Despite ‘high burden’ status, water rates to increase as city and mill negotiate new contract

Residents skeptical of motives, benefits of new agreement

Laura Jean Schneider
Posted 11/24/21



After spending the better part of two years renegotiating a new water agreement, the city of Port Townsend and Port Townsend Paper Corporation are making progress on a final …

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Despite ‘high burden’ status, water rates to increase as city and mill negotiate new contract

Residents skeptical of motives, benefits of new agreement




After spending the better part of two years renegotiating a new water agreement, the city of Port Townsend and Port Townsend Paper Corporation are making progress on a final agreement.

A revised final draft is expected on Dec. 6.

Staring down a literal pipeline of around $64 million of capital improvements to the single artery of the city — and the mill’s — water supply in the next 20 years, the city hopes that increasing water rates will help cover the cost of significant improvements to a system that city white papers state have “suffered a lack of investment.”

That’s expected to change with the finalization of a new long-term contract with the mill.

“We do expect a significant rate increase for the city customers,” City Public Work’s Director Steve King City said during the council’s consideration of the agreement at its meeting Monday.

King said that since the Department of Health has mandated water conservation for the city, higher costs could incentivize using less water, while also admitting that water conservation mandates do not apply to the mill.

“It’s a perplexing issue, I think, Steve,” said Mayor Michelle Sandoval, “when it comes to water conservation, because it comes at a cost.”

Currently, the city’s average combined water utility rate for a single-family residence is more than $1,700 annually. This current cost is already considered a “high burden,” according to Environmental Protection Agency metrics.

At the same time that burden is acknowledged in white paper research, the city document adds that “delay in funding the system only creates a larger rate impact for the future.”

The current lease with the mill has been in place and extended since 1956; the new agreement would cover the next 20 years, with a 20-year renewal.


The system in question is the Olympic Gravity Water System (OGWS) pipeline that draws water and pipes it over 30 miles from the Big and Little Quilcene Rivers.

The pipeline has provided water to both the mill and the city of Port Townsend for nearly a century.

Some residents and organizations remain skeptical of the shared interests.

In an email to the city, Port Townsend resident Niles Powell wrote: “Simply put, the city is giving away our water to a private corporation.”

“Local citizens are carrying the mill by not charging it appropriately for its water use,” he added.

In a public comment submitted to the city by the North Olympic Sierra Club, the club alleges, “The paper mill pays nothing for its water.”

The nonprofit environmental group further recommended that the mill be charged for water use, like city residents, using an “incrementally introduced” plan to motivate and accommodate “water efficiency improvement.”

Port Townsend Air Watchers wrote, “The current arrangement unduly burdens all other businesses and ratepayers, as well as the city itself,” and claims that no charges to the mill, by the city, have been required since 1986.

Kathy Ryan was succinct in her letter to the city: “I do not want my taxes to pay for the mill’s water,” she wrote in an email.

“I want my taxes to pay for my water.”

And Port Townsend resident Fran Post wrote the city, “It seems to me that a new contract with the mill needs to significantly increase their financial contribution for our water since they use the bulk of it.”


But according to the new draft agreement, the mill and the city will pay the same rates for raw water, despite the difference in usages, starting at $1.07 per thousand gallons next year, and increasing by 17 cents by 2026.

The city owns the existing water rights to the Big and Little Quilcene Rivers, which supply all water to the city and the mill. That’s something Powell pointed out in his email to King.

“The mill does not own our water and by no stretch of the legal imagination does it have any right to it,” Powell wrote.

In the current agreement, and historically, the mill has leased the use of water, to the tune of around 10 million gallons per day, providing infrastructure maintenance and system operations for both parties through a public-private agreement.

Initial documents state that the city anticipates using a cost-of-water-used approach for the new agreement.

According to city documents, city and mill water use will be metered to allocate cost by volume of water use, beginning April 1, 2022.

The wholesale cost of water delivery is not taxable, although a white paper states the mill is “an end user and thus some taxes would be applied.” Estimates of those taxes were not provided in the white papers.


Regardless of what model of agreement is pursued, the entire pipeline, and thus water for the city and the mill, are dependent on the renewal of three special use permits from the U.S. Forest Service that expire in 2029.

A white paper acknowledges that, “the greatest risk related to climate change is a decrease in summer and fall flows in the Big and Little Quilcene rivers,” the sole source of the city’s water.

To account for lost precipitation, multiple documents suggest doubling the size of Lord’s Lake reservoir, a significant back-up reserve, at an estimated cost of $9.3 million.

However, the east dam is in poor condition, and should sizable seismic activity occur, water loss is inevitable.

A $250,000 engineering survey is scheduled to take place next year, with an estimate of around $4 million to fix the dam.

A white paper notes: “Since the mill is more sensitive to upsets than the city, mill use is the driver for maintaining 24/7 reliability.”

It costs the mill $600,000 a day to be out of operation, and the mill must shut down if any pipeline interruption occurs.

However, if the city forewent an agreement with the mill, water could be provided to the city using just 1/3 of the current pipeline, and only one of the two diversions.

Additionally, white papers state, a partnership with Jefferson County Public Utilities Department could be arranged to supply high-quality water to the Tri-Area with surplus flow, adding “if PTPC [the mill] were to leave the partnership, the system could easily accommodate Tri-Area demand.”

Joe Breskin, treasurer of the Olympic Environmental Council, wrote in a lengthy document to the city, that times have changed since 1928, when “the prospect of the mill’s arrival was celebrated wildly and for many years the mill has been central to the community’s economy.”

“Residents are paying ever higher water bills,” he pointed out, adding, “the pollution continues, city infrastructure is wearing out, and it appears to be time for the mill to step up.”


2 comments on this item Please log in to comment by clicking here


    It seems a small price for citizens to subsidize a private corporation that provides many stable, secure jobs for our community.

    But uncer*****y demands contingencies. Three years ago, who knew tourism and travel would be decimated by a pandemic? I think it behooves us to build a reimbur*****t into the contract if the mill ceases operation for whatever reason and say, sells to a developer or some such unforeseeable twist to our futures.

    Kp Flaherty


    Thursday, November 25 Report this

  • greggk47

    I understand Kathy Ryan's sentiment to only pay for her water and not the mills. Let me offer that under the new purposed contract the mill would pay $4.6 million a year and shields the 5400 homes in Port Townsend from an extra $71.33/month to equal that $4.6 million short fall. Let me also suggest that a business loosing $25,000/hr because of no water is highly motivated and has expertise, talent and contacts to return it to service quickly as opposed to a city with a more committee form of administration rather than autocratic one. Then let's look at $9.3 million to enlarge Lords lake and $4 million to fix the dam. Each of the 5400 homes now must pony up $2400 to fund those expenses (over time) rather than sharing the cost with the mill that uses 5 times as much water the city. There are mills that run close to zero discharge meaning they hardly use any water and if the cost is to high for the mill they might go that route or close if it's to expensive. This symbiotic relationship has worked well so be careful for what you wish for.

    Friday, November 26 Report this