EXHIBIT 2-D

Concepts for Ordinance No. YY, Impact-Based Assessment of WDS

Excerpts from August 16, 2004 Staff Note (Updated March 2005)

OVERVIEW:

Staff was directed to develop proposed modifications to current regulations to streamline the WDS permit process to reduce unnecessary staff effort and lessen financial impact to property owners with less anticipated environmental impact, while continuing to protect sensitive water resources and the environment. The concept described in the following paragraphs is termed an “impact-based” review of water distribution systems. A new Ordinance No. YY would codify the concepts described below. It is envisioned that a CEQA Initial Study/Negative Declaration would be circulated for public review.

Staff recommends a new process whereby all owners of new wells permitted by the County (or other types of systems not based on wells), except for specific situations defined as exempt, submit an application form to MPWMD that briefly describes key characteristics of the property and proposed uses so that a rough estimate of water use and/or potential impact can be made.

Based on this first screening, the application would be assigned as Exempt, Level 1, Level 2, Level 3, or Level 4. The level of regulation is proportional to anticipated impact based on the sensitivity of the geographic area, size of parcel, number of parcels served, and whether the application is residential or non-residential. In short, the five types of action include:

Ø Exempt from MPWMD Rule 20 to obtain WDS permit.

Ø Level 1, Permit Waiver – simplified permit issued; no system limits set.

Ø Level 2, Staff Permit – staff sets system limits and other conditions; no public hearing; can be appealed to General Manager and Board.

Ø Level 3, Staff Public Hearing – Staff hearing officer makes decision; can be appealed to Board.

Ø Level 4, Board Public Hearing – Board makes decision.

CRITERIA TO DETERMINE LEVEL:

The determination of whether an application is Exempt or Level 1 through 4 will depend on the characteristics, or combination of characteristics, of an application. The characteristics are intended to give a general estimate of water use and potential impact. These factors can include:

Ø Land Use Type, such as single-family residential, commercial or agricultural.

Ø Number of parcels/connections, that is, how many parcels are served by the water system.

Ø Size of lot, for example, larger lots are assumed to have the potential for greater water use, especially in residential use. Due to the intensity of possible water in a small space, lot size is not as an important factor in a commercial setting. The lot acreages should be consistent with other MPWMD and Monterey County regulations.

Geographic area/location, such as inside or outside the alluvial aquifer; based on environmental sensitivity of the area, or similar compelling reason such as water rights, overdraft, etc. The proximity of the proposed well or other facility to existing wells, listed Carmel River tributaries, alluvial aquifer boundaries or the shoreline is also important.

Ø Relation to Cal-Am, that is, whether or not a property is inside or outside the Cal-Am service area, and is already served by Cal-Am.

There is no distinction between a potable (domestic drinking water) and non-potable (agricultural/irrigation only) supply. The reason is that the quantity of water being extracted out of the ground is the key factor in assessing environmental effect, not how it may be treated and used by the property owner. Also, a property owner on a single parcel could initially apply for a non-potable well, ostensibly for irrigation use only, and subsequently convert the well for potable use without the knowledge of the County or District. This scenario is of concern because, until SWRCB Order 95-10 is resolved, the District does not wish to exempt situations where a private potable system may fail, leading to a petition for Cal-Am service. For this reason, any supply (potable or non-potable) proposed within the main Cal-Am service area begins at Level 2.

CHARACTERISTICS OF ACTION LEVELS:

Following are proposed characteristics for each of the five action levels. In the discussion below, the term “parcel” means an existing legal lot of record (see Rule 11), and refers to a residential setting unless noted otherwise. The term “new subdivision” means a proposal to create new legal lots of record. For all situations, the well must be properly registered and metered, and report use annually.

The definition of “sensitive receptors” referenced below is based on the following:

Ø The 1,000-foot delineation for the zone of influence of a well drilled in Carmel Valley upland formations or other areas is based on extensive hydrogeologic studies associated with the Santa Lucia Preserve EIR certified by Monterey County in 1996. District staff members were part of a peer review team for these studies, which offer the best available information. An existing well is included as a “sensitive receptor.”

Ø The Carmel Valley Alluvial Aquifer (alluvium) is delineated due to the water rights determinations in SWRCB Order 95-10.

Ø The listed tributaries described in Rule 20 include: Tularcitos, Hitchcock Canyon, Garzas, Robinson Canyon and Potrero Creeks. These creeks were selected because: (1) they reflect the majority of contributed streamflow to the Carmel River in the lower Carmel Valley; (2) portions of each stream are mapped as part of the alluvial aquifer; (3) they are regularly monitored by MPWMD staff (including stream gauges); (4) extensive baseline data currently exist; and (5) data for these tributaries are included in the District’s CVSIM computer model; and/or (6) they are known to support habitat for sensitive species. Other smaller, intermittent tributaries are not recommended to be listed because it would be difficult to make environmental findings about them based on evidence in the record.

Ø The Pacific Ocean shoreline is included to address potential seawater intrusion that potentially could be caused by a well within 1,000 feet of the mean high tide line, depending on the characteristics of the well.

Exemption/No Permit Needed

Staff would continue to screen all Monterey County well construction permits sent to the District to assess whether an MPWMD WDS permit is needed. As shown in Exhibit 2-B, properties that meet all of the following criteria would be exempt from the requirement to obtain a WDS permit:

Ø one or two parcels totaling less than 2.5 acres;

Ø location outside of the Carmel River Basin and Seaside Basin (entire basin);

Ø location not within the Cal-Am service area (or not served by Cal-Am as a remote meter);

Ø location more than 1,000 feet from sensitive receptors defined above.

Only a very limited number of properties and situations would qualify as exempt. Examples include certain areas within the Carmel Highlands, Aguajito/Jack’s Peak, and Highway 68 uplands (not within Laguna Seca Subarea).

Level l, Permit Waiver

Level 1 properties are distinguished from exempt properties by being located in the upland areas of the Carmel River watershed as shown in Exhibit 2-B. A Permit Waiver would be issued with a basic set of assumptions that must hold true, or the waiver is invalid. No production or connection limits would be set. Characteristics for Level 1 include:

Ø one or two parcels totaling less than 2.5 acres;

Ø location in Carmel Valley Upland more than 1,000 feet from sensitive receptors;

Ø location not within the Cal-Am service area (or not served by Cal-Am as a remote meter).

Level 2, Administrative Permit

Level 2 would be similar to the Corps of Engineers "Nationwide Permit," where the process is streamlined for certain situations. There would be no public hearing, but production and connection limits would be set, along with other conditions, as determined by staff (General Manager or designee). The applicant would need to provide a hydrogeologic assessment by a qualified consultant as defined in Rule 21-A-9 as amended by Ordinance No. 118. Water rights are not a key issue because Level 2 permits are for parcels outside the Carmel River Alluvial Aquifer (see Exhibit 2-B). Level 2 is the minimum level of review for any situation within the main Cal-Am service area (Monterey Peninsula Water Resources System).

Level 3, Hearing Officer Review

Level 3 would entail formal notice and a public hearing before the MPWMD staff Hearing Officer, similar to the current situation. As shown in Exhibit 2-B, Level 3 situations reflect sensitive areas such as the Carmel River Alluvial Aquifer and Seaside Basin (Laguna Seca and Coastal Subareas); larger parcels in less sensitive areas; and systems serving three or more parcels. All new subdivisions and non-residential situations are either Level 3 or 4. A low-acreage new subdivision (less than 2.5 acres total) in a less sensitive area would be Level 3. A commercial/industrial situation expected to use less than 1 AFY would be Level 3.

Level 4, MPWMD Board Hearing

Level 4 would entail formal notice and a public hearing before the MPWMD Board, similar to the current situation. As shown in Exhibit 2-B, hearings before the Board would be reserved for larger, potentially controversial projects, and/or wells located within known sensitive areas. New subdivisions of any size in sensitive areas are Level 4. A commercial/industrial situation expected to use more than 1 AFY in Carmel Valley would be Level 4. Level 4 would apply to any commercial entity with anticipated water use over 10 AFY.

COMPARISON TO THE EXISTING SITUATION:

This proposed structure would expand the MPWMD “regulatory net” in sensitive areas, but streamline it in less sensitive areas or potentially lower impact situations. Staff believes this is a reasonable compromise to focus staff and Board attention on situations that require the most oversight and could cause the most impact to the community water resources. All boxes shown in gray in Exhibit 2-B are situations where the level of review is streamlined. All boxes shown in black are situations where the level of review is increased. Boxes in white are the same as the existing situation. Exhibit 2-E provides selected examples where the permit process would be decreased, increased or the same.

Expanded Regulation

The most prominent example of expanded regulation is the need for a Level 3 or 4 permit for single parcels within the Laguna Seca Subarea as well as the Coastal Subareas of the Seaside Basin. Previously, no WDS permit was needed for a single-parcel system in the Laguna Seca Subarea. This change reflects the findings of the Phase III Hydrogeologic Study for the Laguna Seca Subarea, which demonstrated that current water extractions are roughly double the reliable yield of the Subarea (overdraft condition), and that the Subarea is in a water supply deficit. Also, regulation of some single-parcel systems that are outside the Carmel River Basin and Seaside Basin Coastal Subareas, but still within the Cal-Am service would increase. For example, lots with wells in Pebble Beach would not be exempt.

Streamlined Regulation

An example of a more streamlined process (Level 1 or 2, depending on the situation) is that a public hearing would not be required for two-parcel systems outside of the alluvial aquifer. Currently, any two-parcel system would require a public hearing before the MPWMD Board. Under the proposed concept, staff would handle these applications administratively. Also, 3+ parcel situations less than 2.5 acres that currently require a public hearing before the Board would be heard by a staff hearing officer under the proposed refinements.

FEE STRUCTURE:

A sliding scale fee structure is proposed as follows, based on staff’s best estimate of actual time needed to process the permit, follow up on conditions, and track use annually. The staff hourly rate is currently $70 per hour; fees may be rounded for simplicity.

Ø Pre-Application Screening: $150 for review and determination of exemption or level. Includes assessment and graphing of location of nearby wells within 1,000 feet.

Ø Exemption Confirmation: $50 for written Confirmation of Exemption.

Ø Level 1: $300 to review application, provide Permit Waiver with Conditions, track use.

Ø Level 2: $1,400 application fee, assuming 20 hours as base, plus County CEQA Exemption fee, etc. Charge at $70 per hour (over 20 hours) and all other expenses for more complex cases according to Rule 60.

Ø Level 3 or 4: $2,450 application fee, assuming 35 staff hours as base. Charge $70 per hour for all time over 35 hours as well as actual legal and consultant costs (See Ordinance No. 118).

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