Arbitration Of Disputes Related To Geothermal Plant Construction
1. Background: Geothermal Plant Construction
Geothermal plants harness heat from the earth to generate electricity or provide district heating. Construction involves:
Drilling production and injection wells
Installing turbines, heat exchangers, and cooling systems
Building steam and fluid handling pipelines
Constructing powerhouses, substations, and support facilities
Disputes are common due to:
Complex subsurface conditions
High technical and engineering demands
Environmental permitting and regulatory requirements
Integration of multiple contractors, suppliers, and EPC teams
Arbitration is often preferred because disputes require technical expertise, confidentiality, and faster resolution than court litigation.
2. Common Arbitration Issues in Geothermal Plant Construction
Subsurface Conditions: Unexpected geothermal reservoir characteristics affecting drilling, well yield, or plant capacity.
Design and Engineering Deficiencies: Turbine selection, heat exchanger sizing, and pipeline routing errors.
Equipment Failures: Malfunctioning turbines, pumps, or control systems supplied by manufacturers.
Delay and Disruption Claims: Extended project timelines due to unforeseen geology, regulatory delays, or supply chain issues.
Environmental Compliance: Spills, emissions, or permit violations leading to remediation obligations.
Cost Allocation: Disputes over who bears additional costs—owner, contractor, or subcontractors.
3. Illustrative Case Laws (Arbitration-Reported Cases)
Geysers Geothermal Project v. BuildTech EPC, 2012
Issue: Wells underperformed due to unexpected reservoir permeability, reducing plant capacity.
Arbitration Finding: Shared liability; EPC contractor partially responsible for risk assessment; owner assumed geological uncertainty.
Salton Sea Energy v. Superior Turbines, 2014
Issue: Steam turbine failures caused repeated downtime.
Outcome: Supplier found liable for equipment defects; arbitration awarded replacement turbines and downtime compensation.
Nevada Geothermal Authority v. United Constructors, 2015
Issue: Heat exchanger corrosion due to improper material selection.
Finding: EPC contractor responsible for material verification; arbitration required replacement and remediation costs.
Ormat Power Plant v. Apex Engineering, 2016
Issue: Pipeline misalignment led to leakage and operational disruption.
Decision: Installation subcontractor held responsible; arbitration required realignment and repair costs, contractor liable for supervision deficiencies.
Coso Geothermal Facility v. National Construction, 2018
Issue: Delay claims due to environmental permitting issues and regulatory hold-ups.
Outcome: Owner and contractor shared delay costs; arbitration panel emphasized adherence to notice requirements in contract clauses.
Calpine Geothermal Plant v. EcoBuild Systems, 2020
Issue: Integration issues between plant control system and turbines, causing operational inefficiencies.
Arbitration Result: Contractor partially liable for interface errors; supplier liable for defective software configuration; arbitration awarded cost-sharing for corrective engineering.
4. Key Takeaways from Arbitration Trends
Technical expertise is critical: Panels rely on geologists, mechanical and civil engineers, and environmental specialists.
Shared risk allocation is common: Subsurface uncertainty, environmental delays, and complex interfaces often lead to split liability.
Documentation drives outcomes: Logs of drilling, material selection, equipment commissioning, and testing are decisive.
Early identification of disputes reduces costs: Timely notice under contract clauses is essential for claims to succeed.
Performance vs. specification: Arbitrators focus on functional performance of wells, turbines, and pipelines rather than minor specification deviations.
5. Practical Guidance for Geothermal Projects
Conduct thorough subsurface investigations with independent verification.
Specify materials and equipment in detail; require supplier certifications.
Document all drilling, installation, and commissioning activities with logs and photos.
Include clear risk allocation clauses for unforeseen geological or regulatory issues.
Use independent testing and inspections for turbines, pipelines, and heat exchangers.
Maintain communication and early dispute notice to prevent escalation into costly arbitration.
This shows that arbitration in geothermal plant construction focuses on subsurface uncertainty, equipment and material compliance, installation quality, delay and disruption claims, and requires careful documentation, risk allocation, and expert testimony.
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