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2 <br /> allocation, or Level II allocations, with withdrawals <br /> beginning at some date at least five years beyond the date <br /> of allocation. Under the terms of the administrative rule, <br /> Level I allocations holders are liable for the a pro rata <br /> share of the state' s capital and interest costs, as well as <br /> operation and maintenance costs. Level II allocation <br /> holders are liable for a pro rata share of the state' s <br /> interest, operation and maintenance costs only. Each water <br /> purveyor holding a Level II allocation becomes liable for <br /> repayment of capital costs when it converts its allocation <br /> to the Level I status or actually begins withdrawing water. <br /> Each water purveyor is liable one percent of the applicable <br /> state costs for each 1.0 mgd of its water supply <br /> allocation. <br /> The administrative rule also makes provision for <br /> modifications to the initial allocations, reallocations, <br /> new allocations and recalculation of allocation costs. The <br /> water supply allocations and associated costs are set to be <br /> reviewed by the EMC at five year intervals with necessary <br /> adjustments to be derived "equitably" . <br /> In July of 1988, Orange County joined with OWASA, the Town <br /> of Hillsborough, the Orange-Alamance Water System and <br /> Chatham County to submit a joint application for Level II <br /> allocations of water supplies from Jordan Lake. Chatham <br /> County also requested a Level I allocation. The <br /> application was submitted to the EMC and Division of Water <br /> Resources (DWR) staff for review and approval as per the <br /> procedures specified in the administrative rule. After an <br /> investigation and staff recommendations by DWR and a <br /> November 1988 EMC public hearing, the EMC determined the <br /> amount of each allocation. The administrative rule <br /> requires the EMC to hold at least 50 mgd in reserve and the <br /> EMC complied by not allocating 58 mgd. Including both <br /> Level I and Level II allocations, a total of forty-two <br /> million gallons were allocated to seven local jurisdictions <br /> and water purveyors. Of this total, Orange County received <br /> 1.0 mgd, OWASA received 10.0 mgd, Hillsborough received 5 .5 <br /> mgd; Orange-Alamance received 3.5 mgd and Chatham County <br /> received 6.0 mgd. No entity involved in the application <br /> with Orange County received a Level II allocation as large <br /> as it requested. <br /> All of the allocation holders in the County have always <br /> realized that transmission of water supplies, in either <br /> treated or untreated form, will be an expensive endeavor. <br /> Hazen & Sawyer' s 1987 report, "Orange County Water Supply <br /> Study, Phase I" , estimated that pumping 10 mgd of raw water <br /> to north-central Orange County would require expenditure of <br /> approximately $25,000,000 for construction of a raw water <br /> intake, granular activated carbon treatment (GAC) unit, <br /> pumping facilities and pipelines. The true capital costs <br /> involved in pumping raw water to north-central Orange <br /> County may be as much as $10, 000,000 less than Hazen & <br />