Water Is NOT The “New Oil”

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The great Mountain Water debate is on in Missoula County District Court as the City of Missoula takes its eminent domain case for public ownership against Mountain Water Company and its new owner, the infamous global equity firm, the Carlyle Group. The trial comes as a consequence of Carlyle reneging on its promise to sell Mountain Water to the City of Missoula after Carlyle acquired Mountain’s parent company, California based Park Water.

This trial also comes as another step in the age-old fight for Missoulians to gain control of their water system. Missoula is the only city in Montana that does not own its own water, and never has, dating back to 1905-06 when the Water Works diversion became privately owned.

In fact, this all goes back to the 1870’s When Frank Worden, C.P. Higgins and David Pattee constructed the reservoir and infrastructure from Rattlesnake Creek to Water Works Hill and the reservoir that was bought by Missoula Mercantile Company, naming it Missoula Water Company. Then a dam was constructed in 1901-02 to divert the waters. By 1905 Senator and copper-king William A. Clark plaid $900,000 for the system, and a year later changed the name to the Missoula Light and Water Company.

the Diversion dam on Water Works Hill was reconstructed with concrete in 1924, at which point Mayor William Beacom suggested that the public purchase the water, offering $600,000 for the system. But the roaring 20’s being what they were, Missoulians didn’t bite, and the utility remained under private ownership.

By 1930, Missoula’s population had grown to 14,657. The Montana Light and Water Company had also grown to provide a central heating system for the city as well as the trolley system, in addition to the utilities of water and electricity. It was at this point that the Montana Power Company bought the system. Established in 1912, Montana Power was a private firm founded by John Ryan, President of the Anaconda Copper Mining Company. Shortly thereafter it was determined that that Water Works Infrastructure was insufficient to provide water to the demands of an ever expanding population, inspiring the addition of five wells into the system.

Jump forward to 1979 when Montana Power sold our water system outright to a California based firm in the creation of Mountain Water as a subsidiary utility service to provide water to some 4,000 Missoulians residing outside of the city limits. Mountain Water was and still is owned by Park Water, a California based company owned by a man named Sam Wheeler. Following the Public Service Commission’s approval of the deal, the city missed its chance to buy the utility in 1979. The vice chairman of Montana Power, Jack Burke, was determined to confirm whether the city of Missoula was interested in purchasing the utility, and went out of his way to do so. Montana Power contacted Mayor Bill Cregg to inform him that the utility was available, but before the city council could even consider the proposal, Montana Power announced their sale to Sam Wheeler for $8 million. Wheeler claimed that the city missed its chance to purchase the system because the delays associated with municipal financing took too long, stating that the city didn’t have the money and lacked the time and resources to raise it, whereas Wheeler who had the cash in hand was able to bypass the bureaucracy of city decision making.

By 1983, 40,000 people called the Missoula valley their home, whereupon the Water Works system was abandoned completely for the utilization of Missoula’s Aquifer. Water Works was to remain an emergency back-up, but nothing more. Though Water Works was providing nearly half of the city’s water (45%) a giardia outbreak that infected the digestive systems of thousands of residents led to the realization that Water Works required millions of dollars of additional improvements for more sophisticated filtering and improvement costs. The following year the city again attempted to purchase Mountain Water, valued at $11million in 1984. The city proposed a bond, but Mountain Water’s general manager Lee Magone appraised the system’s worth at $16 million.

The city announced that the salaries of Mountain Water employees would be cut in the event of the sale, resulting in employees accusing the City of failing to account for the impact on their lives. Thus a handful successfully opposed the popular majority of Missoulians who wanted to see the water owned locally, obtaining a voter initiative to block the sale to the City. After the city’s failed litigation against those individuals, Mayor John H. Toole began eminent domain proceedings against Mountain Water with tremendous support from Missoula residents. That trial ensued in March of 1986, and ended dismally in August of that same year when the court determined that the city had, “failed to prove that the condemnation was necessary.” The battle created bad blood and hard feelings on both sides, turning the relationship between the City and Mountain Water from civil to hostile. The city had to pay for Mountain Water’s massive legal fees, and Sam Wheeler vowed that he would never allow the City that tried to wrestle his property away from him, any opportunity to purchase it.

Though attempts to bury the hatchet have been made, it appears as though Wheeler kept his word.

In 2011 Sam Wheeler sold Park Water (and in-turn Mountain Water) to the Carlyle Group. Carlyle knew Wheeler wouldn’t sell to Missoula, but also understood Missoula’s desire to gain control of the utility. So Carlyle had to assure Mayor Engen that while Wheeler wouldn’t sell to Missoula, they would, but they needed to buy it from Wheeler first. Enter the notorious Robert Dove who swooped in to convince Mayor Engen to back the transfer, promising to consider “in good faith” any offer Missoula made to purchase the system from Carlyle later on.

Carlyle has since rejected at least two offers that we know of (one of $50 million and one of $65 million) leading the city to accuse Carlyle of ‘bait and switch’ techniques, subsequently taking Carlyle to court. In April of 2014, filing eminent domain proceedings which remained on track for trial in the spring of 2015.

Carlyle is arguing that with regards to the wording of their written agreement with Mayor Engen, that all they actually promised was that they would consider selling Mountain Water to Missoula; not that they would actually do so.



Liberty Utilities, a subsidiary of Canadian Algonquin Power, desires to purchase the system from Carlyle, and it looks as though Missoula is getting left out of the loop once again. So Missoula is on course for another attempt at condemnation in yet another effort to place the utility in the hands of the people. But Algonquin really wants it. In fact, since the city has already racked up $1.9 million in legal fees as of March 2015, Algonquin officer and Liberty President David Pasieka actually offered $2.5 million to Mayor Engen, aiming to convince him to pass up the eminent domain proceedings.

Despite Pasieka’s efforts, the condemnation trial began on 18 March thus embarking a long list of witnesses and experts upon the arduous cross-examination voyage to shed light on this whole story. The trial continues every business day until 2 April whereupon Judge Karen Townsend will determine whether condemnation is necessary.

After the 2nd of April, it’s entirely Judge Townsend’s prerogative whether to condemn the system and give ownership to the City, or not, and she can take as long as she deems necessary to arrive at that final decision. If she decides condemnation is necessary, Carlyle will no doubt appeal the decision and Missoula’s eminent domain proceedings will move to the Montana Supreme Court, which is a very different place than it was the last time this happened in the 1980’s.

But the competition is fierce and insidious. Liberty has shoveled advertising dollars all over the city in such a fierce marketing campaign that Judge Townsend called for them to halt the ads because they were unfairly affecting public perception and influencing her own objectivity.

But the ads are merely a symptomatic accompaniment of the presence of the major corporate players.

Managing director of infrastructure Robert Dove is back in Missoula on behalf of Carlyle, and is certainly no stranger to the business of water rights. When he worked for Bechtel he was a member of the board of directors for International Waters on behalf of Bechtel, sealing the deal to gain control over the water systems in Bolivia. After monopolizing water resources, immediately hiking rates by 50%, and lobbying to create laws in Bolivia that actually made it illegal for residents to collect rain water, the Cochabamba Water Wars ensued. You might remember seeing footage of thousands of women marching in the streets clanging pots and pans to draw attention toward Bechtel’s inhuman policies. The Bolivian government cancelled its contract with Bechtel, and Bechtel actually sued Bolivia for lost earnings. Robert Dove was present for those hearings as well.

Representing Carlyle is Bill Mercer of Billings based Holland & Hart, and Mercer’s history is as interesting as Bobby Dove’s. He was asked to resign his post as U.S. Attorney by Montana Senator Jon Tester after a report accused Mercer of changing federal law so he could live outside his district and hold a separate post in Washington D.C. In 2006 Mercer got himself into hot water when U.S. District Judge Donald Molloy accused Mercer of acting overly zealous with regards to imposing federal charges in state matters, asking Mercer, “Do you ever concern yourself with justice?”

Also on the defense, representing Mountain Water is Joe Connor of Baker Donelson, who is apparently notorious for getting his clients a lot more money than they originally demanded. Responding to the City’s declaration that public ownership is in the best interest of Missoulians, Connor said: “This is our property, and you can’t prove we don’t deserve to keep it.”

On the opening day of the trial, Connor brandished a segment of bent, rusty pipe and dramatically declaring it to be the primary evidence that private ownership is necessary if our leaky infrastructure is to ever recover; that the entire leaky system is in such a state of disrepair, private ownership is the only way to restore the infrastructure.

Unfortunately his argument doesn’t hold water, since the condition of that pipe is the direct result of private ownership which seeks profits over structural reinvestment. We have to ask ourselves if the infrastructure would be in the state of decay that it is if it were under city management. If it were, the city council would be directly responsible for reinvesting funds garnered from ratepayers back into the system instead of hording them. Private owners have no incentive to reinvest into the system, instead providing profits to shareholders, CEO’s and other corporate beneficiaries with large financial dividends.

With more than 22,000 customers paying an average of $47.35 a month, rate payers are contributing to an enterprise that amounts to more than a million dollars a month ($1,041,700). Those rates are guaranteed to rise according to Carlyle’s own estimates of projected earnings. And given what previous private owners have allowed our infrastructure to become, we’re not only guaranteed rate hikes, but proliferating system failures as the system continues to crumble.

So if the system is making a million-dollars-a-month, where is that money going? We know that 42 employees at Mountain Water’s parent company rake in a cumulative $6.1 million annually, one third of which is provided for by Missoulians. And our rates, which are already among the highest in the region (that includes surrounding states) are guaranteed to skyrocket year after year if private ownership continues.

Bruce Bender helps to provide some context for this claim. On Thursday, 19 March 2015, Bender who serves as Missoula’s Chief Administrative Officer, explained the significance of a chart that showed plans for rapid rate increases that Carlyle’s lawyers insisted be kept out of the public record. Much to their chagrin, Judge Townsend allowed the documents to be submitted for public record as evidence, and as a result Missoulians have been made aware of Carlyle’s 6-year plan for a 50% increase in rates, from $39 million to $59 million.

The following day on 20 March, Missoula’s director of Central Services Dale Bickell, announced that Missoula could operate Mountain Water for nearly $7 million less annually than Carlyle, further demonstrating how absurd Missoula’s rates are already.

Perhaps most alarming of all, the Public Service Commission appears to have a rather cozy relationship with Mountain Water and Carlyle. According a brief filed by the City in August of 2014, “unlawful ex parte communications” took place between the agency and the private firms concerning whether the PSC planned to intervene in Missoula’s eminent domain proceedings, illustrating “evidence of the agency’s coordination against the public interest.”

Money talks, while everything else walks, and corporate money is talking very loudly is Missoula, Montana right now. They’ve bought airtime and newspaper space, they’ve offered millions to our elected representatives, and they’ve established relationships with all the major players. Though our owners are already fabulously wealthy, the speculation for more profits at the hands of Missoulians has blinded them from decency, and further transformed this entire Mountain Water situation into the circus of corruption that it is. This water deal represents a tremendous profit potential for private equity firms like Carlyle and Algonquin, and with unpolluted water resources dwindling world wide, multinationals are aggressively swooping in to gain control of systems like Mountain Water. Either Missoula gains control of the resource, or our rates go through the roof – or worse, Nestle will lobby to open a bottling plant here and begin shipping Missoula’s water around the world in plastic bottles. If history is any guide at all, we could then be subjected to laws prohibiting the collection of rainwater, and Robert Dove would gladly smile over those proceedings just as he has in the past over similar circumstances. Unless Missoula can somehow gain control of the system, we will be rendered utterly helpless in determining its future.

drought-water-scarcity-15Gabrielle Lafayette is a journalist, writer, and executive producer for the Outer Limits Radio Show.
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