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:

August 16, 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:  Application #20080915MBS was considered by the Board on July 19, 2010, and was continued to address questions and concerns raised by Board members and the public.  Board action on August 16, 2010 entails two required components as ordered by the Monterey County Superior Court following a telephonic hearing on July 30, 2010:


A.     Set aside the Findings of Denial adopted by the Board on March 26, 2009, which were directed by the Board on February 26, 2009; and

B.     Render a final decision on Application #20080915MBS submitted by co-applicants California American Water (CAW) and Security National Guaranty, Inc. (SNG) regarding water service to the Monterey Bay Shores Ecoresort (MBSE). 


Specifically, in his July 30, 2010 Order After Ex Parte Hearing, Case #M66343 (Exhibit 18-A), Judge Roger Randall made the following (summarized) determinations:


1.      The District must formally set aside its March 26, 2009 denial on August 16, 2010.

2.      The District must make a final decision on the Application on August 16, 2010 based solely on the record before the close of the public hearing on July 19, 2010; no new evidence may be considered.  [Note: District staff understands this to mean that public comment may be taken at the August 16, 2010 continued hearing, but the comments must be limited to information presented as of the July 19, 2010 hearing.] 

3.      The District must report its action and findings to Judge Randall by August 23, 2010. 

4.      The request by SNG to hold the District and four Board members in contempt of court was “denied as premature.”

5.      The SNG request for the Court to approve the May 2009 “Front-Loading” Water Delivery Agreement between SNG and CAW (Exhibit 18-B) and to prohibit MPWMD from reviewing that Agreement was deemed to be inappropriate to address in an Ex Parte hearing.

6.      Each party bears their own attorneys’ fees and costs. 


Notably, as part of the Order, Judge Randall “reminds” the District that:

Ø      The Sixth Court of Appeal determined that the MPWMD Board has a “limited function with respect to this matter and that it only has the right to require an accounting of water that is used to ensure that no Carmel River water is being used” to serve MBSE.

Ø      Pursuant to the May 11, 2009 Superior Court ruling (Exhibit 18-C), “no environmental review may be made regarding the use of Seaside Basin water, and that commingling of water from two sources does not result in any environmental impacts.”


At this writing (August 10, 2010), MPWMD has not received a signed version of the Court Order; thus, an unsigned version referred to as the “July 30, 2010 Order” is attached as Exhibit 18-A, and will be replaced when the signed version is received. Special Counsel has indicated the formal signed version will be essentially the same as the exhibit provided herein.


This Application has a lengthy regulatory and legal history, which is described in the July 19, 2010 staff agenda materials.  These materials are provided on the District website at: (click on Item #21 for staff note and exhibits, presentation materials and supplemental information).  It is recommended that Board members review the July 19, 2010 materials.  Key documents are provided again as exhibits herein.


In brief, the CAW/SNG Application requests District approval to increase the CAW water distribution permit (WDS) to enable it to produce up to 90 acre-feet per year (AFY) of SNG’s 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.  The 90 AFY is based on 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”).  The “wheeling” (delivery) by CAW was approved by the Seaside Basin Watermaster in a letter dated September 19, 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.  All MPWMD files associated with this Application are available for review at the District office. 


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


1.      Formally set aside the March 26, 2009 Findings of Denial for MWPMD Application #20080915MBS, including the February 26, 2009 vote to deny approval of the Application.  This is a Court-ordered requirement that is independent of any other action, and should be a separate motion.


2.      Adopt the MPWMD Findings of Approval (revised August 2010) for Application #20080915MBS to Amend the CAW WDS (Exhibit 18-D) with specific reference to Findings associated with District compliance with CEQA as a Responsible Agency. Of note are revised Findings #9, #12, #13 and #18 that are linked to revised Conditions of Approval #29 and #30 that specify water accounting data documentation and protocol to demonstrate that Seaside Basin water will indeed be “front-loaded” pursuant to the May 11, 2009 Court Order, Item #7 (Exhibit 18-C).   These conditions were added because the May 18, 2009 Front–Loading Agreement as presented on the Board on July 19, 2010 was considered to be vague and incomplete, and the July 30, 2010 Court Order does not allow new evidence, such as a revised Front-Loading Agreement, to be considered.  It is noted that a WDS Permit is subject to revocation if there is failure to comply with each and every permit condition (see Condition #23 as required by MPWMD Rule 22-D-1-o).  Thus, CAW must demonstrate that the “front-loading” performance objective will be achieved within 90 days for the WDS Permit to remain valid.


3.      Approve Application #20080915MBS; authorize issuance of MPWMD Permit #M10-07-L4 with the 32 Conditions of Approval (revised August 2010) specified in Exhibit 18-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.  It is noted that Special Conditions #29 and #30 were revised, clarified and expanded to ensure accurate accounting of water deliveries, consistent with the May 11, 2009 Court Order.  As described in the “Discussion” section below, it is important that the Board recognize the limitations imposed by the Court, and how the Conditions were crafted to be consistent with the various Court Orders affecting the Application.


4.      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.  Following litigation, a new hearing to re-open the matter occurred on July 19, 2010.  Please refer to the MPWMD website for meeting agendas for these dates at:


On July 19, 2010, a motion to approve the Application failed on a 3-to-4 vote.  A second motion was approved to direct District staff and attorneys to address several technical and legal questions that were raised at the July 19, 2010 hearing, and to continue consideration of the Application to a hearing on August 16, 2010.  The hearing record was closed as of July 19, 2010.  The motion also stated that legal action against the District would suspend these staff efforts; that component was superseded by a Court Order following the July 30, 2010 Ex Parte hearing. 

Because an understanding of the legal setting is essential, the following paragraphs repeat, clarify and provide an update on legal matters.  The CAW/SNG Front-Loading Water Delivery Agreement (Exhibit 18-B) is also reviewed, as the adequacy of this document was a key issue expressed by Board members on July 19, 2010.  Please also see the “Discussion” section.


Litigation and Court Action

Legal Action in 2009:  Soon after MPWMD formally adopted Findings of Denial at its meeting of March 26, 2009, 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).  In a May 11, 2009 filing (Exhibit 18-C), the Court made seven orders reconfirming Seaside Basin water rights, how MPWMD’s exercise of authority may not contravene the Seaside Basin Adjudication “Physical Solution,” and how MPWMD can require strict accounting, but cannot make environmental determinations based on mixing of water from various sources.  The Court’s (summarized) Order includes:


1.      Seaside Basin water right holders are entitled to use specified amounts; producing water from inland wells is preferable to producing water from 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, “for example, there is a wheeling agreement between Parties within the Seaside Basin which includes a provision for ‘front loading’ or ‘prior to delivery’ production of water from the Seaside Basin that was adequate to cover draw down by another Party with adjudicated water rights.”


The Court further ordered 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.


Legal Action from June 2009 through July 19, 2010:  Appeals filed by the District suspended action for approximately one year.  District and SNG attorneys signed a Stipulation on June 17, 2010 that extended the time for the rehearing to July 19, 2010, when the District Board would “reopen, reconsider and rehear and make a final determination” on the SNG Application.  The co-applicants also met with District staff on June 23 and July 1, 2010 regarding the staff recommendations and proposed revised Conditions of Approval.  As of mid-July 2010, staff’s understanding was that both CAW and SNG concurred with all the proposed Findings and Conditions, some of which included edits suggested by the co-applicants.


Legal Action after July 19, 2010:  This section is provided for completeness. However, no document or information after July 19, 2010 may be considered as factual evidence for this hearing, with the exception of the July 30, 2010 Court Order signed by Judge Randall.  On July 26, 2010, SNG filed an ex parte request to Judge Randall asking that the following be ordered by the Court: 

Ø      MPWMD should not be allowed to consider any new evidence or argument regarding evidence presented at the July 19, 2010 hearing;

Ø      MPWMD should be ordered to make a final determination on the Application on or before August 16, 2010;

Ø      MPWMD should file a report to the Court on its action, including its findings, and evidence supporting that action, no later than August 23, 2010;

Ø      The Front Loading Agreement should be governed by the Adjudication Decision and is not subject to environmental review or approval by MPWMD.  Also, any Operations Plan is the sole purview of the Watermaster and the Court, to the extent not pre-empted by the California Public Utilities Commission.  In other words, this would obviate MPWMD Conditions #29 and #30.


A companion motion requested that the Court hold the District and four named Board members potentially in contempt of court for not making a final determination on July 19, 2010. 


On the afternoon of July 30, 2010, Judge Randall held a conference call with MPWMD, CAW, SNG, City of Seaside and City of Sand City attorneys.  The Judge’s July 30, 2010 Order following that phone conference is provided as Exhibit 18-A, and is reviewed in the “Summary” section above (pages 1 and 2 of this document).


CAW and SNG Agreement Regarding Front-Loading Delivery of Water

Based on the May 11, 2009 Court Order, 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 18-B). The co-applicants describe the Agreement as a means to: (1)  “make it clear that they intend to comply with the terms” of the Court Order 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 an existing storage facility.  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.


For reference, the actual water use expected to be used by the MBSE is between 63 and 70 AFY, depending on assumptions about gray-water reuse.  This is equivalent to 5 or 6 AF/month, which is equivalent to roughly 40 gallons per minute, or roughly 0.1 cubic foot per second (cfs).


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 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 SWRCB 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. 


DISCUSSION:  The following paragraphs describe new or revised elements of the Findings and Conditions of Approval, and then focus on the two main issues raised by the Board in its discussion on July 19, 2010.  They include: (1) CEQA questions and related concerns about impacts to the Carmel River raised by the Sierra Club in its July 17, 2010 letter (Exhibit 18-F), and (2) operational questions and concerns related to the Front-Loading Water Delivery Agreement (Exhibit 18-B). 


August 2010 Revised Findings of Approval

The revised August 2010 Findings of Approval for Application #20080915MBS (Exhibit 18-D) are based on evidence provided in the Application materials, including supporting documents received through July 19, 2010, on file at the District office.  It is notable that Findings #9, #12, #13 and #18 have been amended to refer to the required documentation in revised Conditions of Approval #29 and #30.   The key issue is lack of specificity in the May 2009 Front-Loading Agreement, which only states that CAW will “take whatever steps are necessary” to achieve the front-loading goal, but gives no indication of how that performance objective will be measured.  It also states that the co-applicants will provide “further assurances in writing or other documentation as necessary.”  The District Board expressed a desire for documentation and substantial evidence that shows that achieving the front-loading goal is actually feasible in various scenarios, given existing limitations and constraints on the CAW system from a physical and regulatory perspective.  The detailed accounting data and protocol required in revised Conditions #29 and #30 is the best solution to this inadequacy, given the July 30, 2010 directives from the Court. 


The following paragraphs show how Findings #9, #12, #13 and #18 were changed, with strikeouts for deletions and bold italic for additions: 


9.         FINDING:            Approval of the Application, with the August 2010 MPWMD Conditions of Approval, would not result in significant adverse impacts to “Sensitive Environmental Receptors” (SER) as defined by MPWMD Rule 11, including the Carmel Valley Alluvial Aquifer (CVAA).  The Monterey County Superior Court has determined the Seaside Basin “natural safe yield” and specified pumping rights of property owners as part of the Seaside Basin Adjudication Decision, including 149 AFY for the applicant.  The Monterey County Superior Court has determined that serving the SNG parcel with CAW wells further inland (rather than onsite wells) is an overall benefit to the ongoing integrity of the Seaside Basin and is part of the Physical Solution. On April 1, 2010, the Court of Appeal confirmed the findings of the Superior Court.  The Water Delivery Agreement, with adequate documentation as required in MPWMD Conditions of Approval #29 and #30, is consistent with the May 11, 2009 Court Order finding that with adequate “front-loading,” there is no resultant adverse impacts to the Carmel River or the CVAA.  [Rule 22-B-3]


EVIDENCE:         Seaside Basin Adjudication Decision specified in Finding #1. May 11, 2009 Court Order and April 1, 2010 Appeal Decision specified in Finding #3. Water Delivery Agreement specified in Finding #4.  MPWMD Permit #M10-07-L4, Conditions of Approval.


12.       FINDING:            With adequate documentation as required in MPWMD Conditions of Approval #29 and #30, the source of water supply is the CAW water distribution system, solely from wells in the Seaside Basin, consistent with the May 2009 Court Order, April 1, 2010 Appeal Decision, and Water Delivery Agreement.  The cumulative effects of issuance of this WDS permit do not result in significant adverse impacts to the source of supply or the species and habitats dependent on the source of supply due to actions by the Superior Court to reduce Seaside Basin pumping to the natural safe yield.  [Rule 22-B-6]


EVIDENCE:         MPWMD Permit #M10-07-L4, Conditions of Approval #3, #29 and #30.  Letter from Craig Anthony, CAW General Manager, dated January 29, 2009.  Letter from James Kassel, State Water Resources Control Board (SWRCB) Assistant Deputy Director for Water Rights, dated February 5, 2009.   Seaside Basin Adjudication Decision specified in Finding #1. May 11, 2009 Court Order and April 1, 2010 Appeal Decision specified in Finding #3.  Water Delivery Agreement specified in Finding #4.


13.       FINDING:            With adequate documentation as required in MPWMD Conditions of Approval #29 and #30, the source of supply for the subject parcel is derived from the Paso Robles and Santa Margarita Aquifers in the Seaside Basin, which is not within the jurisdiction of the SWRCB.   The SWRCB has determined that the one-for-one replacement required in its Order WR 95-10 does not apply to the MBSE Application so long as CAW supply to the subject parcel is derived solely from the Seaside Basin.  [Rule 22-B-7]


EVIDENCE:         MPWMD hydrogeologic maps on file. January 20, 2009 e-mail confirmation of Kenneth Emanuel, SWRCB technical staff member, confirming applicant written summary of October 10, 2008 meeting regarding SWRCB jurisdiction in Seaside Basin.  Letter from Craig Anthony, CAW General Manager, dated January 29, 2009.  Letter from James Kassel, SWRCB Assistant Deputy Director for Water Rights, dated February 5, 2009.  MPWMD Permit #M10-07-L4, Conditions of Approval #29 and #30.  


18.       FINDING:            The Application identifies the location of the source of supply for the water distribution system as CAW wells in the Seaside Basin.  [Rule 22-C-3]


EVIDENCE:         Permit Application specified in Finding #1, including engineering maps. Letter from Craig Anthony, CAW General Manager, dated January 29, 2009.  MPWMD Permit #M10-07-L4, Conditions of Approval #4, #29 and #30.


With the revised August 2010 Conditions of Approval (Exhibit 18-E) to ensure that the Front-Loading Agreement is viable, no additional impact to the Carmel River should occur as a result of the MBSE project.  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. 


With the revised Conditions of Approval, District staff believes a Finding can be made that 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 in the District files and records; 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. 


August 2010 Revised Conditions of Approval

The revised August 2010 Conditions of Approval (Exhibit 18-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.  Please refer to the July 19, 2010 discussion for more detailed information. 


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.  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.  CAW requested minor clarification to Conditions #8, #9, #11, with strikeouts for deletions and bold italic for additions, as follows:


8.         The WDS system owners CAW and the Property Owner shall report production by the Water Meter Method (MPWMD Rule 56) for the wells designated in Conditions #4 and #7.  [Rule 22-D-1-e; Rule 22-D-2]


9.         Permittee The Property Owner shall comply with all MPWMD water conservation rules that pertain to CAW customers as applicable to the mixed-use MBSE project (e.g., commercial, hotel, residential, landscape).  Current ordinances specify maximum water use rates for fixtures and require new development to install drought-resistant landscapes, and drip irrigation, where appropriate.  Contact with the District Permit and Conservation Office at 831/658-5601 is recommended during project planning.  [Rule 22-D-1-f]


11.       Any intensification or expansion by the Property Owner within the Permitted System shall require a new application and Permit pursuant to MPWMD Rules 23 and 24.  [Rule 22-D-1-k]


During its July 19, 2010 presentation, District staff suggested refining Condition #13 text to be more similar to that approved for the Ocean View Plaza WDS.  Importantly, the text is not the same because the Ocean View Plaza and MBSE water sources are quite different.  Condition #13 now includes the text recommended by staff on July 19, 2010, which defines the term “short term” and requires that emergency water trucks be minimized to the extent practicable in the case of system failure.  It also reflects some text refinements suggested by CAW for clarity.  The following paragraph shows how Condition #13 was changed, with strikeouts for deletions and bold italic for additions: 


13.       No permanent intertie between the Permitted System and any other system intended to provide service to the MBSE parcel shall be allowed without amending this WDS Permit pursuant to Rule 22-E. in relation to the MBSE parcel.  The MBSE parcel may receive non-CAW, trucked-in water or water from the back-up well on the property, as allowed by the Monterey County Health Department, in a non-fire emergency, system failure or similar short-term critical event that prevents CAW from serving the parcel.  The term “short-term” is defined as less than or equal to 120 days.  The Permittee may apply in writing to the MPWMD Board of Directors for extensions to the 120-day time limit, each to be approved by the Board upon a finding of good cause, and each to be limited to a period of 120 days.  Use of trucked-in water shall be guided by MPWMD Rule 173, provided however, that the number of trucks used to transport water shall be minimized to the extent practicable.  The subject parcel is part of the within the CAW service area and may receive CAW water for emergency fire service [Rule 22-D-1-h] 


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.  There is no change to this condition.


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.  There is no change to this condition.


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.  There is no change to this condition.


Special 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 wells in the Coastal Subareas of the Seaside Basin serve the MBSE parcel, 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 weekly 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.”  Condition #29 has been revised to refer to a new Attachment #3 that lists the water accounting data expected by the District General Manager.  As described in the staff presentation on July 19, 2010, Condition #29 is also revised to remove confusing language about the Sand City Desalination Project. Condition #29 focuses on the sources of supply for the 90 AFY production in contrast to the metered sales at the MBSE parcel addressed in Condition #27.  The following paragraph shows how Condition #29 was changed, with strikeouts for deletions and bold italic for new text: 


29.              CAW shall implement strict water accounting methods approved by the MPWMD General Manager to track CAW production sources to ensure: (a) only water from wells in the Coastal Subareas of the Seaside Basin wells (not Sand City desalination water) serve the MBSE parcel identified in Condition #1, and (b) no Carmel River Basin water is produced by CAW to serve the subject parcel, consistent with the May 11, 2009 Court Order and May 18, 2009 Water Delivery Agreement.  CAW shall submit weekly reporting of daily MBSE-related water production data in the manner and form as prescribed by the District; a required data set is provided as Attachment #3 to these Conditions.  A written request to make refinements to the data set in Attachment 3 may be considered by the General Manager at a future date if CAW system physical conditions necessitate a change. The data tracking and reporting protocol shall be approved by the District General Manager, prior to completion of construction of the MBSE project.


Special Condition #30 is related to Condition #29 as it requires a Water Accounting Protocol to confirm the use of Seaside Basin water for MBSE, with emphasis on the November through April “high flow” period (i.e., when Carmel River flow is greater than 40 cfs) as defined by SWRCB Order 98-04.  This period is when Seaside Basin pumping is minimized, and when careful “front-loading” accounting is most essential to demonstrate use of only Seaside Basin sources to serve the MBSE.  In May through October, pumping from the Seaside Basin is maximized, so front-loading will easily occur.  It is noted that costs associated with the extra steps to monitor and report on the front-loading are covered by the payments from SNG to CAW for water service.


A new Attachment #4 to Condition #30 provides the basic protocol, from which CAW will develop a more specific protocol within 90 days for its employees to follow. The protocol entails careful tracking of water from several wells and water flow in and out of the Hilby storage tanks.  The protocol has built in extra amounts of pumping to provide a “cushion” to ensure that Seaside well pumping accounts for both MBSE and other customer use.  The protocol assumes the maximum allowed production by CAW to serve MBSE (90 AFY).  It also addresses failure of the two primary wells that will be pumped.  The intent of Condition #30 and Attachment 4 is to demonstrate that CAW is physically able to “front-load” water from Seaside Coastal Subarea wells to serve the MBSE parcel under various conditions.  Given the importance of the Carmel River resource, such assurance ahead of time is necessary, as failure to avoid impacts to the Carmel River is unacceptable.  Condition #30 is revised to delete reference to an “Operations Plan” and instead refers to the Water Accounting Protocol that must be prepared by CAW and deemed as adequate by the General Manager within 90 days.  The following paragraph shows how Condition #30 was changed, with strikeouts for deletions and bold italic for new text. 


30.              Consistent with the May 18 11, 2009 Court Order Water Delivery Agreement, CAW shall submit a written Operations Plan Water Accounting Protocol regarding the sole use of Seaside wells to serve the MBSE project to the District, subject to approval by the MPWMD General Manager, within 90 days of the preparation date shown (see top of page 1) for this Permit to remain valid.   The Assessment Water Accounting Protocol shall include specific procedures to implement the components itemized in Attachment 4. : (a) which Seaside wells are likely to 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 interagency 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 Water Accounting Protocol may be requested by CAW, subject to approval by the MPWMD General Manager.


Special 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.  There is no change to this condition.


Special Condition #32 requires SNG to ensure that any use of its on-site wells on the MBSE parcel does not result in more than 149 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 79 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. There is no change to this condition.


Notably, the May 2009 Front-Loading Agreement (Item #2) signed by CAW and SNG states that they will “take whatever steps necessary” to ensure the SNG parcel is served solely from Seaside Basin wells.  Revised Conditions #29 and #30 are also consistent with Item #5 of the Front-Loading Agreement, which promises “further assurances in writing or other documentation as necessary” in order to implement the Agreement.   Attachment #3 and #4 of the Conditions of Approval #29 and #30, respectively, are examples of those “further assurances and documentation” needed by the MPWMD Board to find that the Agreement is “adequate to cover draw down by another Party with adjudicated water rights” pursuant to the May 11, 2009 Court Order, Paragraph #7, line 8 (Exhibit 18-C).  In crafting Attachments #3 and #4 with CAW, District staff gained a better understanding of how the CAW system functions, and believes these attachments, if properly implemented, address concerns raised by the Board (see subsection below).    


It is noted that Condition #23, as required by District Rule 22-D-1-o, states that the WDS Permit is subject to revocation if the Permittee and/or Property Owner do not fully comply with each and every Condition of Approval for Permit #M10-07-L4.


            Co-applicant Comments on August 2010 Revisions:  At the July 19, 2010 public hearing, the co-applicants did not express any opposition to the Findings and Conditions; they had been previously revised to incorporate mutually acceptable edits submitted by the co-applicants that were also satisfactory to District staff and Counsel.  After the July 19, 2010 hearing, the MPWMD General Manager contacted CAW on July 20 about operations issues and the Front-Loading Agreement.  The CAW and MPWMD General Managers and technical staff met again on August 9, 2010 to develop the CAW data requirements and protocol for Attachments #3 and #4.  The administrative draft staff materials, including revised Findings and Conditions, were provided to the co-applicants on August 6, 2010.  On August 9 and 10, 2010,  CAW’s attorney provided some minor text corrections to this staff note and the Conditions, which were incorporated.  SNG also made minor text revision requests, some of which were incorporated.  A requested deletion to Condition #29 by SNG was not made as it is standard language used for all permits.  Staff believes the SNG representative understands why his requested changes were not made.   The completed Attachments #3 and #4 were provided to the co-applicants on August 10, 2010, and the co-applicants concurred with them.  It is noted that only CAW would carry out the water accounting requirements in Attachments #3 and #4.   


CEQA Compliance and July 17, 2010 Sierra Club Letter    

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 described 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.  It also described how CAW would be serving the project based on SNG’s adjudicated water rights.  The Addendum evaluated the potential impacts associated with each environmental topic normally listed in an Initial Study.  As described in the July 19, 2010 agenda packet, with the additions to Conditions #29 and #30, District staff and Counsel believe that the proposed findings support the decision not to prepare a Subsequent EIR for this Application because the criteria in CEQA Guidelines Section 15162(a) are not met.  More detailed information is provided at:  

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 Court Order (Exhibit 18-C), as confirmed by the Court of Appeal.  The Court Order was described in the “Background” section above.  In his July 30, 2010 Order, Judge Randall reminded the District that it may only focus on potential impacts to the Carmel River that are not associated with mixing of water sources.  The District’s authority at this time is focused on the adequacy of the accounting documentation as reflected in proposed Conditions of Approval #29 and #30.


With the revised MPWMD Conditions of Approval (Exhibit 18-E), approval of the Application would be 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 Court Order.  There are no mitigation measures or alternatives that meet the specific criteria of CEQA Guidelines 15162(a)(3)(C) and (D).  The Addendum and Court Order will suffice for purposes of the District as a Responsible Agency, thus fulfilling the requirements of CEQA. 


As required by CEQA Sections 15091, 15092 and 15093, the District Board, if it adopts Findings (and cited evidence) #21, #22 and #23 (Exhibit 18-D), will have 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).  


On Friday afternoon, July 16, 2010, the District received a letter from CELP/Sierra Club (Exhibit 18-F) asserting that a Subsequent EIR is needed and that the District’s CEQA compliance is not adequate.  The letter expressed concerns about economic incentives for CAW to misuse Aquifer Storage and Recovery (ASR) water, and to tap more Carmel River water than necessary.  At the Monday, July 19, 2010 hearing, District staff and Counsel verbally explained that the letter author had misunderstood how the Seaside Basin Adjudication functions, and the factual basis for many of his assertions was unfounded.  Staff also noted that the most recent interagency Water Supply Strategy and Budget adopted by the Board in May 2010 requires CAW to first use native groundwater sources in Seaside Basin, then injected ASR water, and lastly Carmel River sources.  Exhibit 18-F is a memorandum dated August 11, 2010 from District Special Counsel regarding the Sierra Club assertions, which echoes the staff assessment with regard to the use of ASR water or the allocation of water between Standard and Alternate Producers.  Special Counsel also concluded that the trial court would likely reject the Sierra Club’s argument that the Application will result in increased diversions from the Carmel River to serve other users.   The memo addresses other legal issues raised by Board members.


As a point of interest, the District General Manager met with the Sierra Club representative, Larry Silver, after the July 19, 2010 hearing to provide a detailed explanation of the Adjudication Order.  Mr. Silver later submitted a corrected letter to the Board Chairperson, which included an acknowledgement of his misunderstanding, but essentially reiterated the same points.  This second letter is not provided as an exhibit as it is not admissible as evidence in this hearing pursuant to the July 30, 2010 ruling by Judge Randall.  Subsequent letters by Mr. Silver are also not included as exhibits, but were provided to the Board under separate cover, as is any letter transmitted to the Chairperson by a member of the public. 


MPWMD Board Concerns About Front-Loading Water Delivery Agreement   

District Special Counsel has opined that the District retains the discretion to determine whether the proposed Front-Loading Agreement is adequate to assure that the project is served solely by Seaside Basin water, with the understanding of the need to be consistent with the May 2009 Court Order allowing mixed sources of supply in storage tanks.  A variety of concerns were expressed by the Board on July 19, 2010 about the lack of specificity of the May 2009 Front-Loading Agreement.  One Board member wondered if it could potentially be considered a project under CEQA.  Some Board members stated that if the Front-Loading Agreement could be modified to be more comprehensive and detailed, they would feel more confident that there would not be impacts to the Carmel River.  This desire for more detailed information is tempered by the following directives in Judge Randall’s July 30, 2010 ruling as well as his verbal statements to the parties on that date:


Ø      The Board must make a final decision on August 16 and provide a written report with findings to the Judge by August 23, 2010.

Ø      The decision may be based only upon the record through July 19, 2010.  An amended Front Loading Agreement is not allowed to be considered, even if one existed.  Staff’s understanding is that only a timely appeal of Judge Randall’s July 30, 2010 Order could potentially change this directive.

Ø      The District is limited in its authority to address CAW operations in this matter; it must focus on water accounting as it relates to potential impacts to the Carmel River, in compliance with the May 2009 Court Order.

Ø      The Front-Loading Agreement is not a project under CEQA. This view is also shared by District Special Counsel, who will be present on August 16, 2010 in closed and open session to answer Board member questions.


Comprehensive answers to all the Board’s questions are not known at this time, but staff has a better understanding of how the integrated CAW system works in the Seaside Basin, similar to an electrical grid.   The MBSE project will not be served by one well or tank designated for that purpose.  Thus, Board member questions about what happens if specific wells, tanks or pipelines fail are answered by the fact that extensive redundancy occurs throughout the Seaside Basin Coastal Subarea of the CAW system.  Staff is satisfied that there is adequate production and storage capacity, especially in light of the fact that the MBSE project would not be completed earlier than mid-2013, assuming final permits in mid-2011.  In the next year, there will be improvements and enhancements to the CAW system associated with MPWMD’s ASR Project and with preparation for the Regional Water Supply Project.  Notably, the Seaside Basin Adjudication requirement for CAW customers to reduce Seaside Basin Coastal Subarea use by 418 AF in year 2012, with another reduction of 418 AF in 2015, provides more than adequate supply to ensure that MBSE can be served by CAW facilities in the Seaside Basin.  Recall that the SNG water right to 149 AFY does not change; thus 90 AFY will remain available for CAW to supply to MBSE while other CAW customers must reduce their consumption.


Staff has bolstered its confidence in the success of the Front-Loading Agreement by revising Special Conditions #29 and #30 (Exhibit 18-E) to add more rigorous water accounting documentation requirements, to be developed in the next 90 days, subject to approval of the General Manager.  It is noted that the MBSE project will not come before the California Coastal Commission until mid-2011 at the earliest, so there is adequate time to finalize the water accounting protocol before another agency needs confirmation of a valid WDS Permit.   As noted above, the August 9, 2010 meeting with CAW was very productive as District staff has a better understanding of how the CAW system works, and is confident that proper application of the accounting protocol will preclude use of Carmel River water to serve the MBSE project. 


Regarding Condition #3, one Director asked about the ramifications if the actual system loss factor was greater than 7%.  Using a 7% loss factor, 90 AFY of CAW production is equivalent to 83.7 AFY of metered sales at the MBSE parcel.  A higher system loss factor would mean less water delivered to MBSE.  For example, an 8% loss factor is equivalent to 82.8 AFY metered sales to MBSE.  If MBSE needed more than CAW was willing or able to deliver, it could pump from its own wells to make up the difference, up to a total of 149 AFY total production for the MBSE project (see Condition #32).  The applicants could also apply to amend the WDS permit, if needed.


At least two Directors asked for detailed operations plans and MPWMD Conditions of Approval similar to those recently approved for the Ocean View Plaza WDS.  Staff has amended the conditions to be as consistent as possible (example: Condition #13), but there are important differences between the two projects.  Ocean View Plaza is dependent on its own desalination plant as the sole source of supply, and is prohibited from receiving CAW water, even in an emergency.  Thus, detailed information regarding emergency procedures due to system failure and other operations scenarios was required by the Coastal Commission, MPWMD and several other agencies.  Such requirements are not appropriate for MBSE because it will be supplied by the CAW water system, including redundant facilities within that system.  If there were a temporary distribution system failure in the Sand City/Seaside area, the MBSE would be treated like any other CAW customer, or SNG could operate its own wells as an emergency backup.


Noticing and Public Comment 

Public notice was properly provided for the July 19, 2010 hearing in many ways.  These notices indicated that a hearing could be continued and separate new notice would not occur.  The WDS hearings are posted on the “CEQA Notices” section of the District website at: .  This hearing is also noticed as part of the August 16, 2010 agenda at:


The July 19, 2010 hearing entailed three comment letters, two in favor and one opposed.  At the hearing, several members of the public spoke in favor of the Application and one spoke in opposition.  The opposition point of view was the Sierra Club/CELP, which is addressed above.  Public comments are allowed for the August 16, 2010 meeting, but only if they are based on evidence in the hearing record through July 19, 2010.


To date, the Sierra Club/CELP has transmitted several e-mails with additional letters and exhibits to the Board Chairperson.  Any member of the public has the right to transmit written communications to the District Board, but the District may not, for this public hearing, accept the Sierra Club communications after July 19, 2010 as factual evidence, as ordered by the Court.  Staff’s understanding is that District Counsel will provide written guidance to the Board on how they should handle the Sierra Club letters or any other communication, either oral or written, received prior to or at the August 16, 2010 hearing on this matter. 



18-A    July 30, 2010 Order After Ex Parte Hearing (unsigned version as of August 10, 2010)

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

18–C   May 11, 2009 Court Order from Monterey County Superior Court (Randall)

18–D   MPWMD Draft Findings of Approval, dated August 2010

18-E    MPWMD Draft Conditions of Approval, dated August 2010

18–F    July 17, 2010 letter from Sierra Club to MPWMD

18–G   Memo from MPWMD Special Counsel dated August 11, 2010 re: legal issues