Daily Sitka Sentinel

Business or Lottery? Water Deal May Be Both

By SHANNON HAUGLAND
Sentinel Staff Writer

The Gary Paxton Industrial Park Board on Monday discussed the Assembly’s questions about proposed bulk water sales.

At its meeting last Tuesday the Assembly postponed action on a bulk water sale proposal the GPIP board had forwarded, citing concerns about the risk the water sales might pose to the city’s other uses of the Blue Lake water resource.

The company Arctic Blue Waters Alaska is proposing purchasing Blue Lake water for export. It’s one of several proposals for water sales and export contracts the Assembly has considered since the city acquired the old Alaska Pulp Corp. property and water rights in the 1990s.

To date, no water exports of any sizable amounts have taken place, but sales of water purchase options have generated income – as well as some development costs – for the city.

The Assembly sent a number of questions back to the GPIP board dealing with concerns about the length of the purchase agreement, the possible effects of climate change on the water supply, and the status of the city’s water rights if there are no water sales, contracts or exports.

Garry White, director of GPIP, said he believes the board addressed these concerns, and hopes the Assembly will approve the water purchase agreement when it’s presented at the March 9 meeting.

The answers to the Assembly’s questions are:

Contract Length – White said the company will have the right to purchase 2 billion gallons of water, and have first right of refusal on another 6.8 billion gallons within the first five years of the contract. The contract is for 20 years, but the company can seek approval for four five-year extensions – with the approval of the city and company.

“There’s a benchmark at five years, the board added another benchmark at four years (at the Monday meeting),” White said today. “After five years, water allocations fall under the sole discretion of the city administrator.”

If the contract is approved, the company must make a non-refundable $10,000 deposit within 15 days of the signing. The sale price is half a cent per gallon of water, with credit allowed from the $10,000 deposit. After the first five years of the contract, the company has water export benchmarks and must export water every year.

One change approved by the board at Monday’s meeting is a requirement for the company to submit its plans and drawings for infrastructure that is needed to get the water to the point of loading.

Climate Change – White said there are a number of safeguards to protect the city’s water needs for hydro-generation, and drinking water. In the city water export permit from the Department of Natural Resources, White said, the state also has regulations providing for fish habitat management and lake levels for Blue Lake.

Water export permit – White said the city petitioned the state in 2013 to allow for multiple uses of the water, including water export, hydro-generation and industrial use, such as hatcheries.

“It shows that we are using the water for beneficial uses” even if no water is exported, he said. That will help the city retain its water rights, under the DNR permit, he said.

From the public, Hugh Bevan, former city administrator and public works director, asked for more details on the Arctic Blue Water plan, including the company’s plan for piping the water from the powerhouse after-bay to the ship or tanker. A discharge pipe above the fresh water intake of the powerhouse was originally planned for water sales, but is now being used to pipe water to the Northern Southeast Regional Aquaculture Association Sawmill Cove hatchery.

Bevan, a civil engineer, also asked for the company’s plans for a pump system. “It’s going to take some big pumps - how do those pumps interface with the Blue Lake powerhouse?” he added Tuesday. He suggested a technical memorandum be sought from a power engineer to answer the questions.

Bevan’s third question related to navigation, namely how the company’s vessels would interact with other uses at the industrial park, including boat haulout and the business by Hanson Maritime and Silver Bay Seafoods at other park docks.

City Attorney Brian Hanson said he has reviewed the water purchase contract in detail for possible risks to the city, and felt some of Bevan’s concerns were premature at this time.

Commenting today, Hanson said “These are very legitimate concerns that he bought up; all we’re doing is setting up whether they have the right or not to purchase water. The purchase agreement said they have to pay for (the infrastructure), and do it correctly. That’s one protection. The second is if we need any of (the water) for drinking or electric power we get first crack at it.

“Fred Paley (the prospective purchaser), in accordance with the contract, is going to have to address these concerns before he takes the water, and he needs to get approval from the city (for his plans).”

Fred Paley is a 12 percent shareholder of Arctic Blue Waters Alaska Inc. The president of the company is Charles Cartier of Fairbanks.

Hanson said he’s neutral on whether the Assembly should approve the contract or not. (Brian Hanson is not related to Lee Hanson, owner of Hanson Maritime, which has a dock at the industrial park.) 

Paley, who lives in British Columbia, attended the Monday GPIP board meeting through Zoom, and had previously sent the board a letter in response to the Assembly’s concerns at the Assembly meeting.

He said that for the past 20 years he’s been diligently working on a goal of securing a bulk water sales agreement with a foreign buyer to export bulk water from Blue Lake.

In his letter to the board, Paley listed expenditures totaling $6.6 million he has paid over the years in his efforts to purchase Sitka water.

That includes infrastructure and $450,000 to maintain the purchase options for his previous company, Global H20.

Paley also noted investments by others to move sales of Blue Lake water: $10 million invested by a company called True Alaska to bottle water at the industrial park, and $1.8 million for water purchases under Alaska Bulk Water, plus the installation of a pipe and manifold loading system.

Despite the large sums paid under the water purchase agreements, no water of any sizable amount has ever been exported.

Paley updated the board on his progress with his latest venture, with Arctic Blue Waters. He said he’s working with companies in Egypt interested in purchasing Blue Lake water for bottling in Egypt, but needs Assembly approval of the sales agreement before securing the deal.

Assembly member Thor Christianson, who is the liaison to the GPIP board, said Monday that he’s in favor of a sale agreement with Arctic Blue Waters.

“Everybody should buy one lottery ticket,” Christianson said, citing the potential of millions of dollars in income for the city if the water is actually exported. “If we’re not in the game we definitely won’t (win). No one else is even trying.”

Fred Paley also stressed the upside of the deal to Sitka.

“If we can move large volumes, the city could do quite well,” he said today.