PORT TOWNSEND — The Port Townsend City Council and the Port Townsend Paper Corp. are close to completing a new water agreement for the paper mill that would have the mill pay for raw water use for the first time since the initial lease in 1956.

The new agreement would have Port Townsend and the mill sharing costs for repairs, maintenance and capital improvements to the Olympic Gravity Water System (OGWS), as well as have the mill to start paying for its monthly water usage, said Steve King, Port Townsend public works director.

City council members are expected to discuss and potentially take action on the agreement tonight. Residents can view the meeting at www.cityofpt.us/citycouncil/page/agendasminutesvideos.

With the agreement, Port Townsend would continue to be responsible for the permitting and administration of the OGWS and will cooperate on operational responsibilities.

The mill would provide oversight of the day-to-day operations, including keeping screens clear, monitoring stream conditions, setting the water level and keeping the right of way clear, King said in a presentation to the council on Nov. 22.

The mill has historically drawn water through the OGWS from the Quilcene watershed, and the new agreement has stipulations to limit the mill’s impact on water levels and use, especially during droughts, King said.

Under the new agreement, the mill would have water use meters installed and would be limited to 14 million gallons of water a day or less, and in times of drought, the city can require the mill to temporarily shut down to conserve water, King said.

Officials have been negotiating the agreement over the last two years, as the current lease for the mill expires on Dec. 31, according to a press release from the city.

The current lease has been in place and extended since 1956.

The new agreement would be the first time the mill will pay for raw water use, beginning in April 2022. King estimated that, for 2022, the mill would pay about $370,000 per month for water use, he said Thursday.

Port Townsend also would pay the mill to oversee the day-to-day operations of the OGWS, King said.

If approved, the raw water use fees would be held in a fund by Port Townsend, to assist with capital improvements, as the 20-year plan for the OGWS has significant projects included to begin in the about 10 years, King said.

Those projects include starting to replace pipeline along the OGWS that was installed in 1931, beginning in 2031, as well as another portion of pipeline starting about 2038, King said.

As of 2021, the cost estimates for those replacements is $45 million over the next 20 years. However, that number will be more by the time the projects start, due to inflation, King said.

In addition to the mill agreement, Port Townsend officials are finishing preparations for water rate increases for the city residents as a whole. They will average about $9 to $14 a month for residential water-sewer customers in the city due in part to the expected capital costs for upcoming projects, King said.

The city council is expected to take up the final decision on the city residential water rates during its meeting on Dec. 13.

More information on the city water-sewer rate increases can be found at www.peninsuladailynews.com/news/port-townsend-water-rates-likely-to-rise.

If approved, the mill agreement would take effect Jan. 1, while the raw rate costs would start to be tracked and charged beginning April 1, King said.

The agreement would be in effect through Dec. 31, 2041.

King said he’s appreciated the cooperative negotiations that have occurred between Port Townsend and the mill.

“We’ve enjoyed productive and constructive meetings with the mill, built on years of the teams working closely together to maintain and operate the system,” King said in a press release. “City and mill staff have a real deep understanding of the water system, which is a benefit to us all.

“I’m hopeful a new agreement will be the basis for continuing the good work necessary in providing reliable water for our community over many years to come.”

King’s presentation and more information on the draft agreement can be found at www.tinyurl.com/PDN-PTWaterAgreement.

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Jefferson County reporter Zach Jablonski can be reached at 360-385-2335, ext. 5, or at zjablonski@peninsuladailynews.com.