Legacy of neglect to cost Ariz. water customers for years
On Christmas Eve in 2007, a resident in a San Tan Valley neighborhood called the Arizona Department of Environmental Quality to report a major problem: Raw sewage was gushing out of a manhole cover by his house, flowing down the road between houses and into a nearby wash.
When inspectors arrived to investigate several days later, they noted a trail of toilet paper that stretched from the sewer cover into Queen Creek, a normally dry wash.
The spill in a residential area wasn’t the first for developer George Johnson’s sewer and water company, and it would not be the last.
For years, keeping raw waste in the pipes was a struggle for Johnson Utilities, with approximately 78 overflows from 2010 through April 2018 alone, state records show.
Finding a place to send treated effluent also was a challenge. So was controlling the odor. So was delivering sufficient clean water to customers.
The problems plagued not only the people living in the area between the towns of Queen Creek and Florence but also created headaches for builders.
Construction on thousands of new homes and businesses was delayed because the utility wouldn’t have enough capacity to serve them.
About 100,000 people live in the utility’s territory today.
Records from the Department of Environmental Quality show that Johnson Utilities ignored the agency’s advice when it built its first sewer plant, opened it without proper approval, ran the system poorly and had 20 years of issues that regularly drew inspectors to the growing water company.
But DEQ didn’t sue to stop the problems until another agency, the Arizona Corporation Commission, installed a new company, EPCOR USA, as manager and was moving to revoke Johnson Utilities’ certificate to operate.
Twelve years after that Christmas Eve spill, DEQ finally went to court to try to force the company to fix the persistent problems.
While a new company is in charge, years of neglect by the original owner and inaction by state agencies will continue to haunt residents.
Problems with the water and sewer system will require at least $138 million to fix.
As with all utilities, expenses are passed along to the people paying the bills.
The effort to wrestle control of the company away from Johnson involved the Department of Environmental Quality, Arizona Corporation Commission, the state Attorney General’s Office and a decision from the Arizona Supreme Court.
At the end of January, Johnson sold his company to EPCOR, a subsidiary of a Canadian company, for $110 million.
It’s now known as EPCOR’s San Tan water and wastewater districts.
Johnson fought until the end. He challenged EPCOR’s installation as the interim manager.
When the state sued him for $100 million to repair the utility, he sought to have the case dismissed.
Only after Johnson lost a case at the state Supreme Court last summer did he relent and agree to sell the business.
Johnson, who is 88, isn’t walking away with the cash from the sale, at least for now, thanks to a class-action civil case filed by disgruntled customers.
He declined to answer questions from The Arizona Republic about the company’s track record but issued a statement wishing EPCOR well. Customers have conflicted feelings. They generally approve of EPCOR taking over permanently, but they know the prospect of higher rates awaits them.
“From a consumer point of view, to get rid of Johnson is tremendous, but we are still screwed,” said John Dantico of Florence, who lives near one of the Johnson sewer plants and has spent five years battling the company over its operations and its odors.
No alarms for Christmas Eve spill
The Department of Environmental Quality and the Arizona Corporation Commission tried for years to rein in Johnson Utilities, using the tactics that normally keep utilities operating within the guardrails of state law.
But this was no ordinary utility. The Arizona Republic reviewed years of DEQ records, Corporation Commission filings and court records from Johnson Utilities.
The company was told from the beginning that some of its facilities were improperly constructed. It plowed forward nonetheless.
The state hit the company with violations for spilling sewage and effluent dozens of times, but Johnson Utilities kept doing it anyhow.
A request to inspect the Johnson Utility violation records at the Arizona Department of Environmental Quality resulted in a push cart at the department’s Phoenix headquarters loaded with torn, worn brown folders overstuffed with violation notices and emails sent between the department and the utility, as well as customer gripes.
And while the volumes are extensive, even they are not complete.
The department has destroyed some of the oldest records in accordance with the state public records retention rules.
For the Christmas Eve spill, DEQ records indicate that Johnson workers notified the state of the spill only after the agency asked about it, and the company estimated 500 gallons had spilled.
But DEQ estimated as much as 5,000 gallons of sewage spilled, which Johnson workers flushed into Queen Creek wash with 6,000 gallons of potable water.
The spill happened just outside the Pecan Water Reclamation Plant.
Johnson was asked to install remote sensors for the plant, which it hadn’t done before, citing the cost.
Even when sensors were put in place, sewage spills continued. And they got worse.
In November 2011, an alarm went off at the same plant, indicating heavy flows were coming into the facility.
Within minutes, the excessive force caused an overflow that filled a room with 21,000 gallons of raw sewage.
The waste streamed out the door, across the plant’s yard, under a gate and, again, into Queen Creek.
There were more spills at the Pecan Water Reclamation Plant, including one in March 2018 that sent 65,000 gallons of untreated sewage into Queen Creek.
The spill was about 13 times the size of the one on Christmas Eve and spilled out of the same neighborhood manhole at Kelly Lane and Harold Drive.
When the state sued Johnson in 2019, it listed more than 50 counts against the company, including five counts of unlawful sewage discharges at Pecan and a host of other violations. The Christmas Eve spill was the first count.
Others included substandard effluent leaving the plant, changing operations without state approval and operating unlicensed holding ponds.
Former DEQ engineer blames agency
George Johnson for decades has been a controversial figure as he developed thousands of acres in Arizona and elsewhere.
Those who never were customers of his utility probably have heard of him from other exploits:
● In 2007, Johnson and his partners agreed to pay the state a record $12.1 million to settle a lawsuit that accused them of polluting the state’s water, bulldozing protected land, fatally infecting bighorn sheep and destroying archaeological sites. He later also settled with the federal government over related issues.
● He was charged in a federal bribery case in 2017, accused of bribing a regulator in exchange for a vote for higher rates at his utility. The jury could not reach an agreement, a mistrial was declared and he was not retried.
● Johnson threatened to cut the throat of the Florence town manager in 2018, according to the manager’s report to police, but Johnson denied the accusation and was never charged. The dispute between the men had to do with Johnson trucking sewage sludge through town to spread on cropland, which was done to save the cost of sending it to the dump.
When Johnson was developing Johnson Ranch in the San Tan Valley, he applied to state regulators in 1995 to become the water utility as well.
The Arizona Corporation Commission granted his utility application in 1997, in part relying on his previous experience of launching and selling a water utility with land he developed outside Tucson.
The new company expected 127 customers in its first year, according to application documents.
Regulators had concerns with his utility even before the first sewage plant was complete, although some blame DEQ for not heading off problems earlier, too.
Murray Sharkey, a professional engineer who runs his own utility consulting company, worked as an engineer for DEQ when Johnson Utilities was getting started in the late 1990s.
“I said to managers at DEQ, ‘How do you let this stuff happen?’” recalled Sharkey, a self-described “old guy” who launched his professional engineering career in New York in 1970.
Sharkey said he was shocked when he got to Arizona and took a job with the state and found what a light touch regulators
used with Johnson Utilities, despite serious concerns with how the company was building its infrastructure.
“Nobody ever took him to task,” he said of Johnson. “DEQ has had this history of weak enforcement. It’s been part of their history. They do very little.”
Sharkey saw firsthand how Johnson operated. In March 1999, an engineer from a firm working for Johnson submitted documents to DEQ indicating the Section 11 plant on Hunt Highway was complete.
Sharkey and other DEQ workers inspected the plant and found it was nowhere near finished, he said.
Sharkey reported the engineer, Brian Tompsett, to the Arizona Board of Technical Registration for submitting the false document to the state.
Tompsett had to sign a consent decree noting his violation of the rules of professional conduct, according to records from the Board of Technical Registration.
Sharkey called it “a slap on the wrist.” Tompsett went on to become a longtime executive with Johnson Utilities.
He did not respond to requests for comment for this article.
Sharkey said that most municipalities in the state run their utilities well, and that Johnson is an outlier.
“Those people that do it right have good economies and it’s a nice place to live,” he said. “But there are other places where poop flows out on the ground.”
DEQ defends work on Johnson Utilities
DEQ spokesman Sam Nuanez defended the agency’s handling of Johnson Utilities, and said the agency prefers to work with troubled companies rather than sue right off the bat.
Lawsuits take time and can delay the fixing of problems, he said.
“In most cases, the environment and public benefit by immediately problem solving with the regulated facility rather than litigating,” Nuanez said. “In the case of Johnson Utilities, they did make incremental progress over the years, but in the end, we decided it was not enough.”
By the time DEQ filed its massive lawsuit against the utility in 2019, regulators at the Corporation Commission already had placed EPCOR as the temporary manager of the utility and had begun a rare proceeding to take away Johnson’s certificate allowing him to run the utility.
Those certificates are a property right, and taking them away from utilities is no small task. But Nuanez said DEQ’s response was appropriate.
“The fact is that the timing of our lawsuit, coupled with actions by the (Corporation Commission), a class-action lawsuit by ratepayers and action from the county and (Residential Utility Consumer Office) resulted in the best possible outcome for utility customers: the sale of the utility to a respected operator,” Nuanez said.
DEQ settled its lawsuit against the utility Jan. 26 in exchange for an agreement with EPCOR to fix the remaining problems with the system, and provide some benefits for ratepayers.
“EPCOR will bring Johnson Utilities’ drinking water and wastewater facilities into compliance with all Arizona environmental regulations through a return to compliance plan,” Nuanez said.
The settlement should lead to fixes for many problems, but it also dropped the possibility of civil penalties against Johnson. Nuanez said that, too, was OK.
“According to the Attorney General’s Office, courts rarely approve statutory maximums, especially when there is potential for overlapping accountability,” Nuanez said of the decision to abandon penalties against Johnson and his affiliated companies.
Should the state ever run up against a utility that routinely spills sewage and violates other laws, Nuanez said the experience with Johnson Utilities “provides an opportunity to learn and to improve.” “Through this process we’ve found that, wherever possible, collaboration with other state agencies on complex and litigious cases is crucial,” Nuanez said. “ADEQ will apply this and other experiences gained in the future to continue ensuring protection of public health and the environment.”
‘Real work’ begins now, EPCOR says
When EPCOR took over as interim manager in 2018, the first order of business — besides stopping the persistent sewage leaks — was adding additional wells and water treatment equipment so customers would have enough water pressure.
For some homeowners served by the utility, the lack of pressure was a more persistent concern than the sewer overflows.
In May 2018, the utility essentially ran out of water for customers when a pump failed and the company didn’t have a replacement.
The company shut off about 120 water meters to maintain pressure for the remaining customers.
That resulted in a fine from the Corporation Commission, as companies that are allowed to run monopolies on utility services are expected to provide those services without interruption.
The state noted that it found dozens of days in the summer of 2018 when pressure was low enough on the Johnson water system to warrant civil penalties.
But low pressure was a common customer complaint before then.
In EPCOR’s initial report to regulators after taking over management of the utility, it stated there simply was not enough water, which is pumped from the ground, not enough facilities to treat the water and not enough pumps to get it to customers when demand was high.
EPCOR has added 9 million gallons a day of capacity to the system.
That has solved problems such as customers having such low water pressure that their upstairs toilets wouldn’t flush, officials said.
“We feel like we have really made a lot of good strides in not only addressing the potable water side but building resiliency into the system,” said Jeff Stuck, EPCOR operations director, adding that EPCOR has spent about $46 million improving the system.
EPCOR also recently completed one of three connections that allow the company to tie in the wastewater system to the town of Queen Creek, adding capacity to the overburdened sewers.
EPCOR’s customer-satisfaction rates are above 80%, according to its own polling.
And many customers wrote to the regulators imploring them to approve the takeover by EPCOR, citing years of problems with Johnson.
Now begins what EPCOR officials refer to as the “real work” in rebuilding the utility.
EPCOR’s initial assessment of the sewer system noted that it simply was built piecemeal, without a master plan for guidance, and not maintained properly.
EPCOR also cited some unusual circumstances, such as goats being used to control weeds at one sewer facility, leaving waste on the property that was “inconsistent with operational compliance requirements.”
A bigger problem than the goats, though, was the design of the system itself.
Sewer systems ideally are built using gravity to carry wastewater downhill to a treatment facility.
Where hills prevent this, “lift stations” are used to pump the sewage uphill, though they are normally used sparingly.
The Johnson system runs against gravity in many places, requiring 33 lift stations to get waste to the four treat