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Libby officials make progress with International Paper on water deal
Jun. 13—The City of Libby is making progress in its negotiations with International Paper for a new water agreement.
At the June 2 meeting, attorney Allan Payne said there are still negotiations occurring about some of the details.
"The monetary side has been agreed upon, but there are a few other details to be worked out," Payne said.
The previous agreement ended in June 2020. The new deal would ensure that IP would continue compensating residents for the cost of being unable to use wells due to creosote and other chemicals that leached into an aquifer beneath the city during past wood treatment operations.
According to previous reporting in The Western News, compensation from companies for groundwater contamination in Libby dates back to 1985 when Champion International Corporation instituted a "Buy Water Plan."
That year, Champion purchased St. Regis Co., which — along with J. Neils Lumber Co. — was responsible for wood treatment fluids leaching into the aquifers beneath the city from 1946 to 1969, according to court documents. After detecting the chemicals in the water Libby-area homeowners were drawing from their wells, Champion offered to provide an alternative supply to affected residents.
In a June 2, 2025, letter from Mayor Peggy Williams to city councilors, she explained the new agreement would be in line with the previous 2010 Water Agreement.
"IP has offered to continue the annual payments at the same level as they would have been under the 2010 agreement for a period of 10 years, plus an additional 10 years, on the condition that the Environmental Protection Agency continues to require that the city keep Well Ban Ordinance 1353 in place," Williams wrote in the letter.
Williams believes the well ban ordinance is almost a certainty. After the 20-year period, the deal could be cancelled by IP or the city.
The preliminary terms of the deal, the first annual payment, due July 1, would be $381,892. Each future payment would be increased by the Consumer Price Index rate of inflation.
International Paper's offer also includes a lump sum payment of $1.3 million as a way to catch up on the four missed annual payments from 2021 to 2024.
Payne, who is still working on other details, said when he gets the best deal he'd bring it to council.
City officials believe IP should pay interest on the four missed payments so the city doesn't lose purchasing power.
According to Williams, IP is also seeking a requirement that the city doesn't object to restrictions other agencies may seek to place on groundwater in the Libby area and to expand the Well Ban Ordinance's effective area if the EPA requests it.
"There are some serious concerns about those new requirements and our legal counsel is negotiating with IP to remove them from the final proposed agreement, which hopefully will be presented to council very soon for approval," Williams wrote in the June 2 letter.
Beginning in October 1986, Champion began paying the city $30,000 annually for 10 years. In 2008, a few years after IP acquired Champion, the city entered into a new agreement requiring a payment of $400,000 for fiscal years 2008-2009 and 2009-2010. Under the terms of the city's latest agreement with IP, executed in 2010, IP was responsible for making annual payments to the city until at least June of 2020.
The payments started at $250,000 and were adjusted each year based on inflation. The contract also required IP to pay a lump sum of $1.15 million to cover years when the city had not received compensation payments.
Talks over the new agreement began in June 2019 when an executive with IP told city officials the company would not renew the 10-year contract.
In an initial correspondence, Payne suggested slightly increasing IP's contribution. Payne noted in an August 2019 letter that the two prior contracts IP held with the city were based on a compromise that the company would cover 23 percent of the city's anticipated water system operational costs. After the city undertook an expensive repair of the Upper Flower Creek Dam, which Payne said approached $15 million, he proposed increasing IP's contribution to 25 percent.
