A multimillion-dollar dispute between the natural gas pipeline company doing the Kennebec Valley pipeline project and its major contractor is likely to go to a trial before a federal judge.

U.S. Magistrate Judge John Nivison has recommended that most of the claims between Summit Natural Gas of Maine Inc. and Schmid Pipeline Construction Inc. continue, rejecting a motion for summary judgment.

That recommendation came this week in U.S. District Court in Bangor. Both sides have a chance to file objections, and the case then will go to U.S. District Judge George Z. Singal, who can accept, reject or modify the recommendation to send it to trial.

“We’re fully prepared to go forward in terms of a bench trial and have a fact-finder make a determination on the issues outlined in Judge Nivison’s opinion,” John Hobson, one of Schmid’s attorneys, said Friday.

Hobson said Schmid is seeking almost $72 million plus interest, costs and attorney fees, plus fees under a prompt payment law. About $35 million paid directly by Summit to Schmid’s subcontractors would be deducted from that, Hobson said.

“My client’s policy is not to comment on pending litigation matters,” A. Robert Reusch, one of Summit’s attorneys, said in a reply to an emailed query. “We will not, therefore, be commenting on the Magistrate’s decision issued earlier this week.”

Schmid sued Summit for $72 million in damages in December 2013, saying Summit had breached its contract with the company and underestimated the scope of necessary work on the pipeline network. As a result, Schmid said it had to increase the number of workers and their working hours while providing more in materials and equipment without Summit increasing its payments.

Summit filed counterclaims against Schmid, alleging breach of contract, breach of warranty and other claims.


The 2012 arrival of Summit, a Colorado-based utility, looked to be a game-changer for Maine’s energy market. In a state where oil heat dominates, Summit pledged to spend $350 million to connect 15,000 homes in the Kennebec Valley to natural gas, and $73 million to serve 80 percent of the homes in Cumberland, Falmouth and Yarmouth within five years.

But Summit got off to a rough start, particularly in the Portland suburbs. A harsh winter set back the construction season, and digging only began in spring 2014. Then safety violations for drilling too close to sewer lines were followed by fines from the state Public Utilities Commission. The setbacks left a bad taste with frustrated customers, who were promised gas by the fall but didn’t get it. Taken together, the problems pushed back the original build-out timetable by a year and created a public relations challenge for a company that needs to build trust to gain customers.

As of January 2015, the company reported having about 3,000 residential, commercial and industrial customers under contract for natural gas delivery in 12 cities and towns in central and southern Maine, according to a news release Summit distributed in May.


Nivison’s written recommendation outlines some of the contract negotiations, including a discussion in which Schmid declines to work on a unit-price basis and instead proposes to bill for “labor, equipment, materials and subcontractor costs on a time-and-materials basis.”

An April 2013 proposal by Josh Purrenhage, Schmid’s vice president of operations, says, “By reducing our profit on this project, we believe we can install the 353,500 (linear feet) of pipe for a budget of approximately $61 million inclusive of 10 percent contingency.”

By late October 2013, after construction had been underway for some months and the contract amended several times, Schmid told Summit the projected final cost would be about $120 million.

Nivison lists the claims in the dispute, in which Schmid says Summit had little experience in pipeline construction, and Summit says Schmid’s key personnel were absent for about half the construction season.

Schmid quit work on the project on Nov. 20, 2013, saying that Summit had refused to reimburse it for about $64 million in capital outlay.

Schmid says Summit breached the contract and violated a state prompt payment law, among other claims. Summit, in counterclaims, says Schmid breached the contract by failing to manage performance and control costs.

Schmid sought summary judgment on the breach of contract and prompt payment claim.

Nivison recommended refusal, saying the factual record includes evidence from which a fact-finder could conclude that some of Schmid’s work was deficient or performed inefficiently, and that Schmid billed incorrectly for some subcontracted work.

Nivison recommended rejection of Summit’s claim against Schmid for unjust enrichment, saying the “parties agreed to a specific rate that was acceptable to both parties and that was not dependent on Schmid realizing a certain profit.”

Objections to Nivison’s recommendations and requests for oral argument must by made by July 13.

Press Herald Staff Writer Tux Turkel contributed to this report.

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