Alaska co-op looks to settle topdrive suit

Naknek Electric Association, a small Southwest Alaska power cooperative, is asking a bankruptcy judge to approve settlement of a lawsuit over alleged shipping damage to a key component of its geothermal drilling rig.

In September 2010, Naknek Electric sued the Bristol Bay Borough in state Superior Court, alleging that borough employees allowed the topdrive of the co-op’s drilling rig to tip off a forklift during unloading from a barge at the Naknek port in 2009. A topdrive is the motorized unit that turns a rig’s drillstring.

Naknek Electric said it incurred $262,923 in repair costs for the topdrive, and that its total damages exceeded $1 million when counting “consequential damages” such as work delays.

The borough argued, among other things, that it didn’t damage the topdrive and that the unit was used and imperfect when it arrived at Naknek.

Naknek Electric currently is operating under Chapter 11 bankruptcy protection due to multiple problems plaguing its attempt to establish a geothermal energy source. The co-op bought its National 1320 drilling rig in 2009, and has used it to drill one exploratory geothermal well thus far.

On Jan. 4, the bankruptcy attorney for Naknek Electric filed papers seeking approval of a proposed $175,000 settlement with the borough.

The borough has agreed to pay that sum in exchange for dismissal of the case, the papers say.

The amount is well short of the repair bill for the topdrive, but the papers say it would be costly for the co-op to push the case to trial.

“The difference between the settlement amount of $175,000 and out-of-pocket expenses of $262,923 is not high enough to justify the expenditure of more than $100,000 in legal fees plus expert witness costs,” the papers say. “There is also at least some risk that the Borough could prevail on its argument that the top drive unit’s slipping off the forklift did not cause any of the out-of-pocket damages to the top drive.”

The papers further state that Naknek Electric “believes that proceeds of this settlement are not subject to the various liens asserted against the drill rig.”

—Wesley Loy