JIM FUGLIE: View From The Prairie — Refinery Update: Another Day, Another Lawsuit; Ho Hum

If you happen to be in Texas, in the Houston area, the first week of January, and you’ve got a little time to kill, you could probably stop by the 215th Judicial District Courthouse for a little entertainment. There’s going to be a trial going on that might interest you. Lawyers for this company called Meridian Energy Group that I’ve been writing about lately, the one that wants to put an oil refinery beside Theodore Roosevelt National Park, is going to be telling a judge why it shouldn’t have to pay more than $400,000 to an engineering firm it hired to help design its refinery. I’m eager to hear the story.

An engineering company, Gibson Applied Technology and Engineering, has filed a breach of contract lawsuit against Meridian for failure to pay $419,131 for work GATE did in 2019.

Is this starting to sound familiar? Here’s the background. Meridian sent out a press release in September of 2018 that said: “Meridian Energy Group, Inc., the leading developer of innovative and environmentally-compliant oil refining facilities, announced today that the company has signed a Letter of Intent with GATE Energy. Meridian is pleased to announce that GATE Energy has been selected to provide commissioning and start-up services to the Davis Refinery team during development and execution of the 49,500 bpd Davis Refinery located in Belfield, North Dakota. This LOI comes only weeks after Meridian has begun Civil Construction of the Davis Refinery. The Davis Refinery will commence construction in 2019 and will be fully operational in 2020.”

Well, it didn’t quite work out. What actually happened in 2020 is GATE got tired of sending invoices to Meridian and not getting paid, and so it took Meridian to court. In a lawsuit filed May 26, 2020, attorneys for GATE wrote, “Plaintiff sent regular invoices to the Defendant for payment for the services it had provided, supported by time reports. Defendant’s representative signed the time reports for the Invoices and returned them to the Plaintiff. Defendant failed to pay the Plaintiff for the invoiced services and work, as the Invoices came due. Each of the Invoices contains a reference that the Invoices are due ‘Net 30.’ The last invoice was dated Sept. 9, 2019.”

The lawsuit goes on, “As of Sept. 9, 2019, the total amount due and owing to the Plaintiff from Defendant under the Invoices was $419,131 for 2402 hours of work provided. On or about April 8, 2020, Plaintiff, through its counsel, served by certified mail and email, Defendant a written demand for payment of the above Invoice amounts due and owing under the MSA. Defendant has refused to respond to the Demand and has refused to payments of any of the remaining amounts due and owing to the Plaintiff.”

Three months after the lawsuit was filed, on Aug. 21, a judge “ORDERED, ADJUDGED AND DECREED that Plaintiff recover from the Defendant, on Plaintiff’s breach of contract claim, damages in the amount of $419,131.00, together with pre-and post-judgment interest thereon at the rate of 5 percent (5%) per annum, beginning May 26, 2020, until paid.”

Well, now it’s 18 months later and the interest is still adding up because Meridian still hasn’t paid. And so Judge Elaine H. Palmer of the 215th District Court has called them back to her courtroom for a trial. In a memo dated just a couple of weeks ago, Oct. 26, 2021, Judge Palmer wrote, “THE CASE IS SET FOR TRIAL FOR THE TWO WEEK PERIOD BEGINNING JANUARY 3, 2022.  DOCKET CALL DECEMBER 13TH 2021. Parties are to appear at 9 AM SHARP for Docket call.”

Wow. Two weeks in court. I hope Meridian can afford to pay its lawyers. This is pretty much getting to be par for the course for Meridian. Go back and take a look at that press release: “Meridian has begun Civil Construction of the Davis Refinery.” Yep, it did that. Meridian hired another engineering firm, SEH, who hired a subcontractor to level off a quarter section of prairie west of Belfield as the future home for the refinery. The subcontractor, Martin Construction from Dickinson, scraped the dirt into a 10-foot high wall around the property to keep inquisitive minds from peeking in to see how construction was — or wasn’t — progressing on the refinery.

When Meridian failed to pay the $2.2 million dollar bill, SEH took out a construction lien against the property, which is still in place today — a $2.2 million unpaid bill.

And then last year, a group of former employees filed a $600,000 lawsuit against them for nonpayment of wages and salaries. Meridian still hasn’t paid those employees either, in spite of the fact it received more than $1.7 million from the federal government’s Paycheck Protection Program to do just that, which I wrote about a couple of weeks ago. I wonder where that money went.

And yet Meridian goes on about its business as if the lawsuits don’t even exist. Company officials were here in North Dakota this September to plead their case to the state’s Department of Environmental Quality for an extension of their Permit to Construct a refinery, a permit first issued in the spring of 2018, more than three years ago. Boldly they proclaimed that the financing package for their billion-dollar scheme was just around the corner, and as soon as they left Bismarck, they were going to go around that corner to the offices of the giant investment bank Morgan Stanley and get it, and then they were going to start building the refinery, to satisfy the requirements of the Permit. The permit extension requires Meridian to make periodic progress reports on the refinery’s construction to the DEQ. Of course, Meridian says it is going to build its refinery in pieces somewhere else, and bring the pieces here someday and put them together. Kind like a Lego refinery, it sounds like to me. How convenient. It’s pretty hard for the DEQ to monitor the progress that way.

So once Meridian goes around that corner and get that financing package, it’s going to have to spend the first $3.5 million on old lawsuit bills. Meanwhile, I’m wondering how many more of these bad deals our state officials are going to have to see before they say, “Maybe we don’t want your kind of company in North Dakota.”

Oh, and one more note about that $1.7 million in government guaranteed loans through the Small Business Administration’s Paycheck Protection Program, those loans that don’t have to be repaid. The first loan of $853,800 was issued in April 2020 to cover the paychecks for what the company said was a payroll of 41 employees. The SBA has forgiven that loan already, according to a group monitoring the program for fraud. A second loan for the same amount was issued earlier this year to pay 39 employees. That one hasn’t been repaid yet.

But a former employee of the company is now calling “bullshit!” on Meridian, saying it never had that many employees. That’s important because the amount any business was allowed to borrow was based on a formula depending on the number of its employees. If a company had fewer employees than it claimed, (the former employee told me they thought the company had fewer than 20) it would have only been eligible for a much smaller “loan.”

Did Meridian inflate its employee numbers? One former employee told me a couple of weeks ago employees were told that there were mysterious book entries for payroll through the years, of people drawing paychecks that no one even knew or had ever seen at the company’s offices.

I’m doing some checking. There’s a thing called the Freedom Of Information Act available when you’re seeking information on the use of federal tax dollars. I’ll report when I know more.

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