Item 12

ITEM:		PUBLIC HEARING

12.	CONSIDER FIRST READING OF ORDINANCE NO. 165 AMENDING RULES 11, 21, 23 AND 23.1 AND ADDING RULE 23.7 TO ESTABLISH A WATER ENTITLEMENT FOR MALPASO WATER LLC

Meeting Date:			July 20, 2015	Budgeted:	N/A

From:			David J. Stoldt,	Program/	N/A
			General Manager	Line Item No.:

Prepared By:			Stephanie Locke	Cost Estimate:	N/A

General Counsel Review: Yes
Committee Recommendation: On March 17, 2015, the Water Supply Planning Committee recommended the Board conduct the first reading of a draft ordinance that would amend Rules 11, 21, 23 and 23.1, and add Rule 23.7 to establish a Water Entitlement for Malpaso Water LLC.
CEQA Compliance: District is a Responsible Agency relying on an EIR certified by the SWRCB

SUMMARY: Ordinance No. 165 (Exhibit 12-A) establishes a Water Entitlement for the Malpaso Water Company LLC (Malpaso Water Company) of 80 Acre-Feet Annually (AFA) (85.6 AFA of production water) to be used for new and intensified water uses by properties located within the California American Water service area. Water Entitlement Holders established by previous MPWMD ordinances include the Pebble Beach Company and the other fiscal sponsors of the CAWD/PBCSD Wastewater Reclamation Project, the City of Sand City, and Cypress Pacific Investors LLC. Ordinance No. 165 also streamlines the ordinance process for future Water Entitlements by reducing the number of amendments needed throughout the District’s Rules. Each Water Entitlement is a discrete quantity of water designated by a District ordinance to a specified Water Entitlement Holder for new or Intensified Water Use. For the Malpaso Water Company Water Entitlement, the Water Entitlement Holder assigns water to its subscribers via Assignment Documents that the subscribers then use to obtain Water Use Permits from the District. The Water Use Permit can then be used to permit new or intensified water use up to the amount specified.

Before water from the Malpaso Water Entitlement will become available to Malpaso Water Company subscribers, the Board must approve an amendment to the California American Water Water Distribution System to allow Malpaso Water Company and the California American Water Company to divert and use water from the Carmel River system in the manner and for the purposes authorized by Water Right License 13868A. This action will be considered as a separate agenda item at the August 2015 Board meeting.

The development of existing legal lots of record in California American Water’s service area is currently constrained by a lack of available MPWMD Allocations and Water Credits, and State Water Board Order WR 2009-0060, which prohibits California American Water from diverting water from the Carmel River for new service Connections or increased uses of water at existing service addresses resulting from changes in zoning or use. Earlier this month, the State Water Board split License 13868 into two new licenses: Licenses 13868A and 13868B. License 13868A authorizes the municipal use of 85.6 acre feet per year for existing lots of record within the parts of Cal-Am’s service area that are within the Carmel River watershed or the City of Carmel-by-the-Sea. After adjustment for system losses, License 13868A will allow a Water Entitlement of 80 AFA. License 13868B dedicates the remaining portion of the existing water right to instream uses.

RECOMMENDATION: The Board should consider approval of the first reading of Ordinance No. 165, establishing a Water Entitlement for the Malpaso Water Company LLC.

CEQA: The MPWMD is a responsible agency under the California Environmental Quality Act (CEQA). As a CEQA responsible agency, the MPWMD may rely on the SWRCB’s Eastwood/Odello Water Rights Change Petition certified Environmental Impact Report (EIR) for MPWMD’s CEQA compliance for this ordinance.

Under CEQA, the State Water Board was the lead agency for preparation of environmental documentation for the project (Eastwood/Odello Water Right Change Petition Project). A Notice of Preparation (NOP) for the draft EIR was circulated to a project-specific mailing list and to the State Clearinghouse. The 30-day NOP comment period commenced on March 4, 2014 and ended on April 2, 2014. The State Water Board also posted the NOP for the draft EIR to its website. The State Water Board held a scoping meeting on April 2, 2014 to receive oral and written comments on the NOP. The NOP and comments received are included in Appendix A of the draft EIR. The State Water Board considered oral and written comments received during the scoping period in preparing the draft EIR.

A public Notice of Availability (NOA) of the draft EIR was mailed to adjacent landowners and interested parties on October 30, 2014, and was posted in the Office of the County Recorder, County of Monterey, on October 30, 2014. In addition, the NOA was also physically posted in several locations near the location of the project, including on State Route 1 near Palo Corona Regional Park, Carmel Valley Road at Via Mallorca, Carmel Valley Road at Williams Ranch, and Carmel Valley Road at Prado Del Sol. The Notice of Completion for the draft EIR was filed with the State Clearinghouse on October 30, 2014. The draft EIR was circulated to the State Clearinghouse, to federal, state, and local agencies, and to organizations and individuals that had expressed interest in receiving the draft EIR. The draft EIR public review period commenced on October 31, 2014 and ended on December 15, 2014.

On May 29, 2015, the State Water Board provided proposed written responses to all public agencies that commented on the draft EIR. The State Water Board received no suggested revisions to the proposed responses.

As disclosed in the final EIR, approval of the individual well alternative has the potential to result in significant effects based on erosion from well and pipeline construction, and based on the potential for introducing hazardous substances into the environment during well and pipeline construction. With implementation of best management practices in construction, impacts will be minimized to a less-than significant level. This mitigation measure was included as Condition 18 to License 13868A. This condition requires that, prior to commencement of construction, the Malpaso Water Company will submit a construction plan including best management practices to minimize erosion and to prevent the accidental release of a potentially hazardous material from entering the environment. Upon completion of construction, the Malpaso Water Company must report on implementation of the measures, and on any breaches. Changes or alterations have been incorporated into the project which mitigate or avoid the significant effects on the environment of erosion and hazardous materials during construction. (See Pub. Resources Code, § 21081, subd. (a)(1).)

On July 3, 2015, the State Water Board certified the final EIR. The Board found that, on the basis of the whole record, there was no substantial evidence that the State Water Board’s approval of the petitions would have a significant effect on the environment. The SWRCB also concluded that the Project, including the delivery of water represented by the Water Entitlement to the Benefited Properties, does not violate any provision of Order WR 95-10 or Order WR 2009-0060. A Notice of Determination was filed with the State Clearinghouse on July 7, 2015.

The District Board action must comply with CEQA as well as MPWMD regulations. In the review of this ordinance, MPWMD has followed those guidelines adopted by the State of California and published in the California Administrative Code, Title 14, Sections 15000, et seq. Specifically, the MPWMD, as a Responsible Agency under CEQA for this action, has complied with Guidelines section 15096. The MPWMD has considered the applicable Eastwood/Odello Water Right Change Petition EIR sections prepared by the State Water Board that relate to hydrology, water quality and water supply. A package of these excerpts was provided to each Board member via email.

Copies of the full EIR associated with the Eastwood/Odello Water Right Change Petition Draft are available for public review at the District office in hard copy or CD. The EIR and related documents can be found at

http://www.waterboards.ca.gov/waterrights/water_issues/programs/ceqa

BACKGROUND: In 1997, Clint Eastwood and the Margaret Eastwood Trust (Eastwood) canceled permits for development of 82 home sites on the historic Odello East property, located on the south bank of the Carmel River and primarily immediately east of Highway 1, and donated approximately 49 acres of the 131 acre Odello East and an associated agricultural water right to the Big Sur Land Trust.

Eastwood is planning to donate approximately 82 acres of Odello East to the Big Sur Land Trust to facilitate the Carmel River Floodplain Restoration and Environmental Enhancement Project ("Floodplain Project"). This property currently is being used for irrigated pasture. After the donation is completed, the Big Sur Land Trust will restore native vegetation on this property.

The Odello East water rights will not be needed to irrigate this property after native habitat is established. As envisioned by the project proponents, 85.6 AFA of production of the Odello East water supply will be made available for community benefits on existing lots of record within California American Water Company's service area. This water, for example, would allow for an existing home to be remodeled or added on to, and for a new home to be built on an existing lot of record. Also, this water may be used by Cal-Am on an interim basis to reduce Cal-Am's unauthorized diversions from the Carmel River, consistent with the State Water Resource Control Board (SWRCB) Cease and Desist Order. Forty-six AFA of the Odello East water supply will be dedicated permanently to Carmel River instream use. This dedication is structured to provide beneficial use without adversely affecting water flows in the Carmel River or water levels in the alluvial aquifer; and enhance flows to the Carmel River Lagoon. The Eastwood donation of Odello East to the Big Sur Land Trust will occur after final regulatory actions to approve the water rights assignment and the necessary agreements have been completed.

Bottlenecks in the lower Carmel River from the construction of levees and Highway 1 have contributed to significant floods. The 1995 flood destroyed the Highway 1 Bridge and the 1998 flood caused millions of dollars in damage to residents and businesses north of the Carmel River. The Floodplain Project will let the river use its historic floodplain by removing portions of the river levees, restoring the natural floodplain on lower Odello East and building a causeway to allow flood flows to pass under Highway 1 to the floodplain on the west side of the highway. The original Floodplain Project included removal of approximately 101,500 cubic yards of fill material on Odello East (the "Blister" area), which blocked the Carmel River from flowing to the historic floodplain. Eastwood removed the Blister in 2009 and compacted it to create an east/west haul road on the property. Removal of the Blister will facilitate the Floodplain Project, and the haul road can be used as a recreational trail after the land donation to the Big Sur Land Trust. Reconnecting the floodplain to the Carmel River and the Lagoon will create and maintain a mosaic of wildlife habitats and aid in the restoration of Steelhead. The recreational component of the project will include development of an integrated trail and parkland system along the Carmel River.

The County of Monterey is coordinating with public agencies for environmental review for all phases of the Floodplain Project.

A Water Conveyance and Temporary Use Agreement was signed between Cal-Am and Eastwood on April 27, 2015. This agreement contains the following provisions:

· Eastwood will form the Malpaso Water Company, a limited liability company (LLC). (After the agreement was signed, Eastwood did form Malpaso Water Company, LLC.)

· The Agreement will become effective when the SWRCB has adopted the necessary orders and issued water right Licenses 13868A and 13868B and the MPWMD has adopted an ordinance creating the Malpaso Water Company Water Entitlement. The agreement contemplated that the SWRCB Division of Water Rights would adopt one order issuing these water right licenses and the SWRCB then would adopt a separate Order of Determination stating that these licenses are not subject to the provisions of the SWRCB’s 2009 cease and desist order to Cal-Am. However, after the agreement was signed, the SWRCB Division of Water Rights decided to adopt just one order, Division Decision 2015-0001, which satisfies both of these requirements. Accordingly, the MPWMD’s adoption of its ordinance is the only remaining regulatory action for the Agreement to become effective.

· Promptly after the Agreement becomes effective, Malpaso Water Company will construct the Eastwood/Cañada Well, which will be used to pump the water to be diverted under water right License 13868A. (Three Cal-Am wells will be backup wells, to be used when the Eastwood/Cañada Well is shut down for maintenance.)

Malpaso Water Company will enter into subscription agreements with owners of legal lots of record. The subscription agreements and Water Use Permits issued by MPWMD will run with the land and will not be transferable.

· Cal-Am will treat, convey and deliver water pumped by the Eastwood/Cañada Well under License 13868A to Malpaso Water Company subscribers that have received water-use permits from the MPWMD, and Cal-Am will provide any necessary new meters and connections for such subscribers.

· Cal-Am will use any surplus water available for diversion and use under License 13868A to supply the diverted water to Cal-Am’s existing customers. MPWMD has requested that, to the extent such water is surplus to the legally available supplies from other Cal-Am sources, the Odello East water be made available to the Aquifer Storage and Recovery system.

EXHIBIT

12-A Draft Ordinance No. 165

U:\staff\Boardpacket\2015\20150720\PublicHrngs\12\Item 12.docx

July 20, 2015

Budgeted:

General Counsel Review: Yes

Committee Recommendation: On March 17, 2015, the Water Supply Planning Committee recommended the Board conduct the first reading of a draft ordinance that would amend Rules 11, 21, 23 and 23.1, and add Rule 23.7 to establish a Water Entitlement for Malpaso Water LLC.