ITEM:		ACTION ITEMS
15.	receive update on Agreement with California American Water Regarding Management and Operation of SEASIDE BASIN Aquifer Storage and Recovery Facilities
Meeting Date:			November 21, 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: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: The Board will receive an update on the proposed Agreement between the Monterey Peninsula Water Management District (MPWMD or District) and California American Water (Cal-Am) regarding management and operation of the Seaside Basin Aquifer Storage and Recovery (ASR) facilities. The purpose of the ASR project is to benefit water supply and environmental conditions in the Carmel River and Seaside Groundwater Basins. The proposed Agreement was last discussed at a special Board workshop on June 16, 2005, at which time the Board provided several recommended revisions. A revised draft document (Exhibit 15-A) was provided to Cal-Am subsequent to that meeting. The District has not received confirmation from Cal-Am on the acceptance of the proposed revisions. Consequently, the ASR management and operations agreement is currently on hold until additional response is received from Cal-Am.

The ASR Agreement negotiation was prompted by California Department of Health Services (CDHS) interim approval of the District’s ASR test injection well (Exhibit 15-B). In order for the test injection well to be used for production during the upcoming Water Year (WY) 2006, CDHS requires that informal arrangements over the past several years for the well’s operation and maintenance be converted to a long-term written agreement between the District and Cal-Am. Accordingly, the Agreement, as drafted, contemplates that the District would issue a 15-year license to Cal-Am for operation and maintenance of the ASR facilities. In addition to clarifying joint efforts, needed cooperation and respective ownership rights, of and between MPWMD and Cal-Am on the present ASR facilities, the proposed Agreement will serve to facilitate plans being undertaken by both entities to expand and make permanent -- on an accelerated basis -- ASR project facilities and their operations.

RECOMMENDATION: Staff recommends that the Board review the current status of the proposed ASR Agreement and provide direction to staff.

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 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.

IMPACT TO RESOURCES: Approval of the proposed Agreement will reduce District expenditures, in that energy and other expenses the District now absorbs for operation, maintenance and repair of the ASR test injection well will be shifted to Cal-Am. Expenditure reductions totaling $65,000 for this purpose were made as part of the Fiscal Year (FY) 2005-06 budget (June 20, 2005 budget transmittal letter). If the proposed Agreement is not approved then the operation and maintenance costs would continue to be the District’s responsibility, but these specific costs are not included in the FY 2005-06 budget.

EXHIBITS

15-A Proposed Agreement Titled: Aquifer Storage And Recovery (ASR) Management and Operations Agreement between California American Water and Monterey Peninsula Water Management District (Not attached to this staff report is its Exhibit A, SMTIW Operations and Maintenance Manual; please refer to the May 16, 2005 Board packet, item 15 to view Exhibit A).

15-B August 15, 2003 Letter from Betsy Lichti, CDHS to Steve Leonard, Cal-Am

U:\staff\word\boardpacket\2005\2005boardpackets\20051121\ActionItems\15\item15.doc

J. Oliver, 11/8/05, 2 pages.