ITEM:		PUBLIC HEARING
15.	CONSIDER APPROVAL OF APPLICATION #WDS-20150715RYA TO TRANSFER CYPRESS PACIFIC WATER RIGHTS TO COMMUNITY HOSPITAL OF THE MONTEREY PENINSULA (CHOMP) PARCELS IN RYAN RANCH
Meeting Date:			August 17, 2015	Budgeted:	N/A
From:			David J. Stoldt	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Henrietta Stern	Cost Estimate:	N/A
General Counsel Review: Reviewed 8/10/2015
Committee Recommendation: N/A
CEQA Compliance: N/A. The Superior Court and Appellate Court found that MPWMD has limited authority to make determinations under CEQA for usage of adjudicated Seaside Groundwater Basin water.

A. CONSIDER APPROVAL OF AMENDMENT TO RYAN RANCH UNIT WATER DISTRIBUTION SYSTEM (WDS) TO ENABLE SERVICE TO CHOMP, PARCELS APN 259-221-004 AND -005, CALIFORNIA-AMERICAN WATER COMPANY, APPLICANT

B. CONSIDER APPROVAL OF RYAN RANCH WDS SYSTEM CAPACITY AMENDMENT IN COMPLIANCE WITH MPWMD DECISION ON INSUFFICIENT PHYSICAL SUPPLIES (JUNE 2009)

SUMMARY: The Board will consider Application #WDS-20150715RYA (Exhibit 15-A) submitted on July 15, 2015 by co-applicants California-American Water Company (CAW) and Cypress Pacific Investors, LLC (Cypress). This application stems from the previous Board approval of Permit #M14-05-L4 (“CAW/Cypress Amendment”) on September 15, 2014, which allowed CAW to increase its System Capacity (annual water production limit) in the Seaside Groundwater Basin Coastal Subareas by up to 3.41 acre-feet per year (AFY) from transferred Cypress water rights. This translates to 3.17 AFY metered sales delivered to future recipient parcels within the Seaside Basin designated by Cypress. In this case, the entire 3.17 AFY is designated to serve a future expansion of the Community Hospital of the Monterey Peninsula (CHOMP) campus at Ryan Ranch on Assessor’s Parcel Numbers (APN) 259-221-004 and -005 (Exhibit 15-B), referred to herein as the “CHOMP Parcels.” However, CAW’s Ryan Ranch Unit WDS has been under a moratorium for new connections since June 15, 2009, when the District Board determined that supplies were insufficient to serve customers and specified certain actions before new customers could be served. Thus, two Board considerations are on the agenda:

1. Amend the Ryan Ranch Unit WDS to enable service only to the CHOMP Parcels (referred to herein as the “CAW/Ryan Ranch-CHOMP Amendment”), which entails several changes to the current Conditions of Approval for the Ryan Ranch Unit.

2. Approve a Statement of Expanded Supply for the Ryan Ranch Unit WDS (Exhibit 15-C) that increases the System Capacity pursuant to Order #5 of the June 2009 Findings, Conclusions and Decision of the Board, Hearing on Insufficient Physical Supplies in Accord with District Rule 40-B (“Ryan Ranch Decision” shown as Exhibit 15-D); and enable receipt of a future application by CHOMP for a Water Permit to expand water use pursuant to Order #4 of the Ryan Ranch Decision.

District compliance with the California Environmental Quality Act (CEQA) is addressed in the “Recommendations” section below. Additional information is provided in the “Background” and “Discussion” sections below. This public hearing has been properly noticed as described below. MPWMD files associated with this application by CAW and Cypress are available for review at the District office, or other locations as applicable.

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

1. Adopt the MPWMD Findings of Approval for Application #WDS-20150715RYA for the CAW/Ryan Ranch-CHOMP Amendment (Exhibit 15-E).

2. Approve Application #WDS-20150715RYA; authorize issuance of MPWMD Permit #M15-06-L3 for the CAW/Ryan Ranch-CHOMP Amendment with the Conditions of Approval specified in Exhibit 15-F. The Conditions of Approval include all the Mandatory Conditions of Approval specified in MPWMD Rule 22-D as well as several special conditions for this project, as described in the “Discussion” section below. Notably, they allow CAW to transfer 3.17 AFY metered sales from its “main” system (derived from Seaside Basin Coastal Subareas) into the Ryan Ranch Unit via the existing emergency interconnection to serve only the two CHOMP Parcels.

3. Direct staff to file a Notice of Exemption with the County Clerk. As explained below, this would be a Statutory Exemption for a ministerial action pursuant to CEQA Guidelines section 15268.

4. Approve a Statement of Expanded Supply for the Ryan Ranch Unit (Exhibit 15-F) that confirms: (a) the System Capacity for the Ryan Ranch Unit may be increased by up to 3.17 AFY metered sales designated solely for the CHOMP Parcels; (b) “credible expert analysis” has occurred in the form of the September 15, 2014 hearing materials that led to the Board approval of the CAW/Cypress Amendment (Permit #M14-05-L4); and (c) District staff may accept a future application by CHOMP for a Water Permit to expand water use within Ryan Ranch. These actions comply with Orders #4 and #5 of the 2009 Ryan Ranch Decision (Exhibit 15-D).

MPWMD CEQA Compliance

A Monterey County Superior Court Order dated May 11, 2009, as confirmed by the Appellate Court (Cal-Am v. Seaside, and Sierra Club v. MPWMD; 6^th Appellate District, H034335, April 1, 2010), determined that MPWMD can require a WDS Permit for water rights transfers in the Seaside Basin, but the Physical Solution governs the environmental aspects of Seaside Basin groundwater usage, and no party to the Basin Adjudication can require environmental review under CEQA with regard to such usage. District Counsel has confirmed that the MPWMD Board’s decision on the CAW/Ryan Ranch-CHOMP Amendment is viewed as a CEQA ministerial action (CEQA Guidelines section 15268) due to the above Court Orders.

In his July 30, 2010 Order After Ex Parte Hearing, Case #M66343), Judge Roger Randall determined that MPWMD has the authority to require an accounting of water production to satisfy itself that no Carmel River water is being used, but cannot make environmental decisions based on mere co-mingling of Seaside and Carmel Basin waters in CAW storage tanks. Thus, the previous CAW/Cypress Amendment Conditions of Approval (MPWMD Permit #M14-05-L4) included a “Front-Loading Agreement” and specified a data collection protocol to ensure that only CAW wells in the Coastal Subareas of the Seaside Basin are used to serve the Cypress recipient parcels, which are now designated as the two CHOMP Parcels in Ryan Ranch.

BACKGROUND: An extensive history and litigation is associated with water rights in the Seaside Groundwater Basin, which affect the Findings, Conditions and CEQA compliance for water right transfers in the Seaside Basin. In brief, the Seaside Groundwater Basin Adjudication Decision by the Monterey County Superior Court allows parties to combine pumping facilities and delivery for maximum benefit and management of the Basin, with Watermaster approval. Thus, Cypress water rights may be physically produced from another Seaside Basin well owned by CAW and delivered to recipient parcels within the Seaside Basin. The SWRCB previously determined that the one-for-one replacement in Order WR 95-10 for new CAW supplies does not apply to transferred water rights within the Seaside Basin.

CAW/Cypress Amendment

Permit #M14-05-L4 for the CAW/Cypress Amendment (September 2014) allowed CAW’s production in the Seaside Basin to increase by 3.41 AFY. However, MPWMD issues Water Permits based on estimated metered sales (customer consumption) and must account for 7% CAW system losses. Thus, the 3.41 AFY production becomes 3.17 AFY metered sales that would be permitted for construction projects on the Cypress recipient parcels. The MPWMD Water Demand Division was tasked to track the 3.17 AFY amount as a separate “account” and issue Water Permits using the standard District methodology to estimate demand until the total is used up. The CAW/Ryan Ranch-CHOMP Amendment application entails one transfer of the entire 3.17 AFY amount to the two adjacent CHOMP Parcels at the Ryan Ranch campus. CHOMP will need to demonstrate that the 3.17 AFY limit will not be exceeded.

Determinations on Ryan Ranch Unit System Capacity

In November 1989, the District approved the annexation of the Ryan Ranch Unit into the CAW system, to be operated as a separate unit. The 1989 Conditions of Approval included a System Capacity of 175 AFY and the Expansion Capacity Limit of 190 connections, assuming five wells and certain capacity requirements. This approval also allowed an emergency intertie between the main CAW system and the Ryan Ranch Unit, which was metered and reported, when used.

Based on repeated annual use of the emergency intertie and the fact that only two wells were in service, in September 2008 the District General Manager formally advised CAW that the Ryan Ranch water supplies were insufficient, which triggered a series of MPWMD public hearings to determine changes that should be made to the System Limits. These efforts culminated in June 15, 2009 Board action that reduced the production limit to 72 AFY. Because the previous Water Year production was 82 AFY, a moratorium on any new Water Permits was imposed. The MPWMD Board directed that no Water Permit applications would be received until CAW “develops additional well capacity to sustain a higher System Capacity and has its System Capacity modified” in a future public hearing. These actions were formalized in the June 15, 2009 Findings, Conclusions and Decision of the Board, Hearing on Insufficient Physical Supplies in Accord with District Rule 40-B (Exhibit 15-D).

CAW funded hydrogeologic studies and test well explorations in Ryan Ranch, but no new supplies have been developed to date. The emergency intertie from the main CAW system was used in 11 out of the past 12 Water Years (WY 2003 through WY 2014), but the trend is toward much lower amounts in recent years due to infrastructure improvements.

CAW/Ryan Ranch-Bishop Interconnection

At its June 15, 2015 meeting, the Board approved Permit #M15-03-L3 for the “CAW/Ryan Ranch-Bishop Interconnection” for Emergency Use, which entails use of the Bishop Unit WDS (rather than the main CAW system) as the source of emergency supply when Ryan Ranch Unit supplies are insufficient. This included updating and revising the Conditions of Approval for both the Ryan Ranch and Bishop WDS. Notably, Permit #M15-03-L3 Condition #13 prohibits use of the intertie between the main CAW system and the Ryan Ranch Unit unless written authorization is provided by the MPWMD General Manager in an emergency event, based on documentation that neither the Ryan Ranch nor Bishop Units can provide adequate supply. This Condition will be changed by the proposed CAW/Ryan Ranch-CHOMP amendment.

DISCUSSION: The following paragraphs describe the proposed Findings and Conditions of Approval, and the Statement of Expanded Supply.

Findings of Approval

The Findings of Approval for Application #WDS-20150715RYA (Exhibit 15-E) are based on evidence provided in the application materials, including supporting documents received through August 7, 2015, on file at the District office. With the Conditions of Approval for the previous CAW/Cypress Amendment, CAW/Ryan Ranch Bishop Interconnection, and the current Permit #M15-06-L3, and previous action by the Monterey County Superior Court and Seaside Basin Watermaster, 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 (Findings) and 22-C (Minimum Standards for Granting a Permit). Specifically, this action should “not create an Overdraft or increase an existing Overdraft….” (Rule 22-C-4).

Conditions of Approval

The Conditions of Approval (Exhibit 15-F) proposed for Permit #M15-06-L3 are consistent with MPWMD Rule 22-D (Mandatory Conditions) governing approval of Water Distribution Systems. Conditions #1 through #4 define the Permitted System, including an increase of 3.17 AFY metered sales to serve the two CHOMP Parcels in Ryan Ranch. This would increase the System Capacity (production limit) in the Ryan Ranch Unit from 72.0 AFY to 75.17 AFY.

Mandatory Conditions #5 through #24 include a variety of subjects such as water quality, metering, annual reporting, conservation, fee payments, timely notice of system changes, staff access, and required Indemnification Agreement, Acceptance Form and Deed Restriction. Condition #24 states that the WDS Permit is subject to revocation if CAW (or CHOMP) does not fully comply with each and every Condition of Approval for Permit #M15-06-L3. Conditions #25 and #26 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.

A key change is that Condition #13 will now allow use of the emergency intertie between the main CAW system and the Ryan Ranch Unit to facilitate delivery of up to 3.17 AFY solely to the CHOMP Parcels. Importantly, the restrictions remain in place for all other situations. The deleted text is in strikeout and the new text is in bold italic:

13. Except for service solely to the two CHOMP Parcels specified in Conditions #1 through #4, and Special Condition #27, Nno intertie between the Permitted System and any other water system intended to provide non-emergency service to the Ryan Ranch Unit Parcels shall be allowed without amending this WDS Permit pursuant to Rule 22-E. An intertie between the CAW Bishop Unit and the Ryan Ranch Unit shall only be allowed during emergency events via a one-way pipeline crossing York Road as approved by the City and/or County of Monterey. The term “emergency event” means that water system facilities are not capable of providing sufficient supply to customers, typically due to failure of a facility component. Transfers of water between the Bishop Unit and the Ryan Ranch Unit must be metered and reported to the District within one week of occurrence. Use of the emergency intertie between the Bishop and Ryan Ranch Units shall be subject to MPWMD Board review if such use occurs for more than 60 days. Except for service solely to the two CHOMP Parcels specified in Conditions #1 through #4, and Special Condition #27, Uuse of an intertie between the “main” CAW water system (i.e., draws water from the Monterey Peninsula Water Resource System) and the Ryan Ranch Unit is prohibited unless written permission is given by the District General Manager in an emergency event, including documentation that both Ryan Ranch and Bishop Unit supply cannot meet the required demand. The Ryan Ranch Parcels may receive CAW water from any source for emergency fire service, so long as this service is documented and reported in accordance with these conditions. [Rule 22-D-1-h]

Ryan Ranch Unit Special Conditions of Approval

The current Special Conditions for the Ryan Ranch Unit reflect the Board’s June 15, 2015 approval of the CAW/Ryan Ranch-Bishop Interconnection. Approval of application #WDS-20150715RYA and Permit #M15-06-L3 would amend the current Special Conditions in the following ways:

Ø Special Condition #27 describing the current moratorium on Water Permits is amended to specify that only the two CHOMP Parcels may receive up to 3.17 AFY for future expansion of the hospital facilities; no other parcels may be served with that water unless written authorization by MPWMD is granted. The new text is in bold italic as follows:

27. Except for service of up to 3.17 AFY metered sales designated solely for the two CHOMP Parcels specified in Conditions #1 through #4, the District shall not accept an application for a Water Permit to expand water use in the Ryan Ranch Unit service area until its System Capacity is further modified Pursuant to the Findings, Conclusions and Decisions Regarding Insufficient Supply in the Ryan Ranch Unit adopted by the MPWMD Board of Directors on June 15, 2009. Permittee may apply for, and the District may further amend, the Ryan Ranch Unit System Capacity based upon credible expert analysis in accordance with Rule 40-B-4.

Ø Special Condition #28 regarding copies of Watermaster approvals, if applicable, is amended to add the CAW/Ryan Ranch-CHOMP Amendment.

Ø Special Condition #29 regarding well production reporting is not changed.

Ø Special Condition #30 regarding well water level reporting is not changed.

Ø Special Condition #31 regarding reporting of metered sales is amended to require CAW to meter the pipelines that deliver water to the two CHOMP Parcels and report cumulative water use on a quarterly basis to MPWMD. This is to ascertain whether or not the two CHOMP Parcels are staying within the 3.17 AFY limit. If metered sales on the two CHOMP Parcels exceed 3.17 AFY, then CHOMP will be subject to the procedures specified in District Rule 20.4, Permit Rule Non-Compliance. The new text is in bold italic as follows:

31. By November 30 of each year, Permittee shall continue to provide an annual report to the District of metered sales (customer consumption) that identifies consumption during the previous Water Year. Permittee shall meter the pipelines that deliver water to the two CHOMP Parcels and report cumulative water use on a quarterly basis to MPWMD to ascertain that water deliveries to the two CHOMP Parcels remain within the 3.17 AFY limit. If metered sales on the two CHOMP Parcels exceed 3.17 AFY, then CHOMP will be subject to the procedures specified in District Rule 20.4, Permit Rule Non-Compliance.

Ø New Special Condition #32 provides notice to CHOMP that final construction plans will need to demonstrate that projected water use will not exceed 3.17 AFY, using District methodology at that time, in order to receive a Water Permit for the project.

Ø New Special Condition #33 provides notice that a current standard Condition of Approval for all Water Permits is a Deed Restriction that entails release of consumption information upon request by the District. This information may be accessed by the general public. CAW would release information designated in a future recorded Notice and Deed Restriction signed by CHOMP as part of the Water Permit. This condition was part of the CAW/Cypress Amendment and applies to all recipient parcels.

The proposed conditions were submitted to the co-applicants the week of August 3, 2015. No comments were received from CAW as of August 12, 2015. CHOMP and Cypress concurred with the Conditions of Approval.

Statement of Expanded Supply

The Statement of Expanded Supply for the Ryan Ranch Unit (Exhibit 15-C) formally determines compliance with Order #4 and #5 of the June 2009 Ryan Ranch Decision (Exhibit 15-D). It formalizes the 3.17 AFY increase to the System Capacity for the Ryan Ranch Unit; determines that “credible expert analysis” to justify this increase has occurred in the form of the September 15, 2014 hearing materials that led to the Board approval of the CAW/Cypress Amendment (Permit #M14-05-L4); and allows District staff to accept a future application by CHOMP for a Water Permit to expand water use within Ryan Ranch.

Noticing

Public notice has been provided no later than 10 days prior to this public hearing in several ways, including: (1) mailed notices to property owners within 300 feet of Parcels APN 259-221-004 and -005; (2) posted notices onsite and in public areas closest to the subject Parcels; (3) posted notices at the District office, CAW office, Watermaster office, and Monterey City Hall; (4) notice of the public hearing to recipients of District agendas for the August 17, 2015 meeting; and (5) posting of the August 17, 2015 public hearing notice and agenda materials on the District website.

EXHIBITS

15-A Application #WDS-20150715RYA dated July 15, 2015

15-B Location of CHOMP Parcels, APN 259-221-004 and -005

15-C MPWMD Statement of Expanded Supply for the Ryan Ranch Unit dated August 2015

15-D MPWMD Ryan Ranch Decision on Inadequate Supplies (June 2009)

15-E MPWMD Draft Findings of Approval dated August 2015

15-F MPWMD Draft Conditions of Approval dated August 2015

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