ITEM:		ACTION ITEMS
14.	ADOPT FINDINGS OF DENIAL OF APPLICATION TO Amend California American Water (caw) Distribution System to ServE Monterey Bay Shores Ecoresort IN Sand City; California American Water and Security National Guaranty, co-applicants; MPWMD Application #20080915MBS-l4; APN# 011-501-014
Meeting Date:			March 26, 2009	Budgeted:	N/A
From:			Darby Fuerst,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Henrietta Stern	Cost Estimate:	N/A
General Counsel Approval: Yes
Committee Recommendation: N/A
CEQA Compliance: Not required for denial of a project. The MPWMD, as a Responsible Agency, determined on February 26, 2009, that a Subsequent EIR is needed prior to reconsideration of the application.

SUMMARY: As directed by the Board at its February 26, 2009 meeting, the Board will consider Findings of Denial (Exhibit 14-A) for Application #20080915MBS submitted by co-applicants California American Water (CAW) and Security National Guaranty, Inc. (SNG). In brief, the application requests District approval to enable CAW production of up to 90 acre-feet per year (AFY) to serve Assessor’s Parcel Number (APN) 011-501-014, the site of the proposed Monterey Bay Shores Ecoresort (MBSE) in Sand City. The 90 AFY amount is a portion of the 149 AFY water right identified for the parcel in the Seaside Basin Adjudication and confirmed by the Seaside Basin Watermaster. Additional background and discussion are provided below.

The motion approved by the Board on February 26, 2009 was comprised of three components:

1. Deny Application #20080915MBS;

2. Direct staff to prepare Findings of Denial for consideration on March 26, 2009; and

3. If the applicant wishes to proceed with the application, MPWMD shall prepare a Subsequent EIR (SEIR) focused on water issues prior to reconsideration.

This agenda item addresses the second component (Findings of Denial).

RECOMMENDATION: District staff recommends that the Board take the following action:

· Adopt the Findings of Denial (Exhibit 14-A) for MPWMD Application #20080915MBS to Amend the CAW Water Distribution System (WDS) permit with specific reference to Findings associated with District compliance with California Environmental Quality Act (CEQA) as a Responsible Agency, exercising its independent judgment.

The primary issues identified in the Findings include: (a) inadequate documentation of the environmental effects of exercising SNG’s water rights through service by CAW, (b) need to evaluate alternative means of supplying the MBSE parcel from Seaside Basin sources, and (c) the desire for the public to have an opportunity to comment on the environmental document.

BACKGROUND: Public hearings on the application were held on November 17, 2008, January 29, 2009, and February 26, 2009. The MPWMD Board initially continued this item in November 2008 to allow the public more time to review environmental documents associated with the MBSE, and for the applicant to respond to several information requests posed by the Board. On January 29, 2009, the Board opened the public hearing but continued this item pending receipt of a written determination by the State Water Resources Control Board (SWRCB) regarding applicability of the one-for-one replacement condition in SWRCB Order WR 95-10, Condition 2. Technical information from CAW about delivery of water solely from wells in the Seaside Basin was also requested. The Board denied the application at a public hearing on February 26, 2009 for the reasons enumerated in the “Discussion” section below.

Extensive background information is provided in the materials prepared for previous meetings. The November 17, 2008 materials are available on the District website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2008/20081117/1117agenda.htm (Item 11).

The January 29, 2009 staff report and presentation materials are available on the website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2009/20090129/0129agenda.htm (Item 18).

The February 26, 2009 staff report and presentation materials are available on the website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2009/20090226/0226agenda.htm (Item 15).

The Addendum to the Final Environmental Impact Report, Monterey Bay Shores Resort, SCH #97091005 (printed Dec. 2008) considered by the City of Sand City on January 20, 2009 is on the District website at: http://www.mpwmd.dst.ca.us/ceqa/ceqa.htm.

The MBSE project website is: http://www.montereybayshores.com/.

All MPWMD files associated with this application are available for review at the District office. The Seaside Basin adjudication decision and related information are available on the Watermaster’s website at: www.seasidebasinwatermaster.org.

DISCUSSION: The following paragraphs reflect the formal Findings of Denial and explain why the Board did not approve Application #20080915MBS on February 26, 2009. A key issue was the adequacy of the City of Sand City’s December 2008 Addendum to the 1998 Final EIR, in light of new information, and several requests from hearing participants that the MPWMD Board require that an SEIR be prepared before rendering a decision on the application.

District Counsel advised on February 26, 2009, that the District Board was not compelled to require an SEIR pursuant to CEQA Guidelines Section 15162. This advise was based on previous correspondence with CAW and SWRCB (Exhibits 14-B and 14-C, respectively), combined with the proposed MPWMD Conditions of Approval, which were designed to ensure that CAW water supply for MBSE would come from Seaside Basin wells year-round, and not from the Carmel River. Counsel also advised the Board that as Responsible Agency decision-makers, they may exercise their independent judgment, and have the authority to require an SEIR if they believe such an analysis is needed to make an informed decision, consistent with the criteria in CEQA Guidelines Section 15162, and with State policy embodied in Section 15003.

CEQA Guidelines Section 15162 states that no Subsequent EIR shall be prepared unless one or more of the following situations occur, on the basis of substantial evidence in light of the whole record:

· Project involves new significant environmental effects or a substantial increase in the severity of previously identified significant effects due to a change in the project;

· Project involves new significant environmental effects or a substantial increase in the severity of previously identified significant effects due to a change in the circumstances (setting) under which the project is undertaken; or

· Project involves new information of substantial importance that shows any of the following: (A) the project will have one or more significant environmental effects not previously discussed; (B) significant effects previously examined will be substantially more severe than previously described; (C) mitigation measures or alternatives previously found to be infeasible would in fact be feasible and would substantially reduce one or more significant effects of the project, but the project proponents decline to adopt the measure or alternative; and (D) mitigation measures or alternatives considerably different than those analyzed in the previous EIR would substantially reduce one or more significant effects of the project, but the project proponents decline to adopt the measure or alternative.

It is noted that the baseline for these changes is the situation when the original Final EIR was certified (in this case, year 1998).

CEQA Guidelines Section 15003 lists 10 policy statements that are implicit to CEQA, as reviewed by the Courts. Paraphrasing several policies in Section 15003 as they may apply to the MBSE application, a Supplemental EIR (and the CEQA process in general):

· serves not only to protect the environment, but also to demonstrate to the public that it is being protected;

· informs other governmental agencies (e.g., California Coastal Commission) and the public generally about environmental effects;

· demonstrates to an apprehensive citizenry that MPWMD has, in fact, analyzed and considered ecological implications of its actions;

· enables the public to determine the environmental and economic values of their elected officials;

· is intended to be interpreted in a manner to afford the fullest protection for the environment; and

· compels government officials to make decisions with environmental consequences in mind.

New Information at February 26, 2009 Public Hearing

Written comments submitted by Craig Anthony in a letter dated February 26, 2009 (Exhibit 14-D), and oral comments by Mr. Anthony as part of the public hearing that evening, raised questions about CAW’s ability and desire to serve MBSE solely from Seaside wells during the “high flow season,” defined as when Carmel River flow exceeds 40 cubic feet per second (cfs) at the Highway 1 Bridge in November through April. To date, this has been a period when CAW’s Seaside Basin wells are turned off pursuant to SWRCB Order 98-04. This Order directs CAW to minimize production in Seaside during the high flow season in order to maximize water storage in the Seaside Basin for use in dry periods, thereby reducing dry season extractions from the Carmel River Basin, when the river habitat is most vulnerable. Order 98-04 does not prohibit use of Seaside wells in the November through April period.

The key technical question relates to the physical ability of CAW to supply water to just one customer (MBSE) from a Seaside well in the high flow period. Mr. Anthony stated that the smallest usable CAW municipal well produces about 250 gallons per minute (gpm), while maximum use by MBSE would be roughly 50 gpm. This results in CAW’s concern about needlessly producing CAW water from the Seaside Basin in winter in light of the annual limit imposed by the Adjudication, especially when the near-term possibility of a further 10% reduction in the CAW annual production limit from the Seaside Basin is considered.

More importantly, Mr. Anthony explained that water produced from a Seaside well is pumped to the Hilby storage tank, where it is mixed with Carmel River water. Mr. Anthony described CAW’s inability to accurately assess where water would be coming from to serve MBSE on a daily or weekly basis, although monthly measurements could be taken to indirectly demonstrate that water for MBSE was coming from the Seaside Basin. These comments may be interpreted as being inconsistent with CAW’s January 29, 2009 letter, which stated that CAW “will insure Seaside Wells will be operated year round to deliver MBSE water to the above parcel.”

The February 26, 2009 letter signed by Mr. Anthony (Exhibit 14-D) disagrees with the SWRCB letter of February 5, 2009 (Exhibit 14-C) and notes that “Order 95-10 is silent on what parcels of land [CAW] can serve from the Carmel River, and does not prohibit [CAW] from serving new development, provided that the Company otherwise complies with the volume limits set by that Order.” The letter suggests that the last sentence of MPWMD Condition #4 be stricken. This sentence “expressly prohibits” use of Carmel River sources to serve the MBSE parcel, consistent with the SWRCB letter of February 5, 2009. The CAW letter of February 26, 2009 also suggests simplified water production tracking rather than the “strict water accounting methods” described in MPWMD Condition #29. These comments raise additional concern about year-round supply from Seaside Basin wells because they do not comply with the SWRCB’s February 5, 2009 request that MPWMD impose “strict water accounting methods to ensure that any use of Carmel River water [italics added] does not serve this project.”

While CAW may be correct that SWRCB Order 95-10 does not direct which specific parcels in the Seaside area may receive CAW service, the SWRCB can rescind its conclusion that the one-for-one replacement requirement in Order 95-10 does not apply to MBSE if the SWRCB believes that “any use” of the Carmel River will be taken to serve the MBSE parcel. If the one-for-one replacement condition is imposed for CAW service to MBSE, then the assertions by environmental groups regarding the direct, indirect and cumulative effect of CAW service to MBSE on the water supply for CAW customers would have merit. This issue would be new information that was not addressed in the December 2008 Addendum prepared for the City of Sand City, and would meet the SEIR criteria in CEQA Guidelines Section 15162.

On February 26, 2009, members of the public and some Board members expressed the opinion that additional environmental review is needed because Mr. Anthony’s February 26, 2009 letter and statements appear to be at odds with his letter of January 29, 2009, and the SWRCB letter of February 5, 2009. To add to the confusion, the co-applicant (SNG, represented by counsel), in remarks to the Board on February 26, 2009, had different suggestions than CAW regarding acceptance of the key Conditions of Approval described above.

Speakers at the February 26, 2009 public hearing and some Board members expressed concern about the fact that there could be more water actually drawn from the Seaside Basin in the near-term with the MBSE project served by CAW than without it, especially if the Watermaster chooses not to initiate the first 10% reduction to CAW (scheduled for January 2009).

Speakers at the February 26, 2009 public hearing and some Board members questioned whether on-site MBSE wells or water from the pending Sand City desalination project could be alternative sources of supply to the MBSE project. For reference, MPWMD Rule 23.6, which was created by MPWMD Ordinance No. 132 in January 2008, currently prohibits CAW service via a Water Entitlement to the MBSE parcel from the desalination project as a Benefitted Property, partly because MBSE has its own independent source of Seaside Basin water. However, this ordinance could be changed by action of the MPWMD Board. The 300 AFY desalination project is sized based on hydrologic performance, and would not meet the full redevelopment needs of the City of Sand City (450 AFY), but the plant could serve as a near-term source of supply for MBSE as it may be many years until the City is built out. Another possible supply source in the long-term is a larger regional desalination project as described in the Draft EIR for the Coastal Water Project.

Conclusions re: Need for SEIR

Based on the new information above, there are principled reasons why the District Board would choose to require that an SEIR be prepared, based on the criteria in CEQA Guidelines Section 15162(a), and the complexity of the local water supply situation. A secondary issue is that the public has had no formal opportunity to comment on the Addendum, and should be afforded the opportunity to comment on the environmental review of water supply issues, in light of the CEQA policies in Guidelines Section 15003. The above discussion and conclusions form the basis of the Findings of Denial provided as Exhibit 14-A. The Findings focus on the environmental effects of exercising SNG’s water rights through service by CAW, not the validity of the water rights themselves. The Findings also address the need to explore potential alternative means for SNG to exercise its water rights in partnership with CAW, and the need for public review of water supply issues that could affect the public, given that 95% of Peninsula water customers are served by CAW.

EXHIBITS

14–A Draft Findings of Denial for Application #20080915MBS to amend the CAW WDS to serve MBSE

14–B CAW letter dated January 29, 2009 regarding service to MBSE from Seaside wells

14–C SWRCB letter dated February 5, 2009 regarding applicability of Order 95-10 to MBSE

14–D CAW letter dated February 26, 2009 regarding proposed MPWMD Conditions of Approval for MBSE service by CAW

U:\staff\word\boardpacket\2009\20090326\ActionItems\14\item14.doc

Prepared by H. Stern, 3/16/09