Who owns defunct mill's water?
The EPD and Durango's creditors both claim it's theirs at Friday's
bankruptcy hearing.

Mary Landers

A federal judge decided Friday to continue to allow a defunct paper mill's water permits to be sold at auction despite objections from the state Environmental Protection Division.

The Durango Georgia Paper Co. mill in St. Marys went bankrupt in 2002. Last month Judge Lamar W. Davis Jr. issued an order that included a provision to auction off its 40 million gallons a day groundwater withdrawal permit in increments of 1 million gallons.

The Georgia EPD objected to the sale of the permit, saying that Durango never owned the water in the first place, it merely had the right to use it.

"We think it's our water, to be very blunt about it," said W. Wright Banks Jr., senior assistant attorney general, who presented the EPD's objection to the sale of permits.

Bidders who buy million gallon increments will have no better chance of getting a permit from EPD than anyone else, Banks said.

"If you bid on a lot and buy 1 million gallons, what have you bought?" he said. "Our position is you bought nothing."

The regulatory agency issues groundwater permits for not only a specific amount, but also a particular use at a particular place. In Durango's case, the permit specifies that the Floridan aquifer water comes from eight wells in St. Marys for the manufacturing of pulp and paper. The permit expires Dec. 31, though it is possible that the trustees could renew before then.

The original auction provisions do state the use of the permit is subject to EPD approval, Judge Davis, of the U.S. Bankruptcy Court for the Southern District of Georgia, pointed out.

But Banks worried aloud that the caveat wasn't strong enough.

"It almost makes it sound like once you bought a lot you go over to EPD and they have a stamp and they're gonna stamp it," he said.

Although Davis overruled the EPD's objection, he did order Banks to work with the trustees' attorney, Ward Stone Jr., to come up with a stronger "buyer beware" message to insert in the order. If the two can't agree on a warning, then an EPD warning may be grafted onto the order alone.

The auction is scheduled for Dec. 6. Likely bidders include developers who would put housing tracts on the land.

Representing the trustee and the creditors' committee, Stone disagreed with the EPD's fundamental position.

"We own the groundwater," Stone said.

His reading of Georgia law is that it's still unsettled on groundwater rights.

"We say everyone who owns property owns the groundwater under it," Stone said. "That's not to say the state can't regulate it reasonably."

In 2003 the Georgia General Assembly fought bitterly over the issue of buying and selling water rights, ultimately defeating a bill that would have allowed water trading.

Environmental groups worry that this sale of water permits could be used to try to establish precedent. Or it could be used in an effort to circumvent the legislative process and get water permit trading approved in the courts.

"In our view, Georgia law does not allow rights to a water withdrawal permit to be auctioned off and therefore the asset that is proposed to be sold has no value," said Chris DeScherer, an attorney with the Southern Environmental Law Center. "So the only people that would be interested in bidding on this so-called asset would be those looking to remake Georgia water law."

DeScherer represented six environmental groups opposed to the water permit auction: The Georgia Conservancy, The Georgia Wildlife Federation the Upper Chattahoochee Riverkeeper Fund, the Satilla Riverkeeper, Center for a Sustainable Coast and the Altamaha Riverkeeper.

The judge's denial was not what they wanted to hear.

"We would have preferred the judge to strike all references to water permit bids," DeScherer said. "But the process laid out by the court gives the state the opportunity to make clear to all potential bidders that the auctioning off of a water withdrawal permit is not legal. We look forward to seeing that language."