ITEM:		INFORMATIONAL ITEMS/STAFF REPORTS
23.	QUARTERLY WATER SUPPLY PROJECT STATUS REPORT
Meeting Date:			October 18, 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 July through September 2010 period. The next quarterly report will be written in January 2011. 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.

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.

As described in the July 2010 quarterly report, MPWMD has participated in “alternative dispute resolution” meetings, settlement discussions with other parties, evidentiary hearings held by the CPUC and filed many legal briefs on topics identified by the CPUC Administrative Law Judge. MPWMD supports the RWP, but not the Water Purchase Agreement (WPA) due to inadequate protection of Peninsula ratepayers.

District action in the July –September 2010 period included continued discussions with MCWD, MCWRA and CAW regarding the need for better representation and financial accountability as part of the RWP. The most recent meeting was on August 26, 2010. The MCWRA and MCWD General Managers indicated a willingness to consider adding MPWMD as a member of the Project Advisory Committee, but as an “Advisor,” MPWMD would not have the authority to make or appeal decisions. The MPWMD Chairperson, Vice-Chair, General Manager and General Counsel also met with CPUC Commissioner Bonn on August 26, 2010 to discuss concerns associated with the Water Purchase Agreement. The CPUC has set a goal of October 20, 2010 for a proposed decision on the RWP and funding; a final decision by the full Commission is expected 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. Several infrastructure components, such as specific pipelines and pressure reduction devices, have recently been installed with the goal to enable operation at 100% of injection capacity.

As noted in the July 2010 report, the 500 AF annual injection goal was achieved in the first week of March 2010, and a revised goal of 1,000 AF was set. As of May 31, 2010, a record-setting 1,111 AF were diverted and injected. 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.

Efforts in July-September 2010 focused on monitoring the injected water while in storage in the Seaside Basin, which entailed a series of water quality tests and actions to satisfy the Regional Water Quality Control Board requirements and the California Department of Public Health before the ASR water may be delivered to CAW customers. Due to operational requirements set by the State Water Resources Control Board (SWRCB), the ASR recovery phase will be accomplished in the first three months of Water Year 2011. District and CAW staff and consultants continue to meet regularly to move the project forward. District staff and consultants are also compiling data for the annual ASR report. Efforts also focused on construction of the Chemical/Electrical building at the ASR Phase 1 site. Construction began in mid-April 2010, and should be completed in December 2010. Bidding for electrical equipment will be conducted in October 2010.

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

MPWMD and CAW continue to work in partnership on Phase 2 ASR. The project timeline is dependent on a variety of factors, especially formal approval 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 through July 2010 enabled MPWMD to commence drilling one full-scale test well in August 2010 on the Seaside Middle School property. The test well is currently undergoing production testing at this writing (early October 2010). If the test well results are positive, the intent is for the well to become a full-scale ASR well (i.e., “Seaside Middle School ASR-1”), and a second permanent well would also be drilled at the site, subject to MPUSD approval. District staff has assisted in a long-term easement arrangement between CAW and MPUSD for the ASR well site, which was discussed by the MPUSD board on October 4, 2010, and is scheduled for formal consideration by MPUSD in November 2010. The District and CAW are also nearing completion of a reimbursement agreement for MPWMD’s expenses (over $1,000,000) associated with the Seaside Middle School ASR Test Well.

A second major issue affecting project development is water rights for Phase 2 ASR. CAW dropped two water rights protests it had previously filed against the District’s applications, and focused on functioning as partners in this effort. Through September 2010, MPWMD and CAW staff and attorneys have met either separately or together with protestants National Marine Fisheries Service (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. The District’s goal is to have the water rights permit in place by December 1, 2010. In a related matter, District staff and counsel are evaluating various options for the Phase 2 well environmental review due to its function as a near-term test well and potentially a future long-term permanent well.

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 continuous 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 (WSP) 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 WSP committee recommended that staff proceed with investigation of the potential for projects within the District boundary, with emphasis on desalination. The District Engineer continues to lead this effort. To date, District staff has met with representatives of the Monterey Bay National Marine Sanctuary, Naval Postgraduate School, City of Sand City, Pebble Beach Company, CPUC Division of Ratepayer Advocates, City of Santa Cruz, and City of Monterey regarding the potential for desalination projects within the District boundary. A minimum desalination project production goal of 2,000 AFY was set by the WSP committee. The District Engineer will present a status report to the WSP committee at its October 11, 2010 meeting

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 September 20, 2010. Notably, the GRP project had been temporarily “on hold” so that MRWPCA can focus on its role in the Regional Project described above in Goal 1. It now appears that the GRP could be part of the “Phase 2” Regional Project. The Board directed staff to continue to work with MRWPCA to encourage wastewater recycling, including outreach and public education. These topics were discussed at the September 28, 2010 Public Outreach Committee meeting. The MRWPCA presentation is available on the District website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2010/20100920/ppt/7_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. On August 26, 2010, District staff attended a quarterly meeting on the status of San Clemente Dam. The Department of Water Resources, Division of Safety of Dams (DSOD) is posed to complete the CEQA process on the selected alternative, dam removal and rerouting via San Clemente Creek, and roughly 900 acres surrounding the dam are slated to be transferred to the federal Bureau of Land Management (BLM). The goal is to complete the project by 2013. District staff is coordinating with various agencies to ensure operations at the Sleepy Hollow Steelhead Rearing Facility are not adversely affected. In a related matter, on September 22, 2010, CAW applied to the CPUC for a rate increase associated with the costs of dam removal and rerouting. The total project cost is estimated to be approximately $85 million, of which CAW proposes to fund about $53 million. The remainder is proposed to be funded by a variety of state and federal agencies as well as private foundations.

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. CAW confirmed its position in September 2010. 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.

The District reports monthly on CAW’s compliance with the Adjudication limits in the Seaside Basin. To date, CAW use has been below the limit in the Coastal Subareas, and over the limit in the Laguna Seca Subarea. However, the two may be combined, resulting in total use in the Seaside Basin as below the current limit. Notably, an August 5, 2010 letter from the SWRCB has directed CAW to first maximize use of native water from the Seaside Basin, including carryovers from previous years, then use ASR water as the second source before Carmel River sources are tapped. Thus, the system will be managed to result in actual use just barely under the limit in the Seaside Basin and as much below the Carmel River limit as possible.

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 the summer of 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 updates 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.

Notably, the District is a participant in the CPUC process to consider the CAW moratorium request in order to ensure that exempted areas are clearly identified and the effect on District Water Permit approval procedures is clarified. District Counsel attended an August 25, 2010 CPUC case management hearing, where the Administrative Law Judge (ALJ) determined that there would be no evidentiary hearing. Instead, opening briefs are due on October 8, 2010 and reply briefs are due October 22, 2010. A recommended decision by the ALJ is likely in December 2010, with a final decision by the full commission expected in January 2011.

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