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Enxco Development Corporation v. Northern States Power Company

April 3, 2013

ENXCO DEVELOPMENT CORPORATION, PLAINTIFF,
v.
NORTHERN STATES POWER COMPANY, DEFENDANT.



The opinion of the court was delivered by: Michael J. Davis Chief Judge United States District Court

MEMORANDUM OPINION AND ORDER

This matter is before the Court on Defendant Northern States Power Company's ("NSP") motion for summary judgment [Doc No. 71], NSP's motion to exclude expert testimony of LeRoy Koppendrayer [Doc. No. 64] and Susan E. Wefald [Doc. No. 60] and Plaintiff enXco Development Corporation's ("enXco") motion to exclude expert testimony [Doc. No. 78].

I. Factual Background

enXco*fn1 is the U.S. Subsidiary of EDF Energies Nouvelles, a multi‐national company that is involved with renewable energy products, including solar and wind projects. enXco has been involved in many renewable energy projects throughout the United States. (NSP Ex. 1 (Grimbert Dep. at 11).) NSP, a Minnesota corporation and a subsidiary of Xcel Energy, Inc. ("Xcel"), is an electric and natural gas company that provides energy to customers in Minnesota and the Dakotas. (NSP Ex. 3.)

In October 2008, enXco and NSP entered into two contracts for the development and purchase of a wind energy generation project in North Dakota, referred to as the Merricourt Project. (NSP Exs. 5 and 6.) The first contract is the Developed Wind Project Purchase and Sale Agreement (the "PSA") wherein enXco agreed to sell its wind energy development assets, including real property, to NSP. (NSP Ex. 5.) The second contract is the Engineering Procurement and Construction Agreement (the "EPCA") through which NSP agreed to pay enXco $353,500,000 for engineering, procurement of necessary infrastructure, construction, commissioning, start‐up and testing of the Merricourt Project. (NSP Ex. 6.)*fn2 During the development of the Merricourt Project, enXco bore all the risks associated with ownership. (NSP Ex. 1 (Grimbert Dep. at 30, 90‐91).) Once the parties closed on the PSA, ownership of the Merricourt site would be transferred to NSP. (NSP Ex. 7 (Peluso Dep. at 99); Ex. 5 (PSA "Recitals").)

The PSA includes certain conditions precedent that were to be completed by the "Long‐Stop Date" which was set for March 31, 2011. (Ex. 5 (PSA §§ 1.1 (Definition of "Long‐Stop Date"), 2.3.1).). Article 3 provides that "[t]he obligation of [NSP] to consummate the transaction contemplated by this Agreement shall be subject to fulfillment at or prior to the Closing of each of the following conditions . . ." (Ex. 5 (PSA at 15).) Relevant to this case, enXco was required to deliver to NSP a "Permitting Opinion"*fn3 and to obtain and transfer to NSP all final and non‐appealable permits from the North Dakota Public Service Commission ("NDPSC). (Id. PSA at §§ 1.1 (Definition of "Permitting Opinion"), 3.1.6, 3.7, 6.11 & Schedule 6.11.) Pursuant to North Dakota law, one such required permit is the Certificate of Site Compatibility ("CSC"), which was required before construction for the Merricourt Project could begin. N.D. Cent. Code § 49‐22‐02.*fn4 Another condition precedent required that there had been no Material Adverse Effect ("MAE") or that any MAE had been cured by the Closing Date. (NSP Ex. 5 (PSA § 3.5).)*fn5

The PSA also provides that the parties shall use reasonable efforts "to obtain or assist in obtaining, all consents, approvals, transfers, permissions, waivers, orders, reissuances and authorizations of . . . all Authorities and other third parties which are required to be obtained or made by them in connection with the consummation of the transactions contemplated by this Agreement or in connection with the Project." (Id. § 8.3.)

Either party could terminate the PSA, upon written notice to the other, in the event the Closing did not occur or the conditions precedent had not been fulfilled or waived on or before the Long‐Stop Date. (Id. § 10.1(a)(I).)

After the contracts were executed, enXco submitted a letter of intent to the NDPSC in December 2008 with respect to the CSC. (NSP Ex. 12.) Because North Dakota law provides that such a letter must be sent one year prior to the application for a CSC, enXco requested the NDPSC to waive this requirement to allow enXco to meet the construction schedule for the Merricourt Project. (Id.) enXco further noted in its letter that it intended to file the application for a CSC in October 2009. (Id.) The request to shorten the waiting period was granted. (NSP Ex. 14.) enXco did not, however, submit its application for a CSC until October 26, 2010. (NSP Ex. 13.) enXco asserts that the delay in filing the CSC application was due, in part, to the concerns raised by the United States Fish and Wildlife Service ("USFWS") about possible adverse effects of the wind project on two bird species. Such concerns caused NSP to send enXco a letter dated May 20, 2010 as notice that NSP believed enXco was in breach of sections 6.6, 6.7 and 6.11 of the PSA and notice of an MAE based on a report from the USFWS of a possible adverse effect to whooping cranes from the Merricourt Project. (Dalton Decl., Ex. 23.) The referenced USFWS report dated February 10, 2010 recommended that "enXco not commence project construction until they have applied for and receive an Incidental Take Permit (ITP), if needed, from the Service in accordance with Section 10(a)(1)(B) of the ESA [Endangered Species Act], pursuant to a regional or project‐specific HCP [habitat conservation plan]." (Id.) enXco's project development manager, Chris Sternhagen, testified at his deposition that issues with the USFWS concerning the taking of two avian species affected the locations of individual wind turbines, and that this issue prevented enXco from submitting its CSC application earlier. (NSP Ex. 8 (Sternhagen Dep. at 313).) At a later deposition, however, he testified that the layout of the turbines actually had "really played very little impact as to the schedule." (NSP Ex. 21 (Sternhagen Dep. at 157).)

After submission of the CSC application in October 2010, the NDPSC issued a "Notice of Filing and Notice of Hearing" on said application. (NSP Ex. 26.) The NDPSC also deemed the application complete. (NSP Ex. 27.) The hearing was scheduled for December 21, 2010 to address whether the Merricourt Project would produce minimal adverse effects on the environment and citizens of North Dakota, whether the proposed facilities are compatible with environment preservation and the efficient use of resources, and whether the proposed facility locations minimize adverse human and environmental impact while ensuring that the energy needs are met and fulfilled. (Id.)

Due to inclement weather, the December 21, 2010 hearing was rescheduled to February 10, 2011 at Teddy's Grill in Edgeley, North Dakota. (NSP Ex. 30.) At the February 10 hearing, one of the commissioners of the NDPSC thanked enXco for its thorough application. (Dalton Decl., Ex. 45 (Transcript of Feb. 10, 2011 Hearing at 8).) Also at the hearing, enXco informed the NDPSC that construction of the project should be completed in 2011, and that the project would be commercially operable by December 31, 2011. (Id. at 33‐34.)

On March 17, 2011, the NDPSC discovered that the hearing on enXco's CSC application was held in the wrong county and that a new hearing would have to be held in the correct county. (NSP Ex. 34.) Pursuant to statute, the NDPSC had to provide twenty days notice before holding the new hearing. N.D. Cent. Code § 49‐22‐13(4); N.D. Admin. Code § 69‐02‐04‐01. enXco thereafter submitted a request for an expedited hearing. In this request, enXco noted that the agreements between enXco and NSP regarding the Merricourt Project provided the PSA had to close no later than March 31, 2011. (NSP Ex. 34 at 2.) "However, if a reconvening of the public hearing in this matter is required and cannot occur until after March 31, 2011, under the agreements between enXco and NSP, NSP can terminate the Purchase and Sale Agreement between the parties, effectively terminating this Project, as set forth in the attached Affidavit of Chris Sternhagen." (Id. at 3.) The NDPSC denied the request for expedited hearing and set the new hearing for April 15, 2011. (NSP Ex. 35 at 13.) The April 15, 2011 hearing was also rescheduled to May 12, 2011 due to inclement weather. (NSP Ex. 40 at 2.) Ultimately, the NDPSC issued enXco the CSC on June 8, 2011. (Id.)

In addition to the fact that enXco did not obtain the CSC by the Long‐Stop Date of March 31, 2011, the parties do not dispute that the PSA did not close on or before that date. (NSP Ex. 25 at Nos. 12 and 19.) By letter dated April 1, 2011, NSP informed enXco that it was exercising its right to terminate the PSA pursuant to § 10.1(a)(I) of that agreement. (NSP Ex. 42.) NSP stated its reasons for the termination, noting that the Closing had not occurred on or before the Long‐Stop Date and because conditions precedent to Closing were not fulfilled or waived on or before the Long‐Stop Date. (Id.) In addition, NSP further notified enXco that because it was terminating the PSA, NSP was entitled to terminate the EPCA pursuant to § 13.8.2 of that agreement. (Id.; NSP Ex. 6 (EPCA § 13.8.2).)

Thereafter, enXco brought this action, asserting four counts: Declaratory Judgment; Breach of Contract (Specific Performance‐PSA); Breach of Contract (PSA and EPCA); and Breach of Contract (Implied Covenant of Good Faith and Fair Dealing) (PSA and EPCA). By letter dated July 18, 2012, enXco notified NSP of its intent to withdraw its claim for specific performance (Count II). (NSP Ex. 45.)

II. Standard for Summary Judgment

Summary judgment is appropriate if, viewing all facts in the light most favorable to the non‐moving party, there is no genuine dispute as to any material fact, and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322‐23 (1986). The party seeking summary judgment bears the burden of showing that there is no disputed issue of material fact. Celotex, 477 U.S. at 323. "A dispute is genuine if the evidence is such that it could cause a reasonable jury to return a verdict for either party; a fact is material if its resolution affects the ...


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