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Home My WebLink AboutWQ0014306_Letter to NCDEQ re Moratorium (4894-5563-0256.1)_20240321womblebonddickinson.com March 21, 2024 Robert Tankard North Carolina Department of Environmental Quality 943 Washington Mall Washington, North Carolina 27889 Robert.Tankard@deq.nc.gov Via E-Mail PDF Attachment Re: Notification of Sewer Moratorium for the Eagle Creek Wastewater Treatment Plant (Permit No. WQ0014306) Dear Mr. Tankard: WOMBLE BOND DICKINSON Womble Bond Dickinson (US) LLP 555 Fayetteville Street Suite 1100 Raleigh, NC 27601 t: 919.755.2100 f: 919.755.2150 Lisa Rushton Partner Direct Dial: 919-755-2164 Direct Fax: 919-755-6064 E-mail: Lisa. Rushton (cDwbd-us.corn I write to request a call with you on March 22nd, 2024 to discuss a stay of the North Carolina Department of Environmental Quality's ("DEQ") sewer moratorium (the "Moratorium") on the Eagle Creek Wastewater Treatment Plant (the "WWTP") as noticed in the February 22, 2024 letter from you to Raymond Gottlieb of Sandler Utilities at Mill Run LLC ("Sandler"). I represent Currituck Water & Sewer, LLC ("CWS" or the "Client")) in its project development and associated acquisitions in Currituck County, North Carolina, including its imminent purchase and takeover from Sandler of the WWTP operations. On behalf of my Client, I would like to discuss alternatives to DEQ's imposition of the Moratorium so that: (1) CWS may expeditiously close on its purchase of the WWTP from Sandler without exposing itself to the risk of unnecessary liability; (2) After closing, CWS may undertake and complete anticipated repairs and/or upgrades to the WWTP to include the specific repairs and/or upgrades referenced in DEQ's February 22, 2024 letter to Sandler —including: (a) repair of the travelling bridge filter and the reclaimed irrigation system such that they are fully and reliably operable, (b) ensuring that Biosolids are disposed of per the permit requirements, and (c) improving the operating efficiency of the WWTP's high - rate disposal system such that it operates below the 84%-of-capacity that was reflected during the October, 2023, inspection (collectively sometimes hereinafter referred to as "Upgrades"); and (3) We can avoid contested case petitions from aggrieved parties. To assist in our discussion, I have included background information on CWS' operations and proposed purchase of the WWTP below. A. Background Information CWS is a private water and sewer service provider that owns or operates water and wastewater utility assets in North Carolina. CWS and Sandler are parties to an Asset Purchase Agreement for the WWTP (the "WWTP APA"). In reliance on this WWTP APA, CWS entered into Service and Asset Womble Bond Dickinson (US) LLP is a member of Womble Bond Dickinson (International) Limited, which consists of independent and autonomous law firms providing services in the US, the UK, and elsewhere around the world. Each Womble Bond Dickinson entity is a separate legal entity and is not responsible for the acts or omissions of, nor can bind or obligate, another Womble Bond Dickinson entity. Womble Bond Dickinson (International) Limited does not practice law. Please see www.womblebonddickinson.com/us/legal-notice for further details. •:/♦� March 21, 2024 Page 2 Purchase Agreements (the "Development Agreements") with developers to purchase and operate wastewater collection systems in two residential subdivisions comprised of approximately 756 single- family residences. Under the terms of these Development Agreements, Sandler's WWTP is expected to continue to provide wastewater treatment services to the residential subdivisions until CWS closes on the WWTP APA, at which time, CWS will take over operation of the WWTP and provide wastewater treatment services to the subdivisions. CWS has invested significant resources in preparing to fulfill its obligations under the WWTP APA and in connection with the Development Agreements. CWS' investments include, but are not limited to, an order from the North Carolina Utilities Commission (the "Commission") approving the transfer of the WWTP from Sandler to CWS and the construction of force mains and lift stations for the subdivisions covered by the Development Agreements. While we appreciate DEQ's recent agreement to allow 29 new connections to proceed, CWS understands the developers associated with the Development Agreements are nearing completion of an additional phase of development and intend to seek additional Sewer Extension Permits from DEQ in short order. Should DEQ proceed with the imposition of the Moratorium, this further development will be impacted and the developers and CWS will likely incur significant unexpected costs associated with the Development Agreements and other challenges. B. Current Acquisition Status CWS has already obtained internal approval to move forward promptly with its acquisition of the Sandler assets. CWS anticipates closing on the acquisition of the Sandler WWTP within one to two weeks. Further, it has prepared to immediately commence the Upgrades upon closing the transaction. CWS has a contractor lined up, which is ready to proceed. CWS also has ordered and confirmed the availability of equipment required for the Upgrades. C. Avoidance of a Moratorium Based on current conditions, we believe that the imposition of the Moratorium on the WWTP is both unnecessary and counter -productive to the goal of most efficiently Upgrading the WWTP to achieve its permit conditions. Rather than moving forward with the imposition of the Moratorium, CWS asks that that we discuss the merits of a defined stay on the imposition of the Moratorium based on CWS' imminent acquisition of the WWTP and pending Upgrades of the WWTP. Given the imminent closing on the WWTP APA, it is likely the WWTP will remain in its current condition until CWS becomes its owner and completes the Upgrades —which are, and will remain, CWS's top priority upon completing the acquisition. Importantly we note that the problems identified by DEQ relate specifically to equipment and certain operational failures and no effluent violations exist or are linked to the current functionality of the WWTP. Further, one of the primary causes of the treatment unit malfunctions is the failure of Mill Run Golf & Country Club, Inc. ("Mill Run") to meet its contractual obligation to utilize wastewater effluent from the Effluent Storage Pond, also referred to as the reclaimed irrigation system, for irrigation of Mill Run's golf course as is required under a 1996 Golf Course Agreement, which was amended and restated in 1997. •:/♦� March 21, 2024 Page 3 Overall, the impact of the Moratorium will not expedite CWS closing on its acquisition nor its implementation of the Upgrades. Rather, its sole effect will be to impose unnecessary hardship on the developers and to create material financial losses and risks for both CWS and the developers. Our understanding is that the deadline for contested case petitions related to DEQ's action is Monday, March 25, 2024, which is why I have requested a call in the nearest possible term. I am generally available for a call at your convenience both tomorrow and Friday and look forward to discussing this proposed stay of the Moratorium, my Client's plans to bring the WWTP into compliance, and how CWS can collaborate with DEQ to avoid any adverse impact in the interim. Please let me know of your availability and if you have any questions that I may answer in the meantime. Best regards, Womble Bond Dickinson (US) LLP /s/ Lisa K. Rushton Partner cc: Currituck Water & Sewer, LLC