From Coal to Roads: VDOT Uses Coal Synergy Concept to Improve Access in Southwest Virginia

by Nossaman LLP
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On July 31, 2013, the Virginia Department of Transportation (“VDOT”) executed a $108 million lump-sum design-build contract with Bizzack Construction, LLC (“Bizzack”) for the design and construction of the rough-grade roadbed for the U.S. Route 460 Connector “Phase II.”  The “460 Connector Phase II” project is a 6.2-mile four-lane, limited access highway located between the U.S. Route 460 Connector Phase I, which is under construction near Breaks Interstate Park, Route 460 and the proposed Route 121 (Coalfields Expressway) interchange in Buchanan County, Virginia.  This route is designated as part of “Corridor Q” by the Appalachian Regional Commission and part of the Appalachian Development Highway System, a program originally envisioned by President Lyndon B. Johnson to bring commerce and transportation to Appalachia.  

The design-build contract employs an innovative coal synergy concept to provide a road to rough grade, resulting in a substantial reduction of anticipated costs compared to traditional construction methods.  A second contract would pave the road and complete the project for motorists to use.  Completion of the rough-grade roadbed is scheduled for early 2018.

Bizzack, through its subsidiary, Rapoca Energy, had secured considerable surface and subsurface real property rights as well as arrangements with mining companies in the vicinity of the planned right of way.  Through this design-build contract, Bizzack at once gives the mining companies a place and use for their mining spoils and access to areas previously uneconomical to pursue mining, but for VDOT’s desire for a road.  VDOT avoids the cost for “fill” and other road-bed material needed to construct the road to highway design speeds and slopes. 

The coal synergy concept thus reduces road building costs substantially by using a coal companies’ larger-scale earth moving equipment and construction techniques to prepare the road bed to rough grade, and allowing the companies to recover marketable coal reserves during the road bed preparation.  To maximize the coal synergy opportunities, the design-build contract contains provisions so that portions of  the revenues from the sale of the marketable coal would reduce the contract price if marketable coal is extracted above a certain quantity.  Virginia Transportation Secretary Sean Connaughton specifically addressed the cost-savings advantages of the coal synergy strategy in prior remarks about this project, observing that it affords the Commonwealth of Virginia the ability to deliver the 460 Connector Phase II project at “a much reduced cost.”

To mark this major milestone, Governor Bob McDonnell, VDOT Deputy Commissioner Charlie Kilpatrick and Virginia Senator Phillip Puckett braved the foggy conditions to host an event on August 10, 2013 in Buchanan County, Virginia.  Governor McDonnell highlighted the project as a “key connection” that “will open up southwestern Virginia to more job and business opportunities.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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