It may become known as the area’s great water wager.

A group of area rural water districts is expected to decide within the next 30 to 60 days whether to proceed with a $17 million project to build a new water plant between Lawrence and Eudora.

The stakes are significant for Lawrence residents because a new plant is expected to siphon off some of the city’s largest wholesale water customers.

That would create a wrinkle in the city’s plans to pay for an already-completed $17 million expansion of the city’s Clinton Water Treatment Plant.

“Those wholesale water customers are important to us,” City Commissioner Rob Chestnut said. “The more water we sell outside the city, the less costs that have to be recovered from water users inside the city.”

In other words, the big buyers make it easier for the city to avoid big increases in the water rates it charges residents.

Shifting waters

Since the late 1970s, the city of Lawrence has been the dominant water provider in the area. It has contracts to provide treated water to Baldwin City and Douglas County Rural Water Districts Nos. 1, 2, 4, 5 and 6, among others.

But now RWD Nos. 2 and 5 and Osage County Rural Water District No. 5 are nearing the end of a multiyear feasibility study for a new water plant. The three districts are contemplating operating a new wholesale water district that would have its own plant and sell water to other major users in the area.

The new wholesale water districts also have invited Rural Water District No. 4 and Baldwin City — which is the second largest user of Lawrence water, behind KU — to join the district.

Leaders with both RWD No. 4 and Baldwin City have said they are actively considering shifting future water purchases to the new district.

Larry Wray, the leader of the new wholesale water district, said he expects decisions to fall into place soon.

“We’re finally at that point where everybody is going to have to make up their minds,” Wray said. “Some big decisions are on the way.”

The wholesale water district already has an option to purchase “several acres” of ground north of North 1500 Road between Eudora and Lawrence, Wray said. The property is adjacent to the Kansas River. A plant at the site would use ground wells that would be recharged by the Kansas River.

The plant likely would start relatively small, Wray said, but easily could be expanded. The project, however, would carry a large initial price tag because it would involve about 30 miles of new pipe. Wray said current estimates have the project at about $17 million.

“Nothing is set in stone yet,” Wray said, “but I think a lot of us think we’re going to do this.”

City to dive in

Lawrence leaders will try to talk area water districts out of building a new plant. Mayor Mike Amyx told staff members during this summer’s budget session that he believes it is imperative to keep the wholesale water customers, now that the city has undertaken the $18 million expansion at the Clinton plant.

“This is about us selling more water,” Amyx said. “We need to figure out how to do that. Let’s get a return on this investment we have made.”

The city is going to try to sell more water by doing just what a big superstore does to sell more gadgets: Lower prices.

During the budget session, the city committed to lower the rate it charges wholesale customers in 2011. Current plans call for the wholesale rate to drop to $3.64 per thousand, down about 5 percent from the current rate.

But now, the question becomes whether it will be too little, too late. The last two years, Lawrence has increased the wholesale rates by 15 percent or more each year. Those rate increases created high levels of concerns with wholesale water customers.

“I found it pretty difficult to understand why they took that position in this economy,” said Baldwin City Mayor Ken Wagner.

Baldwin City has hired an engineer to examine ways that Baldwin City could shift its future water purchases away from Lawrence. Wagner said two options are receiving the most attention. One is to join up with the area rural water districts to build the new plant between Eudora and Lawrence. The second option is to join up with the city of De Soto and others to revamp an old water plant at the former Sunflower Army Ammunition Plant.

Wagner, though, said he’s not ruling out working with Lawrence.

“They’ve already told us that they’ve revised their rates down for next year, but there really hasn’t been any indication of what they are going to do after 2011,” Wagner said. “That’s something we’ll have to know.”

City Manager David Corliss said he will meet with wholesale water customers to determine what type of long-term contracts can be developed.

“We are asking them what level of assurance they need in regards to future rate increases,” Corliss said. “We want to work with them on that.”

Scott Schultz, administrator for RWD No. 4, said his group also still wants to hear from Lawrence. But his district — which provides water for an area between Lawrence and Baldwin City — has an offer on the table from the new wholesale water district. RWD No. 4 also already has a connection with a Johnson County water district, which receives its water from the city of Olathe. Schultz said buying more water on the Johnson County contract, which already is 50 cents per thousand cheaper than Lawrence — is a possibility.

“We need a long-term contract of 20 years or more, and a supplier that has some ability to give some price certainty is more likely to get our business than a supplier who raised prices in the 12 to 18 percent range over the last few years.

“Don’t get me wrong, we think the water quality from the city of Lawrence is excellent. But so is the water quality from the city of Olathe.”