EXHIBIT 15-B

MONTEREY PENINSULA WATER MANAGEMENT DISTRICT

POTENTIAL FOR SEAWATER DESALINATION

WITHIN THE MPWMD BOUNDARY

PRELIMINARY REPORT - DRAFT

by

Andrew M. Bell, District Engineer

October 2010

INTRODUCTION

The purpose of this report is to describe findings of a study to identify the potential for seawater desalination within the Monterey Peninsula Water Management District (MPWMD or District) boundary. This study was directed by the MPWMD Board of Directors’ Water Supply Planning Committee.

BACKGROUND

MPWMD investigated seawater desalination projects in the early 1990s as part of its “interim” or “near term” water supply project evaluation that was implemented during the protracted process for environmental review and permitting of a new dam on the Carmel River. A seawater desalination project with Ranney collector (radial well) intakes along the City of Sand City coast was developed, and a Final EIR for the project was issued in December 1992. The desalination plant had a capacity of 3 million gallons per day (MGD), and the project was to be operated seasonally to provide 2,000 acre-feet per year (AFY) of potable water. Approval of the project and its financing was presented to the electorate in June 1993, but the measure failed.

In 2002, 2003, and 2004, a series of technical and environmental studies were prepared for a 7.5 MGD project with potable water yield of 8,400 AFY utilizing subsurface seawater intake located along the coast in Sand City. After release of the report titled “Board Review Draft, MPWMD Water Supply Project Draft Environmental Impact Report” in December 2003, this project was not pursued by the District.

In 2008, the District Board directed evaluation of the potential for a project with facilities located between the southern portion of the City of Sand City and the northern end of what is now the Fort Ord Dunes State Park. The report on this investigation by ICF Jones & Stokes and Camp Dresser & McKee, Inc., titled “Monterey Peninsula Water Management District 95-10 Project Constraints Analysis,” was completed in August 2008. This report recommended further analysis in three areas in Fort Ord Dunes State Park, using the shallow Dune Sands aquifer along the coast as a source of desalination project feedwater. Based on the findings of this study, further analysis of project potential was conducted, including the drilling of boreholes to determine the presence or absence of a low-permeability layer that would separate the Dune Sands aquifer from the portions of the Seaside Groundwater Basin that are currently used to supply potable water (Paso Robles Aquifer and Santa Margarita Aquifer). Results of this work, conducted by hydrogeologist Martin B. Feeney, are presented in a November 2009 report titled “Monterey Peninsula Water Management District 95-10 Project, Hydrostratigraphic Investigation.” Conclusions of the report include that there is not a continuous low-permeability layer between the shallow Dune Sands aquifer and the “180-foot aquifer” of the Salinas Valley Basin. Similarly, low-permeability strata were found to not be continuous between the Dune Sands aquifer and the Paso Robles Aquifer in the Seaside Groundwater Basin. Thus, the shallow Dunes Sands aquifer in the southern portion of the Fort Ord Dunes State Park could not be used as a source for feedwater without impacting current uses from the Salinas Valley Basin or the Seaside Groundwater Basin.

WATER SUPPLY GOALS AND FEASIBILITY CRITERIA

At the March 8, 2010 Water Supply Planning Committee meeting, it was determined that the minimum water supply production capacity for a project to be considered feasible would be 2,000 acre-feet per year. In addition, locations for project facilities, other than for discharge of reject water or brine, were limited to between Cypress Point and the northern extent of the District boundary. If needed, brine discharge could be accomplished through construction of a pipeline to the Monterey Regional Water Pollution Control Agency’s wastewater treatment plant outfall, which is located north of the City of Marina, outside the MPWMD boundary.

LIMITING FACTORS

For all potential projects considered, the primary limiting factor is the ability to develop adequate feedwater (seawater or brackish water) intake facilities, both siting and capacity. For example, for the portion of the coast in Del Monte Forest, the Pebble Beach Company representative contacted by staff stated that the current coastline resources (e.g., recreational access and tourism) are not compatible with intake facilities along the coast.

For all projects, the regulations and procedures regarding desalination projects located within the Monterey Bay National Marine Sanctuary should be planned, designed, constructed, operated, and monitored in accordance with the May 2010 report titled “Guidelines for Desalination Plants in the Monterey Bay National Marine Sanctuary.” For example, this document states that “installation of certain desalination facility structures such as intake/outfall pipelines on or beneath the ocean floor would require Sanctuary authorization of California Coastal Commission Coastal Development Permits that allow for seabed disturbance” (page 2). Other considerations include preference for the use of subsurface intakes as an alternative to open ocean intake facilities, avoidance and minimization of “impingement and entrainment to the extent feasible,” minimization of “disturbances to biological resources and to recreational activities,” and minimization of impacts from brine discharge (pages 6 and 7).

Plant site availability and methods for disposing of reject water or brine discharge were considered for all potential projects.

CONCLUSION REGARDING POTENTIAL PROJECT SITES

Based on review of project locations between Cypress Point and the southern portion of the Fort Ord Dunes State Park, the following project areas appear to have the greatest potential:

City of Monterey – intake facilities and plant site at abandoned wastewater treatment plant site across Del Monte Avenue from the Naval Postgraduate School;

City of Sand City – intake facilities north and south of the recently-constructed Sand City desalination project facilities;

Meetings Held with Agency and Property Owner Representatives

May 7, 2010 Richard Simonich, City of Sand City (City Engineer)

May 7, 2010 Diana Brooks, California Public Utilities District, Division of Ratepayer Advocates

July 1, 2010 Mark Stilwell, Pebble Beach Company

July 1, 2010 Heidi Luckenbach, City of Santa Cruz/Soquel Creek Water District

Apr. 5, 2010 Brad Damitz, Monterey Bay National Marine Sanctuary

Apr. 30, 2010 Bob Holden, Monterey Regional Water Pollution Control Agency

July 20, 2010 Brad Damitz, Monterey Bay National Marine Sanctuary

Aug. 16, 2010 Steve Matarazzo and Richard Simonich, City of Sand City (City Manager and City Engineer)

Sep. 17, 2010 Steven A. Quimby, Naval Postgraduate School

Descriptions of Key Meetings

On May 7, 2010 District Engineer Andrew Bell met with the City of Sand City’s engineer, Richard Simonich of Creegan & D’Angelo, to review additional information about the project and to learn if there is the potential for installing feedwater intake facilities along the coast in Sand City and in adjacent areas. Mr. Simonich provided information on the City of Sand City’s intake facilities but did not believe there are additional feasible intake sites in adjacent areas to the north. He did not have information on areas to the south.

On July 1, 2010, Mr. Bell spoke with a Mark Stilwell of the Pebble Beach Company regarding use of the portion of the coast in Del Monte Forest from Cypress Point northward as locations for desalination project facilities. Mr. Stilwell stated that the current coastline resources (e.g., recreational access and tourism) are not compatible with intake facilities or other desalination project facilities along that portion of the coast.

Also on July 1, 2010, Mr. Bell met with Heidi Luckenbach, City of Santa Cruz engineer, to get an update on the city’s desalination project, which is being considered in partnership with Soquel Creek Water District. He asked in particular what the project proponents have learned regarding the potential for surface and subsurface intake facilities. Ms. Luckenbach stated that a report by a consultant to the city regarding alternative methods for seawater intake is in preparation. Mr. Bell requested a copy of the report when it is available. As of the writing of this report, the consultant report on feedwater intake facilities had not been completed.

Mr. Bell contacted Brad Damitz of the Monterey Bay National Marine Sanctuary (MBNMS, or Sanctuary) on April 5, 2010 to discuss Sanctuary regulations for desalination projects. At that time a document was in preparation by the MBNMS and the National Marine Fisheries Service, both of which are agencies within the National Oceanic and Atmospheric Administration, regarding guidelines for desalination projects located within the Sanctuary. That document was issued in May 2010 with the title “Guidelines for Desalination Plants in the Monterey Bay National Marine Sanctuary,” and copies were provided to members of the Board on May 19, 2010. On July 20, 2010 General Manager Darby Fuerst and Mr. Bell met with Mr. Damitz to further discuss regulations and procedures regarding desalination projects located within the Sanctuary. Mr. Damitz reiterated many of the items addressed in the May 2010 Guidelines report. Mr. Damitz also described how the Sanctuary staff works with the California Coastal Commission and the Regional Water Quality Control Board in review and approval of desalination projects.

On August 16, 2010, Messrs. Fuerst and Bell met with the City of Sand City’s City Manager Steve Matarazzo and City Engineer Richard Simonich to pursue opportunities for locating desalination project facilities (e.g., desalination plant, storage tank, pump station(s), pipelines) within the city. Mr. Matarazzo stated that the City of Sand City would be concerned about any project that would impact the city’s desalination project, and that the city retains all rights to the Aromas Sands (the shallow beach or dune sands aquifer where the City’s intake and discharge facilities are located) within its boundary. He also stated a fiscal concern, that the city does not want more tax-exempt uses of properties within the city.

On September 17, 2010, Messrs. Fuerst and Bell met with Steven A. Quimby, Installation Planner for the Naval Postgraduate School (NPS) and two other NPS staff members to learn if there is potential to site seawater desalination project facilities at the abandoned Monterey wastewater treatment plant site across Del Monte Avenue from the NPS. This site is owned by the U.S. Navy. Mr. Quimby described current uses of the property and the fact that the City of Monterey had recently released a coastal land use plan that describes potential recreational opportunities in the vicinity of the NPS property. Mr. Quimby stated that he believes NPS would be open to consideration of desalination project facilities at this site, but that more detailed information on project facilities, land area requirements, and project construction and operations is needed. Based on feedback received at this meeting, Mr. Bell will prepare information showing requirements for siting, constructing, and operating a desalination project at this site for review and consideration by the NPS staff and leadership.

REFERENCES

Camp Dresser & McKee, March 2003, Monterey Peninsula Water Supply Project Alternatives, Phase 1 Technical Memorandum (prepared for MPWMD)

Camp Dresser & McKee, April 16, 2004, Sand City Desalination Project Feasibility Study (prepared for MPWMD)

Camp Dresser & McKee, June 23, 2004, Monterey Peninsula Water Supply Project, Phase 2 Technical Memorandum. Project Facilities Alternatives for the Sand City Desalination Project, 5.5 million gallons/day (8,400 acre-feet/year) (prepared for MPWMD)

Damitz, Brad (Monterey Bay National Marine Sanctuary), David Furukawa (Separation Consultants, Inc.), and Jon Toal (Kinnetic Laboratories), November 8, 2006, Desalination Feasibility Study for the Monterey Bay Region (prepared for Association of Monterey Bay Area Governments)

EIP Associates, December 1992, Final Environmental Impact Report, Near-Term Desalination Project (prepared for MPWMD)

Feeney, Martin B., with assistance from Pueblo Water Resources, Inc., November 2009, Monterey Peninsula Water Management District 95-10 Project, Hydrostratigraphic Investigation (prepared for MPWMD)

GEI/Bookman Edmonston, Separation Processes Inc., and Malcolm Pirnie Inc., February 20, 2008, Evaluation of Seawater Desalination Projects Proposed for the Monterey Peninsula (prepared for MPWMD)

ICF Jones & Stokes and Camp, Dresser & McKee, Inc., August 2008, Monterey Peninsula Water Management District 95-10 Project, Constraints Analysis (prepared for MPWMD)

Jones & Stokes Associates, December 2003, Board Review Draft, MPWMD Water Supply Project Draft Environmental Impact Report (prepared for MPWMD)

National Oceanic and Atmospheric Administration’s Monterey Bay National Marine Sanctuary and National Marine Fisheries Service, May 2010, Guidelines for Desalination Plants in the Monterey Bay National Marine Sanctuary

Appendix

Selected Water Quantity Conversions

Unit Rate Acre-Feet per Year Acre-Feet per Day

1 gallon per minute 1.6129 0.0044192

1 cubic foot per second 723.97 1.9835

1 million gallons per day 1,120.1 3.0689

1 liter per second 25.567 0.07005

1 cubic meter per second 25,567.0 70.045

Example 1 – 50% Recovery

· feedwater rate is 7,500 gallons per minute (gpm)

· recovery (percentage converted to potable water) is 50%

· plant operates 90% of the time

Potable Water

Annual yield = 7,500 gpm x 1.6129 acre-feet per year/gpm x 0.50 x 0.90 = 5,444 acre-feet per year

Reject Water (Brine)

Annual quantity = 7,500 gpm x 1.6129 acre-feet per year/gpm x 0.90 – 5,444 acre-feet per year

= (10,887 – 5,444) acre-feet per year = 5,443 acre-feet per year

Example 2 – 40 % Recovery

· feedwater rate is 6,000 gallons per minute (gpm)

· recovery (percentage converted to potable water) is 40%

· plant operates 90% of the time

Potable Water

Annual yield = 6,000 gpm x 1.6129 acre-feet per year/gpm x 0.40 x 0.90 = 3,484 acre-feet per year

Reject Water (Brine)

Annual quantity = 6,000 gpm x 1.6129 acre-feet per year/gpm x 0.90 – 3,484 acre-feet per year

= (8,710 – 3,484) acre-feet per year = 5,226 acre-feet per year

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