Update On Water Supply Projects For The Monterey Peninsula

“Those who do not learn from history are doomed to repeat it.”
- George Santayana

The following is a status report on desalination projects being developed to address State requirements to reduce pumping from the Carmel River. The update also describes major issues related to these efforts. Many of the issues are not new and have been raised over the past 15 to 20 years. LandWatch hopes that past mistakes are avoided so that a water supply for the Monterey Peninsula can finally be developed.

Major controversies include ownership, governance, costs and the source of water to be desalinated. The CalAm desalination plant would take water from the Salinas Valley Groundwater Basin while other proposals would take water directly from the ocean. Both sources face significant impediments. Once the major issues outlined in this report are addressed, LandWatch hopes to confidently support a water supply proposal for the Monterey Peninsula.

While there are issues related to projects comprising the overall water supply project, this report focuses on the desalination component. The desalination projects described below would supplement water from other sources including but not limited to Carmel River wells, aquifer storage and recovery, and groundwater replenishment. The size of the desalination plant would vary based on whether or not groundwater replenishment becomes a feasible option. Also, in January 2013, CalAm increased demand numbers to accommodate the Pebble Beach project, “tourism bounce back,” and about 2,400 lots of record. This increased demand would require a larger desalination plant than initially proposed. An Environmental Impact Report on the CalAm project and alternatives identified below is being prepared by the California Public Utilities Commission. It is scheduled to be released for public review in July 2013. Meeting the January 2017 State deadline for a replacement water supply is problematic for all three projects.

PROJECT PROPOSALS

CalAm Water Supply Project

CalAm proposes using slant intake wells to produce water for the desalination facility located on 46 acres adjacent to the regional wastewater treatment plant in Marina. Slant wells would be located on 376 acres west of the proposed plant. Brine disposal would be through the regional wastewater treatment plant’s outfall.

A 2013 report evaluating seawater desalination projects prepared for the Mayors’ Monterey Peninsula Regional Water Authority identifies water production costs between $2,320 to $4,950 per acre-foot (AF) for the larger desalination plant and $3,017 to $6,565 per AF for the smaller plant. (Table 5-2, Evaluation of Seawater Desalination Projects, Separation Process, Inc.) These estimates are for 9,000 and 5,500 acre-feet per year (AFY) and do not reflect larger project sizes that CalAm proposed in January.

The Mayors conditionally support the CalAm project as long as CalAm meets conditions related to governance, financing, power costs, the proposed surcharge, sea level rise, hydrology, an expedited permitting process and a contingency plan. The proposal has now been signed by the four parties (Monterey Peninsula Regional Water Authority, Monterey Peninsula Water Management District, Cal-Am, and the County of Monterey).

DeepWater Desal (DWD)

The DWD project is for a desalination plant in Moss Landing. Although DWD envisions a project that would ultimately be larger and supply water to several other customers, the plant capacities that were analyzed in the Mayors’ report were for 5,500 AFY and 9,000 AFY. Proponents are DeepWater Desal, LLC, Dynergy Moss Landing Power Plant, and G3 Data Centers. The project would use an ocean water intake near Moss Landing at about 100 feet deep with transmission through an existing power plant right-of-way to an existing pump station at the power plant for transfer to the desalination plant on power plant property. Brine would be disposed of through the existing power plant outfall. DWD is establishing a power purchase agreement involving Dynergy and the City of Salinas to purchase power directly at wholesale rates which would reduce desalination plant energy costs. A preliminary report on modeling of potential impacts from operating a desalination facility ocean intake was completed in August 2012. The State Lands Commission has agreed to be the lead agency for preparation of an EIR. Permits will be applied for once the EIR is completed.

The Mayors’ report identifies water production costs between $1,470 to $3,150 per AF for the larger desalination plant and $1.870 to $4,005 per AF for the smaller plant - the least costly of the three alternatives.

People’s Moss Landing Project

The project evaluated in the Mayors’ report is for a 5,500 AFY or 9,000 AFY desalination plant on the former National Refractories and Minerals site (200 acres) in Moss Landing. The proponent is the Moss Landing Community Business Park, LLC. The site includes an existing subsurface intake well and pumping station and an existing 52" concrete outfall pipe for brine disposal. A preliminary environmental report on environmental issues and constraints was prepared in September 2012.

The Mayors’ report identifies water production costs between $2,320 to $3,480 per AF for the larger desalination plant and $2,075 to $4,450 per AF for the smaller plant.

Monterey Peninsula Water Management District (MPWMD)

The MPWMD proposes developing a desalination facility to utilize water sources outside the Salinas Valley Groundwater Basin as a safety “backstop” to the CalAm project in the event the CalAm project falters. The District will partner with a developer to conduct environmental review up to $500,000 per year. It could undertake the effort either as the Lead Agency or a co-Lead Agency with another public agency per the California Environmental Quality Act (CEQA).

MPWMD sent a Request for Qualifications to all potential ocean desalination project developers, and the People’s Moss Landing Project and DWD each submitted a proposal. The People’s project would be for a 11,200 AFY desalination plant. The proposal identifies the cost of desalinated water at $1,340 per AF. DWD project would be for a 10,000 AFY (Phase I) and 25,000 AFY (Phase II) desalination plant.

MAJOR ISSUES

Public Access to the Decision-Making Process.

CalAm’s project application is under review by the California Public Utilities Commission (CPUC). The CPUC’s decision-making process includes semi-judicial hearings conducted by an administrative law judge. The CPUC held two “public participation” hearings in January 2013 in Monterey. The remaining hearings will be held in San Francisco with limited opportunities for the general public to participate. Official participants in the hearing process are called interveners with many being represented by legal counsel, as is LandWatch. The CPUC approved the now defunct Regional Project even after several of the fatal flaws that finally brought the project down had been pointed out by many in the community.

Uncertainty about availability of water rights in the Salinas Valley Groundwater Basin

Salinas Valley agricultural water users claim that they are at risk from slant wells within the boundaries of the Salinas Valley Groundwater Basin (SVGB) and that CalAm’s plan will cause a protracted water rights dispute and possibly trigger an adjudication of the water basin. The State Water Resources Control Board has stated that hydrological modeling is needed to address this issue - a position advocated by LandWatch and others at CPUC hearings. A dispute over the availability of water rights was one of the issues that doomed the Regional Project.

Uncertainty regarding the ban on exporting water from the SVGB

Legislation establishing the Monterey County Water Resources Agency prohibits exportation of water outside the SVGB. The CalAm project would return water to the SVGB equal to the amount of fresh water extracted from the Basin, but whether or not this would avoid the ban is uncertain - again, an issue for the former Regional Project.

CalAm’s use of water from the shallow Sand Dunes Aquifer may violate groundwater rights and yield insufficient water for the project

Extraction of water from the shallow aquifer rather than from the 180 foot aquifer is proposed to avoid the water rights issue. This approach assumes that the shallow aquifer and the 180 foot aquifer are not connected and that water rights exist for extracting water from the shallow aquifer. MPWMD staff has testified that “... the raw water intake capacity required for either the 9.6 MGD-sized desalination plant...or the 6.4 MGD-sized plant ... could not be met from the dune sand aquifer via the proposed 7 to 9 slant wells to be located at this site.” Test well data addressing this issue will not be available until 2015 or 2016, and it is unclear if these data will resolve the uncertainty.

Under the Regional Project, because of the predicted gradual increase of the freshwater component in the well water and the resulting need to return more and more water to the SVGB over time, the ability of the project to meet future Peninsula water demand was also uncertain. The SVGB demand was predicted to consume nearly the entire capacity of the desalination plant, leaving little for Monterey Peninsula customers who were to pay for the entire cost. Conceivably, a similar situation could develop with the new CalAm project.

The CPUC is scheduled to make a decision before all data are available

The Commission is scheduled to receive testimony and briefings and hold evidentiary hearings for the permit before the July draft environmental impact report (EIR) and test well data are released. Final CPUC action is scheduled for January 2014. LandWatch thinks the current process is backwards because we want the decision-making process to be fully informed by science and data. Testimony should be given by interveners after scientific data that would inform the testimony are released.

Governance

The governmental body with the major decision-making authority for the CalAm project is the CPUC. While the Mayors and others have proposed a structure for input into the process, it lacks real teeth and has yet to be accepted by CalAm. Under the Regional Project, governance concerns were raised resulting in a proposal similar to the Mayors’ current proposal; it was categorically rejected by CalAm and its partners.

Public Ownership

Unlike the Regional Project, the new CalAm project would be owned by a private, for-profit utility. Project funding would be more costly in part due to uncertain access to public funding and the need to return a profit to shareholders. The Mayors propose to address higher CalAm costs through a $100 million public contribution intended to lower the project's interest rate. Public ownership, on the other hand, would assure transparency and create accountability since a locally owned public agency is subject to the Brown Act and other transparency requirements and has locally elected representatives. A public agency would have greater access to State loans and grants. Additionally, a publicly owned project would not be required to pay property taxes, unlike a privately owned facility. While a County Ordinance requires public ownership of a desalination plant, the CPUC indicates it has the authority to pre-empt the ordinance.

Sizing. Developing a water project that replaces existing demand prior to addressing growth has been a consistent position of State Legislation, the CPUC’s study in response to legislation (Plan B), and proponents of recent water supply projects. CalAm recently proposed to include water for lots of record and “bounce back” of the tourism industry in addition to a replacement supply. There is some debate as to whether or not water for these purposes would be growth inducing as defined by CEQA. At a minimum, unless there are enforceable requirements limiting water supply to lots of record and existing tourism activities, water could be made available for new development. Total water allocated for lots of record and tourism bounce back (1,600 AFY) would accommodate 6,400 residential units (assumes 0.25 AFY per unit).

Surcharge

CalAm is requesting a $99 million in “upfront” fees to be paid for by ratepayers while the project is being designed and constructed. Normally, rate increases are delayed until new facilities are in service. CalAm’s position is that the surcharge would lower future rates and limit ratepayers’ sticker shock when the total bill comes due. This funding could be spent with no assurance that a final project is completed. Ratepayers are currently paying over $40 million for the defunct Regional Project and pilot desalination facility at Moss Landing.

DeepWater Desal

The project includes receiving water for desalination directly from the ocean. The California Coastal Commission has generally not supported direct ocean intake if other alternatives are available because of entrainment issues. Additionally, direct ocean intake faces many State imposed hurdles. Finally, while the project applicants have funded start-up costs, available funding for project completion appears to be uncertain.

People’s Moss Landing Project

The project includes receiving water for desalination directly from the ocean and would face similar challenges as described above for DWD. Verification of the condition of the existing on-site infrastructure is another issue that has been raised.

CONCLUSION

The path ahead to develop a water supply for the Monterey Peninsula is challenging with many significant issues to be addressed before we can look with confidence to a final outcome.

You can participate by letting your voice be heard. E-mail the CPUC Public Advisor (public.advisor@cpuc.ca.gov) and demand that (1) the schedule be revised to assure that all hydrologic data and EIR information be evaluated before the permit is considered; and (2) the CPUC select a desalination project that is legally viable and the most cost-effective for ratepayers.

Prepared by Janet Brennan

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posted: 03.013.13