ITEM:		ACTION ITEMS
16.	DISCUSS BOARD OPTIONS IN THE EVENT AGREEMENT IS NOT REACHED WITH CALIFORNIA AMERICAN WATER ON THE AQUIFER STORAGE AND RECOVERY PROJECT MEMORANDUM OF AGREEMENT, INCLUDING BECOMING A LICENSED WATER DISTRIBUTOR
Meeting Date:			November 21, 2005	Budgeted:	N/A
From:			David A. Berger,	Program/	N/A
			General Manager	Line Item No.: N/A
Prepared By:			Joe Oliver	Cost Estimate:	N/A
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: The Board will review and discuss options for moving forward with the Seaside Basin Aquifer Storage and Recovery (ASR) program in the event that an ASR management and operations agreement is not reached with California American Water (Cal-Am). A draft version of this agreement was reviewed by the Board at a special workshop on June 16, 2005, at which time the Board provided several recommended revisions. A revised draft document was provided to Cal-Am subsequent to that meeting. The District has not received confirmation from Cal-Am on the acceptance of the proposed revisions. Consequently, the ASR management and operations agreement is currently on hold until additional response is received from Cal-Am.

Cal-Am, as the owner of the public water distribution system (WDS) providing water to Monterey Peninsula municipal customers, maintains a water system permit from the California Department of Health Services (CDHS). In a letter dated May 2, 2005 (Exhibit 16-A), CDHS reiterated an earlier requirement for a long-term agreement between the District and Cal-Am prior to issuing Cal-Am a permit amendment allowing delivery of water from the District’s Santa Margarita Test Injection Well (SMTIW) to the Cal-Am system.

As an alternative to a long-term agreement between the District and Cal-Am, one option that Board members discussed at its September 8, 2005 Strategic Plan Workshop and requested additional information on is whether or not the District could become a licensed water system operator with the CDHS, in lieu of Cal-Am having to obtain a permit amendment for this purpose. District Counsel advises that Section 325 of the District enabling statute authorizes the District to perform "any and every lawful act necessary in order that sufficient water may be available to any present or future beneficial use or uses of the lands or inhabitants of the District." Counsel notes that the District is further specifically authorized by Section 328 to acquire public or private water systems to provide water supply, and to store water underground carry out its purposes, and is authorized by Section 331 to "provide, sell and deliver" water within the District. Section 366 allows the District to distribute water to systems such as the Cal-Am WDS from alternative sources, and fix the terms and conditions under which those alternative supplies are to be used. This is accomplished by determining the "basin production percentage" pursuant to Section 20, and compelling its use pursuant to Section 364. Section 365 authorizes the District to "require producers to produce more or less of their total water needs."

Taken together, District Counsel advises that the District is authorized to store water, and make the stored water available as a source of supply to Cal-Am. The District's statutory authority as the integrated manager of Peninsula water resources requires Cal-Am to accept and use this alternative supply, either by agreement or under regulation by the District. 

RECOMMENDATION: Staff recommends that the Board review and discuss options for moving forward with the ASR program in light of the current status of the ASR agreement negotiations and provide direction to staff on the CDHS permitting issue.

BACKGROUND: Subsequent to the Board special workshop on June 16, 2005, District staff again contacted CDHS staff in July to confirm several understandings.

1. The first was whether or not CDHS would need to process a permit amendment for injection activities at the SMTIW alone (i.e., injection but not recovery into the Cal-Am system). The answer is no, CDHS has permit authority only when water is recovered into the Cal-Am system.
2. The second question was whether or not a long-term agreement would be required if the District were to apply for and receive a WDS permit from CDHS for the ASR project (including recovery into the Cal-Am system). The answer is yes, the District would still need a long-term agreement with Cal-Am if the District was issued a WDS permit for this activity.

A follow up meeting with CDHS and Cal-Am has been scheduled, but will not take place before the deadline for this Board packet. The purpose of this meeting is to explore possible alternative options that would allow CDHS authorization of the ASR project. District staff will provide a summary of the outcome of this meeting during the discussion of this item at the November 21, 2005 Board meeting.

IMPACT ON STAFF/RESOURCES: None determined at this time.

EXHIBITS

16-A May 2, 2005 CDHS letter

U:\staff\word\boardpacket\2005\2005boardpackets\20051121\ActionItems\16\item16.doc

J. Oliver, 11/4/05, 2 pages