Nippon Paper, FSE Energy resolve biomass boiler dispute

By Erin Voegele | January 14, 2016

Nippon Paper Industries USA Co. Ltd. and FSE Energy have issued a joint statement announcing the resolution of a legal dispute over a biomass boiler installed at Nippon Paper’s mill in Port Angeles, Washington.

The project was originally announced in mid-2010. Court documents explain NPI and FSE executed a contract in November 2010 for the design, manufacture, shipping, erection and successful testing of a 225,000 pounds per hour (PPH) biomass-fired boiler with auxiliary equipment at the Port Angeles facility.

In November 2014, FSE filed a complaint with the U.S. District Court for the Western District of Washington seeking financial compensation for several issues, including for extra work and change order work performed for the project, as well as damages resulting from delays.

The complaint alleges that NPI encountered delays during the pre-construction period of the project that caused FSE to incur substantial additional costs. It also states that FSE achieved mechanical completion of the project before Nov. 26, 2013, with the mud drum set in October 2012 and the first fire achieved on Sept. 14, 2013. The complaint goes on to state that all components of the boiler system were tested and certified by the National Board of Boiler & Pressure Vessel Inspectors before or upon installation and that the certifications state that the mud drum and tubes attached to it were constructed in accordance with the applicable sections of the American Society of Mechanical Engineers boiler and pressure vessel code. According to information contained in the complaint, the boiler system was hydro tested multiple times and on each occasion passed the hydro testing and functioned normally, until NPI broke the boiler system by draining water from the mud drum and hosing the hot mud drum down with cold water, which caused stress fractures due to thermal shock. The complaint also highlights problems allegedly caused by NPI during the commissioning phase that resulted in the breaking of the mud drum, including repeated burning of fuel that was not in compliance with the contract’s fuel specifications, electrical outages in other areas of the paper mill, which tripped the boiler system, and repeatedly spraying cold water on the hot mud drum with a fire hose.

NPI later filed a counterclaim with the court, responding to FSE’s complaint. In the document, NPI denies that FSE achieved mechanical completion and notes that it lacks information as to the truth associated with FSE’s claims of the dates the mud drum was set and first fire was achieved. While NPI admits the boiler system was hydro tested several times, the company denies FSE’s claims that it broke the boiler system by draining water from the mud drum and hosting it down with cold water. NPI also denied FSE’s claims that its actions during commissioning resulted in breaking of the mud drum. These alleged actions included repeated burning of fuel that was not in compliance with the contract’s fuel specifications, electrical outages in other areas of the paper mill, which tripped the boiler system, and repeatedly spraying cold water on the hot mud drum with a fire hose.

In its counterclaim, NPI alleges a hole in the tube joint was discovered during a January 2014 shutdown was caused by water escaping the mud drum while the boiler was under pressure. The counterclaim also alleges that March 2014 tests revealed multiple tube joints in the mud drum were leaking or weeping water and that a crack was found in row 22 of the mud drum later that month. Additional cracks were later found in row 22. NPI said that it investigated and learned that FSE had approved weld repairs to the mud drum after a third-party supplier had bored some of the row 22 holes in the wrong positions and that all of the cracks found in row 22 of the mud drum were in the weld repair material. The counterclaim details other alleged issues associated with the mud drum and FSE’s performance.

A joint statement issued by both companies in January indicates the boiler is now online and the assembled turbine is producing electricity. According to the statement, the companies settled the dispute out of court. Neither party admitted liability and the terms of the settlement are confidential.

Bo Thibaut, CEO of FSE Energy, said, "We are pleased to have been able to resolve this matter." Steve Johnson, mill manager at Nippon Paper, stated, “We have resolved the case and are satisfied with the outcome.”