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Roughly one in four Oregonians gets their drinking water from the same remarkable source: the protected Bull Run watershed in the Mount Hood National Forest.

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For years, the Bull Run has provided most of the drinking water for the city of Portland — and a steady revenue source for the Portland Water Bureau, which sells city water to dozens of smaller communities.

These wholesale customers currently make up about 40% of the demand for water and about 10% of the bureau's gross annual revenue.

But the demand for Portland's water is shifting dramatically as the city prepares to build and pay for a new treatment plant that will cost in the ballpark of $1 billion. Four of the five largest wholesale customers are looking at switching to other sources and scaling back or not renewing their 20-year purchase agreements with the city.

The banks of Reservoir 1 in the Bull Run Watershed. Cassandra Profita / OPB/EarthFix

Several factors are driving the shift, including a new plan to use the Willamette River to supply drinking water to the growing communities in Washington County and the steep cost of Portland's proposed filtration plant.

If wholesale customers end their contracts — and in the process avoid sharing in the capital cost of the new plant — that could mean even higher future bills for residential customers in Portland.

The Portland City Council voted in 2017 to build a water filtration plant after state and federal regulators revoked an agreement allowing the city to rely largely on the pristine natural environment in the Bull Run to guarantee the safety of its drinking water.

The Bull Run watershed is approximately 100 square miles of protected land in the Mount Hood National Forest, much of it old growth forest, that drains into a river and the city’s two reservoirs. The public isn’t allowed in the area, and the area is carefully managed to protect water quality.

Testing in 2017 found very small amounts of cryptosporidium, a microscopic parasite and potential pathogen, in the Bull Run reservoirs. There were no indications the parasite was making people ill, but the EPA stringently regulates all crypto in drinking water because of the risk it can pose, particularly for people with compromised immune systems.

Putting A Price On Water

The project is facing new skepticism after the Water Bureau revealed substantially higher cost estimates for in September. Bureau officials initially told city leaders the plant would cost at most $500 million, but the estimate is now $850 million to $1.25 billion for the most robust version of the plant. That more expensive design combines water filtration with treatment with ozone, a common disinfectant, and it includes two main conduits running in and out of the plant.

Andrew Degner, the water resources manager for the city of Gresham, calls the filtration treatment plant “a necessary investment,” but he worries about the potential impact on lower income customers in his city if his department is forced to pass along the cost of the new facility to ratepayers.

“Obviously the impact is going to be substantially increased water costs at the wholesale level,” Degner said.

Gresham, which has been buying water from Portland since 1912, is exploring developing new groundwater wells as a cheaper alternative to renewing their purchase agreement for Bull Run water.

“Water is essential,” he said, “and we don't want to price people out of an essential product.”

The neighboring Rockwood Water People's Utility District serves about 62,175 people in Gresham, Fairview and East Portland and is another of Portland's largest wholesale customers.

Rockwood Water already operates three of its own groundwater wells and is working with Gresham on a strategy to add more wells and move way from needing to purchase water from Portland.

“The goal is to be able to make that transition in the next five years,” said Tom Lewis, a member of the Rockwood Water Board of Directors. “When you see a big filtration system coming, with some good guesswork of the expense, then for ourselves it was, How much would it cost us to supply our own water?” he said.

To Renew Or Not To Renew

Gresham and Rockwood both have 20-year purchase agreements with the Portland Water Bureau that expire in 2026. They must indicate by 2021 whether they plan to renew the contracts and give the Portland Water Bureau an estimate of their minimum water purchase.

The Portland Water Bureau plans to bring the new treatment plant online by 2027. Under the terms of their agreements, wholesale customers would only pay their share of the treatment plant cost after it comes online. In the near term, the bureau plans to finance construction by increasing water rates for its Portland customers and issuing revenue bonds.

Chris Wanner, director of operations for the Portland Water Bureau, said cost estimates for the plant are still “speculative.” He hopes wholesale customers will hold off on making any decisions until the bureau has better design specifications and more precise cost estimates for the plant.

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“By 2021, the bureau will have much more defined costs of what that filtration system will look like,” he said.

Wanner acknowledged that the potential departure of large wholesale customers — and the hundreds of thousands of households they serve — could mean higher rate increases for the Water Bureau’s remaining customers.

“There would be an incremental increase in the cost for our own retail customers, and the remaining wholesalers on our system,” he said. “It is a complicated equation to say that everyone’s rate would go up a set amount.”

The water bureau has estimated that the most expensive version of the plant will add $132 to the average annual residential water bill by 2028. But that estimate doesn’t take into account the potential loss of customers in Gresham, Fairview and East Portland.

While Gresham and Rockwood are scrambling to put together plans for alternative water sources, Portland's biggest wholesale customer, the Tualatin Valley Water District, is much further along with a plan to develop its own supply of water to serve the growing population in Washington County.

The Tualatin Valley Water District buys water from Portland and sells it to 215,000 customers in parts of Beaverton, Hillsboro and Tigard.

But the district is partnering with Hillsboro to develop a new source of drinking water: the Willamette River near Wilsonville.

That project is expected to cost $1.2 billion, a total that includes a new filtration plant in Sherwood to treat the river water. It’s slated to come online in 2026.

An Evaporating Pool Of Customers

Tualatin Valley has notified Portland that it won’t be renewing its wholesale agreement, and the Water Bureau has factored that into its long-term projections for supply, demand and rate increases.

Less certain, though, is how many other smaller customers the Portland Water Bureau might lose as the Tualatin Valley source comes online.

Michael Grimm, general manager of the West Slope Water District, said his utility is weighing the cost of renewing its agreement with Portland versus switching. His utility serves around 11,000 people in the hills between Portland and Beaverton and has a 20-year agreement with Portland that expires in 2026.

“All the planets are aligning at the same time,” Grimm said.

While the cost of paying for Portland’s new filtration facility is one consideration, Grimm said the most critical issue for utilities to Portland’s west may be security of their water supply in the event of an earthquake. Many of Portland’s pipes are a century old, while Tualatin Valley is building its new treatment plant and distribution pipes to withstand a major subduction zone quake.

“Cost is going to be a concern of our customers. Water quality. Resiliency. Long term stability. All those things are key,” Grimm said.

The Benefits Of A New Plant

Some of the Portland Water Bureau’s wholesale customers question how carefully the Portland Water Bureau and the City Council are managing the filtration project, given the ballooning cost estimates.

But even skeptics of the project said they see Portland’s filtration plant as a fundamentally sound investment.

“No matter what West Slope does, the city of Portland is going to be well served for decades to come,” Grimm said.

A filtration system is particularly valuable, wholesale customers say, because it will help the Water Bureau continue to provide drinkable water in the case of an earthquake or a fire in the dense forests that surround the Bull Run.

The city and the forest service say a large fire in the bull Run could trigger a multi-year water supply emergency for Portland and its customers.

Two years ago, water managers got a taste of just how real that threat is when a fire ignited by a stray firework ripped through the Columbia Gorge and the Mount Hood National Forest, and burned right up to the edge of the protected forest surrounding the Bull Run reservoirs.

“Having a treatment plant will help deal with the taste and odor and water quality issues that are associated with that,” said Degner, with the city of Gresham.

For its part, Water Bureau officials said that whether whole customers continue their purchase agreements, they will maintain relationships with all of them at minimum for disaster relief.

“We still have a valve we could open and provide water to them, or conceptually they could provide water to the city of Portland retail customers as well,” Wanner said.

“We will remain regional partners in, if nothing else, the ability to back each other up."