The proposal for a Western Area Water Supply (WAWS) pipeline project to bring potable water to the western area of the state (HB 1206) was heard by the Senate Appropriations Committee this morning.
Normally, by the time a bill makes it to its second appropriations hearing, most concerns in the bill have been dealt with, but not so in the case of this extremely controversial project, which depends on sales of water from the project to private oil industry consumers to pay back a public bond that would be guaranteed by the state of North Dakota.
For the bonds to be marketable (A+ rating), the state of ND would have to take on 100% moral obligation on the issuance, rather than the formerly proposed 80%, which would only give the bonds a B- rating.
In its most recently amended form, the WAWS project is limited to a $75 million dollar bond issue. The bill was also amended to make provisions in case of default, authorizing county boards to increase property taxes by up to 5 mills in Burke, Divide, McKenzie, Mountrail, and Williams counties.
The bill originated out of the Western communities in response to their need for potable, rural water and has significant support from the oil and gas industry, whose demand for water continues to increase with the boom in oil production.
Ron Ness, President of the ND Petroleum Council, testified today that the industry has a definite and increasing need for a consistent water source, whether that water is potable or not.
According to supporters, it is a marriage to be celebrated – rural residents, farmers and ranchers get plenty of water for domestic and agricultural use, oil producers can cut down on the time and expense of water delivery trucking, and the state gets their public project paid for by revenues from water sales to the oil industry.
But opponents fear the picture may not be so rosy, and the state could find itself paying alimony for years to come if future private sales do not meet with the plan’s demand projections.
And a third interested party, private water suppliers, say that they were never invited.
Representatives today said they were not contacted, much less consulted, while the WAWS engineering and financing plans were being drawn up.
Steve Burian, CEO of Advanced Engineering and Environmental Services, Inc. (AE2S), presented committee members with an extensive report showing the projected population growth, oil industry growth, water needs and revenue projections his consulting firm put together for the project.
According to Burian’s data projections, population in some western areas could as much as double in the coming decade, while industrial demand for water would increase from 2010’s 1.9 billion gallons to 4.6 to 5.9 billion over the coming few years. Burian insisted that his estimates stayed on the conservative side, and that the project was a win-win scenario with very limited risk.
The President of Power Fuels and Landtech Enterprises, a water hauling company operating in western North Dakota, told the committee that he forecasts high rates of industry growth and demand as well. He currently employs about 700 employees operating 350 water trucks and expects the number of employees to increase to over 1,000 in 2012.
Private water pipeline investors and builders, however, say that the WAWS project projections grossly overstate the amount of water needed to meet future demand and erroneously assume 100% of revenues will go towards profit.
“A lot of what I am hearing today is speculation,” said Brandon Ames, a Williston hydraulic engineer and entrepreneur. “And I’m not OK with that as a taxpayer, as a water engineer, or as an entrepreneur.”
Bob Harms, a Tioga native representing independent water suppliers, told the committee that everyone agrees that places such as Watford City and McKenzie County are in desperate need of rural water.
Harms proposed that the water commission itself take over control for building a delivery pipeline of potable water for rural water supply, and that the state should pay for the project through general fund and oil trust fund appropriations and do away with the bonding issue.
By doing so, Harms said, the water commission would fulfill its mission of serving North Dakota citizens, and the government would remove itself from unfair competition with private providers who already have significant investments in several smaller scale pipelines and water depots under construction to meet fracking needs.
“If the need is for water for the population, then appropriate the funds and build it,” said Harms, but undertaking a public project that relies on 80% of its cash flow to come from the volatile needs of industrial oil consumers is risky venture, and one which the state should not undertake.
“Let’s build a pipeline, not a pipe dream,” agreed Bill Sheldon, a rancher also involved in the water business.
Mike Ames, President of Agri Industries, told the committee that they “have had a lot of misinformation provided to you.” He presented 2010 water requests from Ames and McKenzie Counties to Gov. John Hoeven, showing vastly lower amounts of projected water needs than the figures used by Burian.
Ames said his company has put in more than 25 water depots, will have 6 more in place by summer, and 20 more in the coming year, at no cost to the state of ND. “We’re here to save you $150 million – how many lobbyists come in and tell you that?”