ITEM:		INFORMATIONAL ITEMS/STAFF REPORTS
32.	QUARTERLY WATER SUPPLY PROJECT STATUS REPORT
Meeting Date:			July 18, 2011	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 2011 period. Quarterly updates are prepared for the January, April, July and October regular Board meetings. The next quarterly report will be written in October 2011. 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 presentation 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

Another special workshop on water supply options is planned for August 25, 2011.

For the past several years, the MPWMD Board has identified water supply goals and objectives at Strategic Planning Workshops. On March 31, 2011, the Board held its most recent Goal Setting Session. At its April 18, 2011 meeting, the Board adopted five Water Projects that the District should pursue, as follows:

Water Project 1 (formerly called the Aquifer Storage and Recovery [ASR] Phase 1 Project -- inject at least 1,111 acre-feet (AF) of water in the 2011 season (assuming adequate stream flow), with infrastructure in place to enable operation at full capacity.

Water Project 1 is a cooperative effort with California American Water (CAW) which 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 via two MPWMD wells for later recovery in dry periods. The two wells are now called “Santa Margarita Well #1” and “Santa Margarita Well #2.” District and CAW staff and consultants regularly meet to coordinate roles, responsibilities and tasks needed to enable operation of Water Project 1 at full capacity.

The Final Environmental Impact Report (EIR) for Water Project 1 estimated 920 AFY as the long-term average project yield. In 2010, 1,111 AF were diverted and injected, which smashed the old record of 411 AF in Water Year (WY) 2006. In December 2010, the Board set a goal to exceed the WY 2010 mark, weather and stream flow permitting. The new injection season for WY 2011 began on December 1, 2010 pursuant to the State Water Resources Control Board (SWRCB) water rights permit. Carmel River flow increased with heavy rains in mid-December, and the first diversion day occurred on December 21, 2010. Diversion continued until January 17, 2011, then ceased until river flow again was adequate on February 16, 2011. Flow continued until May 31, 2011 with a total of 1,117 AF injected, breaking the old record by 6 AF. The cumulative injection total into the Seaside Basin from the program inception through May 2011 is 4,345 AF.

Injection in 2011 typically was at a rate of 11.5 AF/day, which is roughly double the 5-to-7 AF/day achieved in 2010. The increased performance is due to improvements in the CAW water delivery system, such as specific pipelines and pressure reduction devices. Also, in early 2011, Well #2 was rehabilitated, and now works in conjunction with Well #1. This rate is not at maximum capacity, but is considered reasonable given the constraints of the CAW system at the present time.

Efforts in April-June 2011 included completion of construction of the Chemical/Electrical building at the Water Project 1 site and mobilization of equipment for the building. Actual installation is underway and the timeline is dependent on specific actions by PG&E. The District and CAW continue to work with the Fort Ord Reuse Authority (FORA) and the City of Seaside on easements for a strip of land that is needed for a pipeline that will help maximize injection in the future. This process entails additional clearance of the land for potential munitions and other activities.

District and CAW staff and consultants continue to meet regularly to move the project forward. The District has assisted CAW in its efforts to obtain approval from the Regional Water Quality Control Board and the California Department of Public Health so that the water may be delivered to CAW customers. Beginning in June 2011, District staff and consultants began compiling data for the annual Water Project 1 report for year 2011, which will include confirmation that diversions for Water Project 1 have not impeded fish passage, based on a series of observations of the river at various flow rates.

Water Project 2 (formerly known as ASR Phase 2) — complete project and expand production by at least 500 AF to meet SWRCB deadline.

Well Construction and Easements: Water Project 2, when completed, is expected to produce another 1,000 AFY, with each well producing 500 AFY. MPWMD and CAW continue to work in partnership regarding new wells and associated CAW infrastructure necessary to deliver and extract the water. Results of an initial test well drilled in 2009 were positive; MPWMD then constructed and tested a full-scale test well in August 2010. This well is currently known as “Seaside Middle School Well #1.” This well is significant as it should satisfy one of the components of SWRCB Order WR 2009-0060 (Cease and Desist Order) that requires CAW to implement one or more “small projects” by the end of 2011 that produce at least 500 AFY to reduce unlawful diversions from the Carmel River. 

As described in the January 2011 quarterly report, the project timeline was delayed due to extended negotiations leading to approval by the Monterey Peninsula Unified School District (MPUSD) of a long-term easement with CAW for a portion of the Seaside Middle School property to be used as for well construction (Well #1 and a future Well #2). The easement approval was critical because connection of the CAW pipeline essential for full-scale injection testing was delayed until the easement issue was resolved. On January 24, 2011, the MPUSD approved the easement, and CAW is poised to complete the last section of pipeline to the site once escrow closes on the easement. District staff and consultants installed the Well #1 pump, motor and regulating valves. A temporary pipeline from the Water Project 2 site to the Water Project 1 site for back-flushing is pending FORA’s approval of the easement as described above in Water Project 1.

In a related matter, the District and CAW negotiated on a reimbursement agreement for MPWMD’s expenses (not to exceed $2,500,000) associated with Water Project 2. The District Board approved the agreement at its January 27, 2011 meeting, followed by approval by CAW. The agreement was executed on February 28, 2011. The first payment of $1.1 million was received in June 2011.

Water Rights: A second major issue affecting Water Project 2 is water rights. CAW dropped two water rights protests it had previously filed against the District’s applications, and focused on functioning as partners in this effort. Throughout 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). On November 24, 2010, NMFS transmitted a letter withdrawing its water rights protest, based primarily on the inclusion of recovery rules in the operations scenario. CRSA similarly withdrew its protest on December 24, 2010, based primarily on refined bypass flows.

In April 2011, the District received a draft water rights permit for Water Project 2 from the SWRCB. Both District and CAW reviewed the draft and had minimal comment. The District’s understanding is that a final permit should be received in July 2011. In a related matter, District staff and consultants prepared initial drafts of the project description and hydrogeologic information to be included in a technical addendum to the original Environmental Impact Report (EIR) on Water Project 1. For reference, work to date has been under a CEQA exemption for a test project; additional environmental review is needed for Water Project 2 as a long-term, permanent facility.

CAW Infrastructure: A third issue is the capacity of the CAW distribution system to deliver injection water to the Water Project 2 site. This matter is the subject of ongoing coordination meetings between MPWMD and CAW staff. CAW has indicated that the needed infrastructure upgrades to deliver injection water at full capacity may not be available until the Regional Water Project improvements are in place. In the meantime, pipeline construction by CAW in early 2011 in the City of Monterey will help improve the ability of CAW to deliver injected and stored water from the Seaside Basin wells to a larger area and number of customers in the CAW system.

Water Project 3 (formerly known as the MPWMD “95-10 Desalination Project”) —assess the potential for development of local desalination facilities with the goal to establish a contingency project if the Regional Desalination Project is delayed; analyze options, including the Naval Postgraduate School site (priority site), and funding sources.

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 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 larger 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, and various coastal property owners 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.

At its November 15, 2010 meeting, the Board received the District Engineer’s assessment of various sites evaluated in August 2008 consultant report titled “Monterey Peninsula Water Management District 95-10 Project Constraints Analysis.” More information is available on the District website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2010/20101115/15/item15.htm.

The WSP Committee meeting agendas and materials are on the website at:

http://www.mpwmd.dst.ca.us/asd/board/committees/watersupply/2011/2011.htm and

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

In April-June 2011, the District focused on meetings with the Naval Postgraduate School about the possibility of developing a desalination project at the abandoned City of Monterey wastewater treatment plant site that is now owned by the Navy. At the May 4, 2011 WSP Committee meeting, Director Brower indicated that he met with Captain Gerral David and Commander Matthew McCann on April 18, 2011. Captain David indicated that the local Navy administration supports working with the District on development of a site plan that would meet the needs of the Navy and the District. The Navy is concerned that underwater sonar it operates at that site could be incompatible with seawater intake. The water tank height would also need to be adjusted. No determination has been made as to whether the Navy would lease or grant the property to the District. The Navy would consider receipt of an allocation of water from the project as payment for use of the property.

May 20, 2011, District staff again met with NPS staff and received a site tour from their Public Works Officer. Follow-up activities are in progress.

Regarding development of a desalination project in Sand City, Director Pendergrass stated at the May 4, 2011 WSP Committee meeting that the City of Sand City was granted a right to all brackish water within the city boundaries, and that development of additional desalination facilities is infeasible. District staff noted that the Seaside Groundwater Basin Adjudication decision did grant the City of Sand City the right to brackish water for its desalination facility, but the decision did not quantify the amount of brackish water available to the City. The District Engineer noted that until a study site is chosen and the source of brackish or sea water is determined, it is premature to develop cost estimates for a desalination project in Sand City.

In a related matter, representatives from Deep Water Desalination made a presentation to the WSP Committee at its June 21, 2011 meeting regarding their proposal for development of a desalination project in Moss Landing that would utilize intake water withdrawn from the deep water canyon near Sandholdt Road pier.

Water Project 4 – support the MRWPCA Groundwater Replenishment Project, as feasible, including cooperation on public outreach and a pilot project.

The MPWMD Board previously directed staff to assess current status of the Groundwater Replenishment Project (GRP) proposed by the Monterey Regional Water Pollution Control Agency. Possibilities include purified wastewater for irrigation only, and/or as potable supply through groundwater injection. District staff continues to assist MRWPCA staff, as feasible. In a September 2010 presentation, the MRWPCA General Manager noted that the GRP had been placed “on hold” until its role in the multi-agency Regional Water Project could be resolved. 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

In December 2010, based on the CPUC’s approval of the Regional Water Supply Project, MRWPCA staff indicated a desire to restart work on the GRP as part of Phase 2 of the Regional Project, and requested MPWMD support. At its December 13, 2010 meeting, the MPWMD Board approved issuing a letter to MRWPCA expressing support for further investigation of the proposed GRP and related agency cooperation. The staff report and letter is provided on the District website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2010/20101213/09/item9.htm and

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2010/20101213/handouts/item9.pdf.

At its March 31, 2011 Goal Setting Workshop, the District Board reiterated its intent to support reuse of recycled water, as feasible given MPWMD budget constraints. The Board directed staff to continue to work with MRWPCA to encourage wastewater recycling, including outreach and public education. A request to co-fund a technical study is not feasible at this time.

Water Project 5 -- Investigate Los Padres Reservoir Expansion, including a preparation of technical evaluation (“white paper”).

Pursuant to previous direction of the Board, District staff pursued options for increasing storage at Los Padres Dam and Reservoir, which is 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

However, Chairperson Brower indicated that he continues to raise this issue with CAW as part of a long-term water supply plan, especially in light of the environmental benefits of stream flow releases from Los Padres Reservoir in the summer and fall months.

Other Relevant Action Affecting Water Supply

Regional Water 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. As described in more detail in the January 2011 quarterly report, MPWMD participated in the CPUC process since fall 2009. MPWMD supported the RWP, but not the Water Purchase Agreement (WPA) due to inadequate protection of Peninsula ratepayers.

As described in the January 2011 quarterly report, several variations of a CPUC Proposed Decision were released in October-December 2010. On December 2, 2010, the full Commission adopted Commissioner Bohn’s revised Alternative Proposed Decision, which approved the Regional Project, adopted the Settlement Agreement, including the Water Purchase Agreement with minimal changes, and issued a Certificate of Public Convenience and Necessity (CPCN) for CAW’s proposed facilities. The Commission’s decision became effective December 2, 2010. As adopted, MPWMD will not have a role on the Advisory Committee for the RWP.

Since January 2011, District staff has tracked the RWP’s progress. Delays due to financing and conflict of interest allegations have occurred, and County Counsel has been quoted stating that certain agreements may be jeopardy. Also, the MCWD was sued by the Ag Land Trust over alleged CEQA violations.

Seaside Basin Adjudication

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.

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 finds 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 through the year 2016, 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, has continued to actively participate in litigation on the CDO through the present. Since January 2011, the District participated in a series of settlement meetings with other litigants, with former Superior Court Judge Richard Silver as the mediator. Settlement concepts are being considered by the parties at present.

District website includes Answers to Frequently Asked Questions about the CDO (FAQ) with emphasis on District permits, CAW connections, rationing, etc. The most recent version (February 2011) of the FAQ is located at:

http://www.mpwmd.dst.ca.us/CDO/FAQ/CDO_FAQ_20110202_HS.pdf

Moratorium on CAW System

In May 2010, CAW submitted an application to the CPUC requesting a moratorium on new connections in its Monterey District Main System, with certain exceptions. The District participated in the CPUC process to ensure that exempted areas are clearly identified and the effect on District Water Permit approval procedures is clarified. In August 2010, the CPUC Administrative Law Judge (ALJ) determined that there would be no evidentiary hearing. Instead, opening and reply briefs were lodged in October 2010. A Proposed Decision by the ALJ was issued in January 2011, and the full Commission approved the CAW request on March 24, 2011. CAW made a presentation to the District Board at its April 18, 2011 meeting about the ramifications of the moratorium. More information is provided on the District website at:

http://www.mpwmd.dst.ca.us/puc/CAWMoratorium_2011/InfoPage.htm.

San Clemente Dam Removal and River Reroute

District staff has participated in workshops and discussions regarding the removal of San Clemente Dam for many years. In December 2007, an EIR/EIS on the San Clemente Dam Seismic Safety Project was certified by the California Department of Water Resources (DWR). Efforts to refine the project 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. In March 2010, CAW, the California Coastal Conservancy and NMFS formally decided to collaborate on the implementation of Alternative 3 (Carmel River Reroute and Dam removal). One year later, on March 14, 2011, DWR filed a Notice of Determination to approve Alternative 3 and end the CEQA process. This alternative entails 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 has coordinated with various agencies to ensure operations at the Sleepy Hollow Steelhead Rearing Facility are not adversely affected, including a letter mailed to CAW and BLM on January 28, 2011. In a February 7, 2011 reply, CAW indicated that a commitment is premature, but they understood the District’s concern and would work cooperatively toward a resolution. 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.

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