ITEM:		INFORMATIONAL ITEMS/STAFF REPORTS
29.	QUARTERLY WATER SUPPLY PROJECT STATUS REPORT
Meeting Date:			July 19, 2010	Budgeted:	N/A
From:			Darby Fuerst,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Henrietta Stern	Cost Estimate:	N/A
General Counsel Review: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

This is a quarterly report on Monterey Peninsula Water Management District water supply augmentation projects for the April through June 2010 period. The next quarterly report will be written in October 2010. Detailed quarterly updates have been prepared for the January, April, July and October regular Board meetings through October 2009. Starting with the January 2010 report, limited background information is provided, unless essential for clarity. The reader should refer to previous reports through October 2009 for a detailed historical overview of previous action. A brief monthly report on Strategic Plan objectives is provided at each regular Board meeting. This information can be found by clicking on the pertinent agenda item on the District website at:

http://www.mpwmd.dst.ca.us/asd/board/meetings/meeting.htm.

Updated weekly information is also available in the General Manager’s letter to the Board at:

http://www.mpwmd.dst.ca.us/gmletters/gmletters.htm.

An MPWMD Board Special Workshop on water supply alternatives was held on March 27, 2008, which provided good background information. Please refer to the District website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2008/20080327/0327agenda_rev.htm

For the past several years, the MPWMD Board has identified water supply goals and objectives at Strategic Planning Workshops. The most recent workshop was held on November 10, 2009, and resulted in 90-day, 3-year and 5-year goals, which were adopted on December 14, 2009.

Action on 90-Day or Near-Term Goals

The adopted Strategic Plan identifies a completion date of February 28, 2010 for the 90-day goals. Though that date has passed, many goals continue and segue into longer-term goals. The goals are numbered for reference only, and do not reflect priority.

Goal 1: Actively join with Marina Coast Water District (MCWD), California American Water (CAW), Monterey County Water Resources Agency (MCWRA), Monterey Regional Water Pollution Control Agency (MRWPCA), and Jurisdictions to provide input on the regional water supply planning process. Have meaningful influence over the type, management and financing of the selected regional project.

The Final EIR for CAW’s proposed Coastal Water Project (CWP) was certified by the California Public Utilities Commission (CPUC) in December 2009. A combination of projects, known as the Regional Water Project (RWP), was identified as the preferred alternative. The RWP features a 10 million gallon per day (MGD) desalination project to be constructed by MCWD in north Marina, in concert with CAW and MCWRA, along with aquifer storage and recovery and recycled wastewater components. MPWMD and other parties had not been included in the discussions on how the RWP would be constructed, operated, managed and financed. Thus, MPWMD formally requested that the CPUC include MPWMD in the settlement discussions. This request was granted in fall 2009.

From November 2009 through March 2010, MPWMD participated in CPUC-sponsored “alternative dispute resolution” meetings on the RWP, with emphasis on costs, management, oversight and accountability to the community. The CPUC set deadlines for settlement resolution or identification of issues remaining to be resolved by April 6 and 7, 2010, respectively.

MPWMD Resolution 2010-01, supporting the RWP as the best alternative, was approved at the February 28, 2010 meeting. In addition, the resolution stated that MPWMD must be involved in decision-making for the RWP “to ensure that the water needs of the citizens and environmental resources within the District are reliably met in a cost-effective manner,” and that the water users within the Monterey Peninsula area are entitled to full and fair representation in all water supply planning efforts that affect their present and future water resources. The resolution may be viewed at: http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2010/20100225/17/item17.htm.

On March 25, 2010, the Board voted 4-3 in closed session to sign the settlement agreement. Based on the March 30, 2010 release of the final project financing documents by MCWD, MCWRA and CAW, the MPWMD Board reconsidered its position on April 5, 2010 and voted 4-3 to not sign the settlement agreement. This is due to the limited opportunity for public review of the documents, the much higher project costs than were previously disclosed, and lack of protection for Peninsula ratepayers. Counsel and staff prepared formal comments on the Water Purchase Agreement (WPA) by the April 30, 2010 CPUC deadline and suggested ways the WPA and financing information could be amended to satisfy MPWMD concerns. The District reiterated its support for the RWP but not the financing and oversight.

MPWMD staff, counsel and financial consultant participated in CPUC workshop hearings in San Francisco on May 10-12, 2010, where the parties agreed on a common financial model. A revised WPA was completed on May 19, 2010 and MPWMD comments and suggested modifications were provided by the May 27, 2010 deadline. The District again participated in CPUC evidentiary hearings on the WPA on June 8-11, 2010. The Administrative Law Judge directed that the parties file legal briefs on several issues, including concerns raised by the District regarding ratepayer protection, accountability and oversight. She also encouraged the parties to continue to try to settle. To that end, the Chair/Vice Chair and General Manager met with MCWRA and MRWPCA on June 15, 2010. The District also helped publicize local hearings for the general public convened by the CPUC on June 28 and 29, 2010 in Monterey and Seaside. District counsel and staff worked through late June to submit the opening briefs by the July 2, 2010 deadline; reply briefs will be due on July 16, 2010. The CPUC has set a goal of October 20, 2010 for a proposed decision on the RWP and funding, and a final decision by the full Commission on November 19, 2010.

Goal 2: For the Aquifer Storage and Recovery Phase 1 Project, (a) inject at least 500 acre-feet of water in the 2010 season (assuming adequate streamflow), with infrastructure in place to enable 100% efficiency, and (b) determine the full project completion date.

Aquifer storage and recovery (ASR) entails diverting excess water flows, if available, in the winter season (December 1 through May 31) from the Carmel Valley Alluvial Aquifer (CVAA) through existing CAW facilities and injecting the water into the Seaside Groundwater Basin for later recovery in dry periods. District staff regularly meets with CAW consultants and staff to coordinate roles, responsibilities and tasks needed to enable operation of the Phase 1 ASR Project at full capacity. A key issue has been potential disruption to the Phase 1 activities during the realignment of General Jim Moore Blvd. near the ASR site in early 2010, a crucial injection period. District staff has closely coordinated with FORA contractors and MCWD regarding a bypass pipeline to prevent disruptions; only minor disruptions have occurred to date.

Carmel River flow allowed ASR Phase 1 operations to begin on December 13, 2009 and continued through the permit end date of May 31, 2010, except for 20 days when flow was inadequate. In the first week of March 2010, the 500 AF injection goal was achieved. At the March 25, 2010 Board meeting, a new annual goal of 1,000 AF was set, based on the wet conditions to date. As of May 31, 2010, a record-setting 1,111 AF had been diverted and injected in WY 2010. This is the largest volume of ASR injection in any one year since the program began in 1998; the previous annual record was 411 AFY. The cumulative injection total into the Seaside Basin is now 3,228 AF, equivalent to the annual supply for about 13,000 families. In 2010, the ASR facilities had operated at roughly 2,100 gallons per minute (gpm), or 84% of the current operational capacity of 2,500 gpm.

A simultaneous task is constructing the Chemical/Electrical building at the ASR Phase 1 site. The final building permit was issued and the Board approved a contractor in March 2010. Construction began in mid-April 2010, and should be completed in late August 2010.

For reference, at its March 15, 2010 meeting, the Board received the ASR Report for Year 2009. Refer the MPWMD website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2010/20100315/05/item5.htm.

Goal 3: For the Aquifer Storage and Recovery Project Phase 2, determine the timetable for project development/completion.

The project timeline is dependent on a variety of factors, especially selection of an adequate ASR Phase 2 site. MPWMD obtained permission from the Monterey Peninsula Unified School District (MPUSD) and a permit from the City of Seaside to drill a test/monitor well at the Seaside (formerly Fitch) Middle School site in October 2009. The test results were positive, and discussions with MPUSD have continued through June 2010 regarding construction of one full-scale test well in summer 2010 on the Seaside Middle School property. If the test well results are positive, the first well would become a production well and a second permanent well would also be drilled at the site in summer 2011, subject to MPUSD approval. At this writing (July 8, 2010), the project is moving forward under the District’s license agreement with MPUSD. The long-term easement arrangements between CAW and MPUSD for the site have yet to be resolved. The only opportunity for drilling in 2010 is June 7 through August 9, when school is out of session. Drilling will take at least 30 days, and entails 24-hrs-per-day operation for some of that time.

A second major issue affecting project development is water rights. CAW dropped two water rights protests it had previously filed against District’s applications, and focused on functioning as partners in this effort. Through June 2010, District staff has held separate Phase 2 water rights settlement meetings with protestants National Marine Fisheries Services (NMFS) and the Carmel River Steelhead Association (CRSA). Settlement with NMFS appears to be feasible in the near-term, but limited progress has been made in resolving CRSA’s protest.

A third issue is the capacity of the CAW distribution system to deliver injection water to the Phase 2 project. This matter is the subject of ongoing ASR coordination meetings between MPWMD and CAW staff. CAW has indicated that the needed infrastructure upgrades to deliver water supply to the ASR Phase 2 wells at full capacity may not be available until the Regional Water Project improvements are in place.

Goal 4: For the MPWMD “95-10 Desalination Project,” determine if the Board should continue pursuit of project development.

In fall 2009, District consultants completed hydrogeologic field work and laboratory analyses along the Fort Ord coastline. A technical report on desalination project feasibility was prepared and presented to the Board at its December 14, 2009 meeting. The report concluded that the coastal Fort Ord hydrogeology does not support its use as the source of subsurface feedwater for a desalination project, and the District should not pursue the project. This is primarily due to the fact that there is not a clay barrier to protect the lower Paso Robles and Santa Margarita aquifers from contamination by seawater extracted for the desalination project. The Board directed staff to provide a description of desalination projects investigated by MPWMD in the past in order to assess whether there are any remaining viable local desalination options within the District. This staff report was provided to the Water Supply Planning Committee at its March 8, 2010 meeting. The staff report is provided on the District website at:

http://www.mpwmd.dst.ca.us/asd/board/committees/watersupply/2010/20100308/02/item2.htm.

The committee recommended that staff proceed with investigation of the potential for a project or projects within the District boundary, with emphasis on desalination. The District Engineer continues to lead this effort. In May 2010, the Monterey Bay National Marine Sanctuary released its final guidelines for desalination projects within the Sanctuary; copies were provided to each Board member. To date the District Engineer has met with representatives of the Sanctuary, City of Sand City, Pebble Beach Company, CPUC Division of Ratepayer Advocates, City of Santa Cruz, and CAW regarding the potential for desalination projects within the District boundary.

Goal 5: For the MRWPCA Groundwater Replenishment Project (2,000+ AFY), schedule a presentation from MRWPCA to the MPWMD Board on cost, legal issues, timeline and next steps.

The Board directed staff to assess current status of MRWPCA Groundwater Replenishment Project (GRP). Possibilities include purified wastewater for irrigation only, and/or as potable supply through groundwater injection. District staff continues to assist MRWPCA staff, as requested. A presentation by the MRWPCA General Manager was made at the MPWMD Board meeting of January 28, 2010. Notably, the GRP project is temporarily “on hold” so that MRWPCA can focus on its role in the Regional Project described above in Goal 1. The MRWPCA presentation is available on the District website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2010/20100128/ppt/13_files/frame.htm.

Action on 3-year and 5-Year Goals

3-Year Goal: Resolve Fate of San Clemente and Los Padres Dams

Since mid-2009, District staff has participated in workshops and discussions regarding the removal of San Clemente Dam. These efforts culminated in a January 11, 2009 signing ceremony, hosted by U.S. Rep. Sam Farr, wherein numerous entities, including the District, pledged cooperation on dam removal and re-routing of the Carmel River.

At the direction of the Board, District staff pursued options for increasing storage at Los Padres Dam and Reservoir, owned by CAW. This effort stalled when CAW responded to District inquiries in an October 5, 2009 letter, which stated that CAW has “no interest” in making modifications to the dam. A written report is provided in the January 28, 2010 agenda packet at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2010/20100128/03/item3.htm

5-Year Goal: Operate Within Safe Yield of Seaside Basin

A Court adjudication of the Seaside Groundwater Basin was completed in March 2006 and amended in February 2007. The Court 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, and regularly participates at the monthly meetings. The District and its consultants have also been retained by the Watermaster to carry out certain technical tasks to help implement the Seaside Basin Monitoring and Management Program (SBMMP). District staff also contributes by serving as a Technical Committee member.

Other Relevant Action Affecting Water Supply

SWRCB Cease and Desist Order: On January 15, 2008, the SWRCB issued a draft Cease and Desist Order (CDO) against CAW. The Draft CDO refers to the 1995 SWRCB Order 95-10, and notes that compliance with Order 95-10 (i.e., find a replacement water supply to offset unlawful diversions from the Carmel River Basin) had not been achieved after 12 years. The CDO institutes a series of cutbacks to CAW production from the Carmel River and prohibits new or intensified connections in the CAW Main System, among other effects. MPWMD and several other parties participated in formal hearings before the SWRCB in summer 2008.

After several draft versions, the final SWRCB Board determination on the CDO was issued on October 20, 2009. The District (and other parties) immediately filed suit to challenge this ruling, and the Monterey County Superior Court issued a stay on November 3, 2009. In response to a challenge by SWRCB, the Court ruled on November 23, 2009 that the stay will remain in effect until a hearing in Santa Clara is held on April 22, 2010. The change to Santa Clara was based on a requested change in venue by SWRCB, which was approved by the Court on January 14, 2010. An appeal lodged by the District was not successful.

On April 22, 2010, the Santa Clara Superior Court lifted the stay, that is, determined that the CDO is in effect and will remain in effect until litigation is resolved. District Counsel and staff, at the direction of the Board, will continue to actively participate in litigation on the CDO through 2010.

District staff posted (and will update as needed) Answers to Frequently Asked Questions about the CDO (FAQ) on the District website, with emphasis on District permits, CAW connections, rationing, etc. This also addresses a May 2010 submittal by CAW to the CPUC requesting a moratorium on new connections in its Monterey District Main System, with certain exceptions. The most recent version of the FAQ is located at:

http://www.mpwmd.dst.ca.us/CDO/FAQ/UpdateCDO_FAQ_V70_20100527.pdf.

It is noted that the District plans to respond to the CAW moratorium request in order to ensure that exempted areas are clearly identified and certain text is clarified to be consistent with previous action.

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