20070425Petition for Reconsideration.pdf

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John R. Hammond, Jr., ISB No. 5470
BATT & FISHER, LLP
S. Bank Plaza, 5th Floor
101 S. Capitol Boulevard
Post Office Box 1308
Boise, ID 83701
Telephone: [phone]
Facsimile: [phone]
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Attorneys for Applicant
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
APPLICATION OF SPIRIT LAKE EAST
WATER COMPANY, INc., FOR
AUTHORITY TO INCREASE ITS
RATES AND CHARGES FOR WATER
SERVICE IN THE STATE OF IDAHO
Case No. SPL-06-
PETITION FOR RECONSIDERATION
OF ORDER NO. 30279
COMES NOW Spirit Lake East Water Company ("Spirit Lake
" "
Applicant" or
Company ) and pursuant to Idaho Public Utilities Commission s Rules of Procedure
331 and Idaho Code g 61-626 respectfully Petitions for Reconsideration on that part of
the Commission s Final Order 30279 finding that the Company s evidence concerning
the cost of its current generator was insufficient to allow it to be included in Spirit Lake
rate base. As will be discussed in more detail below the Company asserts that the
Commission decision on this matter is unreasonable, unlawful, erroneous, unduly
discriminatory and not in conformance with the facts of record and/or applicable law
resulting in a revenue requirement and rates which are confiscatory.
PETITION FOR RECONSIDERATION - OR\G\NAL
BACKGROUND
Early in 2005, due to water system outages that occurred in 2004, the Idaho
Department of Environmental Quality ("DEQ") required that Spirit Lake make
improvements to its system to ensure system reliability. One item that the Company
agreed to install at DEQ's and the Company s engineers suggestion was a generator that
was capable of operating both the Company s well pump and three centrifugal water
pumps to ensure system reliability in the event of a power outage. See Exhibit A. I Later
DEQ found the engineering plans for the installation ofthe generator to be acceptable and
approved them for construction purposes. See Exhibit B. On September 26, 2005 , Spirit
Lake advised the DEQ that it was in possession of a generator capable of satisfying the
need to ensure system reliability. See Exhibit C. Spirit Lake obtained this generator
from one of its shareholders, Hanson Industries, Inc., who had previously obtained the
generator from Kaiser Aluminum, as discussed in more detail below. Although this 55
Hp capacity generator was smaller than the one originally proposed to be installed, DEQ
approved its installation stating:
Mr. Hanson reported that they had purchased a diesel-powered, 55-
capacity, standby generator capable of running the three booster pumps all
at once but not capable of operating the 100 Hp well pump. He presented
a 2004-5 two year history from Koot. Electric Coop. for power outage
history for the area showing only half a dozen outages occurred with none
longer than two hours in duration. The 190 000 gallon water tank should
have enough capacity to supply the booster pumps during a several hour
power outage. (The peak instantaneous demand by 232 homes might be
about 250 gpm which would consume 30 000 gallons of storage during
two hours with a full tank lasting about 12 hours. With a maximum 366
connections, peak demand might be about 350 gpm which would use
about 40 000 gallons of storage and empty a totally full tank in about 9
I This correspondence was disclosed to Staff in response to Audit and Production Requests.
PETITION FOR RECONSIDERATION - 2
hours.) We agreed that standby power capable of running the booster
pumps was practical and acceptable.
On April 28, 2006 DEQ found that the installation of a standby generator was
completed. Exhibit D.
As stated previously, Spirit Lake obtained this generator from one of its
shareholders, Hanson Industries. Hanson Industries ("Hanson ) obtained this generator
in November of2003 when it purchased approximately 157 acres of real property, along
with fixtures and improvements and certain personal property. See Exhibit E. See also
Reply Comments Exhibit 16. At the time, Kaiser Aluminum was in Chapter
bankruptcy and the sale had to be approved by the United States Bankruptcy Court for
the District of Delaware. See Exhibit F. No specific cost value for the generator was set
forth in the purchase and sale agreement or for any fixture, improvement or item of
personal property.
The value assigned to this generator when it was transferred from Hanson to
Spirit Lake was set at $12 360.00. The Company and Hanson in good faith attempted to
demonstrate the reasonableness of this value by submitting estimates for the cost Spirit
Lake would incur if it were to obtain a generator of similar capacity from another source.
See Reply Comments Exhibit 16. The average of these estimates is $10 800.00. In
discussions with Commission Staff, it indicated that it would not object to the inclusion
of a value of $6 000.00 in rate base for the generator.
PETITION FOR RECONSIDERATION - 3
II.
ARGUMENT
Legal Standard
The Commission is statutorily vested with jurisdiction to regulate rates charged
by public utilities furnishing services, products or commodities in the State of Idaho.
Idaho Code g 61-501. When the Commission finds that the rates proposed by a public
utility for such services are unjust, the Commission must establish just, reasonable or
sufficient rates. Idaho Code g 61-502. The Idaho Supreme Court's review of
Commission rate-setting decisions is to determine if the Commission regularly pursued
its authority and whether the constitutional rights of the utility were violated by the fixing
of rates which were unjust, unreasonable and thus confiscatory. Utah-Idaho Sugar
Intermountain Gas Co.100 Idaho 368, 597 P.2d 1058 (1979); Intermountain Gas Co.
Idaho Public Utilities Comm 97 Idaho 113 540 P.2d 775 (1975); Federal Power
Comm v. Hope Natural Gas Co.320 U.S. 591 64 S.Ct. 281 , 88 LEd. 333 (1944).
The Commission s Decision to not Allow the Cost of the Generator in
Spirit Lake s Rate Base is unreasonable, unlawful. erroneous, unduly discriminatory and
not in conformance with the facts of record and/or applicable law, resulting in a revenue
requirement and rates which are confiscatory.
There is no dispute that Spirit Lake installed this generator as required by DEQ
and that it is used by the Company in the operation of the water system. The Idaho
Supreme Court has unequivocally stated that the Commission should include in rate base
all items which are proven with reasonable certainty to be justifiably used by the utility in
providing services to its customers. See Citizens Utility Co. v. Idaho Public Utilities
PETITION FOR RECONSIDERATION - 4
Comm 99 Idaho 164 579 P.2d 110 (1978); Agricultural Products v. Utah Power
Light Co.98 Idaho 23 557 P.2d 617 (1976). As this equipment was installed for the
benefit of the customers of Spirit Lake it clearly should be allowed to be included in rate
base.
In assigning a value to the generator, Spirit Lake obtained the best information it
possibly could gather by soliciting estimates for the cost of a similar generator from
companies unaffiliated with Spirit Lake or Hanson. See Reply Comments Exhibit 16.
Although the average of these estimates is slightly lower than $12 630., they still
provide reliable and relevant evidence as to the cost to obtain a generator of this sort. No
evidence has been introduced into the record to contradict the validity or accuracy of
these estimates.
The reason Spirit Lake has attempted to justify this value for the generator
through estimates is that when the generator was obtained in 2003 by Hanson in a real
estate purchase and sale agreement from Kaiser Aluminum, no specific value was
assessed to it. Generally speaking, it is not unusual for real estate purchase and sale
agreements to not specifically assign values to fixtures, improvements and personal
property, such as a generator, that are included in such a transaction. Further, as this sale
was necessitated by Kaiser Aluminum s need to liquidate assets quickly to pay creditors
in its bankruptcy, it is not surprising that a cost value for a minor piece of equipment in
terms ofthe overall sale was not set forth. Two years later, when Spirit Lake was
required by DEQ to install a standby generator to power its booster pumps in the event of
a power outage, the Company was able to obtain such a generator more quickly from its
shareholder Hanson than from the private sector. The fact that this generator did not have
PETITION FOR RECONSIDERATION - 5
a value assigned to it from the purchase and sale agreement does not justify punishing
Spirit Lake by ruling that no value at all should be included in its rate base. When Spirit
Lake obtained this generator from its shareholder it did so for the benefit of its customers.
Further, Spirit Lake made a reasonable business decision based on the information it had
at the time to obtain this generator from Hanson. Further, its attempt to assign a value to
the generator based on the estimated cost to obtain a similar generator from a third party
is reasonable under the circumstances and thus, has provided clear evidence of the cost of
the generator so that it should be included in its rate base. See General Telephone Co. of
the Northwest, Inc. v. Idaho Public Utilities Commission 109 Idaho 942, 712 P.2d 643
(1986).
The Company also asserts that it is unreasonable under the circumstances for the
Commission to disallow inclusion of the cost of the generator in rate base and that such
decision amounts to a regulatory taking violating the Fifth and Fourteenth Amendment of
the United States Constitution. Duquesne Light Co. v. Barasch 488 U.S. 299, 109 S.Ct.
609, 102 LEd.2d 646 (1989). In Duquesne the Supreme Court restated the
constitutional parameters of rate setting for public utilities under the taking clause of the
Fifth Amendment:
The guiding principle has been that the Constitution protects utilities from
being limited to a charge for their property serving the public which is so
unjust" as to be confiscatory. If the rate does not afford sufficient
compensation, the State has taken the use of utility property without
paying just compensation and so violated the Fifth and Fourteenth
Amendments.
Duquesne 488 u.S. at 307-, 109 S.Ct. at 615-, 102 LEd.2d at 657.
PETITION FOR RECONSIDERATION - 6
In this case, Spirit Lake obtained and installed this generator for the benefit of its
customers. Although it obtained this generator from Hanson, there is no evidence in the
record showing that the cost assigned to this generator for rate base purposes was not
established by the evidence provided by Spirit Lake. Nor is there any evidence
contradicting that which was provided by the Company. Finally, Staff in its discussions
with the Company indicated that it would not object to the inclusion of $6 000 in rate
base for the generator based on the estimates contained in Exhibit 16 attached to the
Company s Reply Comments. Based on these facts, there is no reasonable reason for the
Commission to disallow inclusion of any cost for this generator in rate base and any
decision to do so amounts in confiscatory rates.
In the alternative, Spirit Lake asserts that the Commission could direct Staff to
obtain several cost estimates for a generator of similar size and compare them to that
obtained by the Company and then determine what value should be included in rate base.
CONCLUSION
Based on the foregoing, Spirit Lake respectfully requests that the Commission
reconsider its decision to disallow inclusion of any cost for the generator in the
Company s rate base. In addition, the Company respectfully requests that the
Commission allow the Company to include the amount of$12 360.00 in rate base for the
generator or some other figure based either on Staff s position of $6 000.00 or the
average of the cost estimates contained in the Exhibit 16 attached to the Company
Reply Comments.
PETITION FOR RECONSIDERATION - 7
If the Commission affirms its order in this regard, it amounts to a regulatory
taking. No reasonable person would assume that this generator has zero value and should
not be included in the Company s rate base.
DATED This 24th day of April, 2007.
CERTIFICATE OF SERVICE
I HEREBY CERTIFY That I have, this 24th day of April, 2007, caused to mailed
a true and correct copy ofthe foregoing document to the following by U. S. Mail, Postage
Prepaid thereon, in the following indicated manner:
Weldon B. Stutzman
Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington Street
P. O. Box 83720
Boise, Idaho 83720-0074
u. S. Mail
~ Hand Delivery
Facsimile
PETITION FOR RECONSIDERATION - 8
EXHIBIT A
mil oom& ASSOCIATES, INC.
ENGINEERS SGRVEYORS
I1AHO
lG26linooin
CQw" cr~Me.ID ~~14
~H)64-93a2
1'iJ~ 2;00-664-(i946
WASIINGTON
2310 N. Moller Hoad
$itJte 11;\1
~ib~,1)1 L:I!~c. 'WA 99019
51J9.?5!K1000
r,,~ 5W-255-6009
TGII il'ee
H77-BI~'5(j72
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WGGlwRldllX1lrIUJ.COJTI
January 6, 200S
Robert Boyle
Hanson Industries
15807 E Indiana Ave
Spokane, W~Y9216
Re: Spirit Uike East Water System
Dear Bob:
At YO\1r direction, we have reviewed the Spirit Lake East (SLE) water system
deficiencies with respect to the recent Idaho Department of Environmental
Quality (IDEQ) requirements regarding minimUJJ1 system pressure, anddeveloped options to meet those requirement;!,
Background:
Due to a well pmnp failure, the water SLE system experienced low prCSSUtcsbetween October 4 and October 10 2004. As a result, IDEQ notified the Spirit
Lake East Water Company that the water system was in violation of IDAP
58.01.0S.5S2_01.b.i by Dot maintaining a minimum pressure of 20 psi, Asecond IDEQ letter, dated October 28, 2004. directed the water.- system construct a second well within 180 days of the date of the letter, In reviewing
the following options, please refer to the Welch Comer Spirit Lake East Water
System Analysis dated October 2004 for a more detailed description of the
water system.
Development of Altematjves:
In ordc.r to develop options for satisfying IDEQ's October2S1b notice, WelchComer first ideutified the primary failure mechanisms that would result in a
loss of system prcs~ure to the system.
1. Booster l'w:nps: A failure of tbe booster pumps would quickly
result in depressurization of1hc system, as there is no elevated
storage. The smaU volume available in the bladder tanks would be
quiclcly drained. There are three booSter pannI's in senrice, so it is
un1ikely that aU three would fail simultaneously. Also, these are
relatively smaU pumps that could be obtained locally.
2. Power: Power S~tcrn outages arc common in the area due to the
overhead conductors. A Joss of power takes both the well and
booster pump station out of service. HistoricaJly. this is the most
oonunon failure mechani~m.
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3. Well Pump/motor: Failure of the well pump OJ:' motor ca:o result ina water system outage. but not immediately. As long as there iswate!; in the reservoir. the booster pump system can keep tho system
pressurized.
4. Well: A catastrophic well failure due to a structural faill!re or
contamination would result in a. long-tom outage. However, this
type of failun; is extremely uncommon.
The following options were developed. to address the failure mechanisms listed
above and satisfY the IDEQ pressure requirements.
, .
Option A: Drill a soc::ond well
Drilling a secoo.d well would address failure mechanisms 3 (well
pump/motor failure) and 4 (well fa.ilure)~ but would not guarantee that thesystem would maintain pressure at all times. In the event of.a power
outage or booster pump failure; the system would still be out ofwatcr. Thecstiroated cost to design and consb:\lct a new well and pumping system and
tie it into the c:ciStjU8 system is $200.000. This assumes that ZI 5CCond well
can be sited on the existing well lot. Drawdown teSting should be
performed to assess the risk orwell jnterference if this option is pUISUcd.
Option B: Standby Power for Booster Pumps
Providing standby power fOf the booster station would protect the system
&om the most common wlure mechanism (2), power outages. In order to
maximize the usefulness of this option. the storage re;servoir would alsoneed to repaired to allow the maximum volume of standby watt:(
storage. With the reservoir repaired. the system would have 192.000
gallons of storage available durin,g an outage. The drawback to thisalternative is that in the event of a well failure or extended power outage, itwould be necessary to haul water to the reservoir. Th~ estimated budget torepair the reservoir is less than $10,000 assuming that the repairs can be
made using Xpcx or other similar treatment method. If a liner must beinstalled. the estimated cost is $32 000
In order to start and run the one 25 horsepower and two 1 0 horsepowerpumps, an 80 KW sbndby generator would be required. The material costora unit of this size and an automatic transfer switch is approximately
$36.000. An additional $5.000 should also be budgeted for insta.llation
and miscellaneous electrical modifications.
Under this optio~ it would also be important to have an early warning
system that would alert tbe operators of a problem before the reservoir
drained out. A simple float and autodial~r systcoo. could accomptish this
for an estimated cost of $2 000 to $2.500, Part of the problem with the
cWTent system is that the operatoni arc not always aware of a problem
before they receive complaints of Jow pressure.
Option C: Standby Power for both Booster aDd Well PQD1ps: Anotheralternative would be: to install a standby generator large enough to be able:
to run both the well and booster pumps. This wouLd protect the systemnom outages under most conditions. A mechanical failUIc oftbe well
pump would still make it necessary to haul water to the reservoir. As with
Option B, the reservoir would need to be repaired.
A 250 KW standby generator would be required fot this option at an
approxhnate cost of$56 ooo, including the transfer switch plus S5,OOO for
installation. Additionally. having a spate well pump and motor in
mventory would provide protection under nearly all circumsta.nccg. A
spare 100 liP pump and motor would cost approximatc1y S 15 000.
- .
Option D: Elevat~ Storage: Construction of elevated storage wouM
provide the most reliable system of maintaining pressure. However. the
duration of the protection would be limited by the size of the reservoir. This
typc of reservoir is also very expensive to constxuct. FOT example. the 68 000
gallon c1cvated storage reservoir TccommcndM io the Spirit Lake East WaterSystem Evalulltion hnd an estimated total project cost of $424,000. This
estimate assumes the s1oragc will be sited on the well lot or on property owned
by the Spirit Lake East Homeowners Aswciation and does not include any
land acquisition costs. Depending on the site 5clccted~ the elevated storagewould also help equalize pressW'es during normal operations.
APaJysis or Alternatives;
Based on the above. it appears that the highest degree of protection against
water outages would be provided thl:ough the instaUation of standby power.
Having a spare well pump and motor in inventory would make the !:ystem very
secure.
It is also rcconnncnded tbat an autodialer be installed to alert operators if the
reservoir levels get too low. Also. the reservoir itself should be repaired so
that all of the available standby storage can be utilized.
'fhc total estimated budget to do all oftbe above would be as follows:
250 KV genset/transfcr switch
Reservoir Repairs
Spare P1DI1pIMOtOf
Autodialer System
Total
$61 000
$10 000
$15 000
$ 2.200
$88,200
Dri11ing a second well would provide 1c.~s system reliability than the above
improvements at more than twiee the cost. Elevated storage would provide a
rusher level of rcliabil1ty but only for short duration C\'cnts. Tb~c wowd also
be a secondary benefit of pressU(e equalization under peak operating
conditions. HowcvCt", elevated storage would be the mO$t expensive option.
We would be pleased to review these options with you in morc detail aod help
work with. you and IDEQ to reach a solution that meets everyone s need$. If
you have any questions please feel free to give me a call.
Sincerely,
Wetch Comer & Associate$, Inc-)!U
Steven B. Cordes, P.
Project Manager
SBC/gym
FILE COpy
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BA...1t:'.~ Ft:S:UER
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A LIMITED LIABILITY PARTNERSHIl'
Jcii-,n R. Hmnmond Jr-c-m;lil: jrh~!)haltrish('r,C\)1n
February 10 2005
Anthony P. Davis
Analyst
DEPARTMENT OF
ENVIRONMENTAL QUALITY
2ll0 Ironwood Parkway
Coeur d'Alene, ID 83814-2648
Re:Spirit Lake East Water Company Water System
PWS# 12801
CONFIDENTIAL SETTLEMENT COMMUNICATION PURSUANT TO IRE 408
Dear Mr. Davis:
Thank you for your letter of January 7th to my client regarding the March response date.
This correspondence is to advise you of Spirit Lake East Water Company s ("SLE" or the
Company ) progress in making improvements to its water system for the benefit of its,
customers and to comply with the Department of Environmental Quality s ("DEQ") recent
demands. As you know, the engineering firm of Welch Comer & Associates, Inc. was retained to
analyze and advise SLE on the water system and future improvements. A copy ofthis
assessment is enclosed with this correspondence.
Welch Comer January 6 , 2005 assessment analyzed SLE's system in the context of
developing options for satisfying DEQ's requirements as contained in its October 28, 2004
correspondence to the Company. This assessment identified the primary failure mechanisms that
would result in a loss of system pressure to the system and four options to remedy such a
problem. Welch Comer identified power system outages as the most common system failure
with failure of booster pumps, well pump/motor failure and well failure as other causes. Based
on its analysis and reference to a draft of its Spirit Lake East Water System Analysis dated
October 2004 and prepared for the potential sale ofthe system to North Kootenai Water District, I
Welch Comer recommended that the highest degree of protection against water outages and
depressurization would be provided through the installation of standby power to run both the
well and booster pumps in the event of an outage In addition, Welch Comer recommended that
SLE make the following additional improvements: l) purchase a spare well pump motor for
placement in inventory in the event of another motor failure; 2) install an autodialer system to
I This sale was not consummated and the reasons for this failure are still being investigated by SLE,
2 Welch Comer also stated that its recommended improvements would provide more reliability and cost far less than
drilling a second well.
T 208.331,1000 . F 208,331.2400 . P,Box 1308 Boise, Id 83701 . Suite 500, US Bank Plaza 101 S. Capitol Blvd, Boise, Id 83702
alert operators ifreservoir levels get too low; and, 3) repair ofthe reservoir tank wall to increase
its capacity to the full 192 000 gallons. The total estimated budget for these improvements totals
$88 200.00. After carefully considering this recommended course of action, SLE now believes
that it is the most reasonable and prudent path to follow to improve its system and address the
spirit ofDEQ's concerns.
The following background is provided to aid in understanding why SLE believes its
proposed course of action is reasonable and prudent. The SLE system began operations in 1979
and has been regulated by the Idaho Public Utilities Commission since 1983.3 Since 1983 the
Company s rates for its customers have remained extremely low. Currently, the Company's
customers pay a $l2.00 minimum, monthly charge, and .1 O~ for each lOO additional gallons after
usage of9 000 gallons. See Spirit Lake East Tariff Schedule. In its twenty-five years plus of
existence SLE has operated its system in a reliable, safe and economical manner for the benefit
of its customers. SLE believes its record is strong as is demonstrated by contaminant testing
results over this period oftime and the infrequent outages the system has suffered.4 Although the
recent outage that occurred was a significant event, SLE made every effort to quickly respond to
the needs of its customers. The Company did this by filling its reservoir repeatedly using tanker
trucks to transport water SLE had purchased from the City of Spirit Lake. More generally,:SLE
believes that through the years it has made every effort to comply with the applicable laws and
rules that govern the operation of its system. Because of the Company s goocloperation and
management record, it requests that DEQ work with SLE to effectuate the improvements that
Welch Comer has recommended.
, Although SLE agreed to study and analyze DEQ's demand for the installation of a second
well SLE now believes that if it foll'ows Welch Comer s recommendations it will increase its
storage capacity and improve the reliability of its system in a more timely and c:ost effective
manrier and therefore
, '
address DEQ's concerns.s In addition, SLE will commit to the: l)
institution of a cross connection control program; 2) the promotion of proper septic tank
maintenance; and, 3) development of a written well protection program. Based on the foregoing,
SLE intends to make these system improvements as recommended by Welch Comer and others
as voluntarily committed to by the Company. SLE will submit the appropriate plans to DEQ in
this regard. It is SLE's sincere hope that DEQ will support and assist in the improvement of the
See IPVC Order No. 17114, Case No. V-I 500-127.4 For example, in 200 I DEQ specifically stated that:
Historically, (SPLE) has had few water quality problems other than microbial contamination
entering through the distribution system, The system installed a chlorinator in 1996 to deal with
the problem.
Assessment at p. 2; see also at p. 8 (documenting other contaminant testing results). In addition, this Assessment
noted that a Sanitary Survey perfonned conducted on July 12 2000 found "the Spirit Lake East Water Company
system to be well run and in compliance with Idaho Rules for Public Drinking Water Systems." Assessment at 6; see
also at p. 10. It should also be noted that neither of these analyses of the SLE water system contended that it was in
violation of DEQ's Rules because it had only one well.5 SLE believes and agrees with DEQ that the installation of a second well is an eventual and necessary system
improvement as the system moves towards full hook up (the system now has approximately 60% of total allowed
hook ups). The future, second well will follow DEQ and other governmental agencies rules and regulations prior to
actual construction.
SLE system in this manner. SLE believes this course of action represents a reasonable and
prudent solution to its current system deficiencies, which at this time arguably do not pose an
immediate threat to the health and safety of its users. Further, SLE believes this course of action
will help to eliminate the possibility of administrative proceedings or other litigation which
would only add further expense and could delay the completion of system improvements that will
benefit SLE's customers.
If you have any questions regarding SLE' s course of action please contact me at your
convemence.
Sincerely,
JRH/klh
Enclosurecc: Robert Boyle
Ron J. Sutcliffe
Gary Gaffney
meRC-& ASSOCIATES, INC.
ENGINEERS SGRVEYORS
I1AHO
1626 Linooln """'1
CQI'U: tf~~ne, ID ~~1~
roIJ-E)64-9382
1'iJ~ 2re-66H946
WASIINGTON
2310 N- Moller Hoad
$\lIte 11;\1
~ib~;1)1 L:I!~c. WA 99019
51J9-?55c6000
r;)~ 5W-255-60Q9
roll iree
!\77-B1!,'i.5(j72
~'ma~
I'1c(;!/wAlchCC1lrl~I.coJ11
January 6, 2005
:Robert Boyle
Hanson Industries
15807 E Indiana Ave
Spokane
, \y~\
99216
Re: Spirit Lake East Water System
Dear Bob:
At yo\1I'direction. we have reviewed the Spirit Lake East (SLE) watCT system
deficiencies with respect to the recent Idaho Department of Environmental
Quality (IDEQ) requirements regarding minimum system pressure, and
developed option~ to meet those requirements.
Background:
Due to a well pump failure. the water SLE SystCO1 experienced low pr~s\U'es
between October 4 and October 10,2004. As a result. IDEQ notified the Spirit
Lake East Water Company that the wa1(!f system was in violation of IDAP A
58.01.08.552.0l.b.i by not maintaining a minimum pressure of 20 psi.
second IDEQ letter, dated October 28, 2004, directed the water: system to
construct a second well within 180 days of the dale of the letter. In reviewing
the following options. please refer to the Welch Comer Spirit Lake East Water
SyYtcm Analysis dated October 2004 for a. more detailed description of thewater system.
Development of Alternatives:
In order to develop options for :mtisfying IDEQ's October281h notice, Welch
Comer first ideotified the primary failure mechanisms that would result in a
loss of system p~~ure to the system.
1. Booster Pwnps: A failure of the booster pumps would quick1y
result in depressurization of1bc system, as there: is no elevated
storage. The smaU volume available in the bladder tanks would be
quickly drained. There are three booSter pumps in service, so it is
unlikely that aU three would fail simultaneously. Also, these are
relatively mlal1 pumps that could be obtained locally.
2. Power: Power s~tcm outages arc common in the area due to the
overhead conductors. A Joss of power takes both the well and
booster pump station out of servi~. Historical) y, this is the most
common failure mechanil:loo.
.,\", 1\I160~\PI;RtIO).DOC ""-ii l:gcordC$~welchcomc:r, com
3. Well Pump/motor~ Failure of the well pump or: motor can result in
a water system o"~agc, but not immediately. As long as there is
watel: in the reservoit:, the boo!;rter pump system can keep the system
pressurized.
4. Well: A catasltoph1c we)) failure due to a stIUctural faill1re or
contamination would result in a. long-term outage. However, this
type of failure is extremely uncommon.
The following options were developed to address the failure mecharusms listed
above and satisfy the lDEQ pressure requirements.
, -
Optioo A: Drill a s~c:ond wen
Drilling a second well would address failure mechanisms 3 (well
pump/motor failure) and 4 (well failure)~ but would oot guarantee that the
system would maintain pressure: at all times. In the event of a power
outage or booster pump failure; the system would still be out ofwatcr. The
C$tiroated cost to design and constnlct a new well and pumping system and
tie it into the existing system is $200,000. This assumes that D second well
can be sited on the existing well lot. Drawdown tcsting should be
perfonned. to assess the risk orwell jnterference if this option is pumlcd.
Option B: Standby Power for Booster Pumps
Providing standby power for: the boost~ station would protect the system
&om the most conunon failure mechanism (:l). power outages. In order
maximize the usefu1ness of this option. the storage reservoir would also
need to be. repaired to allow the maximum volume of standby water
storage. With the reservoiX' repaired. the system would have 192,000
gallons of storage available during an outage. The drawback to this
nltemativc is that in the event of a well failure or extended power outage, it
would necessary to haul water to the reservoir. The estimated budget to
repair 111e reservoir is less than $10,000 assuming that the repairs can be
made using Xpcx. (rt other simitar treatment method. If a liner must be
installed. the estimated cost is $32 000
In. order to start. and run the one 25 horsepower and two 1 0 horsepower
pumps, an 80 KW standby generator would be required. The material cost
ora unit of this size and an automatic transfer switch is approxhnately
$36,000- An additional $5,000 should also be budgeted for mstaJlation
and miscellaneous electrical modifications.
Under this optio~ it would also be important to have an early vroming
system that would alert the operators of a problem before the reservoir
drained out. A simple float and autodialer system could accomplish this
for an estimated cost of$2 OOO to $2 500. Part of the problem with the
cWTent system is that the operators arc not always aware of a problem
berote they receive complaints of Jow pressure.
Option C: Standby Power for both Boostet and Well PQlDpS: Anotbet
altemati'yoe would be: to install a standby generator large enough to be able
to run both the well cmd booster pumps. This wouLd protect the system
fi:'om outages under most conditions. A mechanical failUIc of the well
pump would stil1 make it necessary to haul water to the reservoir. As with
Option B, the reservoir would need to be re))ajred.
A 250 KW standby generator would be required COJ: this option at an
approxhnatt:: cost ofSS6,OOO, including the transfer switch plus 55,000 for
installation. Additionally, having a spate well pump and motor in
mventory would provide protection under nearly all circumstances. A
spare 100 HP pump and motor would cost approximatc1y $15 000.
, .
Option D: Elevated Storage: Construction of elevated storage would
provide the most reliable system of maintaining pressure. However. the
duration of the protection would be limited by the size of the reservoir. This
type of reservoir is also very expensive to constnIct. For CXan1ple. the 68,000
gallon c1evated storage reservoirrccomrocodod in the Spirit Lake East Water
System Evaluation had an estimated total project cost of $424,000. This
estimate assumes tbe storage wiJI be sited on the well lot or on property owned
by tho Spirit Lake East Ho1Ilcowners Association and does not include any
land acquisition costs. Depending on the site selected. the elevated storage
would also help equalize pressures during norma) operations.
ADalysis of Alternatives:
Based on the above, it app~ars that the highest degree of protection against
water outages would be provided thxough the instal1ation of standby power.
Having.. spare well pump and motor in inventory would wake the :;:ystem 'Very
sec\U'C.
It is also recommended that an autodialer be installed to alert operators if the
reservoir levels get too low. Also, the reservoir itself should be repaired so
that all of the available standby storage can be utilized.
The total estimated budget to do all of the above would be as follows:
Total
$61,000
$10 000
$15 000
$. 2.200
$88,200
250 KV geosetltransfcr switch
Reservoir Repairs
Spare PmnplMotor
Autodialer System
Drilling n second well would provide Ic.o;;s system. reliability than the above
improvements at more than twice the cost. E1evated storage would provide
lUsher level of reliability but only for short d\lJ'aijon events. Tbe(c wouJd also
be a secondary benefit of press~ equalization under peak operating
conditions. However, elevated storage would be the most expensive option.
We would be pleased to review Ihcsc options with you in more detail aod help
work with you and IDEQ to (each a solution that meets everyone s need$. If
you have any questions please feel free to give me a call.
Sincerely,
Welch Comer & Associate$, loc.
;/p!U
Steven B. Cordes, P.
Project Manager
SBCI gym
EXHIBIT B
April 22, 2005
Robert J. Boyle
Vice President of Hanson Industries, Inc.
Spirit Lake East Water Company
15807 E. Indiana Avenue
Spokane, W A 992l6-l864
RE:Spirit Lake East Water System Improvements
Dear Mr. Boyle:
On March 15 2005 , this office received a letter from you providing information on your proposal for making
improvements to the Spirit Lake East water system. Your letter responded to my February 18, 2005 letter
with a commitment to complete the following nine (9) water system improvements before July 15, 2005:
a. Repair of tank wall leaks.
b. Repair of tank roof.c. Installation of a standby generator.
d. Ins.tallation of an auto-dialer.
e. Purchase of a replacement well pump for standby with the existing well.f. Starting a cross-connection control program.
g.
Starting of a wellhead protection program.
h. Installation of an exterior vent from the chlorine solution tank.
1. Repair of the water meter on the well discharge line.
On March 24 2005 , this office received a submittal from Steve Cordes, P.E. of Welch Comer and Associates
consisting of a proposal for the "Spirit Lake East Water System Maintenance and Repair" project and plans
and specifications for supply and installation of a standby power generator on the Spirit Lake East water
system. We have reviewed these two proposals and have the following comments
Suirit Lake East Water System Maintenance and Reuair:This proposal dated March 2005 as stamped
by Philip Boyd, P.E. of Welch Comer and Associates identified three items of repair or modification work.
Two items involved work on the existing 190 000-gallon concrete ground-level water storage reservoir.
Areas of the tank walls subject to leakage will be resealed with application ofXypex sealant products first on
the tank interior and then on the tank exteriors. The existing roofing surface material will be entirely
removed and the joints between the pre-cast concrete roof deck sections will be re-sealed using the same
Xypex product used on the tank wall cracks. As the third item, the chlorine solution tank located in the
pumphouse will be equipped with a vent hose extending from the tank to outside the building.
Although the exact Xypex product to be used was not identified in the submittal, the Xypex Corporation has
several protective barrier materials listed by NSF/ANSI under Standard 6l (Drinking Water System
Components - Health Effects) that would be acceptable as sealant on this tank. A copy of the listing is
enclosed. As long as the Xypex sealant used is NSF / ANSI Standard 6l listed as required by Idaho drinking
water rules and is specifically identified with as-builts, use of this product to seal the tank walls and roof is
acceptable to DEQ.
RE: Spirit Lake East Water System Improvements
April 22, 2005
Page 2
The proposal outlined a construction procedure that keeps the water reservoir in service while the work is
being done inside and on top of the tank. Since there are no guarantees or provisions specified that would
ensure a reliably safe drinking water supply could be maintained while workers are inside and on top of the
tank removing debris, applying the sealant, and removing waste products, the proposed practice of
maintaining service through the tank while the work is being performed is not acceptable to DEQ.
An alternative method for maintaining the water system in operation while the water reservoir is isolated
from service and repaired needs to be developed. DEQ suggests that temporary water storage capacity be
mobilized to the site to replace the tank while it is out of service and being repaired. Please note that the
product requires a minimum cure time of three days and set time of twelve days so it will take at least a
month to complete the repair. Before the tank work is started, DEQ will need to approve an alternative
construction method involving taking the tank out of service.
When the tank walls are repaired and sealant has fully cured, the tank needs to be filled to the overflow
elevation and tested by examination for leakage. Although not mentioned in the proposal, the absence of any
observable wall leaks as certified by the design engineer is considered by DEQ to constitute acceptable seal.
Because the inside sealant is more effective, we recommend that the inside sealant be applied and accepted
before any external sealant is applied.
The slope of the roof should be measured and examined to ensure that it is sufficient to prevent ponding of
water on the roof. Water accumulation on the roof can result in the seals at joints failing due to freeze
effects. If the roof can structurally handle additional loading as verified by your engineer and the existing
slope is insufficient, DEQ recommends that consideration be made to placing a capping concrete layer on top
of the resealed roof.
Standby Power Generator:Plans and specifications as prepared by Terry Stulc, P.E. of Trindera
Engineering and submitted by Welch Comer and Associates on March 24 2005 for supply and installation of
a standby power generator next to the Spirit Lake East water system pumphouse have been reviewed. This
installation consists of a diesel engine-driven generator and associated items all intended to operate the
submersible well pump and three existing booster pumps on this system during power failures.
The submitted plans and specifications were found to be acceptable and are hereby approved for construction
purposes in accordance with the Idaho Rules for Public Drinking Water Systems and Section 39-ll8 of
Idaho Code. The system auto-dialer needs to send a phone signal to the system operators whenever the
standby generator is automatically activated.
Inspection of installation of the power generator approved herein must be done by an Idaho licensed
Professional Engineer (P.) or by someone under the direct supervision of a P.E. If major modifications to
this accepted design are necessary, the design engineer must secure DEQ approval of the changes prior to
implementation of the changes. Section 3 9-ll8 of Idaho Code requires preparation of complete and accurate
as-built plans as certified by the inspecting engineer. The as-built plans need to be submitted to DEQ for
review and approval within thirty (30) days of completion of construction.
Since the 400-gallon fuel tank for the diesel engine will be double-walled with interstitial monitoring for
leakage, it is acceptable to DEQ. However, you should contact the Panhandle Health District (Rick Barlow
at 4l5-5200) to ensure compliance of this fuel tank with the Critical Materials Ordinance applicable for
installations located over the Spokane Valley - Rathdrum Prairie Aquifer.
RE: Spirit Lake East Water System Improvements
April 22 , 2005
Page 3
Outstandine: Compliance Items:Of the nine items listed above as a-, the recent submittals have addressed
four of the items - items a-c and h. Compliance with the remaining items prior to your commitment date of
July l5 , 2005 still needs to be accomplished with the following actions.
d. Installation of an auto-dialer. This can be accomplished by working with your electrical engineer
who can oversee installation of an auto-dialer system used to alert the operators during problems.
e. Purchase of a replacement well pump for standby with the existing well. Submittal of evidence of
purchase of a standby submersible pump and motor capable of replacing the existing well pump
with storage of the pump on-site.
f. Starting a cross-connection control program. Submittal of a draft cross-connection control
ordinance to Tony Davis at this office including an implementation schedule for the system
operator to conduct inspections of existing installations and locations needing installation of
backflow devices (irrigation systems mostly)
g.
Starting of a wellhead protection program. Submittal of a plan to Yvonne Pettit at this office for
implementation of a wellhead protection program at Spirit Lake East.
1. Repair of the water meter on the well discharge line. Submittal of evidence that the water meter
has been repaired, is operating properly, and the operator is taking periodic flow data.
In summary, DEQ has accepted the proposed water tank wall and roof repairs conditioned on taking the tank
out of service while the repairs are completed. Installation of the vent tube on the chlorine solution tank is
also acceptable. Plans and specifications for supply and installation of the proposed standby generator have
been approved as long as the installation includes an auto-dialer message sent to the system operators
whenever an automatic switchover to the generator is done during power outages. And finally, five
compliance items as listed above still need to be implemented or completed before July l5 , 2005.
Sincerely,
Gary 1. Gaffney, P.
Enclosure (NSF Xypex listing)
Steve Tanner & Anthony Davis, DEQ, CdA
Steven Cordes & Phil Boyd, Welch Comer and Associates, l626 Lincoln Way, CdA
Terry Stulz, Trindera Engineering, l859 Lakewood Drive, Suite l03, CdA 838l4
John Hammond, Jr., Batt & Fisher LLP, P.O. Box 1308, Boise, ID 83701
Harry Hall , IPUC , P.O. Box 83720, Boise, ID 83720-0074
Ron Sutcliffe, Deputy AG, DEQ, Boise
John Balbi , 3l772 N. Kelso Drive, Spirit Lake, Idaho 83869
(#8577 with Spirit Lake East pws file)
EXHIBIT C
September 26, 2005
Gary Gaffney
Department of Environmental Quality
State of Idaho
2ll0 Ironwood Parkway
Coeur d' Alene , ID 838l4-2648
RE: Spirit Lake East Water Company
Dear Mr. Gaffney:
I am providing you information re: the repairs mandated in your September 20
2005 letter for our meeting this Wednesday. We can discuss these items in an agenda
format to assist us in addressing all the issues.
1. Roof Repair: portions of the damaged roof were removed to l6" and replaced
by gluing down and then the same type shingles were placed over the repair
shingles and glued down. A band of metal sheeting (about 1"2" inch thick)
was placed around the perimeter of the roof to prevent wind from peeling it
back. This is how the roof was damaged. The roof was water tested for one
hour (generating over 2" of water onto the roof and flowing off of it) and there
were no leaks detected into the tank from the roof. The water inside the tank
was not subject to any possibility of contamination from the roof repairs since
the solid concrete top was not breached in the repairs or previously by the
peeled back shingles. Our engineer, Phil Boyd, can provide further technical
details at our meeting.
2. Tank Repair: the exterior tank repair will be discussed in detail at our
meeting. Water quality tests were taken before and after the repair and showed
no presence of coliforms. A copy of the reports will be provided at our
meeting. Although we did not repair the tank internally as was agreed upon
earlier, we believe this method of repair was far safer than the health risks
associated with taking the tank down and providing temporary water storage.
In addition, if this repair is effective, the costs are minimal which in turn will
benefit our ratepayers. Lastly, the internal repair was premised upon a third
party buying the system who preferred the repair be performed in this manner.
Our engineer, Phil Boyd, can provide further technical details at our meeting.
3. Standby Power: we have possession of a genset capable of satisfying the need
for pressure. I need to discuss this issue at length at our meeting.
4. Pump and Motor: we have the inventory pump and motor in place in the pump
house.
EXHIBIT D
As the result of the meeting held today with Raymond Hanson and Robert Boyle of Spirit lake Water Company and
Phil Boyd of Welch Comer and Associates, I have prepared the following conclusions regarding the nine compliance
items:
1. Storage Tank Wall Repairs: Mr. Hanson acknowledged that he had authorized work on the tank repairs
without securing DEQ concurrence but defended his decision to proceed without the engineer s assistance
based on Phil Boyd's decision to not purchase the water system. When the DEQ approved coating material
(Xypex) proved to be ineffective , it was removed and replaced without notifying DEQ by a Tamms Industries
coating (Hey'Di K-11/Hey Di SB(1)). A printout showing this material has NSF/ANSI Standard 61 listing was
provided. Photos of the wall repairs were provided. The repair consists of a 20-foot long horizontal crack that
may have developed as the result of a cold joint involved with the original concrete pour for the tank in the
1980s. Both the interior and exterior of this tank were coated with a thin concrete coating (gunnite or
shotcrete) when it was originally completed,
They reported that the operator sampled the water system before and after the crack work for coliform bacteria
and all results were absent bacteria. At this time , the operator, Jim Kruger, is applying more coats of the
Tamms product to the outside repair and will be refilling the tank to above the elevation of the crack to see if
the repair has stopped all visible leakage.
The original plan was to also repair any cracking present in the interior of the tank. Although the owners felt
exterior repairs might prove to be effective in stopping tank leakage, the owners could not confirm that the
condition of the tank interior was sound. This water tank has been in continuous service for about 25 years
apparently without having the tank interior closely examined or cleaned of debris once. We asked the
engineer to examine the tank interior as best he can manage and report back to DEQ with his observations
and recommendations. If the interior of the tank exhibits evidence of sediment accumulation on the bottom
shotcrete spalling, or significant cracking, then DEQ expects the owner to develop a plan for cleaning the tank
interior. If the engineer s initial evaluation suggested a need to look closer or clean the tank, we suggested the
owner consider hiring one of the professional tank inspection and maintenance companies like Liquid
Engineering who can use approved methods for going inside a water tank while it remains in service. We
referred Bob Boyle to Terry Werner with the Post Falls water department who used these services on their
MG Highland tank.
(Note: A chlorinator was installed on this water system in the 1990s after it experienced periodic
bacteriological contamination. The source of the bacteria problem has not been exactly determined but may
be due to the roof and wall problems in the water tank. Other sources of contamination could be from the
aquifer or from the distribution system but are less likely. Tank repairs might be followed by an experiment to
move chlorination from the well discharge to the booster pump to see if storage in the tank can be done
without introducing bacteria into the system.
2. Tank Roof Repairs: A qualified contractor was retained by Mr. Hanson to make repairs to the overlay
material on the top of the tank roof. They reported that sections of the roof overlay material was cut out and
replaced with new patches of similar material using sealed joints. Along the perimeter'of the tank, this
contractor installed metal stripping section that were secured by screws into the span-deck precast concrete
sections that make up the roof. The operator installed a water sprinkler on top of the roof and ran it until there
was 2-inches of water inside a vessel set under the sprinkler. It was reported that the operator looked inside
the access hatch and could not observe any of this water moving through the roof and dripping into the water
below. Pictures of the roof were provided. The roof may have a low spot where water accumulates into a
pond, No joints between the roof units were cleaned and repaired with placing a coating sealant into the
joints. While we felt unsure that this work was adequate to seal the roof from leakage into the tank, we felt
interior inspection of the tank might reveal whether water or daylight is coming through the roof member joints.
3. Standby Power Generator: Mr. Hanson reported that they had purchased a diesel-powered, 55-Hp capacity,
standby generator capable of running the three booster pumps all at once but not capable of operating the
100 Hp well pump, He presented a 2004-5 two-year history from Koot. Electric Coop, for power outage history
for the area showing only a half dozen outages occurred with none longer than two hours in duration. The
190 000 gallon water tank should have enough capacity to supply the booster pumps during a several hour
power outage. (The peak instantaneous demand by 232 homes might be about 250 gpm which would
consume 30 000 gallons of storage during two hours with a full tank lasting about 12 hours. With maximum
366 connections, peak demand might be about 350 gpm which would use about 40 000 gallons of storage and
empty a totally full tank in about 9 hours.) We agreed that standby power capable of running the booster
pumps was practical and acceptable.
The generator is a skid-mounted unit that will be installed in a lean-to built next to the booster pumphouse. It
will have an automatic switch to power the boosters in the event of a power outage and also energize the auto-
dialer circuit alerting the operator of tank levels, Mr. Hanson indicated this installation will be installed and
operational before the end of October. The diesel tank on the generator will have a secondary containment
provision. (The PWS Rules say the following about generators on well lots (IDAPA 58.01 ,08.550,03.r):
i. An internal combustion engine to drive either a generator for emergency standby power or a pump to
provide fire flows, and an associated fuel tank, may be placed on the well lot. (5-03)
ii. A propane or natural gas powered generator is preferable to reduce risk offuel spillage. (5-03)
iii. If a diesel or gasoline-fueled engine is used, the fuel tank and connecting piping must be double-
walled. The tank must be above ground and may be contained within the structural base of the generator
unit. A certified water system operator shall be present during filling of the tank following a period of
usage, or during periodic extraction and replacement of outdated fuel. (5-03)
iv. Should the internal combustion engine be located within the well house, the floor of the well house
shall be constructed so as to contain all petroleum drips and spills so that they will not be able to reach
the floor drain(s). Engine exhaust shall be directly discharged outside the well house. (5-03)
v. A spill containment structure shall surround all fuel tanks and be sized to contain one hundred fifty
percent (150%) of the fuel tank volume. (5-03)
4. Auto-dialer: The auto-dialer system is installed and operational. A catalog cut for the device called GUARD-
IT as made by Rayco was provided. The delay in securing this item was due to Verizon s delay in installing a
phone line to the pumphouse. The dialer connects to operator Ray Kruger with defaults to the Spokane office
of the company. It alerts the operator of low levels of water in the storage reservoir.
5. Spare Well Pump & Motor: Mr. Hanson reported that the spare well pump and motor are in the company
shop in Spokane, We asked that they move the pump and motor arrangement into the SLE pumphouse so
that it is easily available for use in case of a well pump failure. They agreed, Failure of the well pump in
October of 2004 was apparently caused by damage to an improperly secured power line inside the well.
6, Cross-connection Ordinance: Mr. Boyle is ready to issue notices to users instructing them about
compliance with this ordinance but will first sent the notice in draft format for Tony Davis to review, We
indicated that the ordinance should be applied to all existing and new services where a cross-connection
potential exists, These will probably be automatic irrigation systems and stock watering tanks. We directed
Mr. Boyle to contact Robert Hansen at 208-2654270 for assistance with identifying certified backflow
prevention device testers in Idaho,
7, Wellhead Protection Plan: It was agreed that implementation of a wellhead protection plan would wait until a
later date when the program could be done by others for perhaps new system owners.
8. Chlorine Solution Tank Vent: A picture was provided showing a vent pipe had been installed to vent
chlorine fumes out C?f the tank to prevent corrosion of the pumproom equipment. Corroded pipes have been
repainted.
9, Flow Meter: It was reported that the flow meter on the well discharge line has been placed
back in service but that the operator indicated that only two of the three propellers inside the meter were
present. Since this brings into question the meter s accuracy, this flow meter will be checked further to make
certain it is operating with all its parts.
We discussed the importance of the system operator monitoring water usage. We suggested that elapsed
time meters be installed on each of the three booster pumps as a way to measure distribution demand, check
the well flow meter, and establish water demand characteristics. These elapsed time meters are relatively
inexpensive and can be installed by an electrician when the standby generator controls are installed. An
elapsed time meter installed on the well pump would also be wise.
There are presently 232 active connections on this water system with a potential for a maximum of 366
lots/services.
Disapproval Notice: The DEQ letter disapproving the system required issuance of a disapproval notice to all users
within 10 days (September 30 ). Although there were objections voiced to this requirement, Mr. Boyle will draft a
notice for DEQ review and intends to issue it. We indicated it was acceptable for the notice to be drafted as a
newsletter-type document so as to not alarm the users.
In summary it appears that items 2 , 4, 7, and 8 are substantially completed. Items 1 , 3, 5, 6 , and 9 need additional
attention. The next step should be for the engineer to report to DEQ on items he took from the meeting as needing
additional attention. Disapproval status should remain on the system until all nine deficiencies are resolved.
Gary J. Gaffney, P.
Idaho Department of Environmental Quality
2110 Ironwood Parkway
Coeur d'Alene, ID 83814-2648
Tel: [phone]
Fax: [phone]
E-mail: qqaffnevCW,deq.idaho,qov
Thursday, September 29, 2005
EXHIBIT E
\ STATE OF IDAHO
DEPARTMENT OF
ENVIRONMENTAL QUALITY
2110 Ironwood Parkway. Coeur d'Alene, Idaho 83814-2648. [phone] Dirk Kempthorne. Governor
Toni Hardesty, Director
April 28 , 2006
Robert J. Boyle
Hanson Industries , Inc, Vice President
Spirit Lake East Water Company
15807 E Indiana Ave
Spokane , WA 99216-1864
John Hammond , Jr
Batt & Fisher, LLP
PO Box 1308
Boise , 10 83701
Re:Spirit lake East Water System Improvements
Dear Mr. Boyle and Mr. Hammond:
On April ii , 2006 , Steve Tanner, Stephanie Ebright , and I , representing the Idaho
Department of Environmental Quality (DEQ), inspected the water system to determine
compliance with DEQ's letter of January 24 , 2006 that outlined remaining water system
deficiencies. These deficiencies were as follows:
1. Repair of leaks in the wall of the reservoir.
2. Repair of reservoir roof.3. Installation of a standby generator to provide power to the water system pumps
during power failures.4. Installation of an auto-dialer to notify the operator when problems occurred at the
water system facilities.
5. Purchase of a replacement pump for the well to minimize the length of time that the
water system would be out of water should equipment fail.6. Initiating a cross-connection control program.7. Installation of an exterior vent from the chlorine solution tank.
8. Repair of the water now meter on the well discharge line.
The DEO has found that, with the exception of item number 2 above , the water system
has adequately addressed all other listed system deficiencies.
In regards to item number 2 , repair of reservoir roof, by letter on October 6 , 2005, the
DEO recommended that the system instigate a sampling plan in order to ensure that the
water in the reservoir was not subject to contamination. If the water system agreed with
this sampling proposal , the DEO asked that the system so indicate in writing by October
, 2005. As of this date , the DEO has not received a written response from the system
agreeing to the sampling proposal.
- -
Spirit Lake East Water System Improvements
April 28, 2006
Page 2
On November 1 , 2005, representatives of the DEQ inspected the water system and
noted ponding on the reservoir roof. At the time of the April 11 , 2006 inspection , the
DEO representatives again observed ponding on the reservoir roof. Water ponding on
the roof can result in the joint seals failing due to freeze effects and water in the
reservoir becoming contaminated. The Idaho Rules for Public Drinking Water Systems
currently applicable to the reservoir, require that "storage reservoirs have adequately
drained watertight roofs or covers." Title 1 , Chapter 8 , Section 1-8307.03 (1977).
Additionally, the applicable rules require that "reservoirs shall be constructed and
maintained in such a manner that stored water is protected from all possible sources of
contamination." Section 1-8307.01.
In order for the system to regain an approval designation and to ensure that water in the
reservoir is protective of public health , the DEO requests that the system conduct a
sampling effort that includes relocating the chlorination system to inject into the
discharge side of the booster pumps and sampling the water pumped from the well and
of water stored in the reservoir weekly for total coliform during a six-month period. If the
system does not wish to conduct a sampling effort as proposed , the DEO requests the
system provide an alternative proposal, to the agency, detailing actions the system will
take to ensure that the roof is draining adequately and that stored water in the reservoir
is protected from all possible sources of contamination along with a timeline for
completing such actions. The system shall provide , in writing, its preferred option to the
DEO by May 12 , 2006. Once the system and the DEQ have agreed to a sampling plan
or alternative proposal, along with timelines for completion, the agency will reassign an
approval designation to the system.
If you have any further questions on this matter, please contact DEO at 2110 Ironwood
Parkway in Coeur d'Alene. Our phone number is [phone].
Stephen Tanner, IDEOCdA
Stephanie Ebright IDEOSO
Jerri Henry IDEOSO
EXHIBIT F
PURCHASE AND SALE AGREEMENT
by and between
KAISER ALUMINUM & CHEMICAL CORPORATION,
a Delaware corporation
Seller
and
HANSON INDUSTRIES, INc.
a Washington corporation
Purchaser
dated November 11 , 2003
1 .
--------------------------,---"---.,---------,, ,., -------------
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is made and entered into this 11 th day
November, 2003 by and between KAISER ALUMINUM & CHEMICAL CORPORA nON, a
Delaware corporation ("Seller ), and HANSON INDUSTRIES, me. a Washington corporation
Purchaser
REClT ALS
WHEREAS, Seller is the owner of approximately 157.2.3 acres of real estate located in
Mead, Washington, commonly known as Parcell and legally described on the attached Exhibit
A (the "Real Property," which together with appurtenances and improvements thereto is
collectively referred to and more specifically described below as the "Property"
WHEREAS, Purchaser wishes to purchase from Seller and Seller wishes to sell to
Purchaser the Property upon the terms and conditions set forth herein.
AGREEMENT
NOW THEREFORE, inconsideration ofthe terms and provisions of and the mutual
promises and covenants set forth in this Agreement, the parties hereto hereby agree as follows:
Property
1.1 Included Propertv
Seller shall sell and convey to Purchaser and Purchaser shall purchase and acquire from
Seller the Real Property together with all buildings and improvements thereon and all rights
titles and interests of Seller in and to easements, appurtenances, rights, privileges, belonging or
appurtenant thereto; all trees, shrubbery, and plants now in or thereon; all rights, titles, and
interests of Seller in and to all alleys, strips, or gores of land, if any, lying adjacent thereto; all
rights, titles, and interests of Seller in and to all leases, rights-of-way, rights of ingress or egress
or other interests in, on, or to, any land, highway, street, road, or avenue, open or proposed, in
, across: in front of, abutting, or adjoining thereto; all rights, titles, and interests of Seller in
and to all buildings, fixtures, equipment and other improvements located thereon as of the
Effective Date, except for the Excluded Property (defined below); rights, title and interests in all
pennits, certificates, approvals, and licenses (to the extent freely assignable) with respect thereto
including, but not limited to, certificates of occupancy and conditional use and other pennits; and
all rights, titles, and interests of Seller to water rights appurtenant thereto (collectively together
with the Land, the "Property"); subject, however, to the provisions of Sections 1.2 and L3,
1.2 Excluded Property: Access
Notwithstanding the foregoing, the fIXtures, equipment and personal property described
on the attached Exhibit B (the "Excluded Property") shall not be sold to Purchaser and shall
remain the property of Seller; provided that if Seller fails to remove the Excluded Property on or
before twelve (12) months after the Closing Date (defined below) the Excluded Property shall, as
a matter of convenience to the parties and at no additional consideration, become the property of
EXHIBIT G
IN THE UNITED STATES BANKRUPTCY COURTFOR THE DISTRICT OF DELAWARE
In re:
KAISER ALUMINUM CORPORATION
a Delaware corporation et aI.,
Jointly Administered
Case No. 02-10429 (JKF)
Debtors.
Chapter 11
Re: Doclwt No. .3169
Agenda No.
Hearing: December 15, 2003 at 3:00 p.
ORDER AUTHORIZING DEBTOR AND DEBTOR IN POSSESSIONKAISER ALUMINUM & CHEMICAL CORPORATION TO ENTER
INTO SALE AGREEMENT AND SELL CERTAIN REAL PROPERTY
REFERRED TO AS PARCEL 2, LOCATED IN MEAD, WASHINGTONFREE AND CLEAR OF LIENS, CLAIMS AND ENCUMBRANCES
This matter coming before the Court on the Motion of Debtor and Debtor in
Possession Kaiser Aluminum & Chemical Corporation for an Order Authorizing it to Enter into
:\f,
Sale Agreement and Sell Certain Real Property, Referred to as Sale of Parcel 2, Located in
Mead, Washington Free and Clear of Liens, Claims and Encumbrances (the "Motion ); the Court
having reviewed the Motion, the pleadings relating thereto and having been advised at the
rii
1f,;
hearing on the Motion (the "Hearing of the First Amendment (the "First Amendment"to the
Hanson Sale Agreement (as such capitalized term is defined in the Motion), which reflects a
revised sales price of $500 000 for Parcel 2; the Court finding that (a) the Court has jurisdiction
over this matter pursuant to 28 US-G ~~ 1 57 and 1334; (b) this is a core proceeding pursuant
28 US-C. 9 I 57(b)(2); (c) notice of the Motion was adequate under the circumstances; (d) the
sale of Parcel 2 as set forth in the Hanson Sale Agreement, as amended by the First Amendment
is a reasonable exercise of KACC's business judgment , complies with section 363 of the
Bankruptcy Code and is in the best interest ofKACC's estate; and (e) the sale of Parcel 2
pursuant to the ten1lS of the First Amendment has been approved by the statutory committees
appointed in this case and the legal representative for furme asbestos claimants; and the Court
DU-5813103v3
having detem1ined that the legal and factual bases set forth in the Motion establish just cause for
the relief granted herein;
IT IS HEREBY ORDERED THAT:
Subject to the tem1S of this Order, the Motion is GRANTED.
Capitalized tem1S not othelwise defined herein have the meanings given to
them in the Motion.
KACC shall file a notice of the First Amendment and the sale price
reduction on all parties requesting notice in these cases, The notice shall provide that all parties
in interest must file any objection to the sale pursuant to the Hanson Sale Agreement, as
modified by the First Amendment, within 10 days of the filing and service of the notice and that
KACC will be authorized to consummate the sale without further Court order if no objections are
filed. If an o~jection to the sale is filed, any response must be filed within one business day
following the filing of the objection" The Court will thereafter taIce the matter under advisement.
If no objections are filed within the requisite I a-day period, this Order shall automatically
become effective the day after the last day of the objection period, and the parties to the Hanson
Sale Agreement, as amended by the First Amendment, shall be authorized to take all actions and
enter into all transactions authorized by this Order immediately.
Subject to the notice required above and pursuant to section 363 of the
Banlauptcy Code, KACC is authorized to sell Parcel 2 to Hanson in accordance with the Hanson
Sale Agreement, as amended by the First Amendment
Hanson shall take Parcel 2, pursuant to the terms of the Hanson Sale
Agreement, as amended by the First Amendment, free and clear ofliens, claims, encumbrances
and other interests, in accordance with section 363(f) of the Bankruptcy Code- All such liens
claims , encumbrances and other interests shall attach to the proceeds of the sale with the same
DU.SBJ3103v3
validity and priority as they attached to Parcel 2; provided, however, that the order of priority of
such liens, claims and encumbrances and other interests shall be as set forth in the Second
Amended and Restated Final Order Authorizing Secured Post-Petition Financing on a Super
Priority Basis Pursuant to 11 US.C. 99 363 364, and 507(b) and Granting Relief iTom
Automatic Stay Pursuant to 11 US.C 9 362, entered on August 13 2003 (the "Financing
Order-
KACC shall apply the net proceeds ofthe sale of Parcel 2 in accordance
with the Financing Order.
Su~ject to the notice required above, KACC is authorized to consummate
the transactions contemplated by the Hanson Sale Agreement, as amended by the First
Amendment, and enter into any and all agreements or transactions that it deems necessary or
appropriate to carry out the proposed sale of Parcel 1 and the terms of this Order without further
application to this Court
Subject to the notice required above, this Order is effective upon its entry
and no stay of this order, pursuant to Bankruptcy Rule 6004(g), shall apply.
Dated:/2-//&~'2003
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ED ST;yr,~S BANKRUPTCY JUDGE
DU.5813103v3