Oil prices sitting stubbornly at more than $10 per barrel above budget forecasts. Cost overruns on capital projects totaling almost $3 million.

It was a sober March meeting for the governors of the Steamship Authority this week.

The good news was that the actual and projected traffic on SSA ferries remains strong. But it was the bad news which took up most of the time at Tuesday’s meeting.

First, the SSA’s director of engineering, Carl Walker, detailed a considerable list of problems, delays and unbudgeted costs on the boat line’s various capital projects.

The mid-life refurbishment of the ferry Nantucket has not gone to plan, as workers have discovered unexpectedly large amounts of corroded steel, asbestos and lead paint.

“Most of it was hidden,” Mr. Walker said. “We’ve also looked at wasted [rusted] piping, wasted electrical cables that were behind the asbestos panels or underneath the decking.”

As a result, there had been some 150 change orders made to the original contract for the work.

In total, the value of the change orders — modifications to the original work schedule and price — now was approaching $1 million. The ferry renovation project, originally budgeted at $7.5 million, is now expected to cost about $8.45 million.

“Am I happy with this?” he asked. “Absolutely not. I’m not used to having projects that are 10 or 12 per cent over budget. But I think the reality is I probably should have put a lot more into contingency going in with a 30-year-old boat.”

The additional work, however, is not expected to interfere with the vessel’s scheduled return to service in late April on the Nantucket route. Next, he moved onto the work on the Oak Bluffs terminal, where the contractor was running behind schedule, in part because of bad weather.

The original completion date was to have been April 20, but Mr. Walker said work would now probably be done by the end of April or early May.

Mr. Walker expressed “great concern” about making the deadline, but would have a better idea by the end of this month. At present, the Oak Bluffs terminal still is set to resume its seasonal operation as scheduled on May 21.

In the case of Oak Bluffs, change orders had added less than $50,000. But the SSA governors also reluctantly agreed to an extra $169,000 for engineering for phase one of the project.

On Nantucket, too, terminal work had also been problematic. Work had to stop because of the failure of a bulkhead. Repairs to the bulkhead will cost $600,000, and take until May to complete.

In addition, there will be an extra cost of $575,000 for pilings for the new work, because they have to be driven 40 feet further into the seabed than anticipated.

And changes to the plans for work at the boat line’s maintenance facility in Fairhaven now total $575,000, he said.

Then there was the matter of skyrocketing oil prices. The SSA budget originally assumed oil prices of $80 a barrel for the coming year. This was later amended to $90, or $3.06 a gallon. But, as treasurer Robert Davis reported, on the very day of the meeting, fuel was costing $3.66.

If prices stayed as high for the year, that would put fuel costs at about $1 million more than the budget forecast.

Speaking to the Gazette yesterday, boat line general manager Wayne Lamson suggested the increased costs could yet force the deferral of future capital work, as well as higher fares.

If oil prices remained high in a month’s time, he said, the SSA might be forced to consider either a fuel surcharge or fare increases.

“Looking ahead the price of oil is [expected to be ] lower than you can buy it for today,” he said, citing predictions from the U.S. Department of Energy sources and other sources. “The forecast is that the future barrel price would be somewhere in the mid-$90 range for this year.

“But depending what happens between now and our next board meeting, we’ll take a look at prices, and assess our options going forward.”

If oil was still sitting at over $100 at the time of the next meeting, he said the board “perhaps” might consider a surcharge or fare rise.

The capital cost overruns, he said, would not lead to fare increases, but might see future projects deferred. The most likely project was the second phase of the Oak Bluffs terminal.

“We’re looking at advertising this summer and hopefully awarding a contract, but when that time comes we’re going to have to look at where we’re at in terms of funds available,” he said.

He said options were to issue bonds, fund it out of internal capital built up over the past couple of strong seasons, or delaying it.

In other business at Tuesday’s meeting, the governors approved a request by Hy-Line ferries to cut services between Oak Bluffs and Hyannis during the months of April and November.

They also adopted a new privacy policy relating to passengers’ personal information, and agreed to discounted fares for people, including veterans, with permanent physical disabilities or long-term mental illness.

And they amended the waitlist procedure for trucks more than 20 feet long, so they can be informed of places on boats only 24 hours ahead of departure time, rather than 48, to make it easier for the trucks to get on.