email, which included statements about the health hazards posed by sewer plants, was characterized as an attempt to use fear and intimidation to manipulate the city, according to officials' reactions.
(Reilly has also been previously criticized by Toledo after writing what officials called threatening and malicious emails, and their City Council declined an invitation in October to begin a pilot program with Blue Array, specifically, they said, because of these emails.)
But both Vader’s legal counsel and state officials have said Blue Array has no grounds to ask for payment, as the current MOU signed by both parties states Blue Array shall be responsible for all expenses "related to the ownership or operation of Blue Array’s MBRs and related infrastructure."
"There's no legal obligation for the community to compensate them (Blue Array)," said Smith, whose stance was confirmed by both Cathi Read, of the Department of Commerce, and attorney Joe Rehberger during the meeting.
Read also noted it would be a violation of the State Constitution for Vader to compensate Blue Array in light of the MOU, stating any payment with such an agreement in place would constitute a gifting of city funds.
"They can't legally do that," she said of Blue Array’s invoice.
The council included a refusal to pay the invoice in their motion to give the 30 days notice, though it is expected Blue Array will contest this response in light of their recent acquisition of legal counsel, according to Smith.
But Blue Array may be operating on borrowed time, as it was reported Reilly and co-owner Victoria Jelderks are significantly indebted to former financial backer JH Kelley, of Longview, after the two agreed to buy JH Kelley’s interest in Blue Array back in July.
Smith said he understands JH Kelley could possibly acquire Blue Array’s treatment plants and related equipment if Reilly and Jelderks default on their debt, a scenario which could come about as soon as the end of the year.
"A date of Dec. 31 has been mentioned a number of times by Blue Array," said Smith of JH Kelley’s possible acquisition of the company, adding Vader is very short on official details regarding the situation.
When asked to comment on the nature of JH Kelley’s departure with Blue Array or the relationship between the two companies, JH Kelley has declined to respond to emails and Reilly has said it would not be appropriate to share such details on the record.
Council members said they are optimistic JH Kelley may continue offering portable treatment plant services if they acquire Blue Array, as the option remains significantly cheaper than paying millions of dollars for a more conventional sewer plant upgrade.
Before they can consider portable treatments plants as an option, the city must revise their Facilities Plan to comply with state regulations, and during the meeting approved a committee to review contractors for such a revision. The Facilities Plan study is expected to be paid for by a grant already acquired by the city for such planning services.
It is expected the current status of Blue Array, as well as Vader’s next steps toward a sewer plant upgrade, will be discussed during the council’s upcoming meeting on Dec. 17. If Vader chooses a conventional sewer plant option, they may end up paying multiple millions of dollars and be required to raise sewer rates considerably to pay back associated construction loans.