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it is EXTREMELY primitive. Its kind of ridiculous, but if it works, don't fix it.

Probably a lot cheaper than a steel tank. Not really familiar with potable water requirements, but I wouldn't have guessed that this would be part of that system!

Many woods are mold resistant naturally. I'm not sure what type of wood is used in water tanks but they are cleaned every so often and are cheap to build and install. A steel tank would require cranes and lifting equipment and seals for temperature shrinkage. These wood tanks are still built today. In fact I've seen many bring replaced with exactlybthe same systems.