ITEM:		ACTION ITEMS
14.	Consideration of Proposed Memorandum of Agreement with California American Water Regarding Management and Operation of Aquifer Storage and Recovery Facilities
Meeting Date:			April 18, 2005	Budgeted:	N/A
From:			David A. Berger,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Joe Oliver	Cost Estimate:	N/A
General Counsel Approval: Yes
Committee Recommendation: Pending
CEQA Compliance: N/A

SUMMARY: The Board will consider approval of a Memorandum of Agreement (MOA) between the Monterey Peninsula Water Management District (MPWMD or District) and California American Water (Cal-Am) regarding the Seaside Basin Aquifer Storage and Recovery (ASR) project operations. The purpose of the ASR project is to benefit water supply and environmental conditions in the Carmel River and Seaside Basins. The proposed MOA (Exhibit 14-A) is the outcome of a negotiation between respective management staff and legal counsel of the District and Cal-Am that was triggered by California Department of Health Services (CDHS) 2004 conditional approval of the District’s ASR test injection well. CDHS required that informal arrangements between the District and Cal-Am over the past several years for the well’s operation and maintenance, be converted to a written agreement. In addition to clarifying joint efforts and cooperation between the MPWMD and Cal-Am on the present test injection well, the proposed MOA will serve to facilitate plans being undertaken by both entities to expand and make permanent ASR project facilities and their operations.

On April 4, 2005 the Administrative Committee scheduled a special meeting at 4:30 p.m. on April 18 to review this proposed MOA.

RECOMMENDATION: Staff recommends that the proposed MOA (Exhibit 14-A) be approved and the General Manager authorized to execute it.

BACKGROUND: Since initiating an ASR pilot program in the Seaside Basin in 1996, the District has been cooperating with Cal-Am on installation and operation of ASR test facilities, based on a mutual desire to develop further knowledge and planning of this important water resource project. This cooperative effort, while successful, has been undertaken without a formal written agreement between the parties regarding ASR operations. In July 2004, during the permitting process with the CDHS to allow water from the District’s test injection well, the Santa Margarita Test Injection Well (SMTIW), to be delivered to Cal-Am customers via the Cal-Am distribution system, the CDHS reiterated their request that an agreement between the two parties be provided. An agreement was requested by CDHS to show that Cal-Am was authorized by the District to pump water from the SMTIW on a long-term basis. At about this same time, one of

Cal-Am’s main Seaside production wells, the Paralta well, suffered an equipment failure, necessitating use of the SMTIW on an emergency basis as a back-up supply for the Cal-Am system. The cost and other impacts of this unexpected occurrence on SMTIW operations and maintenance, coupled with District and Cal-Am management recognition that a framework was needed for joint cooperation on future ASR planning, also served as a catalyst for negotiating this proposed agreement.

The MOA provides a basis for describing ownership of ASR-related facilities by the respective parties, and clarifies each agency’s roles in ASR operations, as well as costs associated with the existing and future planned ASR program. The following is a summary of its key provisions:

1. Definitions are included of ASR Facilities owned by the District, and Associated ASR Facilities owned by Cal-Am, including respective rights to permits, planning and construction each party holds to their respectively owned facilities.

2. Cal-Am obligation to operate the ASR Facilities and Associated ASR Facilities, and the District’s functional responsibilities and authority with respect to the SMTIW, are set out in a detailed Operations and Maintenance manual that the District staff has reviewed and which is part of the proposed MOA.

3. Cal-Am’s operation of the SMTIW will conform to the District’s quarterly water supply budget strategy for most effective management of the Seaside groundwater resources.

4. Cal-Am and the District jointly agree to cooperate in securing permits and approvals needed for current and future ASR facilities and their operation.

5. Cal-Am will not charge the District for water injected into the ASR Facilities, and the District will not charge Cal-Am for water recovered from its ASR Facilities.

6. Cal-Am will pay for all costs to operate, maintain, repair and replace the District-owned ASR Facilities, including our actual and necessary ASR-related costs; and in exchange for absorbing this expense, the District would separately license the operation of its ASR Facilities to Cal-Am initially for a 20-year period, conditioned on Cal-Am’s compliance with District-approved annual water supply budgets.

IMPACT TO RESOURCES: Approval of the proposed MOA will reduce District expenditures, in that energy and other expenses we now absorb for operation, maintenance and repair of the ASR test injection well will be shifted to Cal-Am. This cost is budgeted at $65,000 in fiscal 2004-05. If this MOA is approved, the cost savings will become part of eliminating the District’s operating deficit in the fiscal 2005-06 proposed budget. Of course, there would not be savings to most District residents and businesses, as they would ultimately pay these ASR costs through Cal-Am customer service rates.

EXHIBITS

14-A Draft Memorandum of Agreement Titled: Aquifer Storage And Recovery (ASR) Management & Operations Agreement Between California American Water And Monterey Peninsula Water Management District

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