Summit Carbon Solutions, the company building the 2,000-mile web of carbon capture pipelines in the Midwest, is being sued for breach of contract by the manufacturer that would make the pipes.
Landowners who oppose the Summit project have speculated that the company may be out of money and may end the project, but Summit says it plans to continue its effort to build a carbon capture pipeline.
Welspun Tubular, based in Little Rock, Arkansas, says Ames, Iowa-based Summit signed a Sept. 16, 2022, purchase agreement for more than 4.1 million feet of pipe for $182.5 million.
The agreement includes payment for materials purchased to manufacture the pipe and a $15 million cancellation charge if Summit backs out of the deal.
The massive, controversial environmental project will slice through thousands of private properties in five states: Iowa, Minnesota, Nebraska, South Dakota, and North Dakota.
Summit must acquire right-of-way property rights for each property, and many landowners are not interested in selling their land rights. There have been meetings, lawsuits, and protests.
Carbon capture is a green initiative aimed at averting climate change. It captures carbon dioxide (CO2) and sends it through a pipe to be buried underground. Carbon capture is lucrative because it is subsidized with tax credits from the federal government.
Companies can monetize tax credits by selling them to other companies at a discount from face value, thereby giving the buyer a tax break and putting cash in the seller’s pocket.
A Summit spokeswoman told The Epoch Times in an email that the dispute with Welspun revolves around timing issues related to pipe production.
“We’re committed to resolving this matter swiftly, and our intention to collaborate with Welspun remains unchanged,” she said.
“We anticipate a resolution that aligns with our shared goals: building a pipeline to safely and permanently store CO2, opening access to new markets for ethanol.”
The Epoch Times then asked if that meant that the company plans to buy pipe from Welspun after all.
The spokeswoman did not respond.
If they can get it built, the pipe system will store 16.7 million tons of CO2 underground each year, according to Summit. That amounts to $1.4 billion per year in tax incentives.
But Summit is not ready to start digging. It is still in the approval process.
Canceled Pipe Purchase
According to court papers, pipe production was to start on May 8, 2023. Welspun bought hot-rolled steel coils that met Summit’s specifications.The contract allowed Summit to suspend the purchase agreement for up to six months.
During the suspension, if Welspun received a third-party offer to produce pipe that would fill the production line spot reserved for Summit, Welspun was required to notify Summit of the offer and “the duration of offered use of the production line.”
Summit then had two options: instruct Welspun to reject the third party’s offer and resume production of Summit’s pipe or continue the suspension and let Welspun accept the third-party offer.
Summit suspended the purchase agreement on Jan. 31, 2023, according to court papers, and Welspun did several jobs for other parties, with Summit’s permission.
Then, as the six-month limit neared, Welspun told Summit that it had another third-party job that would go an additional month beyond Summit’s new start date, Dec. 16, 2023.
Summit agreed to let Welspun do that job, too. But when Welspun sent a letter stating that it intended to start Summit’s job on Feb. 5, Summit sent word back that it would be “maintaining the suspension,” according to court papers. Welspun stated that it was not agreeable to further extending the suspension.
Summit asked to discuss the status of the project and those discussions revealed “that the project was dramatically off-schedule,” the filing states.
Discussions ensued, and on Feb. 19, Summit canceled the purchase agreement, according to court papers. Summit also stated that it would not pay for the steel or the cancelation fee.
Summit instructed Welspun: “Be on notice that no cancellation charge is due ... because the date of start of production has not yet occurred, and also be on notice that no direct costs, including the cost of the steel purchased to produce the pipe, are due since the suspension was ordered on Jan. 31, 2023, which date was more than 90 days prior to the first scheduled start-of-production date.”
Welspun is asking the court to make Summit pay and award Welspun damages.
