Council Approves Transferring Ownership Of Geo-Thermal Wells

A pair of infrastructure assets previously owned by the City have been transferred to a provincial Crown utility.

Council has agreed to transfer responsibility for the maintenance and the ownership of two geo-thermal wells to SaskWater as a means of lowering the City’s financial liability. The two wells are part of the system which supplies geo-thermal mineral water to the Temple Gardens Mineral Spa.

The issue had been raised at Council in December 2020.

The two wells, one a production or supply well and the other an injection or disposal well, were initially drilled and developed by SaskWater in 1989.

Later the wells and surrounding property became a City asset and the water supply system was operated by SaskWater.

In 2019 major workovers of the wells was needed in order to maintain regulatory approval. A consultant told the City the required work had an estimated cost of $501,719.

In an effort to lessen the blow the issue of the wells’ ownership and necessary work came up in discussions between the City and SaskWater regarding increasing the cost of potable water supplied to the SaskWater by the City.

As part of the deal the City reached with SaskWater, the Crown Corporation would pay the lion’s share of the remediation and workover costs and acquire ownership of the wells.

SaskWater would pay $368,632 and the City would pay $133,087 of the estimated $501,719 abandonment and workover cost. SaskWater would assume ownership, plus any responsibilities regarding the wells and also supply the Temple Garden Mineral Spa with the geo-thermal mineral water.

At the present time the original production well has been de-commissioned (also known as an abandonment) and the former disposal well was converted into a new production well.

The City will continue to dispose of the geo-thermal water through its sanitary sewer system at an initial rate of $1.4572 per cubic meter, a rate which can be annually adjusted. The City agrees to dispose of the water at this rate up to it equaling the amount of supplied geo-thermal mineral water to the Spa.

The source of the City’s $133,087 will be through refunding the annual water levy SaskWater paid to the City from 2011 - 2018 and waiving the $15,500 charge for 2019 and 2020.

DISCUSSION

Although the deal was viewed as a good deal for both parties there was one councillor - Councillor Dawn Luhning - who was opposed to using a refund to SaskWater to finance it.

“This in essence is concluding the paperwork to make the actual transfer,” city manager Jim Puffalt told Council.

“And as you recall the point of this was cost avoidance as there was some thoughts it was going to be a large cost to bring those wells back into circulation…working with SaskWater (we were able) to ensure the supply of geo-thermal water to an important tourism industry in Moose Jaw and transferring back the money they had given us over the past few years,” Puffalt said.

“I think it is a good deal for everybody involved. Certainly our tourism industry is supported and the large half a million cost we may have experienced has been averted.”

Councillor Luhning asked a question about the financing of the deal because she was having “a little bit of difficulty wrapping her head around it.”

“Why are we paying them $134,00 dollarish as a refund from the water levy,” she asked.

Puffalt said it was part of the cost sharing agreement for the wells between the City and SaskWater.

“Rather than put the City into a liable position for that much money it was believed that as we reported to Council before rather than spend that money (the full cost to rehabilitate the wells) transfer the wells and cost share on that (rehabilitation) cost and avoid the cost all together,” he said.

“To go back to 2011…I don’t know if I am in favour of paying them back that money or not…I am OK with everything else but I am not sure if we should be going back and paying them any money in retro…it makes more sense to me to just leave that out of the recommendation,” Councillor Luhning said.

Councillor Luhning asked if the refund portion of the deal and the actual deal itself could be voted on as separate motions - a request she was granted.

“This has been an on-going conversation that we have had over two and a half years I believe with concerns we had with outlying water users at one point. SaskWater participated in that conversation and that was an opportunity for us to speak to SaskWater concerning the wells,” Mayor Fraser Tolmie said.

In 2019, the City increased water rates to water purchasers outside of the City as a means to ensure they paid their fair share of infrastructure upgrades to supply them with water. Out of town water purchasers pay for their water based upon the rate charged to City water customers.

The need for the increased water rates to out of town customers was because as part of their previous Budget deliberations Council decided to reduce water rate increases and make up for the loss through increased property taxes.

Since out of town water purchasers do not pay property taxes to the City of Moose Jaw their share of the costs of repairing and upgrading the water system infrastructure were in the City’s opinion in essence being subsidized by City property taxpayers.

Mayor Tolmie said he would not describe the deal to sell the geo-thermal wells to SaskWater as “revenue neutral” but it was a way to reduce the costs for the wells as they will now be looked after by SaskWater.

“There were two wells and we did not want to take the liability issue for the full costs and this was a way to cost share the re-hab and ensuring the supply continued towards Temple Gardens (Mineral Spa),” Puffalt replied.

City clerk Myron Gulka-Teichko said although there were now two motions - one motion to approve the sale and one to approve the refund to finance the sale - they were “a package deal and meant to be interconnected.”

“And with respect to the $134,000 I believe my recollection it is just an effort to try to find a source of funding for that particular refund if we can put it that way as opposed to taking the money from somewhere else,” Gulka-Teichko said. “So again it is an offset of what would have been a large liability for the City to re-hab a well for perhaps up to $500,000.”

Councillor Heather Eby said she supported the recommendation as it was presented because of the potential regulatory and other costs the City was responsible for regarding the two wells.

“That ($500,000 cost to re-hab the wells) was going to be our responsibility. This is the City’s attempt along with SaskWater to eliminate that huge cost for us and a way to cost share…that is a simple way of looking at it but it might be a little bit more complicated than that,” Councillor Eby said. “Going forward I think it is a good way to keep this infrastructure working.”

On the first motion to finance the geo-thermal well transfer to SaskWater from the City by financing it through a refund the vote was 6 - 1 with Councillor Luhning opposed.

The second motion to transfer the ownership and responsibilities of the geo-thermal wells to SaskWater was unanimously approved.