ITEM:		ACTION ITEM
13.	CONSIDER APPROVAL OF AMENDMENT 5 TO THE PURE WATER MONTEREY COST SHARING AGREEMENT
Meeting Date:			March 15, 2021	Budgeted:	No
From:			David J. Stoldt	Program/
			General Manager	Line Item No.:	35-03-786010
			David J. Stoldt	Cost Estimate:	$181,125
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: Action does not constitute a project as defined by the California Environmental Quality Act Guidelines section 15378.

SUMMARY:  In order to gain greater certainty on the CEQA process and to make representative strides toward a ready-to-go Pure Water Monterey expansion project, in March 2019 the District and Monterey One Water (M1W) approved funds to be expended to continue and substantially complete the supplemental environmental impact report (SEIR). Under Amendment 3 of the Cost Sharing Agreement with M1W, the District funded up to $750,000 of such costs and M1W provided the rest, as well as staffed the effort.

On November 14, 2019 the California Coastal Commission (CCC) failed to approve a Coastal Development Permit for the desalination plant and rescheduled a hearing into 2020.

The M1W Board failed to certify the SEIR in early 2020 and Cal-Am subsequently pulled its application for the desalination plant from the CCC in September. Cal-Am resubmitted its application, but it was deemed incomplete by the CCC. Cal-Am may resubmit its CCC application later this year, but Pure Water Monterey expansion remains a viable project.

However, now the SEIR document is over a year old. M1W appears now ready to vote on certification, but the SEIR needs to be updated. Four areas of additional work to update and improve the SEIR include:

• Denise Duffy & Associates’ (DD&A) contract would be amended based on changes in circumstances, to include DD&A review of SEIR project description changes, and preparation of a draft and final Environmental Memorandum updating information in the SEIR address environmental impacts of this change in circumstances. 

• Carollo Engineers would be hired to develop a M1W Regional Dynamic Water Balance Model using Carollo’s Blue Plan-it® Decision Support System. Carollo is uniquely qualified to provide these services based on their extensive development and use of the BluePlan-it® model on similarly complex “One Water” systems. In addition, Carollo has experience with M1W conveyance and treatment facilities, the City of Salinas’ industrial wastewater and storm water systems, and Marina Coast Water District’s conveyance system.  The model will enhance M1W’s ability to effectively communicate future water volume and flow conditions, including with changes in climate, the proposed PWM Project expansion, and/or increased CSIP system demands.  The model will be expandable in the future to provide water quality modeling, water supply cost projections for budgeting, operational decision support tools, and/or infrastructure planning and design assumptions. This work will help address many questions about source water availability which has been subject of much discussion during the SEIR certification process.  Although this work will not be completed before SEIR certification, the initial documents and data can be made available to inform stakeholders and the Board, as it becomes available. The work is valuable for the long-term operation of the Phase 1 project, as well as the expansion.

• Perkins Coie’s contract would be amended to continue to provide staff and the M1W Board with CEQA legal consultation and review of additional documents, staff reports, resolutions, responses to comments, and meeting preparation and attendance regarding the SEIR and expansion.

• Staff at Monterey One Water would manage and guide the above work and provide initial drafts of environmental information, staff reports, resolutions, and responses to comments.

The estimated budget amounts are:

Denise Duffy & Associates (CEQA) $ 25,000

Carollo Engineers (Source Waters) $ 55,000

Perkins Coie (legal team) $126,000

M1W internal costs $ 24,000

$230,000

By adoption of Amendment 5 to the Cost Sharing Agreement (Exhibit 13-A) the District would commit to 75% of the cost or $172,500. The Amendment also includes language requiring M1W to certify the SEIR or specify in writing deficiencies if the SEIR is not certified, and require M1W to pay 100% of any additional cost to correct deficiencies if M1W should decide to once again attempt to certify the SEIR.

RECOMMENDATION:  The General Manager recommends the Board approve Amendment 5 to the Cost Sharing Agreement and the expenditure of up to $181,125 (including a 5% contingency) in support of qualifying an expansion of Pure Water Monterey for CEQA SEIR approval and source water modeling.

BACKGROUND: On August 28, 2017 the Administrative Law Judge in the California Public Utilities Commission (CPUC) application A.12-04-019 asked for testimony on the capability of expansion of Pure Water Monterey to meet Peninsula water demands. Specifically, plans for expansion of the Pure Water Monterey (PWM) project, if any, and “whether expansion of the PWM project could provide water to California American Water (Cal-Am) in excess of 3,500 acre-feet per year, in what amounts, and at what cost?”

The District and Monterey One Water (M1W) submitted its testimony on those issues on September 29, 2017. Hearings were held and in many instances several intervenors expressed strong interest in an expansion of Pure Water Monterey – in some cases as an alternative project if the desalination facility is stalled, and in other cases as a potential low-cost interim measure.

Cal-Am’s application for a Certificate of Public Convenience and Necessity (CPCN) for the Monterey Peninsula Water Supply Project (MPWSP) resulted in CPUC Decision 18-09-017 on September 13, 2018. In granting the CPCN, the Commission, by Ordering Paragraph 37, at page 214 of D.18-09-017, directed Cal-Am to do the following:

“37. Within 180 days of the date of this decision Cal-Am shall file a Tier 2 advice letter providing specific additional information and its assessment as to whether it intends to file an application with the Commission to pursue a Water Purchase Agreement (WPA) for additional water supply to be provided by a PWM [Pure Water Monterey] expansion. Cal-Am shall serve the Tier 2 advice letter on the service list for this proceeding.”

D.18-09-017 Finding of Fact 20, at page 168, and its discussion at pages 39 and 42 to 43 stated:

“20. The Commission would like to determine if, in conjunction with the MPWSP approved in this decision, PWM expansion could provide an affordable, specific, concrete, and reliable additional or supplemental source water supply for Cal-Am ratepayers in the Monterey district.”

In response, on March 1, 2019 Cal-Am filed an extension request that sought a seven (7) month delay (from March 12, 2019 to October 31, 2019) in complying with Ordering Paragraph 37. Cal-Am offered two grounds in support of that request: (1) The MPWSP “is currently proceeding according to schedule, and as such there is no reason to believe that there will be a delay in the MPWSP desalination plant coming online before December 31, 2021,” and (2) “the information necessary to determine whether PWM expansion should be used to supply California American Water customers is not yet available.” Cal-Am concludes that, therefore, there is “insufficient information” for it to make an informed assessment. The CPUC denied the extension request.

In order to gain greater certainty on the CEQA process and to make representative strides toward a ready-to-go project, in March 2019 the District and Monterey One Water (M1W) approved funds to be expended to continue and substantially complete the supplemental environmental impact report (SEIR). Under Amendment 3 of the Cost Sharing Agreement with M1W, the District funded up to $750,000 of such costs and M1W provided the rest, as well as staffed the effort.

On November 14, 2019 the California Coastal Commission (CCC) failed to approve a Coastal Development Permit for the desalination plant and rescheduled a hearing into 2020.

The M1W Board failed to certify the SEIR in early 2020 and Cal-Am subsequently pulled its application for the desalination plant from the CCC. Cal-Am may resubmit its CCC application later this year, but Pure Water Monterey expansion remains a viable project.

EXHIBIT

13-A Amendment 5 to the Pure Water Monterey Cost Sharing Agreement

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