NEWS –  FOR IMMEDIATE RELEASE                                                              MAY 19, 2010

NYS CANAL CORP IGNORES MVWA SETTLEMENT OFFER;

                        MVWA DEEMS COURT CASE INTERVENTION NECESSARY

ALBANY, NY --- Mohawk Valley Water Authority officials today announced two actions regarding years of water level disputes with the New York State Canal Corporation. Officials stated that a settlement offer extended to Canal Corp on April 28 has been ignored, and consequently, the Authority has deemed it necessary to file a motion to intervene in Erie Boulevard Hydropower’s Court of Claims action against New York State, the NYS Thruway Authority, and the NYS Canal Corporation.      

MVWA Settlement Offer

In its April 28, 2010 settlement letter to Canal Corporation the MVWA offered these terms to try to resolve the litigation:

• MVWA would indemnify the State for any damages recovered by Erie in connection with Erie’s litigation against the State. 

• The State/Canal Corporation would agree to deviate from the Operating Diagram, when necessary, to preserve reservoir levels.

• MVWA would pay the State/Canal Corporation 2% of the MVWA’s cost per gallon charged for amounts withdrawn above 26 MGD (40.3 cfs) on those days when the inflow drops below 335 cfs during the Canal season.

• MVWA would receive agreement from State/Canal Corporation to permit withdrawal of up to 43 MGD (66.65 cfs) if and when requested by MVWA in the future.
• At such time as the MVWA begins withdrawing 40.3 cfs (~ 26 MGD), it would be willing to deposit into escrow at the beginning of each Canal season: $20,000 if withdrawals are anticipated to peak at 50 cfs (~32 MGD); $30,000 if withdrawals are anticipated to peak at 60 cfs (~39 MGD); and $45,000 if withdrawals are anticipated to peak at 66 cfs (~43 MGD) with the amount subject to reconciliation 30 days after the close of the Canal season.

• For additional water needed in excess of 43 MGD (66.65 cfs), up to the maximum 48.5 MGD (75 cfs), the parties would negotiate a fair price for the extra water to be taken.

This offer was extended with a request to respond by May 7, 2010. Receiving no response to the settlement offer, MVWA on Tuesday, May 18, 2010 filed a motion to intervene in Erie Hydropower’s NYS Court of Claims action against NYS, NYS Thruway and NYS Canal Corporation. 

2. MVWA – 5/19/10

“MVWA has tried numerous times since 2004 to settle this dispute triggered by actions of the NYS Canal Corporation and Erie Hydropower,” stated Patrick J. Becher, MVWA’s Executive Director. “This latest failure to cooperate leaves us with no alternative but to again seek legal recourse.”

Motion to Intervene

MVWA’s motion to intervene relates to the October 21, 2009 claim filed by Erie Hydropower against the State, Thruway Authority, and Canal Corporation in the Court of Claims. That claim alleges a breach of the 1921 Agreement between Erie’s predecessor, Utica Gas & Electric (UG&E), and the State, arising out of Canal Corp’s September 2007 reduction of the release rate from Hinckley Reservoir lower than that called for by the Operating Diagram.

According to MVWA’s Becher, this situation was caused by Canal Corporation’s massive and unprecedented over-release of more than 2 billion gallons of water during the summer of 2007, and which caused a regional water emergency that threatened water supplies to 130,000 residential and business customers of the Mohawk Valley Water Authority. “This situation had never occurred before because there was a standard practice of adjusting releases so the water supply would not be jeopardized, in accordance with decades of reservoir management by the New York Power Authority (NYPA),” said Becher.  

Becher said Canal Corp now takes the position that reservoir releases must be set in strict accordance with the 1921 Agreement’s Operating Diagram, regardless of hydrological conditions. This runs counter to the decades-old practice of preserving the water levels, when necessary, to protect MVWA’s water supply, he said.

“The MVWA’s legal actions are absolutely necessary and in fact, critical to preserving the MVWA’s water supply going forward”, stated Elis J. DeLia, Mohawk Valley Water Authority Board Chairman. “As a result of this state/private company relationship, Hinckley Reservoir is being operated to maximize the profits of a foreign-owned power company at the direct expense of the public water supply. This includes the state permitting Erie to benefit from any over-releases when there is excess water, yet requiring compensation when there is insufficient water to guarantee MVWA’s water supply.”

John Murad, of Hancock & Estabrook, MVWA Counsel, said that there are a variety of reasons that the MVWA needs to intervene in the Court of Claims action:

1.      The issues being litigated in the Court of Claims action will have a direct impact on the MVWA’s 130,000 customers, including the interpretation of the 1921 agreement between the State defendants and Erie, which involves the historic recognition of the MVWA’s right to water from Hinckley Reservoir;

2.      The State defendant’s have demanded that the MVWA defend the Court of Claims action or indemnify them against any damages awarded in the case;

3.      The state defendants and Erie have previously entered into a “joint defense agreement,” in which their attorneys shared confidential information and

communicated with each other’s witnesses in defense of the MVWA’s claims in litigation in Oneida County Supreme Court;

3. MVWA – 5/19/10

4. The State defendants and Erie have previously indicated that they interpret the 1921 agreement to not allow the decades old practice of allowing deviations from the Operating Diagram to preserve reservoir levels, which will injure the MVWA’s 130,000 customers;

5. The State defendants have recently begun operating the reservoir to not allow deviations from the Operating Diagram unless the MVWA pays Erie, a foreign owned power company, for the deviations, despite regular and enriching over-releases to the power company;

6. Erie’s alleged claims for damages is subject to the defense that the massive and unprecedented over release of water enriched Erie far more than its alleged damages; given Erie’s close relationship with the State defendants, MVWA is concerned that this defense will not be properly interposed or vigorously pursued;

“Given that joint defense agreement between the State Defendant and Erie, MVWA has no reason to believe that its interest in having a proper interpretation of the deviation exception—consistent with the parties’ long-standing practice—will be protected by the State,” noted MVWA Chairman DeLia.

Regional Appeal: Proper Reservoir Management and Good Public Policy

While there are diverse interests related to Hinckley Reservoir, many local Oneida and Herkimer County stakeholders agree that Canal Corp should be directed to return to the historic practice of deviations from the Operating Diagram during dry weather conditions.

A resolution recently was passed by the Oneida County Board of Legislators stating that deviations protect the interests of clean drinking water, environmental conservation, fisheries, wildlife habitat, power generation, economic development, tourism and recreational activities, and quality of life for Hinckley Reservoir residents and property owners.

“We firmly believe that all these interests can be balanced if the reservoir is managed properly,” stated Oneida County Executive Anthony J. Picente Jr.  “However, from the first breach of protocol in 2007, the Canal Corporation has been uncooperative in their response to requests to honor the historic practices in the management of Hinckley Reservoir.” Picente continued, “If their actions since 2007 are a reflection of true intent, then the Canal Corp, the Governor’s office, and Erie Hydro need to place the health, safety and prosperity of our region at the top of their list.”