ITEM:		INFORMATIONAL ITEMS/STAFF REPORTS
30.	QUARTERLY WATER SUPPLY PROJECT STATUS REPORT
Meeting Date:			January 27, 2011	Budgeted:	N/A
From:			Darby Fuerst,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Henrietta Stern	Cost Estimate:	N/A
General Counsel Review: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

This is a quarterly report on Monterey Peninsula Water Management District water supply augmentation projects for the October through December 2010 period. Quarterly updates are prepared for the January, April, July and October regular Board meetings. The next quarterly report will be written in April 2011. Starting with the January 2010 report, limited background information is provided, unless essential for clarity. The reader should refer to previous reports through October 2009 for a detailed historical overview of previous action. A brief monthly presentation on Strategic Plan objectives is provided at each regular Board meeting. This information can be found by clicking on the pertinent agenda item on the District website at:

http://www.mpwmd.dst.ca.us/asd/board/meetings/meeting.htm.

Updated weekly information is also available in the General Manager’s letter to the Board at:

http://www.mpwmd.dst.ca.us/gmletters/gmletters.htm.

An MPWMD Board Special Workshop on water supply alternatives was held on March 27, 2008, which provided good background information. Please refer to the District website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2008/20080327/0327agenda_rev.htm

For the past several years, the MPWMD Board has identified water supply goals and objectives at Strategic Planning Workshops. The most recent workshop was held on November 10, 2009, and resulted in 90-day, 3-year and 5-year goals, which were adopted on December 14, 2009.

Action on Near-Term Goals

The following goals reflect 90-day objectives that continue and segue into longer-term goals. The goals are numbered for reference only, and do not reflect priority.

Goal 1: Actively join with Marina Coast Water District (MCWD), California American Water (CAW), Monterey County Water Resources Agency (MCWRA), Monterey Regional Water Pollution Control Agency (MRWPCA), and Jurisdictions to provide input on the regional water supply planning process. Have meaningful influence over the type, management and financing of the selected regional project.

The Final EIR for CAW’s proposed Coastal Water Project (CWP) was certified by the California Public Utilities Commission (CPUC) in December 2009. A combination of projects, known as the Regional Water Project (RWP), was identified as the preferred alternative. The RWP features a 10 million gallon per day (MGD) desalination project to be constructed by MCWD in north Marina, in concert with CAW and MCWRA, along with aquifer storage and recovery and recycled wastewater components. MPWMD and other parties had not been included in the discussions on how the RWP would be constructed, operated, managed and financed. Thus, MPWMD formally requested that the CPUC include MPWMD in the settlement discussions. This request was granted in fall 2009.

MPWMD Resolution 2010-01, supporting the RWP as the best alternative, was approved at the February 28, 2010 meeting. In addition, the resolution stated that MPWMD must be involved in decision-making for the RWP “to ensure that the water needs of the citizens and environmental resources within the District are reliably met in a cost-effective manner,” and that the water users within the Monterey Peninsula area are entitled to full and fair representation in all water supply planning efforts that affect their present and future water resources. The resolution may be viewed at: http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2010/20100225/17/item17.htm.

Throughout 2010, MPWMD participated in “alternative dispute resolution” meetings, settlement discussions with other parties, evidentiary hearings held by the CPUC and filed many legal briefs on topics identified by the CPUC Administrative Law Judge. MPWMD supported the RWP, but not the Water Purchase Agreement (WPA) due to inadequate protection of Peninsula ratepayers.

District action in the October-December 2010 period included continued discussions with MCWD, MCWRA and CAW regarding the need for better representation and financial accountability as part of the RWP. A Proposed Decision (PD) by the assigned Administrative Law Judge (ALJ) and an Alternate Proposed Decision (APD) by the assigned Commissioner were released on October 21, 2010. Both decisions recommended approving the Regional Project, adopting the Settlement Agreement with modifications, and issuing a Certificate of Public Convenience and Necessity (CPCN) for Cal-Am facilities. Oral argument regarding the PD and APD by the parties was presented to ALJ Minkin and Commissioner Bohn on November 10, 2010. During oral argument, the three key Settling Parties -- MCWD, MCWRA and Cal-Am -- indicated that the proposed modifications to the Water Purchase Agreement would be unworkable and unacceptable.

Written comments on the Proposed Decision (PD) and Alternate Proposed Decision (APD) were submitted by the parties on November 17, 2010. Reply comments were submitted by the parties on November 22, 2010. Along with other parties, MPWMD officials met with Commissioner Bohn and Commissioner Ryan on November 22 and 23, 2010, respectively.

A revised PD by ALJ Minkin and a revised APD by Commissioner Bohn were released on December 1, 2010. On December 2, 2010, the full Commission adopted Commissioner Bohn’s revised APD approving the Regional Project, adoption of the Settlement Agreement, including the Water Purchase Agreement with minimal changes, and issuance of a CPCN for Cal-Am’s facilities. The Commission’s decision, which was approved on a 4-1 vote, became effective December 2, 2010. This means that MPWMD will not have a role on the Advisory Committee. The District issued a news release the same day stating that MPWMD supports the Regional Project , and is pleased that Peninsula Cities have been granted a role on the Advisory Committee to better ensure ratepayer representation.  The release further stated that the District will continue to work cooperatively with CAW and other entities to meet future water supply needs and enhance environmental protection.

Goal 2: For the Aquifer Storage and Recovery Phase 1 Project, (a) inject at least 500 acre-feet of water in the 2010 season (assuming adequate streamflow), with infrastructure in place to enable 100% efficiency, and (b) determine the full project completion date.

Aquifer storage and recovery (ASR) entails diverting excess water flows, if available, in the winter season (December 1 through May 31) from the Carmel Valley Alluvial Aquifer (CVAA) through existing CAW facilities and injecting the water into the Seaside Groundwater Basin for later recovery in dry periods. District staff regularly meets with CAW consultants and staff to coordinate roles, responsibilities and tasks needed to enable operation of the Phase 1 ASR Project at full capacity. Several infrastructure components, such as specific pipelines and pressure reduction devices, have recently been installed with the goal to enable operation at 100% of injection capacity.

As noted in the July 2010 report, the 500 AF annual injection goal was achieved in the first week of March 2010, and a revised goal of 1,000 AF was set. As of May 31, 2010, a record-setting 1,111 AF were diverted and injected. This is the largest volume of ASR injection in any one year since the program began in 1998; the previous annual record was 411 AFY in Water Year 2006. The cumulative injection total into the Seaside Basin through May 2010 was 3,228 AF.

Efforts in October-December 2010 focused on monitoring the injected water while in storage in the Seaside Basin, which entailed a series of water quality tests and actions to satisfy the Regional Water Quality Control Board requirements and the California Department of Public Health before the ASR water may be delivered to CAW customers. Due to operational requirements set by the State Water Resources Control Board (SWRCB), the ASR recovery phase was accomplished in the first three months of Water Year (WY) 2011 (October-December 2010). District and CAW staff and consultants continue to meet regularly to move the project forward. District staff and consultants are also compiling data for the annual ASR report. Efforts also focused on construction of the Chemical/Electrical building at the ASR Phase 1 site. Construction began in mid-April 2010, and continued through December 2010. Bidding for electrical control equipment was conducted in October 2010, has been ordered, and is under construction. Efforts also continued on a pipeline easement that will help maximize injection.

In December 2010, the Board set a goal to exceed the WY 2010 mark, weather and streamflow permitting. The new injection season for WY 2011 began on December 1, 2010 pursuant to the SWRCB permit. Carmel River flow increased with heavy rains in mid-December, and the first diversion day occurred on December 21, 2010. By the end of December 2010, 66 acre-feet had been diverted and injected into the District’s Phase 1 wells, resulting iN a cumulative total of 3,294 AF.

In a related matter, in November 2010, the MPWMD Board approved a contract with Zim Industries, Inc. to perform well rehabilitation work at the Santa Margarita ASR-2 well, which will increase the well’s performance during the WY 2011 injection season.  The work began in December 2010 and was completed in the third week of January 2011. The well will be put into service, subject to Carmel River flow availability to meet bypass flow requirements.  

Goal 3: For the Aquifer Storage and Recovery Project Phase 2, determine the timetable for project development/completion.

Well Construction and Easements: MPWMD and CAW continue to work in partnership on Phase 2 ASR regarding new wells and associated CAW infrastructure necessary to deliver and extract the water. The project timeline is dependent on a variety of factors, especially formal approval of an adequate ASR Phase 2 site. MPWMD obtained permission from the Monterey Peninsula Unified School District (MPUSD) and a permit from the City of Seaside to drill a test/monitor well at the Seaside (formerly Fitch) Middle School site in October 2009. The test results were positive, and discussions with MPUSD through July 2010 enabled MPWMD to drill and construct one full-scale test well in August 2010 on the Seaside Middle School property, followed by actual testing of the well. This test well will be known as “Seaside Middle School ASR-1” as this project moves forward beyond the current test phase.

Efforts in September-October 2010 focused on “pumping and surging” to remove fine sediments from the well to improve its performance, along with step-rate and constant-rate production testing.  During development and production testing, water discharge was being piped from the well to a nearby area on the school property for percolation back into the aquifer system. Upon completion, the drilling contractor removed the temporary pumping and discharge equipment, and carried out site restoration work for several weeks.  District staff’s understanding is that this new ASR test well will satisfy one of the requirements in SWRCB Order WR 2009-0060 (i.e., the Cease and Desist Order) that requires CAW to implement one or more “small projects” within 24 months that total not less than 500 AFY to reduce unlawful diversions from the Carmel River. 

Throughout the October-December 2010 period, MPWMD and CAW continued negotiations with MPUSD regarding the process for the MPUSD to approve the long-term lease agreement with CAW for a portion of the Seaside Middle School property to be used as the Phase 2 ASR well site.  The easement area would include the site where the Seaside Middle School ASR-1 Well was constructed in addition to a future second well, similar to the Santa Margarita Phase 1 ASR well couplet near Eucalyptus Road. The MPUSD Board’s consideration of the requested easement by CAW is a three-step process:  (1) adopt a resolution of intent to convey the easement (approved on December 13, 2010; (2) hold a public hearing on the easement (conducted on January 10, 2011); and (3) take action on the easement request (scheduled for January 24, 2011).  The easement approval is a critical path element as connection of the CAW pipeline essential for full-scale injection testing is delayed until the easement issue is resolved. In a related matter, the District and CAW continue to negotiate on a reimbursement agreement for MPWMD’s expenses (over $1,000,000) associated with the Seaside Middle School ASR-1 Well.

Water Rights: A second major issue affecting Phase 2 ASR project development is water rights. CAW dropped two water rights protests it had previously filed against the District’s applications, and focused on functioning as partners in this effort. Throughout 2010, MPWMD and CAW staff and attorneys have met either separately or together with protestants National Marine Fisheries Service (NMFS) and the Carmel River Steelhead Association (CRSA). On November 24, 2010, NMFS transmitted a letter withdrawing its water rights protest, based primarily on the inclusion of recovery rules in the operations scenario. CRSA similarly withdrew its protest on December 24, 2010, based primarily on refined bypass flows. District staff will focus on obtaining a SWRCB water rights permit for Phase 2 ASR in 2011. In a related matter, District staff and counsel are evaluating various options for the Phase 2 ASR site environmental review due to its planned function as a future long-term permanent ASR project facility.

CAW Infrastructure: A third issue is the capacity of the CAW distribution system to deliver injection water to the Phase 2 project. This matter is the subject of ongoing ASR coordination meetings between MPWMD and CAW staff. CAW has indicated that the needed infrastructure upgrades to deliver water supply to the ASR Phase 2 wells at full capacity may not be available until the Regional Water Project improvements are in place. In the meantime, pipeline construction by CAW carried out in late 2010 through early 2011 in the City of Monterey will help improve the ability of CAW to deliver ASR-stored water from the Seaside Basin wells to a larger area and number of customers in the CAW system.

Goal 4: For the MPWMD “95-10 Desalination Project,” determine if the Board should continue pursuit of project development.

In fall 2009, District consultants completed hydrogeologic field work and laboratory analyses along the Fort Ord coastline. A technical report on desalination project feasibility was prepared and presented to the Board at its December 14, 2009 meeting. The report concluded that the coastal Fort Ord hydrogeology does not support its use as the source of subsurface feedwater for a desalination project, and the District should not pursue the project. This is primarily due to the fact that there is not a continuous clay barrier to protect the lower Paso Robles and Santa Margarita aquifers from contamination by seawater extracted for the desalination project. The Board directed staff to provide a description of desalination projects investigated by MPWMD in the past in order to assess whether there are any remaining viable local desalination options within the District. This staff report was provided to the Water Supply Planning (WSP) Committee at its March 8, 2010 meeting. The staff report is provided on the District website at:

http://www.mpwmd.dst.ca.us/asd/board/committees/watersupply/2010/20100308/02/item2.htm.

The WSP committee recommended that staff proceed with investigation of the potential for projects within the District boundary, with emphasis on desalination. The District Engineer continues to lead this effort. To date, District staff has met with representatives of the Monterey Bay National Marine Sanctuary, Naval Postgraduate School, City of Sand City, Pebble Beach Company, CPUC Division of Ratepayer Advocates, City of Santa Cruz, and City of Monterey, and various coastal property owners regarding the potential for desalination projects within the District boundary. A minimum desalination project production goal of 2,000 AFY was set by the WSP committee.

At the October 11, 2010 WSP Committee meeting, attention was focused on an August 2008 consultant report titled “Monterey Peninsula Water Management District 95-10 Project Constraints Analysis.” This report evaluated the potential for a seawater desalination project with intake facilities located along the coast in the City of Sand City and the southern portion of former Fort Ord, now Fort Ord Dunes State Park. A total of nine locations were analyzed, five in Sand City and four in former Fort Ord. Staff was directed to make a presentation to the full Board on feedwater intake capacities in two of the tables in the 2008 Constraints Analysis report and on some of the findings made in that report. The Board received the District Engineer’s assessment at its November 15, 2010 meeting, and directed staff to continue to assess potential combinations of projects. More information is available on the District website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2010/20101115/15/item15.htm

The WSP Committee meeting agendas and materials are on the website at:

http://www.mpwmd.dst.ca.us/asd/board/committees/watersupply/2010/2010.htm.

Goal 5: For the MRWPCA Groundwater Replenishment Project (2,000+ AFY), schedule a presentation from MRWPCA to the MPWMD Board on cost, legal issues, timeline and next steps.

The Board directed staff to assess current status of MRWPCA Groundwater Replenishment Project (GRP). Possibilities include purified wastewater for irrigation only, and/or as potable supply through groundwater injection. District staff continues to assist MRWPCA staff, as requested. A presentation by the MRWPCA General Manager, Keith Israel, was made at the MPWMD Board meeting of September 20, 2010. Notably, Mr. Israel noted that the GRP had been placed “on hold” so that MRWPCA can focus on its role in the Regional Project described above in Goal 1. It now appears that the GRP could be part of the “Phase 2” Regional Project. The Board directed staff to continue to work with MRWPCA to encourage wastewater recycling, including outreach and public education. These topics were discussed at the September 28, 2010 Public Outreach Committee meeting. The MRWPCA presentation is available on the District website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2010/20100920/ppt/7_files/frame.htm

At its October 11, 2010 meeting, the District’s Water Supply Planning Committee similarly discussed how MRWPCA did not plan to take any further action on the GRP until the CPUC had issued a decision on Phase 1 of the Regional Project, which it did on December 2, 2010 (Decision 10-12-016). That same month, MRWPCA staff indicated a desire to restart work on the GRP as part of Phase 2 of the Regional Project, and requested MPWMD support. At its December 13, 2010 meeting, the MPWMD Board approved issuing a letter to MRWPCA expressing support for further investigation of the proposed GRP and related agency cooperation. The staff report and letter is provided on the District website at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2010/20101213/09/item9.htm and

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2010/20101213/handouts/item9.pdf.

Action on Long-Term Goals

3-Year Goal: Resolve Fate of San Clemente and Los Padres Dams

Since mid-2009, District staff has participated in workshops and discussions regarding the removal of San Clemente Dam. These efforts culminated in a January 11, 2009 signing ceremony, hosted by U.S. Rep. Sam Farr, wherein numerous entities, including the District, pledged cooperation on dam removal and re-routing of the Carmel River. On August 26, 2010, District staff attended a quarterly meeting on the status of San Clemente Dam. The Department of Water Resources, Division of Safety of Dams (DSOD) is posed to complete the CEQA process on the selected alternative, dam removal and rerouting via San Clemente Creek, and roughly 900 acres surrounding the dam are slated to be transferred to the federal Bureau of Land Management (BLM). The goal is to complete the project by 2013. District staff is coordinating with various agencies to ensure operations at the Sleepy Hollow Steelhead Rearing Facility are not adversely affected. In a related matter, on September 22, 2010, CAW applied to the CPUC for a rate increase associated with the costs of dam removal and rerouting. The total project cost is estimated to be approximately $85 million, of which CAW proposes to fund about $53 million. The remainder is proposed to be funded by a variety of state and federal agencies as well as private foundations.

At the direction of the Board, District staff pursued options for increasing storage at Los Padres Dam and Reservoir, owned by CAW. This effort stalled when CAW responded to District inquiries in an October 5, 2009 letter, which stated that CAW has “no interest” in making modifications to the dam. CAW confirmed its position in September 2010. A written report is provided in the January 28, 2010 agenda packet at:

http://www.mpwmd.dst.ca.us/asd/board/boardpacket/2010/20100128/03/item3.htm

5-Year Goal: Operate Within Safe Yield of Seaside Basin

A Court adjudication of the Seaside Groundwater Basin was completed in March 2006 and amended in February 2007. The Court determined that the Seaside Basin is in overdraft; set a reduced “natural safe yield” and a near-term “operating yield” allowed to be produced by the parties as they work toward a “physical solution” (including ASR and wastewater reclamation) to eliminate the overdraft. A nine-member Watermaster Board was created to implement the Decision with continued oversight by the Court. The MPWMD holds one seat on the Watermaster with two out of 13 votes, and regularly participates at the monthly meetings. The District and its consultants have also been retained by the Watermaster to carry out certain technical tasks to help implement the Seaside Basin Monitoring and Management Program (SBMMP). District staff also contributes by serving as a Technical Committee member.

The District reports monthly on CAW’s compliance with the Adjudication limits in the Seaside Basin. To date, CAW use has been below the limit in the Coastal Subareas, and over the limit in the Laguna Seca Subarea. However, the two may be combined, resulting in total use in the Seaside Basin as below the current limit. Notably, an August 5, 2010 letter from the SWRCB has directed CAW to first maximize use of native water from the Seaside Basin, including carryovers from previous years, then use ASR water as the second source before Carmel River sources are tapped. Thus, the system will be managed to result in actual use just barely under the limit in the Seaside Basin and as much below the Carmel River limit as possible.

Other Relevant Action Affecting Water Supply

SWRCB Cease and Desist Order: On January 15, 2008, the SWRCB issued a draft Cease and Desist Order (CDO) against CAW. The Draft CDO refers to the 1995 SWRCB Order 95-10, and notes that compliance with Order 95-10 (i.e., find a replacement water supply to offset unlawful diversions from the Carmel River Basin) had not been achieved after 12 years. The CDO institutes a series of cutbacks to CAW production from the Carmel River and prohibits new or intensified connections in the CAW Main System, among other effects. MPWMD and several other parties participated in formal hearings before the SWRCB in the summer of 2008.

After several draft versions, the final SWRCB Board determination on the CDO was issued on October 20, 2009. The District (and other parties) immediately filed suit to challenge this ruling, and the Monterey County Superior Court issued a stay on November 3, 2009. In response to a challenge by SWRCB, the Court ruled on November 23, 2009 that the stay will remain in effect until a hearing in Santa Clara is held on April 22, 2010. The change to Santa Clara was based on a requested change in venue by SWRCB, which was approved by the Court on January 14, 2010. An appeal lodged by the District was not successful.

On April 22, 2010, the Santa Clara Superior Court lifted the stay, that is, determined that the CDO is in effect and will remain in effect until litigation is resolved. District Counsel and staff, at the direction of the Board, will continue to actively participate in litigation on the CDO through 2010.

District staff posted (and updates as needed) Answers to Frequently Asked Questions about the CDO (FAQ) on the District website, with emphasis on District permits, CAW connections, rationing, etc. This also addresses a May 2010 submittal by CAW to the CPUC requesting a moratorium on new connections in its Monterey District Main System, with certain exceptions. The most recent version of the FAQ is located at:

http://www.mpwmd.dst.ca.us/CDO/FAQ/UpdateCDO_FAQ_V70_20100527.pdf.

Notably, the District is a participant in the CPUC process to consider the CAW moratorium request in order to ensure that exempted areas are clearly identified and the effect on District Water Permit approval procedures is clarified. District Counsel attended an August 25, 2010 CPUC case management hearing, where the Administrative Law Judge (ALJ) determined that there would be no evidentiary hearing. Instead, opening briefs were due on October 8, 2010 and reply briefs were due October 22, 2010. A Proposed Decision by the ALJ was expected in December 2010, but no action has been taken by the CPUC.

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