ITEM:		CONSENT CALENDAR
2.	CONSIDER RECOMMENDATION TO THE BOARD TO AMEND COST SHARING AGREEMENT WITH DEEPWATER DESAL
Meeting Date:			September 15, 2014	Budgeted:	Yes
From:			David J. Stoldt, General Manager	Program/	Alternative Desal Project
				Line Item No.:	1-11-1
Prepared By:			David J. Stoldt	Cost Estimate:	Ongoing; Not to exceed $800,000
General Counsel Approval: N/A
Committee Recommendation: The Water Supply Planning Committee reviewed this item on August 21, 2014 and recommended approval 3-0. The Administrative Committee reviewed this item on September 8, 2014 and recommended approval 2-0.
CEQA Compliance: N/A

SUMMARY: The District’s Cost Sharing Agreement with DeepWater Desal LLC has six suspension and termination provisions (Section 8 of the Agreement – see “DISCUSSION” below). At this time, District staff believes the sixth provision with respect to definitive agreements (Section 6.4 of the Agreement – see “DISCUSSION” below) is in need of modification because the key date of May 30, 2014 has passed. Staff continues to meet with the DeepWater team and believes sufficient progress is being made on all of the areas, and the May 30, 2014 deadline should be extended.

RECOMMENDATION: The General Manager recommends that the Administrative Committee recommend the Board of Directors extend the deadline for definitive agreements under Section 6.4 of the Cost Sharing Agreement with DeepWater Desal LLC as follows shown in version below.

DISCUSSION: The edits to the relevant sections of the Agreement are shown in bold italics and strikeout as follows:

“8. Suspension or Termination of MPWMD Payment Obligation

In addition to enforcing other rights set forth in this Agreement, MPWMD may, in its sole and absolute discretion suspend or cease payments under this Agreement if any of the following issues arise:

· Progress and/or expenditures made by the Company do not meet MPWMD expectations with respect to Environmental and Permitting Activities, completion of technical studies, development of preliminary design for the CCRWP or Desalination Plant, or the Company has failed to enter into or maintain adequate contracts for rent, insurance, or consultants; or,

· There has been a failure to identify either a CEQA Lead Agency and a federal NEPA lead agency within sixty (60) days of Company’s filing a complete application with a state permitting agency; Identification of federal or state lead agencies shall be evidenced by publication by that lead agency of a Notice of Intent or a Notice of Preparation in compliance with CEQA and NEPA, as may be applicable; or,

· MPWMD, in its sole discretion, finds and declares that its Water Supply Charge is limited and not available to fund reimbursement obligations under this Agreement; or,

· MPWMD, in its sole discretion, within one hundred sixty (160) days of the Effective Date of this Agreement, determines the Company lacks sufficient funds, taking into account funds contributed by MPWMD under this Agreement, to pay Environmental and Permitting Costs and to meet the additional costs anticipated above in the Background, Paragraph B, of this Agreement; or,

· MPWMD, in its sole discretion determines the Company will not have sufficient funds available for its expenditure on additional technical studies and/or preliminary design related to the CCRWP and Desalination Plant; or,

· The Company, on or before December 31, May 30, 2014, fails to enter into or maintain, in full effect, one of the Definitive Agreements described above in section 6.4.

6.4 Definitive Agreements. On or before December 31, May 30, 2014, the Company shall use its best efforts to enter into one of the following agreements to facilitate construction and operation of the CCWRP, including the Desalination Plant

· an option agreement for the Company to purchase the “Tank Farm” parcel adjacent to the Dynegy Moss Landing Power Plant from Dynegy Moss Landing, LLC, together with easements necessary to construct intake and/or outfall pipelines necessary to operate the CCRWP and the Desalination Plant; and

· an agreement for the Company to purchase from the City of Salinas sufficient electricity needed to operate the CCRWP and the Desalination Plant; and

· an agreement in a form reasonably acceptable to MPWMD for development of intake and outfall pipeline facilities, and data center components for the CCRWP.

In the event the MPWMD Option is still in effect at the time the agreements referenced in this Paragraph are made, such agreements shall expressly recognize and accommodate exercise of the MPWMD Option.”

EXHIBIT

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