CONSIDER APPLICATION TO Amend California American Water Distribution System to ServE Monterey Bay Shores Ecoresort IN Sand City; California American Water and Security National Guaranty, co-applicants; MPWMD Application #20080915MBS; APN 011-501-014


Meeting Date:

July 19, 2010





Darby Fuerst,




General Manager

Line Item No.:    



Prepared By:

Henrietta Stern

Cost Estimate:



General Counsel Review:  No review to date. 

Committee Recommendation:  N/A

CEQA Compliance:  The MPWMD, as a Responsible Agency, will rely on the EIR for the Monterey Bay Shores Resort (SCH #97091005) previously certified by the City of Sand City in December 1998, and the Addendum to the EIR (December 2008) adopted by the City on January 20, 2009.  A Court Order directs that MPWMD cannot interfere with the Seaside Basin Adjudication Orders and cannot address environmental impacts to the Seaside Groundwater Basin, or co-mingling of Carmel River and Seaside Basin sources.


SUMMARY:  As the result of litigation, pursuant to a Court Order, this action is a re-opening of the public hearing held to  consider Application #20080915MBS (Exhibit 21-A) submitted on September 15, 2008 by co-applicants California American Water (CAW) and Security National Guaranty, Inc. (SNG).  In brief, the application requests District approval to increase the CAW water distribution permit to enable it to produce up to 90 acre-feet per year (AFY) of SNG adjudicated water from its inland wells in the Coastal Subareas of the Seaside Groundwater Basin only if the water is used to service Assessor’s Parcel Number (APN) 011-501-014, the site of the proposed Monterey Bay Shores Ecoresort (MBSE) in Sand City, shown in Exhibit 21-B.  The Application and in particular, the 90 AFY is based on pumping and water rights held by SNG as specified in the Seaside Groundwater Basin Adjudication Judgment of March 27, 2006, Monterey County Superior Court Case #M66343, as amended (“Adjudication Decision”), and approved by the Seaside Basin Watermaster in a letter dated September 19, 2008 (Exhibit 21-C).  In essence, CAW is “wheeling” (delivering) SNG’s water. 


The 39.04-acre project site was used for sand mining for 60 years, and has been in a degraded state for many years.  The resort proposal now includes the following uses:  (1) a 161-room hotel; (2) 46 visitor-serving condominium units; (3) 42 additional visitor-serving condominium units; (4) 92 residential condominium units; (5) auxiliary uses to include a restaurant, conference and spa facilities; and (6) parking, open space area, public access, and trails.  Many “green” technologies are proposed, as described on the MBSE project website. 


There are existing on-site wells owned by the applicant, but these are not part of the application currently before the Board.  The District owns two monitor wells located on the subject parcel. This application has a lengthy regulatory and legal history, which is described in the “Background” section below, along with links to agenda materials on the District website. A selected number of pertinent materials are copied herein as exhibits.  It is recommended that Board members review the agenda materials from the meetings itemized below; hard copies are available upon request. 


The “Discussion” section below focuses on new information pertinent to the application since the last public hearing in March 2009.  This includes recent Court directives resulting from litigation as well as a new agreement between CAW and SNG to ensure that Seaside Basin water is used to supply the MBSE project.


For reference, in 2007, the District approved adding the MBSE parcel to the CAW service area when the District approved WDS applications associated with the Sand City Desalination Project.  However, MPWMD Ordinance No. 132 (January 2008) created Rule 23.6, which prohibits CAW service to the MBSE parcel with desalinated water because it is not considered to be a “Sand City Site” or a Benefited Property with a Water Entitlement from the Desalination Project as defined in MPWMD Rule 11 (Definitions).  This exclusion was made in January 2008 because the MBSE project  had an adjudicated right to 149 acre feet per year of water from the Seaside Basin water, and production from the Desalination Project is limited.  The Conditions of Approval were finalized in June 2008.


The MPWMD serves as a Responsible Agency in compliance with the California Environmental Quality Act (CEQA), and relies on environmental documents adopted by the City of Sand City (Lead Agency) and determinations made by the Monterey County Superior Court in the Seaside Basin Adjudication Decision Orders, as discussed below.  All MPWMD files associated with this application are available for review at the District office.  This public hearing has been properly noticed.


RECOMMENDATIONS:  District staff recommends that the Board take the following actions:


1.      Adopt the revised MPWMD Findings of Approval for Application #20080915MBS to Amend the CAW WDS (Exhibit 21-D) with specific reference to Findings associated with District compliance with CEQA as a Responsible Agency. The “Discussion” section below describes how certain previous Findings about project impacts to the Seaside Groundwater Basin are not allowed by order of the Court. 


2.      Approve Application #20080915MBS; authorize issuance of MPWMD Permit #M10-07-L4 with the 32 Conditions of Approval specified in Exhibit 21-E.  The Conditions of Approval include many required conditions specified in MPWMD Rule 22-D as well as several special conditions for this project, as described in the “Discussion” section below.


3.   Direct staff to file a Notice of Determination with the Monterey County Clerk in compliance with CEQA Guidelines Section 15096(i).  


BACKGROUND:  Public hearings on the application were held on November 17, 2008, January 29, 2009, February 26, 2009 and March 26, 2009.  Extensive communications were received from special interest groups, individuals and the applicant at these meetings.  To access all the submitted materials, refer to the MPWMD website for meeting agendas for these dates at:


The MPWMD Board initially continued this item in November 2008 to allow the public more time to review environmental documents associated with the MBSE, and for the applicant to respond to several information requests posed by the Board.  On January 29, 2009, the Board opened the public hearing but continued this item pending receipt of a written determination by the SWRCB regarding applicability of the one-for-one replacement condition in SWRCB Order WR 95-10, Condition 2. The SWRCB determined that the one-for-one replacement does not apply. Technical information from CAW about delivery of water solely from wells in the Seaside Basin was also requested. The Board denied the application at a public hearing on February 26, 2009 and directed that Findings of Denial be prepared; these were approved on March 26, 2009.  As described below, the applicants filed suit against the District challenging the denial, especially in relation to environmental review and impacts to the Seaside Basin.


Extensive background information is provided in the materials prepared for previous meetings. The November 17, 2008 materials are available on the District website at: (Item 11).

The January 29, 2009 staff report and presentation materials are available on the website at: (Item 18).

The February 26, 2009 staff report and presentation materials are available on the website at: (Item 15).

The March 26, 2009 staff report and presentation materials are available on the website at: (Item 14).

The Addendum to the Final Environmental Impact Report, Monterey Bay Shores Resort, SCH #97091005 (printed Dec. 2008) considered by the City of Sand City on January 20, 2009 is on the District website at:

The MBSE project website is: 

The Seaside Basin adjudication process and related information are available on the Watermaster’s website at: 


Water Rights

Integral to the MBSE water supply is the Seaside Basin Adjudication Decision.  This Decision is a complex order establishing pumping priorities, water rights and usage, basin management provisions and administration.  The Decision provides that the Seaside Groundwater Basin shall be administered by a Watermaster, and sets the groundwater quantities allowed to be used by the property owners, including SNG for parcel APN 011-501-014.  The Decision also contains production and portability provisions, with Watermaster approval, which allow parties to combine pumping facilities and delivery for maximum benefit and management of the Basin.  Thus, water may be produced from another offsite well owned by another entity and delivered to the SNG parcel so long as the well is within the Seaside Basin.  SNG was granted an Alternative Production Allocation (APA) of 149 AFY under the Decision, which is not reduced over time.    This contrasts with CAW’s Standard Production Allocation (SPA), which is reduced over time to meet the targets set by the Court.  In a letter dated September 19, 2008 (Exhibit 21-C), the Watermaster confirmed SNG’s right to produce 149 AFY from the Seaside Groundwater Basin for beneficial use on the SNG property, and confirmed that the SNG parcel could be served by a CAW well located farther in land.  More importantly, the May 11, 2009 Court Order confirmed the Basin management principle that usage of water from the basin should occur in the most beneficial way to preserve the integrity of the Basin (e.g., inland production by a CAW well is preferable to coastal production by an onsite SNG well).  Hence, CAW may produce the requested 90 AFY for service to the MBSE site through CAW wells located farther inland, and this amount will not be reduced over time.  From a hydrogeologic perspective, production from non-coastal wells is preferable to production by coastal wells as the risk of seawater intrusion is reduced. 


Citing the Seaside Basin Adjudication Decision, James Kassel, Assistant Deputy Director for Water Rights, and Chief Enforcement Officer for the SWRCB Water Rights Division, determined in a February 5, 2009 letter that the one-for-one replacement required in SWRCB Order 95-10 does not apply to the SNG situation so long as CAW water is supplied only from wells in the Seaside Basin and not from Carmel River sources (Exhibit 21-F).  The letter recommends that MPWMD require “strict water accounting methods to ensure that any use of Carmel River water does not serve this project” and that such data also be included in CAW’s ongoing quarterly reports to the SWRCB.  As explained below, District staff has recommended several Conditions of Approval that stem from the SWRCB letter, as tempered by a May 2009 Court Order and an associated water delivery agreement between CAW and SNG that specifies a “Seaside Basin only” source of supply. 


The SWRCB letter also encourages CAW to obtain 59 AFY from SNG and other available adjudicated rights to reduce pumping from the Carmel River (these rights would be subject to the one-for-one replacement requirement in Order 95-10, i.e., Condition 2).   This suggestion is not the topic of today’s action as it is outside of the scope of the WDS application. 


Litigation and Court Action

The MPWMD Board formally adopted Findings of Denial at its meeting of March 26, 2009.  The primary issues identified in the Findings include: (a) inadequate documentation of the environmental effects of exercising SNG’s water rights through service by CAW, (b) need to evaluate alternative means of supplying the MBSE parcel from Seaside Basin sources, and (c) the desire for the public to have an opportunity to comment on the environmental document.  Soon thereafter, SNG filed suit to challenge the District’s denial in the form of a “Motion to Enforce and Clarify the [Seaside Groundwater Basin Adjudication] Amended Decision” (Monterey County Superior Case #M66343).  On April 29, 2009, the case was heard by Judge Roger D. Randall, the same Judge who oversaw the adjudication process. In a May 11, 2009 filing (Exhibit 21-G), the Court made the following (summarized) seven orders: 


1.      Seaside Basin water right holders are entitled to use specified amounts, and water from inland wells is preferable to coastal wells;

2.      Seaside Basin water may be temporarily stored with water from other sources;

3.      The integrity of the Seaside Basin Adjudication “Physical Solution” must be preserved;

4.      MPWMD has the authority to regulate WDS, but cannot exercise that authority in contravention of the Physical Solution;

5.      The Physical Solution governs environmental impacts in the Seaside Basin, and no party can require CEQA review regarding Seaside Basin impacts;

6.      MPWMD Findings of Denial #17 through #21 (March 26, 2009) should be removed because they relate to Seaside Basin impacts and are inconsistent with the Physical Solution described in the Adjudication;

7.      “MPWMD has the authority to require an accounting of water quantity to satisfy itself that no Carmel River water is being used, but cannot make environmental decisions based upon mere storage of water from two sources.”  Also, “there would be no issue as to Carmel River water” if there is a “wheeling agreement” between CAW and SNG that includes “front loading” or “prior to delivery” production of water from the Seaside Basin  into a storage tank to cover any drawdown of Seaside water to be used to serve the MBSE parcel.


The Judge further ordered that MPWMD set aside its denial of the application, in particular Findings of Denial #17 through #21, reopen its hearing, and “reconsider and make a final determination” on the application in June 2009 in light of the Court’s ruling.


The District filed an appeal before the Sixth District Court of Appeal, which delayed action for roughly one year.  In April 2010, the Court of Appeal affirmed the trial court’s decision and denied the MPWMD petition for a rehearing.  The formal paperwork transferring jurisdiction back to the trial court occurred on June 1, 2010 and the District received formal notice on June 2, 2010.  The District signed a Stipulation extending the time for the rehearing to the July 19, 2010 Board Meeting and the Court has ordered July 19 as the new date by which a determination must be made by the District on the application. The parties also met on June 23 and July 1, 2010 about the staff recommendations and proposed revised Conditions of Approval.  The specific effects of the litigation on the Findings of Approval and Conditions of Approval are reviewed in the “Discussion” section below.


California Coastal Commission

District Rule 22-D-3 requires approval by the California Coastal Commission (CCC) and other entities in order for the MPWMD WDS to remain valid.  For reference, the CCC in December 2009 denied MBSE application citing water supply and several other reasons.  However, SNG filed suit; litigation is in progress and the December 2009 CCC denial is not final.  A separate lawsuit is also in progress regarding a takings claim.  The administrative record for this litigation should be produced in July-August 2010, hearings should occur in late 2010 or early 2011, but the case will likely not be resolved until mid-2011.  This situation should not impede MPWMD action on the WDS application at this time because of MPWMD Rule 22-D-3.  In addressing this issue previously, the District was advised that the CCC prefers to take action last as it addresses many different types of issues besides water.   In any case, MPWMD Condition of Approval #5 requires all legally required approvals to be in place before the WDS permit is valid.


SWRCB Cease and Desist Order and CAW Moratorium Request to CPUC

SWRCB Order WR 2009-0060, issued in October 2009, is a Cease and Desist Order (CDO) against CAW, which prescribes a series of significant cutbacks to CAW’s pumping from the Carmel River from 2010 through December 2016. CAW customers may be subject to water rationing, a moratorium on Water Permits for new construction and remodels, and fines if pumping limits are exceeded.  Ongoing lawsuits against the CDO will probably not be resolved until late 2010 or early 2011.  Specific groups of Cal-Am customers may not be affected, depending on the situation.  When the final CDO was issued in October 2009, MPWMD and CAW filed suit, and await consideration by the Court. The Monterey County Superior Court suspended (“stayed”) implementation of the CDO from November 2009 through April 22, 2010, when a new judge in Santa Clara County reinstated the CDO.  Thus, the CDO is in effect at this time and for the foreseeable future.    


On May 27, 2010, CAW submitted an Amended Application to the California Public Utilities Commission (CPUC) to authorize CAW to refuse to connect new customers in certain areas of its Monterey District, and to institute a moratorium on new or expanded water service connections for projects that obtained all their necessary governmental permits after October 20, 2009.  Specific exceptions were named, including customers who receive Entitlements of water from the Sand City Desalination Project.   The moratorium would last until either: (a) CAW shows the CPUC written confirmation from the SWRCB that CAW has obtained a permanent supply of water to replace its unpermitted diversions from the Carmel River, or (b) until litigation on the CDO results in the Court overturning the CDO, whichever comes first.  CAW has requested that the moratorium become effective immediately after approval by the CPUC.  The CPUC has not acted to date; a formal decision could occur in September-November 2010.  The full text of CAW’s filing to the CPUC may be viewed at the District website at:


As written, CAW’s moratorium request to the CPUC is ambiguous and could possibly be interpreted to not include service to the MBSE parcel, which raises the question of whether CAW would serve the parcel if this MPWMD WDS application is approved.  Specifically, the May 27, 2010 CPUC filing, under Part III, Requested Relief (page 9), states that CAW “seeks to impose, with some exceptions, a moratorium on all new or expanded water service connections in its Monterey District, if the last entitlement for that connection was obtained after October 20, 2009.” One pertinent exception is connections “served by the Sand City Water Entitlement pursuant to Monterey Peninsula Water Management District Ordinance 132 and Rule 23.6.”   The MBSE project has not received its Coastal Development Permit to date, and parcel APN 011-501-014 is specifically excluded as a recipient parcel in MPWMD Ordinance No. 132 and Rule 23.6, as it is not considered to be a “Sand City Site” or a “Benefited Property.”


Exhibit 21-H is a letter from Tim Miller, CAW Corporate Counsel, dated July 6, 2010, that addresses this situation as well as annexation of the MBSE parcel into the CAW service area.  The letter reflects discussion between SNG, CAW and District staff on July 1, 2010.  CAW never intended that the SNG parcel be included in the moratorium request because the CAW/SNG “front-loading” Water Delivery Agreement (Exhibit 21-I described in the “Discussion” section below) ensures that Carmel River water is not used on the parcel, and the moratorium request is focused on compliance with the CDO.  The applicant also asserts that the Superior Court determined that where there is “front-loading” of Seaside Basin water, there is no impact on the Carmel River.  They also assert that the SNG water rights existed prior to October 20, 2009, and are therefore not subject to the moratorium. 

The July 6, 2010 CAW letter refers to a July 1, 2010 response to the CPUC filed by SNG (Exhibit 21-J) regarding CAW’s moratorium request.  SNG has requested that the CPUC clarify that the SNG parcel is not included in the moratorium, and that all parcels within the City of Sand City be exempted from the moratorium.  CAW intends to support the SNG request.    Notably, if the District acts to approve this WDS application; any questions about actual service by CAW would be addressed by CAW and the CPUC, not the District.  This is true for any other applicant for a District Water Permit at this time, as directed by the Board.


Annexation of SNG Parcel into CAW Service Area

When the District authorized annexation of the MBSE parcel into the CAW service area as part of the Sand City Desalination Project WDS approvals in 2007-2008, a condition included a subsequent Advice Letter filed with the CPUC.  It was assumed that the initial Advice Letter had been processed, but this is not the case.  The July 6, 2010 CAW letter (Exhibit 21-H) provides a history of a series of Advice Letters that were transmitted to the CPUC, with the most recent letter formally withdrawn by CAW on November 24, 2009.  Thus, the MBSE parcel is currently not in the CAW service area.  However, the July 6, 2010 CAW letter advises the District that a new Advice Letter will be filed by July 19, 2010 in time for this hearing.  On July 9, 2010, the District received an e-mail copy of Advice Letter No. 850 filed by CAW to the CPUC (Exhibit 21-K).  Staff’s understanding is that such “Tier 2” Advice Letters are approved by CPUC Division of Water and Audits staff, unless a protest is received.


DISCUSSION:  The following paragraphs summarize pertinent older information as well as new information received after March 2009, including litigation and direction from the Court as it relates to CEQA compliance, Findings of Approval, Conditions of Approval and other issues.


CAW and SNG Agreement Regarding Front-Loading Delivery of Water

Based on the May 11, 2009 filed Court Order described above, CAW and SNG on May 18, 2009, executed an “Agreement Between Security National Guaranty, Inc. and California American Water Regarding Front-Loading Delivery of Water” (Exhibit 21-I). This will be referred to as the “CAW/SNG Front-Loading Water Delivery Agreement” herein. The co-applicants describe the Agreement as a means to: (1)  “make it clear that they intend to comply with the terms” of Court Order (Case #M66343) described above; (2) “ensure operationally that only Seaside Basin water is produced and stored for the benefit of the SNG property in advance of SNG demand for such water;” and (3) “provide assurance (in addition to accounting and reporting requirements) that there will be no temporal or other impact on waters produced or stored from other sources, including without limitation, the Carmel River.”


To achieve this goal, once the MPWMD WDS permit is obtained and a master meter is connected to the SNG property, CAW and SNG will do the following:


1.      CAW will lease up to 90 AFY of adjudicated water from SNG, and CAW will produce this water from its inland wells in the Coastal Subareas of the Seaside Basin. 

2.      At least one month before setting the master meter, CAW will pump water from its inland Seaside wells to a storage tank.  CAW “shall take whatever steps necessary to ensure” that the water produced from Seaside Basin wells delivered for SNG’s use will exceed the amount actually delivered to SNG (defined as “front-loading” delivery).

3.      CAW will pump its Seaside Basin wells “as frequently as necessary” to ensure the SNG property is only supplied by Seaside Basin water.

4.      The Agreement does not prohibit “mixing of molecules” from different sources (such as the Carmel River) in a tank, consistent with the Court decision.

5.      “The parties shall provide further assurances in writing or other documentation as necessary in order to achieve the purposes and implementation” of the Agreement.


Previous MPWMD review in February-March 2009 questioned the ability of CAW to serve MBSE solely from Seaside well(s) during the winter “high flow season.” To date, this has been a period when production from CAW’s Seaside Basin wells has been reduced or eliminated pursuant to SWRCB Order 98-04, which directs CAW to minimize production from the Seaside Basin from November 1 through April 30, when Carmel River flow at the Highway One Bridge exceeds 40 cubic feet per second (cfs).  This practice helps to maximize winter/spring water storage in the Seaside Basin for use in dry periods, thereby reducing extractions from the Carmel River Basin, when the river habitat is most vulnerable.  It is noted that Order 98-04 does not prohibit use of Seaside wells by CAW.  The October 2009 Cease and Desist Order (Order #9-c) does not change this direction, but does defer to the Watermaster to determine how water may be withdrawn from the Seaside Basin. 


Based on the language in the Agreement above, it appears CAW will “take whatever steps necessary” to ensure the SNG parcel is served solely from Seaside Basin wells, though this may be a less efficient means of operating the CAW system.  The May 11, 2009 Court Order specifically allows for front-loading to occur to enable service from Seaside wells during the winter season.   CAW also must always remain under the Carmel River annual limits set by the SWRCB, and within Seaside Basin limits set by the Court.  As noted below, MPWMD Special Condition #30 requires a formal written summary on how the “Seaside Basin” as the only source of supply will be achieved.  This is consistent with Item #5 of the Agreement, which includes “further assurances in writing or other documentation as necessary” in order to implement the Agreement.   


July 2010 Findings of Approval

The July 2010 Findings of Approval for Application #20080915MBS (Exhibit 21-D) are based on evidence provided in the application materials, including supporting documents received through June 2010, on file at the District office.  New information since March 2009 includes the May 11, 2009 Court Order and the May 18, 2009 CAW/SNG Front-Loading Water Delivery Agreement described above.  District staff believes the application meets the criteria and minimum standards for Approval set by District Rules 22-B and C.  Pertinent information includes environmental documents prepared for the City of Sand City in compliance with CEQA; technical studies, reports, memoranda and maps; correspondence between MPWMD staff, the applicant, and/or SWRCB; previous approvals by other governmental entities; action by the Monterey County Superior Court and Seaside Basin Watermaster; and review of CEQA in light of previous comments by hearing participants and direction by the Superior Court.  


MPWMD approval of the application, as conditioned, is not anticipated to result in a further effect to the Seaside Basin beyond what has already been approved and/or is allowed by Court Order.  The Superior Court’s action in the Seaside Basin adjudication includes a management plan to address the overdrafted nature of the Seaside Basin by requiring Standard Producers, such as CAW and others, to reduce their cumulative use over time until the natural safe yield of the Seaside Basin is reached.  The natural safe yield, assumes that all of the Alternative Producers, such as SNG, are using their allocated water and that the adjudicated water falls within the natural safe yield of the Seaside Basin.  The reduction of the Standard producers occurs whether or not the Alternative Producers utilize their adjudicated rights and the Amended Decision has already contemplated the use of those rights in crafting the long term management strategy to bring the Basin in compliance with the natural safe yield.  Thus, approval of the application is consistent with MPWMD Rule 22-C-4 regarding overdrafts and the Court ordered management plan for the Seaside Basin.


The SWRCB letter of February 5, 2009 and the proposed MPWMD July 2010 Conditions of Approval (Exhibit 21-E), which are consistent with the SWRCB letter and the May 11, 2009 Superior Court Order, will result in no additional impact to the Carmel River.  Only Seaside Basin water shall be allowed to be produced by CAW to serve the MBSE project, and a strict accounting of water sources used to serve the MBSE project shall be required.  The SWRCB has determined that the one-for-one replacement for new CAW supplies in Order 95-10 does not apply to the 90 AFY of SNG’s water rights set aside for the MBSE project.  The Findings of Approval also include several Findings that specifically relate to CEQA compliance by the District.  These are addressed in the “MPWMD CEQA Compliance” subsection below. 


July 2010 Conditions of Approval

The July 2010 Conditions of Approval (Exhibit 21-E) proposed for Permit #M10-07-L4 are consistent with MPWMD Rule 22-D governing approval of Water Distribution Systems.  Conditions #1 through #4 define the Permitted System, including up to 90 AFY of CAW production to serve the MBSE located on APN 011-501-014, based on SNG’s legal right to 149 AFY of Alternative Production Allocation water. 


Condition #3 includes several additional components:


·        The source of CAW supply to serve the MBSE parcel shall be derived solely from the Seaside Basin, consistent with the CAW/SNG May 18, 2010 Front-Loading Water Delivery Agreement.  It is noted that the Court allows the “comingling of water and storage from different sources,” which CAW refers to as the “mixing of molecules” in a storage tank which may receive water from Seaside Basin and Carmel River sources, so it is possible that actual Carmel River water droplets could reach the MBSE site.    

·        Due to system losses in the CAW system, the 90 AFY production limit is equivalent to a maximum of 83.7 AFY metered sales at the MBSE project site, based on assumed system losses of seven percent (7%).  The MPWMD General Manager may consider a change to the 7% loss factor if CAW provides adequate documentation (as determined by MPWMD) showing such a change is warranted.  This issue is discussed further below.

·        For the purpose of MPWMD’s Expanded Conservation and Standby Rationing Program, up to 90 AFY is added to CAW’s allowed production from the Coastal Subareas of the Seaside Groundwater Basin pursuant to the Adjudication Decision.  This means the current amount of 3,087 AFY would be increased to a new amount of up to 3,177 AFY in the next two years.  The CAW production limit of 10,429 AFY from the Carmel River, as currently set by the SWRCB as part of its Cease and Desist Order, would not be changed by this action.  


The consideration of system losses, resulting in a lower number than 90 AFY for actual metered sales to the MBSE parcel was raised by the MPWMD General Manager in January 2009, and reflects the fact that the District distinguishes between production from the well(s) and metered sales at the point of use by the customer. Based on CAW records, the system losses (sometimes referred to as “unaccounted for water”) had been more than 10% for several years.  The rate was 9.7% for the past 12 months, indicating a downward trend.   Additionally, CAW was granted authority in its last rate setting to upgrade its delivery system in Seaside and Monterey District, which should result in fewer leaks.  The CPUC has set a goal of 9.0% for the loss rate as part of the authorized rate increase approved in July 2009.  District staff is willing to change the factor to 7% (the standard target for CAW system losses in the MPWMD Rules and Regulations) given these facts.  Using a 7% loss factor, 90 AFY of CAW production is equivalent to 83.7 AFY of metered sales at the MBSE parcel.  As noted above, CAW may provide documentation in the form of a technical report to the MPWMD General Manager to support a requested change to the 7% loss factor, based on protocol approved by the MPWMD General Manager prior to the submittal of the technical report.  Importantly, the SNG situation is not the same as the Sand City Desalination Plant WDS, where a brand new pipeline will transmit desalinated water directly from the plant into the CAW system at a specific location only a few hundred feet away.  The District did not impose a system loss factor for the desalination project WDS due to that unique situation.


Conditions #5 through #23 reflect standard MPWMD mandatory conditions, including water quality, metering and annual reporting, conservation, required Indemnification Agreement, fee payments, timely notice of pending or actual changes to the system, and other required elements.  Condition #5 addresses approvals by other agencies, which is required by District Rules 22-D-1-c and 22-D-3.  This condition has been revised to specifically name pertinent agencies that regulate the MBSE project, and states that the validity of the MPWMD WDS permit is contingent on project approvals by these other entities.  Other Conditions of Approval (Conditions #24 and #25) address basic water rights and the Endangered Species Act; these conditions are not required by District rules, but are included in all MPWMD WDS permits. 


Special Condition #26 addresses the requirement that District staff have physical access to the two dedicated monitor wells owned by MPWMD on APN 011-501-014, in addition to the existing production well owned by SNG.  The District’s wells must be maintained in good condition throughout construction. 


Special Condition #27 requires SNG and its successors to provide copies to the District of any report submitted to the Watermaster on water levels in its production well(s) on a monthly basis; the amount of water it has produced on a quarterly basis; and certain water quality test results on an annual basis each Fall. It also requires CAW to provide metered sales information to parcel APN 011-501-014 on an annual (water year) basis, and more frequently, if directed by the MPWMD General Manager.  This information is used to ensure that metered sales to MBSE do not exceed the 83.7 AFY limit imposed in Condition #3.


Special Condition #28 requires SNG and its successors to give notice to the District and copies of any correspondence with the Watermaster regarding transferring the right to produce water from the Basin under an Alternative Production Allocation right to a Standard Production Allocation right. 


Special Conditions #29 through #32 are intended to be consistent with the SWRCB letter dated February 5, 2009 (Exhibit 21-F), the May 11, 2009 Court Order (Exhibit 21-G) and the CAW/SNG Front-Loading Water Delivery Agreement (Exhibit 21-I).    


Condition #29 states that CAW must implement “strict water accounting methods approved by the MPWMD General Manager” to track CAW production sources to ensure that only Seaside Basin wells (and not Sand City desalination water) serve the MBSE parcel identified as APN 011-501-014, and no Carmel River Basin water is produced to serve the subject parcel, consistent with the May 2010 Court Order and Water Delivery Agreement.  The condition also requires monthly quarterly reporting of daily MBSE-related water production data, and that the reports shall be provided to MPWMD “in the manner and form as prescribed by the District.”  It adds that the data tracking and reporting protocol must be approved by the District prior to completion of construction of the MBSE project.  This means that the District will work with CAW to develop a reasonable production tracking and reporting protocol.  This condition focuses on the sources of supply for the 90 AFY maximum production in contrast to the metered sales at the MBSE parcel addressed in Condition #27. 


Condition #30 is related to Condition #29 as it addresses how CAW will actually serve the MBSE parcel with only Seaside wells, given CAW’s current practice to minimize or terminate Seaside well production during the winter “high flow season.”  Condition #30 requires CAW to submit a written Operations Plan to the District within 90 days of the CAW/MBSE WDS approval explaining: (a) which Seaside wells will be used to serve MBSE; (b) physical constraints associated with potential source wells and related infrastructure; (c) impacts to compliance with SWRCB Order 98-04, if any; (d) ramifications to the Quarterly Water Supply Strategy and Budget process; and (e) estimated production from Seaside Basin well(s) in the winter “high flow season” to serve the MBSE parcel (and potential other customers, if required due to well operation constraints).  An extension of time to submit the report may be requested by CAW subject to approval by the MPWMD General Manager.  


Condition #31 requires that CAW provide the District a copy of any quarterly report to the SWRCB that includes information about service to the subject MBSE parcel. 


Condition #32 requires SNG to ensure that any use of its on-site wells on the MBSE parcel does not result in more than 90 AFY extractions from the Seaside Basin, when CAW production is also considered.  It also requires careful tracking and reporting in the manner and form as prescribed by the District.  For example, if CAW produces 70 AF from Seaside to serve the MBSE parcel in a year, production from SNG’s on-site wells may not exceed 20 AF in that year.  It is understood that SNG does not plan to use its on-site wells unless needed as a back-up supply.  This condition is simply proposed as a cross-check and safeguard.


The net result of Conditions #3, #27, #29, and #32 is that: (a) no more than 90 AFY production will be extracted from the Seaside Basin to serve the MBSE parcel; (b) no more than 83.7 AFY of CAW metered sales will be consumed at the SNG parcel; and (c) CAW’s near-term rights to water in the Coastal Subareas of the Seaside Basin could be as high as 3,177 AFY (3,087 + 90).


The applicants have indicated that they understand these conditions, and generally agree with them, with the exception of the system losses described above for Condition #3.  Notably, District Rule 22-D-1-m as specified in Condition #19 requires written, notarized acceptance of the conditions via a Permit Condition Acceptance Form in order for the WDS permit to be valid.   Rule 22-D-1-n as specified in Condition #22 requires recordation of a deed restriction signed and notarized by the property owner that includes the WDS permit, conditions, and Indemnification Agreement between the applicants and MPWMD. 


MPWMD CEQA Compliance

The District Board action must comply with CEQA as well as MPWMD regulations.  In the review of this application, MPWMD has followed those guidelines adopted by the State of California and published in the California Administrative Code, Title 14, Section 15000, et seq.  Specifically, the MPWMD, as a Responsible Agency under CEQA for this action, has complied with Guidelines Section 15096.  The District Board has relied on previous action by the City of Sand City, the Lead Agency under CEQA.  On December 1, 1998, the City adopted Resolution SC 98-83 certifying the Final Environmental Impact Report (SCH#97091005) for approving the MBSE as originally proposed. The City also approved the project via a series of resolutions that were provided in the November 17, 2008 public hearing materials.  The City’s Notice of Determination for the FEIR was filed with the County Clerk on December 2, 1998. 


The District Board also relies on a technical Addendum, updated in December 2008, which describes the reduced size and scope of the project, particularly the reduced water demand due to new water-saving technologies that are now part of the project description.  The Addendum addresses each of the questions posed in an Initial Study, and evaluates the potential impacts associated with each environmental topic.  In relation to water supply issues, the Addendum summarizes information that is already in the public record and/or has already been evaluated by MPWMD independently as part of the WDS approval process.  The pertinent information in the Addendum includes:


·        Updated water rights status for SNG and determination of 149 AFY available to the project site as a result of the Seaside Basin Adjudication Decision;

·        Confirmation by the Watermaster that CAW may serve the MBSE parcel based on SNG’s water rights;

·        Revised water use estimates, as confirmed by District staff, for MBSE as proposed in 2009; this amount is less than the original project evaluated in the 1998 EIR; and

·        Description of the MPWMD approval process for the subject WDS permit. 


In early December 2008, a final version entitled Addendum to the Environmental Impact Report for the Monterey Bay Shores Resort (SCH # 97091005) (light blue cover, still dated October 2008) was provided to the District Board.  The project description and water-related sections of this December 2008 document were placed on the District website and a hard copy was provided in the District foyer. The Board was provided the four pages where there were minor refinements from the October 2008 to the December 2008 versions (previously distributed).  This information is included in the January 29, 2009 staff report. 


Finally, the District relies upon the environmental determinations made by the Superior Court in the Adjudication Decision and as clarified and ordered in its May 11, 2009 Order.


At a January 20, 2009 public hearing, the City of Sand City formally adopted the Addendum, including an errata sheet with minor corrections unrelated to water supply or hydrology.  The City passed Resolution #SC 96-06 that determined: (1) no major revisions to the EIR are needed for the revised project, and (2) a Subsequent EIR is not required for the revised project.


CEQA Guidelines Section 15164 states that the lead agency or a responsible agency shall prepare an Addendum to a previously certified EIR if some changes or additions are necessary, but none of the conditions described in CEQA Section 15162(a) regarding a Subsequent EIR have occurred. District staff and Counsel do not believe a Subsequent EIR is needed because the project does not: 


·        Involve new significant environmental effects or a substantial increase in the severity of previously identified significant effects due to a change in the project [Guidelines 15162(a)(1)];

·        Involve new significant environmental effects or a substantial increase in the severity of previously identified significant effects due to a change in the circumstances (setting) under which the project is undertaken [Guidelines 15162(a)(2)]; or

·        Involve new information of substantial importance that shows any of the following: (A) the project will have one or more significant environmental effects not previously discussed; (B) significant effects previously examined will be substantially more severe than previously described; (C) mitigation measures or alternatives previously found to be infeasible would in fact be feasible and would substantially reduce one or more significant effects of the project, but the project proponents decline to adopt the measure or alternative; and (D) mitigation measures or alternatives considerably different than those analyzed in the previous EIR would substantially reduce one or more significant effects of the project, but the project proponents decline to adopt the measure or alternative. [Guidelines 15162(a)(3)].


With respect to hydrology and water supply, the anticipated water demand has been reduced due to “green” technologies incorporated into the project description; the Superior Court has adjudicated the Seaside Groundwater Basin resulting in 149 AFY water rights and use assigned to SNG; and water production to serve the MBSE parcel would be pumped from CAW wells farther inland rather than by coastal wells at the project site, thereby reducing the risk of seawater intrusion.  The current CAW/MBSE application, with the proposed MPWMD Conditions of Approval (Exhibit 21-E) is consistent with the Seaside Basin Adjudication Decision, SWRCB Order 95-10, year 2009 direction by the Watermaster and SWRCB Division of Water Rights, and with the May 2009 Superior Courts Order.  There are no mitigation measures or alternatives that meet the specific criteria of CEQA Guidelines 15162(a)(3)(C) and (D) cited above. 

The Addendum and Court Order will suffice for purposes of the District as a Responsible Agency, thus fulfilling the requirements of CEQA.  Furthermore, CEQA Section 15164(c) states that an Addendum need not be circulated for public review.  As noted above, the City of Sand City adopted the Addendum at a public hearing on January 20, 2009. 


CEQA directs that projects should first avoid, then minimize and mitigate impacts, in that order.  As described above, the July 2010 proposed Conditions of Approval focus on avoidance of hydrologic impacts via: (a) serve the project only from Seaside wells in accordance with the Seaside Basin Adjudication Decision, SWRCB letter of February 5, 2009, May 11, 2009 Court Order and May 18, 2009 CAW/SNG Front-Loading Water Delivery Agreement; (b) implement stringent tracking and reporting of water production and consumption, (c) regulate on-site pumping to stay within limits set by the Seaside Basin Adjudication Decision, and to minimize pumping near the coast, and  (d) develop clear operational plans to consistently comply with the conditions.


As required by CEQA Sections 15091, 15092 and 15093, the District Board, through Findings (and cited evidence) #21, #22 and #23 (Exhibit 21-D) has determined, in relation to hydrology and water supply, that: (a) the project will not have a significant effect on the environment, (b) mitigation measures are not required as part of the District’s action on this WDS permit, and (c) a Statement of Overriding Considerations was not required to be adopted by the District Board for this action.  If the application is approved by the Board, the District will file its own Notice of Determination in compliance with CEQA Section 15096(i).  


In January-February 2009, the District received letters from CELP/Sierra Club, Land Watch Monterey County and League of Women Voters questioning the adequacy of the City of Sand City’s Addendum to the Final EIR on the MBSE project for use by the District as a Responsible Agency.  The letters questioned whether a Subsequent EIR is needed and asserted that the District’s CEQA compliance may not be adequate.  Please refer to the CEQA section in the February 26, 2009 discussion as well as the previous review of the May 11, 2009 Court Order (Exhibit 21-G) herein regarding limitations of MPWMD’s CEQA review.  Concerns about use of Carmel River water are addressed by the CAW/SNG Front-Loading Water Delivery Agreement (Exhibit 21-I) and several Conditions of Approval requiring documentation to support that agreement, as described above.      


Noticing and Public Comment

Public notice has been provided for this public hearing in several ways, including: (1) mailed notices to property owners within 300 feet of the subject parcel; (2) posted notices at the project site; (3) posted notice at the MPWMD office; (4) notice of the public hearing to recipients of District agendas for the July 19, 2010 meeting; (5) standard agenda/hearing notices to local media; and (6) posting of the CEQA documents and related materials on the District website at: and for agenda items/meetings at:


In January-February 2009, many letters, both pro and con, were received.  For this July 19, 2010 hearing, no comment letters were received by the July 13, 2010 printing deadline.  Any letters received after the printing deadline for this staff report will be provided to the Board at the July 19, 2010 hearing. 



21–A   Application #20080915MBS to amend the CAW WDS (without attachments)

21–B   Map of Project Location

21–C   September 19, 2008 Seaside Basin Watermaster letter confirming water rights

21-D    MPWMD Draft Findings of Approval, dated July 2010

21–E    MPWMD Draft Conditions of Approval, dated July 2010

21–F    February 5, 2009 letter from SWRCB

21–G   May 11, 2009 Court Order from Judge Randall

21–H   July 6, 2010 letter from CAW Corporate Counsel re: moratorium and annexation  

21–I     May 18, 2009 CAW/SNG Agreement Regarding Front-Loading of Water

21-J     SNG Response to the CPUC re: CAW Moratorium Request, dated July 1, 2010

21-K    CAW Advise Letter No. 850 submitted to CPUC dated July 9, 2010