STRATEGIC PLANNING WORKSHOP                                       September 29, 2004




SUMMARY:  The Board will receive a staff presentation on a matrix (Exhibit 7-A) that compares available information on five water supply options.  In the context of Monterey Peninsula Water Management District (MPWMD) strategic planning, the overall purposes of the matrix are to:


Ø      summarize and consolidate information provided by proponents of current water supply project proposals in a single format to facilitate comparison;


Ø      facilitate Board discussion of next steps regarding water project implementation as it relates to use of MPWMD resources (staff, consultants, budget) in the coming years. 


Five projects are the subject of the matrix.  Three are relatively large seawater desalination plants that would meet existing water needs on the Monterey Peninsula, in particular, fully comply with State Water Resources Control Board (SWRCB) Order 95-10, and potentially meet future needs of the Peninsula and other coastal areas in northern Monterey County.  The smaller aquifer storage and recovery (ASR) and reclaimed water projects could not meet the basic goal to comply with SWRCB Order 95-10, but could be combined with any of the desalination projects to boost production, serve as back-up supply or help reduce costs.  All projects would require upgrades to the existing Cal-Am distribution system.  The five projects in the matrix are briefly described below; many exhibits provided by the sponsors are attached to provide more detailed information:


Ø      Coastal Water Project (CWP) sponsored by California American Water (Cal-Am).  Major components of the CWP include a seawater desalination plant in Moss Landing, transmission pipeline to the Monterey Peninsula, and an ASR project in the Seaside Basin.  The proposed site is the Duke Energy power plant, with planned use of Duke’s existing intake/outfall pipelines, or possible horizontal directionally drilled (HDD) wells for intake. The yield goal is up to 20,272 acre-feet per year (AFY).  A primary purpose is to comply with State Water Resources Control Board (SWRCB) Order WR 95-10 to legalize the existing Peninsula supply, with minimum production of 10,730 AFY.  Other goals include reducing impacts to the Seaside Basin (1,000 AFY), and meeting existing and future water needs on the Monterey Peninsula (3,572 AFY) and coastal communities of northern Monterey County (4,970 AFY).  Water rights for additional winter direct diversions from the Carmel River are also included in the project description.  A Cal-Am letter published in the September 20, 2004 Monterey County Herald states, “Cal-Am has expressed a willingness to enter into a partnership with the County [of Monterey] that could result in public ownership of the CWP.”  


Ø      North Monterey County Desalination Project (NMCDP) sponsored by the Pajaro/Sunny Mesa Community Services District (P/SM).  Major components of the NMCDP include a seawater desalination plant in Moss Landing, transmission pipeline to the Monterey Peninsula, and a potential 30-acre solar energy power production facility to reduce energy costs.   The proposed site is the former National Refractories mineral plant, with planned use of existing intake/outfall pipelines, with possible use of Duke pipelines, if needed. The yield goal is 20,000 – 30,000 AFY, depending on purveyor demand; a 20,000 AFY project was used for cost estimates, assuming similar demand for water as described for the CWP (see above).  A primary goal is to meet current and future needs of the expanding P/SM service area in northern Monterey County (possibly up to 5,000 AFY).  Similar to the CWP, the project can be sized to meet the current and future needs of communities from Moss Landing to the Monterey Peninsula, including compliance with Order 95-10.  The P/SM Board has authorized creation of a Joint Powers Authority (JPA) with MPWMD, and is exploring partnerships with other public entities.


Ø      Long-Term Water Supply Project in Sand City (WSP) sponsored by MPWMD.  The WSP is comprised of a seawater desalination plant in the Sand City area with new seawater intake/brine discharge facilities at Seaside State Beach, Sand City and/or former Fort Ord.  The project design envisioned HDD wells for intake/discharge, but the geology of the former Fort Ord coastal area requires use of the existing Monterey Regional Water Pollution Control Agency (MRWPCA) outfall for large volumes of brine discharge.  The basic yield goal is 8,409 AFY to legalize existing (year 2003) demand; production up to 11,000 AFY may be possible, depending on the outcome of hydrogeologic and engineering investigations that must be performed. The project goal is to meet local, near-term needs, including compliance with Order 95-10 assuming Cal-Am diversions from the Carmel River do not exceed 11,285 AFY and total Cal-Am production remains under 15,285 AFY. 


Ø      Aquifer Storage and Recovery in Seaside Basin (ASR) sponsored by MPWMD.  The ASR project diverts “excess” Carmel River winter flow, as defined by state and federal resource agencies, treated and transmitted via the Cal-Am distribution system, to special injection/recovery wells in the Seaside Basin on the former Fort Ord.  Available storage capacity in the Seaside Basin Coastal Subareas serves as an underground reservoir for the diverted water for use during dry periods.  MPWMD already owns and operates one successful full-scale well at the proposed site.  This project would add a second well at the current site along with some additional transmission pipeline and other improvements.  This “small ASR” project utilizes existing facilities and envisions a reliable yield of 700 – 1,300 AFY, depending on operating assumptions.  The MPWMD ASR project could relatively easily combine with any other project described in the matrix. Additional water rights approved by the SWRCB would be needed.  It is notable that the ASR component of Cal-Am’s CWP is very similar to the MPWMD ASR project. 


Ø      Regional Urban Recycled Water Project (RURWP) sponsored by MRWPCA and Marina Coast Water District (MCWD).  MRWPCA, in cooperation with MCWD and Monterey County, has successfully treated wastewater for non-potable irrigation uses in northern Monterey County.  The RURWP is a two-phase project being evaluated as a means to increase use of reclaimed water and help meet future community needs.  A total of 1,700 AFY and 3,100 AFY in Phase I and II, respectively, is envisioned; in either case, only 300 AFY has been designated for use within the Cal-Am service area by non-potable customers such as golf courses, cemeteries, parks and other landscape open space.  The RURWP could be combined with ASR or the desalination projects described in the matrix.


A second, related concept known as the Groundwater Recharge Project (GRP) is currently undergoing preliminary evaluation by MRWPCA staff.  The GRP concept is not included in the matrix because little information is presently available.  If MRWPCA staff believes the concept has merit, findings will be presented in October or November 2004.  Briefly, the concept envisions use of highly treated reclaimed water for groundwater injection into the Seaside Basin, similar to the ASR project described above.  Available yield for recharge could be 3,000 – 10,000 AFY depending on future negotiations between MRWPCA, MCWD and Monterey County Water Resources Agency (MCWRA).   This quantity represents available reclaimed water that is currently not used by food crops in the winter that could be put to a beneficial use rather than be discharged into the ocean.  Similar technology has been successfully used in Orange County for many years.  Extensive technical investigations are needed to ensure that source and receiving waters are compatible, and that local geology supports this technology.


Throughout the matrix, numbered rows provide the information requested for the matrix.  The following lettered columns are also used:


Column A --     Decision Element (topic)

Column B --     Coastal Water Project  (Cal-Am)

Column C --     North Monterey County Desalination Project (P/SM)

Column D --     Long-Term Water Supply Project/Desalination at Sand City (MPWMD)

Column E --     Aquifer Storage and Recovery in Seaside Basin (MPWMD)

Column F --     Regional Urban Recycled Water Project (MRWPCA)


In the “Discussion” section, similarities and differences between projects are described for each decision element, with emphasis on water production, cost, timeline and opportunities for MPWMD participation in project development and implementation.  The discussion also highlights uncertainties and describes important information that is currently unknown, and should be known, prior to committing to a project. 


RECOMMENDATION:  The Board should receive the matrix information and ask questions of staff. The workshop should also address how a decision between projects should be made (e.g., selection criteria, weighting). Formal Board action is not envisioned at the workshop, but the matrix discussion should serve as a springboard for Board consideration of the five project proposals in the near future.  The Board Chairperson has requested that a special meeting be set for October 28, 2004 to determine which project or projects should continue to be pursued or evaluated by MPWMD. 


BACKGROUND:  At its July 19 and 29, 2004 meetings, the Board heard presentations by and posed questions to project proponents, with emphasis on water production capacity, cost, timeline and opportunities for MPWMD participation.  On July 29, the Board directed staff to prepare a matrix summarizing information provided by project proponents related to these questions, and obtain and summarize regulatory process information for discussion on September 29, 2004.  This section describes the history and methods used to prepare the matrix.  The “Discussion” section below evaluates the information obtained.



The current matrix is Version 9 of a product that has evolved since July 29, 2004.  Based on the questions posed on July 29, 2004, MPWMD staff developed a matrix format that contained only the decision elements, and transmitted this to Cal-Am, MCWRA, P/SM and MRWPCA (referred herein as the project sponsors or proponents) on August 20, 2004.  Suggestions for refinement were solicited and data input by the project sponsors were requested by September 3, 2004; some sponsors were not able to meet this deadline.  In August-September 2004, MPWMD staff separately met with project sponsors (and communicated via phone and/or e-mail) to review and refine the matrix, clarify desired content, and respond to questions.  Based on initial information provided by the project sponsors, including written sponsor responses and associated technical reports, MPWMD staff developed rough draft versions of the matrix for review.  These early versions were refined based on sponsor comments and clarifications.  A project sponsor received draft versions of their matrix information only, not others.  Information on all projects together was not shared until the entire matrix was completed and publicly distributed (Version 9). 


MPWMD staff also summarized MPWMD information about its desalination and ASR projects.  MPWMD also researched the regulatory process for key state and federal agencies, and asked its consultants for input based on their experience with water projects.


Due to staff note preparation deadlines and/or lack of available information, some matrix elements are incomplete or certain questions exist that have not been resolved.  Staff will work to refine the matrix and assessment, and may provide updated information at the September 29, 2004 meeting.


Matrix Information

Matrix information is based on what proponents submitted and has not been altered.  The District has not independently checked the completeness and reliability of the information, with one exception – regulatory agencies were contacted to confirm the regulatory process and timeline associated with each project as it is presently understood.  If MPWMD staff has questions about the accuracy of the information submitted, they are noted in the “Discussion” section, not on the matrix itself.  The primary matrix topics (“Decision elements”) include:


Ø      Project description,

Ø      Water yield, including recipients and phasing,

Ø      Project cost to customers, including detailed cost breakout,

Ø      Financing and assumptions,

Ø      Timeline and key milestones,

Ø      Permits needed and regulatory agencies involved,

Ø      Site control,

Ø      Project operations and proponent capabilities,

Ø      Project participants including MPWMD opportunities,

Ø      Public involvement,

Ø      List of acronyms found in the matrix.


By necessity, the matrix information is abbreviated.  The supporting information provided by each proponent is listed as Exhibit 7-B.  Due to space constraints, not all information materials listed in Exhibit 7-B are provided herein.  All documents are available at the District office for review by the public.  Representative materials attached to this staff note as exhibits are shown in Table 1 below.


A series of exhibits summarizes the regulatory agencies and processes associated with each project based on research by MPWMD consultants and staff.  Information sources include state and federal regulations, agency websites and personal contacts with agency staff.  Due to time constraints, this is not a complete assessment.  These exhibits are also listed in Table 1.  


Table 1:  List of Exhibits Supporting Matrix






Exhibit 7-A

Matrix of five water supply alternatives.

Exhibit 7-B

List of references and information sources for matrix.

Exhibit 7-C

MPWMD minutes of July 29, 2004 meeting with responses to questions posed to Moss Landing desalination proponents at the meeting. 

Exhibit 7-D-1

Town hall meeting presentation materials on Coastal Water Project provided by Cal-Am and MCWRA, August 24, 2004.

Exhibit 7-D-2

Cal-Am/MCWRA responses to matrix questions, August 24, 2004.

Exhibit 7-D-3

CWP public outreach meeting schedule.

Exhibit 7-E-1

Pajaro/Sunny Mesa CSD presentation materials on North Monterey County Desalination Project, July 29, 2004 MPWMD workshop.

Exhibit 7-E-2

P/SM responses to matrix questions, September 10, 2004.

Exhibit 7-E-3

Organizational chart for Pajaro/Sunny Mesa CSD.

Exhibit 7-F

MPWMD staff presentation materials on desalination project in Sand City area, July 29, 2004 MPWMD workshop.

Exhibit 7-G

MPWMD staff presentation materials on ASR project in Seaside Basin, July 29, 2004 MPWMD workshop.

Exhibit 7-H-1

MRWPCA presentation materials on reclamation project options, July 19, 2004 MPWMD regular Board meeting.

Exhibit 7-H-2

Overview of Regional Urban Recycled Water Project (undated)

Exhibit 7-H-3

MRWPCA responses to matrix questions for RURWP, September 14, 2004.

Exhibit 7-H-4

MRWPCA information on conceptual Groundwater Recharge Project

Exhibit 7-I

Table of regulatory agencies associated with each project, and whether regulatory (R) and/or property (P) interests exist.

Exhibit 7-J

Worksheets on key federal and state agency regulators and processes.

Exhibit 7-K

Worksheets summarizing personal contacts with agency staff regarding timeline and process issues for each project.

Incomplete Cost Information

Varying levels of effort have been expended by proponents to estimate the respective project capital and operating costs.  Importantly, District staff believes that cost estimates for all projects in the matrix are incomplete and potentially inaccurate from an engineering standpoint.  All current estimated costs are based on planning or concept level evaluations, some of which entail little site-specific research.  None are at the formal “preliminary design” or “final design” levels that entail detailed engineering study, and specifications tailored to the specific project conditions.  The cost estimates could be inaccurate by 35% to 100% or more.  Many important capital and operating cost elements such as site acquisition, right-of-way, and required mitigation measures may be missing and/or cannot be accurately predicted at this time.  Examples of unresolved underlying assumptions that could have a significant impact on the true project capital and/or operating costs include:


Ø      Expected performance as reflected in service reliability (percent downtime that is acceptable), which in turn affects facility redundancy, size and number of storage tanks (days of storage), power back-up, etc. 

Ø      Types of interruptions that can occur, especially associated with a power plant.  Examples include:  power (electricity); intake and outfall pipelines (for example, planned regular intake screen cleanings); emergency plant shutdown. 

Ø      Replacement life of key components.

Ø      Location in the process stream of the source water taken from the intake pipeline.

Ø      Assumptions about water quality of raw source water, and flow rate; seasonal changes in the source water quality.

Ø      Desired delivered water quality (e.g., total dissolved solids) and flow rate; treatment needed to meet delivered water quality standards over all seasons.  

Ø      Assumed pre-treatment method.

Ø      Brine disposal and NPDES permit assumptions and issues.

Ø      Expiration date of current permits for facility components; need for permit renewal or amendment due to change in owner or use.


DISCUSSION:  The following paragraphs describe how the matrix information was evaluated, highlights similarities and differences and note uncertainties for future investigation.


Review of Matrix Information

For each decision element, the responses for the five projects were reviewed and subjected to the following questions:


Ø      How are the projects similar?

Ø      How are they different? 

Ø      What accounts for significant differences in cost, timeline etc?

Ø      What are the uncertainties and unknowns regarding a key decision element such as cost or time?

Ø      What information is needed to resolve the uncertainty?  When and how can it be made available?

Ø      What costs are associated with uncertainties that may not be shown in the matrix or addressed by proponents?


This discussion emphasizes the three desalination projects because they are most comparable, and District staff believes that only one of the three desalination projects is likely to move forward due to overlapping goals, size and cost.  In contrast, the smaller ASR and reclaimed water projects could be combined with any of the desalination projects and are not mutually exclusive.  The ASR and reclaimed water projects could potentially proceed on an independent path from the desalination projects. 


This discussion will focus on the major Decision Element topics.  If a matrix line number is referenced, it refers to the numbered row in the matrix.


Project Description (line 6)

The projects include two similar desalination plants at Moss Landing, one desalination project in the Sand City area, one “small ASR” project and one reclaimed water project that can provide limited yield to the Cal-Am system.   Please refer to the “Summary” section above for an overview of the project descriptions, and the proponents’ exhibits for more detailed information. 


Pilot Project (line 7)

The two Moss Landing desalination projects have planned pilot projects, which are now required by state health regulators.  The MPWMD desalination project must add this component to its planning process.  The MPWMD ASR project has successfully operated pilot and full-scale ASR projects since 1998, and has a proven track record.  Similarly, use of reclaimed water produced by MRWPCA has been successfully demonstrated in Monterey County.


Project Yield (lines 8-13)

The two Moss Landing desalination plants are similar in potential size and scope (20,000 AFY or more); actual project size and yield depends on purveyor commitments.  Both could attain the basic project purpose to fully comply with SWRCB Order 95-10 (defined as 10,730 AFY), as well as reduce impacts in the Seaside Basin, and meet future needs on the Monterey Peninsula as well as other coastal communities.   The MPWMD desalination project yield goal was limited to 8,409 AFY to legalize existing (year 2003) community water use with the current production limits imposed by SWRCB Order 95-10 and MPWMD Ordinance No. 92 (comprehensive water conservation plan).  A maximum production of 11,000 AFY may be possible under certain scenarios but the feasibility has not been confirmed.


The ASR and reclaimed water projects provide limited yield, ranging from 300 AFY of non-potable supply from the reclaimed project to 700-1,300 AFY of potable supply from the “small ASR.”  The ASR project could potentially serve as a back-up source of supply if desalination production is interrupted and/or boost total production (see “Unresolved Issues” below).


Project Cost (lines 15-21 and lines 77-112 cost detail)

Each of the three desalination proposals is a major capital project costing at least $176 million.  Though the two Moss Landing desalination projects are of similar size (roughly 20,000 AFY), the capital costs differ by about $85 million (roughly $261 million for the CWP as compared to $176 million for the NMCDP).  Examples of large individual cost differences (greater than $4 million) are shown in Table 2 below (costs are rounded).  It is notable that needed improvements to the existing Cal-Am distribution system to receive waters from the north are included in the desalination and ASR cost components. The items in Table 2 account for about $82 million of the $85 million total capital cost difference.  District staff has not independently evaluated or critiqued the cost estimates, and is simply identifying major differences at this time. 


The operation and maintenance (O&M) cost estimates for the CWP, NMCDP and MPWMD desalination project are $10.5 mil/yr, $13.4 mil/yr and $8.8 mil/yr, respectively. 


Table 2:  Selected Capital Cost Differences Between Moss Landing Desalination Plants










Desal plant (lines 79 - 83)

$127.7 mil

$83 mil

$44.7 mil

Transmission pipelines (line 85)

$31.3 mil

$16.8 mil

$14.5 mil

ASR (line 90)

$10.1 mil


$10.1 mil

Right-of-way (line 97)

$4.4 mil

No data

$4.4 mil

Other costs (lines 98 - 102)

$46.6 mil

$26.8 mil

$19.8 mil

Contingencies (line 103)

$23.7 mil

$35.3 mil

($11.6 mil)








$81.9 mil total difference


The MPWMD desalination plant is of similar total capital cost ($176 million) as the NMCDP, even though the MPWMD plant is much smaller and does not entail a pipeline from Moss Landing.  One reason is the high level of service expected (very little down time) which results in extra facilities being built into the project design.  Cost estimates for similar components that are significantly more expensive the MPWMD plant as compared to the either of the Moss Landing plants include:


Ø      $21.6 million for seawater intake facilities (no existing intake is available) (line 79);

Ø      $18.7 million for brine discharge (assumes new facilities rather than use of an existing outfall) (line 83);

Ø      $61.7 million for environmental/permits and other costs (lines 98 – 102).


The ASR and RURWP capital cost estimates are in the $21 to $34 million range.  Only a portion of the reclaimed water project cost would be applied to the Peninsula (300 AFY), and only direct recipients of the reclaimed water would pay for it.  The O&M cost estimates for ASR and RURWP are roughly $295,000/yr and $1.1 million/yr (Phase I & II combined), respectively.


Cost of Water to Peninsula (lines 23-27)

In general, estimates of the cost of water per acre-foot ($/AF) are very dependent on yield and a variety of other assumptions, and are not clearly defined for some projects.  Thus, an “apples-to-apples” comparison is not feasible at this time.  Preliminary estimates for the two Moss Landing plants are in the $1,100 - $1,200/AF range (line 23) and $2,700/AF for the MPWMD desalination project.  The ASR project cost estimate is roughly $1,600/AF to $2,800/AF, depending on the yield and other assumptions.  Reclaimed water cost would be about $1,100/AF.  Generally speaking, these numbers represent the cost to the sponsor to produce the water.  The actual retail cost of water to the end customer is expected to be higher, based on additional treatment and delivery costs, profit (Cal-Am only), etc.  


Only Cal-Am has developed a written estimate of the impact of its CWP on the residential water bill.  The cost estimates are based on the “Basic Coastal Water Project” components within the “Regional Coastal Water Project.”  Based on the September 20, 2004 CWP application to the California Public Utilities Commission (CPUC), a typical residential customer (“three full-time occupants living in a house on a ¼-acre lot”) would pay an additional $2.40/month in 2006 and an additional $27.04/month in 2011.   These changes reflect rate increases of 7% to 62% over the projected future rates in 2006 and 2011, respectively, not today’s rates.  General rate increases unrelated to the CWP are expected between Fall 2004 and these future years.


Project Financing (lines 29-33)

Assumptions for financing range from 3% to 7% for interest rates, and 20-30 years for the term of financing.  The same assumptions should be applied if comparing two similar projects, unless one proponent is able to demonstrate the ability to obtain a lower rate due to tax-exempt status, grant/loan award etc.  State Revolving Fund loans are assumed by MRWPCA and may be pursued by Cal-Am and P/SM, along with other grants.


MPWMD’s enabling legislation requires a public vote to authorize District-funded projects.  At the July 29, 2004 public workshop, District Counsel stated that a public vote is not required if MPWMD is part of a Joint Powers Authority (JPA).  For all public entities, state law requires a public vote for certain types of bond funding (e.g., general obligation bonds.)  Proposed water projects paid solely by user fees are exempt from the public vote or property owner approval requirements of Proposition 218 (Article 13-C of the State Constitution).  Cal-Am is not required to have a public vote for company-funded projects.                       


Timeline (lines 35-43)

All projects are estimated to take 3-5 years for water delivery.  Each has unique challenges in the pathway from concept to functioning project, and each proponent uses different assumptions about the time it takes to accomplish key milestones.  From a baseline of October 2004, proponents for the CWP, NMCDP and MPWMD desalination projects estimate water delivery would occur in 4.0, 3.3 and 5 years, respectively. 


For the three desalination projects, the major factor that affects the water delivery timeline is the assumption about the environmental, permitting and regulatory processes required by federal, state, regional and local agencies (lines 36-38).  The predicted completion of the environmental review and permitting process for the CWP, NMCDP and MPWMD desalination projects are December 2006, September 2005 and Fall 2006, respectively.   Pajaro/Sunny Mesa is about one year ahead of the others.  P/SM believes that the California Environmental Quality Act (CEQA) process for its desalination project can be completed in one year (October 2004 - September 2005) and key federal and state permits can be obtained in a similar timeframe (January - September 2005).  In contrast, Cal-Am and MPWMD have added 10-12 months after the EIR certification to obtain permits.  District staff believes a mid-to-late 2006 timeframe is more realistic based on MPWMD’s experience with its water projects to date, review of agency regulations, and interviews with agency staff (Exhibits 7-I, J, and K).  Typically, permits are issued many months after a Final EIR is prepared, not concurrently.  Additional clarification from P/SM and federal and state regulators is needed on this subject. 


The NMCDP proposal presumes that the federal National Environmental Policy Act (NEPA) process will not play a significant role in its project timeline due to pipeline alignments that avoid federal jurisdiction as much as possible.  For both the CWP and the MPWMD desalination project, the NEPA process is presumed to play an important permitting role, but the level of federal environmental documentation needed is unclear.  It is possible that the CEQA documents can be efficiently used by the federal agencies. 


In addition to the factors above, the MPWMD project timeline is longer than the two other desalination projects due to an additional six months added for a public vote, and a 24-month construction period (the others assume 18 months).


The ASR and reclaimed water face similar processes.  The MPWMD ASR project should be the fastest project to implementation due to an existing 50-year lease from the U.S. Army, extensive testing and reporting to state agencies to date, proven production to date, and program level review in more than one EIR.  The water rights process and amendment of the existing federal lease are key milestones for this project.


Permits/Regulatory Agencies (lines 45-56)

All projects must comply with a host of federal, state, regional and local regulations.  Each project faces a similar gauntlet (Exhibits 7-I, J, and K).  As noted above, the federal permits needed and level of documentation required by the agencies could greatly affect project time line and cost.  All proponents are uncertain about the federal lead agency and its requirements, due in part to uncertainty about the exact location of facilities.  Formal agreements among certain federal and state agencies can increase the number of agencies involved in review.  Under such an agreement, the NOAA Monterey Bay National Marine Sanctuary has the ability to comment and propose conditions for permits considered by both the California Coastal Commission and Regional Water Quality Control Board. 


Projects such as ASR or any diversion from the Carmel River requires a water rights permit from SWRCB, which can be a lengthy process.  Only Cal-Am must obtain CPUC approval for its project to enable rate increases to fund the project. 


Site Control  (lines 58-60)

Each of the three desalination project sponsors has identified preferred locations for desalination plant facilities and pipeline alignments on property owned by an entity other than the sponsor.  Thus, the cooperation of the property owners (or authority of the sponsor to carry out eminent domain) is essential for the project to go forward.  Otherwise, an alternative site must be found.  Cal-Am materials state that Duke Energy has allowed Cal-Am to build and operate the CWP pilot desalination project on its property, but has not committed to the long-term project.  Cal-Am representatives are confident that they can meet Duke’s criteria of (a) no adverse effect to their current discharge permits, and (2) public support for the project.  Cal-Am has also identified alternative sites in the Dolan Road area of Moss Landing.  Pajaro/Sunny Mesa is working with a cooperative landowner, and has already signed an initial lease agreement with cost and other terms to be negotiated.  MPWMD has not pursued property owner negotiations to date, and has identified several alternative locations for various desalination project components.  All projects entail pipeline alignments that will require cooperation of several landowners, including private and public entities.  A notable entity is the Moss Landing Harbor District, from which permits as well as possible lease agreement amendments for intake and outfall pipelines will be needed.


Both the ASR and reclaimed water projects include existing facilities with functioning leases or ownership in place.  The MPWMD has a 50-year lease with the US Army; MRWPCA owns the treatment plant site and existing facilities; only pipeline and pump station right-of-ways would be needed.  


Operations Issues (lines 63-64)

Two major issues are reflected herein:  (1) identify the technical, managerial and financial capability (TMF), as defined by the State Department of Health Services (DHS) of the sponsor to implement a major water supply project, and (2) how interruptions to power or source water flow are addressed. 


TMF Capability:  Cal-Am is an investor-owned public utility that is a division of a major water services corporation, and District staff presumes it can meet the TMF criteria with in-house and consultant staff; Cal-Am currently operates a 39,000-customer water system in Monterey County.  Its rates must be approved by the CPUC.


Pajaro/Sunny Mesa is a small but expanding community services district that presently provides multiple governmental services, including wastewater and retail water services, for approximately 3,000 customers in northern Monterey County, including pending expansion approvals.  Monterey County LAFCO is in the process of establishing a larger sphere of influence for P/SM.  The agency has two current TMF certifications from DHS.  With a total annual budget of less than $150,000 and five current full-time employees, P/SM notes that it will need to expand its Board and staff, and outsource extensive engineering and legal services to implement a major regional water supply project.  The engineering firm currently retained by P/SM has desalination experience and was recently awarded a contract to implement a desalination pilot project for the Marin Municipal Water District.  P/SM will need an infusion of funding to hire staff and retain consultants to prepare environmental and engineering documents to obtain project permits in the next two years. An unresolved question is the source and timing of this funding.


MPWMD staff and consultants have extensive expertise in water supply planning, hydrology and engineering; the agency has obtained permits for a major reservoir project and smaller desalination and ASR projects in the past.  MPWMD is not a water purveyor, though it has successfully designed, constructed and operated an ASR facility.  Water from MPWMD facilities would be integrated into the Cal-Am system, which is the local water purveyor.  MPWMD would likely outsource for design, construction and operation of the desalination plant.  As a public agency, MPWMD financial resources are limited by its various sources of revenue. 


MRWPCA and MCWD are public agencies with established certified water operators with extensive experience with water and wastewater systems.  As public agencies, their financial resources are limited by their various sources of revenue. 


Power and Water Source Interruptions:  This topic addresses the ability of the sponsor to address planned and unplanned interruptions in electrical power and water (examples: power blackout, intake pipeline maintenance, repair of damaged conveyance pipeline).   Cal-Am has analyzed Duke’s operations and believes its CWP can successfully be operated within the Duke premises.  It has planned for water delivery interruptions by planning a forebay, emergency storage and ASR as a backup.  Pajaro/Sunny Mesa, MPWMD and MRWPCA similarly cite back-up power, emergency storage and/or redundant equipment to alleviate the effect of interruptions.  P/SM is investigating the feasibility of a 30-acre solar energy power generation grid adjacent to the plant.  MPWMD has planned redundancy for some components to minimize loss of production.  Regardless of project, customers within the Cal-Am system benefit from other sources of supply (such as wells in Carmel Valley and Seaside) that could function as temporary supply sources if the main source of supply is off-line. 


Project Participants/MPWMD Role (lines 67-69)

A variety of concepts have been aired by the proponents, but none has been formalized at present.  Cal-Am and MCWRA negotiated the terms of a proposed Letter of Intent to jointly develop the Coastal Water Project. In March 2004, the County Board of Supervisors authorized MCWRA to enter into that Letter of Intent, but have not developed further agreements.  The nature and timing of their partnership is uncertain at present (see “Unresolved Questions” below).  Cal-Am has reiterated its intent that the CWP be a public-private partnership with the facility ultimately owned by the public.  Cal-Am or the County have not solicited MPWMD as a partner, with the possible exception of the ASR component (see “Unresolved Questions” below). 


The Pajaro/Sunny Mesa Board of Directors has authorized its staff to develop a JPA with MPWMD.    No formal action to date has been taken by MPWMD.  P/SM has also met with other entities and indicated a willingness to meet the water needs of coastal communities between Moss Landing and the Monterey Peninsula. 


The MPWMD desalination and ASR projects have been viewed solely as MPWMD projects.  Similarly, no additional partners beyond MRWPCA, MCWD and MCWRA are currently anticipated for the reclaimed water project.


Public Involvement (line 72)

The three desalination proponents have engaged the public in their respective project planning processes beyond the minimum required by CEQA.  Each has hosted informational meetings and/or made presentations to jurisdictions or groups.  Currently, Cal-Am has the most extensive public outreach program with many community forums.  Pajaro/Sunny Mesa has concentrated on agency and jurisdiction presentations.  MPWMD had regular quarterly public update meetings through early 2004.  Current MPWMD communications are through written weekly summaries posted on its website, including desalination project and ASR activities.  MRWPCA currently does not have a public outreach program, but plans one once the Final EIR on the RURWP is certified.


Staff appreciates the proponents’ efforts to fill in the matrix and respond to staff questions to date. Based on staff review of information received through September 22, 2004, there are new questions related to unresolved issues and facts that need to be clarified.  Some questions could be answered relatively soon, while others may not be known for many months.  The proponents will first see these questions on September 24, the publication date of this information package.  Staff will update the Board on September 29 if additional information becomes available in consultation with the proponents.  The questions are divided by project as follows:


Questions Common to More than One Project

Ø      How would estimated project costs compare if the same interest rate and term for project financing were used along with other factors that could be standardized, such as cost of electricity?

Ø      What is role of NEPA and the need for an EIS for each project?

Ø      How can ASR or reclaimed water be added to each desalination project (engineering logistics)?  (See other ASR questions below.)


Questions about the Coastal Water Project 

Ø      Is Monterey County a partner of Cal-Am or not?  If so, what would MPWMD’s participation be? If not, would MPWMD or some other public agency or agencies take its place? 

Ø      If Monterey County is not a partner, will the CWP be downsized to meet only the water needs within the current Cal-Am service area?  What project size would be assumed?

Ø      Note that all cost information on the 10,730 AFY provided by Cal-Am to date is based on being a portion of a larger 20,272 AFY plant with attendant economies of scale.  If a smaller 10,730 AFY stand-alone project is proposed, when will new, accurate cost estimates for the smaller project be developed?

Ø      What are the assumptions about ASR?  Is ASR viewed primarily as a backup supply in case of failure of the desalination plant or is it considered as an additional source of supply (or both?)

Ø      Will ASR be constructed and operated by Cal-Am or MPWMD?  (Note: see additional ASR questions below.)

Ø      When will Cal-Am initiate proceedings to acquire additional water rights for direct winter diversion of Carmel River waters?


Questions about the North Monterey County Desalination Project

Ø      Much of the submitted cost information to date is based on regional or national averages rather than a site-specific assessment.  When will more detailed site-specific information be developed?

Ø      Will preliminary planning, environmental review documents (EIR), permits and site-specific engineering be funded by Pajaro/Sunny Mesa or not?   If not, who is expected to pay and/or carry out this work?

Ø      When and how will negotiations over the National Refractories site acquisition/leasing cost and other terms be completed?  It is understood that a “clean” remediated site for the desalination project is one condition.

Ø      What is the time line for research on the feasibility of the solar energy component? Will P/SM fund this effort?

Ø      Do the current cost estimates include the solar energy component?  If not, can an estimate be made at this time? 

Ø      Are the time line estimates for the permit process realistic, especially assumptions about NEPA compliance?


Questions about MPWMD Sand City Desalination Project

Ø      Does MPWMD plan to complete and circulate the Draft EIR for its desalination project?  This effort would require budgeting and revised contract authorization to incorporate significant new hydrogeologic information learned since the Board Review Draft EIR was completed in December 2003.

Ø      March 2004 engineering studies concluded that the “offshore HDD” well technology is infeasible, while an “onshore HDD” technology should be viable.  Should MPWMD conduct more engineering field tests to confirm the viability of onshore HDD?

Ø      Should MPWMD expand the investigation of using the MRWPCA outfall for brine discharge due to new information indicating limited opportunities in the Fort Ord coastal area?


Questions about MPWMD ASR Project

Ø      Is MPWMD moving forward on an ASR project for either water supply and/or addressing current adverse hydrologic conditions in the Seaside Basin coastal subareas?  (Note: An MPWMD Board agenda item is currently scheduled for October 2004 to begin the EIR process for a long-term ASR project in coordination with the SWRCB water rights process.)

Ø      If MPWMD is moving forward on ASR, should ASR be considered as part of all of the desalination projects?  Should the ASR cost included in the CWP project be removed or should ASR costs be added to the other two desalination projects?

Ø      Does going forward on ASR in the near-term have any adverse effect on any of the other projects?

Ø      What effect will current litigation/water rights issues in the Seaside Basin have on ASR?


Next Steps and Concepts for Future Action

The basic decision the Board needs to make is, “What project or projects does MPWMD wish to pursue to ensure a secure and reliable long-term supply?”  Ancillary questions that are associated with this basic decision include:


Ø      Should the Board proceed with a special meeting on October 28 to consider pursuit or additional investigation of water supply alternatives? 

Ø      Should the decision timing be based primarily on adequate information being obtained (regardless of date), or on a Board timetable (regardless of the completeness of the information)?

Ø      What criteria should be used to select a project(s) to pursue?  Examples include: yield capacity, timeline to water delivery, cost, site control, technical feasibility issues, environmental effects, and opportunities for MPWMD partnership.

Ø      Are some criteria more important than others (weighing)?


The following are decision-making process concepts for the Board to consider for future action.  Some will entail funding authorization to retain consultants to perform specific tasks.  Such activity is not currently budgeted for fiscal year 2004-2005.  The concepts include:


Ø      Consider a third party review (i.e., independent expert or panel) of the desalination cost information to assess whether or not cost estimates are within reasonable range of accuracy based on engineering judgment.

Ø      Continue District staff’s assessment of each project proponent’s timeline based on other agencies’ experience.  Several desalination project proposals are being considered in Southern California and the Bay Area.

Ø      Determine the qualifications and experience of the project sponsor, partners, consultants, and/or management team in successfully carrying out a similar scale of project.