Community Water Company and Phelps Dodge Corporation are committed to finding a permanent solution to local water quality issues. As many residents of Green Valley are aware, Community Water Company and Phelps Dodge have been working together for some time to address elevated levels of sulfate in local groundwater supplies. To that end, negotiations and discussions between Community Water Company and Phelps Dodge have been friendly, cooperative, and productive. The Arizona Department of Environmental Quality has now published a draft Aquifer Protection Permit for Sierrita Mine that is intended to prevent degradation of the aquifer. Copies of the Aquifer Protection Permit are available at http://www.communitywater.com. A public meeting will be held in Green Valley at 9:30 a.m. on Wednesday, August 17, 2005, at the Desert Hills Social Center, to allow for public comment regarding the permit. It is important that the members of Community Water Company and the local community continue to be informed regarding the status of discussions between Community Water Company and Phelps Dodge. Although some issues remain and a final agreement is not yet in place, both companies are dedicated to resolving water quality and other outstanding issues and providing Community Water Company’s customers with high quality water.

As to the current status of Community Water Company’s water supply, Community Water Company has stopped using two of its wells due to elevated sulfate levels. After months of negotiations, our companies executed an agreement where three of Phelps Dodge’s wells with low sulfate levels were connected to replace the two wells that Community Water Company stopped using. These three Phelps Dodge wells are supplying water to Community Water Company’s system on a temporary basis while a permanent replacement source of water is identified. Under the agreement, Phelps Dodge will pay all the costs associated with connecting these wells to the Community Water Company system.

Representatives and employees of both companies have been working cooperatively for months to find a permanent replacement source of water and we have made significant progress. Formal negotiation and strategy sessions have been held nearly every week for several months and have been productive. This is in addition to the numerous smaller group meetings, conference calls, and meetings “in the field” that have been occurring almost daily to address the complex issues involved in finding a permanent source of clean water. The companies also have engineers, consultants, and contractors at work developing designs and plans for new wells, pumps, storage reservoirs, water treatment, and pipeline systems. The drilling of one new well in the Desert Meadows subdivision is currently underway and Phelps Dodge has agreed in principle to the permanent transfer of a second well site to Community Water Company.

Some may question the length of time that it has taken to get to this point, but the issues involved are complex and numerous.

• Studies are required to find sites for new wells that are not affected by sulfates or other contaminants.

• Studies are required to design the pumping, storage, treatment and distribution systems necessary to connect wells to the system.

• Numerous permits and approvals are necessary from various state and local authorities.

• It takes months to drill a well and construct the infrastructure needed to get water from the well to customer’s homes.

• Community Water Company and Phelps Dodge must continue to negotiate on issues to address how new wells and equipment will be paid for, who will perform and manage the work required, what will happen if the new wells experience elevated levels of sulfates in the future, and numerous related issues.

Customers of Community Water Company are receiving safe and clean water. Our water quality now has reduced sulfate levels thanks to the temporary wells provided by Phelps Dodge. Together we intend to do whatever it takes to obtain safe sources of water that will supply the future needs of this growing area and we are dedicated to finding a solution that meets the needs of our community. We will continue to work together in the coming months with the goal of providing permanent solutions to these issues.

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