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Interlocal Agreement Between Chatham County and the City of Durham Respecting Water Sales

Haw River Assembly letter to U.S. Army Corps of Engineers

Aqua positioned to supply fracking operations

Aqua NC’s parent company, Aqua America, supplies pipelines and water to drillers in its home state of Pennsylvania. Aqua America CEO Nicholas DeBenedictus has stated in annual reports and shareholder statements that water services to fracking operations offer new and lucrative opportunities for the company.

The Triangle, including Chatham County, and to a lesser extent, Durham County, is prime fracking ground. Should drillers need a water supplier, Aqua NC is already here.

“That’s a big hypothetical,” says Aqua NC President Tom Roberts. “I have no experience in fracking or providing services for that. It’s a conversation for later.”

In May, Durham City Council passed a resolution opposing fracking. However, the state Legislature legalized fracking this year. Drilling could begin as soon as 2014.

Editor’s Note: This is the first story in a three-part series about Aqua North Carolina. On Jan. 2, INDY Week will examine Aqua NC customers’ frustration with poor water quality and customer service. On Jan. 9, we will examine the cost of Aqua NC water.

Tell us your experience with Aqua NC by posting a comment below.

The controversial 751 South development in Durham, approved for construction but lacking a reliable water source, is still a dream on paper. But with a private water company on board, it could be closer to reality.

Aqua North Carolina, a subsidiary of Aqua America, one of the nation’s largest private utility companies, has spoken with Southern Durham Development (SDD) about providing water to 751 South. And Aqua NC is trying to go through the back door of Chatham County to get it.

Throughout North Carolina, including the Triangle, Aqua has a checkered reputation, as customers have complained about service, water quality and high rates. But what recently perterbed some Durham officials is that Aqua convinced Chatham County commissioners to draft a contract allowing the company to buy 850,000 gallons of water per day.

There’s a hitch: Technically, it’s not Chatham County water. The water originates in Durham, which sells it to Chatham. And once the water leaves Chatham’s hands, Aqua NC could sell it anywhere, including back to Durham customers in 751 South.

Earlier this week, Durham officials sent a letter to Chatham asking to clarify part of their mutual water contract. That change could kill or drastically change Aqua’s plan.

Alex Mitchell, president of SDD, didn’t return phone calls from INDY Week, but Aqua NC President Tom Roberts confirmed that he has “had conversations” with SDD about serving 751 South.

SDD had previously considered drilling wells, although it was uncertain if a well system could sustain a development of 751 South’s size and complexity.

“The only thing that holds them up is the lack of water supply,” says Steve Bocckino, a longtime opponent of 751 South. “I’m hoping Chatham County sees the light and decides not to invade Durham County.”

The potential Aqua agreement could be the latest workaround by SDD. It wants to build 751 South1,300 homes and 600,000 square feet of commercial space on 167 acresin the environmentally sensitive Jordan Lake watershed.

Although Durham County Commissioners approved 751 South in a bitter, divisive and protracted process, Durham City Council wasn’t so accommodating. In February, it rejected SDD’s request that the city extend water lines to 751 South because it would be too expensive.

(The development can receive public sewer service, which was approved by Durham commissioners in July. As planned, sewer lines would cross wetlands owned by the Army Corps of Engineers. Local environmental groups, including the Haw River Assembly, last week petitioned federal officials to more closely scrutinize the permitting process. This could also delay construction at 751 South.)

Undeterred, this summer SDD and its lobbyist enlisted state Rep. Tim Moore, a Republican from Cleveland County200 miles awayto introduce a bill that clearly targeted Durham. It would have prohibited a city from denying water and sewer service to a project in its designated “urban growth area” outside municipal limits. The bill failed.

This fall, SDD unexpectedly withdrew its annexation request before the city, a curious move for a company that had so fervently fought for public services. Then on Nov. 19, the Monday before Thanksgiving, Roberts, president of Aqua NC, petitioned Chatham County commissioners to work on the resale agreement. Prompted by Commissioner Sally Kost, Roberts acknowledged Aqua NC could resell water to 751 South.

The commission voted 4-1 in favor of drafting a contract. Kost was the lone dissenting vote.

“Some people are saying this isn’t necessarily about 751,” Kost says. “But the history of the project makes me wonder. And I certainly don’t think we should use part of the Chatham County water allocation to provide water for residents in Durham County.”

“This is a group of investors who have a significant investment and after making it, misjudged what they thought could happen with the property,” says Durham City Manager Tom Bonfield. “They’re trying to exhaust all the ways they know how to get to where they want to get to. It’s their right to do that. I don’t necessarily fault them for pursuing it.”

Amending the water contract with Chatham County could squelch the Aqua deal and others like it. Earlier this week, Durham Director of Water Management Don Greeley sent a letter to his Chatham County counterpart, David Hughes, asking that the contract more explicitly prohibit the countyor the companies it sells tofrom reselling water outside of Chatham. The same language could be inserted into contracts Durham has with other cities, towns and utilities.

Although the respective city and county managers would sign the contract, it would need Chatham commissioners’ approval.

“When we purchase water, it’s ours,” says Chatham County Manager Charlie Horne, “but we want to stay on good terms with Durham.”

Kost says she doubts her fellow commissioners want to supply water to Durham County, but she’s unsure of how the majority of commissioners would vote on the contract change. The issue has not been placed on the agenda for the Dec. 17 meeting, but Kost says she plans to discuss it. The vote likely would be held in January.

The regional wheeling and dealing that occurs with water was prompted by the drought of 2007, during which area rivers and lakes were drastically depleted. Falls Lake, which provides water to Raleigh, looked like the surface of the moon. Lake Michie levels dipped so low that Durham considered tapping into quarries. As a result, Durham, Raleigh, Cary, Chatham County and Orange County have crafted interlocal agreements to help bail one another out in case of severe dry spells or other emergencies.

In 2008, Durham and Chatham signed a 20-year contract under which they agreed to sell water when necessary. Since then, it’s happened only occasionally, during the summer.

The 850,000 gallons per day of Durham’s water that Chatham would sell to Aqua represents a fraction of Durham’s average daily usage of 26 million gallons. And, according to the contract, if Durham enacts water restrictions, Chatham would have to implement the same ones in order to buy water.

Currently, Durham charges Chatham its lowest rates for water. The sale of 850,000 gallons per day would generate $1,977 in daily gross revenues or about $720,000 a year.

Aqua NC, whose strategy is to acquire underserved areas or troubled water systems, already provides water via wells and sewer to nearby Colvard Farms, a development that straddles the Chatham-Durham county line.

Neal Hunter, a minority shareholder in SDD, owns Colvard Farms, which could be further developed. Aqua NC, Roberts says, would like to provide service to those prospective customers and others on the west side of Jordan Lake.

Without the Chatham water deal, though, 751 South’s water options are dwindling.

“I still think [SDD] will wake up and say, ‘Why am I doing this?’” Bocckino says. “But the opponents are never going to give up, either.”

This article appeared in print with the headline “Troubled waters.”