Fargo-Moorhead Diversion Authority, hit with fed enjoinder, puts construction contracts at risk


Minnesota and North Dakota are clashing over the construction of  a rural ring levee opponents say is part of the approximately $2 billion Fargo Moorhead Diversion Project meant to change the course of the treacherous north flowing Red River—it threatens the Fargo, ND -Moorhead, MN, cities with flooding almost every spring.

In May, a federal judge ordered construction stopped until the Minnesota Department of Natural Resources completes its ongoing environmental review of the project. The Fargo-Moorhead Diversion Authority says the loss of the remainder of the 2015 construction season would equate to losing $2 million.

The Richland/Wilkin Joint Powers Authority and MnDak Upstream Coalition filed suit in April 2014 to stop construction of the The Oxbow-Hickson-Bakke ring levee designed to protect a series of rural communities south of Fargo from ongoing flooding and against water stored upstream by the diversion. The authority says it’s a stand-alone project, but plaintiff’s argued that it is a part of the larger project and therefore subject to the Minnesota DNR’s review findings.

What’s really at stake is that Fargo politicians want to build into the natural flood plain to develop the area for higher property tax rates, says Gerald Von Korff, attorney for the plaintiffs, Rinke Noonan Law Firm, St. Cloud, MN. “The area they want to protect for development and tax assessment purposes is an area the size of Minneapolis,” he says. “And Fargo is one of the least dense cities in the United States. People will start to build there again after it has flood protection.”

A resident of Bakke, N.D., Marcus Larson, testified via affidavit in U.S. District Court in May that construction work continued at the site despite the federal injunction. Von Korff said it’s evidence the authority has continuously rejected its obligation to comply with Minnesota and U.S. law. “They think the fines they might face from the court will be less than the cost of freezing the construction contracts,” Larson says.

The FM diversion has put itself and contractors at risk with its fait accompli tactics, Von Korff says. “It’s unimaginable that hey have thrust themselves into this position unless they did it on purpose,” Von Korff says. “Six [authority] lawyers should be smart enough to put into a contract that the authority doesn’t have to pay contractors if the project is enjoined. It’s just common practice. So they’ve locked themselves in order to say that they will be damaged by a stop-work order. You never bid out on a project under review unless you provide some safety.”

Robert Cattanach, attorney for the authority at Dorsey Whitney LLP, Minneapolis, argued that construction work was not being continued on the ring levee. “The only construction work being performed there now is by private homeowners,” he said, but would not comment on any further details about the stop work order. “I’m uncomfortable commenting because there are several matters still pending with the court,” he said. The authority is appealing the U.S. district court ruling.

All those houses he’s talking about are on land owned by the authority,” Von Korff says.

The Red River has exceeded flood stage in 49 of the past 110 years, every year from 1993 through 2011, and again in 2013. Because of the dangers there is strong federal support for the diversion. Terry Williams, project manger with the Army Corps of Engineers, St. Paul, MN, said the project was authorized by the Water Resources Reform and Development Act, but no funding has been appropriated at the federal level. The project needs $800 million in U.S. funding. “I wish I had a crystal ball, but it’s up to Congress now,” she says. Meantime, the authority and financial consultants Ernst & Young are exploring the construction of the 33-mile diversion channel with a P3 contract.

Troy Erikson, vice president of engineering at Fargo’s Industrial Builders Inc., one of the authority’s top payees to date, said the injunction does not compromise its ongoing work. “We’re not really working out there,” he said. “There are a lot of projects in the city of Fargo that we’re working on now and those aren’t affected [by the injunction].” Construction in Fargo currently involves permanent flood walls and a pump stations which are part of the levee system throughout the city.

The primary construction manager for the authority, Tom Waters, vice president, CH2M, did not return Tristate’s request for comment regarding the risks the injunction posed for the company.

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