Stop the Mad Water Grab

February 18, 2003

The Humboldt Bay Municipal Water District will meet this Friday, February 21st to discuss whether to proceed with negotiations with Aqueous, Inc. in a plan to export 15 millions gallons of Mad River water each day down the Pacific Coast using tugboats and giant inflatable bags. This plan sets a dangerous stage for the future of Northern California, with the privatization of water, NAFTA, and significant environmental concerns all at the center.

The Water District only revealed this plan to the public last month and is now attempting to push it through with little to no public debate. Please help our voices be heard loud and clear on this disastrous plan. The Coalition to Stop the Mad Water Grab, of which EPIC is a member, asks that you call or write the Humboldt Bay Municipal Water District today and tell them to say no to the Mad Water Grab!

Humboldt Bay Municipal Water District
(707) 443-5018
Office@HBMWD.com

Also, please contact your local officials to ask their support in stopping the Mad Water Grab. Their addresses and phone numbers appear following the additional information below. Please also visit the Coalition to Stop the Mad Water Grab’s website for additional information at: http://www.madwatergrab.org

BACKGROUND

“Once the tap is turned on — that is, once any deals are made by any state or municipality in a country to privatize water or water services — the tap cannot be turned back off without violating corporate rights.”

– International Forum on Globalization

Aqueous, Inc. hopes to make daily exports of 15 million gallons of water from the Mad River, towing the water in bags that are 800 feet long — the size of three football fields — down the Pacific Coast. At this point, Aqueous, Inc. and the Humboldt Bay Municipal Water District have not revealed the destination of this water, but it is certain that towing it down the Pacific would require huge amounts of horsepower and diesel fuel in some of the world’s most dangerous waters. Additional information and facts follow:

• In 2002, the Alaska Water Exports, Inc. proposed to export water from the Gualala and Albion Rivers to San Diego using giant inflatable bags. Local citizens united to vigorously oppose the plan, and it was withdrawn near the end of the year.

• Changing its name to Aqueous, Inc., the same company is now proposing to “buy” 13.2 million gallons of Mad River water per day from the Humboldt Bay Municipal Water District. This water would be diverted from the Mad River 9 miles from its confluence with the ocean.

• The Water District has promoted this plan by saying that the water is “excess” industrial water, but the water is currently flowing down the Mad River and into its estuary.

• There are only two similar operations in the world, but both operate on a much smaller scale than that proposed. The operation between Turkey and Cypress operates at a deficit, and the company running it, Nordic Water Supply, has had problems with bags tearing loose and ripping.

• The principal of Aqueous, Inc., Ric Davidge, formally worked under President Reagan for the infamous anti-environmental Interior Secretary James Watt, and claims to have potential investors from transnational corporations based in Saudi Arabia and Japan.

• The Mad River is currently listed as “impaired” under the federal Clean Water Act for excessive sediment and temperature pollution.

• The water would be piped from the Mad River to the Samoa pulp mill on Humboldt Bay where it would be transported in giant, inflatable bags using tugboats

• The inflatable “bladder” bags would be 800 feet long, the size of three football fields, and carry about 15 million gallons of water each

• Using tugboats to pull such a large bag full of water would require an estimated 3,000 to 4,000 horsepower engine, using a tremendous amount of diesel fuel.

• Humboldt Bay is notorious for being one of the most perilous passageways on the West Coast, regularly presenting extremely dangerous waters to shipping traffic.

• Two large oil spills occurred in Humboldt Bay in just the last six years, both having profound negative impacts on Humboldt Bay and the species it harbors, including marbled murrelets, coho salmon, brown pelicans, and other species.

• The North American Free Trade Agreement (NAFTA) and other international trade agreements could apply even if the water is exported within U.S. borders, bringing serious implications surrounding the privatization of water and loss of local control. In several similar circumstances, government entities have paid hundreds of millions of dollars to settle lawsuits that were brought against them under NAFTA. [Please see the following excerpt from the North Coast Journal on this issue.]

• It is estimated that the planned water proposal would save each customer, at a maximum, $10 per year. The Samoa pulp mill would gain $565,000 to $1 million per year.

The Mad Water Grab, NAFTA, and Water Privatization Concerns

The following excerpt is taken from an article that appeared in the North Coast Journal on February 6, 2003. For the entire article, go to: http://www.northcoastjournal.com/020603/cover0206.html

According to Rische, “One thing I hadn’t thought about was NAFTA (the North American Free Trade Agreement) and trade issues.”

“We will be shipping water from one California city to another,” stated Davidge. “There are no trade issues. Suggestions that NAFTA and GATT (the General Agreement on Trade and Tariffs) apply are purposeful misrepresentations meant to scare folks.”

Privatizing water?

Public Citizen, for one, isn’t convinced. The watchdog group founded by Ralph Nader has been keeping an eye on water privatization lately, said Juliette Beck from Public Citizen’s Oakland office. “In the context of NAFTA’s Chapter 11, Davidge’s proposal could put us on a slippery slope to privatize ownership of water.”

Lydia Lazar, assistant dean of international law at Chicago Kent College, was more specific. When it comes to international trade agreements, “whether or not water is being transported across international borders is not the only question.” International trade agreements, she pointed out, can cover trade within a country if foreign investors are involved.

NAFTA makes a distinction between “containerized” or bottled water and “bulk freshwater,” the water in question here. Bottled water is obviously a privatized commodity that can be traded freely — check out the grocery store. But what about the bulk water exports? Beck pointed to a 1993 declarative statement signed by all three NAFTA countries.

“Unless water, in any form, has entered into commerce and becomes a good or product, it is not covered by the provisions of any trade agreement, including the NAFTA.”

In other words, putting water into enormous bags might be tantamount to bottling it, in which case NAFTA could conceivably kick in.

Many scientists, public policy experts and public interest advocates think that water privatization would be a disaster.

Dr. Peter Gleick, president of the Pacific Institute and a member of the prestigious National Academy of Sciences, summarizes the work of many scientists in an Institute report: “Water is both an economic and social good, far too important to the well-being of humans and our environment to be placed entirely in the private sector.” If corporations owned water, argues Gleick, they would naturally try to sell as much as possible — only at higher prices — shutting out poor people and fragile ecosystems without guaranteeing any conservation.

Fans of this genre point out obvious similarities to California’s energy debacle. Enron spearheaded the privatization of a public utility, followed by wholesale deregulation, market manipulations, phantom energy trades and rolling blackouts, while power plants remained idle. A few executives got rich; the public got Enron-ed. With water, warns Gleick, things could get much worse.

“A Pandora’s Box”

The Chapter 11 provision of NAFTA — the decade-old treaty between the United States, Canada and Mexico — isn’t about bankruptcy, at least in a financial sense. It was originally conceived to protect foreign investments against government measures “tantamount to expropriation” — or equivalent to depriving an investor of possession by a government seizing property.

In practice, though, it’s opened a “Pandora’s box” of litigation, worldwide corporate lobbying — and worse, according to Howard Mann in a Chapter 11 legal critique called “Private Matters, Public Problems,” jointly published by the Ford Foundation, the World Wildlife Federation and the International Institute for Sustainable Development. A senior trade advisor to the last group, Mann is an international lawyer who has represented government bodies and private firms in international trade negotiations worldwide.

“Investment” has been interpreted to mean anything from capital investments to trade — including market share, market access, and rosy Enron-esque forecasts of anticipated profits. Government measures have been interpreted to mean just about any government act; as of 2001 there had been at least 20 Chapter 11 suits — and 11 of those challenged environmental laws as “tantamount to expropriation.”

Unfortunately, it’s tough to be sure — Chapter 11 cases are closed to the public and have no appeal to a government’s domestic court. The courts consist of a majority-rules tribunal of three arbitrators — one each selected by the investor, the state being sued, and the NAFTA secretariat, staffed mainly by ex-lobbyists, corporate executives, and government officials with business contacts. Essentially, the state often goes into arbitration with two strikes against it.

With a gift for understatement, Mann finds the trade courts “worrying from a basic democracy perspective,” with “a disturbing lack of balance between the protection of private interests and the need to promote and protect the public welfare.” Chapter 11 is “being turned into a means to fend off proposed new regulations, lobby for or against specific government actions, and generally to preserve or gain a competitive position,” writes Mann. “Threats to use Chapter 11 are now a routine lobbying instrument.”

Journalist Bill Moyers, who covered NAFTA for the PBS special “Trading Democracy,” put it more bluntly: “Chapter 11 is an end-run around the Constitution.”

Here is a sampling of Chapter 11 litigation:

Methanex v. California. In the late 1990s, the fuel additive MTBE started turning up in groundwater around Lake Tahoe. Alarmed, scientists found evidence that the chemical caused cancer in animal studies. Gov. Gray Davis signed a bill ordering its phase-out — and the manufacturer, the Canadian company Methanex, sued under Chapter 11. Methanex sought compensation for the projected profits that would be lost under the ban — to the tune of $970 million. The case is under appeal.

In Sun Belt Water, Inc. v. Canada, a Santa Barbara-based company had a contract to export bulk water from British Columbia to Goleta, near Santa Barbara. The contract was later rescinded when the Canadian province outlawed bulk water exports, fearing a NAFTA-inspired water grab. Meanwhile, a Canadian company with domestic plans was allowed to proceed. Sun Belt sued in 1998 under Chapter 11 for more than $200 million. More about that later.

NAFTA’s investment protections are increasingly being adopted in other international trade agreements like GATT and the Free Trade Area of the Americas, still under negotiation.

In Bechtel v. Bolivia, the American water conglomerate lost a contract to privatize water in the city of Cochabamba after rate hikes and water outages sparked deadly riots. Bechtel used a Dutch subsidiary to sue under a trade agreement that the Netherlands had with Bolivia.

Clearly, privatization of local water services can fall under international trade agreements.

A Trojan horse?

So if Davidge/Aqueous/WorldWater/Mizutech or another bulk water exporter gets a contract — or even a tentative agreement called a “letter of intent” — could a case be filed under Chapter 11 or another international treaty?

“It depends on the nature of the dispute — or the contract,” said Lazar of Chicago Kent College.

If any government agency enacted a new law or regulation that affected the ability of the Humboldt water district to fulfill its contract — from limiting access due to drought or expanded Endangered Species Act listings to outlawing bulk water export — the regulating agency could potentially be sued in trade court for compensation.

Even more troubling, another bulk water exporter could potentially file suit in trade court as soon as the ink was dry on the Aqueous deal, demanding equal access to California’s water, since NAFTA and other international trade agreements prohibit regulating the amount of a commodity being traded. Put simply, a deal with Aqueous could set a precedent for privatizing Northern California water.

Would the water district be able to write a contract to supersede international trade agreements? Don’t bet on it, said Lazar. “The water district is not going to be able to contract around it.”

“We’re concerned about the potential implications,” said Arcata City Manager Dan Hauser, a member of the district’s task force. “What if he [Davidge] uses this contract to leverage more deals in the western U.S.? It could be a foot in the door to other rivers.”

Woolley echoed Hauser’s concern. “Water being gold in this state, I think we need to be very concerned.”

An ominous ruling

Now, back to Sun Belt Water v. Canada. That Chapter 11 case regarding bulk water export was adjudicated — or settled — when the Office of the U.S. Trade Representative intervened, and will probably not go to trial. The terms — you guessed it — have not been disclosed, but Sun Belt CEO Jack Lindsey has said, “Because of NAFTA, we are now stakeholders in the national water policy of Canada.”

In his Dec. 15 letter to the State Water Resources Control Board, Davidge sounded a similarly ominous tone. Planning for Northern California watersheds should include “outside interests,” Davidge wrote. “To exclude them from the public process would not be wise as they will have growing political and economic power as economies and communities and in fact cultures face the loss of their water understructure.”

And, by the way, who are the foreign investors — the Saudi firm Mizutech and other “unnamed partners?” Davidge would only say that “we will be in compliance with federal disclosure laws and the Jones Act,” which requires that any shipping company operating between U.S. ports be at least 51 percent American-owned and American-crewed.

Please contact the Humboldt Bay Harbor District at the number above and the following local officials:

Representative Patty Berg
235 Fourth Street, Suite C
Eureka, CA 95501
Phone: (707) 445-7014
Fax: (707) 445-6607

Senator Wes Chesbro
710 E Street, Suite 150
Eureka, CA 95501
Phone: (707) 445-6508
Fax: (707) 445-6511

Congressman Mike Thompson
317 3rd Street, Suite 1
Eureka, CA 95501
Phone: (707) 269-9595
Fax: (707) 269-9598