Wednesday, September 18, 2019

Puerto Rico water utility sells remaining Southern Gas pipeline at bargain prices

By on August 15, 2017

SAN JUAN – Hundreds of pipes from the controversial Gasoducto del Sur, or Southern Gas Pipeline, that were transferred to the Puerto Rico Aqueduct and Sewer Authority (Prasa) in 2009 at a cost of $60 million to convert them into the Southern Aqueduct will be sold to a Caguas firm for about $50,000.

The sale was authorized Tuesday by Prasa’s board after engineer José Rivera said the pipes were causing losses to the public corporation since it has been paying $4,500 a month to rent a facility in the Port of Ponce to store them.

After the administration of former Gov. Luis Fortuño canceled the controversial Southern Gas Pipeline in 2009 following public outcry and lawsuits, miles of pipelines and other assets, including easements, were transferred to Prasa to build the Southern Aqueduct. As part of the cancellation, the Puerto Rico Electric Power Authority (Prepa) had to pay $60 million to the project developer.

A vent pipe for a natural gas pipeline (Photo by Tim Boyle/Getty Images)

On Aug. 17, 2009, Prasa entered into an agreement with the Puerto Rico Industrial, Tourism, Educational, Medical & Environmental Control Facilities Financing Authority (Afica by its Spanish acronym) to purchase the assets for $23.5 million. As part of the agreement, Prasa assumed the rights and obligations of Prepa under a loan agreement between Afica and the electric utility of up to $35 million, according to audited Prasa reports.

Rivera explained that nothing is owed to Afica since 2011.

In 2013, the Prasa board decided to sell the pipes. That same year, a Houston-based firm, DKM Enterprises, bought hundreds of pipes that were in a duty free zone at the Port of Ponce, a transaction that reportedly released Prasa from lease payments of $14,000 a month.

However, there are still about 1,181 pipes that Prasa has tried unsuccessfully to sell, Rivera explained. The pipes, which cost about $2,500 each, are corroded and some have been cut.

“In April 2017, we asked the General Services Administration about a material disposal contract, but in May they said they could only accept it as a donation,” the engineer said.

However, Caguas Realty Utility Corp. offered to buy the pipes for construction use. The firm offered $50,000 for the remaining pipes, which it promised to remove from the site within 90 days. The company offered to continue to pay the lease if the material is not removed by then.

“Once that sale was made, we would no longer have this rent,” Prasa Executive Director Eli Díaz said, adding he would order a report on the transaction to avoid similar situations in the future.

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