Excess Water Leaving Town High and Dry

EUREKA, Calif. —  As Southern California confronts the very real possibility of a water shortage from the Colorado River, the water district in this North Coast town has a different problem: too much of the liquid gold.

The Humboldt Bay Municipal Water District, which serves 80,000 customers in the Eureka area, has tried to lure thirsty companies to relocate here with an announcement on its website: “We have water for your business!”

The reason has to do with the changing North Coast economy. When the city had two operating pulp mills, which process wood chips from timber operations for use in paper and other products, they guzzled five times as much water as all other customers combined.

One of those mills went belly up in 1993, and its payments to the water district ended in 1999. The other, Stockton Pacific Enterprises, may not survive the year.

“We’ve got to come up with something,” said water district General Manager Carol Rische. “The alternative is the community’s rates are going to skyrocket yet again.”

Residents here saw a precipitous rise in their water bills this year after the district cut a deal with the pulp mill -- slashing its costs to help keep it afloat. Municipal customers bore the brunt of the arrangement as their share of the costs went from 37% to 55%.

Another factor could make the situation even more pressing: a possible shift on the water district’s governing board toward a more cautious approach to outside water buyers.

Kaitlin Sopoci-Belknap, who won a board seat in the Nov. 2 election, was among a large group of environmentalists who raised red flags over a proposal last year by an Alaska businessman to ship water in giant plastic bags from Humboldt County’s Mad River to Southern California. She pledged during her campaign that she would “keep our water here and clear.”

Sopoci-Belknap argued that once the district started trading its water on the open market, it could be forced to sell to the highest bidder and thereby lose control of the resource.

She said the board needed to be “incredibly cautious” when considering outside bidders for the district’s 20-million-gallon daily surplus -- enough to supply 160,000 people.

“I think it’s not in our best interest having a big announcement on our website saying, ‘We will sell you water,’ ” she added.

According to the Assn. of California Water Agencies, a coalition that represents public water agencies in Sacramento, 75% of the state’s annual precipitation falls up north. Yet more than 75% of the demand is in the southern part of the state.

In 1962, the Humboldt Bay water district built the Matthews Dam to ensure a stable and abundant water supply for the coast and pave the way for large industrial users. The dam created Ruth Lake, the 48,000-acre-foot reservoir of Mad River water in Trinity County.

When the timber industry was strong, the pulp mills made ample use of the water supply.

But times have changed. Now, the remaining pulp mill faces a $30-million debt -- at 17% interest -- and will either change ownership or shut its doors by the end of the year, said Stockton Pacific CEO Steve Fleischer.

The situation is so dire that the mill’s 162 employees agreed to take a 15% pay cut through the end of the year.

“We’re hanging on because our employees, our vendors, our constituents, have banded together to make cost concessions that mean we’re alive,” Fleischer said. But, he added, “this company will not survive with $30 million of debt at 17%.”

What would save it is a management-led buyout of the company, in which current managers would go in with other investors, or a sale to an outside buyer. Representatives of a Chinese company toured the plant recently and another potential buyer has also come forward, Fleischer said.

If the pulp mill doesn’t find a buyer, Rische said the district may have few options other than try to market its water elsewhere -- or to completely dismantle its industrial infrastructure, of which the pulp mill is the sole remaining user. But that would mean closing the door to any new potential industries that might need the water.

As she put it, “Do we continue to maintain [that infrastructure] for the potential benefit to a new customer, or are we going to put it to bed?”