Some of Sitka’s surplus water may be headed to Cape Town, South Africa, which is experiencing its worst drought in a century.
The board of Sitka’s industrial park on Tuesday (2-20-18) drafted a proposed contract which — if approved by the assembly — could see up to a billion gallons of water per year headed to the drought-ravaged city, possibly starting as early as this May.
Cape Town is predicted to run out of water in July.
Sitka has made a business out of selling options on its surplus water supply — over $1.5 million dollars in fact — yet has never sold a drop of bulk water. Nevertheless, this is the first time the community has been approached by a customer from a major urban area about to go dry. Cape Town is the second-most populated city in South Africa (after Johannesburg) with 3-and-three-quarters of a million people.
Cape Town’s reservoirs are expected to be at zero on July 9.
“People on the streets of Cape Town are going to be paying for this water, and we have to keep it cost-effective as possible” said, Anna-marie Gerike, the CEO of Greengold which — until now — has been involved in exporting fresh produce from Cape Town.
Gerike met with the board of Sitka’s Gary Paxton Industrial Park via teleconference to discuss her business plan, which involves shipping water in containers to private clients, and in Panamax freighters for pumping directly into the Cape Town municipal storage system. She’ll pay Sitka the going rate of $.01 per gallon.
Industrial park board member Dan Jones, also appearing by phone, suggested that this was not a typical water deal for Sitka.
“I think this is an extraordinary circumstance, and the parallel isn’t the current contracts we have.”
Sitka has the rights to export over 9 billion gallons a year from its Blue Lake reservoir, and contracts in place with Arctic Blue Waters Alaska for about 2 billion gallons, with Eckert Fine Beverages for 100 million gallons — both the latest players in a line of entrepreneurs who have paid tens of thousands of dollars to secure exclusive control over a share of Sitka’s water, provided that they actually ship water. Which they have not done. Every agreement so far ultimately has been cancelled, with the money forfeited to Sitka.
So the industrial park’s board has been in this game for a while. Executive director Garry White proposed a deal that was helpful, but realistic.
“She’s going to have to contract vessels, potentially go out and get startup cash. So I think she’s going to need some kind of contract in her hand. That was why I was suggesting a one-year contract at a billion gallons, with a pretty steep requirement to keep that contract.”
Steep, but not too steep. Board member Charles Horan observed that Sitka was not the only alternative source for Cape Town. The bulk water market so far has been driven by speculation; this time, there is an actual crisis.
“This amount of money is going to create a vacuum in the market. There’s a lot of other water that could suddenly become available.”
The board settled on charging Greengold only a $5,000 administrative fee, and granting the company rights to a billion gallons of Sitka’s water a year — provided that Gerike moves 50 million gallons in the next six months.
If she “proves up,” as board members like to say, they’ll give her the option to extend for longer. Although Cape Town is facing an immediate crisis, Gerike told the board that the city’s water problems would not be remedied very soon.
“For the next 5 years Cape Town will not have normal water supplies. That’s out of the horse’s mouth. It’s not something I’m thumb-sucking. My prediction is that at least we will have a stable market for the water for five years — if we get it right.”
And “getting it right” works both ways. When Sitka’s assembly meets to discuss this contract, they’ll hear from a newly-formed municipal water committee which has concerns over whether the excess capacity of the Blue Lake hydroelectric reservoir is really “excess” at all — especially in a low water year — and what would happen if every customer who had rights to Sitka’s water actually showed up with a ship.