Turbine Spat to be Heard in State Court

OGDENSBURG, NEW YORK - A dispute over removing two gas turbines, capable of generating about 85 megawatts of electricity, from the cogeneration facility at the St. Lawrence Psychiatric Center is headed for state Supreme Court.

Wood Group Power Solutions Inc. of Tulsa, Okla., agreed April 20 to buy the gas turbines for $9.1 million from AG Energy L.P., according to a lawsuit filed with the St. Lawrence County clerk's office. The agreement called for Wood Group to remove the turbines by Nov. 1.

Wood Group representatives arrived in Ogdensburg on Aug. 27 to plan for removal of the turbines and related equipment starting Sept. 10, but were turned away by AG Energy, which issued an unspecified list of demands, the lawsuit says. Wood Group is seeking court orders requiring AG Energy to permit removal of the turbines immediately.

Arrangements for the turbines to be taken by barge through the St. Lawrence Seaway to a repair depot so they can be serviced have already been made, according to court documents. The barge is already en route to Ogdensburg from Louisiana, and further delay could trap the barge and turbines in the Seaway for the winter, according to court papers.

In addition to seeking immediate release of the machinery, the lawsuit seeks unspecified damages for breach of contract, conversion and unjust enrichment. It alleges AG Energy received $300,000 in undue payments for energy after the sale. A hearing on the lawsuit is scheduled before state Supreme Court Judge David R. Demarest, court officials said.

Wood Group is represented by the Morgan, Lewis & Bockius law firm of New York City and attorney Eric J. Gustafson of the Pease & Gustafson law firm, Massena. Mr. Gustafson and Wood Group representatives didn't return calls for comment.

AG Energy is represented by Howard L. Margulis of the Troutman Sanders law firm of New York City. The company hadn't seen the suit.

AG Energy is obliged to provide year-round steam heat to the St. Lawrence Psychiatric Center. The steam heat comes from the same facility where the turbines are.

"For several weeks, AG Energy has attempted to obtain the cooperation of Wood Group for the safe and orderly removal of the turbines while the steam plant continues to operate," Mr. Margulis wrote in an e-mailed statement. "Unfortunately AG Energy has been unable to obtain cooperation from Wood Group in this regard, and having not been served as of yet with the court papers, AG Energy can only surmise that they relate in some way to this ongoing dispute. Once we receive proper service of the court papers, AG Energy may have further comment on the suit."

AG Energy is affiliated with Alliance Energy, according to state Public Service Commission documents.

Alliance Energy Regional Manager Joseph Klimaszewski plans to address the City Council at its meeting to discuss the future of the cogeneration plant.

"We'll begin a conversation with the city to update them and keep them informed of Alliance's plans to move toward renewable and sustainable energy," company spokeswoman Jane Rubinstein said. "It's Alliance's business model to be a green company, to being carbon neutral, and Ogdensburg is part of that plan."

Alliance Energy is trying to convert the Ogdensburg cogeneration plant to run on alternative fuels such as biomass or biodiesel, company officials said.

The company is undertaking engineering and feasibility studies to determine the best fit for the plant. The proposed project calls for $40 million to $50 million of investment in the plant, which would employ about 200 construction workers. Counting spinoffs for the company's suppliers, the project could create up to 150 jobs. The project won't come to fruition, however, unless the company can get out from under the 25-year contract that obliges its Ogdensburg cogeneration plant to supply steam heat to the St. Lawrence Psychiatric Center.

"If they don't renegotiate the contract, they will shut down the plant," Mrs. Rubinstein said.

The Ogdensburg cogeneration plant began producing electricity in 1994. The electricity generated at the plant was sold primarily to Niagara Mohawk Power Corp., now National Grid, with the steam byproduct to the St. Lawrence Psychiatric Center. Federal law used to require public power companies to buy power from independent sources, such as cogeneration plants, in their service areas.

Those rules have changed, and the utility companies are no longer obliged to purchase power from anyone. The independent power industry has suffered in recent years.

"Alliance is trying to make the project cost-effective," Mrs. Rubinstein said. "One of the critical prerequisites to pursuing the green conversion is to renegotiate the steam contract with the state."

The negotiations have stalled, with no future meetings now planned, Mrs. Rubinstein said. No timetable was available for when a decision was to be made by Alliance Energy on the plant's future.

The company operates three cogeneration plants in the state - Ogdensburg, Batavia and Sterling.

In April, the company also acquired three hydroelectric and two gas-fueled electric generating plants from Mirant Corp. The facilities include three hydroelectric plants on the Mongaup River, along with the Shoemaker generating plant in Middletown, Orange County, and Hillburn generating plant in Hillburn, Rockland County.