EXHIBIT 1-A

MPWMD Aquifer Storage and Recovery (ASR) Project in Seaside Basin

January 2006

Aquifer storage and recovery (ASR) entails diversion of “excess” Carmel River winter flow, as allowed by state and federal resource agencies, which is then treated and transmitted via the California American Water (Cal-Am) distribution system, to special injection/recovery wells in the Seaside Basin on the former Fort Ord Military Base. Available storage capacity in the coastal areas of the Seaside Basin serves as an underground reservoir for the diverted water, which is then extracted during dry periods. This “conjunctive use” more efficiently utilizes local water resources to improve the reliability of the community’s water supply while reducing the environmental impacts to the Carmel River and Seaside Basins. Water is diverted from the Carmel River only when it is plentiful, and is used to recharge the over-pumped Seaside Basin in wet periods. Water is then pumped back out from the Seaside Basin in dry periods to help reduce the pumping impacts on the Carmel River.

Since 1996, the Monterey Peninsula Water Management District (MPWMD or District) has investigated the feasibility of ASR. The District constructed a demonstration project in 1997, a pilot test well in 1998, and a full-scale, 700-foot deep test well in 2001. Results of extensive water quality and quantity testing have been very promising. To date, District-owned wells have injected about 1,450 acre-feet (AF) into the Seaside Basin as part of the testing program. Based on this success, the District has proposed adding a second full-scale well at the current Santa Margarita test site, located east of General Jim Moore Boulevard near Eucalyptus Road on the former Fort Ord Military Base.

The proposed MPWMD Phase 1 ASR Project entails a maximum diversion of 2,400 acre-feet per year (AFY) from the Carmel River, a maximum extraction of 2,000 AFY from the Seaside Basin, and an average yield of about 1,050 AFY. These quantities alone are not enough to bring the community into full compliance with State Water Resources Control Board (SWRCB) Order 95-10 to replace nearly 11,000 AF historically taken from the Carmel River, but the ASR Project could be combined with any other water supply project to augment supply and improve reliability. The Phase 1 ASR Project is geared toward near-term environmental protection and more efficient operations using existing resources. There is no water supply increment identified for new construction or intensified water use. Expanded ASR projects (Phases 2 and 3) are expected to be considered in the future to further supplement the community water supply.

Preliminary cost estimates prepared by engineering consultants in 2005 concluded that the capital cost of the Phase 1 ASR project would be about $3.26 million, including engineering and construction management, environmental review, project administration and contingencies. The operation and maintenance (O&M) costs, including energy, are estimated at $300,000 per year. A total annual cost of nearly $562,000 per year was estimated, based on a capital cost payoff at 5% for 20 years, plus the O&M. A total cost per acre-foot of $534/AF (2005 dollars) was derived from the total annual cost divided by the 1,050 AFY average yield.

The current MPWMD ASR testing program has operated under annual temporary water rights permits issued by the SWRCB. MPWMD is preparing an Environmental Impact Report (EIR)/Environmental Assessment (EA) to support its long-term water rights application to the SWRCB, and for easement approvals from the U.S. Army for the second well.

In December 2004, the District issued a Notice of Preparation (NOP) of an EIR on the full three-phase ASR project. Based on comments received in January 2005 and interagency meetings with Cal-Am, local, state and federal agencies, the scope was amended in March 2005 to prepare a combined EIR/EA that focuses solely on project-level review of the Phase 1 ASR project as described above. Alternative site locations for injection wells are also being evaluated, in addition to alternative means to reduce impacts to the Carmel River and Seaside Basin. A Draft EIR/EA should be available for public review in February 2006; a Final EIR/EA is anticipated to be completed by Summer 2006.

For more information on ASR, visit the MPWMD website and review the following items:

July 18, 2005: www.mpwmd.dst.ca.us/asd/board/boardpacket/2005/20050718/26/item26.htm

Mar 21, 2005: www.mpwmd.dst.ca.us/asd/board/boardpacket/2005/20050321/20050321_agenda.htm

(Select Powerpoint presentation on ASR)

Mar. 21, 2005: www.mpwmd.dst.ca.us/asd/board/boardpacket/2005/20050321/16/item16.htm

Sept. 29, 2004: www.mpwmd.dst.ca.us/asd/board/boardpacket/2004/20040929/07/item07.htm

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Revised January 17, 2006