ITEM:		INFORMATIONAL ITEMS/STAFF REPORTS
25.	QUARTERLY WATER SUPPLY PROJECT STATUS REPORT
Meeting Date:			January 26, 2006	Budgeted:	N/A
From:			David A. Berger,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Henrietta Stern	Cost Estimate:	N/A
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

This is a quarterly report on District water supply augmentation projects for the October through December 2005 period. The next quarterly report will be written in April 2006. Limited background information is provided herein. A detailed historical overview of previous action may be found in year 2003 and 2004 reports. Information is also available as part of the weekly General Manager’s letter to the Board, and quarterly updates at the January, April, July and October regular Board meetings, all of which can be found on the District website at www.mpwmd.dst.ca.us.

Based on a Strategic Planning Session held on September 8, 2005, and ratified at the October 17, 2005 regular meeting, the Board identified the following water supply objectives for year 2006:

WS1: Determine existing and future water needs.

WS2: Evaluate water supply options to meet community needs.

WS3: Determine MPWMD role in governance of Regional Urban Water Supply project.

WS4: Encourage public participation and understanding.

WS5: Pursue MPWMD water supply projects.

WS6: Create Board Water Supply Committee and charge.

At the September 2004 strategic planning workshop, the District Board reviewed several proposed water augmentation projects in a detailed comparative matrix. The Board confirmed that it would not proceed on further analysis of a local MPWMD-owned desalination project in the Sand City area at this time, and instead focus its efforts on collaboration with other agencies on a regional water supply project, as well as pursue the MPWMD Phase 1 Aquifer Storage and Recovery (ASR) Project planned to be operational in year 2007. In June 2005, the Board approved a user fee adjustment to fully fund the Phase 1 ASR Project.

At the September 2005 strategic planning workshop and the November 21, 2005 regular meeting, the Board approved six workshop dates to address specific water supply issues consistent with the six water supply objectives noted above. The workshop topics and dates are shown in the table below.

The following paragraphs describe action on each of the six water supply objectives in the last quarter of 2005 and early January 2006.

Workshop Topic	Meeting Dates
A. Aquifer Storage and Recovery –Overview and Future Possibilities B. Receive Public Comment on Draft EIR on the Phase 1 ASR Project (pending release of Draft EIR/EA)	Wed. 1/25/06
Regional Urban Water Supply Board Governance	Wed. 2/22/06
Part A – Water Needs Analysis, Existing Setting and Demand	Thurs. 3/23/06
Part B – Water Needs Analysis, Future Demand at Buildout	Thurs. 5/18/06
Water Supply Augmentation Alternatives	Thurs. 5/25/06
Water Projects Cost and Timeline Analysis	Thurs. 6/29/06

WS1: DETERMINE EXISTING AND FUTURE WATER NEEDS

Staff is developing information for presentation at the March 23 and May 18, 2006 workshops, as shown in the above table.

WS2: EVALUATE WATER SUPPLY OPTIONS TO MEET COMMUNITY NEEDS

Activities associated with this objective will culminate in a report and presentation at the June 29, 2006 workshop noted above. At the direction of the Board in December 2005, staff issued a Request for Proposals to consultants to assist with a detailed evaluation of three proposed desalination projects previously reviewed in the comparative water supply matrix: (1) Coastal Water Project (CWP) at Moss Landing proposed by California American Water (Cal-Am); (2) the Monterey Bay Regional Desalination Project (MBRDP) at Moss Landing proposed by Pajaro/Sunny Mesa Community Services District (PSM); and (3) MPWMD desalination project proposed in the Sand City area. Staff also requested the most recent engineering and cost information available from Cal-Am and PSM. Proposals were received on January 10, 2006 and the Board will consider authorizing a contract with the recommended consultant at the January 26, 2006 Board meeting. The consultants will provide independent review of the following attributes for each project:

Ø technical feasibility of major components;

Ø reasonableness of the estimated capital and operation costs;

Ø proposed financing mechanisms, if available;

Ø existing and proposed right-of-way agreements;

Ø physical, regulatory, environmental and other constraints to project implementation, which affects timeline.

WS3: DETERMINE MPWMD ROLE IN GOVERNANCE OF REGIONAL URBAN WATER SUPPLY PROJECT

District staff continues to coordinate with Monterey County Water Resources Agency (MCWRA), Monterey Regional Water Pollution Control Agency (MRWPCA), and Marina Coast Water District (MCWD) on regional water supply solution opportunities. The District General Manager participated in Monterey County-led meetings of water district and city/county representatives regarding a potential governance structure for a publicly-owned Regional Urban Water Supply (RUWS)/Joint Powers Agreement (JPA) Board. MCWRA General Manager Curtis Weeks is completing a series of presentations to Monterey County cities and water districts whose staff have participated in developing the RUWS/JPA Board governance concept. Mr. Weeks has advised the District that a draft Formation Agreement should be ready in late January or early February 2006 for review by affected councils and boards.

WS4: ENCOURAGE PUBLIC PARTICIPATION AND UNDERSTANDING

District staff continues to communicate with the public through weekly updates posted to the District website and monthly presentations at Board meetings, which are carried by public access television. Public participation and understanding of water supply issues are a major goal of the six workshops noted in the above table.

WS5: PURSUE MPWMD WATER SUPPLY PROJECTS

The primary water supply efforts at this time focus on ASR, including: (1) continued testing of the existing full-scale Santa Margarita Test Injection Well; and (2) pursuit of the expanded Phase 1 ASR Project at the Santa Margarita test site, which entails completion of an Environmental Impact Report (EIR) and Environmental Assessment (EA) to meet state and federal environmental review requirements. Both the existing and future ASR programs require permits from the State Water Resources Control Board (SWRCB) and other entities.

Conduct ASR Testing

ASR entails diverting excess water flows (typically in Winter/Spring) from the Carmel Valley Alluvial Aquifer through existing Cal-Am facilities and injecting the water into the Seaside Groundwater Basin for later recovery. Since 1996, the District has evaluated the feasibility of ASR at greater levels of detail, including obtaining temporary water rights to divert Carmel River water and inject it into the Seaside Basin. From 1998 through March 2005, the District injected approximately 1,450 acre-feet (AF) of excess winter flow from the Carmel River into the Seaside Basin. During this period, approximately 1,140 AF were recovered and delivered to the community via the Cal-Am system as part of the test program.

On December 14, 2005, the District received a temporary permit #21175 from the SWRCB for continued testing of the MPWMD Santa Margarita Test Well in the Seaside Basin through May 2006, pending adequate flows in the Carmel River as set by the SWRCB in consultation with federal and state fishery agencies. An annual diversion limit of 650 AF was set for 2006. Injection testing began on January 4, 2006, and should continue as long as adequate flow remains in the river. As water is injected, various testing efforts associated with water quality and storage will be carried out through late 2006. In December 2005, the Board received an annual report on the 2005 testing efforts, which concentrated on water quality effects of the injected water on the local groundwater.

District staff continued to meet with Cal-Am on a Management and Operations Agreement (MOA) regarding ASR testing, mutual aid, cost-sharing, water rights and other issues. A final agreement has yet to be approved, but positive forward progress was made in December 2005. It is anticipated that a final draft MOA will be available for review at the January 25, 2006 ASR workshop, which would enable the Board to consider the agreement at its February 2006 meeting. District staff also met with the California Department of Health Services to clarify that a temporary permit can be issued to Cal-Am to use the water extracted from the MPWMD test injection well in 2006.

Prepare EIR/EA to Evaluate MPWMD ASR Project

In September 2004, the Board directed staff to initiate preparation of an EIR on the District’s ASR project. Contract amendments with Jones & Stokes Associates (JSA) and Padres Associates were approved in October 2004. A Notice of Preparation (NOP) of an EIR was issued on December 13, 2004, and public hearings to receive oral comments on the NOP were held on January 12, 2005. At its February 24, 2005 meeting, the Board received a formal Scoping Report summarizing the NOP comments. At its March 21, 2005 meeting, the Board provided direction to staff on the ASR project description and revised scope of work for the EIR, in light of the NOP comments and several coordination meetings with local agencies and Cal-Am. Please see the Board packet materials for February 24, March 21, and April 18, 2005 for detailed information. This information is also on the District website: www.mpwmd.dst.ca.us.

The December 2004 NOP originally envisioned environmental review of three phases, with emphasis on a smaller Phase 1 project to be implemented within one year of project approval. Based on public comments and Board direction in March 2005, the current EIR now focuses on Phase 1 (one additional well at existing test site within the next 1-2 years). Future EIRs will address Phases 2 and 3, once more information is known about regional land use plans and infrastructure. Also, the environmental document is now a combined EIR and Environmental Assessment (EA) to comply with the National Environmental Policy Act (NEPA), with the U.S. Army as federal lead agency.

The MPWMD Phase 1 project is focused on better management of existing water resources to help reduce current impacts to the Carmel River and Seaside Basins. The project is viewed as being complementary to other larger, long-term water augmentation projects that are currently being explored by various entities. The project entails a maximum diversion of 2,400 acre-feet per year (AFY) from the Carmel River for injection, a maximum extraction of 2,000 AFY from the ASR wells in the Seaside Basin, and an average yield of about 1,050 AFY. The proposed operation of the Phase 1 ASR Project would result in reduced pumping of the Carmel River in the Summer/Fall and increased storage in the Seaside Basin, which are considered to be environmentally beneficial.

An administrative draft EIR/EA was completed for MPWMD internal review in October 2005. Second version administrative draft EIR/EA was provided to U.S. Army on November 1, 2005 for its required review in accordance with the National Environmental Policy Act (NEPA). The Army requested two time extensions for review through December 2, 2005; comments provided to MPWMD by the Army on December 6, 2005. In mid-December, District consultants addressed the Army comments, revised and expanded the cumulative impacts section to include other projects known to exist or are planned in the ASR project area, including a temporary pipeline under construction by Cal-Am, and incorporated information provided by the Army regarding hazardous materials and biology.

In Fall 2004, Cal-Am requested District assistance to obtain federal approvals to construct a temporary pipeline along General Jim Moore Boulevard. Since then, District staff has filed for an easement with the U.S. Army on Cal-Am’s behalf and helped Cal-Am obtain an encroachment agreement for the pipeline from the City of Seaside in compliance with the California Environmental Quality Act (CEQA). Forward progress on the pipeline is important because it will foster operational flexibility to enable water delivery to and extraction of recharged water from the MPWMD test well without affecting other nearby components of the Cal-Am system.

On December 22, 2005, a meeting between the staffs of the U.S. Army, MPWMD and Cal-Am was held to: (1) confirm from the Army that the EIR/EA document for Phase 1 ASR was ready for public review; and (2) clarify and distinguish permit process for Cal-Am temporary pipeline from the Phase 1 ASR project. At the meeting, the Army staff confirmed that the MPWMD document addressed their comments and was ready for release. However, the Army also indicated that a permit (easement) for the Phase 1 ASR project could not be issued until an Environmental Assessment (rather than a simple exemption) was prepared for the Cal-Am temporary pipeline pursuant to NEPA. The District’s ASR project is linked to the pipeline because current operations in the EIR assume its existence. The pipeline was scheduled for completion in 2005 and certain portions have already been constructed.

The Army position in December 2005 was a significant, substantial change from previous direction to both MPWMD and Cal-Am in consultations conducted in early 2005, and has impacted the EIR timeline. Previously, both MPWMD and Cal-Am staff were advised that the federal permit for the temporary pipeline was imminent based on a completed Biological Assessment prepared by Cal-Am, which resulted in a Biological Opinion that addressed the needs of the California Tiger Salamander in compliance with the Endangered Species Act. The Army staff apologized for any inconvenience this new direction may create, and confirmed that additional documentation is needed for the pipeline under NEPA because of the presence of salamander habitat along the pipeline route.

The Army recommended that the Cal-Am temporary pipeline information be incorporated into the chapters of the MPWMD Phase 1 ASR project as the most efficient way to facilitate issuance of two separate permits – one to MPWMD for the ASP Project and one to Cal-Am for the temporary pipeline. The Army pledged it cooperation to fast-track environmental review of the revised document.

In late December 2005, Cal-Am indicated it wished to review the option of preparing a separate Environmental Assessment rather than joining the District’s EIR, and requested until January 13, 2006 to make that determination. In late December 2005 and early January 2006, Cal-Am and the District exchanged information to facilitate forward movement for both projects, and met on January 10, 2006 to discuss further coordination on a variety of ASR-related topics. Upon review of its consultant’s proposal received on January 11, 2006, Cal-Am advised the District on January 12, 2006 that it wishes to integrate the pipeline information into the District’s EIR/EA. With District oversight, Cal-Am will contract separately with Jones & Stokes to add the pipeline information into the District’s EIR; thus, there should be no impact to the District’s contract and budget with Jones & Stokes.

District consultants indicated that the Cal-Am pipeline information could be incorporated into the existing document in two-to-three weeks upon receipt of project information. Based on all the above, the earliest release date for the Draft EIR/EA would be late January 2006. An update will be provided at the January 26, 2006 regular Board meeting.

Obtain Water Rights for ASR Projects

District staff plans to meet with SWRCB staff on January 24, 2006 to continue to update them on ASR and Seaside Basin activities, and assess progress on the District’s permit application for water rights for the long-term ASR project since the previous meeting in August 2005. Two Petitions for Change were originally submitted by the District in October 2001 and revised in September 2003. The SWRCB noticed the District’s Petitions on April 15, 2005. The District prepared formal responses to the National Marine Fisheries Service (NOAA Fisheries) and California Department of Fish & Game (CDFG) protests in mid-June and July 2005, respectively. District staff met and/or exchanged correspondence with NOAA and CDFG in Fall 2005 regarding protest dismissal terms. Excellent progress has been made with NOAA Fisheries; CDFG still has certain issues that need resolution. In December 2005, the SWRCB dismissed a request by Cal-Am to re-open the protest period on the District’s Petitions (Cal-Am did not submit a timely protest during the comment period in mid-2005).

As noted above, the District obtained a temporary urgency permit for the 2006 test season for the existing ASR test well over the objection of Cal-Am.

In related action, a Cal-Am letter dated November 3, 2005 included a formal complaint to the SWRCB challenging the validity of MPWMD’s current water rights associated with the New Los Padres Reservoir Project (issued in 1995) as well as the Petitions for Change for the long-term ASR projects that are associated with the 1995 water right. The Cal-Am complaint also asked that the District’s water rights be conveyed to Cal-Am. At this writing (January 12, 2005), the SWRCB has yet to determine whether it will accept Cal-Am’s complaint. An associated Cal-Am letter also provided information to the SWRCB in support of Cal-Am water rights applications.

Ø

Prepare Seaside Basin Groundwater Management Plan; Participate in Litigation

District staff and consultants began in October 2004 to prepare a long-term Seaside Basin Groundwater Management Plan (SBGMP) in compliance with protocols set by the State of California (AB 3030 as amended by SB 1938). An Advisory Committee comprised of major groundwater pumpers, agency officials, and stakeholders was formed in October 2004; meetings and information exchanges have occurred through Summer 2005. In December 2004, the Board approved a formal public outreach program that began in 2005.

Complicating this task is litigation filed by Cal-Am on August 14, 2003. The suit asserts Cal-Am’s water rights and requests a Court adjudication of the Seaside Basin. The Cal-Am lawsuit involves issues of public concern such as: prioritization and quantification of water rights within the basin; rights to aquifer storage within the basin; rights to artificially introduce non-native water into the basin through direct injection or spreading grounds; a judicial determination that the basin is in overdraft; and the appointment of a water master to manage the basin water rights and resources. The District is a recognized interested party in the litigation, and participated in many settlement meetings, mediation and other litigation activities through 2005.

Extensive District staff and attorney resources were expended in the October-December 2005 period in preparation for the trial before (retired) Judge Robert Randall, which began on December 12, 2005. Several District staff and consultants served as expert witnesses at the trail. Judge Randall is expected to render a tentative Decision in mid-January 2006, and will likely hold a hearing for the parties to comment on the tentative Decision. All parties agree the Seaside Basin is in overdraft, and all parties agree that ASR could serve as an important part of a physical solution to address the overdraft. The key issues to be resolved include (1) what water production should be allowed in the next 5-10 years; and (2) who should serve as the “Water Master” of the adjudicated basin, accountable to the Court to implement its physical solution.

Interagency Cooperation

Despite litigation and water rights issues, District staff continued to work with Cal-Am to discuss ways to further ASR as a needed component of the “water portfolio” for the Peninsula. Cal-Am staff participated in a January 10, 2006 planning meeting for the ASR Workshop scheduled for Jnauary 25, 2006. A technical meeting is planned in the near future to best coordinate Cal-Am and MPWMD timelines for facilities to foster ASR and meet mutual goals. The District continues to work with Cal-Am and resource agencies to develop quarterly management strategies to reduce impacts to the Carmel River and Seaside Basins, while meeting community water needs.

District staff led the effort to obtain $497,000 of Proposition 50 grant funds to prepare an Integrated Regional Water Management Plan (IRWMP) for the Monterey Bay Area. After an initial announcement by the California Department of Water Resources (DWR) that the Monterey Bay Area request had missed the funding cutoff, District staff attended a briefing in Sacramento on September 23, 2005, where additional funds were requested. On October 3, 2005, the District learned that an additional $3,000,000 from Prop. 50 will be made available for Planning Grant proposals and that the MPWMD-led group would be awarded $497,000 to fund about 40% of the work necessary to complete. Final written approval of DWR staff funding recommendations was made by the DWR Director in early January 2006. The District will work with its local public and non-profit partners to complete the IRWMP in 2006, which will position the Area to receive implementation funds for specific projects, such as the MPWMD ASR Project.

WS6: CREATE BOARD WATER SUPPLY COMMITTEE AND CHARGE

The Board began consideration of forming a Water Supply Committee (WSC) comprised of three Board members at the December 2005 meeting; this item is on the agenda for January 26, 2006.

RELATED WATER AUGMENTATION ACTIVITIES

The following table summarizes related water augmentation efforts in the October-December 2005 period. These activities do not directly reflect the six water supply objectives, but are relevant to overall water supply efforts.

ACTIVITY	ACTION
Seismic Retrofit and Sediment Removal from San Clemente Reservoir.	District staff participates in the EIR/EIS process on the seismic retrofit of San Clemente Dam. Potential removal of sediment from San Clemente Dam continues to be explored by Cal-Am, DWR, and the U.S. Army Corps of Engineers (USCOE). District staff participates in meetings and provides technical expertise upon request. Cal-Am maintains the water level of San Clemente Reservoir at 515 feet (10 feet below spillway elevation of 525 feet) pursuant to direction from DWR’s Division of Safety of Dams. On September 30, 2005, District staff received a Notice of Preparation (NOP) for the San Clemente Dam Seismic Safety Project EIR/EIS. The 2005 NOP incorporates features of the 1997 NOP and identifies a broadened range of alternatives under consideration. Comments were submitted on the NOP in early November 2005. Subsequently, the District received an administrative draft EIR/EIS for internal review, with comments requested by January 30, 2006.
Implement and Refine Water Distribution System (WDS) Rules and Regulations.	Based on earlier Board approval of a concept ordinance in May 2005, and CEQA review in June-July 2005, staff developed Ordinance No. 122 for first and second reading in July-August 2005. The Ordinance became effective on September 14, 2005. The ordinance creates a Pre-Application process for all new wells in the District along with an impact-based, multi-level permit process, based on the size, location and water use of affected parcels. Staff and consultants developed procedural guidelines, new application forms, and continue to refine Implementation Guidelines to accompany the ordinance. Several applications are currently at various stages in the permit process.
Review CEQA Documents for Other Projects	The District logs incoming CEQA notices and comments on selected documents prepared by other agencies for projects within the District boundary that could potentially affect water supply, water quality or environmental resources managed by the District.

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FINAL 1/13/06