From Steven M. Harris, Lead Attorney (February 15, 2005)

I thought you would be interested in the fact that the Pitt-7 v. City of McAlester suit settled recently. Mike Davis and I attended a Federal Court sponsored settlement conference about 10 days ago with a quorum of board members from Pitt-7 (Pittsburg County, Oklahoma Rural Water District #7). This case has been pending in federal court for 7+ years - including two trips to the 10th Circuit (both of which were reversals in favor of Pitt-7).

The salient elements of the Pitt-7 v. City of McAlester settlement are:

1. City of McAlester agreed that it would not further expand service to any area inside the agreed water district territory.
2. City of McAlester will pay $175,000 to Pitt-7 at settlement closing.
3. City of McAlester will deliver as Pitt-7's consumption requires (over a period of approximately 4 years) 355,000,000 gallons of water at "no charge" to Pitt-7.
4. Certain customers previously served by City of McAlester will be transitioned back to Pitt-7 within 60 days of settlement closing.
5. McAlester agrees to sell water to Pitt-7 under a 20 year contract and grant Pitt-7 reasonable connections to the McAlester system. (Pitt-7 derives 100% of its water from McAlester - there being no adequate alternative supply source.)

We calculate the value of the cash + water value benefit to Pitt-7 at approximately $950,000. The 20 year supply contract was also important to Pitt-7 since McAlester threatened to terminate Pitt-7's water supply during the course of the litigation. These settlement terms were recited by the parties into the record during an open court proceeding (U.S. District Court, Eastern District of Oklahoma) on Wednesday, February 2, 2005.

Although this is not the largest settlement we have achieved for a federally indebted rural water district (two settlements we negotiated for Creek County Rural Water District #2 - Oklahoma, during pending litigation with the Cities of Glenpool and Jenks - produced more revenue for the water district) it is certainly a major victory for a water district who stayed the course against municipal encroachment.

We will post the formal settlement document when it is completed. I'm beginning to see a trend toward settlement of these cases - as our cases of Payne County Rural Water District #3 v. Town of Perkins and

Wagoner County Rural Water District #8 v. Town of Haskell have also settled recently. The municipalities in both pending federal cases have agreed to pay the water districts damages for encroachment. The Payne-3 case was pending in the Eastern District of Oklahoma and the Wagoner-8 case was pending in the Western District of Oklahoma.

We were recently retained as co-counsel in the case of North Star Water v. City of Aztec (District of New Mexico).

Obviously the big news recently are the two appellate decisions in favor of Public Water Service #8 (Clay County Missouri).

Steve Harris