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GPT: Are Export Corporations After Our Water

September 2013

Cover Story

GPT: Are Export Corporations After Our Water

by Sandra Robson

Sandra Robson moved to Whatcom County from California about four years ago. She was drawn to this area because of the beautiful natural surroundings and lots of water and trees. She is passionate about protecting and preserving the environment we all enjoy and need. She is actively engaged in educating herself and others about all things Gateway Pacific Terminal.

Benjamin Franklin once said, “When the well is dry, we shall know the worth of water.” Goldman Sachs, which is considered by many an expert on the worth of things, convened a February 8, 2013, summit called, “Water: Emerging Risks and Opportunities,” and prepared a subsequent white paper with takeaways from the summit. General Electric and World Resources Institute (WRI) were also co-hosts of the summit, which sought to address the water challenge facing our nation. The white paper from Goldman Sachs’ Environmental Markets Group on this subject titled “Water: Emerging Risks and Opportunities” states, “In the current market, where there are large pools of private capital looking for long-term yield, water investments offer a compelling alternative investment class. Investing in water infrastructure can offer long-term regulated rates that are inflation protected and less susceptible to economic cycles.” (see

The fact that Goldman Sachs, which owns 49 percent of SSA Marine, considers water such a good investment, causes some people to think that GPT may be just as much about obtaining water and water rights, as it is about exporting coal.

Goldman Sachs’ white paper also includes this tidbit, “Another investment thesis is in water rights, which is fundamentally about buying at lower values and selling at higher prices that the market can bear. Water rights are legally authorized rights to use water from a water source, and generally emerge from property ownership and the right to use adjacent bodies of water. The rights can also be created by contract when one person transfers the rights to another. There are opportunities for water rights investors to work with municipalities in helping aggregate water rights or provide annual allocations. The private sector can often bring nimbleness and value-add to negotiations with families and individuals who own the rights and help allocate the resource to higher value needs.” (ibid, p. 3) Can you imagine having to negotiate with Goldman Sachs about your water needs, and their corporation “helping” allocate water to higher value needs?

Water supply and water rights have become hot topics in Whatcom County recently, especially the water coming from the Nooksack River. Here are some of the highlights: the Lummi Nation and the Nooksack Indian Tribe asked federal agencies in 2012 to adjudicate their water rights to quantify those treaty-protected water rights as Nooksack in-stream flow is significant to their tribes’ well-being; more than 50 percent of the water withdrawn from the Nooksack River by county farmers is unauthorized by state law; Cherry Point industries such as BP Refinery, ConocoPhillips, and Intalco use a substantial amount of water from the Nooksack River for their operations; and in March 2012, SSA Marine’s subsidiary, Pacific International Terminals (PIT), which SSA Marine created for the proposed Gateway Pacific Terminal (GPT), submitted a permit application to Whatcom County for a 48 million ton coal terminal at Cherry Point.

GPT Would Potentially Use 5.33 Million Gallons of Water Per Day

The GPT Project Information Document (available for review at: page 5-91), states the terminal would potentially use 5.33 million gallons per day of Whatcom County PUD-supplied Nooksack River water for the purpose of spraying on the stockpiles of Powder River Basin (PRB) coal in order to try and keep the coal from spontaneously combusting (which PRB coal is prone to do), and to attempt to minimize the coal dust. The water contract between PIT and the PUD for supplying PIT the needed 5.33 million gallons of water per day capacity went into effect on March 26, 2013, and runs until the year 2042, and after that, the contract is year to year, according to records obtained from the PUD.

Additionally, PIT assumed the contract of Chevron, a former Cherry Point industry, for industrial water. The original agreement with Chevron and the PUD was dated April 1970 and it was assigned by Chevron to PIT on August 7, 2007, (records obtained from PUD).

In Washington state, water rights are managed by the Department of Ecology (DOE). Water rights can only be transferred if conditions similar to those for obtaining new water rights are met. Those are: the water right being transferred is a valid and legal water right; the water will be beneficially used; there is no impairment to existing water rights, including in-stream flows; it is not detrimental to the public interest; the instantaneous or annual amount used won’t increase; and the water source won’t change. Do PIT’s water rights transferred to them by Chevron meet these requirements? Also, does the current contract PIT has with the PUD for supplying GPT with 5.33 million gallons per day of Nooksack River water meet the DOE’s requirements for PIT obtaining the new water rights it would need for the terminal?

Two other remaining proposed coal terminals in the Pacific Northwest are Millennium Bulk Coal Terminal in Longview, Wash., and Coyote Island Terminal at the Port of Morrow in Boardman, Oregon. What has become interesting is how water, and at least two of the three proposed Pacific Northwest coal terminals left standing, seem to be potentially intertwined.

The proposed Cherry Point location for GPT, which would handle and export 48 million tons of coal, is just outside the city limits of the city of Ferndale. According to records obtained from Whatcom County PUD, the city of Ferndale's contract for PUD-supplied Nooksack River water ended on December 31, 2011, and beginning on January 1, 2012, Ferndale's water supply started coming from city wells. The city had been using the Nooksack River as its water source since 1974.

The city of Longview also changed its water source, switching from the Cowlitz River, which had been the city’s water source since the 1940s, to well water from the city’s Mint Farm well. At Longview, the proposed Millennium Bulk Coal Terminal would handle and export 44 million tons of coal annually. So, we have two huge coal terminals that will both need large amounts of water to use for spraying their coal stockpiles of PRB coal. Surprisingly, these two cities where the coal terminals would be located, both decided to switch their river water sources to well water.

Both Longview and Ferndale made their decisions to switch their water sources approximately four years prior to the submittal of permit applications from each coal terminal; the GPT permit application was submitted in March 2012, and the Millennium Bulk Terminal’s permit application was submitted in February 2012. Both cities hired engineering consultants to test the wells’ water before making the decision to switch, and both cities were advised by the consultants that the hardness level of the water would be acceptable, and reported the well water taste would be no different than the river water taste.

Industries Need Assurance of Reliable Water Supply

According to a June 13, 2008, Longview Daily News article, when the Longview City Council decided on June 12, 2008, to change from Cowlitz River water to well water, the president of the Cowlitz Economic Development Council, Ted Sprague, had “urged the City Council to make a decision because industries considering locating in Longview needed assurance of a reliable water supply.” Could one of the industries Sprague was referring to have been Millennium Bulk Coal Terminal, which requires the use of a very large amount of water?

Many residents have questioned the city of Longview’s decision to switch to well water. Their main concern was, and continues to be, that there are three hazardous waste cleanup sites near the Mint Farm well: the former Reynolds Metals Company plant whose buildings and dock facilities were purchased (the land is still owned by Alcoa Inc. which bought out Reynolds in 2000) by Millennium Bulk Terminals in January 2012 from Chinook Ventures and is now the site for the proposed Millennium Bulk Coal terminal; the Weyerhaeuser Company mill, and the Flexible Foam plant (formerly Prudential Steel). Chinook Ventures and Weyerhaeuser are cleaning up their hazardous waste, being supervised by the Washington Department of Ecology. The 400+ acre riverfront site is heavily contaminated from five decades of aluminum production by Reynolds. Millennium and Alcoa are collaborating on the site’s clean-up.

Since switching to well water, many residents in both Longview and Ferndale have been upset with the excessive hardness of their water, and the taste. In a July 25, 2013, Longview Daily News article, it was reported that Longview will now hire an engineering consultant, Confluence Engineering, (paying them $29,800) to look into the city’s water quality issues. The Daily News also reported that residents describe the water as rusty and metallic-tasting, and say it’s smelly. They are also unhappy with the hardness of the water.

The news coming from the residents in Ferndale about their well water issues is no better. In an August 25, 2012, article, The Bellingham Herald reported, “Some water users are so dissatisfied they want to go back to the river water supplied by the Whatcom PUD, even knowing there’s an additional cost.” The Ferndale Chamber of Commerce Executive Director, Guy Occhiogrosso, wrote an email in June 2012 to Mayor Jensen and Ferndale City Administrator, Greg Young, reporting that a small consensus was reached, and because of the well water’s hardness and taste, that making the switch to well water was not worth the money saved. Ferndale City Council had used RH2 Engineering in 2006 to conduct an analysis of the Douglas and the City Shop wells, including water quality and a seawater intrusion investigation, along with a subsequent feasibility report.

Rate Increases Lower Than Expected

Originally, Ferndale city officials decided it would be smart to invest in the $5 million conversion from river water to well water. Now as costs continue to add up, people are still dissatisfied with their water. In December 2012, Ferndale City Council approved a contract (not to exceed $30,000) with Wilson Engineering to compile a report for water hardness fixes. The estimate in that report for the cost of a water softener in the treatment plant was $1.2 – $1.4 million. This water switch, so far, has cost the city much more than originally estimated, and seems much more costly than the expected water rate increases that had been one of the main catalysts for Ferndale deciding to switch.

Written communications obtained from both the city of Ferndale and the PUD show the actual rate increases to be much lower than what the city of Ferndale had said. The city had said that the PUD water rates were increasing to 25 percent a year for the next four years (meaning 2011, 2012, 2013, and 2014). PUD Manager, Steve Jilk, wrote a September 27, 2010, email to city Administrator, Greg Young, and city Public Works Director, Janice Marlega, informing them that the PUD was prepared to lower the planned rate increases to their water customers from what they projected the year before, as he thought that might be good information for the city as they proceeded in considering the alternatives of well use, or PUD supply, or even a blend of both.

On November 1, 2010, Steve Jilk sent an email to Young and Marlega saying the projected rate increases the PUD had estimated for the city would be significantly less than what they had projected the year before. PUD had estimated the rate increase would be 20.8 percent for 2011, and they now (Nov. 1, 2010) were projecting the rate increase for 2011 would be 10 percent. Additionally, a November 17, 2010, email from city of Ferndale Finance Director, Mark Peterson, to Young and Marlega showed that the PUD’s actual estimated rate increases would be 10.2 percent for 2011, and 10.5 percent for 2012.

Since the PUD rate increases to the city of Ferndale seemed more reasonable than were first projected by the PUD, and considering the fact that in 2010 the economy was still in dire straits, and switching to well water would necessitate millions of dollars in up-front costs, it has caused people to question Ferndale’s decision to go full speed ahead with their switch to well water.

In the written communications between Ferndale and the PUD it appeared the PUD had tried hard to keep Ferndale as a customer, offering various suggestions and options to them. In an April 23, 2010, email from Steve Jilk to

Mayor Jensen and Janice Marlega, Jilk offered that the PUD would pay for the lion’s share of a feasibility study to determine, at least, the 40,000 foot level costs/options/etc. Jilk wrote that he believed that the PUD and Ferndale would be able to produce water for both their needs more cheaply if they worked together. Jilk also wrote an email on April 21, 2010, to Young and Marlega, saying he had read in that day’s Ferndale Record newspaper about the city’s water supply plans and how he thought it would been valuable to have had some communications to the PUD on those plans. Jilk reiterated that he had indicated in several past meetings with the city that he thought it would be of value to have regular planning discussions with the city so they could jointly plan their water supply systems. That theme of very limited communications from Ferndale to the PUD came up multiple times throughout the written communications obtained from the PUD.

The water switch is a touchy subject for the mayor and city council because residents have continued to question the decisions the city made, and even more so, Mayor Jensen's, as the city’s leader. Some of those questions were even raised by a Ferndale High School student who wrote an opinion piece for the school newspaper, the Eagle Eye, in February of this year about the city’s water switch. The student wrote the opinion piece basically attempting to disprove or prove the idea that is sometimes floating around Ferndale questioning whether there was any personal motivation behind the water switch, on the part of Mayor Jensen, since he owns a plumbing business.

Ferndale Mayor Jensen took umbrage with the student’s opinion piece and contacted Ferndale School District Superintendent, Dr. Linda Quinn, about the editorial and Dr. Quinn responded by explaining the concept of First Amendment rights to the mayor. Then at the March 5, 2013, Ferndale City Council meeting, Councilmember Keith Olson voiced his frustration on behalf of the mayor, saying, “I’m still kind of pissed off about what Jon [Mutchler] brought up about what the school did to you [the mayor]. Is it too late to do a council resolution condemning the school district for, in effect, bullying, and calling it free speech?” City Clerk Sam Taylor answered, “We can pass a resolution on anything we want. We can bring it to the next meeting.” Mayor Jensen concluded by saying, “Um, we’ll bring that to committee.” The suggested resolution has not surfaced since then.

Ferndale Water Switch Possibly Related to More Than Plumbing

Little did that young student know, that there might indeed be something more to the water switch in Ferndale, possibly relating instead, to the proposed GPT, rather than the mayor’s plumbing business. Is it simply a coincidence that both Ferndale and Longview switched their water sources and their cities are both locations for two of the largest coal terminals proposed in the United States? Is there any connection to PIT needing 5.33 million gallons of water per day, and the city’s decision to move off of PUD-supplied Nooksack River water, which will be the source for the water the PUD supplies to GPT? In order to submit their GPT permit application to the county, PIT needed to show they had ample water supply in that application which they submitted in March of 2012. Ferndale had moved off of their PUD-supplied Nooksack River water by December 31, 2011.

Presently, there is no information available regarding the amount of water, nor the source of that water, that is expected to be used at Longview’s Millennium Bulk Coal Terminal. Diane Butorac, the DOE contact listed on the DOE’s webpage for the Millennium Bulk Coal Terminal proposal, said there is no project information document for the proposal. The Millenium Bulk EIS scoping comment period started on August 16, 2013, and yet there is limited detailed information about the proposed terminal for the public to reference for their scoping comments, and there is no information for the public relating to the subject of water. The amount of water needed is likely to be pretty close to the approximate 1.9 billion gallons yearly of water needed at GPT because both terminals are expected to handle and export close to the same amount of PRB coal, which requires the water for spraying on the coal storage piles.

So, we have two cities both switching their water supply from decades-long use of river water to well water; two proposed coal terminals needing huge amounts of water for the purpose of spraying coal storage piles; one of the coal terminal permit applicants, SSA Marine, is 49 percent owned by Goldman Sachs; Goldman Sachs thinks water and water rights are smart investments; and water supply and water quality are becoming concerns for not only our country and world, but also right here in our little beautiful piece of paradise, Whatcom County. And, what are we doing about that serious water concern? We are contemplating letting a corporation come in and build a 48 million ton coal terminal which will result in countless serious adverse impacts to our area and beyond, and giving them the icing on their proverbial cake, a substantial quantity of our water supply and potential future water rights.

Mark Twain once said, “Whiskey is for drinking, water is for fighting over.” We all may be in for the fight of our lives, if these proposed coal terminals are as much about obtaining our water, as they are about exporting coal.

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