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More caution flags hoisted on Mad River bag proposal

Eureka Times-Standard

More caution flags hoisted on Mad River bag proposal

By John Driscoll The Times-Standard

Saturday, January 18, 2003

An Alaskan company’s bid to buy Mad River water and ship it south should be considered, the Humboldt Bay Municipal Water District said Friday, but opposition to the idea already seems to be rising.

The district gave a lengthy presentation on the Aqueous Corp.’s proposal to buy up to 20,000 acre feet — 6.5 billion gallons — from the district. Selling the water, the district calculated, could save residential customers $1 to $2 per month, and save the Samoa Pacific Cellulose pulp mill thousands per month.

But some at the 10 a.m. press conference urged vigilance, questioning the Aqueous Corp.’s credentials and its ability to make good on its promises to generate jobs here.

Water District Manager Carol Rische said that proponent Ric Davidge initially wanted the district to sometime soon sign a letter of intent to sell water, but the district told him he’d have to work on a time line determined by the district.

“We’re not even talking details,” Rische said.

Depending on the price the district would charge Davidge and Aqueous, the district could see revenues of $895,000 to $1.6 million per year. That would reduce wholesale costs for water to the service districts that deliver it by $330,000 to $600,000, Rische said. It would also drop costs to the only industrial customer, the pulp mill, by $565,000 to $1 million.

In contrast, if the Samoa Pacific mill were to shut down, and there was no industrial customer to buy water, costs would skyrocket, the district estimates. Residential bills could go up four to five times, Rische said.

The water district serves about 80,000 people in Arcata, Eureka, Blue Lake, McKinleyville and other service districts. It has two separate pipelines, one that delivers high quality water for drinking from wells sunk in the Mad River and another that draws water from the river for use by the pulp mill. The cost of a treatment facility now being built will be passed onto the district’s customers.

The district has 36 million gallons per day in available supply, much more than it did when the Simpson Paper Co. mill was operating and Samoa Pacific was using a chlorine-bleaching process to make pulp. The Simpson mill closed in the early 1990s. Davidge wants about 13.2 million gallons per day of untreated water. Apparently, the water would be somewhat filtered through the pulp mill, then treated where it is delivered.

“We would still have plenty of supply and we would still have plenty of additional capacity in that industrial system,” Rische said.

Davidge would not be sold water at less than $70 an acre foot, about what Samoa Pacific pays, Rische said. But he could likely sell the water for up to $1,000 per acre foot, depending on where he sells it.

That water would be released from the dam at Ruth Lake, and would draw down the lake some, but not as low as it was for much of the past three decades, Rische said. The river would see higher flows along most of its length below the reservoir to the pumping station at Essex.

The water would be delivered through existing pipelines to the Samoa Peninsula, then to water bags docked at an unused Samoa Pacific dock. Tugs would pull the 800-foot-long bags out of the harbor while a tender minded the tail of the bag. Each bag carries about 46.5 acre feet or 15 million gallons.

For the operation, Davidge has said he’ll need 180 to 200 people who will be well paid.

Some at the conference questioned Davidge’s ability to pull off such an operation. Nadananda of the Friends of the Eel River said the district should dig into Davidge’s history, and make him post a $20 million performance bond. She cautioned against signing a letter of intent to Davidge before doing thorough research.

When the Times-Standard asked Davidge for additional information on his proposal, Davidge sent three documents he wrote on transporting water in bags and on his take on the world market for water.

He includes a cost for shipping water of 52 cents per cubic meter, based on an existing operation. Using this figure, it would cost Davidge nearly $30,000 to ship each bag full of water that costs $70 an acre foot. Selling the water for $500 an acre foot, he’d lose more than $6,000.

According to Reuters News Service, a bagging operation between Turkey and Cypress also loses money, and the company running it, Nordic Water Supply, had problems with bags tearing loose and ripping. Aqueous Corp. is part of a consortium called World Water SA, as is Nordic Water Supply.

But in an e-mail Friday, Davidge wrote that the costs in his letters were based on smaller bags, and that he wouldn’t consider selling water in a market that commanded $500. Selling water at $1,000 per acre foot, the price desalinated water is sold for, he could turn a profit of $46,500 per bag — even using the high cost figure.

“Also, consider that the market value of water is escalating exponentially in many Pacific markets in California,” wrote Davidge. “So, by the time the project is actually delivering water the price and margin will be different.”

At the press conference, Nadananda said she hasn’t been able to locate big tugs that would be needed to pull such huge bags and that are available for long-term commitments. She also questioned the international trade implications of such an endeavor.

“This is just the camel’s nose,” she said.

Reached by phone, Jeff Hugret of ship brokers Marcom International Inc. said it might take a tug with 3,000 to 4,000 horsepower to tow such bags. Perhaps a few dozen tugs with that much power are available on the West Coast, he said.

“The equipment is out there,” he said.

Rische said any agreement would be made only with the will of its customers behind it — the seven cities and community services district and Samoa Pacific.

Humboldt Bay Harbor, Recreation and Conservation District Executive Director Dave Hull said a water bagging operation might be good for the harbor, which is paying off significant debt for its share of a $13.5 million harbor deepening project. Hull said surcharges would be collected to pay down the debt, and unused harbor infrastructure would be revitalized.

Tim McKay of the Northcoast Environmental Center was clearly skeptical. He questioned why North Coast residents would believe any scheme to ship water from the area after being subject to “decades of deceit” over water diversions from the region’s other big rivers.

“I think we’re in a completely different and unique situation,” said Vern Cooney, chairman of the water district board.

He said the proposal would be reviewed by every council in the cities that get district water, and by every community service district the water district serves.

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