Carol Rische

HBMWDHeader

BOARD OF DIRECTORS
KAITLIN SOPOCI-BELKNAP, PRESIDENT
ALDARON LAIRD, VICE-PRESIDENT
BARBARA HECATHORN, SECRETARY-TREASURER
BRUCE RUPP, DIRECTOR
TERA PRUCHA, DIRECTOR March 5, 2009

GENERAL MANAGER
CAROL RISCHE

Congressman Mike Thompson’s Office
Attention: Elizabeth Murguia
317 3rd Street, Suite 1
Eureka, CA 95501

RE: Freshwater Pulp Mill-Impact if they Do Not Resume Operation and Request to Expeditiously Address Current Regulatory Issues

Dear MS Murguia:

As you know, the Humboldt Bay Municipal Water District (HBMWD) supplies drinking water to seven municipal agencies on a wholesale basis throughout the greater Humboldt Bay area. The municipalities served by the District are the Cities of Arcata, Blue Lake and Eureka, and the Fieldbrook-Glendale, Humboldt, Manila and McKinlyville Community Services Districts. Via our wholesale relationship, the District serves drinking water to approximately 75,000 to 80,000 people (60% ofthe entire County), and to numerous businesses, industries and educational institutions.

Up until the mid 1990’s, the District also served two very large industrial water users -the Simpson and Louisiana-Pacific pulp mills, who at that time collectively contributed almost 80% of HBM\VD’s revenue requirement for the regional water system. Much has changed in our community since then. The Simpson pulp mill ceased operation, and Lousiana-Pacific mill has experienced changes in ownership four times.

Up until last month, HBMWD had a contract with Evergreen Pulp for industrial water supply in the amount of 15 million gallons/day (MGD). Via this contract, Evergreen paid 45% of HBMWD’s operating, maintenance and overhead costs associated with our community-based regional water system. This resulted in annual revenue contributions of between $1,000,000 and $1,500,000. Given the sale of the mill to Freshwater Pulp Company (previously Samoa Acquisition), and the fact that they are not in a position to resume operations, HBM\VD agreed to a 90-day transition period in which we are providing a minimum volume of water which allows them to maintain the ocean outfall line, at our bare minimum short-term operating costs. We agreed to this arrangement to give them a chance to resume operation, and due to the significant financial benefit an operating mill provides to the District, our Municipal Customers, and most importantly to rate-payers in our community.

If Freshwater Pulp is not able to resume operation, and our community “loses” the mill, HBMWD will shift the vast majority of costs the mill paid -up to $1,000,0000 -to the Municipal Customers. This in turn will trigger yet another water rate increase tor end-use customers in our community, at a time when our conununity is facing significant economic hardship. And from a community perspective, a significant number of well paying jobs will be lost forever.

Mr. Simpson from Freshwater Pulp informed us he is working with your office and with staff at the North Coast Regional Water Quality Control Board on the current regulatory issues surrounding their discharge permit. We of course understand and fully support the need for Freshwater Pulp to fully comply with all regulatory requirements.

Given the significant adverse impact to the District and community of losing the mill, we respectfully request, and in fact urge, the parties involved with discussions and consideration of these important regulatory issues to address them in the most timely and expeditious manner.

Sincerely,
CRSig

Carol Rische
General Manager

Cc: John Woolley, Field Representative for Assembly Member Wesley Chesbro
      Zuretti Goosby, Field Representative for Senator Pat Wiggins
      Bonnie Neely, Humboldt County Supervisor, 4th District
      Catherine KuWman, North Coast Regional Water Quality Control Board
      Bob Simpson, Freshwater Pulp Corporation
      Tom Reilly, President, Association ofWestem Pulp and Paper Workers, Local 49
      Bob Marino, DG Fairhaven Power