The disastrous contract with Calleguas for Well #8 should be renegotiated in major ways or terminated (Part 2). 

We posted Part 1 on April 10 and forwarded it to Crestview for comment.  No comment has been received, but we can quote from a March 17 email from a shareholder to all directors and the general manager reporting on a meeting with the president of Calleguas.

[We] recently met about this with Steve Blois, president of Calleguas.  There have been at least two other meetings about this between shareholders and Mr. Blois, and we all got the same clear message from him:  Mr. Blois does not believe the Calleguas board would authorize more than the current contractual limit of $3.3 million.  If the project fails to get permits or is terminated for any other reason, Crestview will have to repay all of Calleguas’s advances.  If the cost of the well exceeds $3.3 million for any reason, Crestview will be 100% responsible for all overruns.  A plea to Calleguas for financial relief will fall on deaf ears.  Calleguas has better options, Mr. Blois said, than to pay too much, wait too long, or be involved in a controversial project.

This risk of spending something like $3 million of shareholder money on a project that cannot deliver another drop of water to Crestview and threatens Crestview with insolvency requires the board’s most urgent attention.  To continue spending money on this project before the enormous financial exposure is eliminated—by contract amendment and/or by project relocation/redesign, or by terminating the contract to cut Crestview’s losses—would be a breach of directors’ fiduciary duty of care to the company.

Please seek comprehensive legal advice on these issues and, meanwhile, stop bleeding money into this project.

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