ITEM:		INFORMATIONAL ITEMS/STAFF REPORTS
25.	QUARTERLY WATER SUPPLY PROJECT STATUS REPORT
Meeting Date:			October 16, 2006	Budgeted:	N/A
From:			David A. Berger	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Henrietta Stern	Cost Estimate:	N/A
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

This is a quarterly report on District water supply augmentation projects for the July through September 2006 period. The next quarterly report will be written in January 2007. Limited background information is provided herein. A detailed historical overview of previous action may be found in year 2003 and 2004 reports. Information is also available as part of the weekly General Manager’s letter to the Board, and quarterly updates at the January, April, July and October regular Board meetings, all of which can be found on the District website at: http://www.mpwmd.dst.ca.us

Based on a Strategic Planning Session held on September 8, 2005, and ratified at the October 17, 2005 regular meeting, the Board identified the following water supply objectives for year 2006:

WS1: Determine existing and future water needs.

WS2: Evaluate water supply options to meet community needs.

WS3: Determine MPWMD role in governance of Regional Urban Water Supply project.

WS4: Encourage public participation and understanding.

WS5: Pursue MPWMD water supply projects.

WS6: Create Board Water Supply Committee and charge (deleted January 26, 2006).

A series of five workshops were held to help achieve the water supply objectives dates as shown below:

1/25/06: Aquifer Storage and Recovery (ASR) – Overview and Future Possibilities

2/22/06: Regional Urban Water Supply Board Governance

3/23/06: Water Needs Analysis, Existing Setting and Demand

5/18/06: Water Needs Analysis, Future Demand at Buildout

6/29/06: Desalination Projects Assessment

In addition, the annual Water Supply Augmentation Update (Comparative Matrix) will be reviewed at the October 16, 2006 Board meeting.

This report is the last report to address the above objectives. New objectives developed at the September 25, 2006 Strategic Planning Workshop will be ratified by the Board at its October 16, 2006 meeting. The next quarterly report in January 2007 will address action on the new objectives.

The following paragraphs describe action on Water Supply Objectives WS1 through WS5 in the July 1 through September 30, 2006 period. For clarity, background information is provided for certain objectives.

WS1: DETERMINE EXISTING AND FUTURE WATER NEEDS

At the March 23, 2006 special workshop, District staff concluded that, all things considered, 7,690 acre-feet per year (AFY) of replacement water would be needed at a minimum to meet existing water needs. A maximum of 13,236 AFY could be needed, depending on the assumptions made. A second workshop was held on May 18, 2006 to address future water needs, based primarily on projections made by the District’s Technical Advisory Committee (TAC), comprised of jurisdiction planning staff. The TAC evaluated water needs associated with various types of uses anticipated at “build-out,” based on current General Plans. An estimated 4,545 acre-feet would be needed to meet these needs, including a 20% “contingency” factor to cover unanticipated water needs or upgrades from current restrictions as well as “paying back” current retrofit credits allowed by MPWMD Rules & Regulations (“borrowed” against a future water allocation). The data from these workshops is being used by consultants retained by the California Public Utilities Commission (CPUC) in its environmental review of the Coastal Water Project (CWP) proposed by California American Water (Cal-Am). The consultants have met with District staff on several occasions this quarter to better understand existing and future community needs, and how those needs may relate to various alternatives to the CWP.

WS2: EVALUATE WATER SUPPLY OPTIONS TO MEET COMMUNITY NEEDS

At its February 23, 2006 meeting, the District Board approved retaining a team of water supply engineering design experts led by Bookman-Edmonston/GEI Consultants to conduct an independent technical evaluation of three proposed desalination projects previously reviewed in the comparative water supply matrix: (1) Coastal Water Project at Moss Landing proposed by Cal-Am; (2) the Monterey Bay Regional Desalination Project at Moss Landing proposed by Pajaro/Sunny Mesa Community Services District (PSM); and (3) MPWMD desalination project proposed in the Sand City area. Through mid-June 2006, District staff and consultants reviewed available reports and worked with Cal-Am and PSM to obtain the most recent available engineering and cost information. This culminated in a report presented to the Board at its June 29, 2006 workshop. The consultants provided an independent review of the following attributes for each of the three desalination projects:

Ø Function (Purpose and Water Distribution);

Ø Projected Performance (Desalination Process and Waste Stream);

Ø Economics (Cost and Financing);

Ø Regional Supply Considerations (Regional solutions and Redirected Impacts);

Ø Implementability (Permits and Readiness to Proceed).

The consultants noted that all projects are at early stages of development, which precludes accurate comparisons of component costs. Recommendations were made to increase the contingency amounts for the Moss Landing projects and reduce the estimated cost of operations for the MPWMD Sand City project. Copies of the full report are available at the District office, and presentation materials are provided at the following website location:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2006/20060629/0629agenda.htm.

At the June 2006 workshop, B-E/GEI representatives responded to a number of questions and comments by the Board and public. At the end of the workshop, the Board asked for the cost for additional work by B-E/GEI to revise the final report by including responses to comments and questions during the workshop.

At its July 17, 2006 meeting, the Board was advised that $15,000 is needed to respond to comments and revise the report. The Board determined that additional funds should not be expended to revise the report at that time, and to defer action on amending the B-E/GEI contract until after the September 25, 2006 Board Strategic Planning Workshop. District staff was directed to solicit written comments from Cal-Am and Pajaro/Sunny Mesa Community Services representatives and to prepare a summary of oral and written comments. A summary of comments by the Board, the public, and project proponents, including copies of written comments received was provided to the Board in a memorandum from the District Engineer dated September 12, 2006. The Board will address the contract amendment issue at its October 16, 2006 meeting.

WS3: DETERMINE MPWMD ROLE IN GOVERNANCE OF REGIONAL URBAN WATER SUPPLY PROJECT

District staff continues to coordinate with Monterey County Water Resources Agency (MCWRA), Monterey Regional Water Pollution Control Agency (MRWPCA), Marina Coast Water District (MCWD) and other entities on regional water supply solution opportunities. The District General Manager continues to participate in Monterey County-led meetings of a Managers Working Group comprised of water/wastewater districts and cities from the Monterey Peninsula and north Monterey County, including the northern Salinas Valley, regarding a potential governance structure for a regional water supply planning entity currently known as the Monterey Bar Regional Water Authority (MBRWA). Managers Working Group has also worked on a draft memorandum of understanding and scope of work to enable formal consideration of the regional water supply planning entity by all effected agencies.

WS4: ENCOURAGE PUBLIC PARTICIPATION AND UNDERSTANDING

District staff continues to communicate with the public through weekly updates posted to the District website and monthly presentations at Board meetings, which are carried by public access television. Public participation and understanding of water supply issues was a major goal of the five special workshops noted above. On August 31, 2006, a special workshop was held to hear a presentation by a company that is proposing Seawater Conversion Vessels (SCV), which entails use of ships located offshore to desalinate water and convey treated water to Monterey Bay customers. The District helped plan and attended a AMBAG-sponsored public workshop on September 27, 2006 entitled “Be Smarter About Desal.”

WS5: PURSUE MPWMD WATER SUPPLY PROJECTS

The primary water supply efforts at this time focus on ASR, including: (1) continued testing of the existing full-scale Santa Margarita Test Injection Well; and (2) pursuit of the permanent Phase 1 ASR Project at the Santa Margarita test site planned to be operational in year 2007. In June 2005, the Board approved a user fee adjustment to fully fund the Phase 1 ASR Project.

For reference, at the September 2004 strategic planning workshop, the District Board confirmed that it would not proceed on further analysis of a local MPWMD-owned desalination project in the Sand City area at this time, and instead focus its efforts on collaboration with other agencies on regional water supply solutions, as well as pursue the MPWMD Phase 1 ASR Project.

Conduct ASR Testing in 2006

ASR entails diverting excess water flows (typically in Winter/Spring) from the Carmel Valley Alluvial Aquifer through existing Cal-Am facilities and injecting the water into the Seaside Groundwater Basin for later recovery in dry periods. Since 1996, the District has evaluated the feasibility of ASR at greater levels of detail, including obtaining annual temporary water rights to divert water from the Carmel River Basin water and inject it into the Seaside Basin. From 1998 through March 2005, the District injected approximately 1,450 acre-feet (AF) of excess winter flow from the Carmel River Basin into the Seaside Basin at the MPWMD Santa Margarita Test Injection Well (SMTIW) located on the former Fort Ord military base, just east of General Jim Moore Boulevard near Eucalyptus Avenue. During this period, approximately 1,140 AF were recovered and delivered to the community via the Cal-Am system as part of the test program.

On December 14, 2005, the District received a temporary permit #21175 from the SWRCB for continued ASR testing through May 2006, pending adequate flows in the Carmel River as set by the SWRCB in consultation with federal and state fishery agencies. An annual diversion limit of 650 AF was set for 2006. Injection testing began on January 4, 2006 and proceeded until January 31, 2006, when flows dwindled. Diversions began anew on February 27, 2006 and continued through May 2006. In Water Year 2006, a total of 411 AF were diverted and injected into the Seaside Basin. Thus, the grand total to date is 1,863 AF at the SMTIW site. Various testing efforts associated with water quality and storage have been carried out through September 2006.

District and Cal-Am representatives finalized a Management and Operations Agreement (MOA) regarding ASR testing, mutual aid, cost-sharing, water rights and other issues. The MOA was signed by both parties in late March 2006. Since then, several cooperative meetings and action on ASR technical issues and water rights have occurred.

Prepare EIR/EA to Evaluate MPWMD ASR Project

In Fall 2004, the Board directed staff to prepare an Environmental Impact Report (EIR) on the District’s ASR project, and retained Jones & Stokes Associates (JSA) and Padre Associates to assist in this effort. A Notice of Preparation of an EIR was issued on December 13, 2004. Based on comments received, the Board in March 2005 directed staff and consultants to focus only on the Phase 1 project. The document also became a combined EIR and Environmental Assessment (EA) to meet both state and federal environmental review requirements. Please refer to previous quarterly reports in 2005 and 2006 or weekly reports on the District website for specific details on the project and document preparation history.

The primary goal of the MPWMD Phase 1 project is better management of existing water resources to help reduce current impacts to the Carmel River, especially during the dry season. The project is viewed as being complementary to other larger, long-term water augmentation projects that are currently being explored by various entities. The project entails a maximum diversion of 2,400 acre-feet per year (AFY) from the Carmel River for injection, a maximum extraction of 2,000 AFY from the ASR wells in the Seaside Basin, and an average yield of about 920 AFY. The proposed operation of the Phase 1 ASR Project would result in reduced pumping of the Carmel River in the Summer/Fall and increased storage in the Seaside Basin, which are both considered to be environmentally beneficial.

On March 23, 2006, the District issued the Draft EIR/EA on the MPWMD Phase 1 ASR Project, including information on a Cal-Am temporary pipeline associated for the project, at the request of the U.S. Army. The document was circulated for comments through May 8, 2006, and an extension May 22, 2006 was granted to agencies that requested it. A public hearing to receive oral comments was held on April 17, 2006. A total of nine comment letters and one oral comment (referring to a letter) were received in May and early June 2006. A Notice of Availability, Executive Summary and detailed impact table are on the District website:

http://www.mpwmd.dst.ca.us/asr/EIREA_NOCmailer_031706.htm.

This past quarter, District staff and consultants developed responses to public comments, with emphasis on comments submitted by California Dept. of Fish and Game (CDFG), and National Marine Fisheries Service (NMFS) (NMFS, also known as NOAA Fisheries), which encapsulate many comments offered by other entities.  Notably, both CDFG and NOAA previously filed water rights protests. An extensive effort, including meetings, computer modeling and formal correspondence, was made to resolve water rights issues as part of the EIR responses to comments. On August 21, 2006, the MPWMD Board certified the Final EIR/EA, including responses to comments, adoption of formal Findings of Approval, and adoption of a Mitigation Monitoring Plan to address project impacts. Additional information is available on the District website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2006/20060821/10/item10.htm

The certified EIR/EA is now being used a primary decision-making tool by permitting entities such as the U.S. Army, State Water Resources Control Board (SWRCB), and the City of Seaside. On September 19, 2006, the U.S. Army transmitted a signed Right-of-Entry permit, a key approval needed to construct the Phase 1 ASR Project. District staff has provided supplementary materials to the City of Seaside; its Planning Commission will consider a Conditional Use Permit for the Phase 1 ASR well on October 11, 2006. Cal-Am has written a letter of support urging the City to approve the District project. Assuming permit issuance, the District plans to break ground for drilling the ASR well on December 1, 2006, and complete the well within weeks thereafter.

Obtain Water Rights Permit for ASR Project

District staff continue to coordinate with SWRCB staff to: (1) update the SWRCB on progress on the EIR/EA on the Phase 1 ASR project; (2) protest dismissal efforts with CDFG and NMFS (see above); (3) describe coordination with Cal-Am; (4) determine next steps for the District’s permit application for water rights for the long-term ASR project; (5) discuss other District water rights issues; and (6) describe the Seaside Basin status and activities. Regarding Item 4, two Petitions for Change were originally submitted by the District in October 2001 and revised in September 2003. The SWRCB noticed the District’s Petitions on April 15, 2005. The District prepared formal responses to the NOAA Fisheries and CDFG protests in mid-June and July 2005, respectively. Since then, the District has worked with NOAA and CDFG regarding finalizing protest dismissal terms. If the two protests are dismissed, the SWRCB could issue a water rights permit for the Phase 1 ASR Project administratively in a short period of time, hopefully by the end of 2006, in time for the winter rainy season.

In related action, District staff continues to coordinate with SWRCB staff about the water rights for the associated with the New Los Padres Reservoir Project (issued in 1995). The District transmitted a July 2006 letter requesting an extension of time for the reservoir permits to maintain the water rights associated with them. On a positive note, an important element of the MOA between MPWMD and Cal-Am is retraction of previous Cal-Am complaints and other communications to SWRCB challenging various water rights held by or proposed by MPWMD.

Participate in Seaside Basin Management as Part of Watermaster

The adjudication of the Seaside Basin also affects water project activities. Litigation filed by Cal-Am on August 14, 2003 asserted Cal-Am’s water rights and requested a Court adjudication of the Seaside Basin. The District was a recognized Interested Party and participated in all litigation activities through 2005. Judge Robert Randall rendered a Final Decision on March 27, 2006. The complex and lengthy Decision determined that the Seaside Basin is in overdraft; set a reduced “natural safe yield” and a near-term “operating yield” allowed to be produced by the parties as they work toward a “physical solution” (including ASR and wastewater reclamation) to eliminate the overdraft. A nine-member Watermaster Board was created to implement the Decision with continued oversight by the Court. The MPWMD holds one seat on the Watermaster with two out of 13 votes. The MPWMD Board selected Chairwoman Michelle Knight as the MPWMD representative to the Watermaster Board. The Watermaster has held monthly meetings since its formal commencement on April 5, 2006. District staff have also participated on the Watermaster Technical Committee and contributed significantly to the Basin Monitoring and Management Program report that was submitted to the Court in late May 2006. District staff continues to contribute data and analysis as a Technical Committee member.

Interagency Cooperation

District staff continued to work with Cal-Am staff and consultants to discuss ways to further ASR as a needed component of the “water portfolio” for the Peninsula, both now and in the future. The District continues to work with Cal-Am and resource agencies to develop quarterly management strategies to reduce impacts to the Carmel River and Seaside Basins, while meeting community water needs.

District staff led the effort to obtain $497,000 of Proposition 50 grant funds to prepare an Integrated Regional Water Management Plan (IRWMP) for the Monterey Bay Area. Final written approval of State Department of Water Resources (DWR) funding was made in early January 2006. Since then, the District staff has worked closely with its local public and non-profit partners to complete the IRWMP, including retaining specialized consultants for this type of work. A Draft Plan is nearing completion in October 2006. Completion of a professional IRWMP will position our Area to receive implementation funds for specific projects, such as the MPWMD ASR Project.

RELATED WATER AUGMENTATION ACTIVITIES

The following table summarizes related water augmentation efforts in the January–March 2006 period. These activities do not directly reflect the six water supply objectives, but are relevant to overall water supply efforts.

ACTIVITY	ACTION
Seismic Retrofit and Sediment Removal from San Clemente Reservoir.	District staff participated in the EIR/EIS process on the seismic retrofit of San Clemente Dam. Potential removal of sediment from San Clemente Dam continues to be explored by Cal-Am, California Department of Resources (DWR), and the U.S. Army Corps of Engineers (USCOE). District staff participates in technical meetings and provides technical expertise upon request. In late June 2006, District staff submitted extensive technical comments on the Draft EIR/EIS issued in April 2006.
Implement and Refine Water Distribution System (WDS) Rules and Regulations.	Ordinance No. 122 refining the Water Distribution System (WDS) process became effective on September 14, 2005. The ordinance created a Pre-Application process for all new wells in the District along with an impact-based, multi-level permit process, based on the size, location and water use of affected parcels. Staff and consultants continue to refine Implementation Guidelines and forms to accompany the ordinance. More than 30 applications are currently at various stages in the permit process. In a related matter, the Board in July 2006 adopted the second reading of Ordinance No. 124 to exempt projects in the Former Fort Ord served by water sources other than the Carmel River or Seaside Basin from MPWMD WDS regulations. This is most pertinent to service by Marina Coast Water District for redevelopment as part of Fort Ord Reuse Plan. In August 2006, the General Manager issued WDS Memo #3, which addresses environmental review and permit protocol for applications that include wells located in the Carmel Valley Alluvial Aquifer (CVAA). The Board is scheduled to confirm this administrative direction at its October 2006 meeting. The memo directs more rigorous review based on letters received from NMFS and CDFG on the cumulative impacts on water extractions from the Carmel River.
Review CEQA Documents for Other Projects	The District logs incoming CEQA notices and comments on selected documents prepared by other agencies for projects within the District boundary that could potentially affect water supply, water quality or environmental resources managed by the District. Projects or issues of note this quarter included adequate water supply for new development at Ryan Ranch (City of Monterey) and the proposed Mitigated Negative Declaration for the Villas at Laguna Seca project (Monterey County).

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Draft 1,unreviewed, 10/4/06