State environmental officials Thursday slapped Arizona American Water Co. with $69,000 in fines for two recent incidents in which elevated levels of a suspected cancer-causing chemical entered the drinking water supply of 12,000 people in Scottsdale and Paradise Valley.

Scottsdale studies water company take-over

Steve Owens, director of the Arizona Department of Environmental Quality, the agency that levied the fines, said in a statement issued by ADEQ that it's the maximum penalty allowed under state law.

"The company delivered contaminated drinking water to its customers, failed to maintain and operate its facilities to deliver safe drinking water, and failed to implement an adequate emergency plan," Owens stated. "This is simply unacceptable."

Customers may have been exposed to trichloroethylene, or TCE, levels on Jan. 16 at quadruple the maximum allowable limit because of a mechanical breakdown at Arizona American's Miller Road Treatment Facility in Scottsdale. The company had a previous TCE problem in October, but at the time officials said the tainted water was blended with TCE-free water, lowering concentrations to within federal limits.

The fines also apply to the private water utility's decision to purge the system of lingering TCE-tainted water by opening fire hydrants and letting the contaminated water flow into the street and stormwater sewer without a permit, according to ADEQ.

Arizona American spokesman Todd Walker said the Miller Road treatment plan will remain shut down for the time being, and that the well that caused the two problems has been permanently disconnected from the system. The company has agreed to have employees at the plant at all times that it's in operation, if the plant is reopened; to install improved alarm systems in case of a breakdown; and to upgrade its customer notification system, he said.

Alarm systems in the January TCE spill failed to alert the company of the mechanical breakdown that allowed contaminated water to be distributed to customers for up to 16 hours, and the company did not have anyone on site at the time of the incident. Afterward, the company was faulted for notifying only about two-thirds of its customers of the spill.

Arizona American still faces potential penalties from the U.S. Environmental Protection Agency and the Arizona Corporation Commission. The TCE spills prompted Rep. Harry Mitchell, D-Ariz., to call for a hearing of the House Subcommittee on Water Resources and Environment in Washington last month.

The contamination has also prompted Scottsdale to look at potentially taking control of Arizona American's local system. The Scottsdale City Council recently voted to draft a report analyzing the company's system, appraising its assets and listing options for financing a potential city buyout or condemnation. The study is expected to take several months, and officials have estimated the cost of a takeover at well in excess of $50 million.

EPA officials have said the two TCE incidents are unprecedented in Arizona and possibly the nation.