Responding to the Freedom Industries chemical spill
Next week, Advocates for a Safe Water System will be launching a campaign for a public water system. Those of you who are frequent readers of this blog know that I have often written about West Virginia American Water’s failed expansion strategy and American Water Work’s financial disincentives for investing in infrastructure improvements in West Virginia.
Meanwhile, our original reason for starting this blog – to provide an independent source of information and analysis during the confusion of the water crisis and its aftermath – has largely disappeared. In our first post on this blog, we wrote:
This blog is about providing citizens with the resources and tools that we need to get serious about change in West Virginia. We know that it will take sustained citizen pressure, not just immediate outrage, to really make West Virginia a healthy and safe place for us to live.
Advocates for a Safe Water System has emerged as a community group that is serious about creating lasting change. I am excited to support and participate in their new initiative.
That is why, as of next week, this website is going to transition from being a personal blog to the website for Advocates for a Safe Water System’s new campaign. All of the blog posts from this blog will still be available at archive.ourwaterwv.org.
The Charleston Gazette picked up on the story of the missing PSC Commissioner today. There has been a vacancy on the three-member Public Service Commission for the past eight months and no word from the Governor’s office about when he plans to appoint a new commissioner.
Gazette reporter Andrew Brown filed a Freedom of Information Act request with the Governor’s office seeking
“emails from the Governor’s account(s) or his ‘Senior Staff’s’ account(s) related to the possible hiring of a third member of the West Virginia Public Service Commission, from January 1, 2015 to the present” and “other documents or communications involving the governor or his ‘senior staff’ in which they discuss the hiring of a third member of the West Virginia Public Service Commission, from January 1, 2015 to the present.”
While this request turned up a number of communications to the Governor’s office suggesting various people to fill the void on the Commission, it turned up exactly zero communications from or within the Governor’s office following up on any of the recommendations. It appears that Governor Tomblin is not at all serious about filling this vacancy. And he hasn’t been since January.
It’s not like the Commission doesn’t have a lot to do. In the past eight months, all of the state’s major utilities have asked for rate increases:
That list doesn’t include the rate cases that were started last year but not decided until this year (including major rate increases for Appalachian/Wheeling Power and Mon Power / Potomac Edison).
The Public Service Commission’s duty includes not just setting rates but also making sure utilities provide reliable service (the PSC has launched major investigations in recent years into electric system reliability, billing problems and, of course, WV American Water’s response to the chemical spill). PSC Commissioner is a big job. It requires an ability to learn arcane regulatory law and a willingness to stand up to the powerful out-of-state holding companies that control West Virginia’s major utilities. Such people do exist in West Virginia. It’s pathetic that Governor Tomblin can’t be bothered to try to find them.
Back when Freedom Industries filed for bankruptcy in January 2014, Freedom president Gary Southern allegedly made numerous false statements under oath to try to downplay his role in the company. Why? He was anxious to shield his personal assets – over $8 million – from lawsuits.
Looks like Southern finally got what he wanted.
The twelve criminal fraud charges filed against Southern last December have all been dropped, in exchange for Southern’s guilty plea for three misdemeanor violations of the Clean Water Act. It’s an interesting fact of our legal system that poisoning the water supply for 300,000 people carries a far lower penalty than lying under oath, but so it is. Instead of facing up to 88 years in prison, Southern faces up to three. And Southern gets to keep his $7.3 million and his $1.2 million Florida home.
Last Saturday, West Virginia American Water held its second annual “WaterFest” at the Elk River treatment plant. To its credit, WV American Water offered tours of its facility, including the new chemical testing laboratory and water quality monitoring equipment that it installed after the water crisis, replacing similar equipment that it had taken out in 2004-5.
I’m no chemist, but chemists with Advocates for a Safe Water System who went on a tour of this new/old facility concluded that:
West Virginia American Water is acting as though they are unaware that tons of MCHM remain in the soil at the former Freedom site, which has yet to be remediated. Once again, the water company is showing a stunning lack of planning or foresight.
On Thursday, West Virginia American Water’s parent company, American Water Works, held its second quarter earnings call for investors. The parent company continues to do well, and its dividend payouts to its investors continue to increase – this quarter, American Water Works announced a 10% increase in dividend payments. Anyone who bought stock in American Water back when it was spun off in 2008 has seen the value of their investment increase by 70%.
The good financial news from American Water Works overall highlights its fundamental problems in West Virginia. American Water Works has been successful through a growth strategy that includes: investing money in its regulated utilities, where it is allowed to earn rates of return established by state public service commissions; acquiring more water and wastewater systems; and acquiring non-utility water businesses, including a company supplying water to the shale drilling industry that was acquired earlier this year. So far this year, American Water Works has made four acquisitions and has 17 more pending, none of which are in West Virginia.
In West Virginia, these strategies haven’t worked so well. WV American Water tried a strategy of growth through acquisitions; population decline and falling industrial demand have more than offset new additions to the water system, and sales have been declining since the late 1990s. West Virginia American Water’s relatively low profit rate means that it is less attractive for the parent company to invest money in West Virginia, relative to other subsidiaries. We pay the price in failing infrastructure.
West Virginia American Water held its second annual “WaterFest” in Charleston yesterday. But its PR show doesn’t hide the fact that American Water Works’ business model hasn’t worked out in West Virginia.
Update, 8/4/15: I just received notice that the Public Water Supply Study Commission is in fact meeting tomorrow from 10am to noon in the Governor’s Cabinet & Conference Room (Suite 10) at the Capitol.
Momentum seems to have faded from some of the state efforts started last year in response to the water crisis. The Public Service Commission’s investigation of the water company’s response to the crisis has been stalled since December due to Governor Tomblin’s failure to fill a vacancy on the Commission. And the Public Water Supply Study Commission established by Senate Bill 373 in 2014 also seems to have faded into the night.
The Public Water Supply Study Commission met for the first time in September of 2014 and produced its first report to the legislature in December. The report mentioned a couple of key areas that the Study Commission would be continuing to develop in 2015, including reviewing the Chemical Safety Board’s recommendations on preventing hazardous chemical releases, as well as working with state agencies to improve inter-agency coordination on identifying potential drinking water contaminant sources.
The Commission’s website states that the next meeting of the Commission will be in the first quarter of 2015, which has long since come and gone. It looks like the Commission is setting itself up again for a rush to meet its December 2015 report deadline. Is the Commission actually going to meet and continue its work, or is it going to quietly disappear?
The Department of Environmental Protection is holding a hearing this Thursday evening on its proposed rules to implement the new aboveground storage tank law – the one weakened by the legislature earlier this year. Recall that the bill passed earlier this year gutted the bill passed by the legislature during the water crisis – reducing the number of regulated tanks from nearly 50,000 to 12,000; reducing the frequency of inspections; and allowing even more tanks to be exempted if they show compliance with existing DEP permits.
The Department of Environmental Protection is in the process of making the rules to implement the law. The DEP rules process is another place where industry can push for more exemptions and weak enforcement of the law. The DEP still has a lot of discretion on implementation, including establishing criteria for design and maintenance of tanks and secondary containment facilities, determining fees to assess on storage tank owners, etc. The DEP’s proposed rules are not serious about making storage tank owners show that they’re capable of covering the cost of a potential spill. If the Freedom site had been regulated under these proposed rules, Freedom would have had to demonstrate its ability to pay just $9,600 to cover what is now clearly a multi-million dollar cleanup effort.
The public hearing on the rules will be held Thursday at 6pm at DEP Headquarters (601 57th Street SE, Charleston). Comments can be emailed to email@example.com with “Aboveground Storage Tank Comments” in the subject line. Suggested talking points include:
1. Rules should not weaken standards for tanks or relax timelines for enforcement;
2. Rules should provide an opportunity for public notice and comment on amendments to permits and plans
before a tank is excused from the Act’s requirements;
3. Registration fees should be established that adequately fund and staff the program; and
4. Bond amounts should be increased so that they cover potential liability of a tank failure.
Yesterday, Judge Copenhaver issued an order in the ongoing dispute over the confidentiality of certain documents in the federal court case “Good vs. West Virginia American Water.” The Gazette has the story:
The judge said if the parties could not come to an agreement to release the records, the defendants in the case — West Virginia American Water Co. and Eastman Chemical Co. — would have until Friday to file a response to a legal filing in which the residents’ lawyers said they favored making the records public.
Copenhaver said that the defendants should be “mindful of the restrictions on the sealing of public documents filed with the court and the well-settled rules governing public access.” Generally, court records are to be open to the public unless there is a compelling reason for them to be sealed.
Any interested parties may submit comments to the court about the status of the records by July 17, the judge said. The judge said that if no agreement is reached between the parties, issues about sealing the documents would be discussed at a status conference, scheduled to take place in open court at 9:30 a.m. on July 20.
The status hearing in the case – which is open to the public – will be at the federal courthouse, 300 Virginia Street, East, Suite 2400 in Charleston next Monday at 9:30. Location information including details regarding cell phone and camera use is available on the Court website.
Yesterday, West Virginia American Water took out a full-page ad in the Sunday Gazette-Mail to offer their apology for the recent Dunbar water main breaks that left thousands of customers without water for days. The company says it will “continue the important conversation about our water system.” So far, this “conversation” has consisted of the water company taking out numerous newspaper ads, writing op-eds, and providing inserts in our water bills. When it comes to spreading their message, they’re doing great. When it comes to actually having a “conversation” with their customers, not so much.
When customers have tried to get their questions about the water company’s service answered, the company has responded with stalling and delays. In the Public Service Commission’s general investigation into the water company’s response to the Freedom leak, the company refused to answer basic questions regarding its emergency planning and preparedness. The company insisted on a high degree of secrecy, refusing to disclose its emergency planning documents. When the PSC ordered the water company to produce its emergency plan, the company produced a version that had even the PSC’s 1-800 number blacked out as confidential.
WV American Water provided more information about the repeated water main breaks in Dunbar in a statement on its website. The company notes how hard it was to repair the leaks in Dunbar and how difficult it is to provide accurate estimates of how long it will take to restore water service. The latter problem is a product of the company’s own business strategy of expanding its system and interconnecting more and more water systems onto the same intake – after 30 years or so of that strategy, they have a complex system with 179 different pressure zones (most water systems have less than a dozen), which makes it very complicated and time-consuming to restore water service.
The company assures us that it does in fact do long-term planning to prioritize the investments it makes in the system – though, of course, it doesn’t provide any details of those plans. The company states that its proposed 28% rate increase is driven by capital investments and that those “include upgrades to the distribution system, water treatment facilities, storage tanks, pumping stations and technology and are necessary to enhance customer service and maintain water quality, service reliability and fire protection for approximately one-third of the state… We have made necessary investments to provide safe and reliable water service because it is the right thing to do for our customers.”
But when it comes to the crucial point – catching up with all of the deferred maintenance on its water lines – WV American Water says,
[A]n additional $12 million would be needed each year to take the replacement cycle from 400 years down to 100 years, which is considered a target rate. However, customers eventually pay for every single system improvement through their monthly water bills once those improvements are rolled into rates. Consistent with PSC oversight, West Virginia American Water must balance the need for increased infrastructure investment with the direct rate impact it has on customers.
In other words, WV American Water is still not going to invest any more money in main replacement without a rate increase, beyond the 28% that it’s already asking for.