Washington (Platts)--3Mar2008

Negotiations in the US Southeast have failed to produce an agreement by a
Department of the Interior deadline on how to manage water use during a
drought that threatens hydroelectric power along with other uses.

In a letter released Saturday, Interior Secretary Dirk Kempthorne and
White House environmental adviser Jim Connaughton indicated the negotiations
will continue.

The discussions have involved Interior, the governors of Georgia, Alabama
and Florida, and the federal Council on Environmental Quality, which
Connaughton heads.

"Though the remaining issues are still quite difficult, we are all still
jointly committed to complete resolution," the letter from Kempthorne and
Connaughton said. The letter was addressed to the three governors and then
publicly released.

The negotiations have been under way since November 1, when Interior
announced interim measures for management of the water in two river
basins -- the Apalachicola, Chattahoochee and Flint basin and the Alabama,
Coosa and Tallapoosa basin. A March 1 deadline had been set for an agreement
on longer-term policies.

The region continues to endure a prolonged drought, which motivated the
discussions.

Kempthorne and Connaughton indicated the federal government, which
manages much of those waters through Army Corps of Engineers dams, will devise
a program for extending the interim measures.

Those measures have included a staged reduction in water levels for the
Apalachicola, Chattahoochee and Flint rivers in an effort to balance competing
needs of the three states for water without reducing hydro power.

"We will now begin a process to review interim operations that will
replace the current program before it expires on June 1, 2008," the letter
said. "Federal agencies may subsequently issue further revisions as may be
warranted by federal law, changing hydrogeological conditions, and new
information."

The water resources have been a subject of dispute between the three
states for 18 years, with federal court cases continuing while the governors
and the federal government continue to try to find a compromise.

"Given the situation there is no reason for us not to pursue this in
court," Todd Stacy, a spokesman for Alabama Governor Bob Riley, said.