Immediate payment required for lake water
MOUNTAIN PINE — Hot Springs secured rights in perpetuity Tuesday to 23 million gallons a day of Lake Ouachita storage, a privilege the U.S. Army Corps of Engineers said is conditioned on the city paying its share of storage costs immediately.
City officials have said it will take about four years to build a treatment plant and distribution system for the Lake Ouachita allocation. Stewart Noland of Crist Engineers, the city’s water-system consultant, said Tuesday that an intake site for the plant has been selected, and that the U.S. Forest Service has granted verbal approval to build the intake.
The Corps said immediate payment is mandated as a result of the 1963 federal statute that gives local governments the permanent right to storage they have purchased. The Mid-Arkan-
sas Water Alliance purchased 3.88 percent, or
49,983 acre-feet, of the lake’s more than 2.7 million acre-feet of usable conservation storage. MAWA will pay the $12,436,737 storage cost for the 30mgd total over 30 years, with the city responsible for $444,440 of the $579,705 annual payment.
The North Garland County Regional Water District will pay $96,617 a year for its 5-mgd suballocation, and the Hot Springs Village Property Owners Association will pay $38,647 a year for its
2-mgd share.
Katy Breaux, the senior project manager for the Corps’ Vicksburg District, said at Tuesday’s signing ceremony at the Corps’ Lake Ouachita Project Office that the 1963 law requires MAWA to make payments “pursuant to its agreement with the government.”
The law states a local government’s permanent right to storage is subject to “performance of its obligations prescribed in such lease agreement or agreement executed in reference thereto.” The storage agreement signed Tuesday stipulates the first payment is due within 30 days of the Corps notifying MAWA that the agreement has been executed. Subsequent annual payments are due on the anniversary of the notification.
MAWA’s permanent right to the storage is also conditioned on paying $31,500 a year in operation and maintenance costs for Blakely Mountain Dam, which forms Lake Ouachita. The payments will continue after the 30-year storage costs are paid. The city is responsible for $24,150 of the annual operation and maintenance costs.
MAWA also has to pay a percentage of the dam’s repair, rehabilitation and replacement costs that’s equal to the amount of storage purchased.
A letter dated Nov. 1 that Deputy City Manager Bill Burrough sent the Corps questioned why storage payments are levied after the agreement is signed. It cited language in the 1958 Water Supply Act that states payments for storage of future water supply won’t be made until the supply is used. It also referenced Corps regulations that delay payments compensating the Corps for lost power generation until the water used for generation is reallocated to another purpose.
The Corps said MAWA is buying storage and not water in its response letter dated Dec. 13. The rights to the water are controlled by the Arkansas Natural Resources Commission.
“(MAWA) provided a demand model proving that there was an immediate need for a water supply source in the area of Lake Ouachita,” Col. Michael Derosier, the commander of the Corps’ Vicksburg District, wrote. “It is USACE policy that since we sell storage space and not water, that payment must begin immediately on the storage space that is reallocated.”
The reallocation report the Corps issued in November based storage costs on the costs of replacing power the water lost to municipal supply would have generated at the dam. An updated report issued in January and provided to MAWA earlier this week based storage payments on lost hydropower revenue.
The Southwestern Power Administration sells hydroelectric power the dam generates to utilities in a six-state region, Breaux said. The Corps receives revenue from the sale, the rates of which are structured to allow the Corps to recover costs incurred by the federal-hydropower program.
The revenue collected repays the public for its investment in the program. Southwestern will receive a credit applied to its share of storage costs that is equal to the revenue that’s no longer accruing to the Corps as a result of water being reallocated from power generation to municipal supply.
Payments for storage reallocated from its congressionally mandated purpose are based on either the cost of replacing power the lost storage would have generated with the next-cheapest energy source, lost hydroelectric revenue or dam construction costs updated for inflation.
The highest of those determines the cost of the reallocated storage. The September report showed the $452,000 for annual power replacement as the highest cost, followed by $310,000 annually for updated construction costs and $174,000 annually for lost revenue.
The updated report issued in January reordered the three cost factors. Lost revenue was revised to $459,000 annually, followed by $428,000 for annual power replacement and $218,000 for annual updated construction costs.
Breaux said the Corps’ Hydropower Analysis Center in Portland, Ore., did the calculations, and that she couldn’t explain why they had changed.
Blakely Mountain Dam was built under the Flood Control Act of 1944 for the purpose of flood control and hydroelectric power. Using the dam for other purposes requires storage to be reallocated from the conservation pool. Until 2008, MAWA was seeking to secure storage from the flood-control pool, the top of which is at 592 feet above mean sea level, and avoid reallocation costs.
That’s when the Corps downgraded the dam’s safety rating to a level II. Breaux said the dam was upgraded to a level III in August 2015, but level IV is the threshold for reallocating storage from the flood-control pool. She said monitors installed at the bottom of the dam have detected seepage, but there are no signs that it has compromised the dam’s foundation.
“To date, the seepage that has been observed is clear, as it should be, with no signs of material movement,” she said. “Because of the risk associated with (Dam Safety Action Class) I, II and III dams, USACE dam safety policy does not allow the top of conservation pools to be raised at these projects.”