Irving Oil Ltd. has agreed to give up some land it has been leasing from the City of Saint John for half a century, paving the way for the city to build a new water treatment facility at the site.

Neither party was available to comment on Tuesday on what, if any, impact the deal will have on a decade-long dispute over the cost of some of the industrial water supplied to the Irving Oil refinery by a city pipeline.

But Mayor Mel Norton said in a brief statement at Monday night's council meeting that the deal is costing the city "zero dollars."

"Their co-operation has facilitated securing the property that we need for our drinking water plant," Norton said, extending the city's "gratitude and appreciation."

No potential income for the city has been lost, he said.

Lease dates back to 1958


Irving Oil has agreed to surrender 41 hectares of the leased land back to the city. (City of Saint John)

Irving Oil has a deal dating back to 1958 allowing the company to lease a large portion of city-owned land around the Little River Reservoir "in perpetuity."

The east side reservoir and its watershed create a guaranteed industrial water supply for the oil refinery.

Under the new agreement, about 41 hectares of the land bordering the reservoir and Hickey Road will be "surrendered" and returned to city control for a new public-private water treatment plant.

The plant and related infrastructure are expected to cost $220 million.

But the city hopes to save millions by switching to wells instead of lake water. Council recently awarded a contract to a Quebec company to drill a large production well in the South Bay area to see if there is enough water to convert to a well system.

Lengthy dispute

Saint John has been stuck in delicate negotiations with Irving Oil Ltd. and J.D. Irving Ltd. over their water rates for years.

Both Irving companies claim they have a special case for lower prices.

Irving Oil says it pays the up-to-date rate for 70 to 80 per cent of its water, but the company believes the rate it pays for water from an older, separate line, should be much lower.

Meanwhile, the Irving pulp mill takes more than 90 per cent of its water untreated.

The two companies are paying rates set up in agreements that expired in 2000 and 2005 respectively, according to recent city documents.