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Thursday, December 18, 2008
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United States Seeks $21 Million from State of Oklahoma on Unpaid Reservoir Contract

State has failed to pay Army Corps for 11 years

WASHINGTON—The United States has asked a federal court in Oklahoma to order the state of Oklahoma to pay more than $21 million due under a contract with the Army Corps of Engineers for the construction of Sardis Lake reservoir, the Justice Department announced today.  The state has owed payments to the federal government since 1983, and its last payment was 11 years ago.

The federal government’s filing in the U.S. District Court in Tulsa follows a judgment from the same court on May 19, 2005, ordering Oklahoma to pay more than $14 million within 90 days and to make further payments over a 36-year period.  The state appealed the ruling to the U.S. Court of Appeals, which sided with the federal government, and to the Supreme Court, which declined to hear the case.  Although all its appeals have been rejected, the state has failed to pay as ordered.  

“It is unfortunate that we now need to go to court to seek enforcement of a debt that has already been fully litigated.  But the federal government pursued a variety of reasonable attempts over a period of several years to resolve this issue absent litigation, and the state has, in the end, rejected them all,” said Ronald J. Tenpas, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division.

 In 1974, the United States, through the Army Corps of Engineers, entered into a contract with the Oklahoma Water Resources Board for the construction of a dam and reservoir project, now known as Sardis Lake reservoir, in order to provide storage for municipal and industrial water supply.  The contract stated that the Corps would include water supply storage space at its initial expense, and the Board would repay the Corps the costs associated with this storage space plus interest in 50 annual payments.

 The Corps constructed the dam and reservoir and in 1983 notified the state that the project had been completed.  The state made seven payments totaling approximately $4.5 million over the next 14 years—all of them late and totaling much less than the amount owed.  The last partial payment was received in 1997.  Following repeated attempts to resolve the matter, the federal government then filed a breach of contract suit against the state in 1998 seeking the past due amounts.  The federal government has paid to operate and maintain the project for the state since its completion.

 Today’s action was filed by the Natural Resources Section of the Justice Department’s Environment and Natural Resources Division. The section handles litigation related to federal lands, resource and ecosystem management.