The FM Diversion Authority Board on July 2 approved a statement of principles to settle outstanding claims with the project developer for $57 million, a board presentation said. The agreement, which the parties expect to finalize July 3, would resolve about $400 million in asserted claims and puts milestone payments and schedule commitments in writing.

"This is the culmination of a lot of work and a lot of cooperation with the developer and the DNC's contractors," said John Shockley, a staff presenter, introducing the settlement summary and the payment and schedule terms.

Board members and staff said the settlement is intended to reduce the authority's financial risk and to re-establish collaborative mechanisms between the parties. Under the statement of principles the $57 million would not be paid in a single tranche: an initial $10 million payment would be due about 30 days after the agreement's effective date (presenters identified the effective date as July 3, 2025), followed by milestone payments tied to corrective actions, design-and-construction certificates and completion of specific project components.

Details presented to the board list the payment milestones as follows: $10 million within 30 days of the effective date; $10 million within 30 days of completion of agreed corrective actions for identified noncompliance points; $7 million upon receipt of the design and construction certificate for the Rush River inlet and diversion outlet structure; and multiple $5 million payments tied to completion of local drainage work, the Maple River Aqueduct, the Cheyenne River Aqueduct, North Dakota DOT bridge certificates, completion of BNSF bridge work and completion of Cass County bridge certificates. Presenters said the milestone payments are expected to be structured and substantially completed within about a year.

The settlement also addresses a technical dispute over the use of epoxy-coated reinforcing bar. The agreement resolves past, present and prospective claims related to that issue and calls for a protective treatment product, Tex Coat, to be applied to exposed reinforced-concrete surfaces per the manufacturer's specifications. Presenters said the treatment schedule would include application before substantial completion (reported as anticipated Oct. 1), multiple treatments during a 30-year operation period and one treatment before final handback, about 32 to 33 years after completion.

Presenters said the settlement value represents roughly 2% of the project's approximately $3.2 billion cost and that it reduces the authority's potential liability by about $343 million based on the asserted claim total. They also said the revised schedule, called PBS3R2, maintains a substantial completion date of Oct. 1, 2026, and preserves the project's 2027 flood-year protection date. A lender technical advisory report and prior legislative reporting noted about 161 days of delay through the spring; presenters said the parties consider the schedule back on track under the new plan.

Board members asked few questions during the presentation and the board then voted to approve the statement of principles. The motion approved language allowing the executive director to execute a definitive settlement agreement in substantially the same form presented, subject to review by the executive director, general counsel and the board chair. The board's roll call recorded unanimous approval.

Presenters cautioned that additional legal and administrative steps remain. The statement of principles will be followed by a definitive settlement agreement and amendments to the project agreement, the design-and-construction contract and the project's technical requirements; those documents will require lenders' review and, where changes affect physical features, review by the DWR Office of the State Engineer. Presenters told the board the lenders will have up to 75 days to review and comment, though discussions between the developer and lenders are already underway.

If lenders do not approve particular technical amendments, presenters said the agreement preserves fallback protections: schedule calculations would revert to the prior schedule for time-impact and delay determinations. Presenters and a board member who spoke said the parties also intend to keep regular, staff-level partnering teams and identify a facilitator to reduce future disputes and improve communication.

Board members heard a brief expression of thanks for the negotiation teams. A board member praised the work of "Mr. Shockley, Mr. Nicholson and Jason Benson," the last identified in the meeting as the authority's executive director, for helping to reach the agreement.

Next steps on the board schedule include finalizing the definitive documents, seeking lender review and returning to the board with near-final documents and any required approvals. The authority's next regular meeting was set for July 24.