Attorney pleads bottler’s case

The following article appeared in the March 8, 2006 edition of The Olympian.

This keeps twisting forward, with Thurston PUD still being held at arm's length. There's little recognition here that a successful eminent domain condemnation of the brewery will open a Pandora's box of litigation in the qwest for water to support within-the-UGA growth in accordance with county and municipal comprehensive plans all over Washington.

There's also little public awareness of this case in Washington outside the region around Olympia because our media outlets aren't publishing much about it, even with the high levels of interest in eminent domain actions.

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Attorney pleads bottler’s case
All American threatens bankruptcy in dispute; Olympia, Lacey and Tumwater sign agreement to share site’s water

By Katherine Tam and Christian Hill
The Olympian

All American Bottled Water Corp. threatened to file for bankruptcy if Olympia doesn’t abandon its legal pursuit of the former brewery property’s water, the company’s attorney told the Olympia City Council Tuesday night.

But the 11th-hour plea didn’t deter Olympia officials.

The City Council reaffirmed its plans Tuesday and signed a deal with Lacey and Tumwater to equally share any water it secures from condemning the brewery land for water. Tumwater signed the same deal Tuesday night and Lacey a day earlier. The decision came after Tom Lemly, attorney representing All American, held up a letter that he said was a commitment to loan the company $125 million to help pay for the brewery conversion, which he said arrived three days before Olympia took action.

Operations would have begun soon were it not for Olympia’s decision, he said. He proposed that All American transfer the water rights to the cities, then lease the 2.5 million gallons of water a day that it needs for its water bottling operation.

The lease price should be nominal since the company has already paid to own the water rights. The parties would then settle on a purchase price for the rest of the water.

Council members argued that All American hadn’t been willing to sell water rights before. Lemly confirmed the company hadn’t been interested then, but Olympia’s decision to condemn the brewery land for water changes the situation. All American might be forced to file for bankruptcy Monday if Olympia proceeds, he said. A bankruptcy judge is likely to rule in All American’s favor, he said, because its creditors would have to be repaid.

But the offer came too late, and the council refused to rescind its court action.

“We understand bankruptcy law very well,” Mayor Pro Tem Laura Ware said.

Added Councilman Jeff Kingsbury: “We’ve had a difficult time communicating with All American. For the 400 workers who lost jobs and for the jurisdictions who could benefit from the tax base, I’m looking forward to having a more open line of communication in this matter.”

City Attorney Bob Sterbank said after the meeting that All American’s statement that it would win in bankruptcy court is “overly optimistic. ...

The bankruptcy court would have to choose between real money from the city as opposed to a speculative business plan.”

The legal pursuit for brewery water began Feb. 13 when the Olympia council decided to condemn the brewery land for up to 11.8 million gallons a day in water rights. Officials feared the water would be lost or that another private party would claim it. State law gives a water holder five years to resume use of the water or it reverts to the state.

Tumwater and Lacey will likely join Olympia’s eminent domain petition as co-petitioners. Neither the petition nor the water-sharing agreement precludes the cities from negotiating with All American, Sterbank said.But the water-sharing agreement has frustrated commissioners in the smaller Thurston Public Utility District, who were excluded from talks despite their request to be at the table. The district commission has said it might go to court if the cities keep it out of water talks.

Olympia Councilman Joe Hyer said it was never the city’s intent to “marginalize” the PUD, but Olympia had to move quickly to prevent another private party from beating them to the courthouse. There will be time for further regional discussions later, he said.

Meanwhile, two business representatives asked the city to leave some of the water with the brewery so All American can launch the water bottling operation it promised.

“Please do not take any action that would slam the door shut,” said Gary Johnston, head of the teamsters union that represented the 400 workers who lost their jobs when the brewery closed.

All American bought the Miller Brewing Co. property in 2004. It announced plans to bottle water and employ up to 200 people. The company has had trouble acquiring the financing needed to complete the conversion, but the attorney for All American told the Olympia and Tumwater city councils Tuesday night that the money was coming together. L. Eric Whetstone, president of All American, has invested
$7 million of his own money in the venture and obtained another $40 million from lenders, Lemly said.

It would have started employing 40 to 50 people this fall and more jobs would be on the way, he said after the council meetings.

The Tumwater City Council was more receptive to the All American offer. Mayor Pro Tem Pete Kmet said he hopes the jurisdictions will work together to consider the interests of the brewery during negotiations.

Lemly did not tell the Tumwater council that All American intends to file for bankruptcy if the condemnation proceedings go forward.

Water is fast becoming a growing concern for this region. Lacey is reaching its limit on how much water it can pump because of growth and officials are withholding certificates of water availability from developers in the urban growth area because they can’t guarantee there will be enough. Olympia has enough water to serve its population through 2015. Tumwater expects to need more water by 2022.