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Lawsuit planned against Colorado Springs Utilities over scrubbing technology

September 19, 2016 Updated: September 20, 2016 at 6:41 am
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photo - Workers at the Martin Drake Power Plant install scrubbers on Unit 6, center and Unit 7, right, Monday March 9, 2015. The scrubbers, developed by the Neumann Systems Group, a Colorado Springs-based business, cut down on the sulfur dioxide emissions. The downtown plant must by meet all Environmental Protection Agency air quality standards by 2017.
CAROL LAWRENCE/THE GAZETTE
Workers at the Martin Drake Power Plant install scrubbers on Unit 6, center and Unit 7, right, Monday March 9, 2015. The scrubbers, developed by the Neumann Systems Group, a Colorado Springs-based business, cut down on the sulfur dioxide emissions. The downtown plant must by meet all Environmental Protection Agency air quality standards by 2017. CAROL LAWRENCE/THE GAZETTE 

Two downtown attorneys have filed a notice of intent to sue over a "breach of fiduciary duty" by Colorado Springs Utilities in signing a sole-source, noncompetitive contract for Neumann Systems Group Inc. to install emissions scrubbing systems in the coal-fired Martin Drake Power Plant downtown.

Robert J. Frank and Perry R. Sanders Jr., representing clean air activist Nicole Rosa, write that the stated project cost of $80 million has exceeded $170 million, as revealed in records Rosa obtained in February under the Colorado Open Records Act.

Sanders and Rosa declined to comment on the action. The City Attorney's Office received the notice last month, and it "has been processed according to usual procedure," a city spokeswoman said.

Studies for Utilities by Stanley Consultants in 2007 and 2009, obtained by Rosa's CORA requests, "clearly indicate that conventional dry scrubber technologies" could have been used at Drake, a fact that "invalidates the 2011 sole source jurisdiction," the document says.

Rate increases resulted from the scrubber cost increases, it says. But "all potential insurance carriers" should be notified, as Rosa does not want the damages - estimated from tens of millions to $100 million - passed "back to the very class of people who have been negatively impacted," Utilities' ratepayers.

The notice says "innocent actors will not be pursued in this matter."

"This claim is against Colorado Springs Utilities, an enterprise of the City of Colorado Springs; members and past members of Colorado Springs Utilities Board; and the City of Colorado Springs," it says.

The city-owned Utilities awarded the original $73.5 million no-bid contract to NSG in 2011, later saying that David Neumann's NeuStream scrubber system was cheaper and smaller than conventional technology, could only be provided by NSG and showed promise.

Utilities also bankrolled Neumann to research and develop the technology so Drake could meet federal air quality regulations taking effect next year. The contract promised the city 3 percent and 5 percent of profits for future sales and licensing fees, respectively, of the dual-alkali scrubber technology. Five years later, no other buyer has surfaced.

The selection of NSG spurred dissent not only in the community, but also on the City Council, which serves as the Utilities Board.

"CSU's assertion that Neumann's proprietary technology is the only solution is like saying, 'McDonald's is the only fast food franchise (that sells) hamburgers because they have a secret sauce in the Quarter Pounder,'" then-Councilman Tim Leigh said at the time.

Utilities Energy Manager George Luke also caused controversy when, three years after signing the NSG contract, he joined Neumann Systems Group as its vice president of business operations.

In February, Utilities and David Neumann said testing showed the NeuStream scrubber system on Drake Unit 7 had removed more than 97 percent of sulfur dioxide emissions.

But in May, a second judge upheld Utilities' refusal to release information on those emissions obtained through a contract with AECOM Technical Services Inc. Utilities lawyer Rick Griffith told the court that AECOM was retained to provide legal advice; plaintiff Leslie Weise said she sought the air-quality records because her young son attends a charter school in the path of the Drake emissions plume.

Said Denver attorney Steven D. Zansberg, president of the Colorado Freedom of Information Coalition, "Emission reports showing sulfur dioxide emissions being produced by Drake Power Plant are not a privileged report." Zansberg represents The Gazette in First Amendment cases.

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